United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued May 4, 2006 Decided July 7, 2006
No. 05-5258
DIAMOND VENTURES, LLC,
APPELLEE
v.
HECTOR V. BARRETO, ADMINISTRATOR, UNITED STATES
SMALL BUSINESS ADMINISTRATION,
APPELLANT
Appeal from the United States District Court
for the District of Columbia
(No. 03cv01449)
Alan Burch, Assistant United States Attorney, argued the
cause for the appellant. Kenneth L. Wainstein, United States
Attorney and Michael J. Ryan, Assistant United States Attorney,
were on brief. R. Craig Lawrence, Assistant United States
Attorney, entered an appearance.
Joshua N. Rose argued the cause for the appellee.
Before: HENDERSON, ROGERS and GRIFFITH, Circuit Judges.
Opinion for the Court filed by Circuit Judge HENDERSON.
Concurring opinion filed by Circuit Judge ROGERS.
2
KAREN LECRAFT HENDERSON, Circuit Judge: Hector
Barretto, Administrator of the Small Business Administration
(SBA), seeks interlocutory review of a district court order
allowing the principals and employees of Diamond Ventures
LLC (Diamond Ventures) access to applications submitted to the
SBA in connection with the SBA’s Small Business Investment
Company (SBIC) program. The district court granted access via
a protective order issued pursuant to Federal Rule of Civil
Procedure 26 in Diamond Ventures’ lawsuit against the SBA.
For the following reasons, we grant the SBA’s interlocutory
appeal, reverse the district court’s order and remand for further
proceedings.
I.
Under the SBA’s SBIC program, see 15 U.S.C. §§ 681 et
seq., a successful applicant is granted a license to operate as an
SBIC, a small venture capital resource for small businesses.1
The SBA guarantees the SBIC’s securities in the event the SBIC
fails, allowing the SBIC to better leverage capital investment.
The heart of the application process involves an applicant’s
completion of the Management Assessment Questionnaire
(MAQ), which includes detailed descriptions of the applicant’s
proposed operations, investment strategies, expertise and
proposed sources of capitalization, including general categories
of anticipated investment funds. MAQ, reprinted at Joint
Appendix (JA) 25. The MAQ states that the information
included therein “will be kept confidential to the extent
permitted by law.” Id. Between December 2001 and October
2002, Diamond Ventures applied for an SBIC license from the
SBA four times and was denied a license each time. See, e.g.,
1
Unless otherwise noted the facts are taken from the parties’
submissions below. See Def’s Memo. in Support of Mot. for Prot.
Order, JA 6; Plaintiff’s Mem. re: Def’s Mot. for Prot. Order, JA 65.
3
Letter from Jeffrey D. Pierson, SBA Associate Administrator for
Investment, to C. Earl Peek, Managing Partner, Diamond
Ventures (Feb. 25, 2003), JA 182. Diamond Ventures’ principal
organizer, Earl Peek, then filed a complaint on its behalf against
the SBA, alleging Diamond Ventures’ applications had been
denied on the basis of race in violation of the Equal Credit
Opportunity Act, 15 U.S.C. §§ 1691 et seq.2
Pursuing discovery, Diamond Ventures sought production of
all MAQs submitted by other SBIC applicants to the SBA. The
SBA offered Diamond Ventures’ counsel access to all of the
more than 300 SBIC applications it has on file but opposed
disclosure of the applications to Diamond Ventures’ principals
and employees on the grounds that each SBIC applicant has an
expectation of privacy regarding its own MAQ and that the
SBA’s policy is to treat the information contained therein as
confidential. The parties could not agree on a protective order
and eventually filed simultaneous motions for a protective order
under Federal Rule of Civil Procedure 26(c)(7).3 JA 59, 65.
2
Peek originally brought the claim pro se on behalf of himself and
Diamond Ventures. Diamond Ventures later retained counsel and
filed an amended complaint with itself as the only plaintiff. See
Diamond Ventures v. Barretto, No. 03-1449, 2nd Am. Compl., R.
Doc. 47.
