United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 25, 2007 Decided January 29, 2008
No. 06-5310
CANADIAN COMMERCIAL CORPORATION AND
ORENDA AEROSPACE CORPORATION,
APPELLEES
v.
DEPARTMENT OF THE AIR FORCE,
APPELLANT
Appeal from the United States District Court
for the District of Columbia
(No. 04cv01189)
Oliver W. McDaniel, Assistant U.S. Attorney, argued the
cause for appellant. With him on the briefs were Jeffrey A.
Taylor, U.S. Attorney, and Michael J. Ryan, Assistant U.S.
Attorney. R. Craig Lawrence, Assistant U.S. Attorney, entered
an appearance.
Kristen E. Ittig argued the cause for appellees. With her on
the brief was Stuart W. Turner.
Before: GINSBURG, Chief Judge, and TATEL and BROWN,
Circuit Judges.
2
Opinion for the Court filed by Chief Judge GINSBURG.
Concurring opinion filed by Circuit Judge TATEL.
GINSBURG, Chief Judge: Canadian Commercial Corporation
and Orenda Aerospace Corporation (hereinafter collectively
CCC) brought this “reverse” Freedom of Information Act case
to prevent the Air Force from releasing line-item pricing
information in CCC’s contract to provide services to the Air
Force. The district court enjoined the release and, for the
reasons set forth below, we affirm its judgment.
I. Background
The facts are fully set forth in the thorough opinion of the
district court. 442 F. Supp. 2d 15, 17-27 (2006). To summarize
briefly, in 2002 CCC and the Air Force signed a three-year
contract, which the Air Force had the option to extend for up to
four more years, for CCC to repair, overhaul, and modify J85
turbojet engines. In 2003 Sabreliner, which had bid
unsuccessfully for the job, filed a FOIA request for a copy of the
contract. CCC objected, contending the line-item prices as well
as certain hourly labor rates listed in the contract constituted
trade secrets. After the Air Force issued a Decision Letter in
which it rejected CCC’s contentions, CCC filed suit in the
district court to enjoin disclosure of the information. Id. at 22.
Applying our decision in McDonnell Douglas Corp. v. Air
Force, 375 F.3d 1182 (2004), that court entered a summary
judgment holding the decision of the Air Force was arbitrary and
capricious insofar as it concluded the line-item prices were not
trade secrets; the court enjoined the Air Force from disclosing
those prices, 442 F. Supp. 2d at 41, but not the hourly labor
rates. Id. at 37 n.10. The Air Force alone appealed to this court.
II. Analysis
3
We review the district court’s grant of summary judgment
de novo. McDonnell Douglas v. Air Force, 375 F.3d at 1186.
The underlying Decision Letter issued by the Air Force must be
set aside if and only if it is “arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law.” 5 U.S.C.
§ 706(2)(A).
Exemption 4 of the Freedom of Information Act protects
“matters that are ... trade secrets and commercial or financial
information obtained from a person and privileged or
confidential.” 5 U.S.C. § 552(b)(4). Commercial or financial
information obtained from a person involuntarily “is
‘confidential’ for purposes of the exemption if disclosure [would
either] ... impair the Government’s ability to obtain necessary
information in the future; or ... cause substantial harm to the
competitive position of the person from whom the information
was obtained.” Nat’l Parks & Conservation Ass’n v. Morton,
498 F.2d 765, 770 (D.C. Cir. 1974); see also Critical Mass
Energy Project v. NRC, 975 F.2d 871, 880 (D.C. Cir. 1992) (en
banc) (adhering to National Parks with regard to commercial or
financial information involuntarily submitted to the
Government). We have long held the Trade Secrets Act, 18
U.S.C. § 1905, a criminal statute that prohibits Government
personnel from disclosing several types of confidential
information unless “authorized by law,” is “at least co-extensive
with ... Exemption 4 of FOIA.” CNA Fin. Corp. v. Donovan,
830 F.2d 1132, 1151 (D.C. Cir. 1987). The upshot is that, unless
another statute or a regulation authorizes disclosure of the
information, the Trade Secrets Act requires each agency to
withhold any information it may withhold under Exemption 4 of
the FOIA. Bartholdi Cable Co., Inc. v. FCC, 114 F.3d 274, 281
(D.C. Cir. 1997). A person whose information is about to be
disclosed pursuant to a FOIA request may file a “reverse-FOIA
action” and seek to enjoin the Government from disclosing it.
