author: FLANNERY, District Judge.

text:
    Paul A. WHITE, Plaintiff, v. UNITED STATES DEPARTMENT OF JUSTICE, Defendant.
    Civ. A. No. 83-2703.
    United States District Court, District of Columbia.
    Jan. 10, 1985.

      Paul A. White, pro se.
    Wayne P. Williams, Asst. U.S. Atty., Civ. Div., Washington, D.C., for defendant.
   MEMORANDUM OPINION

FLANNERY, District Judge.

This matter comes before the court on the parties’ motions for summary judgment on plaintiff’s action for disclosure of various documents held by the United States Parole Commission, the Executive Office of the United States Attorney’s Office, and the Bureau of Prisons under the Freedom of Information Act (“FOIA”), 5 U.S.C. § 552 et seq. Defendants have withheld five documents in whole or in part under various exemptions to FOIA. For reasons discussed herein, plaintiff’s motion shall be granted in part and denied in part, defendant’s motion shall be granted in part and denied in part, and defendant shall submit one of the documents to the court for in camera examination.

Background

In separate requests during June and August 1983, plaintiff, then an inmate at the Federal Correctional Institution in Seagoville, Texas, sought copies of various documents from the U.S. Parole Commission, the Bureau of Prisons, and the United States Attorney’s Office for the Western District of Missouri pursuant to the FOIA. After a number of documents responsive to plaintiff’s request were identified and released, plaintiff brought suit to compel disclosure of other records which the agencies had determined to be exempt from disclosure under the Act. Several documents were released subsequent to plaintiff’s decision to bring suit.

With respect to the United States Parole Commission, two documents have been withheld in their entirety. The Commission argues that a presentence report prepared for the United States District Court for the Western District of Missouri and a diagnostic study prepared by the Bureau of Prisons are exempt from disclosure under exemptions 3 or 5 of FOIA, 5 U.S.C. § 552(b)(3), or that, in the alternative, those documents are not available under FOIA because the FOIA is “displaced” by the Parole Commission Reorganization Act and Rule 32 of the Federal Rules of Criminal Procedure.

The Bureau of Prisons has also withheld its copies of the presentence report and the diagnostic study prepared for the sentencing court, which are identical to those withheld by the Parole Commission, under exemption 3. In addition, the Bureau of Prisons has withheld in its entirety a two-page letter dated May 12, 1983 from an official of the Platte County, Mo. Juvenile Court addressed to an official of the Bureau of Prisons (“long letter”), and has partially withheld a one-page letter of the same date from an employee of the Platte County Juvenile Court addressed to a Bureau employee (“short letter”). Defendant’s Memorandum at 4-5. The only deletions from the short letter were the names of the sender and the addressee. The agency argues that contents of the long letter and the names of the sender and the addressee in the short letter are exempt from disclosure under FOIA exemption 6, 5 U.S.C. § 552(b)(6).

The EOUSA has not claimed that any FOIA exemption applies to the one document which it located in response to plaintiff’s request. Rather, EOUSA determined that the document, an FBI Special Agent’s six-page handwritten draft of a memorandum to his supervisor concerning an investigation of plaintiff conducted by the FBI, originated with the Federal Bureau of Investigation and referred it to that agency for direct reply to plaintiff. Defendant’s Memorandum at 5. The FBI ultimately released three of the six pages, claiming that the remainder was exempt from disclosure under exemptions 7(C) and 7(D). Memorandum in Support of Defendant’s Supplemental Motion for Summary Judgment at 2-3 [hereinafter cited as Defendant’s Supplemental Memorandum].

Plaintiff argues that defendant’s decision to withhold the presentence report and the diagnostic study on the basis of exemption 3 is improper as a matter of law as a result of several decisions of this circuit holding that presentence reports are subject to the provisions of FOIA. Further, plaintiff argues that the FBI’s justification for partially withholding its document is insufficient under Vaughn and other precedents of this jurisdiction, and thus that the notes must be disclosed as a matter of law. Finally, plaintiff argues that no “clearly unwarranted invasion of personal privacy” is threatened by releasing the names excised from the short letter, and therefore exemption 6 does not justify nondisclosure. Regarding the long letter, plaintiff argues that there may no longer be any privacy interest in refusing disclosure because the Parole Commission has released a letter to him which is very similar to the description of the long letter withheld by the Bureau of Prisons. Alternatively, he argues that he is entitled to reasonably segregable portions of the long letter. See Plaintiffs Memorandum in Opposition to Defendant’s Motion for Summary Judgment at 10-12 [hereinafter cited as Plaintiff’s Opposition], Discussion

I. Presentence Report and Diagnostic Study

Although the law of several other circuits is to the contrary, it has been conclusively determined in this jurisdiction that presentence reports are “agency records” for purposes of FOIA. See Lykins v. United States Dep’t of Justice, 725 F.2d 1455, 1459 (D.C.Cir.1984); Carson v. United States Dep’t of Justice, 631 F.2d 1008, 1013-17 (D.C.Cir.1980). Defendant has belatedly conceded this point. See Reply to Plaintiff’s Supplemental Memorandum in Support of Motion for Summary Judgment at 3. Therefore, unless one of FOIA’s nine exemptions applies, the presentence report must be released to plaintiff.

Defendant first argues that FOIA’s exemption 3 justifies the decision by the Bureau of Prisons and the Parole Commission to withhold the presentence report in its entirety because those agencies are barred from disclosing presentence reports by statute. Under exemption 3, FOIA’s disclosure requirements do not apply to documents that are

specifically exempted from disclosure by statute ..., provided that such statute (A) requires that the matters be withheld from the public in such a manner as to leave no discretion on the issue, or (B) establishes particular criteria for withholding or refers to particular types of matters to be withheld.

5 U.S.C. § 552(b)(3). Defendant argues that presentence reports fall within this exemption based on the language of rule 32(c) of the Federal Rules of Criminal Procedure and the provisions of 18 U.S.C. § 4208(b), which, the government argues, require that presentence reports be withheld from the public “in such a manner as to leave no discretion on the issue,” or establish “particular criteria for withholding.” See Defendant’s Memorandum at 6-11.