3
Rule 26(c)(7) provides that a party may move “that a trade secret
or other confidential research, development, or commercial
information not be revealed or be revealed only in a designated way.”
Under the rule “[t]he court may enter an order restricting disclosure of
trade secrets and confidential research, development, or commercial
information obtained during discovery. . . . The court can fashion any
order it sees fit, limiting how the information may be used, who may
see it, etc. . . .” Baicker-McKee et al., Federal Civil Rules Handbook,
571–2 (2003 ed.) (citing Seattle Times v. Rhineheart, 467 U.S. 20
4
The two motions were identical except that Diamond Ventures’
version sought to allow its “officers and other personnel . . . who
have a need to use protected materials in order to prepare for and
assist in the prosecution of this action” access to the MAQ
applications while the SBA’s limited access to Diamond
Ventures’ counsel.4 Compare Diamond Ventures’ Proposed
Prot. Order ¶ 3(a)(ii), JA 123, with SBA’s Proposed Prot. Order
¶ 3(a), JA 60. Diamond Ventures’ counsel argued that Diamond
Ventures could not adequately press its discrimination claim
without Peek’s assistance because of Peek’s expertise. Diamond
Ventures’ counsel also stated that hiring an outside expert to
review the MAQs would be “prohibitively expensive.” Pl.’s
Mot. re: Def.’s Mot. for Prot. Order, JA 75.
On January 18, 2005 the district court by minute order
denied the SBA’s motion, JA 127 (Denial Order), and one week
later granted Diamond Ventures’ motion, entering a protective
order that allowed Diamond Ventures’ principals and employees
access to the MAQs. JA 128 (Protective Order). The SBA filed
a motion for reconsideration. On April 18, 2005, the district
court denied the SBA’s motion, stating that it “was not
persuaded . . . that the information [in the MAQs] is
confidential, or, as Defendant claims, that the applicants have an
expectation of privacy in the information they submit.” Apr. 17,
(1984) (emphasis added)).
4
Diamond Ventures’ proposed management included, in addition
to Peek, Dileep Rao and Milton Marbarosh. The SBA’s proposed
protective order sought to deny any Diamond Ventures principal or
employee access to the MAQs. Diamond Ventures argues before us
that Peek “is the only member of the management team whose access
to the disputed documents is necessary to plaintiffs’ ability to
prosecute this action at a feasible cost.” Appellee’s Br. 2 n.1.
5
2005 Reconsideration Order at 2, JA 175 (Reconsideration
Order). The Reconsideration Order noted that Diamond
Ventures argued “persuasively[] that it would be cost prohibitive
for it to hire independent experts merely to review the
documents. Instead, it must rely on its principals’ expertise to
assist counsel in determining what competitive information is
relevant and necessary to the claims.” Id. The SBA appeals the
three orders and in the alternative petitions for a writ of
mandamus preventing release of the information. See
Appellant’s Br. 16–17.
II.
A. Jurisdiction
In Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541
(1949), the United States Supreme Court set forth the “collateral
order” doctrine authorizing the interlocutory appeal of an order
so long as the order “[1] conclusively determine[s] the disputed
question, [2] resolve[s] an important issue completely separate
from the merits of the action, and [3] [is] effectively
unreviewable on appeal from a final judgment.” Will v. Hallock,
126 S.Ct. 952, 957 (2006) (quotations omitted). The doctrine is
“stringent[ly]” applied so as not to “overpower the substantial
finality interests” of 28 U.S.C. § 1291.5 Id.
The first and third Cohen factors are plainly met in this case.
The Protective Order conclusively determines the sole issue in
this dispute: Diamond Ventures’ principals’ and employees’
access to the MAQs. In addition, the order granting such access
5
28 U.S.C. § 1291 provides that courts of appeals “shall have
jurisdiction of appeals from all final decisions of the district courts of
the United States.” A decision is “final” under section 1291 if it
“leaves nothing for the court to do but execute the judgment.” Pigford
v. Veneman, 369 F.3d 545, 547 (D.C. Cir. 2004) (quoting Catlin v.
