Exemption 4 after the Supreme Court's Ruling
in Food Marketing Institute v. Argus Leader Media
On June 24, 2019, the Supreme Court issued an opinion addressing the meaning of the word "confidential" in Exemption 4 of the Freedom of Information Act (FOIA), 5 U.S.C. § 552(b)(4) (2012 & Supp. V 2017), that overturned over forty years of precedent. See Food Marketing Institute v. Argus Leader Media, 139 S. Ct. 2356 (2019). This guidance will discuss the newly defined contours of Exemption 4 in the wake of the Supreme Court's decision, and will provide agencies with workable rules in applying Exemption 4 going forward.
Exemption 4 before Argus Leader
Exemption 4 protects "trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential." 5 U.S.C. § 552(b)(4). The word "confidential" is not defined in the FOIA and over the years courts have applied various tests to determine whether commercial and financial information provided to an agency fell within the parameters of Exemption 4. In the early years of the FOIA, courts of appeals defined the term "confidential" based on whether there was an express or implied promise of confidentiality by the government to the submitting party, see GSA v. Benson, 415 F.2d 878, 881 (9th Cir. 1969), or whether the information was of the type not customarily released to the public by the submitter and which the government "agreed to treat . . . as confidential." Sterling Drug, Inc. v. FTC, 450 F.2d 698, 709 (D.C. Cir. 1971); see also M.A. Schapiro & Co. v. SEC, 339 F. Supp. 467, 471 (D.D.C. 1972).
In 1974, however, these earlier tests were superseded by National Parks & Conservation Association v. Morton, 498 F.2d 765 (D.C. Cir. 1974), which significantly altered the test for confidentiality under Exemption 4 and became the leading case on the issue until the Supreme Court's recent decision. In National Parks, the Court of Appeals for the District of Columbia Circuit determined that the term confidential should be defined using an objective standard that satisfies the legislative purpose of the exemption. See id. at 767. Relying on legislative history, the D.C. Circuit declared that the term confidential should be read to protect governmental and private interests in accordance with a two-prong test. Id. at 770. The court determined that information should be treated as confidential if its disclosure would: 1) impair the government's ability to obtain necessary information in the future, or 2) cause substantial harm to the competitive position of the submitter of the information. Id. While establishing this two-prong test, the court expressly reserved the question of whether any other governmental interests might also be embodied in a "third prong." See id. at 770 n.17. Subsequent courts eventually did adopt a third prong to protect information that would compromise agency program compliance and effectiveness.
Almost two decades after National Parks, the D.C. Circuit, sitting en banc, had an opportunity to reexamine the standard for determining confidentiality and reaffirmed the National Parks test. See Critical Mass Energy Project v. NRC, 975 F.2d 871, 875 (D.C. Cir. 1992). Notably, however, the court's decision in Critical Mass was based primarily on the principle of stare decisis, a legal doctrine which counsels against the overruling of an established precedent. While the court reaffirmed the National Parks test, it also set out to clarify "some misunderstanding as to its scope and application." Id. Relying on its understanding of Exemption 4's legislative purpose, the D.C. Circuit confined the application of the National Parks test to information that was required to be provided to the government and established a separate standard for determining whether information "voluntarily" submitted to an agency is "confidential." Under Critical Mass, commercial or financial information that was "voluntarily" provided to the government was categorically protected as long as it was not customarily disclosed to the public by the submitter. Id. at 879. On March 22, 1993, the Supreme Court denied a petition for certiorari to review the decision in Critical Mass, leaving it and National Parks as the leading cases for defining the term "confidential" under Exemption 4 until the Supreme Court's recent review of the issue in Argus Leader.