Under rule 32(c), a defendant must be permitted to read the presentence report at a reasonable time before imposing sentence. Fed.R.Crim.P. 32(c)(3)(A). However, any copies of the report made available to the defendant or his counsel must be returned immediately following sentencing, “unless the court, in its discretion^] otherwise directs.” Fed.R.Crim.P. 32(c)(3)(E). Defendant argues that the latter provision alone meets the criterion of exemption 3 because it leaves neither the Bureau of Prisons nor the Parole Commission with the discretion to disclose a presentence report and “establishes particular criteria for withholding.” Defendant’s Memorandum at 7.

The government’s argument that the Parole Commission has no discretion to disclose presentence reports because to do so would “nullify” rule 32(c) has been clearly rejected by the Court of Appeals for the District of Columbia Circuit. In Carson v. United States Department of Justice in 1980, and again in Lykins v. Department of Justice in 1984, the court rejected the government’s position that presentence reports could not be considered discoverable “agency records” under FOIA because to do so would render meaningless the sentencing court’s ability to forbid the defendant to retain a copy of the report after sentencing. Lykins, 725 F.2d at 1459 n. 4.

The basis for these holdings was the requirement under the Parole Commission and Reorganization Act (“PCRA”), 18 U.S.C. § 4201 et seq. (1976), that the Parole Commission consider available presentence reports in making parole determinations and provide to a requesting prisoner in advance of any parole determination “reasonable access to a report or other document to be used by the Commission in making its determination.” Id,., §§ 4207, 4208(b); see Carson, 631 F.2d at 1012-13. Because the courts no longer have any discretion to prevent transmittal of presentence reports to parole authorities or to prevent access by inmates to presentence reports prior to parole determinations, the Carson court rejected the notion that rule 32(c) limits the discoverability under FOIA of a presentence report held by the Parole Commission. See Carson, 631 F.2d at 1012-13; see also Lykins, 725 F.2d at 1459 & n. 4.

The court’s reasoning in Carson and Lykins is just as applicable to defendant’s argument that rule 32(c) should provide a per se exemption for presentence reports under section 552(b)(3). Carson and Lykins held that sections 4207 and 4208(b) of the PCRA curtailed judicial control over presentence reports so as to render them agency records of the Parole Commission for purposes of FOIA. In other words, judicial control over presentence reports under rule 32(c) does not affect the Parole Commission’s responsibility to provide access to presentence reports under the PCRA. Therefore, rule 32(c) cannot be argued to provide a bar against the disclosure of presentence reports held by the Parole Commission so as to leave the Commission with no discretion on their release, as required by exemption 3. Prior to the Parole Commission and Reorganization Act, defendant’s contention that the Parole Commission lacked discretion to release presentence reports may have had some merit. However, as both Carson and Lykins make clear, the Act eliminated the control of the sentencing court over presentence reports vis a vis the Parole Commission, and vests that agency with authority over such reports sufficient to render them agency records for purposes of FOIA. Therefore, defendant’s argument that rule 32(c) leaves the Commission “no discretion” over presentence reports such that the rule meets the requirements of an exempting statute under FOIA’s exemption 3 is without merit.

Section 4208(b) of the PCRA and the Commission’s regulations regarding release of presentence reports enacted pursuant to that statute also do not support defendant’s position that the Commission lacks any discretion to release copies of presentence reports to inmates who request them. On the contrary, there appears to be no requirement in either section 4208(b) or regulations enacted pursuant to that statute that the inmate return copies of any documents, including the preseqtence report, to the Commission after being afforded “reasonable access” to them. See 18 U.S.C. § 4208(b); 28 C.F.R. §§ 2.55(a)(3), 2.56(a) (1984). Rather than there being no discretion to provide a copy of the presentence report as required of exempting statutes under FOIA’s exemption 3, the Commission appears to have complete discretion.

The court’s disposition of the issue of the applicability of exemption 3 to the presentence report also governs the outcome on the diagnostic study withheld in its entirety because defendant argues that the same grounds justify exemption for both documents. See Defendant’s Memorandum at 11-12. Under Rule 32(c)(3)(F) of the Federal Rules of Criminal Procedure, a report of a study made pursuant to 18 U.S.C. § 4205(c) shall be considered a presentence report. According to defendant, the diagnostic study in question was prepared pursuant to that statute. Therefore, defendant argues that just as the presentence report must be withheld under exemption 3, the diagnostic study made pursuant to section 4205(c) must also be withheld. Because the court has held that exemption 3 does not provide a blanket exemption for presentence reports, the court is compelled to reject defendant’s argument.

Finally, in a purported “reply” to Plaintiff’s Supplemental Memorandum in Support of Motion for Summary Judgment, defendant has asserted for the first time two new arguments for a blanket exemption for presentence reports. Although defendant correctly notes that an agency is not barred from asserting a particular exemption or theory if it was not cited in responding to the request at the administrative level, defendant has an obligation to clearly set forth the exemptions upon which it plans to rely at the outset of litigation. Instead, defendant has attempted to circumvent both the adversary process and the rules of this court by raising new exemptions nearly five months after defendant’s first dispositive motion was filed, and well after the expiration of the time within which defendant was to reply to plaintiff’s supplemental memorandum under the local rules of this court. Although defendant has not sought leave to file its reply out of time, and this court has no desire to prolong this litigation indefinitely by encouraging defendant’s tactical decision to raise new exemptions in such a piecemeal fashion, the court will address defendant’s new arguments.

First, defendant claims that exemption 5 provides a per se exemption for presentence reports. Reply to Plaintiff’s Supplemental Memorandum at 3-6. Under exemption 5, the FOIA does not apply to

inter-agency or intra-agency memorandums or letters which would not be available by law to a party other than an agency in litigation with the agency.

5 U.S.C. § 552(b)(5). This exemption generally excludes from FOIA’s coverage only those documents “normally privileged in the civil discovery context.” National Labor Relations Board v. Sears, Roebuck & Co., 421 U.S. 132, 149, 95 S.Ct. 1504, 1515-16, 44 L.Ed.2d 29 (1975). Defendant’s assertion that presentence reports “literally fall within” exemption 5 is based on several assumptions. First, defendant argues that a presentence report in the possession of the Parole Commission would be privileged from discovery by third parties in the context of civil litigation. Defendant next asserts that even as to the individual who is the subject of the report, the Parole Commission’s copy of the presentence report is protected by a “qualified privilege” against disclosure, and therefore that an inmate involved in litigation with the Parole Commission could not obtain through discovery a copy of his own presentence report. Thus, defendant concludes, presentence reports fall under exemption 5.