United States, 324 U.S. 229, 233 (1945)).
6
would be unreviewable at the litigation’s end because the harm
the SBA alleges—competitive harm to the SBIC applicants
caused by Diamond Ventures’ principals’ review of the formers’
MAQs—could not be undone on appeal. See Providence
Journal v. FBI, 595 F.2d 889, 890 (1st Cir. 1979)
(confidentiality lost once documents were surrendered pursuant
to court order; “[t]he status quo could never be restored”). The
closer issue is the second Cohen requirement, which itself
consists of two prongs: separability and importance. As to
separability, Diamond Ventures’ management’s access to the
MAQs has nothing to do with the merits of its discrimination
claim. Diamond Ventures argues that the “importance” factor
is lacking because confidential information, unlike privileged
material, is discoverable under the federal rules. Appellee’s Br.
16–18 (citing and distinguishing In re Sealed Case (Medical
Records), 381 F.3d 1205, 1209–10 (D.C. Cir. 2004) (Medical
Records) (discovery order compelling disclosure of privileged
information was “important in Cohen’s sense” because appellant
claimed information was protected by psychotherapist’s
privilege and interests promoted by protecting it from disclosure
were “weightier than the societal interests advanced by the
ordinary operation of final judgment principles”) (citation and
quotation marks omitted). An “important issue” under Cohen is
determined not by the nature of the information being sought but
by the interest that would be harmed if immediate review were
not allowed weighed against the interest in finality. See United
States v. Philip Morris, 314 F.3d 612, 617 (D.C. Cir. 2003)
(under Cohen, issue is important “if the interests that would
potentially go unprotected without immediate appellate review
of that issue are significant relative to the efficiency interests
sought to be advanced by adherence to the final judgment rule”)
(citing Digital Equip. v. Desktop Direct, 511 U.S. 863, 879
(1994)); id. at 618–19 (“The importance prong requires
weighing the institutionally significant status or relationship at
7
stake.”) (quotations omitted). In Philip Morris we held that a
discovery order implicating the attorney-client privilege was
significant compared to the counterbalancing interest in finality
because the privilege “rests at the center of our adversary
system.” Philip Morris, 314 F.3d at 618. In Medical Records,
the significant interest under Cohen’s second factor was that the
documents sought to be discovered were covered by the
psychotherapist’s privilege under Federal Rule of Evidence 501
and by the medical records privilege under the District of
Columbia Municipal Code. Medical Records, 381 F.3d at
1209–10.
Using the Philip Morris test, we believe the privacy and
competitive interests of the SBIC applicants that “would
potentially go unprotected without immediate appellate review”
overcome the interest in finality. As the SBA points out, the
MAQ contains information of the type “routinely protected”
under the Trade Secrets Act, see Appellant’s Reply Br. 7 (citing
18 U.S.C. § 1905), and under Exemption 4 of section 552 of the
Freedom of Information Act,6 cf. McDonnell Douglas Corp. v.
U.S. Dep’t of Air Force, 375 F.3d 1182, 1190, 1192 (D.C. Cir.
2004) (concluding disclosure of pricing information likely to
cause substantial competitive harm and therefore exempt from
disclosure). The SBA submitted declarations from current and
former SBA officials stating that the SBA has in the past
successfully invoked FOIA Exemption 4 to protect MAQ
information from disclosure. See Decl. of Margaret Theresa
Dennin, Chief Administrative Officer for SBA Investment
Division, ¶ 4, JA 58 (“SBA has never disclosed confidential
business information contained in MAQs in response to a FOIA
6
FOIA’s Exemption 4 exempts from disclosure “trade secrets and
commercial or financial information obtained from a person and
privileged or confidential.” 5 U.S.C. § 552(b)(4).
8
request”); Decl. of Michael Wyatt, former SBA General
Counsel, ¶ 5, JA 149 (“SBA takes the position and advises
Applicants that their [MAQ] submissions fall within FOIA
Exemption 4”). While we do not equate the MAQ with a trade
secret,7 we do believe that the notice on the face of the MAQ
itself that the information submitted “will be kept confidential
to the extent permitted by law” as well as the SBA’s and SBIC
applicants’ institutional interests in confidentiality bring the
MAQ within caselaw allowing interlocutory appeal.