Procedural History Leading to the Supreme Court's Decision
The records at issue in Argus Leader involved the Supplemental Nutrition Assistance Program (SNAP), formerly known as the food-stamp program, maintained by the U.S. Department of Agriculture (USDA). See Argus Leader Media v. USDA, 900 F. Supp. 2d 997, 1000 (D.S.D. 2012). The requester sought five years of data that included the names and addresses of all retail stores that participated in the SNAP program, as well as the yearly amount of SNAP benefits each store redeemed. Id. USDA released the names and addresses of over 321,000 retailers participating in the SNAP program, but withheld the store-level redemption data under Exemptions 3 and 4 of the FOIA. Id. at 1001; see also S. Ct. Joint App. 87, Argus Leader.
The District Court affirmed USDA's action under Exemption 3, in conjunction with 7 U.S.C. § 2018(c), a statute that protects certain SNAP related data. Id. at 1008. The Court of Appeals for the Eighth Circuit reversed and remanded, finding that the withheld redemption data did not fall within withholding provision of Section 2018(c). Argus Leader Media v. USDA, 740 F.3d 1172, 1173 (8th Cir. 2014).
On remand, USDA continued to withhold the data under Exemption 4, arguing that disclosure would likely cause retailers substantial competitive harm. Argus Leader, 224 F. Supp. 3d 827, 830 (D.S.D. 2016). The District Court held a two-day bench trial and heard expert testimony from both agency and industry witnesses in order to determine whether the National Parks test for confidentiality was met. Id. at 830-831. The agency presented testimony from representatives from three retail store chains that participated in the SNAP program and from an officer of an association of retail grocery stores to show that store-level SNAP redemption data was customarily held confidential within the retail-food-store industry. Id. at 830. The agency did not proffer specific evidence about the practices of the roughly 321,000 other individual SNAP retailers whose information was sought by the FOIA request. See id. The district court ultimately found the competitive harm arguments made by USDA to be speculative and insufficient to meet the standard set by National Parks. Id. at 835. Accordingly, the court ordered the release of the redemption data. Id.
After being notified that USDA did not plan to appeal, Food Marketing Institute (FMI), a trade group representing grocery retailers, intervened and appealed to the Court of Appeals for the Eighth Circuit. See Argus Leader Media v. USDA, 889 F.3d 914, 916 (8th Cir. 2018). Before the Eighth Circuit, FMI argued that the court should disregard the National Parks standard and should instead apply the ordinary dictionary definition of the term "confidential" to determine whether Exemption 4 applied. See id. at 916 n.4. The court rejected this argument and affirmed the district court's decision that the data did not satisfy the "substantial competitive harm" test. Id. at 917.
FMI petitioned the Supreme Court to review the matter, and on January 11, 2019, the Court granted FMI's petition for writ of certiorari. See Food Mktg. Inst. v. Argus Leader Media, 139 S. Ct. 915, 202 L. Ed. 2d 641 (2019).
The Supreme Court's Rejection of the National Parks Test
In Argus Leader the Supreme Court addressed the question of "when does information provided to a federal agency qualify as 'confidential'" under Exemption 4. Food Mktg. Inst. v. Argus Leader Media, 139 S. Ct. 2356, 2360 (2019). Noting that the FOIA itself does not provide a definition of the term "confidential," the Court found that "as usual, [it must] ask what [the] term's 'ordinary, contemporary, common meaning' was when Congress enacted FOIA in 1966." Id. at 2362 (quoting Perrin v. United States, 444 U.S. 37, 42 (1979)). Citing a version of Webster's New Collegiate Dictionary contemporaneous to the enactment of Exemption 4, the Court found that "[t]he term 'confidential' meant then, as it does now, 'private' or 'secret.'" Id. at 2363.
