On June 24, 2019, the U.S. Supreme Court issued a landmark decision interpreting one of the exemptions to the Freedom of Information Act's (FOIA) general requirement that federal agencies provide the public access to covered records. Specifically, the Supreme Court changed the standard applicable to FOIA Exemption 4, which exempts from disclosure "trade secrets and commercial or financial information obtained from a person and privileged or confidential." See 5 U.S.C. § 552(b)(4). Previously, to qualify for this exemption and prevent the disclosure of its information in the possession of a federal agency, a contractor often had to show that there was a likelihood of competitive harm to the contractor if the information were not withheld. The Supreme Court's ruling in Food Marketing Institute v. Argus Leader Media eliminates this requirement.
While the decision should make it easier for contractors to prevent disclosure of their commercial or financial information, it also leaves unresolved whether a contractor can prevent disclosure merely by showing that the information is "customarily and actually treated as private by its owner," or whether a contractor must also demonstrate that the information was "provided to the government under an assurance of privacy." See Food Mktg. Inst. v. Argus Leader Media, 588 U.S. __, __ (2019) (slip op., at 5-6, 12). For this reason, contractors should seek, when possible, government assurances of confidentiality when private commercial/financial information is submitted to the government, and seek legal counsel when contacted by a federal agency's FOIA office concerning the potential disclosure of their commercial or financial information.
FOIA Exemption 4 Before Food Marketing Institute
Prior to the Supreme Court's decision in Food Marketing Institute, the U.S. Court of Appeals for the District of Columbia Circuit had established widely adopted rules for determining whether or not information that is (1) commercial, financial, or a trade secret and (2) provided by a person outside of the government is (3) privileged or confidential, and therefore subject to FOIA Exemption 4. To determine "confidentiality" for FOIA purposes, the courts have applied one of these two tests, depending on whether the party provided the information to the government voluntarily or involuntarily. See ERG Transit Sys. (USA), Inc. v. Wash. Metro. Area Transit Auth., 593 F. Supp. 2d 249, 252-53 (D.D.C. 2009).
"If commercial or financial information is submitted to the government involuntarily then the government must treat such information as 'confidential' under Exemption 4 if its disclosure would be likely either to 'impair the government's ability to obtain necessary information in the future', or to 'cause substantial harm to the competitive position' of the submitter." Honeywell Tech. Solutions, Inc. v. Dep't of Air Force, 779 F. Supp. 2d 14, 20 (D.D.C. 2011) (citing National Parks & Conservation Ass'n v. Morton, 498 F.2d 765, 770 (D.C. Cir. 1974)). By contrast, "[i]f the information is submitted voluntarily, then the information is 'confidential' under Exemption 4 if it 'would customarily not be released to the public by the person from whom it was obtained.'" Id. citing (Critical Mass Energy Project v. Nuclear Regulatory Comm'n, 975 F.2d 871, 878 (D.C. Cir. 1992)).
Several courts have found that various types of pricing information provided in response to government solicitations were submitted involuntarily, triggering the more burdensome standard from National Parks. See Department of Justice Guide to the Freedom of Information Act: Exemption 4, U.S. Dep't of Justice (Aug. 10, 2009) at 286-90.1 In practice, this frequently required contractors to furnish proof to federal FOIA offices that the release of pricing information would result in competitive harm before the agency would agree to withhold such information when responding to FOIA requests. In some cases, contractors have even had to resort to litigation to prevent disclosure when a FOIA office disagreed that competitive harm was likely to occur.
Impact of the Supreme Court's Recent Decision on FOIA Exemption 4
The Supreme Court's ruling on June 24, 2019 eliminated the requirement under National Parks that there be some likelihood of competitive harm for FOIA Exemption 4 to apply to financial or confidential information obtained involuntarily. Instead, the Supreme Court held that information will be considered confidential (i.e., that Exemption 4 will apply) "where commercial or financial information is both customarily and actually treated as private by its owner and provided to the government under an assurance of privacy." See Food Mktg. Inst. v. Argus Leader Media, 588 U.S. __, __ (2019) (slip op., at 12).
In fact, the Supreme Court indicated that FOIA Exemption 4 may even apply to involuntarily provided commercial or financial information where only the first of these conditions (that the information is customarily treated as private by its owner) is present. See id. (slip op., at 6). In this regard, the Supreme Court cited approvingly the D.C. Circuit's decision in Critical Mass Energy Project, which "adhered to a much more traditional understanding of the statutory term 'confidential.'" Id. (slip op., at 9).
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Though the Supreme Court has declined to fully explain the applicable standard for FOIA offices and courts to apply when considering whether commercial or financial information is "confidential" under Exemption 4, it has provided helpful guidance that contractors and their representatives should bear in mind. First, there is no longer a requirement to demonstrate any likelihood of competitive harm from the release of such information. Second, if possible, contractors should obtain assurances from federal agencies that any confidential commercial or financial information provided will be kept private. Finally, contractors who receive notices from a federal FOIA office concerning the potential disclosure of their information should seek the assistance of counsel in responding.
[1] The U.S. Department of Justice has posted a notice on its website stating that its Office of Information Policy "will issue guidance and provide training on the impact of" the Supreme Court's decision.