Opinion ID: 3011324
Heading Depth: 2
Heading Rank: 3

Heading: Resolution of Issues Raised on Appeal

Text: OSHA Data argues that the District Court's assessment of the costs to OSHA Data was erroneous for two reasons: first, because these costs were not the type of costs encompassed by the statutory and regulatory definitions of review costs, and second, because the agency had not shown a need for the notification procedures that led to the imposition of these projected costs. In furtherance of its first claim, OSHA Data asserts that the initial examination of a document, for which review costs can be charged, 5 U.S.C. S 552(a)(4)(A)(iv), should be narrowly construed, and that the predisclosure notification and evaluation are not part of this initial examination. The construction urged by OSHA Data, in effect, equates initial examination with an initial step in the process.27 The DOL argues that the initial examination includes all relevant steps taken by the agency culminating in its decision as to whether the information is subject to disclosure or is instead exempt. DOL asserts that initial examination refers to the entire _________________________________________________________________ 27. OSHA Data states that [i]n order to assert the need to notify business submitters, [the DOL] must have already conducted its `initial examination'  and thus cannot charge for anyadditional review costs. OSHA Data Br. at 30. Although OSHA Data does not (and cannot) dispute the fact that commercial requesters, due to their responsibility to pay review costs, are generally required to shoulder more of the cost burden of FOIA requests than are other requesters, OSHA Data has not identified what costs incurred by the agency in this case would qualify as review costs. Thus, while in theory OSHA Data seems willing to bear costs beyond the costs of duplication and search, OSHA Data has not suggested what would be the permissible review costs in this case if, as OSHA Data argues, the notification and evaluation costs are not such costs. 17 process leading to the disclosure decision, and that the word initial is used primarily to distinguish this process from the process of reviewing the materials again for purposes of applying the same exemption on an administrative appeal. DOL Br. at 21. While FOIA does not set forth a definition ofinitial examination, we conclude that its language does not support OSHA Data's interpretation. The statute refers to initial examination of a document for the purposes of determining whether the documents must be disclosed under this section and for the purposes of withholding any portions exempt from disclosure under this section. 5 U.S.C. S 552(a)(4)(A)(iv). It cannot be doubted that DOL proposes to undertake predisclosure notification and evaluation for exactly the purpose stated in the statute: to determine whether the documents must be disclosed or whether they are exempt from disclosure. Without complying with these notification procedures, the agency would have great difficulty engaging in any meaningful review so as to make that determination. Thus, we conclude that the statute suggests a broader reading of initial examination, sufficiently broad to encompass the contested steps in the predisclosure decision making process. In addition, the DOL regulations described above are available to fill in the interstices in the statute; these regulations clearly suggest an interpretation ofinitial examination that mirrors the meaning suggested by the DOL. The regulations specifically state that costs may be assessed for review at the initial level, i.e. the review undertaken the first time the documents are analyzed to determine the applicability of specific exemptions to the particular record or portion of the record, and clarify that, therefore, a requester would not be charged for review at the administrative appeal level with regard to the applicability of an exemption already applied at the initial level. 29 C.F.R. S 70.40(d)(3). The regulatory language clearly supports the view that initial examination was being contrasted to subsequent review on appeal, not the view that initial examination consists only of an agency's first internal look at the requested records. OSHA Data has 18 not challenged the validity of these regulations, and we will adopt the meaning apparent to us under the regulations' plain language. We therefore conclude that the expenses of predisclosure notification and evaluation are the types of expenses to which the term review costs was meant to apply. OSHA Data next contends that, regardless of whether notification costs fall within the general ambit of review costs, the costs in this case should not be charged to OSHA Data because it was unnecessary for the agency to incur them. OSHA Data claims that the DOL had no reason to notify -- that is, that there is no basis for the DOL's determination that the information in question might give the agency reason to believe that disclosure of the information could reasonably be expected to cause substantial competitive harm, the trigger for mandatory notification specified by the applicable regulations. 