Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-08-05435/USCOURTS-caDC-08-05435-0/pdf.json

Parties Involved:
Defense Contract Management Agency
Appellee
United States Department of Defense
Appellee
United Technologies Corporation
Appellant

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 16, 2009 Decided March 23, 2010

No. 08-5435

UNITED TECHNOLOGIES CORPORATION,

PRATT & WHITNEY DIVISION,

APPELLANT

v.

UNITED STATES DEPARTMENT OF DEFENSE 

AND DEFENSE CONTRACT MANAGEMENT AGENCY,

APPELLEES

Consolidated with 08-5436

Appeals from the United States District Court

for the District of Columbia

(No. 1:05-cv-02271)

Patricia A. Millett argued the cause for the appellant.

Robert K. Huffman and Duncan N. Stevens were on brief. 

Emmett B. Lewis III entered an appearance.

Kathryn A. Donnelly, Special Assistant United States

Attorney, argued the cause for the appellees. R. Craig

Lawrence, Assistant United States Attorney, was on brief.

Lanny J. Acosta Jr., Special Assistant United States Attorney,

entered an appearance.

USCA Case #08-5435 Document #1236156 Filed: 03/23/2010 Page 1 of 14
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1

DCMA is “an agency of the Department of Defense.” Dep’t of

Defense Directive No. 5105.64 (Sept. 27, 2000) (establishing DCMA).

All references to DoD herein refer to DCMA as well.

Before: HENDERSON, ROGERS and BROWN, Circuit Judges.

Opinion for the Court filed by Circuit Judge HENDERSON.

KAREN LECRAFT HENDERSON, Circuit Judge: Sikorsky

Aircraft Corporation (Sikorsky) and the Pratt and Whitney

Division (Pratt) of United Technologies Corporation appeal the

district court’s grant of summary judgment to the Department of

Defense (Defense or DoD) and the Defense Contract

Management Agency (DCMA)1

 in Sikorsky’s and Pratt’s

separate lawsuits to prevent the release of certain DCMA

documents evaluating their respective quality control processes.

Sikorsky and Pratt contend that DCMA’s decision to release the

documents was arbitrary and capricious in that it failed to

properly apply Exemption 4 of the Freedom of Information Act

(FOIA), 5 U.S.C. § 552(b)(4). We agree and remand. 

I. 

This is a “reverse-FOIA” case. See, e.g., Canadian

Commercial Corp. v. Dep’t of Air Force, 514 F.3d 37, 39 (D.C.

Cir. 2008). In enacting FOIA, the Congress sought to balance

the public’s interest in governmental transparency against

“‘legitimate governmental and private interests [that] could be

harmed by release of certain types of information.’” Critical

Mass Energy Project v. Nuclear Regulatory Comm’n, 975 F.2d

871, 872 (D.C. Cir. 1992) (en banc) (quoting FBI v. Abramson,

456 U.S. 615, 621 (1982)). When an agency determines,

pursuant to a FOIA request, to disclose information gathered

from a non-governmental source, the source may contest the

disclosure as arbitrary and capricious or not in accordance with

law under the Administrative Procedure Act, 5 U.S.C. §§ 702,

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2

“‘[P]erson’ includes an individual, partnership, corporation,

association, or public or private organization other than an agency

. . . .” 5 U.S.C. § 551(2).

3

Alternatively, if a “person” provides information to the United

States voluntarily, the information is confidential if “it is of a kind that

the provider would not customarily release to the public.” Critical

Mass, 975 F.2d at 880.

706(2). See CNA Fin. Corp. v. Donovan, 830 F.2d 1132, 1133

n.1 (D.C. Cir. 1987).

As relevant here, Exemption 4 excepts confidential

information from FOIA’s scope. See infra Part II. According to

the test we articulated in National Parks & Conservation Ass’n

v. Morton, 498 F.2d 765 (D.C. Cir. 1974), and reaffirmed en

banc in Critical Mass, if a “person”2 is required to provide

information to the United States, the information is confidential

under Exemption 4 only if its “disclosure would be likely either

‘(1) to impair the Government’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.’” Critical Mass, 975 F.2d at 878 (quoting Nat’l

Parks, 498 F.2d at 770).3

A. Sikorsky, Pratt & DCMA

Sikorsky makes helicopters and Pratt makes aircraft

engines. Both companies are wholly owned by United

Technologies Corporation. Both have various foreign and

domestic military and civilian customers and both sell their

products to the United States. 

