On June 24, 2019, in a 6-3 decision,1 the Supreme Court put an end to a practice of over forty years which ignored the protections outlined by the plain language of the Freedom of Information Act (“FOIA” or the “Act”) Exemption 4.2 In its decision in Food Mktg. Inst. v. Argus Leader Media (“FMI”), the Supreme Court held that under FOIA Exemption 4, commercial or financial information is confidential if it is “customarily and actually treated as private by its owner and provided to the government under an assurance of privacy.”

Prior to the Supreme Court’s holding, courts of appeals had repeatedly sidestepped the plain language of FOIA Exemption 4, and instead followed the “substantial harm” test established by the United States Court of Appeals for the District of Columbia Circuit3 to determine whether information held by a federal agency was confidential within the meaning of Exemption 4. Under the more stringent “substantial harm” test, companies were required to show that the disclosure of private information held by the federal agencies would have a likelihood of causing substantial competitive injury. Companies trying to protect their confidential information under this test in response to FOIA requests could not avail themselves of the plain language in the statute, because over time, a mountain of case law had developed that ignored the common usage of the word confidential and was instead derived from congressional testimony “on a different bill that was never enacted into law.”4

As the Supreme Court explained in FMI, “when Congress enacted FOIA it sought a ‘workable balance’ between disclosure and other governmental interests — interests that may include providing private parties with sufficient assurances about the treatment of their proprietary information so they will cooperate in federal programs and supply the government with information vital to its work.”5 The substantial harm test ran afoul of this purpose by ignoring protections that FOIA was designed to provide private parties.

While the FMI decision is of great benefit to companies that desire to protect their confidential information that has been provided to a government agency, that benefit might be short-lived. Before the ink was dry on the Supreme Court’s decision, on July 23, 2019, Senator Chuck Grassley (R-Iowa), along with Senators Patrick Leahy (D-Vermont), John Cornyn (R-Texas), and Dianne Feinstein (D-California), introduced a Bill6 to bring back the substantial harm test and negate the effect of FMI. In a press release7 related to the introduction of this Bill, Senator Grassley stated that the Bill aims to “rectify” the Supreme Court’s FMI decision, which overturned the substantial harm test and (according to the press release) “mak[es] it more difficult for the media and general public to learn about government programs and hold accountable those who administer them.”

To be fair, the Supreme Court’s decision does not make it harder for the public to access the information that FOIA was designed to provide. Instead, the Supreme Court’s decision avoids unnecessary litigation over information that is protected under FOIA by adopting a definition of confidential that is both supported by the Act and by the common usage of the word confidential. And, arguably, bringing back the substantial harm test may not be in the best interest of the general public. It would seem that there should not be any debate that trade secrets and private commercial or financial information should not be at risk of disclosure once in the hands of the government. The Supreme Court’s decision provides an unambiguous standard that courts can follow to determine whether information is subject to FOIA, and which private parties can rely on when deciding whether to disclose information to the government. The plain language of Exemption 4 and the Supreme Court’s test set forth in FMI provides predictability and allows parties and courts to focus on what is important — and what should be a straightforward question to answer — whether the information is confidential or whether the information has been publicly disseminated.

If a new law is passed that overturns FMI, it is likely that we will see less clarity and more ambiguity in the implementation of FOIA Exemption 4 which will undoubtably lead to numerous circuit splits.

Key Takeaways

The Supreme Court’s decision in FMI provides predictability and reliability in deciding what information to disclose to the federal government. While we have yet to see how the standard will be implemented, it certainly appears that the new standard — which is based on the long-standing statutory language — provides a clearer test which courts can use to determine whether information is confidential without the need for extensive litigation or experts. On the flip side, Senate Bill 2220 (2019) — if it becomes law — may well harm the balance that FOIA was designed to strike between the need for public access to agency documents and the need to protect private parties’ trade secrets and right to maintain confidential commercial and financial information private.

In light of the uncertainty currently in play as a result of Bill 2220, companies faced with having to disclose their confidential business or financial information to the government should work closely with counsel to discuss the risks associated with such disclosure.