An SBIC applicant relies on the notice, along with other
assurances given by the SBA,8 in deciding to submit the MAQ
which discloses vital business strategies such as the categories
of investors from whom it has solicited funds before applying,
7
We note, however, that if MAQ information were protected under
the Trade Secrets Act, it nonetheless could be discoverable. See Fed.
R. Civ. P. 26(c)(7); supra note 3 (court “may enter an order restricting
disclosure of trade secrets,” fashioning “any order it sees fit”);
Grumman Aerospace Corp. v. Titanium Metals Corp., 91 F.R.D. 84,
90 (E.D.N.Y. 1981) (“Nor does the Trade Secrets Act . . . provide any
basis for preventing disclosure. Disclosure pursuant to the discovery
rules is disclosure ‘authorized by law,’ which the terms of the Act
permit.”). Any protection provided by statute would still be relevant
to the balancing of interests required under Rule 26. See Medical
Records, 381 F.3d at 1215–16 (“[I]n determining which interests to
weigh in the Rule 26 balance, courts look to statutory confidentiality
provisions, even if they do not create enforceable privileges.”).
8
See Dennin Decl. ¶¶ 4–5, JA 57–58 (“I have had numerous
opportunities to receive feedback from SBICs regarding their
objections to the disclosure, either through SBA’s response to a FOIA
request or in civil litigation, of confidential and proprietary business
information they submit to SBA, including [MAQ information]. . . .
SBA has never disclosed confidential business information contained
in MAQs . . . absent an appropriate protective order.”).
9
see MAQ at 11, JA 35, categories of anticipated sources of
investment funds, id. at 12, JA 36, names and contact
information of its equity partners, id. at 13, JA 37, and its
“investing strategy.” Its “investing strategy,” according to the
MAQ, represents the ideal dollar distribution of an applicant’s
investments among industry sectors and its overall investment
and risk reduction philosophy. Id. at 16, JA 40. The “cost[] of
delay,” Philip Morris, 314 F.3d at 618, would be the release of
the information—submitted to the SBA with notice the
information would be kept confidential to the extent permitted
by law—to a potential competitor. This cost outweighs the
“costs of piecemeal review,” id. at 617–18, that underlie the
finality rule because, once the information is disclosed, the
SBIC applicant’s confidentiality interest is permanently lost. As
in Philip Morris, where we held that the release of information
covered by the attorney-client privilege would eviscerate the
“institutional interest” in “full and frank communication
between client and attorney,” id. at 618, releasing MAQ
information whose confidentiality an applicant is notified will
be protected would eviscerate the “full and frank” disclosure
between the applicant and the SBA necessary to the effective
enforcement of the SBIC program. If an applicant hesitates to
disclose information regarding its business plan to the SBA, the
agency may then have to make a licensing decision without the
benefit of full information—potentially resulting in a loss to the
public fisc given the fact that the SBA guarantees an SBIC’s
securities in the event of default. See 15 U.S.C. § 683(b)
(authorizing SBA to “purchase, or to guarantee the timely
payment of all principal and interest as scheduled on, debentures
or participating securities issued by” SBIC). Moreover, the
SBIC program could also be crippled by future applicants’
unwillingness to disclose information regarding their business
plans upon learning of the disclosure of the MAQs here.
Appellant’s Br. 21–22; see also Akzo N.V. v. U.S. Int’l Trade
10
Comm., 808 F.2d 1471, 1483 (Fed. Cir. 1986), cert. denied, 482
U.S. 909 (1987) (“Disclosure of sensitive materials to a
[business] adversary would undoubtedly have a chilling effect
on the parties’ willingness to provide the confidential
information essential to the [agency’s] fact-finding processes.”)
We believe the confidentiality of an SBIC applicant’s MAQ
information is a sufficiently important interest to authorize our
review under Cohen.
