Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-06-05310/USCOURTS-caDC-06-05310-0/pdf.json

Parties Involved:
Canadian Commercial Corporation
Appellee
Department of the Air Force
Appellant
Orenda Aerospace Corporation
Appellee

Document Text:

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.

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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

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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). 

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In two recent reverse-FOIA cases, we held the Air Force

was arbitrary and capricious in concluding disclosure of lineitem 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. 

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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

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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

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*

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.

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

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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. 

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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

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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. 

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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. 

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