DCMA monitors defense contractors, including Sikorsky

and Pratt, to ensure they satisfy their contractual obligations

when providing services and supplies to the United States. It

keeps a regular presence at Sikorsky’s and Pratt’s facilities. If it

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4

The reporter also requested Sikorsky’s responses to the CARs

but DCMA ultimately decided not to release them. Those documents

are not part of this appeal.

5

DoD regulations provide, in relevant part, “If the official

designated by the DoD Component to make initial determinations on

requests for records declines to provide a record because the official

considersit exempt under one or more of the exemptions of the FOIA,

that decision may be appealed by the requester, in writing, to a

designated appellate authority.” DoD Regulation 5400.7-R, C5.3.1

(Sept. 1998), available at http://www.dtic.mil/whs/directives/corres/

pdf/540007r.pdf.

discovers a problem, it notifies the contractor and may issue a

“Corrective Action Request” (CAR) or an audit report to the

contractor to remedy the problem.

1. Sikorsky FOIA Request

In March 2004 a New Haven, Connecticut television

reporter submitted a FOIA request to the regional DCMA office

(DCMA East) for, in pertinent part, all CARs DCMA had issued

to Sikorsky over the past year regarding the Black Hawk

helicopter.4

 The Director of DCMA East initially denied the

request, concluding under Exemption 4 their release “will

significantly impair DCMA’s ability to obtain the same quality

of information from Sikorsky and from other Defense

contractors in the future.” Letter from Keith D. Ernst, Director,

DCMA East, to Alan M. Cohn, WTNH-TV (May 7, 2004). The

reporter then appealed the denial within DCMA.5 In response,

the DCMA FOIA Appeal Authority reviewed the documents and

reversed DCMA East’s decision. 

DCMA’s Office of General Counsel then notified Sikorsky

by letter that it planned to release the CARs, stating DCMA’s

new position that none of them fell under Exemption 4. Sikorsky

disagreed. Citing National Parks, Sikorsky argued that

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Exemption 4 applied because the documents’ “release would

likely cause Sikorsky substantial competitive harm” and would

“significantly impair DCMA’s future ability to obtain the same

detail and quality of information from Sikorsky and other DoD

contractors.” Letter from Robert K. Huffman, Miller &

Chevalier, to Richard N. Finnegan, Associate General Counsel,

DCMA, at 3 (Feb. 11, 2005). Specifically, it asserted that the

CARs included “proprietary information regarding Sikorsky’s

manufacturing process and procedures” and that “[r]elease of

this proprietary information would substantially harm Sikorsky’s

competitive position because its competitors would use this

information to their advantage in . . . adjusting their

manufacturing techniques.” Id. at 11 n.4. 

Nevertheless, in a letter dated December 1, 2005, the

DCMA FOIA Appeal Authority informed Sikorsky that DCMA

had made a “final agency decision” to release the CARs to the

reporter. Letter from Colonel Jamie L. Adams, DCMA Appeal

Authority, to Robert K. Huffman, Miller & Chevalier, at 5-6

(Dec. 1, 2005). In so doing, it rejected Sikorsky’s “substantial

competitive harm argument,” stating that the asserted harm

“appears to be one of suffering embarrassment in the market

place,” which is an “insufficient” basis on which to prevent

disclosure. Id. at 5. It also rejected Sikorsky’s “impairment”

argument, stating that “the question of impairment is a question

for the agency and not for Sikorsky” and concluding that

“release of the CARs would not impair the Government’s ability

to obtain the same kind of information in the future.” Id. at 3.

2. Pratt FOIA Request

In December 2004 a Hartford, Connecticut newspaper

reporter submitted a FOIA request to DCMA East for (1) a

report of a November 2004 DCMA audit of Pratt’s Middletown,

Connecticut Engine Center; (2) a CAR that resulted from the

audit and (3) any and all other documents regarding the audit.