The Supreme Court emphasized that "[n]otably lacking from dictionary definitions, early case law, or any other usual source that might shed light on the statute's ordinary meaning is any mention of the 'substantial competitive harm' requirement" established in National Parks. Id. The Court criticized the National Parks standard for expanding the definition of confidential beyond the term's ordinary meaning based on select portions of legislative history. Id. at 2364. The Court explained that it could not approve such "a casual disregard of the rules of statutory interpretation," which focus on "the ordinary meaning and structure of the law itself," when as in this case, that examination provides a clear answer. Id. In rejecting the National Parks test, the Court noted that it "has drawn considerable criticism over the years," and that even the D.C. Circuit had "distanced itself from the opinion" in Critical Mass. Id. at 2365. In Critical Mass the D.C. Circuit had retained the substantial competitive harm test for required submissions, but "adhered to a much more traditional understanding of the statutory term 'confidential'" for voluntary submissions. Argus Leader, 139 S. Ct. at 2365. That, in and of itself was problematic, though, as the Supreme Court could not "discern a persuasive reason to afford the same statutory term two such radically different constructions." Id.
In rejecting National Parks, the Court was not persuaded by Argus Leader's attempts "to try to salvage the result, if not the reasoning" of that decision. Id. First, the Court rejected Argus Leader's "rearranging [of] the text of Exemption 4 to create a phrase that does not appear in the statute: 'confidential commercial information,'" which Argus Leader maintained was a phrase akin to a preexisting common law term of art that covers only information "whose release would lead to substantial competitive harm." Id. The Court explained that it does not ordinarily "imbue statutory terms of art associated with a specialized common law meaning when Congress hasn’t itself invoked the common law terms of art associated with that meaning." Id.
The Court also rejected Argus Leader's argument that Congress effectively ratified the National Parks standard by enacting similar phrases in other statutes. Id. The Court noted that while this "might (or might not) tell us what later Congresses understood those other statutes to mean, it tells us nothing about Congress's understanding of the language it enacted in Exemption 4 in 1966." Id. at 2366.
Finally, the Court also rejected Argus Leader's policy argument that the "substantial competitive harm" requirement from National Parks should be maintained because FOIA exemptions should be construed narrowly. See id. at 2366. The Court explained that it normally has "no license to give [statutory] exemption[s] anything but a fair reading." Id. The Court opined that "just as [it] cannot properly expand Exemption 4 beyond what its terms permit," it likewise "cannot arbitrarily constrict it either by adding limitations found nowhere in its terms." Id.
Supreme Court's Definition of "Confidential"
Based on the Ordinary Meaning of the Term
As noted above, from the outset of its analysis, the Supreme Court found that the term "confidential" under Exemption 4 continues to carry the same meaning today that it did during the FOIA's enactment, which is information that is "private" or "secret." Id. at 2363. The Court further held that "[c]ontemporary dictionaries suggest two conditions that might be required for information communicated to another to be considered confidential." Id. First, "information communicated to another remains confidential whenever it is customarily kept private, or at least closely held, by the person imparting it." Id. Second, "information might be considered confidential only if the party receiving it provides some assurance that it will remain secret." Id.
The Court determined that the first condition – that the information customarily be kept private or closely held by the submitter – must be met, because "it is hard to see how information could be deemed confidential if its owner shares it freely." Id. The Court determined that this condition had been met in the case because the record reflected that SNAP retailers do not customarily disclose store-level SNAP data. See id.; see also Argus Leader, 224 F. Supp. 3d at 830 (discussing testimony from agency witnesses).
As to the second condition – whether information must be communicated to the government with some assurance that it will be kept private – the Court found that it did not need to resolve that question, as that condition was clearly satisfied in the case before it. Argus Leader, 139 S. Ct. at 2363. USDA had a long history, through its promulgation of regulations, of promising retailers that it would keep the store-level SNAP data confidential. Id.; see, e.g., 43 Fed. Reg. 43275 (1978).
In conclusion, the Court held that "at least where commercial or financial information is both 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." Argus Leader, 139 S. Ct. at 2366.
The Court's ruling thus leaves two questions open. First, is it necessary for the government to provide some assurance of confidentiality to the submitter of information at the time the information is conveyed to the government so that it does not "lose its confidential character," Id. at 2363, and if such an assurance is required, can it be implied? The Supreme Court's prior decision in Department of Justice v. Landano, which the Court cited in Argus Leader, see 139 S. Ct. at 2364, provides helpful analysis in answering these questions.