Although defendant is somewhat ambiguous as to the source of the privileges which it claims would protect presentence reports from discovery in litigation with the Parole Commission, it appears that the alleged per se exemption springs from the same source as the exemption asserted under section (b)(3), that is, the control of the sentencing court over presentence reports and the “statutorily created privilege” to obtain access to the presentence report from the Parole Commission under the PCRA. Those arguments are no more persuasive in the context of exemption 5 than they were under exemption 3. As already pointed out, the sentencing court no longer has any control over presentence reports vis a vis the Parole Commission, which renders suspect defendant’s assumption that rule 32 would have any effect on discovery of a presentence report by the individual who is the subject of that report in civil litigation with the Parole Commission. Further, given an inmate’s entitlement to access to his presentence report prior to his parole hearing under the PCRA, and the Commission’s apparent discretion to allow the inmate to retain a copy of that report, defendant’s assumption that the Commission could assert some nebulous “qualified privilege” to prevent discovery of a presentence report during civil litigation by an inmate who is the subject of that report is similarly without merit.

Finally, defendant argues that in the case of presentence reports, the FOIA is “displaced” by a “particularized disclosure scheme,” that is, the PCRA and rule 32(c). This argument must fail for either of two reasons. First, the whole notion that FOIA may be “displaced” by a disclosure scheme in another statute was placed in doubt by the decision of the United States Court of Appeals for the D.C. Circuit in Washington Post Co. v. United States Department of State, 685 F.2d 698 (D.C.Cir.1982). As the Washington Post • court pointed out

Other legislation, its history, and powers of Congress underlying it are to be taken as justifying refusal to disclose only when they meet the strictures of one of the specific exemptions included in FOIA.

Id. at 704. Thus, rather than allowing defendant to make an “end run” around FOIA’s explicit exemptions by finding regulations pertaining to disclosure in another statute, the court’s opinion in Washington Post can be read to require disclosure unless those regulations meet the requirements of one of the Act’s nine exemptions. Unless disclosure provisions of another statute are sufficiently specific to meet the requirements of exemption 3, they may not be relied upon to justify such a sweeping exclusion as that advocated by defendant in the case at bar. Alternatively, it seems clear that even if FOIA can be “displaced” as in Zale Corp. v. United States Internal Revenue Service, 481 F.Supp. 486 (D.D.C.1979), the “scheme” prescribed by the PCRA and rule 32(c) does not approximate the specificity or particularity which would be required of such a “displacement” statute, particularly given this court’s conclusion that rule 32(c) is irrelevant to the question of the Parole Commission’s discretion to release presentence reports under the PCRA.

In light of the preceding discussion, it should be made clear that although the court holds that presentence reports and other documents, like diagnostic studies, which are classified as presentence reports, are not per se nondiscoverable under exemptions 3 or 5, the court is not holding that such documents are therefore automatically diselosable under FOIA, either to the subject of the report or to third parties. See Carson, 631 F.2d 1015 & n. 29; Lykins, 725 F.2d at 1459 n. 4; see also Crooker v. United States Parole Commission, 730 F.2d 1, 9 (1st Cir.1984), vacated, — U.S. -, 105 S.Ct. 317, 83 L.Ed.2d 255 (1984). The possibility still remains that all or part of any given report may remain confidential under one of FOIA’s nine exemptions. For example, the Parole Commission’s statutory authority to withhold “diagnostic opinions which ... could lead to a serious disruption of [the prisoner’s] institutional program” from the prisoner under 18 U.S.C. § 4208(c)(1) might provide a basis for withholding a diagnostic study under FOIA’s exemption 3. See Crooker, 730 F.2d at 9. Similarly, section 4208(c)(2)’s exemption for documents which reveal “sources of information obtained upon a promise of confidentiality” might be sufficient to satisfy the requirements of exemption 3. Other FOIA exemptions under which nondisclosure might be justified are exemption 6, which allows the withholding of information the disclosure of which would result in an unwarranted invasion of personal privacy, or exemption 7, dealing with law enforcement information. In sum, many of the legitimate concerns raised in defendant’s pleadings are addressed by existing FOIA exemptions, some of which may have been applicable to allow the agencies to withhold all or parts of the presentence report or the diagnostic study at issue in the case at bar. Instead, defendant chose to ignore clearly relevant District of Columbia case law even after it had been brought to its attention by plaintiff, who is both pro se and incarcerated, and rested its argument for exemption on the expansive grounds that presentence reports have been given a blanket exemption from FOIA under exemptions 3 or 5. As the court has demonstrated, Carson, Lykins, and the PCRA itself render this position untenable. The government thus has waived its opportunity to litigate the applicability of other possible exemptions by failing to raise them. See Ryan v. Department of Justice, 617 F.2d 781, 792 & n. 38a (D.C.Cir.1980); Jordan v. Department of Justice, 591 F.2d 753, 779 (D.C.Cir.1978). Plaintiffs motion for summary judgment on his motion for disclosure of the presentence report and the diagnostic study from the Parole Commission shall therefore be granted.

II. The Bureau of Prisons Letters

Regarding the so-called “short letter,” defendant has excised only the names of the sender, an employee of the Juvenile Court, and the addressee, an official of the Bureau of Prisons. According to defendant, “it is likely” that disclosure of these names would “subject these persons to intimidation, harassment, or reprisal,” without any corresponding public benefit to be derived from disclosure. Jackson Declaration at 6. The letter involves a request that communication between plaintiff and any of his previous young “associates” be monitored. Plaintiff is incarcerated for transportation of a minor across a state line with the intent to engage the minor in prostitution. Given the close relation of the subject of the letter and the offense for which plaintiff is incarcerated, and the accepted privacy interests in the identities of law enforcement officials, the court finds that defendant was justified in withholding the names under exemption 6. The court is unable to discern any public interest in disclosure sufficient to outweigh the invasion of privacy that would result from the disclosures sought.

