FOIA Exemption 4: Protecting Proprietary Information (hopefully) Just Got Simpler

“To keep your secret is wisdom; but to expect others to keep it is folly.”

—Samuel Johnson

I frequently handle what are known as “reverse FOIA” responses and have always found them maddening exercises that impose needless burdens on contractors to protect information that they and federal procurement professionals would agree is confidential. Today, the Supreme Court issued a decision in the case of Food Marketing Institute v. Argus Leader Media that will make the protection of information considerably less costly and time consuming to achieve a result that should, to my mind, be a no-brainer.

So what is a “reverse FOIA” scenario. For federal contractors, the classic reverse FOIA circumstance arises when the Government receives a request for information under the Freedom of Information Act in which the disclosure would release a company’s commercially sensitive information. Most commonly, the request is for a copy of a contract, but I have seen requests for other proprietary information including complete copies of proposals.

Generally speaking, FOIA requires the Government to give information to the public upon request. See 5 U.S.C. § 552(a)(3)(A). However, FOIA exempts certain information from disclosure including “commercial or financial information obtained from a person and privileged or confidential.” 5 U.S.C. § 552(b)(4). Despite the seeming clarity of this exemption, a convoluted body of law was spawned in the early post-Watergate era in the case of National Parks Assn. v. Morton, 498 F.2d 765, 770 (D.C.Cir.1974). This case drew a distinction based on whether information was submitted to the Government on a voluntary or involuntary basis. Where information was submitted involuntarily, the National Parks case would only exempt information from disclosure if (1) the disclosure would impair the Government’s need to obtain necessary information in the future, or (2) if the disclosure will cause substantial harm to the competitive position of the person from whom the information was obtained. National Parks, 498 F.2d at 770.

Generally, the submission of information to win a federal contract has been considered to be an involuntary disclosure. Thus, contractors have had to demonstrate that the release of their confidential information would cause substantial harm to their competitive positions. Later cases lowered the bar a bit such that it was not necessary to prove actual harm so long as there was competition to which the information was relevant and there was a “likelihood” of injury.

I have spent many (profitable) hours sifting through contracts and proposals that were the subject of potential release to parse out what should or should not be redacted. Then, having parsed it all out, I spent more time explaining why the disclosure of each different bit of information likely could cause competitive injury and asking that the document be redacted to exclude the proprietary information from disclosure. Frequently, the Government would accept the proposed redactions, but not always.

Fast forward now to today’s ruling. As I said at the outset, I have always thought that Exemption 4 should be an easy standard to apply and that National Parks has done little to advance Governmental transparency and has led to a convoluted body of law that is rife with contradictions. That’s why I find today’s Supreme Court decision a breath of fresh air.

The new standard in my view comes straight from Exemption 4’s text and provides a clear reading: “[W]here commercial or financial information is customarily and actually treated as private by its owner and provided to the government under an assurance of privacy, the information is ‘confidential’ within the meaning of Exemption 4.”

I will keep my fingers crossed that the many legal protections afforded to contractors’ proprietary information will establish a governmental “assurance of privacy” such that information will not be disclosed so long as the contractor treats it as private. You can navigate to the Supreme Court’s decision via this link.