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Government Contracts Monitor

Exemption 4: Protection of Confidential Information - The Ground May be Shifting

April 10, 2019

By: Lindsay Simmons

The Supreme Court recently granted a petition for writ of certiorari over (that is, agreed to review) an Eight Circuit decision involving Exemption 4 of the Freedom of Information Act (“FOIA”).  What is Exemption 4?  It is the exemption that protects from public disclosure “trade secrets and commercial or financial information obtained from a person and privileged or confidential.” Why is this important? It is important to all federal contractors because this is the first time the Supreme Court has agreed to hear a case involving this vital FOIA exemption.

The decision under review is Argus Leader Media v. U.S. Department of Agriculture, 889 F.3d 914 (8th Cir. 2018), cert. granted, — S. Ct. —-, 2019 WL 166877 (U.S. Jan. 11, 2019) (No. 18-481).  In Argus, a newspaper (Argus Leader Media), submitted a FOIA request to the Department of Agriculture (“USDA”), seeking sales figures for every grocery store that participates in the Supplemental Nutrition Assistance Program (“SNAP”) – more commonly known as the food stamp program.  The government provides Program participants with a debit-like card that they use to buy food from participating stores. The government is notified regarding each transaction (called “redemption”).  Argus’ FOIA request was directed at these redemption records.

Relying on Exemption 4, the government (USDA) refused to release its SNAP redemption records. Argus filed suit, and the trial court ruled in its favor – in favor of the release of this redemption information. On appeal, the Eighth Circuit affirmed the trial court’s ruling, holding that the SNAP redemption data was not “confidential” information entitled to protection under the Exemption 4. Specifically, the Court found that commercial or financial information is “confidential” for the purposes of FOIA Exemption 4 only if its disclosure is likely to (i)  impair the government’s ability to obtain necessary information in the future; or (ii) cause substantial harm to the competitive position of the person from whom the information was obtained.

Although the redemption records could be commercially useful, the Eighth Circuit said the government was required to show that the stores submitting the data would experience a substantial likelihood of competitive harm if the data was released.  The Court also addressed the argument that the traditional test for release under Exemption 4 should be abandoned in favor of a standard that applies the dictionary definition of “confidential” as meaning “secret.”

The definition of “confidential” is the core point here – the one with the greatest potential impact on appeal before the Supreme Court. As our readers well know, government contractors typically have no choice regarding the submission of their confidential information to the government in proposals and under data rights clauses in their contracts.  A favorable ruling by the Supreme Court – a broadening of the definition of “confidential” under Exemption 4 –would represent a significant step in the protection of government contractors’ confidential information from disclosure to competitors.  If, as argued in the court below, the plain meaning test regarding the definition of “confidential” were to prevail, government agencies would be able to protect (and indeed required to protect) from disclosure all information that contractors keep secret from the public.  In other words, the plain meaning approach would shut the door on companies/competitors seeking to use the FOIA request process to obtain otherwise unavailable competitive information.  The government would shed the burden of establishing that the release would cause substantial harm.  It would also put an end to the debate over whether the information was “required” to be provided to the government, as opposed to information that was “voluntarily” submitted by a contractor.

The Supreme Court’s decision will likely affect application of FOIA Exemption 4 for government contractors.  Stay tuned.

 

Lindsay Simmons is responsible for the contents of this article
@ Jackson Kelly PLLC 2019

 

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