B. The Merits
As noted, the district court has wide discretion in managing
discovery. Medical Records, 381 F.3d at 1215 (“ ‘Rule 26 vests
the trial judge with broad discretion to tailor discovery
narrowly,’ ” and “ ‘it is appropriate for the court, in exercising
its discretion . . . , to undertake some substantive balancing of
interests . . . .’ ”) (quoting Crawford-El v. Britton, 523 U.S. 574,
598 (1998) (alterations in Medical Records) and Laxalt v.
McClatchy, 809 F.2d 885, 890 (D.C. Cir. 1987)); 8 Wright and
Miller, Federal Practice and Procedure § 2043 (2d ed. 1987)
(determining “reasonable protective measures . . . to minimize
the effect on the party making the disclosure” of confidential
information within trial court’s discretion). We review the
district court’s discovery ruling for abuse of discretion. Medcial
Records, 381 F.3d at 1211. With respect to a protective order
issued pursuant to Rule 26(c)(7), the district court is to
undertake “an individualized balancing of the many interests
that may be present in a particular case.” Id. (quotation
omitted); see In re Sealed Case, 856 F.2d 268, 271 (D.C. Cir.
1988) (remanding discovery order because district court did not
“show engagement in this essential balancing process”).
The SBA argues that the district court made three mistakes
of fact that led it to improperly weigh the competing interests.
First, the district court stated it “was not persuaded . . . that the
information” in the MAQ “[was] confidential or, as Defendant
claims, that the applicants have an expectation of privacy in the
11
information they submit.” Reconsideration Order at 2, JA 175.
Second, it was not convinced that “disclosure of the MAQ
information to competitive bidders could be harmful to
applicants and chill the bidding process” inasmuch as “there is
no competitive advantage because SBICs do not compete with
each other for funding.” Id. Third, the district court found that
Diamond Ventures’ lawyers had to rely on its principals’
expertise to assist them in determining what MAQ information
was relevant to the discrimination claim because it would be too
costly for Diamond Ventures to hire an outside expert.9
We agree with the SBA that the district court erred in
finding that SBIC applicants have no expectation of privacy in
their MAQs—the notice on the face of the MAQ that the
information included therein “will be kept confidential to the
extent permitted by law” belies its finding. The district court
ignored the notice and rejected without explanation the SBA’s
9
The district court also concluded that to the extent the SBA feared
public disclosure of the MAQ data, that fear was negated by the
stipulation in the Protective Order that “protected material shall be
used solely for the purposes of this litigation.” Protective Order ¶ 3(a)
at 2, JA 129; Reconsideration Order at 2, JA 175. The SBA maintains
that once Diamond Ventures’ principals have information regarding
the business operations and strategies of other SBIC applicants, they
cannot be reasonably expected to refrain from using the information
merely because they learned of it in this litigation. Use limitations are
not unusual in protective orders, see e.g., 8 Wright and Miller, Federal
Practice and Procedure § 2043 n. 21 (2d ed. 1987) (citing cases), and
there is no reason to conclude that Diamond Ventures’ principals
would willfully disobey a court order. But see U.S. Steel v. United
States, 730 F.2d 1465, 1468 (Fed. Cir. 1984) (recognizing likelihood
of inadvertent disclosure of trade secrets if information disclosed to
competitor’s in-house counsel “involved in competitive
decisionmaking”).
12
uncontested showing that MAQ applicants have an expectation
of privacy in their applications and believe the SBA will not
disclose the information contained in them. See Dennin Decl.
¶ 4, JA 58; Wyatt Decl. ¶¶ 4–5, JA 149.10 Moreover, the fact
that SBIC applicants may not directly compete with each other
for SBIC licensure does not mean that SBIC licensees do not
compete in the venture capital market for funding—if Diamond
Ventures’ principals, and Peek in particular, review other
MAQs, they will gain information about successful SBICs’
strategies, investor categories and funding sources and be able
to use the information either to apply once again for SBIC
licensure or to compete for funding in the venture capital market
or both. In short, the district court erroneously discounted an
SBIC applicant’s confidential and competitive interests in its
MAQ.