DCMA East identified documents responsive to the request,

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6

There are four levels of CARs, increasing in seriousness from

Level I to Level IV. DCMA issues a Level III CAR to a contractor’s

“top management to call attention to serious contractual

nonconformity.” DCMA Guidebook, Corrective Action Process 2.1,

available at http://guidebook.dcma.mil/226/226-1/index.cfm.

7

DCMA East determined not to release photographs it took

during the November 2004 audit or Pratt’s documentary responses to

that audit and to the CAR. It decided that Exemption 4 covered the

latter material because Pratt voluntarily made available the

information contained therein and that information was the kind Pratt

would not normally release to the public. See Critical Mass, 975 F.2d

at 880. Similarly, it decided that Pratt was not required to permit

DCMA to take photographs during the audit. See id. The photographs

and Pratt’s responses are not part of this appeal.

including (1) the November 2004 audit report; (2) November

2004 DCMA post-audit briefing of Pratt; (3) a resulting “Level

III” CAR6 issued to Pratt in December 2004; (4) internal DCMA

correspondence about the audit and the Level III CAR and (5)

reports of audits of Pratt that DCMA conducted in July and

September 2004.7 DCMA East notified Pratt of the request and

asked Pratt to flag any documents it believed were exempt from

disclosure. Pratt responded that “most of the information

contained in these documents is exempt from disclosure under

Exemption 4.” Letter from Lester K. Katahara, Associate

Counsel, Pratt & Whitney, to JeanMarie C. Faris, Counsel,

DCMA-Hartford, at 1 (Mar. 24, 2005). Citing National Parks,

it argued that the exemption applied because disclosure would

“likely cause substantial harm to [its] competitive position” and

“would likely impair the ability of DCMA to obtain information

of the same quality, reliability, and detail in the future.” Id. at 3.

It submitted several affidavits supporting its claim to the

Exemption. For example, its Director of Quality Military

Engines attested that “a competitor with similar expertise could

and would use th[e] information to gain insights into the

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strengths and weaknesses of P&W’s quality control system as

well as manufacturing techniques and use those insights to

revise and improve its own quality control and manufacturing

systems.” Affidavit of William H. Forthofer ¶ 18 (Mar. 18,

2005) (Forthofer Aff.). It also offered a set of the documents

from which it had redacted the purportedly exempt information.

DCMA East replied to Pratt in October 2005, concluding

that Exemption 4 did not cover the documents except for the

portions DCMA had itself redacted. It stated: 

Applying the criteria established in National Parks to

the documents at issue here, we conclude that release

of the documents will not impair the Government’s

ability to obtain from Pratt & Whitney (or any other

contractors) essential information about their quality

systems. With respect to the competitive harm prong of

National Parks, we concluded that, with the exception

of the actual quality system provisions themselves,

[which were redacted,] the release of the documents

would not likely result in substantial competitive harm

to Pratt & Whitney.

Letter from Steven T. Bogusz, Deputy Director, DCMA East, to

Lester K. Katahara, Pratt & Whitney, at 1 (Oct. 12, 2005). 

Pratt sought reconsideration, elaborating on the same

arguments it had originally made. But DCMA East did not

budge; it said, “While we agree that National Parks is the

appropriate legal standard of review, we disagree that release of

the documents (as redacted) would significantly impair

DCMA’s ability to obtain necessary quality assurance system

information from P&W and other contractors in the future, a

decision solely within DCMA’s purview.” Letter from Steven T.

Bogusz, Deputy Director, DCMA East, to Robert K. Huffman,

Miller & Chevalier, at 2 (Nov. 21, 2005). In addition, it said: 

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We acknowledge that competition in the propulsion

industry is fierce. However, with the exception of the

information that we have already redacted, we do not

believe that P&W has established the likelihood of

substantial competitive harm flowing from P&W’s

competitor’s [sic] affirmative use of the information

contained in the DCMA documents. At most, we

believe that release of the information could be

embarrassing to P&W. But, embarrassment does not

rise to the level of substantial competitive harm of the

type recognized by the courts.

