U.S. Supreme Court Reduces Category of Third-Party “Confidential” Records Subject to Disclosure Under the Freedom of Information Act

July 2, 2019

On June 24, 2019, when the U.S. Supreme Court issued its ruling in Food Marketing Institute v. Argus Leader Media, 2019 WL 2570624, 588 U.S. - - - (June 24, 2019) (“FMI”), it made confidential commercial and financial information provided to the U.S. government by private parties subject to exemption from disclosure under the Freedom of Information Act (“FOIA”) even though disclosure of that information would not cause substantial competitive harm.    

Enacted in 1966, FOIA provides that any person has the right to access federal agency records or information, unless the information falls under one of nine FOIA exemptions.  5 U.S.C. § 552(b).  Exemption 4 provides that “trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential” are not subject to mandatory disclosure.  5 U.S.C. § 552(b)(4).  Under a test created by the D.C. Circuit Court of Appeals in 1974, in National Parks & Conservation Association v. Morton, 498 F.2d 765, 770 (D.C. Cir. 1974), information submitted to government agencies was considered confidential under FOIA Exemption 4 (and therefore exempt from disclosure under FOIA) “only if the disclosure is likely to: (1) impair the Government’s ability to obtain necessary information in the future; or (2) cause substantial harm to the competitive position of the person from whom the information was obtained.”  Later, in Critical Mass Energy v. Nuclear Regulatory Commission, 975 F.2d 871, 884 (D.C. Cir. 1992), the D.C. Circuit clarified that the substantial harm component only applied to compulsory private party submissions and that voluntary submissions should be withheld if the party customarily did so. 

The Supreme Court’s decision in FMI overturned the National Parks and Critical Mass tests.  In a 6-3 decision by Justice Neil Gorsuch, the Court held that there was no legislative basis for the D.C. Circuit’s creation of a carve out from Exemption 4 protections for otherwise confidential information required to be supplied by third parties to the government the disclosure of which would not cause substantial competitive harm.   

FMI involved an effort by Argus Leader, a South Dakota newspaper, to obtain access through a FOIA request to retailer provided, store-level data concerning participants in the Supplemental Nutrition Assistance Program (“SNAP”) in the possession of the U.S. Department of Agriculture (“USDA”).  When the USDA refused to disclose the requested store-level SNAP data, citing Exemption 4, Argus Leader filed suit against the USDA for disclosure of the data.  After the U.S. District Court for South Dakota ordered disclosure of the requested information, the USDA declined to appeal but alerted FMI which, on behalf of its grocery retailer members, successfully intervened and filed an appeal.  The Eighth Circuit Court of Appeals applied the law in National Parks and ordered disclosure of the data, concluding that despite the probability that disclosure of the store-level financial data would be harmful to retailers, the retailers were unable to show that disclosure would cause substantial competitive harm.  Argus Leader Media v. United States Dep't of Agric., 889 F.3d 914, 917 (8th Cir. 2018).  FMI successfully obtained a stay of ordered disclosure under FOIA and a grant of certiorari from the Supreme Court.

Since there was no definition of the term “confidential” in the 1966 statute, the Supreme Court first concluded that “confidential” in Exemption 4 “meant then as it does now, ‘private’ or ‘secret.’”  Confidentiality, according to the Court, mandates two things: “(1) that the information is kept private or at least closely held by the person providing it; and (2) that the party receiving it provides some assurances that it will remain secret.”  The Court determined that the retailers here met the first requirement, and did not resolve the second requirement because it was undisputed that the retailers were in compliance.  Slip Op. at 5.

The Court went on to conclude that there was no basis for writing the National Parks “substantial competitive harm” requirement into the meaning of “confidential.”  The majority opinion stated that while FOIA exemptions should be narrowly construed, “the exemptions are as much a part of [FOIA’s] purposes and policies as the statutes disclosure requirement.”  In overturning National Parks, the Court concluded that it “could not expand Exemption 4 beyond what its terms permit.”  Slip Op. at 8.  As such, proprietary commercial and financial information that is provided by private parties to government agencies and provided to the government under an assurance of privacy will be considered “confidential” under Exemption 4.

Justice Breyer, joined by Justices Ginsberg and Sotomayor, partially dissented from the majority opinion.  While rejecting the “substantial competitive harm” test, Justices Breyer, Ginsberg, and Sotomayor argued that there still needs to be a showing of “genuine” harm for the information to be protected under Exemption 4.  The partially dissenting justices worried that the breadth of majority’s decision “will deprive the public of information for reasons no better than convenience, skittishness, or bureaucratic inertia.”  Slip Op. at 17.

The elimination of the substantial competitive harm test will make it easier for disclosing entities to protect information they keep confidential from disclosure under FOIA and, conversely, harder for the press, academics and competitors to obtain access to confidential information provided by third-parties to the government, since those seeking protection from disclosure need only show that the information has been maintained as confidential.

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