Regarding the “long letter,” defendant has been required to compare it with a letter previously released by the Parole Commission to determine what similarities exist between the two. According to defendant, the letters are not identical, and in fact were written and signed by different persons and addressed to different persons, address different issues, and contain different information. See Second Jackson Declaration at ¶¶ 4-5. In describing the two-page letter, defendant had earlier stated that it contained “a description of the progress until [the date of the letter] of a then fifteen-year-old boy with whom plaintiff had previously been associated” who was at that time undergoing psychiatric treatment at a state institution. Jackson Declaration at ¶ 10. As with the short letter, the court agrees with defendant that disclosure of the contents of this letter would constitute a clearly unwarranted invasion of the juvenile’s personal privacy without any countervailing public interest in disclosure.

III. FBI Document

Finally, defendant has withheld three of six pages of a document which originated with the Federal Bureau of Investigation, claiming that various deletions are justified under exemptions 7(C) and 7(D). See Defendant’s Supplemental Memorandum at 2-3. The requirements for those exemptions have been discussed supra. Without even addressing the partieular elements required to justify deletions under those exemptions, however, it is clear that the affidavit and discussion of the deletions are wholly inadequate to justify the application of any exemption to the material withheld.

The court of appeals for this circuit has determined that when an agency decides to withhold information under FOIA, it must supply the requester with a “relatively detailed justification, specifically identifying the reasons why a particular exemption is relevant and correlating those claims with the particular part of a withheld document to which they apply.” See Mead Data Central, Inc. v. United States Department of the Air Force, 566 F.2d 242, 251 (D.C.Cir.1977); see also Lykins, 725 F.2d at 1463; Vaughn v. Rosen, 484 F.2d 820, 827-28 (D.C.Cir.1973). This detailed procedure forces the government to analyze carefully the documents it seeks to withhold, permits the trial court to fulfill its duty of ruling on the applicability of the exemption, and enables the adversary system to operate by giving the requester as much information as possible, on the basis of which he can present his case to the trial court. See Lykins, 725 F.2d at 1463; see also Coastal States Gas Corp. v. Department of Energy, 617 F.2d 854, 861 (D.C.Cir.1980).

The sweeping and conclusory statements concerning the applicability of FOIA exemptions 7(C) and 7(D) in the Chester Declaration are obviously insufficient for purposes of the Act. See, e.g., Lykins, 725 F.2d at 1463. Defendant has provided no more than general policy arguments supporting each exemption without specific reference to any portion of the document in question. See generally Chester Declaration. In sum, defendant’s declaration is little more than a generic justification for withholding documents under exemptions 7(C) and 7(D) which bears no more relevance to this case than to any other case in which these exemptions are raised.

Because only one brief document is involved, however, the court will order that defendant submit a detailed justification identifying the specific reasons that the particular exemptions are relevant and correlating those claims with the particular parts of the document, as defendant was required by law to do in the first instance. Defendant will file this revised Vaughn affidavit and submit the document in question for the court’s in camera examination, after which the court will rule on the exemptions claimed. The court hastens to add that this is not the normal procedure under FOIA, and that an affidavit as inadequate as that submitted in the case at bar might well justify summary judgment against the government in other circumstances.

      . See Memorandum in Support of Defendant’s Motion for Partial Summary Judgment, and in Opposition to Plaintiffs Motion for Summary Judgment at 4 [hereinafter cited as Defendant’s Memorandum]. Defendant had also made extensive arguments in earlier briefs that a telephone memorandum prepared by an Administrative Hearing Examiner in the Commission’s South Central Regional Office following a telephone conversation with a case analyst in the Commission’s North Central Regional Office was partially exempt from disclosure under exemptions 7(C) and 7(D). Defendant has since notified the court that this document, the so-called “Kostbar memorandum,” had been released without excisions. See Reply to Plaintiffs Supplemental Memorandum in Support of Motion for Summary Judgment, Krupsky Declaration at ¶ 4. Defendant is admonished that a two-sentence note in an affidavit, attached to a reply to one of plaintiffs supplemental memoranda is an entirely inappropriate means to notify the court that a disputed document is no longer in issue, and that the time of both the court and the litigants is wasted by a defendant’s belated determination that excisions in a particular document are not justified under FOIA.

      . See Defendant’s Memorandum at 4 & n. 2. In responding to plaintiff’s request, defendant had initially determined that the presentence report and the diagnostic study were not “agency records” for purposes of FOIA, and had withheld them partially on that basis. See Plaintiffs Supplemental Memorandum, Exhibit 1 at 2-3, Exhibit 5 at 1. Defendant ultimately conceded that the copy of the presentence report held by the Parole Commission is an "agency record” and thus "potentially subject to disclosure under the FOIA.” Reply to Plaintiffs Supplemental Memorandum in Support of Motion for Summary Judgment at 3.

      . In its initial response to plaintiffs FOIA request, defendant had justified nondisclosure under exemptions 7(C) and 7(E) of FOIA. See Plaintiffs Supplemental Memorandum, Exhibit 5 at 1. Defendant has not renewed this claim, however, and now relies solely on exemption 6 for the deletions in these letters. See Defendant’s Memorandum at 14-17; see also id. at 5. Therefore, the potential applicability of exemptions 7(C) and 7(E) will not be addressed. See Ryan v. Department of Justice, 617 F.2d 781, 792 6 n. 38a (D.C.Cir.1980); Jordan v. Department of Justice, 591 F.2d 753, 779 (D.C.Cir.1978).

      . According to a brief filed by the Solicitor General of the United States in Crooker v. United States Parole Commission,-U.S.-, 105 S.Ct. 317, 83 L.Ed.2d 255 (1984), the government no longer contends that presentence reports held by the Parole Commission are not “agency records" for purposes of FOIA, and the Parole Commission will no longer withhold copies of presentence reports under FOIA on the ground that they are not agency records for purposes of the Act. See Brief for Respondent at 13, 15, Crooker v. United States Parole Commission, — U.S.-, 105 S.Ct. 317, 83 L.Ed.2d 255 (1984).

