The Supreme Court appears poised to entertain an impending challenging to the well‑developed Circuit law defining the scope of Freedom of Information Act (“FOIA”) Exemption 4 — the National Parks/Critical Mass test.  This post is the second in a series.  The first described the development of the National Parks/Critical Mass doctrine and recounted the somewhat tortured history of Argus Leader Media v. Department of Agriculture, 889 F.3d 914 (8th 2018).  The Food Marketing Institute (“FMI”), the prospective petitioner, will urge the Court to refocus Exemption 4 doctrine on the plain meaning of a critical statutory term — “confidential.”  This post argues that even if the Court does so, the data FMI seeks to protect should fall outside of Exemption 4.

When Judge Randolph urged his D.C. Circuit colleagues to abandon National Parks 27 years ago, he sought to debunk it defenders’ primary policy argument — that under a plain meaning approach “parties, by designating the information they provide as confidential, would wind up controlling whether it is publicly revealed.”  Critical Mass Energy Project v. NRC, 931 F.2d 939, 947-48 (D.C. Cir. 1991) (Randolph, J., concurring), aff’d, 975 F.2d 871 (D.C. Cir. 1992)(en banc), cert. denied, 507 U.S. 984 (1993).  He asserted, “[o]ne may reasonably ask what is wrong with such a system.”  Id. at 948.  Indeed, section 328 of the Dominican Republic-Central America-United States Free Trade Agreement Implementation Act, Pub. L. 109-53, Title III, § 328, 119 Stat. 494 (2005)(codified at 19 U.S.C.A. §4088) seems to embody just such an approach — “[t]he President may not release information . . . which the President considers to be confidential business information unless the party submitting the confidential business information had notice, at the time of submission, that such information would be released by the President, or such party subsequently consents to the release of the information.”

The short answer to Judge Randolph’s challenge, at least in the context of the Argue Leader litigation, is that the aggregate redemption data the Argus Leader seeks is not the retailer’s commercial information (i.e., it is not “obtained from” the retailer).  Moreover, because the data is merely transactional data documenting the sale of goods to citizens on the government’s behalf, it cannot be considered “confidential.”  The Argus Leader will undoubtedly assert the latter point in contesting FMI’s plea for making customary business practice regarding disclosure dispositive.  Response to Application to Recall and Stay Mandate, etc., 5, 19-21 & nn. 30, 32 (Aug. 16, 2018).

I.  Fiscal Transparency — “Follow the Money”

FOIA is designed to ensure that the citizenry, to which the Government is accountable, can obtain agency records revealing “what their [G]overnment is up to.”  U.S. Department of Justice v. Reporter’s Committee for Freedom of the Press, 489 U.S. 749, 772-73 (1989).  Under SNAP, the Government enlists private entities in a program that reimburses them for selling foodstuffs to program beneficiaries on the Government’s account.  The expenditure of public monies is one of the most critical aspects of “what [the] [G]overnment is up to;” how much particular entities make in providing services under Government programs is an important element of fiscal transparency.

One of the U.S. Constitution’s few affirmative disclosure provisions, Article I, Section 9, Clause 7, specifies that “a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.”  Joseph Story explained the importance of the provision as follows: “Congress is made the guardian of th[e] [public] treasure; and to make their responsibility complete and perfect, a regular account of the receipts and expenditures is required to be published, that the people may know, what money is expended, for what purposes, and by what authority.”  3 Joseph Story, Commentaries on the Constitution of the United States §1342 (1833).  Similarly, in U.S. v. Richardson, 418 U.S. 166 (1974), Justice Douglas wrote: “The sovereign in this Nation is the people, not the bureaucracy. The statement of accounts of public expenditures goes to the heart of the problem of sovereignty. If taxpayers may not ask that rudimentary question, their sovereignty becomes an empty symbol and a secret bureaucracy is allowed to run our affairs.”  Id. at 201 (Douglas, J., dissenting); accord, 3 ST. GEORGE TUCKER, BLACKSTONE’S COMMENTARIES: WITH NOTES OF REFERENCE TO CONSTITUTION AND LAWS OF THE FEDERAL GOVERNMENT OF THE UNITED STATES AND OF THE COMMONWEALTH OF VIRGINIA (The University of Chicago Press 2000)(excerpted).  The Clause’s unenforceability, due to its conferral of a generalized entitlement to the public as a whole, which no individual has standing to enforce, U.S. v. Richardson, 418 U.S. at 176-80, does not blunt the normative power of its imperative.  See, 150 CONG. REC. S10205 (Oct. 1, 2004)(daily ed.)(statement of Senator Byrd).