On the other side of the scale, the district court overvalued
Diamond Ventures’ purported need for an expert to review the
MAQs in order to support its discrimination claim.11 The
10
A former SBA General Counsel declared that in his experience
representing over 100 SBIC applicants, applicants “have an
expectation that SBA will withhold [MAQ] materials from disclosure”
and to allow Diamond Ventures’ principals access to the MAQs would
result in “disclosure to a direct competitor of confidential and
proprietary Applicant data of the sort that [SBIC] Applicants and SBA
have presumed for decades to be protected from discovery and from
disclosure by Exemption 4 of FOIA.” Declaration of Michael K.
Wyatt, JA 150–51.
11
Diamond Ventures’ claim that Peek can substitute for an outside
“expert” is somewhat dubious given that he has failed in four attempts
to obtain an SBIC license. See Letter from Jeffrey D. Pierson, SBA
Associate Administrator for Investment, to C. Earl Peek, Managing
Partner, Diamond Ventures (Feb. 25, 2003), JA 182.
13
information relevant to its claim—i.e., the race of the principals
of other SBIC applicants12 as well as the business strategies of
other SBIC applicants for comparison to its applications—can
be collected, we are confident, by counsel without an expert’s
assistance. Diamond Ventures’ argument that hiring an outside
expert to review the documents would be too costly—a factor on
which the district court expressly relied, see Reconsideration
Order at 2, JA 175–76 (“Plaintiff argues, persuasively, that it
would be cost prohibitive for it to hire independent experts
merely to review the documents. Instead, it must rely on its
principals’ expertise to assist counsel in determining what
comparative information is relevant and necessary to the claims.
. . . [and] the Court finds that Plaintiff’s interests in prosecuting
this case and having adequate legal representation outweigh
Defendant’s competing interests arising from unfounded fears
of public disclosure and competitive harm.”)—is irrelevant to
the balancing. That Peek originally filed his action pro se and
was accorded in forma pauperis status by the district court has
no bearing on Diamond Ventures’ financial health because a
corporation cannot file a pro se action or appear in forma
pauperis. See Rowland v. Calif. Men’s Colony, 506 U.S. 194,
201–02 (1993) (“It has been the law for the better part of two
centuries . . . that a corporation may appear in the federal courts
only through licensed counsel”). Diamond Ventures’ alleged
inability to hire an expert should not be balanced against the
legitimate confidentiality interests of all other MAQ applicants
12
The MAQ itself does not ask for information regarding race.
Diamond Ventures’s counsel proposes to review photographs
submitted with the MAQ and related documents which “normally
include photographs of the key members of the proposed management
team” in order to determine the race of MAQ applicants. Pl.’s Mem.
re: Def.’s Mot. for Prot. Order at 5, JA 65.
14
and the district court erred as a matter of law in doing so. See
Koon v. United States, 518 U.S. 81, 100 (1996) (because “[a]
district court by definition abuses its discretion when it makes
an error of law,” “[t]he abuse of discretion standard includes
review to determine that the discretion was not guided by
erroneous legal conclusions”); Medical Records, 381 F.3d at
1211 (quoting Koon).
For the foregoing reasons, we conclude that the district court
abused its discretion in ordering that the MAQs of all other
applicants for SBIC licensure be disclosed to Diamond
Ventures’ principals and employees. Accordingly, we vacate
Part 3(a)(ii) of the Protective Order entered on January 25, 2005
and remand for further proceedings. The SBA’s challenges to
the Denial Order and the Reconsideration Order and its petition
for mandamus relief are dismissed as moot.
So ordered.
ROGERS, Circuit Judge, concurring: I would limit the scope
of our jurisdiction and merits holdings in the following manner:
I.