        . Indeed, the Solicitor General of the United States has taken the position that although the Parole Commission has elected to allow the prisoner only to read but not to retain a copy of his presentence report, the Commission has discretion under section 4208(b) "either to allow the prisoner to read the documents in question or to furnish him with copies of them." See Brief for Respondent at 16-18 & nn. 7 & 8, Crooker v. United States Parole Commission, — U.S.-, 105 S.Ct. 317, 83 L.Ed.2d 255 (1984). The Parole Act, according to the Solicitor General, "does not bar the Commission from giving the prisoner a copy of his presentence report.” Id. at 16.

      . Reply to Plaintiffs Supplemental Memorandum in Support of Motion for Summary Judgment at 2 n. 1.

      . See Zale, 481 F.Supp. at 489-90.

      . With regard to the presentence report, it appears that plaintiff has already seen the entire contents of the report. See Defendant’s Motion at 6 n. 4. Therefore, the government has arguably waived any FOIA exemption it could have raised as a basis for withholding it from him. See, e.g., North Dakota v. Andrus, 581 F.2d 177, 180-82 (8th Cir.1978); Mead Data Central v. Department of the Air Force, 566 F.2d 242, 257-58 (D.C.Cir.1977). The court expresses no opinion as to the applicability of any FOIA exemptions to plaintiff’s presentence report if requested by some third party.


source: Caselaw Access Project

author: BLOCH, District Judge.

license: Public Domain

text:
    Alfred R. RECCHION, an individual, and derivatively on behalf of Westinghouse Electric Corporation, Plaintiff, v. WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation; Westinghouse Power Systems Company; Westinghouse International Power Company, Inc., a corporation; Robert E. Kirby; Gordon C. Hurlburt; W.L. Hayward; H.R. Kristy; L.J. Kirchner; L. Facchini; Price Waterhouse & Co.; Karl R. Bendetsen; H.O. Berches; D.C. Burnham; Louis K. Eilers; R. Burt Gookin; Donald F. Hornig; John F. McGillicuddy; Roger Milliken; Richard P. Pivirotto; Hobart Taylor; Marina N. Whitman; George L. Wilcox; Douglas D. Danforth; David T. McLaughlin; O. Pendelton Thomas; Barbara Franklin; and Hays T. Watkins, Defendants.
    Civ. A. No. 83-856.
    United States District Court, W.D. Pennsylvania.
    Jan. 25, 1985.

      John M. Tighe and John T. Tierney, III, Tarasí & Tighe, P.C., Pittsburgh, Pa., for plaintiff Alfred R. Recchion.
    Richard H. Martin, Baskin and Steingut, Pittsburgh, Pa., and Patrick F. McCartan and Peter Carfagna, Cleveland, Ohio, and Michael J. Manzo, Berkman, Ruslander, Pohl, Lieber & Engel, Pittsburgh, Pa., for defendants Westinghouse Elec. Corp.; Westinghouse Power Systems Co.; Westinghouse Intern. Power Co., Inc.; Robert E. Kirby; Gordon C. Hurlburt; W.L. Hayward; H.R. Kristy; L.J. Kirchner; L. Facchini; Karl R. Bendetsen; H.O. Berches; D.C. Burnham; Louis K. Eilers; R. Burt Gookin; Donald F. Hornig; John F. McGillicuddy; Roger Milliken; Richard P. Pivirotto; Hobart Taylor; Marina N. Whitman; George L. Wilcox; Douglas D. Danforth; David T. McLaughlin; 0. Pendelton Thomas; Barbara Franklin; and Hays T. Watkins.
    R. Dell Ziegler and James D. Morton, Pittsburgh, Pa., and V. Thomas Fryman, Jr., New York City, for defendant Price Waterhouse & Co.
   MEMORANDUM OPINION

BLOCH, District Judge.

Plaintiff, Alfred R. Recchion, filed a five-count complaint, individually and derivatively, on behalf of Westinghouse Electric Corporation (hereinafter referred to as “Westinghouse”) against Westinghouse; its subsidiaries Westinghouse Power Systems Company (hereinafter referred to as “WPS”) and Westinghouse International Power Systems Company, Inc. (hereinafter referred to as “WIPS”); various of its past and present directors, officers and employees; and Price Waterhouse & Co. (hereinafter referred to as “Price Waterhouse”), a public accounting firm retained by Westinghouse during the complained of period.

Counts I through III are brought against Westinghouse, WPS, WIPS, Price Water-house, and five individual defendants. Count I alleges a violation of § 10(b) of the Securities Exchange Act of 1934 (hereinafter referred to as “the Act”), 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.-10b-5, promulgated thereunder, which prohibits the use of fraudulent or deceptive practices in connection with the purchase or sale of a security. Count II alleges a violation of § 14(a) of the Act, 15 U.S.C. § 78n(a), and Rule 14a-9 promulgated thereunder, 17 C.F.R. § 240.14a-9, which prohibits the solicitation of false and misleading proxies and proxy material. Count III alleges a cause of action based upon breach of the defendants’ fiduciary duty and common law fraud. Count IV is brought against the five individual defendants and alleges a violation of § 10(b) of the Act and Rule 10b-5 which also prohibits corporate insiders from trading on material inside information not known to the investing public and common law fraud. Count V is a derivative count brought on behalf of Westinghouse against all of the individual defendants. The Court has jurisdiction under 15 U.S.C. § 78aa, 28 U.S.C. §§ 1331 and 1337, diversity of citizenship, and pendent jurisdiction.

Although brought as a class action on behalf of all similarly situated Westinghouse shareholders for the period of August 1977 through May 13, 1980, the Court has not so certified it.

Presently before the Court are the following motions: (1) all corporate defendants and individual defendants named in Counts I through IV of the complaint (except Price Waterhouse) motion to dismiss Counts I through IV or, in the alternative, for a more definite statement; (2) Price Waterhouse’s motion to join in the other defendants’ motion to dismiss based upon plaintiff’s lack of standing; (3) Price Waterhouse’s motion to dismiss the complaint; (4) Westinghouse’s motion to dismiss Count V; (5) the individual defendants’ motion to join in Westinghouse’s motion to dismiss Count V; (6) petition of defendants named in Counts I through IV (except Price Waterhouse) and the individual defendants named in Count V for an order requiring plaintiff to post security and costs; and (7) petition of Westinghouse to require plaintiff to post security for reasonable expenses and attorney’s fees.

