Contractor Intel May Be Safer Under Supreme Court’s FOIA Ruling

Companies don’t have to show that disclosure of their private information would cause “substantial competitive harm” in order to maintain privacy under the Freedom of Information Act, the U.S. Supreme Court ruled June 24.

The government must prevent public disclosure under FOIA Exemption 4 if that information is customarily and actually treated as private by its owner and provided to the government under an assurance of privacy, Justice Neil M. Gorsuch said.

Exemption 4 shields from disclosure trade secrets and commercial or financial information.

Gorsuch’s decision in Food Marketing Institute v. Argus Leader Media reversed a ruling forcing a trade association representing grocery retailers to disclose information related to a national food-stamp program.

This ruling is a “big deal” for federal contractors, which submit significant amounts of information that they consider to be confidential and proprietary to the government , said Edmund M. Amorosi of Smith Pachter McWhorter PLC, Tysons Corner, Va.

The substantial competitive harm test, created in a 1974 decision by the U.S. Court of Appeals for the D.C. Circuit, “can be a difficult and time consuming bar to meet, requiring litigation and expert testimony in some cases,” he told Bloomberg Law.

By overruling that decision, National Parks & Conservation Assn. v. Morton, a contractor will only have to show that the information it wants protected from a FOIA request is kept confidential, he said.

It will be “more difficult to use FOIA to collect business intelligence about competitors,” he said.

Contractors now have a simpler, clearer bar to meet to protect information from public release, said Kendra Norwood of Wiley Rein LLP, Washington.

FOIA requests previously “forced contractors, under tight deadlines, to prepare fulsome explanations to government agencies, arguing for the protection of their proprietary information,” she said.

“These responses required contractors to grapple with alternative, and vague, standards for the information, as well as the amount of harm that would result from the release,” she said.

Contractors were at the mercy of government agencies, and then courts, to understand and agree with the business implications of disclosure, she said.

‘Left Open’

The Supreme Court’s ruling, however, “left open whether contractors need to also demonstrate that the government provided ‘some assurance’ that it would maintain the confidentiality, so contractors would be wise to make this additional demonstration until Exemption 4 is further clarified by the courts,” she said.

Joanne L. Zimolzak of LeClairRyan, Washington, agreed the ruling is positive for those that want to protect their information from disclosure, but that “it is not fully clear how the new standard will apply to information in government contracts.”

In federal procurement, there is an assurance of confidentiality when a contractor submits information, she said.

“There is not, however, an assurance of confidentiality when an accepted proposal is later incorporated in a government contract,” she said.

Contractors often argue that pricing and technical data are protected from disclosure, but the definition of trade secret under Exemption 4 is fairly narrow, she said.

“If the information at issue falls outside this definition but consists of confidential business information that provides a competitive advantage, presumably some other test will need to be applied” to stop disclosure, she said.

FOIA Exemption 3 precludes the release of information that is prohibited from disclosure by another federal law, such as the prohibition on disclosing bid information prior to a contract award, she said.

Baker Botts LLP represented Food Marketing Institute. Orrick, Herrington & Sutcliffe LLP represented Argus Leader Media.

The case is Food Marketing Inst. v. Argus Leader Media, U.S., No. 18-481, 6/24/19.