Every government contractor hesitates and ponders whether information confidential and valuable to its business that is disclosed – either voluntarily or by compulsion – in a submission to a U.S. Government agency will be protected from release to a third party pursuant to that dreaded four-letter acronym: F-O-I-A. In a June 24, 2019, landmark decision, the U.S. Supreme Court, in Food Marketing Institute v. Argus Leader Media, has spoken for the first time on FOIA exemption covering such information – and the news is good for contractors seeking maximum protection of their valuable confidential IP and business information.
The Freedom of Information Act, 5 U.S.C. § 552 (FOIA), passed during the Johnson administration, has been the principal vehicle used by third parties seeking records in the possession of a Government agency. Those records include not only those generated by the agency itself but also all documents provided to the agency by persons, businesses and other institutions outside the Government. FOIA has, of course, always exempted “trade secrets and commercial or financial information obtained from a person and privileged or confidential.” 5 U.S.C. § 552(b)(4).
The scope of Exemption 4 was the subject of long-standing debate among various federal courts of appeal. Some (such as the Eighth Circuit Court of Appeals, from which the petitioner Food Marketing Institute sought relief) held that commercial information cannot be deemed “confidential” (and thus exempt from a FOIA request) unless the disclosure is “likely … to cause substantial harm to the competitive position of the person from whom the information was obtained.” Argus Leader Media v. United States Department of Agriculture, 889 F. 3d 914, 915 (2018). In a 6-3 decision, the U.S. Supreme Court overturned precedent articulated by the Eighth Circuit and dating back to the 1974 D.C. Circuit Court opinion in National Parks & Conservation v. Morton, 498 F. 2d 765, requiring a demonstration of competitive harm. Justice Gorsuch in the majority opinion found that the “competitive harm” test was irreconcilable with the plain text of the statute itself, stating that because “confidential” means “‘private or secret,’” the exemption applies to commercial information that is not customarily disclosed to the public and which is communicated to the Government with the implicit or explicit assurance by the Government that it will be kept private.
The Court jettisoned the “competitive harm” requirement, calling it “a relic from a ‘bygone era of statutory construction.’” Because of the plain meaning of the statute itself, the Court stated there was no need to read the tea leaves left in the legislative history of the statute in order to interpret its meaning.
As a result, store-level redemption data of retailers participating in the national food stamp program known as SNAP (Supplemental Nutrition Assistance Program) in the possession of the Department of Agriculture is now protected from the inquiring journalists of the South Dakota newspaper The Argus Leader.
More broadly – and most importantly – the case confirms that any private entity, including a government contractor, which submits commercially sensitive data to the Government under the express or implied assurance that such data will remain confidential need not demonstrate anything more than that it has maintained the confidentiality of the data in order to protect it from third parties seeking its release.
Continue reading at: McCarter & English