Department of Justice Issues New Guidance on Exemption 4 to the Freedom of Information Act
On Oct. 4, 2019, the DOJ issued guidance for determining whether commercial or financial information provided by a person or company is “confidential” under FOIA Exemption 4.
TAKEAWAYS
- When preparing reverse-FOIA submissions, a contractor should address (1) how it kept the information at issue private and confidential and (2) any express or implied assurances that the agency would keep the information confidential.
- Reverse-FOIA submissions no longer need to show that releasing the information could cause substantial competitive harm. This represents a significant change from previous practice.
The Freedom of Information Act (FOIA) generally requires federal agencies to disclose information requested by the public unless the information falls under one of nine exemptions. Exemption 4 exempts from disclosure materials that constitute “trade secrets and commercial or financial information obtained from a person which is privileged or confidential.” (See 5 U.S.C. § 552(b)(4).) Because Exemption 4 is co-extensive with the Trade Secrets Act, 18 U.S.C. § 1905, agencies are “precluded” from releasing information that is covered by FOIA Exemption 4. (See McDonnell Douglas Corp. v. NASA, 180 F.3d 303, 306 (D.C. Cir. 1999).) Consequently, when a contractor learns that a competitor or other member of the public has submitted a FOIA request seeking information the contractor submitted to the Government, the contractor frequently will seek to use Exemption 4 to prevent the Government from disclosing bid and proposal information, as well as other information submitted pursuant to a government contract.
Until this past June’s Supreme Court decision in Food Marketing Institute v. Argus Leader Media, 139 S. Ct. 2356 (2019), a party could typically rely on Exemption 4 to prevent the disclosure of commercial or financial information submitted under compulsion, which is usually the case in contract and proposal documents submitted to the Government where disclosure of the information “is likely to have either of the following effects: (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.” (See Nat’l Parks & Conservation Ass’n v. Morton, 498 F.2d 765, 770 (D.C. Cir. 1974).) In Argus Leader, the Court rejected this test, noting that this test did not find support in the statutory language. (See Argus Leader, Slip Op. at 8.)
In Argus Leader, the Court concluded that information is protected under Exemption 4 “[a]t 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.” (See Argus Leader, Slip Op. at 12.) The Court, however, did not address what assurances of privacy are sufficient for Exemption 4 to apply. The newly issued guidance by the Department of Justice (DOJ) addresses this issue. (There is also a corollary step-by-step guide.) Notably, if a submitter customarily keeps the information private or closely held and there were no “express or implied indications at the time the information was submitted that the government would publicly disclose the information,” DOJ’s guidance instructs agencies that the information is confidential under Exemption 4. Going forward, when preparing reverse-FOIA submissions, contractors should articulate what steps it takes to keep information private and confidential, and affirmatively address the lack of any indication from the agency that the submitted information would be publicly disclosed.
The full impact of Argus Leader is yet to be determined. Some contractor submissions are already protected from disclosure under Exemption 3 to the FOIA. For example, Exemption 3 allows an agency to withhold from disclosure, inter alia, materials “specifically exempted from disclosure by statute ....” (See 5 U.S.C. § 552(b)(3).) Under 41 U.S.C. § 4702 (civilian agencies) and 10 U.S.C. § 2305(g) (defense agencies), unsuccessful proposals for a procurement and successful proposals that are not incorporated into a contract are exempted from FOIA disclosure and thus exempt under Exemption 3. Also, the Federal Technology Transfer Act, 15 U.S.C. § 3710a(c)(7)(A), prohibits agencies from disclosing information if it “is obtained in the conduct of research or as a result of activities under [Title 15, Ch. 63, Technology Innovation] from a non-Federal party participating in a cooperative research and development agreement.”
Many contractor submissions, however, rely on Exemption 4 for protection. Examples of such submissions may include certain proposal information, contract deliverables, correspondence with contracting officials, and voluntary and mandatory disclosures to the Government. In those contexts, we observe that certain provisions of the Federal Acquisition Regulation (FAR) may afford the “assurance of privacy” required under Argus Leader. The FAR states, for example, that during debriefings the Government will protect “[p]rivileged and confidential manufacturing processes and techniques” as well as “commercial and financial information that is privileged or confidential, including cost breakdowns, profit, indirect cost rates, and similar information.” (See 48 C.F.R. § 15.506(e).) Additionally, the FAR provides a protective legend that offerors may use to mark their proposals. (See 48 C.F.R. § 52.215-1.)
In sum, the DOJ’s new guidance provides contractors a new arrow in the quiver that can be used to help protect confidential information submitted to the Government from public disclosure.