By Peter R. Maier
Since the enactment of the Freedom of Information Act, Exemption 4 of the Act has served as a
frequent battleground for belligerents to contest the scope of the FOIA's disclosure mandate.
Exemption 4 excludes from the FOIA's command of compulsory disclosure "trade secrets and
commercial or financial information obtained from a person and privileged or confidential." 5
Initially, the courts adopted a broad interpretation of the term "confidential" under FOIA Exemption 4. Specifically, the courts deemed commercial information to be confidential within the meaning of Exemption 4 if it was furnished to the government with the expectation of confidential handling by the submitter and received by the government under a promise of confidential treatment. See, e.g., Bristol-Myers Co. v. FTC, 424 F.2d 935, 938 (D.C. Cir.), cert. denied, 400 U.S. 824 (1970), GSA v. Benson, 415 F.2d 878, 881 (9th Cir. 1969).
Eventually, judicial decisions began to reflect a gradual narrowing of this of confidentiality concept. Rather than examining only the expectations of the submitter and the government with respect to contested commercial documents, courts began to determine the confidentiality of such data by assessing whether the information was of a type that would ordinarily not be revealed to the public by one in the position of the submitter. See, e.g., Ditlow v. Volpe, 362 F. Supp. 1321, 1324 (D.D.C. 1973); M.A. Schapiro & Co. v. SEC, 339 F. Supp. 467, 471 (D.D.C. 1972).
In 1974, however, the District of Columbia Circuit Court of Appeals adopted a sharply circumscribed definition of "confidential" under Exemption 4 in National Parks, in it which it held that: "commercial or financial matter is 'confidential' for purposes of the exemption if disclosure of the information is likely to have either of the following effects: 1) to impair the Government's ability to obtain necessary information in the future; or (2) to cause substantial harm to the competitive position of the person from whom the information was obtained." 498 F.2d at 770 (footnote omitted).
This National Parks test requires that in order for information to be "confidential" -- and thus protected it under Exemption 4 -- the information's disclosure must be likely either to threaten the government's ability to get similar data in the future or pose a threat to the competitive position of the submitter. Since 1974, almost all courts have utilized these National Parks standards in determining whether documents are "confidential" for Exemption 4 purposes.
The apparent rationale for this confidentiality test was a judicial perception that the two policy interests that the National Parks test embodies constitute the only policy interests Congress sought to advance in fashioning Exemption 4. Although it is evident that these two policy interests -- ensuring continued government access to information and protecting the competitive position of persons who aid the government by furnishing facts and statistics -- were within Congress' contemplation in enacting Exemption 4, there is little in the FOIA's legislative history to suggest that Congress intended the scope of Exemption 4 to extend only so far as necessary to safeguard those two particular interests.
Although those two policy interests were undoubtedly among those that the legislative draftsmen
of Exemption 4 sought to advance, they were not the only interests involved. In both the House
and Senate reports on the FOIA, Congress made clear its desire to encompass within this
exemption information "not customarily
Thus, the courts that have applied the National Parks test have become hypnotized by these two particular policy interests among the ones that Congress had in mind in drafting Exemption 4. The National Parks test, in effect, elevates two particular policy interests to the level of statutory language and thereby unduly restricts the breadth of Exemption 4.
It should not be surprising, therefore, that commentators and Congress periodically have
lamented the imperfections of the National Parks test. See, e.g., K. Davis, Administrative Law
The second prong of the National Parks test -- which requires a court to assess whether disclosure would cause harm to the competitive position of the submitter -- is unwieldy. Applying this aspect of the National Parks test frequently necessitates performing difficult, sophisticated economic analyses respecting the competitive position of the party contesting disclosure of the data.
Although the uniformity with which the courts have embraced the National Parks test might suggest the absence of practical alternatives to it, reasonable options are, in fact, available. First, courts could examine confidentiality with reference to the expectations of the submitter and the government at the time of information submission. This was, in substance, the test applied prior to National Parks. But because this standard arguably permits all financial or commercial information to be characterized as confidential wherever its submitter and the government agree that it should be treated confidentially, its critics have charged that its adoption would reduce the confidentiality limitation of Exemption 4 to a nullity.
On the other hand, the government has now urged, instead, that courts should hold as confidential under Exemption 4 any commercial and financial information that (1) the submitter expects to be treated confidentially and (2) is of a type that is entitled to a reasonable expectation of confidentiality by the submitter. The government proposed this test in the 9 to 5 case, which also involves a more narrow question under the first prong of the National Parks test.
Whether information satisfies the requirements of this test might be established by various types of evidence. For example, whether the government provided the submitter with explicit assurances that tendered information would not be disclosed would be highly relevant. Other factors relevant to determining whether information is of a kind that ought to be entitled to a reasonable expectation of privacy might include (1) whether the particular government agency involved historically has treated such information as confidential, (2) the nature of any general communications from the government agency regarding its disclosure policy respecting similar data, and (3) whether the information is of a kind that persons or entities similarly situated to the submitter customarily keep secret.
As one congressional committee observed in reviewing this aspect of the FOIA in 1978, the test of confidentiality under Exemption 4 ought to satisfy three criteria. First, it should be objective; second, it should be blind as to the identity and motive of the requester; third, it should be easy to apply. H.R. Rep. No. 95-1382, "Freedom of Information Act Requests for Business Data and Reverse FOIA Lawsuits," Report by the Committee on Government Operations, 95th Cong., 2d Sess. 22-23 (1978).
The new test proposed above amply satisfies these criteria. First, it is objective in that it determines confidentiality based not only on the expectation of the submitter but on a whether such information is entitled to a reasonable expectation of privacy on an objective basis. While the National Parks test is "objective" in one sense of that term, it also requires agencies and the courts to make highly subjective guesses about the impact of information disclosure on both the government's future access to data and the competitive position of the submitter.
Second, the proposed test is blind with respect to the identity and motive of the person seeking information disclosure. Thus, it preserves this key facet that is woven into the fabric of the FOIA.
Third, this test would be much easier to apply than the National Parks test. Courts could apply it by inquiring into the actual expectations of the information submitter and by examining whether the type of data at issue is entitled to a reasonable expectation of business secrecy based on the relevant factors described above. While this test would allow changes in the concept of confidentiality to reflect evolving standards of business secrecy in the private sector, it would permit proof by both sides as to whether under the circumstances of a particular case the information is of a kind that one would reasonably presume should be entitled to confidentiality.
The case of 9 to 5 Organization for Women Office Workers v. Board of Governors of the Federal Reserve System, in which the First Circuit heard oral argument on May 4, 1983, may signal the advent of such a new test. The outcome of that case, in which a decision is expected shortly, will hardly serve as a final armistice in the hostilities on the Exemption 4 front. In fact, it may only map out new territory in which the proponents and opponents of expansive interpretation of the FOIA will clash.
As this issue of FOIA Update went to press, the U.S. Court of Appeals for the First Circuit handed down its decision in the 9 to 5 case, in which it reversed the district court and, while not fully accepting the government's position, adopted a considerably broadened view of business information protection under Exemption 4. A full discussion of the First Circuit's decision in 9 to 5 will appear in the next issue of FOIA Update.
Mr. Maier, an attorney on the Appellate Staff of the Department of Justice's Civil Division, argued the government's position before the First Circuit Court of Appeals in 9 to 5 Organization for Women Office Workers v. Board of Governors of the Federal Reserve System.
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