Federal Court Permits the Government's Forfeiture of Contractor's Right to Keep Unit Pricing Confidential under FOIA

6 min

The United States District Court for the District of Columbia (DDC) issued a decision last week underscoring a critical point for federal contractors to keep in mind: a federal agency can effectively forfeit a contractor's right to keep financial information in their contract documents confidential by disclosing its substance in response to a request under the Freedom of Information Act (FOIA).

Given the sensitivity and competitive value of contractor pricing, federal contractors should heed this decision as a warning and reminder to work closely with agencies' FOIA offices when given the opportunity to review and redact materials responsive to a FOIA request.

Background on FOIA Exemption 4

FOIA generally requires the federal government to disclose requested records subject to several exemptions, including "trade secrets and commercial or financial information obtained from a person and privileged or confidential." See 5 U.S.C. § 552(b)(4) (often referred to as "Exemption 4"). As Venable's Government Contracts Group has written previously, a 2019 decision by the United States Supreme Court (Food Mktg. Inst. v. Argus Leader Media, 139 S. Ct. 2356, 204 L. Ed. 2d 742 (2019)) made it easier for contractors to prevent disclosure of commercial or financial information in federal contracts by eliminating the need to show a likelihood of competitive harm if the information was not withheld.

Even before the Supreme Court's decision in Argus, however, the United States Court of Appeals for the District of Columbia Circuit had found line item or unit pricing information in government contracts to be protected from disclosure because it fell within Exemption 4. See, e.g., Canadian Commercial Corp. v. Dep't of Air Force, 514 F.3d 37, 43 (D.C. Cir. 2008) ("The Air Force has given us no reason to deviate from our established precedent that line-item pricing information is subject to Exemption 4 of the FOIA."). The DDC's decision in Judicial Watch, however, shows that there may be limitations to these protections under certain circumstances.

The DDC's Decision

In Judicial Watch, Inc., v. U.S. Dep't of Health & Human Servs., No. 1:19-CV-00876 (TNM), 2021 WL 930350 (D.D.C. Mar. 11, 2021), the DDC held that unit pricing from the particular federal government contract at issue was subject to disclosure under FOIA because it did not fall within Exemption 4. Despite the outcome, the DDC did not hold that federal agencies must always disclose unit pricing in response to FOIA requests. Rather, the case is noteworthy because some of the pricing information had already been disclosed and placed in the public domain. While such earlier disclosure was likely preventable, the fact that it occurred undercut future application of Exemption 4.

In 2018, the plaintiff submitted FOIA requests to the Food and Drug Agency (FDA) and the National Institutes of Health (NIH) for "[a]ll contracts and related documentation between [FDA/NIH] and Advanced Biosciences Resources ('ABR') for the provision of human fetal tissue to be used in humanized mice research." Id. at *1. The Court characterized ABR as having "partner[ed] with Planned Parenthood and other abortion providers to dismember fetuses and sell their parts for research." Id. According to the Court, "ABR was a supplier of human body parts to the Government[.]" Id. at 2.

In response to the FOIA requests, the government refused to produce "two types of information" that it claimed were subject to FOIA Exemption 4: "(A) the names and addresses of ABR's contract laboratories; and (B) unit prices and line-item amounts in contracts between ABR and the Government."

The plaintiff argued, and the Court agreed, that the unit pricing in ABR's federal contracts was not confidential, and so Exemption 4 could not prevent its disclosure. The Court explained that "information cannot be 'confidential' if it is already in the public domain" because FOIA Exemption 4 "reflects the commonsense intuition that an open secret is no secret at all." Id. at *6. As a result, "materials normally immunized from disclosure under FOIA lose their protective cloak once disclosed and preserved in a permanent public record." Id. (quoting Cottone v. Reno, 193 F.3d 550, 554 (D.C. Cir. 1999)).

In this case, the plaintiff did "not appear to dispute that, in general, unit pricing could be confidential information," but argued that this specific pricing information was no longer confidential because it had been placed in the public domain through either (1) "several fee schedules appended to a report released by the U.S. Senate's Judiciary Committee" (for data from 2013-2015) or (2) the perhaps more preventable disclosures by the Government "in responding to this FOIA request" (for data from 2016-2018). Id. at *7.

The Court agreed with the plaintiff and rejected the government's arguments for non-disclosure. While it is likely little could have prevented disclosure of the 2013-2015 records via Congress, the disclosure of the unit pricing in the 2016-2018 records appears to have been avoidable. For this latter set of unit pricing, the Court found that the NIH had "released documents disclosing the total cost of transactions between the Government and ABR," as well as other "information detailing that ABR charges the same price for all types of fetal tissue that are the same age," such that "calculating the per-specimen fee" was "an exercise of simple math." Id. at *9. It did not matter that the redacted pricing information was not "identical" to the released information, because a plaintiff need not "produce an exact copy of the redacted information, in the same form" to show it was in the public domain. See id. at *9-*10.

Thus, the Court found that the unit pricing information from 2016-2018 was in the public domain—and so was not exempt from disclosure under FOIA—because the government had produced sufficient information in response to the FOIA requests to permit the calculation of the unit pricing in question. It appears that, had the government redacted the information from which this unit pricing could be derived, the unit prices themselves could have remained within Exemption 4. Moreover, "[h]ad the Government given reason to believe that the redacted information does not match the information already in the public domain—for example, that ABR's prices fluctuated or that it gave discounts for bulk orders," the Court explained, "the outcome here may have been different. But it has not." Id. at *12.

Key Takeaways for Contractors

The DDC's decision provides a cautionary tale for federal contractors on how to protect their confidential information from disclosure under FOIA. First, contractors should create and follow internal protocols for the safeguarding of confidential information. This can help establish later that the information merits protection under FOIA Exemption 4. Second, contractors should seek assurances that the government will keep any confidential commercial or financial information provided private (although, practically speaking, agencies will rarely execute a non-disclosure agreement). Third, when responding to a notice from a federal FOIA office concerning the potential disclosure of their information, contractors should work with counsel to ensure that the government has redacted all confidential commercial/financial information, including information that would effectively place the confidential information in the public domain. If unit pricing can be mathematically derived from other information in the contract documents responsive to a FOIA request, the contractor should advocate for the redaction of this other information as well.