See Chrysler Corp. v. Brown, 441 U.S. 281, 317-18 (1979).
4
In two recent reverse-FOIA cases, we held the Air Force
was arbitrary and capricious in concluding disclosure of line-
item pricing information in a government contract would not
cause “substantial competitive harm” to the contractor.
McDonnell Douglas v. Air Force, 375 F.3d at 1190; McDonnell
Douglas Corp. v. NASA, 180 F.3d 303, 307 (D.C. Cir. 1999).
The Air Force nevertheless contends we have never decided
whether line-item pricing information is subject to Exemption
4 in the first place, and proposes we hold such information
categorically excluded from Exemption 4 and therefore subject
to disclosure.
Contrary to the contention of the Air Force, it is the law of
this circuit that line-item prices do come within Exemption 4.
In McDonnell Douglas v. Air Force we stated:
We recoil ... from the implication ... of a per se rule (or at
least a strong presumption) that all constituent pricing
information -- as opposed to the bid price itself -- is to be
disclosed; such a rule would be squarely at odds with the
protection we have always understood Exemption 4 to
provide for such pricing information.
375 F.3d at 1192. Similarly, in McDonnell Douglas v. NASA,
after noting “McDonnell Douglas has shown ... that it is likely
to suffer substantial competitive harm” if NASA releases its
pricing information, we stated that “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.” 180
F.3d at 307. We reaffirm today what we have held twice before:
Constituent or line-item pricing information in a Government
contract falls within Exemption 4 of the FOIA if its disclosure
would “impair the government’s ability to obtain necessary
information in the future” or “cause substantial harm to the
competitive position of the person from whom the information
was obtained.” Nat’l Parks, 498 F.2d at 770.
5
Even if the law of the circuit were unsettled, we would not
find the arguments advanced by the Air Force convincing. Its
primary contention is that the Congress must not have intended
Exemption 4 to cover line-item prices in Government contracts
because the FOIA was intended to broaden the array of
information to which citizens have access and the Air Force
regularly disclosed such pricing information prior to enactment
of that statute -- indeed, we are told, it was then required to do
so under its procurement regulations.
Our interpretation of the FOIA would not necessarily be
affected even if the Air Force could document these assertions
of historical fact. Although the general purpose of the FOIA
was indeed to make it easier for the public “to be informed about
what [its] government is up to,” Dep’t of Justice v. Reporters
Comm. for Freedom of the Press, 489 U.S. 749, 773 (1989)
(internal quotation marks omitted), it does not follow that a
specific exemption in the FOIA may not be understood to have
diminished public access to a particular type of information if
that is what its terms require.
Furthermore, in the Decision Letter here under review, the
Air Force provided no empirical support for its historical
assertions. Instead, it cited inconclusive passages from the
legislative history of the FOIA, a House Report written years
before its enactment, and procurement regulations that were
superseded by the Federal Acquisition Regulation in 1984. In
its brief, the Air Force blithely explains away its dearth of
historical support with the non-sequitur that “[b]y 1962, the
disclosure of contract unit prices was the norm. Consequently,
the administrative record does not discuss this issue.” As the
district court correctly summed up the situation:
Quite simply, the record is devoid of any evidence that the
Air Force has actually disclosed this type of information, as
it claims, on a consistent basis .... Instead of merely
6
asserting an alleged disclosure practice based on a novel
interpretation of the history of procurement regulations and
FOIA, the Air Force needed to provide evidence of other
situations in which similar information has been routinely
released. The Court need not accept the Air Force’s
conclusory statement of what its practice has been, or of
what it believes the law allows, without any evidence or
support that the practice has actually been followed.
442 F. Supp. 2d at 30-31 (citation omitted). With respect to this
passage, the Air Force claims the district court improperly
shifted the burden of persuasion to it, but that is not correct. The
court imposed only the burden of production upon the Air Force
as the party in possession of the evidence about its own
practices. See McDonnell Douglas v. Air Force, 375 F.3d at
1191 & n.5. The burden of persuasion properly remained with
the plaintiff.
The Air Force marshals two district court cases endorsing
its proposed per se rule of disclosure of pricing data, Brownstein
Zeidman and Schomer v. Air Force, 781 F. Supp. 31, 33 (D.D.C.
1991), and AT&T Info. Sys., Inc. v. Gen. Servs. Admin., 627 F.