Before addressing the merits of defendants’ motions, the Court deems it appropriate to review the law governing a court’s review of a motion to dismiss. When confronted with a motion to dismiss, the Court must construe all of the allegations of the complaint as true. Scheuer v. Rhodes, 416 U.S. 232, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). On a Fed.R.Civ.P. 12(b)(6) motion to dismiss, such as that presented in this case, the Court must limit its consideration of the facts to those alleged in the complaint. Biesenbach v. Guenther, 588 F.2d 400, 402 (3d Cir.1978). According to the United States Supreme Court, “a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957) (footnote omitted). This stringent standard guides the Court in its review of defendants’ motions.

1. Motion to Dismiss Counts I through IV or, in the Alternative, for a More Definite Statement

All of the defendants have moved, pursuant to Fed.R.Civ.P. 12(b)(6), to dismiss Counts I through IV on the grounds that: (1) plaintiff does not have standing; and (2) plaintiff fails to plead fraud with particularity as required by Fed.R.Civ.P. 9(b). In the alternative, defendants request that, pursuant to Fed.R.Civ.P. 12(e), plaintiff be required to amend his complaint to contain a more definite statement of his allegations.

A. Standing

Defendants argue that plaintiff does not have standing to state a claim under § 10(b) and Rule 10b-5, since the alleged fraudulent misrepresentations and activities were not made “in connection with the purchase or sale of any security.” In Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975), the Supreme Court held that only plaintiffs who are actual purchasers and sellers of securities have standing to maintain actions for violations of § 10(b) and Rule 10b-5. Since plaintiff avers in paragraph 1 of his complaint that he sold shares of Westinghouse stock during the period of the alleged fraudulent activities, defendants’ motion to dismiss Counts I and IV based upon plaintiff’s lack of standing is denied.

All of the defendants state that Count II must be dismissed because plaintiff was not a Westinghouse shareholder and, therefore, does not have standing to sue under § 14(a) and Rule 14a-9 for violations of the proxy rules. Since plaintiff avers that he is now and during the entire relevant period a Westinghouse shareholder, defendants’ motion to dismiss Count II based upon plaintiff’s lack of standing is denied. (Complaint II1, docket entry No. 1).

As a further ground to support dismissal of Count II, defendants state that plaintiff has failed to state a claim upon which relief can be granted, since he does not aver that he granted a proxy in reliance upon the allegedly false and misleading proxy material. The Supreme Court has recognized an implied cause of action under § 14(a) and Rule 14a-9 promulgated thereunder in favor of shareholders who have been injured as a result of false and misleading proxy solicitations. J.I. Case Co. v. Borak, 377 U.S. 426, 430-431, 84 S.Ct. 1555, 1558-1559, 12 L.Ed.2d 423 (1964).

The gravaman of Count II is that defendants “at various times during the class period” distributed proxy solicitations which did not reveal the extensive mismanagement and fraudulent activity alleged in Count I. However, plaintiff does not assert that he granted a proxy in reliance on the contested solicitations. Accordingly, plaintiff does not have standing to assert a direct action for violations of § 14(a) and Count II is, therefore, dismissed. See Gaines v. Haughton, 645 F.2d 761, 772-774 (9th Cir.1981), cert. denied, 454 U.S. 1145, 102 S.Ct. 1006, 71 L.Ed.2d 297 (1982).

B. Specificity and Rule 9(b)

Defendants move to dismiss Counts I through IV of the complaint on the ground that it fails to meet the requirement in Fed.R.Civ.P. 9(b) that allegations of fraud be plead with particularity. Defendants maintain that plaintiff’s averments are conclusory and lack the factual specificity necessary in order for them to formulate a meaningful response. As an alternative to dismissal, defendants seek a more definite statement under Fed.R.Civ.P. 12(e).

Since Rule 9(b) is applicable to a complaint which alleges securities fraud, the Court deems it appropriate to articulate how a court should review the rule’s pleading requirement. See Zerman v. Ball, 735 F.2d 15, 22 (2nd Cir.1984); Decker v. Massey-Ferguson, Ltd., 681 F.2d 111, 114 (2nd Cir.1982); Cramer v. General Tel. and Electronics Corp., 582 F.2d 259, 272-273 (3d Cir.1978), cert. denied, 439 U.S. 1129, 99 S.Ct. 1048, 59 L.Ed.2d 90 (1979). In Christidis v. First Pennsylvania Mortg. Trust, 717 F.2d 96 (3d Cir.1983), the Third Circuit noted that in reviewing actions alleging fraud to determine whether the circumstances constituting the fraud comply with Rule 9(b):

[Cjourts must be sensitive to the fact that [Rule 9(b)’s] application, prior to discovery, may permit sophisticated defrauders to successfully conceal the details of their fraud. Moreover, in applying the rule, focusing exclusively on its “particularity” language “is too narrow in approach and fails to take account of the general simplicity and flexibility contemplated by the rules.”

717 F.2d at 99-100 (quoting 5 C. Wright & A. Miller, Federal Practice and Procedure § 1298, at 407 (1969)).

The defendants, relying on certain leading cases decided in the Second Circuit, urge that the Court strictly construe the particularity requirement of Rule 9(b). See Decker, supra, at 114-115. According to the Second Circuit, Rule 9(b) is a special pleading rule which aides in fettering out strike suits brought solely for their settlement value, prior to discovery. Id. at 114 (citing Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 740-741, 95 S.Ct. 1917, 1927-1928, 44 L.Ed.2d 539 (1975)). However, as previously noted, while the Third Circuit similarly requires that fraud actions brought under federal and state statutes state with particularity the circumstances constituting the fraud, this Circuit appears to temper the quantum of specificity demanded by the Second Circuit. Christidis v. First Pennsylvania Mortg. Trust, supra, at 99-100; Cramer v. General Tel. and Electronics Corp., supra, at 272. This standard guides the Court in its review of plaintiff’s complaint.