More contemporaneously, the Senate Report accompanying the bill that was to become the Federal Funding Accountability and Transparency Act of 2006, Pub. L. 109-282, 120 Stat. 1186 (codified at 31 U.S.C. §6101 note), explained:

Without a rigorous and transparent accountability system in place to provide visibility into who is receiving Federal funds through contracts and grants, and for what purpose, there is a greater potential for fraud and abuse. . . . [In addition,] [g]reater transparency allows taxpayers to judge whether government funds are being used for purposes they consider valuable, or whether spending in certain areas is excessive or wasteful. It also allows the public to better understand, assess, and appreciate the scope and value of federal investments in their communities and to more fully participate in shaping priorities for Federal spending.

SEN. REP. 109-329, 109TH CONG., 2D SESS. 3 (Sept. 8, 2006).  The Act directed establishment of a website” through which the public could access information on federal monetary awards.  Id. at 1-2.  See generally, Thomas H. McTavish, Accountability and Transparency: Finding the Correct Balance, in COUNCIL OF STATE GOVERNMENTS, THE BOOK OF THE STATES 2009 (discussing fiscal transparency on the state level); see, e.g., Department of State, Foreign Operations, and Related Programs Appropriations Act, 2017, Pub. L. 115-31, 131 Stat. 639, §7031(b) (directing the Secretary of State to continue strengthening the ‘‘requirements of fiscal transparency’’ that each foreign government receiving U.S. assistance should satisfy).

The term “confidential” must contain a normative component.  To qualify as “confidential” the government records withheld must contain information that a business entity is entitled to keep secret.  A business entity is not entitled to keep information “secret” from an entity that has agreed to compensate it for services rendered.  Here the entity providing reimbursement is the United States Government, over which “the people” are sovereign.  Thus, whether or not businesses wish to keep their transactions with the government secret, FOIA’s raison d’être, enabling the citizenry access to information regarding the government’s activities, including government’s reimbursement of private entities for their role in government programs, must prevail.  See, Racal-Milgo Governmentt Systems v. SBA, 559 F. Supp. 4, 6 (D.D.C. 1981) (“[d]isclosure of prices charged the Government is a cost of doing business with the Government.”); but cf., Center for Digital Democracy v. FTC, 189 F. Supp. 3d 151, 162-64 (D.D.C. June 1, 2016)(“nonpublic interpretations and analyses of the FTC’s COPPA Rule” by private regulatory organizations exempt as “confidential,” regardless of whether they constitute “secret law,” which FOIA’s affirmative disclosure provisions forbid).

1. Construing FOIA Exemptions Narrowly

In its petition for recall of the mandate, FMI relied on Department of Interior v. Klamath Water Users Protective Assn, 532 U.S. 1, 12 (2001), and Milner v. Department of the Navy, 562 U.S. 562, 569-76 (2011), in support of its textualist approach.  Food Marketing Institute v. Argus Leader Media, Application To Recall And Stay Mandate, etc. 13, 16-17 (Aug 7, 2017).  But, FMI’s proposed texutalist construction of Exemption 4 limits public access to information in the government’s possession by broadly construing the exemption.  By contrast, in Klamath, Milner, and FCC v. AT&T, 562 U.S. 397 (2011), FOIA requesters successfully invoked textualism to expand the public availability of information. FMI’s broad construction of Exemption 4 would limit the reach of FOIA’s fundamental imperative, making agency records publicly available.  In doing so, FMI’s favored construction conflicts with the Supreme Court’s standard admonition that FOIA’s overall policy is disclosure and the Act’s exemptions are to be construed narrowly.  Milner, 562 U.S. at 571; Klamath, 532 U.S. at 7-8; Department of the Air Force v. Rose, 425 U.S. 352, 360-61 (1976).