29 C.F.R. S 70.26(d)(2)(ii). OSHA Data is, in essence, contesting the propriety of the agency's resort to the notification procedures. FOIA explicitly provides a right of action for requesters to contest an agency's ultimate decision to withhold data. See 5 U.S.C. S 552(a)(4)(B) (giving the district court jurisdiction, [o]n complaint, to enjoin the agency from withholding agency records and to order the production of any agency records improperly withheld). It is well established that requesters can challenge the costs charged to them. See, e.g., 5 U.S.C. S 552(a)(4)(A)(vii) (referring to an action by a requester regarding the waiver of fees). We construe OSHA Data's argument, then, as an argument that the assessment of review costs includes within it some determination that these review costs were reasonably or appropriately incurred.28 We will accordingly examine, as did the District Court, the DOL's basis for its decision to _________________________________________________________________ 28. It is important to note that in this appeal, OSHA Data does not challenge the amount of the predisclosure costs estimated by the DOL; rather, OSHA Data challenges the agency's determination that it was necessary to incur notification and evaluation costs at all. 19 incur the notification and evaluation costs that it claims as review costs.29 As the District Court recognized, the DOL has provided several justifications for its decision to pursue predisclosure notification, all of which go toward assessing the risk of substantial competitive harm. The DOL gives several reasons why it believed that some of this specific information might eventually be deemed to qualify as confidential under Exemption 4. First, the DOL had previously represented to submitters that it would maintain the confidentiality of their responses.30 See A. at 18-25. The DOL has also presented evidence that legislators and businesses consider information of this sort to be confidential because of its risk of causing substantial competitive harm if disclosed. See, e.g., A. at 143-44 (Letter from Rep. Cass Ballenger, Chairman, Subcommittee on Workforce Protections, Committee on Economic and _________________________________________________________________ 29. The district courts clearly have de novo review over the ultimate agency decision to withhold records. See 5 U.S.C. S 552(a)(4)(B). However, the parties have provided no guidance as to what standard of review a district court would employ in evaluating the reasonableness of the agency's intermediate decision to pursue predisclosure notification. Is this a case of an agency interpreting its own regulations (here, the predisclosure regulations) that might entail Chevron deference? See Chevron v. Natural Resources Defense Council, Inc. , 467 U.S. 837, 842-44 (1984); Auer v. Robbins, 519 U.S. 452, 461-63 (1997). Or is it a situation where the courts review an adverse agency action for arbitrariness or caprice as provided for by the Administrative Procedure Act? See 5 U.S.C. S 706(2)(A). Or does the de novo FOIA standard apply? We need not decide this question, for we cannot say that the agency erred, under any standard of review, in making the decision to undertake predisclosure notification. 30. The DOL asserts that, if the requested information were deemed to have been provided voluntarily by submitters, rather than provided pursuant to a compulsory regulation, the DOL would have an even more heightened responsibility to keep the information confidential. See DOL Br. at 33-34 (citing Critical Mass Energy Project v. NRC, 975 F.2d 871, 879-880 (D.C. Cir. 1992) (en banc)). Because wefind that the DOL had ample justification for its decision to pursue predisclosure notification even under the assumption that the DOL compelled submitters to provide it, we need not reach the question whether the information was in fact provided voluntarily or by regulatory compulsion. 20 Educational Opportunities, to Charles Bowsher, Comptroller General of the United States, Nov. 12, 1996) (outlining confidentiality concerns stemming from the specific Data Collection Initiative at issue in this case); A. at 196, 200-01 (Declaration of DOL official Emily Sheketoff, Apr. 27, 1998) (describing the basis for the confidentiality concerns expressed by representatives of Goodyear, one of the companies submitting Data Initiative Collection data). More important, as the District Court noted, at least one federal court has held that information similar to the workplace data in question here was competitively sensitive and therefore confidential within the meaning of Exemption 4. See Westinghouse Elec. Corp. v. Schlesinger , 392 F. Supp. 1246, 1249 (E.D. Va. 1974), aff 'd, 542 F.2d 1190 (4th Cir. 1976) (superseded by statute on other grounds, see CNA Fin. Corp. v. Donovan, 830 F.2d 1132, 1141 & n.62 (D.C. Cir. 1987)). The District Court concluded that Westinghouse provided support for DOL's contention that [t]he information sought by OSHA Data could give a submitter's competitors insight into the productivity, hours worked, market share and production, and that the disclosure of such information could cause the submitter substantial competitive harm. A. at 337 n.7. We agree. In Westinghouse, the District Court for the Eastern District of Virginia held that information appearing in a business's equal employment opportunity workforce report and affirmative action plan, could, if disclosed, enable competitors to calculate (via reverse engineering) that business's labor costs and profit margins. See Westinghouse, 392 F. Supp. at 1249. Similarly, argues the DOL, a competitor could use information about a business's number of employees and employee work-hours to calculate estimates of that company's labor costs and productivity, which would give that competitor valuable inside information to assist its pricing strategies. In fact, previous litigation concerning the Data Collection Initiative itself has touched on confidentiality