Source: http://foiaproject.org/case_detail/?title=on&style=foia&case_id=20407
Timestamp: 2019-04-26 12:14:32+00:00

Document:
FOIA Project Annotation: A federal court in South Dakota has ruled that 7 U.S.C. § 2018(c) is an Exemption 3 statute that protects redemption data, which includes the amount of money qualified stores are reimbursed for participating in the federal food stamp program. The Argus Leader submitted a request to the Food and Nutrition Service for information about the food stamp program, including the amounts reimbursed to specific stores. The agency provided some of the information, but withheld the redemption data under § 2018(c). Noting that whether or not § 2108(c) qualified as an Exemption 3 statute had never been litigated before, the court indicated that "the only time that it is acceptable to release information under the statute is if it is either for administrative or enforcement purposes or to investigate criminal activity. That restriction and the statutory language that discusses safeguarding or punishment for releasing information is the type of language that, on its face, is indicative of a withholding statute." The newspaper contended that the redemption data did not qualify under the statutory provision. The court disagreed, pointing out that the information required to be submitted by stores accepting food stamps "allows the government to determine if the applicant qualifies or continues to qualify for participation in the [food stamp] program. This type of information, especially to determine if a retailer continues to qualify for [food stamp] participation, includes the amount of income (redemption data) each retailer derives from [the program] and the federal government." The court concluded that "under the plain language of § 2018, not only is the statute a withholding statute, but Congress intended to exempt redemption data from disclosure."
FOIA Project Annotation: A federal court in South Dakota has ruled that food stamp redemption data showing the yearly redemption amounts paid to each participating store is not protected by either Exemption 4 (confidential business information) or Exemption 6 (invasion of privacy). In a case that was remanded by the Eighth Circuit after the appeals court found that a provision of the statute implementing the food stamp program did not qualify as an Exemption 3 statute, rather than disclose the data to the Argus Leader Media, the Food and Nutrition Service published a request in the Federal Register asking food stamp retailers whether they thought redemption data should be disclosed. Of the potential 321,988 retailers contacted, only 323 responded. Of those responding, 73 percent opposed disclosure of the data. Based on the results, FNS followed up with fifteen food stamp retailers who provided affidavits stating that disclosure could cause competitive harm. The agency then claimed the data was protected by Exemption 4 and Exemption 6. The court noted that in Madel v. Dept of Justice, 784 F.3d 448 (8th Cir. 2015), the most recent Eighth Circuit ruling involving Exemption 4, the court made clear that an Exemption 4 claim required an agency to "provide affidavits which justify the claimed exclusion of each document by correlating the purpose of the exemption with the actual portion of the document which is alleged to be exempt." The court found FNS had not done so here. The court pointed out that "because USDA received a small percentage of responses from [food stamp] retailers, there is evidence that supports the inference that the majority of retailers are not concerned about any competitive harm that might stem from the disclosure of individual store data." Turning to the privacy exemption claim, the court observed that "disclosure of individual store redemption data does not disclose individual finances because the data would not disclose what percentage of the retailer's sales are credited to [food stamps] or how much the retailer profits after deducting expenses. Additionally, a reasonable fact-finder could conclude that there is no threat of competitive harm with the disclosure of individual store data."
FOIA Project Annotation: After failing to convince the Eighth Circuit that data showing food stamp purchases at grocery stores was protected by Exemption 3 (other statutes), the Department of Agriculture has struck out once again in its attempt to claim the data was protected by Exemption 4 (confidential business information). Although the agency provided the district court in South Dakota plenty of industry affidavits testifying to the potential effects of disclosure on grocery stores' razor-thin profit margins, Judge Karen Schreier concluded the agency had not shown that data about food stamp purchases would cause competitive harm. Although food stamp purchase data could contribute to a number of analyzes of how the food stamp program works and whether or not it is effective, it has been the Sioux Falls Argus Leader that has carried the fight on this issue and Schreier's opinion is the newspaper's second victory. The Argus Leader requested data on the Supplemental Nutrition Assistance Program (SNAP) administered by the Agriculture Department's Food and Nutrition Service, including yearly spending totals at individual retail locations. The agency provided some records, but withheld most of the data under Exemption 3 and Exemption 4. In her first ruling, Schreier upheld the agency's Exemption 3 claim. However, on appeal, the Eighth Circuit reversed, finding that 7 U.S.C. § 2018(c) did not apply to the data being withheld. The Eighth Circuit sent the case back to Schreier to consider whether Exemption 4 might apply. After reviewing affidavits from both sides on the issue of competitive harm, Schreier concluded the agency had not shown a likelihood of competitive harm from disclosure. The government provided testimony from Joey Hays, owner of Dyer Foods, a small supermarket chain headquartered in Dyer, Tennessee, said he would