McDonnell Douglas Corp. v. National Aeronautics & Space Administration

                  United States Court of Appeals

               FOR THE DISTRICT OF COLUMBIA CIRCUIT

         Argued May 6, 1999       Decided June 25, 1999 

                           No. 98-5251

                 McDonnell Douglas Corporation, 
                            Appellant

                                v.

         National Aeronautics and Space Administration, 
                             Appellee

          Appeal from the United States District Court 
                  for the District of Columbia 
                           (96cv02611)

     Peter L. Wellington argued the cause for appellant.  With 
him on the briefs was Jerald S. Howe, Jr.

     Michael J. Ryan, Assistant United States Attorney, argued 
the cause for appellee.  With him on the brief were Wilma A. 
Lewis, United States Attorney, and R. Craig Lawrence, As-
sistant United States Attorney.

     Before:  Silberman, Williams, and Tatel, Circuit Judges.

     Opinion for the Court filed by Circuit Judge Silberman.

     Silberman, Circuit Judge:  McDonnell Douglas Corporation 
appeals from the district court's grant of summary judgment 
in favor of the National Aeronautics and Space Administra-
tion's (NASA) decision to release certain contract line item 
prices under the Freedom of Information Act.  We reverse.

                                I.

     In this reverse FOIA action, McDonnell Douglas seeks to 
prevent NASA from releasing satellite launch pricing infor-
mation contained in a contract between the two, under which 
the company has agreed to provide medium-light expendable 
launch vehicle services.  In NASA's solicitation of bids for the 
contract, the agency requested the submission of proposed 
prices for certain contract line items, including prices for 
several launch missions and various other launch-related ser-
vices.  McDonnell Douglas responded with a bid based on its 
Delta launch vehicle.  No other contractors submitted pro-
posals for the contract, and after further negotiations on 
prices and terms--including an agreement to eliminate a 
clause stating that pricing information in the contract was 
considered to be in the public domain--NASA awarded the 
contract to McDonnell Douglas.

     Several months later, "FOIA Group, Inc." submitted a 
FOIA request to NASA, seeking a copy of the contract.  
NASA notified McDonnell Douglas of the request, and of the 
company's opportunity to file objections within five days, 
pursuant to its regulations.  See 14 C.F.R. s 1206.610(b)-(d) 
(1999).  The company objected to the release of certain 
information in the contract--including launch service prices, 
cost figures for specific launch service components and over-
head, labor rates, and profit figures and percentages--on the 
ground that it was protected under FOIA Exemption 4 as 
confidential commercial or financial information.

     Exemption 4 provides that an agency is not obliged to 
disclose information consisting of "trade secrets and commer-

cial or financial information obtained from a person and 
privileged or confidential."  5 U.S.C. s 552(b)(4) (1994).  
Whether such information is protected turns in part on 
whether it was provided to the government voluntarily or 
under compulsion:  if the financial or commercial information 
was disclosed to the government voluntarily, it will be consid-
ered confidential for purposes of Exemption 4 if it is the kind 
of information "that would customarily not be released to the 
public by the person from whom it was obtained."  Critical 
Mass Energy Project v. Nuclear Regulatory Comm'n, 975 
F.2d 871, 879 (D.C. Cir. 1992) (en banc).  If the information 
was required, however, it will be considered confidential only 
if disclosure would be likely either (1) to impair the govern-
ment'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.  See id. 
at 878-80 (reaffirming test of National Parks & Conservation 
Ass'n v. Morton, 498 F.2d 765, 770 (D.C. Cir. 1974), but 
confining it to cases of compelled disclosure).  Although if the 
information falls within Exemption 4, the agency is not pre-
cluded from disclosing it under FOIA (an exemption simply 
means that the government is not compelled to disclose it), 
see Chrysler Corp. v. Brown, 441 U.S. 281, 290-95 (1979);  
CNA Fin. Corp. v. Donovan, 830 F.2d 1132, 1133 n.1 (D.C. 
Cir. 1987), we have held that the Trade Secrets Act, 18 U.S.C. 
s 1905 (1994), "is at least coextensive with that of Exemption 
4 of FOIA," id. at 1151.  Accordingly, when a person can 
show that information falls within Exemption 4, then the 
government is precluded from releasing it under the Trade 
Secrets Act.  See McDonnell Douglas Corp. v. Widnall, 57 
F.3d 1162, 1164 (D.C. Cir. 1995).

     McDonnell Douglas claimed that since its decision to enter 
into the contract was voluntary, providing bid information as 
part of that contract was also voluntary.  Therefore, Critical 
Mass governs, and Exemption 4 applies because bid informa-
tion is not the kind of information that it would customarily 
release to the public.  Alternatively, the company argued 
that, even if it were obliged to provide the information to 
NASA, the information fell within Exemption 4 under Na-

tional Parks because disclosure would likely impair the gov-
ernment's ability to obtain such information in the future and 
would likely cause substantial harm to McDonnell Douglas' 
competitive position.  Since the information falls under Ex-
emption 4--either under Critical Mass or National Parks--
the company asserted that the Trade Secrets Act precludes 
the agency from releasing it.

     NASA rejected these arguments and issued a Notice of 
Intent to release the contract's line item pricing information.  
NASA determined that the company was obliged to provide 
the information in the contract, therefore, National Parks 
and not Critical Mass was the controlling standard.  Al-
though NASA determined that the disclosure of certain infor-
mation--labor rates, overhead factors, profit information, and 
launch service cost figures--was likely to cause substantial 
competitive harm to McDonnell Douglas and would not be 
released, NASA regarded the line item pricing information 
differently;  it rejected the contention that competitive harm 
was likely, reasoning that release of pricing information 
would not allow competitors to underbid McDonnell Douglas, 
nor would it allow the company's commercial customers to 
negotiate more effectively and thereby "ratchet down" 
McDonnell Douglas' prices.