concerns. See American Trucking Assocs. v. Reich, 955 F. Supp. 4, 6 (D.D.C. 1997) (noting employers' concerns about the confidentiality of the Data Collection Initiative). The DOL maintains that the District Court's order for injunctive relief 21 in American Trucking depended in part upon OSHA's assurance that it would keep the survey data for internal use only. See DOL Supp. App. at 3 (District Court order granting injunction, American Trucking Assocs. v. Reich, D.D.C. Civ. No. 96-552 (TPJ), Mar. 18, 1997); see also A. at 200 (Declaration of DOL official Emily Sheketoff, Apr. 27, 1998).31 The issue before us as we examine this early stage of the DOL's process is whether disclosure of the information sought could lead to substantial competitive harm. The evidence produced was sufficient for this purpose. We are not faced with the ultimate issue for the agency, namely whether the information in the Count I and II requests was actually confidential and therefore covered by Exemption 4, and we take no position on this question.32 However, as the _________________________________________________________________ 31. In addition, we cannot fault the agency's decision to exercise caution in making its determination whether the requested information was exempt from disclosure. As the DOL points out, the consequences of an agency's wrongful disclosure of records can be serious. The predisclosure notification regulations mandate notification and evaluation whenever the agency has reason to believe that disclosure of the information could reasonably be expected to cause substantial competitive harm. 29 C.F.R. S 70.26(d)(2)(ii). A submitter that believes that its information was wrongfully disclosed when that information should have been withheld can bring a reverse FOIA suit against the agency under the Administrative Procedure Act. See Chrysler Corp. v. Brown, 441 U.S. 281, 318 (1979). Wrongful disclosure of information protected under Exemption 4 can even lead to criminal liability for an agency under the Trade Secrets Act, 18 U.S.C. S 1905. See CNA Fin. Corp. v. Donovan, 830 F.2d 1132, 1151-52 (D.C. Cir. 1987). While the fact that wrongful disclosure can lead to agency liability cannot, standing alone, justify the agency's decision to undertake notification (under such a rationale, an agency could potentially justify mandatory notification whenever commercial information of any kind, no matter how innocuous, is requested), surely it is appropriate for the agency to consider its responsibility not to wrongfully disclose confidential information as well as its responsibility to disclose all information whose disclosure is mandated by FOIA. 32. As Magistrate Judge Cavanaugh acknowledged, one can imagine information that is far more commercially sensitive than the information requested in Counts I and II. See A. at 188-89 (Transcript of Motion, Apr. 21, 1998, at 38-39). 22 District Court found, the evidence is clearly sufficient to surpass the much less onerous threshold of showing that the DOL acted appropriately in concluding that it had reason to believe that disclosure of the information could reasonably be expected to cause substantial competitive harm, 29 C.F.R. S 70.26(d)(2)(ii).33 This standard for triggering mandatory predisclosure notification is obviously much less burdensome than the standard for justifying an ultimate withholding of information under Exemption 4. See supra note 24 (describing National Parks standard). The DOL need not show that the disclosure of the information requested would cause substantial competitive harm, but must show only that the DOL had reason to believe that disclosure . . . could reasonably be expected to cause substantial competitive harm.34 The totality of the evidence of the potential for substantial competitive harm that was available to the DOL at the time it assessed the need for predisclosure notification was sufficient to give the DOL reason to believe that substantial competitive harm might reasonably result from some of the disclosures in question. In summary, we conclude that the estimated $1.7 million costs for notification and evaluation were review costs properly chargeable to OSHA Data in connection with the notification procedure authorized by agency regulations, and that the District Court correctly dismissed Counts I _________________________________________________________________ 33. We note that the breadth of the Count I and II requests -- seeking information for over 80,000 companies -- makes it difficult for the DOL to determine whether the information falls under Exemption 4 without going through predisclosure notification. The inquiry into the likelihood of substantial competitive harm is a fact-based inquiry that evaluates the circumstances of the employer submitting the information. See CNA Fin. Corp. v. Donovan, 830 F.2d 1132, 1152-53 (D.C. Cir. 1987). Particularly in a case where, as here, the agency collecting the information is collecting it for the first time, see DOL Supp. App. at 11 (Declaration of DOL official Miriam McD. Miller, May 12, 1998), it is unrealistic to expect the agency to be familiar with the competitive circumstances of each of 80,000 submitters without contacting those submitters for further information. 34. It is clear that in order to prove that the agency had reason to believe X, the agency need show something less than X is true. (Here, X = disclosure could reasonably be expected to cause substantial competitive harm.) 23 and II of the Amended Complaint based on OSHA Data's inability to pay these costs.