But FMI’s argument has even more troubling implications.  Agencies ordinarily possess virtually unreviewable discretion to refrain from invoking many of FOIA’s exemptions, Chrylser Corp. v. Brown, 441 U.S. 281, 293-94 (1979)(FOIA’s exemptions permit, but do not require, agencies to withhold documents); EPA v. Mink, 410 U.S. 73, 80 (1973)(same).  Moreover, Congress has now placed agencies under a statutory obligation to exercise that discretion in favor of disclosure, FOIA Improvement Act of 2016, Pub. L. No. 114-185, 130 Stat. 538, §2 (adding 5 U.S.C. §552(a)(8)(A)(i)).  But “reverse” FOIA actions, enable business entities to invoke the Administrative Procedure Act’s judicial review provision to stop an agency’s release of information, Chrylser Corp. v. Brown, 441 U.S. 281, 317-19 (1979); see, e.g., American Farm Bureau Federation v. EPA, 836 F.3d 963 (8th Cir 2016); Chiquita Brands Intern. v. S.E.C., 805 F.3d 289 (D.C. Cir. 2015).  Business entities’ power to challenge an agency’s failure to invoke Exemption 4 makes a capacious interpretation of the provision all the more damaging.  And indeed, Executive Order 12600, 52 FED. REG. 23781 (1987), requires agencies to establish procedures to notify business entities upon receiving a FOIA requests that seeks “confidential commercial information” and provide an internal appeals process before deciding on the agency’s response.

2.  Analogizing to Exemptions 6 & 7(c)

Analogizing to at least to two doctrines under Exemptions 6 and 7(c) may aid in interpreting Exemption 4.  Exemption 6 permits the Government to withhold “personal and medical files and similar files the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.”  Exemption 7(c) similarly allows the Government to withhold law enforcement records to protect personal privacy. There are obvious differences between the Exemptions 6 and 7(c) on the one hand, and Exemption 4 on the other.  Most notably, Exemptions 6 and 7(c) clearly contemplate balancing individuals’ privacy interests against the public interest while Exemption 4 appears to call for no such balancing regarding business’ interest in their commercial and financial information.  Even so, the caselaw interpreting Exemption 6 and 7(c) is instructive in at least two respects.

First, Exemption 6 doctrine helps illuminate the distinction between information regarding the government and information regarding a private entity.  In Reporter’s Committee for Freedom of the Press, the Court noted that the Government collects and maintains much information on private individuals, 489 U.S. at 773, 774.  But, the Court explained, the point of FOIA is not to allow the public to learn about individuals, but to learn about the Government — “FOIA’s central purpose is to ensure that the Government’s activities be opened to the sharp eye of public scrutiny, not that information about private citizens that happens to be in the warehouse of the Government be so disclosed.”  Id. at 774.  Thus, the only cognizable public interest in obtaining information in files relating to private citizens is furthering knowledge of the Government’s activities. Id.

Similar reasoning can distinguish data over which a business entity can legitimately claim dominion from data over which a business entity and the Government must share control.  (This is not entirely unlike the issues regarding whether records prepared for or received from congressional committees are “agency records” covered by FOIA or congressional records exempt from FOIA, see, e.g., ACLU v. CIA, 823 F.3d 655, 662-68 (D.C. Cir. 2016); United We Stand America v. IRS, 359 F.3d 595, 598-603 (D.C. Cir. 2004); Goland v. CIA, 607 F.2d 339, 345-48 (D.C. Cir. 1978).)  The specific examples of material protected by Exemption 4, survey, business sales statistics, inventories, customer lists, scientific or manufacturing processes, and negotiating position during labor-management mediations, SEN. REP. 89-813, at 44, H.R. REP. 89-1497, at 31, reveal little or nothing about what the Government is up to.  But the amounts of government monies claimed by private individuals does.  In a statute that broadly mandates disclosure, exemptions are to be viewed as limited.  But FMI’s application of Exemption 4 would strike at the statute’s heart.