     The company filed this reverse FOIA suit, alleging that 
NASA's decision to release the line item pricing information 
was unlawful under the APA.  On cross motions for summary 
judgment, the district court granted summary judgment for 
the agency.  See McDonnell Douglas Corp. v. NASA, 981 
F. Supp. 12, 13 (D.D.C. 1997).

                               II.

     The company not only argues that Critical Mass applies--
that its submission of bidding information is part and parcel 
of the voluntary act of submitting a bid--but it claims that 
the administration, through the Justice Department, is unlaw-
fully seeking to nullify our recent Critical Mass decision by 
taking an unduly restrictive interpretation of "voluntary" 
submissions, and by instructing agencies to operate as if 

Critical Mass had never been decided and only National 
Parks governed Exemption 4 cases.  If the government will 
not make a good faith effort to distinguish the submission of 
Exemption 4-type information that is voluntary from that 
which is required, it is argued we should use the Critical 
Mass test alone to determine whether information is confi-
dential under Exemption 4 and the Trade Secrets Act.  Ac-
cordingly, appellant goes so far as to ask us (presumably 
through another en banc rehearing) to flatly overrule Nation-
al Parks.

     Although it seems somewhat troubling that Justice, in 1993, 
instructed the agencies that they "should" treat "most" infor-
mation given to the government as "required," without any 
serious effort analytically to distinguish voluntarily supplied 
information from that which is required within the meaning of 
Critical Mass, we do not think it is even necessary in this 
case to decide whether appellant's bidding information was 
voluntarily submitted--still less whether we should, as a full 
court, reconsider overruling National Parks.  That is so 
because assuming arguendo that National Parks applies--
that the bidding information was not voluntarily submitted--
we believe the disputed line item price information is confi-
dential commercial or financial information under the Nation-
al Parks test.

     It is undisputed that the total price of the contract may be 
made public.  But the government does not claim that it or 
NASA has any independent legal authority to release line 
item pricing information.  It does point out that NASA has a 
long and consistent practice of doing so.  That is of no 
consequence.  If commercial or financial information is likely 
to cause substantial competitive harm to the person who 
supplied it, that is the end of the matter, for the disclosure 
would violate the Trade Secrets Act.  To be sure, we noted in 
a previous case that "it appeared passing strange" that the 
prices charged to the government for specific goods could be 
confidential, McDonnell Douglas v. Widnall, 57 F.3d at 1167, 
but we did not address the competitive harm issue in that 
case.

     Appellant claimed the release of line item pricing informa-
tion would cause it competitive harm for two reasons:  it 
would permit its commercial customers to bargain down 
("ratchet down") its prices more effectively, and it would help 
its domestic and international competitors to underbid it (the 
company claimed that disclosure of the line item pricing data 
would allow competitors to calculate its actual costs with a 
high degree of precision).

     NASA's response to appellant's concern that its customers' 
bargaining leverage will be enhanced is rather mystifying.  
The agency said that publication of line item prices is the 
"price of doing business" with the government, which either 
assumes the conclusion, or else assumes a legal duty or 
authority on the government to publicize these prices, which, 
as we have noted, the government does not assert.  NASA 
did recognize that if disclosure enabled competitors to under-
bid McDonnell Douglas that would constitute competitive 
harm.  See Gulf & Western Indus., Inc. v. United States, 615 
F.2d 527, 530 (D.C. Cir. 1979).  But the agency "reasoned" 
that underbidding due to the disclosure would not occur 
because price is only one of the many factors used by the 
government in awarding contracts.  That response seems too 
silly to do other than to state it, and pass on.

     Perhaps the most convoluted--even astonishing--reason 
given by NASA for claiming appellant would not be likely to 
suffer competitive harm is that "it is [McDonnell Douglas'] 
competitors who have suffered competitive harm in failing to 
learn the prices for [McDonnell Douglas'] domestic launch 
vehicles" since their line item prices have become public.  
(Emphasis added.)1  As should be obvious, by so stating, 
NASA implicitly recognized that it would be to the competi-
tor's advantage to receive McDonnell Douglas' line item price 
information.  Of course, it follows that appellant will be 
competitively harmed by that disclosure.  That appellant's 

__________
     1 NASA also argued, inconsistently, that disclosure would not be 
harmful to the company's competitive position because competitors 
can underbid McDonnell Douglas now with information already 
available.

competitors have not attempted to stop the disclosure of their 
line item prices is of no significance in determining the issue 
before us.2

                             * * * *

     NASA's decision could either be seen as not in accordance 
with law because relesing the information would be contrary 
to the Trade Secrets Act, or as arbitrary and capricious for 
its illogical application of the competitive harm test.  Under 
either rubric, the decision must be set aside.  Both of the 
reasons McDonnell Douglas advanced for claiming its line 
item prices were confidential commercial or financial informa-
tion are indisputable.  McDonnell Douglas has shown--as 
much as anyone can show before the event--that it is likely to 
suffer substantial competitive harm.  And under present law, 
whatever may be the desirable policy course, appellant has 
every right to insist that its line item prices be withheld as 
confidential.

__________
     2 We need not address McDonnell Douglas' alternative argument 
that disclosure of its pricing information would also satisfy the 
impairment prong of National Parks.  Though we do note that one 
circuit has held that a submitter cannot even raise the government's 
interests on behalf of the agency in a reverse FOIA case.  See 
Hercules, Inc. v. Marsh, 839 F.2d 1027, 1030 (4th Cir. 1988).