Attorney Blog, Human Resources

Supreme Court Expands FOIA Confidentiality Protections for Private Companies

Attorney Harrison Oldham

In Food Marketing Institute v. Argus Leader Media, the U.S. Supreme Court held that government agencies can withhold a private company’s records from public disclosure under Exemption 4 of the Freedom of Information Act (“FOIA”) if the company has treated the information as confidential and also received promises from the government agency to maintain the information’s confidentiality. The Court’s decision overturned the definition of confidential established over forty years ago in Nat’l Parks & Conservation Ass’n v. Morton.

Exemption 4 of the FOIA protects “trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential.”  According to the FOIA Guide, Exemption 4 is is intended to protect the interests of both the government and submitters of information. The exemption also affords protection to those submitters who are required to furnish commercial or financial information to the government by safeguarding them from the competitive disadvantages that could result from disclosure. The exemption broadly covers two broad categories of information in federal agency records: (1) trade secrets; and (2) information that is (a) commercial or financial, and (b) obtained from a person, and (c) privileged or confidential.

The Dispute.

Argus Leader Media (a local newspaper in South Dakota) filed a FOIA request with the United States Department of Agriculture (USDA), seeking the names and addresses of all retail stores that participate in the national food-stamp program—known as the Supplemental Nutrition Assistance Program (SNAP)—and each store’s annual SNAP redemption data from years 2005 to 2010. The USDA declined to disclose the store-level SNAP data, invoking FOIA’s Exemption 4. The South Dakota newspaper was not satisfied with the USDA’s FOIA response and filed suit to compel disclosure of each participating store’s annual sales data.

Previously, precedent from lower federal courts had created a hurdle for Exemption 4 to apply. A private company would need to show that disclosure of information would cause “substantial competitive harm.” Following circuit precedent, the District Court in the underlying case employed this “substantial competitive harm” test, under which commercial information cannot be deemed “confidential” unless disclosure is “likely . . . to cause substantial harm to the competitive position of the person from whom the information was obtained.” Both the trial and appellate courts followed this line of cases. They ruled that the USDA must disclose the annual sales data for participating stores. The courts agreed that revealing store-level SNAP data could work some competitive harm, but it could not say that disclosure would cause “substantial competitive harm,” and thus ordered the information to be disclosed.

The Supreme Court, however, refused to apply the “substantial competitive harm” test. Instead, it relied solely on the words of the statute. The Supreme Court found that Exemption 4 protects confidential, commercial, or financial information, and that the ordinary meaning of “confidential” is anything kept private or secret. The Supreme Court concluded that a private company’s information will remain “confidential” and protected from disclosure under Exemption 4, so long as the private company customarily and actually treats the information as private and has received assurance from the government that it will maintain the information’s confidentiality.

Accordingly, during its review, the Supreme Court of the United States reasoned that disclosure of the contested data would cause its members some financial injury in the highly competitive grocery industry; this concrete injury would be directly traceable to the judgment ordering disclosure; and a favorable ruling from the SCOTUS would redress the retailers’ injury by reversing that judgment.

The Takeaway.

The Supreme Court’s ruling adds significant protections for private companies. Companies must be sure to clearly designate information as confidential as well as receive assurances from the government before disclosing it.

In addition, the U.S. Department of Justice has stated that as “with all significant FOIA developments,” the Office of Information Privacy will issue guidance and provide training on the impact of this decision.

About Harrison Oldham

Harrison grew up in Mansfield, Texas. He attended Texas A&M University for his bachelor’s degree, where he met his wonderful wife, Kelsey. After graduating magna cum laude from Texas A&M, he attended SMU Dedman School of Law, graduating with honors in 2012. Today, Harrison and his wife live in Dallas, Texas with their son, Teddy.

Since graduating from SMU Law, Harrison has worked exclusively in the field of business law. He has spent time in private practice and in-house, working with clients of every size; from single person startups to Fortune 250 companies. Today his practice focuses on serving the diverse needs of businesses and individuals throughout Texas.

You can learn more about him by visiting his website, at: http://lonestarbusinesslaw.com/.

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