Count I, which is brought under § 10(b) and Rule 10b-5, alleges that the defendants, either as participants or aiders and abettors, overestimated or underestimated production costs for nuclear and fossil facilities of Westinghouse located in the United States and throughout the world. These defendants took unreported profits from completed construction accounts and allocated them to secret reserve accounts called “bags.” The defendants later used the secret reserve accounts to alter financial results in order for the individual defendants to receive financial performance bonuses. (Complaint ¶ 44-11 47, docket entry No. 1). These actions are alleged to have resulted in the misrepresentations of Westinghouse’s financial condition to the detriment of the investing public. Plaintiff further alleges that Price Waterhouse knew or should have known that certified financial statements prepared by them were inaccurate.

Count III essentially alleges the facts contained in Count I and asserts a cause of action for common law fraud and breach of fiduciary duty.

Count IV is brought against the five individual defendants for trading Westinghouse stock, without disclosing, on the basis of material inside information. Count IV alleges a cause of action based upon § 10(b)(5), common law fraud, and breach of fiduciary duty.

To state a claim under § 10(b), plaintiff must allege more than corporate mismanagement. He must allege facts indicating an intent to deceive, manipulate, or defraud. Santa Fe Industries, Inc. v. Green, 430 U.S. 462, 479, 97 S.Ct. 1292, 1304, 51 L.Ed.2d 480 (1977); Ernst & Ernst v. Hochfelder, 425 U.S. 185, 191 n. 7, 96 S.Ct. 1375, 1380 n. 7, 47 L.Ed.2d 668 (1976). Rule 9(b) requires that such fraud be stated with particularity.

A reading of plaintiff’s complaint compels the conclusion that it does not comply with the heightened pleading requirement of Rule 9(b). Plaintiff gives no factual specifics to support his claim that Westinghouse failed to report the true worth of its nuclear and fossil facilities, nor which of those facilities were underestimated or overestimated, beyond stating that they are located in the United States and throughout the world. Thus, plaintiff fails to state the place of the alleged fraud as required by Rule 9(b). See Dusesoi v. United Refining Co., 540 F.Supp. 1260, 1272 (W.D.Pa.1982). Plaintiff has a duty to identify the allegedly false and misleading statements or documents on which he relied. By merely alleging that he relied upon Westinghouse’s financial statements, plaintiff has not clearly or specifically identified which documents that term encompasses. See Decker v. Massey-Ferguson, Ltd., 681 F.2d 111 (2nd Cir.1982). Furthermore, the complaint does not set forth from which sources plaintiff derived his information and belief that Westinghouse’s financial statements contained overstatements and understatements, nor the extent to which Westinghouse misstated its financial worth.

Furthermore, although the plaintiff, in Count IV, alleges that defendants traded Westinghouse stock on inside information, he does not cite one specific instance of such trading.

Since plaintiff only asserts in a conclusory and general fashion without providing the defendants with fair notice of the grounds on which they rest, plaintiff cannot use discovery as a means of uncovering his claims. See Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975). Accordingly, defendants’ motion to dismiss Counts I, III, and IV for failure to plead fraud with particularity as required by Rule 9(b) is granted. Plaintiff is hereby given leave to amend Counts I, III, and IV of the complaint to comply with Rule 9(b) within twenty days of this Memorandum Opinion. Moore’s Federal Practice 119.03 (2nd ed. 1984).

Plaintiff alleges that Price Water-house failed to accurately disclose the alleged temporary diversions and relocation of excess monies and fraudulently certified false financial reports. Again, plaintiff does not identify the financial statements and reports which he claims misled him, apart from referring to all financial statements prepared by Price Waterhouse from August, 1977 until the filing of the complaint. Simply denominating unspecified financial statements and reports as false and misleading fails to state the circumstances constituting fraud. Furthermore, the complaint does not detail the extent of the accounting firm’s knowledge of the true financial situation of Westinghouse, or the efforts they expended, if any, in which they were remiss in investigating Westinghouse’s financial condition. See Christidis v. First Pennsylvania Mortgage Trust, supra, at 100.

Accordingly, Price Waterhouse’s motion to dismiss Counts I and III for failure to plead fraud with particularity as required by Rule 9(b) is granted. Plaintiff is hereby given leave to amend Counts I, III, and IV of the complaint to comply with Rule 9(b) within twenty days of this Memorandum Opinion. Moore’s, supra, at 119.03.

II. Motion to Dismiss Count V

Westinghouse has filed a motion to dismiss Count V of the complaint on the ground that it fails to comply with Rule 23.1 of the Federal Rules of Civil Procedure because: (1) plaintiff has failed to make a demand on Westinghouse’s Board of Directors; (2) plaintiff was not a shareholder of Westinghouse at the time of the alleged wrongful conduct and at the time of the filing of this complaint; (3) plaintiff failed to verify the complaint; and (4) plaintiff does not fairly and adequately represent the interests of the Westinghouse shareholders and Westinghouse.

Defendant Westinghouse filed this motion to which the individual defendants named in Count V have filed a motion to join. (Docket entry No. 25). Since defendants other than the corporation on whose behalf the derivative claim is asserted have standing to raise the defense of failure to comply with the requirements of Fed.R.Civ.P. 23.1, defendants’ motion to join in Westinghouse’s motion is granted. Shlensky v. Dorsey, 574 F.2d 131, 142 (3d Cir. 1978).

Because the Court concludes that plaintiff has failed to satisfy the demand requirement of Rule 23.1, the Court grants defendants’ motion to dismiss Count V of the complaint. It is unnecessary to consider the remaining bases posited by the defendants in support of its motion.

Rule 23.1 states in pertinent part that a shareholder’s derivative complaint shall “allege with particularity the efforts, if any, made by the plaintiff to obtain the action he desires from the directors or comparable authority ... and the reasons for his failure to obtain the action or for not making the effort.”

Plaintiff avers in his complaint that demand would be futile since the directors acquiesced in the complained of conduct and the directors themselves are named defendants. (Complaint ¶ 91, docket entry No. 1). These allegations without more are insufficient to excuse plaintiff from compliance with Fed.R.Civ.P. 23.1.

The demand requirement of Rule 23.1 assures that those who are most familiar and responsible for corporate management determine whether and how to pursue a corporate claim. Cramer v. General Tel. and Electronics Corp., 582 F.2d 259, 275 (3d Cir.1978), cert. denied, 439 U.S. 1129, 99 S.Ct. 1048, 59 L.Ed.2d 90 (1979).