Id. at 3.

B. District Court Proceedings

In late 2005 Sikorsky and Pratt filed separate suits in the

district court against DoD, each alleging that DCMA’s decision

to release the documents was arbitrary, capricious, and contrary

to law under the APA, 5 U.S.C. § 706(2)(A). They sought

declaratory and injunctive relief preventing the documents’

disclosure. The district court granted summary judgment to DoD

in both cases in September 2008. Although the court found that

the documents’ release would “reveal[] the safety measures and

quality control procedures in Plaintiff’s manufacturing,” it

determined that the documents did not fall under Exemption 4.

Sikorsky Aircraft v. Dep’t of Def., C.A. No. 05-02373, at 12-13

(D.D.C. Sept. 22, 2008) (Sikorsky Order); United Techs. Corp.,

Pratt & Whitney Div. v. Dep’t of Def., C.A. No. 05-02271, at 12-

14 (D.D.C. Sept. 22, 2008) (Pratt Order). According to the court,

the gravamen of both complaints was that disclosure would

cause “embarrassment or negative publicity,” a type of harm not

recognized under Exemption 4. Sikorsky Order at 13; Pratt

Order at 13. The court also held that DCMA’s ability to obtain

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8

We consolidated the appeals sua sponte. Order, United Techs.

Corp. v. Dep’t of Def., No. 08-5435 (D.C. Cir. Mar. 5, 2009).

9

Sikorsky and Pratt also suggest in passing that the documents

contain “trade secrets” under Exemption 4. A trade secret is “a secret,

similar information in the future would not be so impaired as to

render the documents exempt from disclosure. Sikorsky and

Pratt timely appealed.8 

II.

“We review the district court’s grant of summary judgment

de novo.” Canadian Commercial, 514 F.3d at 39. When the

district court decision under review itself reviews agency action

under the APA, we, like the district court, will reverse the

agency action only if it is “arbitrary, capricious, an abuse of

discretion, or otherwise not in accordance with law.” See 5

U.S.C. § 706(2)(A); Canadian Commercial, 514 F.3d at 39. This

“standard is narrow and a court is not to substitute its judgment

for that of the agency. Nevertheless, the agency must examine

the relevant data and articulate a satisfactory explanation for its

action including a ‘rational connection between the facts found

and the choice made.’” Motor Vehicle Mfrs. Ass’n of U.S., Inc.

v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)

(quoting Burlington Truck Lines v. United States, 371 U.S. 156,

168 (1962)). “[W]e do not defer to the agency’s conclusory or

unsupported suppositions.” McDonnell Douglas Corp. v. U.S.

Dep’t of the Air Force, 375 F.3d 1182, 1187 (D.C. Cir. 2004).

Exemption 4 covers “trade secrets and commercial or

financial information obtained from a person and privileged or

confidential.” 5 U.S.C. § 552(b)(4). DoD concedes that the

information contained in the documents either is or addresses

“commercial . . . information obtained from a person”; for their

part, Sikorsky and Pratt contend that the information is

“confidential.”9 They “do not contend . . . that the particular

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commercially valuable plan, formula, process, or device that is used

for the making, preparing, compounding, or processing of trade

commodities . . . that can be said to be the end product of either

innovation or substantial effort.” Pub. Citizen Health Research Group

v. FDA, 704 F.2d 1280, 1288 (D.C. Cir. 1983). Ultimately Sikorsky

and Pratt label this issue “irrelevant,” Reply Br. 6, because, to prevent

release, they need only establish that the documents contain

“confidential” information. 

information at issue here was voluntarily provided,” Appellants’

Br. 33 n.10, and thus do not “seek review of th[e] aspect of the

district court’s decision” that “held that disclosure of the

information was mandatory, not voluntary.” Id. at 13 & n.3.

Accordingly, for the documents to be exempt from disclosure,

their release must be likely to cause the contractors “substantial

competitive harm” or “impairthe Government’s ability to obtain

necessary information in the future.” Canadian Commercial,

514 F.3d at 39-40 (internal quotations omitted); see Critical

Mass, 975 F.2d at 878; Nat’l Parks, 498 F.2d at 770.

