Overview
In Food Marketing Institute v. Argus Leader Media, No. 18-481, the United States Supreme Court today brought a merciful end to over 50 years of misdirected and extra-statutory disputes over the meaning of FOIA Exemption 4, which exempts from disclosure "trade secrets and commercial or financial information obtained from a person and privileged or confidential." 5 U.S.C. §552(b)(4). The Court held that Exemption 4 does not require a showing that government release of private submitted data will likely cause substantial competitive harm to the submitter in order to justify withholding it from FOIA responses.[1]
Since the DC Circuit's 1974 decision in National Parks & Conservation Ass'n v. Morton, 498 F.2d 765 (DC Cir. 1974), lower courts have interpreted Exemption 4's "confidential" standard to require much more than simply showing that the information submitted to the government is generally not shared with the public. Instead, under National Parks and the many decisions that followed it, parties invoking Exemption 4 to protect private sector confidential information were required also to demonstrate that its disclosure was likely to cause substantial competitive harm to the information's owner. This standard generated significant litigation about the effect of disclosure of private information submitted to the government. And subsequent efforts by the DC Circuit to clean up the mess made by National Parks only led to more complicated Exemption 4 litigation. See, e.g., Critical Mass Energy Project v. Nuclear Regulatory Commission, 975 F.2d 871, 877 (DC Cir. 1992) (en banc) (retaining National Parks standard only for information required to be submitted to government; consequently necessitating a determination of whether information was voluntarily submitted, in which case it need merely be shown to be "customarily kept confidential" by the private sector source).
In Argus Leader, the Supreme Court has put an end to the confusion wrought by National Parks. Declaring the "substantial competitive harm" standard "a relic from a 'bygone era of statutory construction,'" the Court, by a 6-3 majority, ruled that this longstanding National Parks test will no longer apply to any confidential information – whether voluntarily or involuntarily submitted. Food Mktg. Inst. v. Argus Leader Media, No. 14-481, slip. op. at 8-12 (US June 24, 2019). The Court has thus simplified the showing that contractors and other private businesses must make to protect their confidential data, but in the process, has left open further questions for the lower courts to sort out.
Argus Leader involved a FOIA request by a local newspaper for store-level Supplemental Nutrition Assistance Program (SNAP) sales by local grocers and other retailers. The government denied the request and Argus Leader challenged that denial in district court, which heard extensive evidence of likely competitive harm resulting from disclosure of this store-level SNAP sales data, as well as of confidential treatment of this information by the retailers. Moreover, it was undisputed that when the retailers had submitted the information they, and the government, had understood that it should be kept confidential. Ultimately, however, the district court ordered disclosure on the basis that the likely harm from disclosure failed to satisfy the National Parks standard for Exemption 4 protection, and the Eighth Circuit affirmed.
The Supreme Court reversed, grounding its reasoning in the plain dictionary meaning of "confidential" as "private" or "secret." Relying on the facts that the store-level SNAP sales data was customarily and actually treated as private by the retailers and was provided to the government under an assurance of privacy, the Court deemed it to be "confidential" within the meaning of Exemption 4. Id. at 12. The Court reasoned that information is "confidential" under Exemption 4 if, at the very least, "it is customarily kept private, or at least closely held, by the person imparting it." But the Court declined to decide whether confidential status also requires a governmental assurance of privacy – express or implied, reasoning that "there's no need to resolve that question in this case because the retailers before us clearly satisfy this condition," insofar as "the government has long promised them that it will keep their information private." Id. at 6. By contrast, the Court held that the longstanding requirement that the submitter demonstrate a substantial competitive harm from disclosure had no basis in the statute's plain language. Id. at 7-8 ("We cannot approve such a casual disregard of the rules of statutory interpretation.").