In determining whether the allegations of plaintiff’s complaint are sufficient to excuse demand, the Third Circuit has stated that the inquiry is “intensely factual” and focused upon the disinterestedness of the directors, rather than the nature of their wrongdoing. Lewis v. Curtis, 671 F.2d 779, 786 (3d Cir.), cert. denied, 459 U.S. 880, 103 S.Ct. 176, 74 L.Ed.2d 144 (1982). In Lewis, plaintiff brought a derivative action against the corporation and its board of directors asserting that the directors had participated in an allegedly self-interested transaction and engaged in corporate waste. In that situation, the Third Circuit held that where plaintiff’s complaint set forth in detail facts that would establish bias, demand would be futile and, therefore, should be excused. Id. at 786-787.

Plaintiff’s complaint avers that the directors “by their failure to detect the concealment of the true state of affairs at Westinghouse and to make public disclosure ... aided and abetted [the officers] in their illegal acts.” (Complaint ¶ 89, docket entry No. 1). In particular, the complaint alleges that these officers manipulated the gross profits of Westinghouse and presented a false picture of Westinghouse’s earnings in order to realize greater profits and monies for themselves. {See Count I of plaintiff’s complaint). Furthermore, plaintiff’s complaint alleges that these officers traded Westinghouse stock on inside confidential information in violation of Rule 10b-5 and in breach of their fiduciary duty. {See Count IV of plaintiff's complaint).

Notably, the complaint does not allege that the directors themselves realized any monies from these alleged fraudulent activities or were engaged in any kind of self-dealing. Merely alleging that the directors acquiesced in the challenged transactions does not excuse plaintiff from compliance with Rule 23.1. Weiss v. Temporary Inv. Fund, Inc., 516 F.Supp. 665, 672 (D.C.Del.1981), aff'd., 692 F.2d 928 (3d Cir. 1982), vacated on other grounds, — U.S. -, 104 S.Ct. 989, 79 L.Ed.2d 224 (1984), on remand, 730 F.2d 939 (3d Cir.1984). Accordingly, defendants’ motion to dismiss Count V is granted.

III. Petition for Order Requiring Plaintiff to Post Security for Costs

Defendants named in Counts I through IV petition the Court pursuant to Rule 9(a) of the Local Rules of the United States District Court for the Western District of Pennsylvania for an order requiring plaintiff to post security for costs. Since the Court has dismissed all Counts of the complaint, defendants’ motion is moot.

IV. Petition to Require Plaintiff to Post Security for Reasonable Expenses and Attorneys’ Fees

Defendant Westinghouse moves, pursuant to 15 P.S. § 1516 (1967), for an order requiring plaintiff to post security for expenses, including attorneys’ fees, which may be incurred by the corporation as a condition precedent to maintaining or recovering in a derivative suit. Since the Court has dismissed Count V, plaintiffs derivative claim, defendant’s motion is moot. See supra, Part I.

An appropriate Order will be issued.

      . The Court is aware that the parties have submitted matters outside the pleading. Since they have been excluded by the Court, the motion is treated as one brought under Rule 12(b)(6). See Fed.R.Civ.P. 12(b).

      . Section 10(b) provides as follows:
      It shall be unlawful for any person____ ******
      (b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [Securities and Exchange] Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.

      . Rule 10b-5 provides as follows:
      It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
      (a) To employ any device, scheme, or artifice,
      (b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
      (c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.

      . Section 14(a) provides as follows:
      It shall be unlawful for any person, by the use of the mails or by any means or instrumentality of interstate commerce or of any facility of a national securities exchange or otherwise, in contravention of such rules and regulations as the Commission may prescribe as necessary dr appropriate in the public interest or for the protection of investors, to solicit or to permit the use of his name to solicit any proxy ,or consent or authorization in respect to any security (other than an exempted security) registered pursuant to section 781 of this title.

      . Rule 14a-9 provides as follows:
      No solicitation subject to this regulation shall be made by means of any proxy statement, form of proxy, notice of meeting or other communication, written or oral, containing any statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of a proxy for the same meeting or subject matter which has become false or misleading.

      . Although defendants’ contention is framed in terms of failure to state a claim under Rule 12(b)(6), it is more properly considered as lack of standing. See Gaines v. Haughton, 645 F.2d 761, 774 (9th Cir.1981), cert. denied, 454 U.S. 1145, 102 S.Ct. 1006, 71 L.Ed.2d 297 (1982).

      . In light of the Court’s dismissal of Count II, the Court’s analysis is necessarily confined to the remaining counts.

      . The Court does not imply that allegations of intent must be pled with particularity. See Cramer v. General Tel. and Electronics Corp., 582 F.2d 259, 272-273.

      . The futility of demand must be considered on the basis of existing facts at the time the derivative suit is commenced. Vanderbilt v. Geo-Energy Ltd., 725 F.2d 204, 210-211 (3d Cir.1983) (citation omitted).

      . They are Kristy, Controller of WPS (complaint ¶ 8); Hurlburt, President and Chief Executive Officer of WPS (complaint ¶ 6); Hayward, General Manager of WPS (complaint ¶ 7); Kirchner, Division Controller of Powers System Project Division of WPS (complaint ¶ 9); and Facchini, Division Controller of Power System Project Division of WPS (complaint ¶110).

      . The statute provides in pertinent part:
      B. In any such suit instituted or maintained by a holder or holders of less than 5 per centum of the outstanding shares of any class of such corporation ... or holders have a fair market value in excess of fifty thousand dollars ($50,000), the corporation in whose rights such action is brought shall be entitled at any stage of the proceedings, to require the plaintiff or plaintiffs to give security for the reasonable expenses, including attorneys' fees, which may be incurred by it in connection with such suit, ... to which security the corporation shall have recourse in such amount as the court having jurisdiction shall determine upon the termination of such action. The amount of such security may, from time to time, be increased or decreased in the discretion of the court having jurisdiction of such action upon showing that the security provided has or may become inadequate or excessive: Provided, however, That security may be denied or limited in the discretion of the court upon preliminary showing to the court, by petition, and affidavits and depositions as may be required by the court, establishing prima facie that the requirement of security or full security would impose undue hardship on plaintiffs and serious injustice would result.