Photo by Philip Strong on Unsplash
Sam Berten, Associate Member, University of Cincinnati Law Review
I. Introduction
On June 24, 2019, the Supreme Court held in Food Marketing Institute v. Argus Leader Media that “commercial or financial information that is customarily and actually treated as private by its owner and provided to the government under an assurance of privacy is ‘confidential’ under exemption 4 to the Freedom of Information Act (FOIA) and is therefore shielded from disclosure.”[1] FOIA allows citizens to request the government to disclose unreleased information and documents in the government’s possession, with a few crucial exceptions.
One of the key exemptions to FOIA requests is exemption 4. Exemption 4 of FOIA protects “trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential.”[2] This exemption serves dual purposes: (1) it encourages submitters to voluntarily provide information to the government that will be reliable; and (2) it gives submitters protection from the competitive harm that could result from disclosure of the submitter’s protected information.[3]
II. Background
From 1974-2019, National Parks and Conservation Association v. Morton was the controlling test for Exemption 4 cases.[4] In National Parks, the D.C. Circuit created the “competitive harm” test, which said that “commercial or financial matter is ‘confidential’ [only] if disclosure of the information is likely . . . (1) to impair the Government’s ability to obtain necessary information in the future; or (2) to cause substantial harm to the competitive position of the person from whom the information was obtained.”[5] The D.C. Circuit created this test because of the lower court’s conclusion that the FOIA statute was not clear on its face, so it needed interpretative aid.
The Supreme Court criticized the D.C. Circuit’s approach in 2019 in Argus Leader. The Supreme Court held that the statutory text of Exemption 4 was clear on its face, and the circuit court overstepped its authority when it created the “competitive harm” test.[6] Thus, the Supreme Court rejected the “competitive harm” test. Therefore, after Argus Leader, the government does not have to prove that the disclosure of information would result in financial harm to the submitter.[7] The Court further held that “at least 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, the information is ‘confidential’ within the meaning of Exemption 4.”[8]
III. Discussion
Argus Leader significantly changed the trade secret landscape because it alleviated the need for contractors to prove competitive harm in the event of a public disclosure.[9] Additionally, contractors must take measures to ensure that their trade secrets, as well as any other competitively-sensitive information they hold, are kept secret.[10] These measures will often include restrictions, even within the corporation, to ensure the safety of this protected information.[11] Thus, when bidding on a government contract, contractors should be careful to ask whether their competitively-sensitive information will receive an “assurance of privacy” from the government.
However, this explanation leaves an open door for further trade secret litigation where the commercial or financial information is both customarily and actually treated as private by its owner, but the government provides no assurance of privacy. The lower courts will have to grapple with this residual issue in the coming years. Argus Leader has already been interpreted by the 9th Circuit, which held in Center for Investigative Reporting v. United States DOL that publishing data in an annual report would demonstrate that the information was not confidential.[12] Additionally, the 9th Circuit has followed Argus Leader in Animal Legal Defense Fund v. United States FDA. In Animal Legal Defense, the 9th Circuit Court of Appeals remanded the case to the district court to determine whether the information was “customarily and actually treated” as private, and, “if necessary, the court shall decide whether the term ‘confidential’ requires a governmental ‘assurance of privacy’ and, if so, whether the FDA provided the necessary assurance.”[13]
Thus, Animal Legal Defense may present an answer to the remaining question of whether both prongs are necessary under the Argus Leader test. This decision will be a critical tool for future courts to determine whether simply keeping information confidential within your organization, and from the public, is enough to ensure an exemption under Exemption 4, or whether the government must also assure that the disclosed information will be kept private. If Animal Legal Defense states that both prongs must be satisfied, government contractors must heighten their contractual terms to ensure that any confidential information given to the government during requests for proposals (RFPs) or in furtherance of the government contract, is adequately protected from disclosure under Exemption 4.
IV. Conclusion
The United States District Court for the Northern District of California is also currently deciding American Small Business League v. United States Department of Defense. This case will test the strength and application of Argus Leader. This is particularly true because the presiding judge, Judge Alsup, has described the Pentagon’s efforts to exempt information under Exemption 4 as “trying to suppress the evidence,” and further said “the purpose of the Freedom of Information Act is so the public can see how our government works. Congress passed this law to make small businesses have access to some of these projects, and here is the United States covering it up.”[14]
Judge Alsup has called the case a battle of “David vs. Goliath.”[15] Thus, while Judge Alsup will surely be bound by the Supreme Court’s interpretation of “confidential” under Exemption 4, government contractors should watch this case closely for Judge Alsup’s interpretation and application of Argus Leader.
[1] Food Mktg. Inst. v. Argus Leader Media, 139 S. Ct. 2356 (2019). See Peter J. Toren, Trade Secrets Review: Key 2019 Decisions and Trends (Part I), IP Watchdog (Jan. 21, 2020), https://www.alstongovcon.com/food-marketing-institute-v-argus-leader-media-enhanced-foia-protection-for-contractors-confidential-commercial-or-financial-information/.
[2] 5 U.S.C. §552(b)(4)(2000).
[3] Freedom of Information Act Guide, United States Department of Justice (May 2004), https://www.justice.gov/oip/foia-guide-2004-edition-exemption-4#N_2_; See Attorney General’s Memorandum for Heads of All Federal Departments and Agencies Regarding the Freedom of Information Act (Oct. 12, 2001), reprinted in FOIA Post (posted 10/15/01) (recognizing fundamental societal value of “protecting sensitive business information”).
[4] National Parks and Conservation Association v. Morton, 498 F.2d 765 (D.C. Cir. 1974). See Andrew Howard, Food Marketing Institute v. Argus Leader Media: Enhanced FOIA Protection for Contractors’ “Confidential” Commercial or Financial Information, Alston & Bird (Jan. 6, 2020), https://www.alstongovcon.com/food-marketing-institute-v-argus-leader-media-enhanced-foia-protection-for-contractors-confidential-commercial-or-financial-information/.
[5] National Parks, 498 F.2d at 770.
[6] Howard, supra note 4.
[7] Argus Leader, 139 S. Ct. at 2364.
[8] Id. at 2366.
[9] Howard, supra note 4.
[10] Id.
[11] Id.
[12] Ctr. for Investigative Reporting v. United States DOL, No. 4:19-cv-01843-KAW, 2019 U.S. Dist. LEXIS 213793, at *17 (N.D. Cal. Dec. 10, 2019).
[13] Animal Legal Def. Fund v. United States FDA, No. 19-15528, 2020 U.S. App. LEXIS 1633, at *3 (9th Cir. Jan. 16, 2020).
[14] American Small Business League Provides Update on “David vs. Goliath” Department Of Defense Lawsuit, PR Newswire (Feb. 13, 2019), https://www.prnewswire.com/news-releases/american-small-business-league-provides-update-on-david-vs-goliath-department-of-defense-lawsuit-300794695.html.
[15] Id.