not disclose SNAP data because his competitors could use it against him. However, he admitted that SNAP data would not disclose a store's total profits, that most of his stores' business was already in plain sight, and that Wal-Mart had already saturated his market. Andrew Johnstone, associate general counsel for Sears Holdings Management, testified that profit margins in the grocery business were small, that disclosure of SNAP data could affect sales at K-Mart stores, and that landlords might not renew lease agreements for stores that had a large number of food stamp users. Peter Larkin, president of the National Grocers Association, testified that disclosing SNAP data might cause competitors to target areas with high SNAP volume, but admitted that disclosing SNAP data would not be the same as disclosing a store's profits or net sales. The government's last witness was Gwen Forman, senior vice president of marketing at Cumberland Farms. She testified that disclosure of SNAP data could allow competitors to gauge how successful a store's advertising strategy was, but admitted that SNAP data alone would not determine a store's future plans or business strategy. The Argus Leader's testimony was provided by Richard Volpe, an assistant professor in the Agribusiness Department at California Polytechnic State University. Volpe testified that an array of store data was already publicly available and that analyzing SNAP data over a period of years had limited value. Ryan Sougstad, associate professor of Business Administration at Augustana University, also testified. He noted that SNAP data for individual stores would be of limited value in making decisions about where to locate new stores. The government called Bruce Kondracki, vice president of Market Insights and Consumer Research at Dakota Worldwide Corporation, as a rebuttal witness. Kondracki testified that grocery stores use model forecasts to determine where to add new stores and that SNAP data could improve the accuracy of these models. The newspaper argued that the data did not meet the threshold for coverage by Exemption 4 because it had not been obtained from a person. The newspaper contended that "because SNAP is a government program, the requested SNAP data is obtained from inside the government. The government is giving SNAP benefits to qualifying households, and the government then tracks where the SNAP households are spending their benefits." The Argus Leader pointed out that "the government is essentially keeping data on its own spending." Schreier rejected the claim, noting that the Eighth Circuit had already ruled that the data came from third-party processors "who verify whether the SNAP household has available SNAP benefits and that the third-party processor submits the redemption data to the Food and Nutrition Service." Having found the data was obtained from a third-party, however, Schreier concluded that it was neither privileged nor confidential. She noted that competitive harm was defined as harm caused by the use of proprietary information by a competitor, not because information might be embarrassing and harmful to a company's reputation. She found the agency had shown that actual competition existed in the grocery industry. But she observed that much of the data about store operations was already public and pointed out that "while SNAP data may be beneficial, it would not add significant insights into the grocery industry." She added that "any potential competitive harm from release of the requested SNAP data is speculative at best." She found the government had not shown that SNAP data would have any effect on the decision where to locate a store. She indicated that "although a high volume of SNAP sales might encourage a competitor to enter [a] geographical market, an equally compelling conclusion is that the competitor may decide to stay away from that market. Another equally compelling conclusion is that SNAP sales will have no or little effect on a store's decision to expand into new sites" because of a variety of other factors. Finding the agency had not shown a likelihood of substantial competitive harm, she concluded that "the requested SNAP data does not provide. . .insights into store profitability. SNAP sales are merely a part of the store's total revenue. SNAP data does not disclose a store's profit margins, net income, or net worth."
FOIA Project Annotation: A federal court in South Dakota has awarded Argus Leader Media $68,422.67 in attorney's fees for the company's litigation against the Agriculture Department for records concerning redemptions at the individual store level under the Supplemental Nutrition Assistance Program. The extensive litigation included two trips to the Eighth Circuit. Finding that Argus Media might have some commercial interest in obtaining the information, the court observed that "the primary purpose of publishing such data is to inform the public how and where government resources are being used. Argus is not using its FOIA request to further a private interest in a dispute with the government." Although the government lost on its claim that Exemption 3 (other statutes) or Exemption 4 (confidential business information) protected the data, the court noted that "neither party disputes that USDA had a 'reasonable basis in law' to withhold the documents. FOIA Exemptions 3 and 4 provided a reasonable legal basis to withhold the requested information." The newspaper's attorney requested an hourly rate of $200, a rate the court found was within the range of rates previously approved in the district. But the court found that the attorney's claim that he spent 1,000 hours on the litigation was too high an estimate, particularly since the attorney admitted he did not normally keep hourly records for his client work. Instead, the court reduced the amount to 300 hours, providing an award of $60,000. The court also approved an additional $8,422.67 in costs.

References: § 2018
 § 2018
 § 2108
 § 2018
 v. 
 § 2018