FOIA: Keeping information confidential

FOIA: Keeping information confidential

August 08, 2019 | By Kenneth Hansen in Washington, DC

A US Supreme Court decision in late June will make it easier for federal agencies to withhold confidential information received from private companies from public disclosure when responding to Freedom of Information Act requests.

Protection is no longer limited to "confidential information whose release would cause substantial competitive harm" to the supplying company. Now, to be withheld from release in response to a FOIA request, the information only needs to be "confidential."

At the same time, some members of Congress are considering amending the FOIA to require agencies to release such information.

The Supreme Court decision was in a case called Food Marketing Institute v. Argus Leader Media.

The Freedom of Information Act is a 1966 statute that requires US government agencies to disclose information requested by the public in the belief that government transparency is a good organizing principle in a democracy.

Companies that submit information to the government worry that the information will fall into the hands of competitors. About 10% of FOIA requests are filed by news organizations. The remaining requests come from law firms, companies and individuals.

Agencies responding to FOIA requests send a notice to the person whose information it is before disclosing the information. Some types of information are not disclosed. See the sidebar below.

Areas of Controversy

Under the FOIA, federal agencies are obligated to release any information requested by a member of the public unless an exemption applies. If an exemption applies, then they have the right, but not an obligation, to withhold the requested information, unless some other statute requires that the information be withheld.

The relevant exemption for business confidential information is "exemption 4," which excuses from disclosure information supplied by a company that consists of "[t]rade secrets or commercial or financial information that is confidential or privileged." While the scope of exemption 4 has generated a great deal of litigation over the years, with various federal district and circuit courts having different views, it has never before been considered by the Supreme Court.

Non-disclosure of trade secrets and privileged information has not been particularly controversial. Trade secrets are protected by the Uniform Trade Secrets Act, which not only permits but obligates an agency to withhold trade secrets supplied by a company and makes unauthorized disclosure by a federal employee a crime. Thus, where business confidential information arguably constitutes a trade secret, agencies are understandably inclined to protect it. When in doubt, agencies have often left it to the courts to require them to release the information.

Neither has much controversy arisen as to privileged information, the scope of which is relatively clear.

The key controversy has been with respect to what constitutes confidential information for purposes of protection from disclosure under exemption 4. That was the question in Food Marketing Institute v. Argus Leader Media.

The case arose from an FOIA request filed by Argus Leader Media, owner of the Argus Leader, a South Dakota newspaper, with the US Department of Agriculture. The newspaper was seeking release of the names and addresses of stores participating in the US food stamp program (the Supplemental Nutrition Assistance Program or SNAP) and each participating store's SNAP redemption data for the preceding five years. The USDA tried to meet the newspaper half way by identifying the participating stores, but would not release the redemption data, basing its refusal on exemption 4, which protects "trade secrets and commercial or financial information obtained from a person and privileged or confidential."

As summarized by the court:

Unsatisfied by the agency's disclosure, Argus sued the USDA in federal court to compel release of the store-level SNAP data. Like several other courts of appeals, the Eighth Circuit has engrafted onto Exemption 4 a so-called "competitive harm" test, under which commercial information cannot be deemed "confidential" unless disclosure is "likely . . . to cause substantial harm to the competitive position of the person from whom the information was obtained.

The US district court applied the competitive harm standard and found in favor of Argus. USDA appealed to a US court of appeals, where the Food Marketing Institute, a trade association for retail groceries, intervened in support of USDA's position. When the appeals court affirmed, maintaining the "substantial competitive harm" test, the Food Marketing Institute appealed to the US Supreme Court.

The Supreme Court took a different view. Justice Gorsuch's opinion reflected the court's unanimous rejection of the substantial competitive harm standard for business confidential information to be protected from disclosure by a federal agency. Writing for the majority (himself and five other justices — Roberts, Thomas, Alito, Kagen and Kavanaugh), Gorsuch concluded that the plain meaning of "confidential" should guide non-disclosure. Justice Breyer (joined by Justices Ginsburg and Sotomayor) dissented in part, arguing that some "genuine harm" should come from disclosure if it is to be blocked, but the minority justices agreed that the prevailing standard was misguided.

New Standard

Going forward, the standard is that confidential business information provided to the government should be protected regardless of whether its release would cause substantial competitive harm or, in fact, any harm at all, as long as it is confidential.

But just what is "confidential information"?

To determine what constitutes confidential information for purposes of exemption 4, the Court said, "the term 'confidential' meant 'private' or 'secret'" and referred to contemporaneous definitions of "confidential" in leading dictionaries in 1966 when FOIA was enacted. The court said those dictionaries suggested two requirements for information to be confidential:

In one sense, information communicated to another remains confidential whenever it is customarily kept private, or at least closely held, by the person imparting it . . . . In another sense, information might be considered confidential only if the party receiving it provides some assurance that it will remain secret.

The court then asked whether both tests are needed:

Must both of these conditions be met for information to be considered confidential under Exemption 4? At least the first condition has to be; it is hard to see how information could be deemed confidential if its owner shares it freely.

Thus, a necessary condition for information to be confidential is that the company treats it as such.

As to the requirement that the relevant agency promise to keep the information confidential, the court asked:

Can privately held information lose its confidential character for purposes of Exemption 4 if it's communicated to the government without assurances that the government will keep it private?"

The Court did not answer that question because there was no need. The USDA had "long promised retailers that it will keep their information private." Whether information qualifies for such protection only if the agency has promised to protect it, or what degree of protection an agency would have to offer in order for exemption 4 to apply, remains an open question.