A. Substantial Competitive Harm

To qualify under this prong, an identified harm must

“‘flow[] from the affirmative use of proprietary information by

competitors.’” CNA, 830 F.2d at 1154 (quoting Pub. Citizen

Health Research Group v. FDA, 704 F.2d 1290, 1291 n.30 (D.C.

Cir. 1983)). In reviewing an agency’s determination as to

substantial competitive harm, we recognize that “predictive

judgments are not capable of exact proof,” id. at 1155, and we

generally defer to the agency’s predictive judgments as to “‘the

repercussions of disclosure,’” McDonnell Douglas v. U.S. Dep’t

of the Air Force, 375 F.3d at 1191 n.4 (quoting CNA, 830 F.2d

at 1155). If “a reverse-FOIA movant has made a positive

showing of competitive harm from disclosure,” however, an

agency’s unelaborated contrary conclusion does not suffice. See

Occidental Petroleum Corp. v. SEC, 873 F.2d 325, 341-42 (D.C.

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Cir. 1989) (internal quotation omitted) (agency’s conclusory

decision rejecting substantial competitive harm required

remand). 

Sikorsky and Pratt maintain that disclosure of the

documents will cause two types of substantial competitive harm.

First, they say that their competitors will use the documents to

discredit them in the eyes of current and potential customers.

They worry especially that their competitors will use the

information and the accompanying negative publicity to

persuade foreign costumers that DoD has found Sikorsky’s and

Pratt’s quality controlsystems unreliable and, accordingly, their

products’ quality suspect. Because foreign customers are

unfamiliar with DoD’s exacting oversight, they reason, those

customers will overreact to the disclosed information and

Sikorsky’s and Pratt’s reputation will suffer as a result. Contrary

to Sikorsky and Pratt’s contentions, however, Exemption 4 does

not protect against this species of harm. Calling customers’

attention to unfavorable agency evaluations or unfavorable press

does not amount to an “affirmative use of proprietary

information by competitors.” See CNA, 830 F.2d at 1154 &

n.158; Occidental, 873 F.2d at 341 (desire to avoid

embarrassment and reputational damage is irrelevant to

substantial competitive harm determination); Pub. Citizen, 704

F.2d at 1291 n.30 (“injury to competitive position, as might flow

. . . from the embarrassing publicity attendant upon public

revelations” is not substantial competitive harm) (internal

quotation omitted). In other words, Exemption 4 does not guard

against mere embarrassment in the marketplace or reputational

injury and DCMA correctly rejected the contractors’ reliance

thereon.

Second, Sikorsky and Pratt maintain that the documents

contain sensitive proprietary information about their quality

control processes. Pratt’s Director of Quality Military Engines

attested that “a competitor with similar expertise could and

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10Sikorsky and Pratt maintain that, while “the sensitivity of the

information may not be obvious to laypersons,” the information “from

the vantage point of experienced competitors in the business . . .

provide[s] invaluable insights.” Appellants’ Br. 22.

11During oral argument the Court inquired about portions of the

CARs and November 2004 audit report included in the Sealed

Appendix (SA). [Sealed material redacted.] Both Sikorsky and Pratt

argue that competitors, with their expertise and understanding of

esoteric manufacturing processes, will be able to put together this

would use th[e] information to gain insights into the strengths

and weaknesses of P&W’s quality control system as well as

manufacturing techniques and use those insights to revise and

improve its own quality control and manufacturing systems.”

Forthofer Aff. ¶ 18. Similarly, Sikorsky asserted that

“proprietary information regarding Sikorsky’s manufacturing

process and procedures” is “inextricably intertwined with the

quality control information” included in the CARs and it

asserted that “[r]elease of this proprietary information would

substantially harm Sikorsky’s competitive position because its

competitors would use this information to their advantage in . . .

adjusting their manufacturing techniques.” Letter from Robert

K. Huffman, Miller & Chevalier, to Richard N. Finnegan,

Associate General Counsel, DCMA, at 11 n.4 (Feb. 11, 2005).10

In response, DCMA simply stated that it had redacted all of the

sensitive proprietary information and concluded that disclosure

of the remaining information was not likely to cause the

contractors substantial competitive harm. 