The court holds that it has jurisdiction under the collateral
order doctrine, see Cohen v. Beneficial Indus. Loan Corp., 337
U.S. 541 (1949), over an interlocutory challenge to a protective
order allowing discovery of third-party applications submitted
to the Small Business Administration (“SBA”) with the promise
of “confidential[ity] to the extent permitted by law.” However,
there is no need to suggest that one’s party’s unilateral assertion
of a compromised “trade secret” or “privacy interest” would
suffice to meet the “importance” prong of the collateral order
doctrine. See Digital Equip. v. Desktop Direct, Inc., 511 U.S.
863, 879 (1994); United States v. Philip Morris Inc., 314 F.3d
612, 617-19 (D.C. Cir. 2003). Such liberality would not make
for a “narrow” exception to the finality rule, see Digital Equip.,
511 U.S. at 868, and could open the way for intermediate
appellate review of all manner of discovery disputes.
The Fourth Circuit in MDK, Inc. v. Mike’s Train House,
Inc., 27 F.3d 116 (4th Cir. 1994), rejected collateral order
review of the “trade secret”-type dispute on the basis of its
concern about the difficulty of cabining the notion of a trade
secret:
The dangers of a trade secrets exception to the
nonappealability of discovery orders should be
apparent. A judicially created exception to
nonappealability for categories of sensitive information
is the quintessential slippery slope.
Mike’s Train House, 27 F.3d at 120. I share this concern, but
conclude that it is answered in this instance because the Trade
2
Secrets Act, 18 U.S.C. § 1905 (2000),1 generally protects this
type of information from disclosure when it is in the hands of a
government agency, and the agency has an important
institutional interest in full disclosure by third-party applicants
to its licensing program.
The SBA described, through three declarations, the
sensitive nature of the commercial information contained in the
application for licensing (known as the Management
Assessment Questionnaire, or “MAQ”). As the court
acknowledges, Op. at 8-9, the MAQs contain information that
the SBA describes as of the type “routinely protected” under the
Trade Secrets Act, 18 U.S.C. § 1905, and under Exemption 4
(regarding trade secrets and commercial or financial
information) of the Freedom of Information Act (“FOIA”), 5
U.S.C § 552(b)(4) (2000). Although Diamond Ventures
disputes the sensitivity of some information requested by the
MAQs, it admits the MAQs “are likely to contain financial
information of the kind whose disclosures is prohibited by the
Trade Secrets Act if such disclosure is not ‘authorized by law.’”
1
The Trade Secrets Act prohibits, in relevant respects,
employees of the federal government from
publish[ing], divulg[ing], disclos[ing], or mak[ing]
known in any manner or to any extent not authorized
by law any information coming to him in the course
of his employment or official duties . . . which
information concerns or relates to the trade secrets,
processes, operations, style of work, or apparatus, or
to the identity, confidential statistical data, amount or
source of any income, profits, losses, or expenditures
of any person, firm, partnership, corporation, or
association . . . .
18 U.S.C. § 1905.
3
Appellee’s Br. at 3-4. Given that venture capital firms may
compete one with another for private funding, the disclosure of
information of the sort requested by the MAQ could “cause
substantial harm to the competitive position of the person from
whom the information was obtained,” McDonnell Douglas
Corp. v. Dep’t of the Air Force, 375 F.3d 1182, 1187 (D.C. Cir.
2004) (citing Nat’l Parks & Conservation Ass’n v. Morton, 498
F.2d 765, 770 (D.C. Cir. 1974)), and thus would fall within the
protections of the Trade Secrets Act, which by its plain letter
prohibits release by the SBA of information on the “source of
any income, profits, losses, or expenditures of any person [e.g.,
the applicants who submit MAQs], firm, . . . or association,” 18
U.S.C. § 1905. Further, the SBA submitted declarations from
current and former SBA officials stating that the SBA has
successfully invoked FOIA Exemption 4 to protect MAQ
information from disclosure.2 Additionally, the SBA maintains,
and Diamond Ventures does not dispute, that full disclosure of
the information requested by the MAQs is critical to the success
of the SBA’s Small Business Investment Company program.
