Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-98-05251/USCOURTS-caDC-98-05251-0/pdf.json

Parties Involved:
McDonnell Douglas Corporation
Appellant
National Aeronautics and Space Administration
Appellee

Document Text:

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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, Assistant United States Attorney.

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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 Administration'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 information 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 services. McDonnell Douglas responded with a bid based on its

Delta launch vehicle. No other contractors submitted proposals 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 overhead, 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

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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 considered 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 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. 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 precluded 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 information 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 NaUSCA Case #98-5251 Document #445026 Filed: 06/25/1999 Page 3 of 7
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tional Parks because disclosure would likely impair the government'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 Exemption 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. Although NASA determined that the disclosure of certain information--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 unlawfully 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

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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 confidential under Exemption 4 and the Trade Secrets Act. Accordingly, appellant goes so far as to ask us (presumably

through another en banc rehearing) to flatly overrule National Parks.

Although it seems somewhat troubling that Justice, in 1993,

instructed the agencies that they "should" treat "most" information 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 confidential commercial or financial information under the National 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.

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Appellant claimed the release of line item pricing information 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 underbid 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 competitor'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.

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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 information 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).

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