Supp. 1396, 1403 (D.D.C. 1986), rev’d on other grounds, 810
F.2d 1233 (D.C. Cir. 1987) (per curiam), but both antedate our
decisions in McDonnell Douglas v. NASA and McDonnell
Douglas v. Air Force. The Air Force also cites three cases from
other circuits but they are inapposite to its point. R & W
Flammann GmbH v. United States, 339 F.3d 1320, 1323 (Fed.
Cir. 2003), concerned only whether information that had already
been disclosed to the public came within Exemption 4.
Although Pacific Architects & Engineers Inc. v. Dep’t of State,
906 F.2d 1345, 1347-48 (9th Cir. 1990), and Acumenics
Research & Technology v. Dep’t of Justice, 843 F.2d 800, 807-
08 (4th Cir. 1988), each upheld an agency’s decision to disclose
line-item prices, neither established a per se rule that such
information does not come within Exemption 4; rather, in each
7
case the court assumed the National Parks analysis applied but
concluded the contractor had not shown that disclosure would,
as claimed, enable a rival to reverse-engineer competitively
sensitive information. Beyond a general paean to the benefits of
public disclosure, therefore, the Air Force has given us nary a
reason to believe pricing information that, if disclosed, would
work a substantial competitive harm, should nonetheless be
categorically excluded from Exemption 4.*
The Air Force next contends that even under the analytical
framework of McDonnell Douglas v. NASA and McDonnell
Douglas v. Air Force, its decision to disclose the pricing
information in this case was not arbitrary or capricious. As
noted above, in those cases we concluded that for the purpose of
Exemption 4 we must evaluate line-item prices as we would any
other commercial or financial information, that is, under the
National Parks standard: If the information was submitted to
the Government involuntarily and if its disclosure would either
“impair the government’s ability to obtain necessary information
in the future” or “cause substantial harm to the competitive
position of the person from whom the information was
obtained,” then it comes within Exemption 4 of the FOIA. 498
F.2d at 770. We first address the conclusion in the Decision
Letter that disclosure of the information would not cause
substantial competitive harm to CCC.
In its letter of objection, CCC claimed disclosure of its
pricing information would cause it competitive harm by
enabling rivals to undercut its prices in bidding for option-year
work. In the Decision Letter, the Air Force responded that
disclosure would create no risk of competitive harm for several
*
Its argument that pricing information is not “obtained from” a
contractor but rather emerges from contract negotiations between the
parties does not appear in the Decision Letter, and so we do not
consider it.
8
reasons, each of which the district court rejected. On appeal, the
Air Force relies upon only one of the reasons it gave in the
Decision Letter, to wit, it is likely to exercise its options with
CCC because switching to a new contractor involves high
transaction costs. Indeed, according to the Air Force, switching
contractors would be so disruptive to its operations that it is
almost certain to exercise the options even if CCC’s competitors
submit lower bids for the option years. Therefore, releasing the
pricing information would not cause “substantial competitive
harm” to CCC. As the Air Force correctly notes, we expressly
refrained from passing upon this argument in McDonnell
Douglas v. Air Force. 375 F.3d at 1188.
The argument having now been properly presented, we find
it unconvincing. First, the Air Force offers no explanation why,
if it was so certain it would exercise the options, it solicited a
contract for three years to be followed by four option years;
apparently, the Air Force valued (and presumably paid for) the
ability to switch to another vendor after three or more years.
More important, the argument suffers from a complete lack of
empirical support. The Decision Letter states that “based on
past practice it is likely [the Air Force] will continue to regularly
exercise options,” but does not in any way document the
predicate “past practice.” Nor does it make any effort to
quantify the transaction costs the Air Force would incur if it
switched to a new contractor for the option years. Yet, as the
district court pointed out, 442 F. Supp. 2d at 35, under the
Federal Acquisition Regulation an agency may not exercise an
option unless it has determined that doing so is “the most
advantageous method of fulfilling the Government’s need,”
taking price into account, 48 C.F.R. § 17.207(c)(3); the Air
Force does not mention this limitation, and so does not claim the
transaction costs would be sufficiently high that it would be
likely to exercise the option rather than switch to a bid that is
lower by a given percentage.
9
In the Decision Letter, the Air Force faulted CCC for failing
to present evidence that the Air Force has declined to exercise
options in the past but surely the Air Force is the party best
positioned to provide evidence of its own practice with respect
to exercising or not exercising options and, once again, the
burden of production properly falls upon the party with access
to the information to be produced. See McDonnell Douglas v.