Department of Justice v. Landano, 508 U.S. 165 (1993)
Decades prior to its decision in Argus Leader, the Supreme Court had examined the term "confidential" in the context of the protections afforded to confidential sources under Exemption 7(D) of the FOIA. See Dep't of Justice v. Landano, 508 U.S. 165 (1993). The requester in Landano argued that certain FBI sources could not have reasonably expected confidentiality because they could be called to testify and the FBI might be obliged to reveal their names and the information they provided under Brady, the Jenks Act, or federal discovery rules. Id. at 173. Like the Court in Argus Leader, the Court in Landano rejected that argument based on the dictionary definition of the term "confidential." In light of that definition, the Court determined that "[i]n common usage, confidentiality is not limited to complete anonymity or secrecy." Id. The Court explained, "[a] statement can be made 'in confidence' even if the speaker knows the communication will be shared with limited others, as long as the speaker expects that the information will not be published indiscriminately." Id.
Applying this understanding of the term "confidential" to Exemption 7(D), the Court then turned to the government's argument for a presumption that all FBI sources who provide information during the course of a criminal investigation should be considered confidential. The Court rejected this argument, finding that "the communications the FBI receives can range from the extremely sensitive to the routine," and it is therefore not reasonable to infer an implied understanding of confidentiality in all cases. Id. at 176. At the same time, the Court explained that "[m]ore narrowly defined circumstances," could "provide a basis for inferring confidentiality." Id. at 179. Using an objective test, the Court explained that factors that could be considered in determining if confidentiality can be inferred in the context of Exemption 7(D) are the "nature of the informant’s ongoing relationship with the [government]" and "the character of the crime at issue," as well as "the source's relation to the crime." Id.
As discussed more fully below, the Supreme Court's approach to defining the term "confidential" in Landano, including the objective test it provides for determining if confidentiality can be implied, provides a helpful framework for applying the new Exemption 4 standard established in Argus Leader.
Applying the Argus Leader Decision in Determining
Whether Information Is "Confidential" Under Exemption 4
In light of the Supreme Court's decision in Argus Leader, agencies should no longer apply the "substantial competitive harm" test from National Parks to determine whether information is "confidential" under Exemption 4. Rather, as the Supreme Court detailed in its opinion, agencies should apply the ordinary meaning of that term. That meaning can potentially implicate two conditions, namely, (1) whether the information is "customarily kept private, or at least closely held," by the submitter; and (2) whether the government provides "some assurance" that the information will not be publicly disclosed. See Argus Leader, 139 S. Ct. at 2363. Although the first condition must normally be established at least with evidence about general industry practices, it is yet unclear whether future judicial precedents governing Exemption 4 will require that both conditions exist. The Supreme Court did not have occasion to decide that issue in Argus Leader, where both were "clearly satisf[ied]." Id. In light of that current legal uncertainty, agencies should as a matter of sound administrative practice consider both conditions in the process of determining whether to invoke Exemption 4's protection for "confidential" commercial or financial information. The step-by-step guide being issued contemporaneously with this guidance should be followed to aid agencies in making that determination.
First Condition – Submitter's Treatment of the Information
First, in order to qualify as "confidential," the party imparting the information (i.e., the submitter) should customarily treat the information as private. As the Supreme Court explained, "it is hard to see how information could be deemed confidential if its owner shares it freely." 139 S. Ct. at 2363. Often an agency can determine whether this condition is met based on its own knowledge of the information, the submitter's practices, and/or from the records themselves. Agencies may also seek additional information from the submitter about its practices. And as Argus Leader itself demonstrates, industry representatives can provide the necessary information regarding the customary treatment of such information. That option is particularly appropriate in contexts in which a large number of submitters would make it difficult to collect information from each submitter directly.