Notwithstanding this welcome elimination of the National Parks test, government contractors (and other private businesses) cannot rest easy. Remaining areas of potential concern include the following:
- The question left open by the Court will have to be addressed – legally and factually – in administrative submissions and resulting litigation. It is arguable that Exemption 4 itself and the Trade Secrets Act, 18 U.S.C. § 1905, implicitly provide governmental assurances of continued confidentiality for information that was confidential at the time it was submitted. However, it is also arguable that Argus Leader should be read as requiring something more specifically targeted at the type of information at issue.
- Agencies and courts may be unwilling to simply accept a contractor's general assertion that it treats information as confidential. Cases applying Critical Mass suggest that specific proof of established corporate practices, such as nondisclosure agreements, protective legends and limits on internal distribution with respect to the information at issue will be helpful to establishing that the information is confidential. See, e.g., Airline Pilots Ass’n, Int’l v. United States Postal Serv., No. 03-2384, 2004 WL 5050900, at *5 (D.D.C June 24, 2004) (finding the "customarily kept confidential" standard articulated in Critical Mass was met where the submitter’s declaration described how the requested records were subject to "very limited disclosure within the organization").
- Agencies may contend that they have residual discretion to disclose private sector confidential information encompassed by Exemption 4, which on its face exempts such information only from FOIA's disclosure mandate. Exercising this kind of discretion has heretofore been precluded by the "oceanic . . . scope" of the prohibitions of the Trade Secrets Act, which the courts have interpreted as being at least as broad as Exemption 4. See, e.g., CNA Fin. Corp. v. Donovan, 830 F.2d 1132, 1151-52 (DC Cir. 1987). Decisions that have applied the Trade Secrets Act to information that met the "customarily kept confidential" test articulated in Critical Mass should shed light on this question. See, e.g., Mallinckrodt Inc. v. West, 140 F.Supp.2d 1, 4-6 & n.4 (D.D.C. 2000).
- In order to obtain preliminary and/or permanent injunctions against disclosure of their confidential information, contractors may still need to prove that they are likely to be harmed by such disclosure. In the context of injunctive proceedings, the courts arguably should be willing to take into consideration various types of potential harm to the contractor above and beyond competitive injury in the National Parks. Likewise, they should be willing to entertain evidentiary submissions regarding such harm during the injunctive proceedings, rather than limiting their analyses to the contents of administrative records. Abundance of caution, however, would counsel for including evidence of potential harm in administrative submissions opposing disclosure.
- Contractors may continue to face arguments that the contents of their government contracts should be disclosed as a matter of public interest, notwithstanding their confidentiality concerns. Indeed, the government's amicus brief in Argus Leader asserted:
[W]hether particular information is properly considered "confidential" must . . . take into account the context in which that information appears. Certain information obtained from nongovernment entities, for instance, is itself intimately linked to the government's own actions, actions that one would not reasonably expect to be kept confidential absent some agreement or requirement to that effect. And if disclosure of the government's own actions would effectively disclose the information in question, no expectation of confidentiality would be objectively reasonable.
Brief for the United States as Amicus Curiae Supporting Petitioner, Argus Leader, 558 US __ (No. 18-481). As an example of supposed inherently non-confidential information, the government identified "[t]he amount that the government pays a private entity to supply goods or services to the government." Id. The Court made no explicit reference to this "no expectation of confidentiality" argument, but it may well resurface in future administrative and judicial disputes about Exemption 4.
- It would not be surprising if a hue and cry arises for legislation amending Exemption 4 to restore the National Parks test or otherwise to expose contractors' confidential information to public disclosure. (Numerous amicus briefs were submitted in Argus Leader by media and public interest entities vigorously advocating perpetuation of the National Parks). Contractors should therefore be prepared to ensure that their legitimate interests in confidentiality are known and understood by Congress and other key decision-makers.
In sum, contractors should remain vigilant in protecting their confidential information and should continue to obtain legal advice whenever they learn of FOIA requests directed at such information.
[1] Steptoe & Johnson LLP submitted amicus briefs on behalf of the National Association of Convenience Stores, the National Grocers Association and National Retail Federation in support of the Food Marketing Institute, the prevailing party in the Supreme Court.