See Appellant’s Br. at 21-22; Op. at 9. Trade Secrets Act
protections are at least co-extensive with the protections
afforded under FOIA Exception 4. McDonnell Douglas Corp.,
375 F.3d at 1185 (citing CNA Fin. Corp. v. Donovan, 830 F.2d
1132, 1151 (D.C. Cir. 1987)).
Consequently, although the protection afforded by the Trade
Secrets Act is not an evidentiary privilege, as was the case in the
2
See Decl. of Margaret Theresa Dennin, Chief Administrative
Officer for SBA Investment Division, ¶ 5 (“SBA has never disclosed
confidential business information contained in MAQs in response to
a FOIA request . . . absent an appropriate protective order”); Decl. of
Michael K. Wyatt, former SBA General Counsel, ¶ 5 (“SBA takes the
position and advises Applicants that their [MAQ] submissions fall
within FOIA Exemption 4"); Op. at 7-8.
4
interlocutory appeals In re Sealed Case (Medical Records), 381
F.3d 1205, 1210 (D.C. Cir. 2004), and Philip Morris, 314 F.3d
at 617-18, the protections in this instance are similar to the
statutory bar in In re England, 375 F.3d 1169, 1176 (D.C. Cir.
2004). The statutory protections and the institutional interests
inform the analysis of the “importance” element of the Cohen
analysis and limit the scope of the holding on jurisdiction that is
necessary to hear this appeal. Under this analysis, the court has
no occasion to consider whether a claim that a discovery order
will compromise “privacy” or “trade secrets” gives rise to an
appealable dispute in the absence of (1) Trade Secret Act (or
comparable statutory) restrictions upon the party holding the
information, see England, 375 F.3d at 1176, and (2) a
governmental interest, similar to the SBA’s institutional and
programmatic interest in full disclosure by third parties, see Op.
at 9-10, that might be compromised were the information made
available during discovery to the principals of a potential
licensee. Here, both considerations increase the relative
importance of the interests that would potentially go unprotected
without immediate appellate review. See England, 375 F.3d at
1176; Philip Morris, 314 F.3d at 617. I would leave for another
day the question of whether the court would have jurisdiction
under the collateral order doctrine where a party points only to
the bare standard of Fed. R. Civ. P. 26(c)(7) as the source of its
protected interest from disclosure. See generally, 8 Wright,
Miller & Marcus, FEDERAL PRACTICE AND PROCEDURE, Civ. 2d
§ 2043 (2006).
II.
Turning to the merits, it suffices to hold that the district
court abused its discretion by failing to consider the legally
relevant factors. See generally Kickapoo Tribe in Kan. v.
Babbitt, 43 F.3d 1491, 1497 (D.C. Cir. 1995). As the court
concludes, Op. at 11-13, the district court failed both to address
5
the SBA’s promise of confidentiality to third-party applicants
and to consider the fact that third-party applicants compete with
each other in the market for venture capital funding;
additionally, the district court considered the legally irrelevant
factor of Diamond Venture’s inability to hire an expert. In light
of these errors, it is apparent the district court failed to balance
the legally relevant factors. See Sealed Case (Medical Records),
381 F.3d at 1217; In re Sealed Case, 856 F.2d 268, 272 (D.C.
Cir. 1988); cf. LaSalle Extension Univ. v. FTC, 627 F.2d 481,
484 (D.C. Cir. 1980). The SBA does not challenge the
protective order, with its use limitation, insofar as it allows
counsel for Diamond Ventures to review the MAQs; it
challenges only the provision allowing principals of Diamond
Ventures to review the MAQs. Op. at 11 n.9. This court is not
well-positioned to conclude that the district court “overvalued
Diamond Ventures’ purported need for an expert to review the
MAQs,” Op. at 12, and particularly that we may be “confident”
that any illegal redlining that might be revealed by the MAQs
and SBA’s approval patterns may be apparent to “counsel
without an expert’s assistance,” id. at 13. Such conclusions run
counter to the district court’s findings, which are predicated
upon its greater familiarity with the litigation, and are
unnecessary, because they are not germane to the question of
whether the district court balanced the relevant factors.