It might be easily answered if the government were not involved. If I share a secret with someone without extracting his or her promise to keep the information confidential, it may no longer be a secret. One could argue the same outcome should apply to information shared voluntarily with a government agency without a promise of confidentiality.

But what if companies are legally obligated to share that information, such as in connection with the audit of a federal contractor? Also, there are degrees of volunteering. Information can be mandatorily required to support an application for a federal loan program, even though the decision to apply in the first place is wholly voluntary. Should such information not be protected? There can be strong public interests in having companies volunteer information needed to inform government programs and policies. Whether exemption 4 protection should be lost because information was provided voluntarily is not so clear.

In any event, businesses that find themselves sharing confidential information with the government, whether voluntarily or not, can take comfort from the Food Marketing Institute decision that the information they provide is more likely than before to be kept confidential.

Congress Gets Involved

The Supreme Court decision has raised concerns in Congress.

The Hill newspaper reports that Congressional discontent is rising with respect to the degree of governmental transparency offered by FOIA. Much of that concern relates to agency compliance with FOIA generally, such as failures to respond in a timely fashion to FOIA requests. Additionally, both the Environmental Protection Agency and the Department of Interior have drawn criticism for adopting new FOIA regulations that provide for enhanced review of FOIA requests by political appointees.

Some influential members of Congress have raised the possibility of reversing the new protection provided for confidential business information coming out of the Food Marketing Institute decision.

Senator Chuck Grassley (R-Iowa) said, in a speech on the Senate floor:

Transparency laws like the Freedom of Information Act help provide access to information in the face of an opaque and obstinate government. Unfortunately, a recent Supreme Court ruling and new regulations at EPA and the Department of Interior are undermining access . . . . The public's work ought to be public. So, I'm working on legislation to address these developments and promote access to government records.

Grassley was chairman of the Senate Judiciary Committee, which oversees the FOIA, before moving this year to head the Senate tax-writing committee.

His speech followed a letter from a bipartisan, bicameral group of members delivered to the Government Accountability Office, the investigatory arm of Congress, requesting a review of agency compliance with FOIA. The letter said:

In 2016, Congress passed the FOIA Improvement Act of 2016 to expand public access to government records . . . . Among other reforms, the 2016 Act codified a presumption of openness, allowing agencies to withhold records only when there is foreseeable harm to an interest protected by an exemption or a legal requirement preventing their release. Some agencies are not fully implementing the 2016 improvements and continue to burden requesters with unlawful delays and denials. For these reasons, we request GAO build on its 2018 assessment and conduct a comprehensive review of compliance with FOIA since the 2016 amendments.

Among the provisions in the FOIA Improvements Act of 2016 is one that provides that agencies "shall withhold information" under FOIA "only if the agency reasonably foresees that disclosure would harm an interest protected by an exemption" (or if disclosure is prohibited by law).

The 2016 amendments were not discussed in the Food Marketing Institute opinion. Perhaps they should have been. FOIA issues are not constitutional, but matters of statutory interpretation, where a more recent statute will trump the language, and any judicial interpretations, of an earlier law.

While the Supreme Court concluded that exemption 4 applies where business-supplied information is confidential without the need to show its release would cause substantial competitive harm, the revised FOIA provides that the information, even though subject to the exemption, should still be released unless the "agency reasonably foresees that disclosure would harm an interest protected by an exemption."

Best Advice

The FOIA seems likely to remain a work in progress.

Federal agencies that collect information from private companies will necessarily be revising their FOIA procedures to eliminate the finding of a risk of substantial competitive harm as a condition of withholding company-supplied information.

Between the question left unanswered by the Supreme Court as to whether agencies need to promise protection in advance in order to provide it (absent a statute requiring it), on one hand, and the possibility of Congress legislating different outcomes, on the other, companies providing federal agencies with information that they want to be kept confidential would be well advised to seek assurances in advance from the agency that it will do so if it legally can.

The nine FOIA exemptions

The Freedom of Information Act provides the following nine exceptions to what is otherwise an federal agency’s obligation to release information requested by a member of the public:

Exemption 1:

Information that is classified to protect national security.

Exemption 2:

Information related solely to the internal personnel rules and practices of an agency.

Exemption 3:

Information that is prohibited from disclosure by another federal law.

Exemption 4:

Trade secrets or commercial or financial information that is confidential or privileged.

Exemption 5:

Privileged communications within or between agencies, including those protected by the:

  1. deliberative process privilege (provided the records were created less than 25 years before the date on which they were requested);
  2. attorney-work product privilege, or
  3. attorney-client privilege.

Exemption 6:

Information that, if disclosed, would invade another individual’s personal privacy.

Exemption 7:

Information compiled for law enforcement purposes that:

  1. could reasonably be expected to interfere with enforcement proceedings,
  2. would deprive a person of a right to a fair trial or an impartial adjudication,
  3. could reasonably be expected to constitute an unwarranted invasion of personal privacy,
  4. could reasonably be expected to disclose the identity of a confidential source,
  5. would disclose techniques and procedures for law enforcement investigations or prosecutions, or would disclose guidelines for law enforcement investigations or prosecutions if such disclosure could reasonably be expected to risk circumvention of the law, or
  6. could reasonably be expected to endanger the life or physical safety of any individual.

Exemption 8:

Information that concerns the supervision of financial institutions.

Exemption 9:

Geological information on wells.