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U.S. Supreme Court Broadens FOIA Exemption 4 for ‘Confidential’ Materials

On June 24, 2019, the U.S. Supreme Court in Food Marketing Institute v. Argus Leader Media expanded the Freedom of Information Act’s (FOIA) Exemption 4, excluding from disclosure pursuant to a FOIA request material containing “trade secrets and commercial or financial information obtained from a person and privileged or confidential.” 5 U.S.C. §552(b)(4). Prior case law had limited Exemption 4 to a required application of a “competitive harm” test under which commercial information could not be deemed confidential unless disclosure was “likely…to cause substantial harm to the competitive position of the person from whom the information was obtained.” Nat’l Parks & Conservation Ass’n v. Morton, 498 F.2d 765 (D.C. Cir. 1974). In a 6-3 decision authored by Justice Gorsuch, the Supreme Court rejected the “substantial competitive harm” test in its entirety.

Application of Exemption 4 begins when a business or other private entity either voluntarily provides the government certain information as part of a proposal for a contract or grant, or is otherwise required to provide the government materials under a statute or regulation, and the business marks the materials “confidential” when submitting them to the government. The information is later requested through FOIA, and the government agency withholds the materials designated “confidential (either on its own accord or at the request of the party that provided the materials). A fight ensues whether the information falls under Exemption 4.

This situation arose when Argus Leader Media, a South Dakota newspaper, filed a FOIA request with the Department of Agriculture (USDA), seeking the names and addresses of all retail stores that participate in the national food-stamp program (SNAP), and each store’s annual SNAP redemption data from fiscal years 2005 to 2010. Invoking Exemption 4, USDA declined to disclose the stove-level SNAP data. Argus sued USDA. Following the National Parks precedent, the district court employed the “competitive harm” test, and determined that, while revealing the data could cause competitive harm, disclosure would not definitively cause “substantial competitive harm,” and ordered disclosure.

Petitioner Food Marketing Institute, a trade association representing grocery retailers, intervened and filed an appeal. The Eighth Circuit affirmed, rejecting the Institute’s argument that the “substantive competitive harm” test should be rejected in favor of the ordinary meaning of the term “confidential” used in the statutory language of Exemption 4.

The Supreme Court reversed the Eighth Circuit, describing National Parks as a “relic from a bygone era of statutory construction.” Slip op. at 8. The Court instead focused on the statute’s plain language, and the “ordinary, contemporary, common meaning” of the term “confidential” when Congress enacted FOIA. The Court held the contemporary dictionary definitions of “confidential” established at least one condition to be met for the material to qualify as “confidential” – that the material “must be customarily kept private, or at least closely held, by the person imparting it.” Id. at 6. Another possible condition the Court notes is that when the party receiving the information provides some assurance that the material will be kept confidential. Id.; however, the Court did not resolve whether this second condition is required. In this case, the Court held the information was “confidential” because (1) the retailers did not share the SNAP data or make it public in any way; and (2) it did not lose confidentiality by being shared with USDA because the agency had promised to keep the information private. Id. at 6. As the Court summarized the outcome:

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. Because the store-level SNAP data at issue here is confidential under that construction, the judgment of the court of appeals is reversed and the case is remanded for further proceedings consistent with this opinion.

Id. at 12.

The impact of this decision on parties providing the government sensitive, private commercial, or financial information cannot be overstated. The Court’s rejection of the “substantial harm” test provides parties providing internal business information to the government broader protection for the information they submit. Rather than having to show they would suffer “substantial harm” from the release of the information, the party must only show that they made efforts to keep the information private, and possibly show they received some assurances the information would not be released (as noted, this may not even be required). No longer subject to an esoteric analysis of harm, the government must treat confidential business information in the same manner as the party providing it.

©2019 Greenberg Traurig, LLP. All rights reserved.

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Richard Moorhouse, Greenberg Traurig Law Firm, Northern Virginia, Government Contracts Attorney
Shareholder

Richard Moorhouse has more than 20 years of experience litigating procurement award and contract disputes at the federal, state, and local level. He has extensively prosecuted and defended complex bid protest and claim matters before the U.S. Court of Federal Claims, the U.S. Government Accountability Office (GAO), and the Armed Services Board of Contract Appeals. 

His practice also frequently involves the conduct of internal investigations, the preparation of comprehensive submissions to clients detailing the results of those investigations,...

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Michael Mike Gardner Shareholder Greenberg Traurig Northern Virginia Government Contracts
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Mike Gardner focuses his work on companies who provide national security and infrastructure services to federal and foreign customers. He has experience working with contract negotiations, bid protests, claims and dispute resolution at GAO, the Court of Federal Claims and the Boards of Contract, and has provided compliance support related to the Federal Acquisition Regulations, ITAR, the Defense Security Service, and the Defense Contract Audit Agency.  

Mike also has wide-ranging experience working on international programs managed by the Defense Logistics Agency; global security and nation building programs managed by the Department of State and the Department of Defense; broad spectrum IT solutions including secured cloud data and software as a service programs sponsored by the Department of Defense, the intelligence community and regulated industries like health care, insurance, and financial services; marine industrial work including ship building and repair; and renewable energy project work supporting both major federal facilities and remote, resilient operations.  

Mike works with a large array of clients including assisting large and small businesses on capitalizing on Small Business Administration initiatives. He has also worked with Fortune 50 and privately held companies to develop and implement plans to increase revenue and profitability through organic growth and acquisitions and to plan and execute liquidity events like ESOPs, private equity investment, and M&A events.

Prior to his private law practice, Mike served as a Coast Guard line officer supporting Coast Guard operations in Europe, Africa, and South America.

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Shomari B. Wade Of Counsel Greenberg Traurig DC Government Contracts
Of Counsel

Shomari Wade focuses his practice on government contracts and maintains an active litigation practice which includes bid protests and claims before the Government Accountability Office, Court of Federal Claims, Armed Services Board of Contract Appeals, Civilian Board of Contract Appeals, as well as various Federal and State Courts. He works in small business programs such as SBA 8(a), HUBZone and Service-Disabled Veteran Owned Small Businesses. Shomari’s practice also includes contract formation work, including negotiating of teaming agreements, forming joint ventures and developing small...

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Józef S. Przygrodzki GTLAW Associate Government Contracts Litigation
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Józef S. Przygrodzki focuses his practice on government contracts litigation, counseling, and investigations. Józef advises clients on all aspects of government procurement, including ethics and compliance in procurement and administration of state and local government contracts. He is experienced in litigating bid protests before the Government Accountability Office, the U.S. Court of Federal Claims, as well as before state boards and agencies, as well as having litigated contractor claims before contracting officers, the Boards of Contract Appeals, and various federal courts....

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Brett Castellat Employment Attorney
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Brett A. Castellat represents government contractors on requests for equitable adjustments and in bid protests. He drafts protests before the Government Accountability Office (GAO) and the Small Business Administration (SBA) in disputes involving construction and defense contractors. He also focuses his practice on the representation of employers in a variety of industries regarding Occupational Safety and Health Administration (OSHA) matters. Brett has also assisted in representation involving regulatory compliance under various regulatory frameworks, including the International Traffic...

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