A second aspect of Exemption 6 doctrine merits consideration.  Under Exemption 6, promises of confidentiality, while relevant, are not dispositive.  Robles v. EPA, 484 F.2d 843, 846 (4th Cir, 1973); Washington Post v. HHS; 690 F.2d 252, 263-64 (D.C. Cir. 1982); Ackerly v. Ley, 420 F.2d 1336, 1339-40 n.3 (D.C. Cir. 1969); Kurzon v. HHS, 649 F.2d 65, 69-70 (1st Cir. 1981).  As the Court explained in Washington Post v. HHS, while “release of information provided under a pledge of confidentiality involves a greater invasion of privacy than release of information provided without such a pledge. . ., to allow the government to make documents exempt by the simple means of promising confidentiality would subvert FOIA’s disclosure mandate.”  690 F.2d at 263.

3.  Impact of the Broad Definition of “Confidential” on other Aspects of Exemption 4

The courts’ narrow definition of the term “confidential, has permitted judges to generously define the terms “commercial” and “financial.”  As the D.C. Circuit explained in Baker & Hostetler LLP v. U.S. Dep’t of Commerce, 473 F.3d 312 (D.C. Cir. 2006),  for Exemption 4 purposes, the term commercial “is not confined only to records that ‘reveal basic commercial operations . . . or relate to the income-producing aspects of a business.’ ” Id. at 319 (quoting Public Citizen Health Research Group. v. FDA, 704 F.2d 1280, 1290 (D.C. Cir 1983)).  It “reaches more broadly and applies . . . when the provider of the information has a commercial interest in the information submitted to the agency.” Id.  Thus, in 100Reporters LLC v. United States Department of Justice, 248 F.Supp.3d 115 (D.D.C. 2017), the Court interpreted the term “commercial” to include corporate compliance plans. Id. at 137.  Similarly, in Public Citizen v. HHS, 66 F.Supp.3d 196 (D.D.C. 2014), the Court permitted the withholding of records pharmaceutical companies filed with HHS’s Inspector General’s Office in compliance with agreements entered into to resolve claims of illegal off-label promotion of drugs.  Id. at 206.  Regulatory compliance plans and the like would not seem to easily fit under a “plain meaning” definition of “commercial.”  

Courts could easily construe the term “commercial” to mean “commercially valuable,” particularly in light of the admonition that exceptions to FOIA’s basic rule of disclosure are to be construed narrowly.  Such an interpretation would easily encompass the “competitive effects” prong of the National Parks/Critical Mass test.  Courts must construe statutory terms in tandem so that the statute works harmoniously as a whole.  FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 (2000); Orton Motor, Inc. v. HHS, 884 F.3d 1205, 1212 (D.C. Cir. 2018).

In short, closing hewing to the dictionary definition of “confidential,” as FMI suggests, ignores Learned Hand’s admonition that “it is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary.” Cabell v. Markham, 148 F.2d 737, 739 (2d Cir.), aff’d, 326 U.S. 404 (1945).  The term must be interpreted in the context of a statute that primarily seeks to ensure governmental transparency.  At the Court observed in King v. Burwell, — U.S. —, 135 S.Ct. 2480 (2015), “when deciding whether the language is plain, we must read the words ‘in their context and with a view to their place in the overall statutory scheme’[;][o]ur duty, after all, is ‘to construe statutes, not isolated provisions.’” Id. at 2489 (quoting Brown & Williamson, 529 U.S. at 133, and Graham County Soil and Water Conservation District v. United States, 559 U.S. 280, 290 (2010)).

II. Implications

An approach that seeks to distinguish documents regarding a business’ activities from documents illuminating “what [the] [G]overnment is up to” seems more tethered to the text and offers a clear answer in the case of aggregate SNAP redemption records.  But unless an extreme pro-disclosure or anti-disclosure position is adopted, in many cases such a test will be no less difficult to apply than the National Parks/Critical Mass test.