We find DCMA’s response insufficient. The documents,

even as redacted by DCMA, appear to reveal details about

Sikorsky’s and Pratt’s proprietary manufacturing and quality

control processes. At the least, they identify and locate particular

parts and equipment and describe the timing and criteria of

internal inspections.11 In other words, the documents describe,

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otherwise confidential information and use it to gain a competitive

advantage. 

in part, how the contractors build and inspect helicopters and/or

engines. Once disclosed, competitors could, it appears, use the

information to improve their own manufacturing and quality

control systems, thus making “affirmative use of proprietary

information” against which Exemption 4 is meant to guard.

We believe that DCMA failed to provide a reasoned basis

for its conclusion to the contrary. To be sure, as it repeatedly

stated, mere embarrassment or reputational harm is not

sufficient to trigger Exemption 4. But where, as here, a

contractor pinpoints by letter and affidavit technical information

it believes that its competitors can use in their own operations,

the agency must explain why substantial competitive harm is not

likely to result if the information is disclosed. See, e.g.,

Occidental, 873 F.2d at 341-42. DCMA instead concluded,

without more, that release of the documents will not cause

Sikorsky or Pratt substantial competitive harm. A naked

conclusion, however, is not enough. See McDonnell Douglas v.

U.S. Dep’t of the Air Force, 375 F.3d at 1187 (“[W]e do not

defer to the agency’s conclusory or unsupported suppositions.”);

Occidental, 873 F.2d at 342 (requiring more than “conclusory

statement” regarding substantial competitive harm).

Accordingly, because DCMA’s conclusionary statement is

“unreviewable,” id., we must remand for it to “examine the

relevant data and articulate a satisfactory explanation for its

action,” if it can, “including a ‘rational connection between the

facts found and the choice made.’” Motor Vehicle Mfrs. Ass’n,

463 U.S. at 43 (quoting Burlington, 371 U.S. at 168). 

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B. Impairment

Sikorsky and Pratt also argue that disclosure of the

documents would “likely . . . impair the Government’s ability

to obtain necessary information in the future” and thus run afoul

of the impairment prong of National Parks, 498 F.2d at 770; see

Critical Mass, 975 F.2d at 878. Precedent suggests that it may

be inappropriate to apply this prong in a reverse-FOIA case. See

McDonnell Douglas Corp. v. NASA, 180 F.3d 303, 307 n.2 (D.C.

Cir. 1999) (declining to reach issue but noting “one circuit has

held that a submitter cannot even raise the government’s

interests on behalf of the agency in a reverse FOIA case”)

(citing Hercules, Inc. v. Marsh, 839 F.2d 1027, 1030 (4th Cir.

1988)); see also McDonnell Douglas Corp. v. U.S. Dep’t of the

Air Force, 215 F. Supp. 2d 200, 206 (D.D.C. 2002) (“The

managerial decision about how to best protect the government’s

interests in gathering information simply does not lend itself

easily to judicial review.” (citing Gen. Elec. Co. v. U.S. Nuclear

Regulatory Comm’n, 750 F.2d 1394, 1402 (7th Cir. 1984))),

rev’d on other grounds, 375 F.3d 1182 (D.C. Cir. 2004);

Comdisco, Inc. v. Gen. Servs. Admin., 864 F. Supp. 510, 516

(E.D. Va. 1994) (when agency favors release, “it would be

nonsense to block disclosure under the purported rationale of

protecting government interests”). Because we remand on the

issue of substantial competitive harm, we need not resolve this

issue, see Critical Mass, 975 F.2d at 878, 880 (likelihood of

either substantial competitive harm or impairment precludes

disclosure); Nat’l Parks, 498 F.2d at 770 (same), assuming the

impairment prong’s applicability. 

For the foregoing reasons, we reverse the district court’s

grant of summary judgment and remand to the district court with

instructions to remand to DoD for further proceedings consistent

with this opinion.

So ordered.

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