Air Force, 375 F.3d at 1191 & n.5. In sum, we will not defer to
the Air Force’s unsupported assertions.
Finally, the Air Force contends the Federal Acquisition
Regulation requires it to disclose line-item pricing information,
citing 48 C.F.R. § 15.503(b)(1)(iv) (contract unit prices “shall be
made publicly available”); id. § 15.506(d)(2) (unsuccessful
offeror may obtain “debriefing information” that “shall include
... unit prices”); and id. § 5.303(b)(2) (agency must include unit
prices in public announcement of contract), and that such
disclosure is therefore “authorized by law” and not subject to the
Trade Secrets Act. See Bartholdi Cable, 114 F.3d at 281. As
the district court pointed out, however, § 15.506(e)(1) of the
FAR states “the debriefing shall not reveal any information ...
exempt from release under the Freedom of Information Act
including ... [t]rade secrets”; therefore, the provisions cited by
the Air Force do not independently remove any information
from coverage under Exemption 4. The Air Force attempts to
explain away this limitation on the ground that it “logically
applies only to information other than the information
specifically delineated as required to be disclosed.” This
statement is just illogical; the very purpose of § 15.506(e)(1) is
to protect from disclosure information that the FAR would
otherwise require the Air Force to disclose.
Because CCC has shown that release of the pricing
information here at issue would cause it substantial competitive
harm with respect to the option years in its contract with the Air
Force, we need not address its alternative argument that release
10
would cause it competitive harm when seeking future
procurements. Nor need we pass upon CCC’s further contention
that release would impair the ability of the Air Force to obtain
information in the future.
III. Conclusion
The Air Force has given us no reason to deviate from our
established precedent that line-item pricing information is
subject to Exemption 4 of the FOIA. Its explanation for why
disclosure of the information at issue would not cause
substantial competitive harm to CCC lacks empirical support
and is unconvincing. The judgment of the district court is
therefore
Affirmed.
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TATEL, Circuit Judge, concurring: I agree with my
colleagues that under our reverse-FOIA case law, the Exemption
4 test outlined in National Parks & Conservation Ass’n v.
Morton, 498 F.2d 765, 770 (D.C. Cir. 1974), applies to line-item
government contract prices like the ones at issue here. See Maj.
Op. at 4; McDonnell Douglas Corp. v. Air Force, 375 F.3d
1182, 1187-92 (D.C. Cir. 2004); McDonnell Douglas Corp. v.
NASA, 180 F.3d 303, 305-07 (D.C. Cir. 1999). Because the Air
Force has merely renewed arguments we have already rejected,
and because it has offered inadequate support for its claim that
transaction costs will almost certainly preclude it from switching
to a new contractor, see Maj. Op. at 8, I join the court’s decision.
That said, I believe Judge Garland had it right in his
McDonnell Douglas v. Air Force dissent. Not only did he
persuasively critique how the court there applied the National
Parks competitive harm test to facts closely resembling the
record here, 375 F.3d at 1194-1203 (Garland, J., dissenting), but
he also rightly questioned “whether it makes sense to regard
prices actually paid by the government as trade secrets ‘of any
person’ under the Trade Secrets Act or as confidential
commercial or financial information ‘obtained from a person’
under Exemption Four of FOIA,” id. at 1203 (citations omitted).
After all, given that FOIA’s primary purpose is to inform
citizens about “what their government is up to,” Dep’t of Justice
v. Reporters Comm. for Freedom of the Press, 489 U.S. 749, 773
(1989), it seems quite unlikely that Congress intended to prevent
the public from learning how much the government pays for
goods and services. Moreover, the Air Force, as its position in
this case well demonstrates, would prefer to disclose contract
line-item and option prices because in a competitive bidding
environment such information may well save money for the
government and the taxpayers who fund it. By contrast, entities
whose interests lie in charging government agencies as much as
possible, or in preventing others from charging less for the same
services, would prefer to keep such data confidential.
12
Thus, applying the National Parks competitive harm test to
agreed-upon prices in government contracts “may bar disclosure
of such prices in the very situation in which the public interest
in disclosure is at its apogee.” McDonnell Douglas v. Air Force,
375 F.3d at 1203 (Garland, J., dissenting). Like Judge Garland,
I find that result troubling and inconsistent with FOIA’s
fundamental objective. But believing the question settled in this
circuit, I am compelled to join the court’s conclusion that the Air
Force must keep the requested pricing information free from
public scrutiny.