The committee reports accompanying FOIA focus on circumstances in which the distinction between business information and the government’s activities is quite clear.  The paradigm case for application of the exemption was business entities’ responses to government questionnaires and surveys, such as Bureau of Labor Statistics surveys.  SEN. REP. 89-813, at 44, H.R. REP. 89-1497, at 31, 100 CONG. REC. 17667 (July 31, 1964)(colloquy between Senators Humphrey and Long).  Such survey responses reveal little about the government’s regulation of, aid to, or cooperation with private entities.  However, in the Senate hearings held in 1963, Assistant Attorney General Norbert A. Schlei, expressed concern about the confidentiality of information “exacted, by statute, in the course of necessary regulatory or other governmental functions.”  HEARINGS ON S. 1666 BEFORE THE SUBCOMM. ON ADMINISTRATIVE PRACTICE AND PROCEDURE OF THE SENATE COMM. ON THE JUDICIARY, 88TH CONG., 1ST SESS. 199 (Oc.t 28, 29, 30 and 31, 1963) [accessible through this webpage](quoted in National Parks & Conservation Assn v. Morton, 498 F.2d at 765, 768-69 (D.C. Cir. 1974)).  He suggested that the bulk of commercial and financial information was exacted in such diverse contexts.  Hearings on S. 1666, at 199.  Even so, the committee reports ultimately adverted to only two such circumstance, where a business provides information to a governmental lending agency in connection with a loan and where information was provided as part of labor-management mediation.  SEN. REP. 89-813, at 44, H.R. REP. 89-1497, at 31.

Aside from loan applications, labor-management mediation, survey responses submitted for statistical compilation, and records of transactions with the government, how are we to distinguish a business’ information from that divulge “what [the] [G]overnment is up to?”  Information submitted to regulators by a regulated entity is, in a sense, the regulated entity’s information, it is generated by the entity about its own actions and financial status, yet critical to assessing the diligence of government regulators.

Or take the audit materials at issue in National Parks itself.  National Parks & Conservation Assn. v. Kleppe, 547 F.2d 673 (D.C. Cir. 1976).  The materials surely reported the business entity’s activities and financial position.  But the relevant statutory scheme created a symbiotic relationship between the Park Service and its concessionaires.  See, id. at 676-77.  The Park Service could confer a monopoly or other preferred status upon concessionaires, id. at 676, but the concessionaires were subject to intrusive review and control of their activities by the Park Service, much as in the private sector franchisees might be subject to review or control by a franchisor. See, id at 676-77; see, 16 C.F.R. §436.1(h)(defining franchise in private commercial context.  The Park Service was required to assess whether a concessionaire has lived up to its contractual obligations and review the reasonableness of the consessionaire’s prices, inter alia.  Id. at 676.  And, of course, the concessionaires were operating on Park Service properties to provide goods and services to Park Service guests.  The risk of “sweetheart” deals, favoritism, and Park Service-concessionaire collusion to impose unnecessary restraints on competition are obvious.

The Government’s review of concessionaire’s financial records, determination of whether to renew concession contracts, and decision to confer a monopoly or “preferred” status on a concessionaire are clearly matters related to the Government’s financial transparency.  Citizens probably cannot assess the Park Service’s decision-making in such matters without access to the information upon which the Parks Service relies in making such determinations.  There are other such complex commercial relationships between the Government and other entities.  See, Forest County Potawatomi Community v. Zinke, 278 F.Supp.3d 181 (D.D.C. 2017) (information relating to a competitor tribe’s unsuccessful application to open a gaming establishment).

I cannot explore these issues in this post.  The point is that barring embrace of one extreme position or another, an interpretation tied more closely Exemption 4’s text of will not be easy to apply and may well require case-by-case adjudication over a period of years to fully flesh out the Exemption’s scope.

III.  Future Posts in this Series

The next post will discuss whether the National Parks/Critical Mass test should be overturned at all.  It will argue that the normative value of leaving long-standing court of appeals precedence in place outweighs the value of fealty to the statutory text, particularly in the context of FOIA.