March 26, 2020

By: Mackenzie Bell.,  Smith Currie and Hancock, LLP. 

Every federal government contractor should be concerned about whether confidential and valuable information, disclosed in a submission to the government, will be protected from release to the public under the Freedom of Information Act (“FOIA”). Recently, in Food Marketing Institute v. Argus Leader Media, the Supreme Court addressed the issue for the first time, and the news is good for federal government contractors seeking comprehensive protection for their private commercial and financial information. Food Marketing Institute illustrates how federal general contractors can protect their confidential information from release under the new meaning of Exemption 4.

Prior Standard

Exemption 4 of FOIA protects from the disclosure of “trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential.” But courts dealing with Exemption 4 have grafted a requirement for the federal contractor to show “substantial competitive harm” on to the “privileged and confidential” language of the statute. By 1992, in the Court of Appeals for the D.C. Circuit, for example, a party seeking to halt disclosure under Exemption 4 had to prove that competitors could take advantage of the information and cause harm to the submitting party. This requirement applied to mandatory submissions requested by the government.  For voluntary submissions, the submitting party also had to show that it does not normally release this kind of information to the public.

New Standard

In Food Marketing Institute, the Court rejected these tests. Instead, the Court looked to the plain meaning of the word “confidential” and found two conditions of confidential information: (1) information traditionally kept private by the submitter; and (2) information disclosed when the government provides “some assurance that it will remain secret.” The Court held that the submitter must always illustrate the first condition because Exemption 4 should not treat information as confidential if the owner of the information does not. The Court did not consider whether information typically treated confidentially by the submitter would lose protection if given to the government agency “without assurances that the government will keep it private,” because the record reflected that the government in this case had provided such an assurance. The Court did not provide clear guidance as to whether government “assurance” is always required. Thus, for the moment, this question falls to the district courts, the Department of Justice Office of Information Policy, and FOIA officers to answer.

Department of Justice Guidance on Exemption 4

In response to Food Marketing Institute, the Department of Justice (“DOJ”) Office of Information Policy furnished guidance on the meaning of “confidential information” under Exemption 4. The DOJ Guidance also provides contractors information as to how government agencies will respond to FOIA requests for information that could be subject to Exemption 4. The DOJ Guidance states that “[i]n light of th[e] current legal uncertainty,” agencies should consider both conditions of the Food Marketing Institute test “as a matter of sound administrative practice.” Thus, the DOJ Guidance instructs agencies to consider both the submitter’s treatment of the information and any assurances of confidentiality from the government.

Treatment of Information by the Submitter. The DOJ states that agencies can decide whether submitters keep certain information private based on the records themselves or the agency’s knowledge of the submitter’s practices. It also suggests that agencies contact submitters for more information about their practices.

Assurances of Confidentiality by the Government. The DOJ recognizes that government assurances “can be either explicit or implicit.” Explicit assurances are found in direct communications with the government, general notices on the agency website, or regulations or statutes. These notices can also provide information to the submitter that the government will not keep certain kinds of information confidential. Implied assurances can be inferred according to the “generic circumstances,” such as the government’s treatment of similar information.

Guidance for Federal Government Contractors

At the outset, contractors should keep valuable information confidential, mark it as confidential, and limit its scope. Contractors should also document their disclosure practices in anticipation of the time when a contractor must efficiently respond to an agency’s inquiries and support any claims of confidentiality. When responding to a submitter notification letter, contractors should demonstrate that they protect their private information and that they will only provide such information to the government agency with assurance that it will remain confidential.

Demonstrating that Valuable Information is Kept Confidential. Although Food Marketing Institute and the DOJ Guidance do not detail the specific information that agencies want to know about the submitter’s practices, agencies will likely expect contractors to provide the following:

  • Written organizational policies prohibiting disclosure of confidential information;
  • Relevant contract documents requiring confidentiality or containing nondisclosure provisions;
  • Document markings and legends indicating the information is confidential and explicitly falls under FOIA Exemption 4;
  • Periodic employee training sessions addressing the need for information privacy; and
  • Written declarations showing how records were under limited disclosure within the company.

Contractors must review their information security policies, contract terms, and marking policies to ensure these documents are sufficient to lay the groundwork for demonstrating the submitter’s practices that valuable information is kept confidential.

Requiring the Government to Provide Assurance that Information Remains Confidential. To establish an express assurance, contractors should save any direct communications with the government and any notices on the agency website that expressly assure confidentiality. When disclosing information to the government, the contractor should expressly state that there is no intent by the government to disclose the information to the public or other third parties without an NDA.

The government has not provided any express assurances, contractors should state themselves that the government will maintain the confidentiality of the information. Contractors should review and update their standard protective legends on documents provided to the government with language confirming the contractor’s understanding that the provided information is under an assurance of confidentiality. These legends should state that the information is exempt from disclosure under FOIA Exemption 4 and that the government also assures confidentiality under the Trade Secrets Act, applicable contractual provisions, protective orders, and otherwise.

The views expressed in this article are not necessarily those of ConsensusDocs. Readers should not take or refrain from taking any action based on any information without first seeking legal advice.