FOIA Advisor

Commentary: Top Exemption 4 decisions of 2017

Commentary (2018)Allan BlutsteinComment

The large majority of FOIA decisions issued each year resolve disputes concerning the adequacy of agency searches and/or the withholding of records on privacy, law enforcement, or civil discovery grounds.  Typically, only a small percentage of FOIA disputes involve Exemption 4, a provision that protects “trade secrets and commercial or financial information obtained from a person and privileged or confidential.” But Exemption 4 cases are among the FOIA’s most legally complex and can have a big impact on a company’s bottom line and business practices.  As 2018 gets under way, Allan Blutstein looks back at some of the key Exemption 4 decisions issued over the past twelve months.    

Am. Small Business League v. DOD (9th Cir.) (unpublished)

In 2014, the Northern District of California ordered the Pentagon to release documents concerning Sikorsky Aircraft’s participation in the agency’s Comprehensive Small Business Subcontracting Plan.  In reaching its decision, the district court rejected as “not enough” Sikorsky’s declaration that the “‘[r]elease of the information . . . would cause substantial harm to the company’s competitive position,’ on the basis that a competitor ‘could’ use such information to assess the strengths and weaknesses of Sikorsky’s bid proposals to the agency.” 

On appeal, the Ninth Circuit reversed the district court and held that Sikorsky’s declaration “at least created a genuine issue of fact.”  The Circuit observed that Sikorsky had identified its competitors and averred that those competitors “could use the redacted information to gain a significant competitive advantage.  Nothing more is required to gain protection from disclosure under Exemption 4, and the district court erred in ruling otherwise.”

Frank LLP v. Consumer Fin. Prot. Bureau (D.D.C.)

In a decision otherwise favorable to the government, the court ruled that CFPB had an improper policy of treating records provided to it in response to civil investigative demands (CIDs) as "voluntarily" submitted -- and therefore entitled to greater protection -- for Exemption 4 purposes.  The court reasoned that such submissions should be treated as mandatory because CFPB possesses the legal authority to issue CIDs (which are functionally equivalent to administrative subpoenas), as well as the power to seek judicial enforcement if a CID is ignored.  Going forward, this ruling requires CFPB to evaluate whether releasing CID-obtained records will likely cause substantial competitive harm to the submitter, as opposed to evaluating whether the submitter customarily treats those records as confidential. 

Ctr. for Pub. Integrity v. U.S. Dep't of Energy (D.D.C.)

Here, the court rejected plaintiff’s novel argument that agencies are automatically precluded from invoking Exemption 4 to withhold records related to a corporation’s wrongdoing -- in this instance, illegal lobbying.  The court’s other notable ruling addressed whether the corporation's production of documents in response to an agency “notice letter” was voluntary or involuntary.  Although the agency component that possessed the legal authority to compel production did not author the notice letter, the court found that the agency's letter offered the corporation "no real choice" and that the "very real specter of government compulsion" was sufficient to render the production involuntary. 

Det. Watch Network v. U.S. Immigration & Customs Enforcement (2d Cir.), cert. denied 583 U.S. __ (2017)

The Second Circuit dismissed an attempt by private detention facility contractors to overturn the Southern District of New York’s 2016 decision that the unit prices, bed-day rates and staffing plans appearing in government contracts were not confidential.  Notably, the government declined to join the appeal and let stand the district court’s threshold finding that the negotiated contractual terms were not “obtained from a person” for Exemption 4 purposes, contrary to numerous decisions in multiple circuits.