Second Condition – Assurance of Confidentiality by Government
As mentioned above, while the Supreme Court's opinion did not determine to what extent the second condition – an assurance of confidentiality by the government – must also be met, agencies should as a matter of sound administrative practice consider whether the context in which the information was provided to the agency reflects such an assurance.
Such an assurance of confidentiality can be either explicit or implicit. Neither the Court's decision in Argus Leader nor any of the authority it cited suggests a requirement of an express (as opposed to implied) assurance of confidentiality by the government. Notably, when discussing "assurances," the Court cited approvingly to the Ninth Circuit's "conclu[sion] that Exemption 4 would 'protect information that a private individual wishes to keep confidential for his own purposes, but reveals to the government under the express or implied promise' of confidentiality." Argus Leader, 139 S. Ct. at 2363 (quoting GSA v. Benson, 415 F.2d 878, 881 (9th Cir. 1969) (emphasis added).
An express assurance of confidentiality can be established in several ways. It can be found in direct communications with the submitter, as well as through general notices on agency websites or, as in Argus Leader, through regulations indicating that information will not be publicly disclosed. Where an express assurance of confidential treatment exists, assuming that the submitter also satisfies the first condition, the standards for confidentiality under Exemption 4 are met.
Of course, such notices or communications could also explicitly notify submitters of the agency's intention to publicly disseminate the information. In those situations, the information, when objectively viewed in context, would be deemed to have lost its "confidential" character under Exemption 4 upon its submission to the government, given that the submitter was on notice that it would be disclosed.
In determining whether there was an implied assurance of confidentiality, agencies can be guided by the analytical framework provided in Landano. As noted above, in Landano, the Court provided an objective test to assess whether "an implied assurance of confidentiality can be inferred," based on "generic circumstances" surrounding the communication between the informant and the government that would "characteristically support an inference of confidentiality." 508 U.S. at 179. As Landano explained for criminal investigation contexts, factors such as the "nature of the informant's ongoing relationships with the [government]" and "the nature of the crime and the source's relation to it" may help determine whether there was an implied promise of confidentiality under Exemption 7(D). Id.
Similarly, in the context of Exemption 4, agencies can look to the context in which the information was provided to the government to determine if there was an implied assurance of confidentiality. Factors to consider include the government's treatment of similar information and its broader treatment of information related to the program or initiative to which the information relates. For example, an agency's long history of protecting certain commercial or financial information can serve as an implied assurance to submitters that the agency will continue treating their records in the same manner.
Conversely, such factors may in some contexts result in the opposite conclusion that the submitter could not have had a reasonable expectation of confidentiality. For example, absent an express assurance by the agency, a submitter would not normally have a reasonable expectation of confidentiality for records the agency has historically disclosed. In addition, what the government pays a private entity to supply goods or services to the government reflects the government’s own actions and will often undermine a submitter’s claim to reasonably expect such information to be kept confidential.
Prior to Argus Leader, agencies had a long history of conducting predisclosure notification of submitters, seeking their views on whether a contemplated FOIA disclosure could likely result in substantial competitive harm.
Many agency predisclosure notification regulations have followed the model provided by the Department of Justice, which defines the term "confidential commercial information" more broadly, without reference to competitive harm, and instead refers more generically to material that may be protected under Exemption 4. In the wake of Argus Leader, agencies should now use those predisclosure notification procedures when necessary to seek the submitter's views on whether the two conditions that agencies should consider in determining whether information is "confidential" for purposes of Exemption 4 of the FOIA, as outlined in this guidance, are met.
The Supreme Court's decision in Argus Leader changed the way agencies should define the word "confidential" for purposes of Exemption 4 of the FOIA. The "substantial competitive harm" test was found to be inconsistent with the terms of the statute. Instead, the term confidential is to be afforded its ordinary, common meaning. Attached to this guidance is a step-by-step guide for agencies to use to determine whether information can be protected as confidential under Exemption 4. Agency personnel with any questions about applying the new standard are encouraged to contact OIP.