Opinion ID: 216306
Heading Depth: 2
Heading Rank: 1

Heading: FOIA Exemption Four

Text: The trade secret exemption to FOIA states, [t]his section does not apply to matters that are (4) trade secrets and commercial or financial information obtained from a person and privileged and confidential. 5 U.S.C. § 552(b). In order to invoke Exemption 4 in the Ninth Circuit, the government agency must demonstrate that the information it sought to protect is (1) commercial and financial information, (2) obtained from a person or by the government, (3) that is privileged or confidential. GC Micro Corp. v. Defense Logistics Agency, 33 F.3d 1109, 1112 (9th Cir.1994). The terms commercial or financial are given their ordinary meanings. See Pub. Citizen Health Research Group v. FDA, 704 F.2d 1280, 1290 (D.C.Cir.1983). To summarize, commercial or financial matter is `confidential' for purposes of the exemption if disclosure of the information is likely to have either of the following effects: (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. GC Micro Corp., 33 F.3d at 1112 (adopting the standard from National Parks and Conservation Ass'n v. Morton, 498 F.2d 765, 770 (D.C.Cir.1974)). The only issue before this court is the second prong substantial harm. Information is confidential for the purposes of the trade secrets exemption where disclosure of that information could cause substantial harm to the competitive position of the person from whom the information was obtained. GC Micro Corp., 33 F.3d at 1112-13 (9th Cir.1994) ( citing Nat'l Parks & Conservation Ass'n v. Morton, 498 F.2d 765 (D.C.Cir.1974)). The government need not show that releasing the documents would cause actual competitive harm. Id. at 1113. Rather, the government need only show that there is (1) actual competition in the relevant market, and (2) a likelihood of substantial competitive injury if the information were released. Id. This Court must first determine whether the district court had an adequate factual basis for its decision. Courts can rely solely on government affidavits so long as the affiants are knowledgeable about the information sought and the affidavits are detailed enough to allow the court to make an independent assessment of the government's claim. Lion Raisins v. U.S. Dept. Of Agriculture, 354 F.3d 1072, 1079 (9th Cir.2004) (citing Church of Scientology v. United States Dept. of the Army, 611 F.2d 738, 742 (9th Cir.1979)) (If the agency supplies a reasonably detailed affidavit describing the document and facts sufficient to establish an exemption, then the district court need look no further in determining whether an exemption applies.). See Bowen v. U.S. Food & Drug Admin., 925 F.2d 1225, 1227 (9th Cir.1991) (holding that affidavits that described documents withheld, the statutory exemptions claimed, and the specific reasons for the agency's withholding provided adequate factual basis for application of trade secrets exemption). Lion Raisins, 354 F.3d at 1080. If the district court had adequate factual basis for its decision then this court must decide whether the district court clearly erred in determining that the Notices of Seizure fell within the trade secrets exemption to FOIA. Competitive harm analysis is ... limited to harm flowing from the affirmative use of proprietary information by competitors. Competitive harm should not be taken to mean simply any injury to competitive position.... Pub. Citizen Health Research Group, 704 F.2d at 1291-92 & n. 30 (quotation omitted; emphasis in original). Although the court need not conduct a sophisticated economic analysis of the likely effects of disclosure[,] ... [c]onclusory and generalized allegations of substantial competitive harm ... are unacceptable and cannot support an agency's decision to withhold requested documents. Id. at 1291 (internal citation omitted).
Watkins argues that the information contained in Notices of Seizure cannot be commercial because it pertains to the unlawful importation of counterfeit goods, and not any sort of legitimate commercial activity. The district correctly rejected this argument because Notices of Seizure are not final determinations that goods seized are counterfeit. Instead, the issuance of a Notice is akin to a finding of probable cause. See generally United States v. 10,510 Packaged Computer Towers, 152 F.Supp.2d 1189 (N.D.Cal.2001) (concluding the government properly seized and forfeited merchandise under 19 U.S.C. § 1526(e) because it had probable cause to believe the merchandise was counterfeit). As the Agency's declarations demonstrate, an importer whose merchandise is seized can challenge the seizure both administratively and in court. Further, importers sometimes acquiesce in the Agency's seizure and forfeiture of legitimate goods. As a result, we cannot conclude that information contained in a Notice of Seizure is non-commercial just because it's likelyperhaps even very likelythat the merchandise seized is counterfeit. In short, the district court's finding that the Notices contain plainly commercial information, which discloses intimate aspects of an importers business such as supply chains and fluctuations of demand for merchandise, is well supported.
The major area of dispute is whether or not the information contained in the Notices of Seizure is privileged or confidential. Since the government conceded that importers are mandated to provide the information to them (AR 93), the only issue before the court is whether the disclosure would cause substantial harm to the competitive position of the providers of the information. To satisfy the harm element, the government needs to show there is actual competition in the relevant market and a likelihood of substantial injury. We must ensure the district court had an adequate factual basis for its ruling. As Lion Raisins demonstrates, a district court can satisfy this burden with only affidavits from knowledgeable Agency personnel. In this instance, the Agency provided two affidavits from knowledgeable agency employees, as well as declarations from major trade organizations representing a range of legitimate importers. Despite Watkins's arguments that the Agency did not specify a relevant market, Watkins specified the relevant market by requesting all Notices of Seizure. Therefore, Watkins established the relevant market as the entire market for imported goods. There is no set test for determining actual competition in a relevant market. We embrace a common sense approach to this issue. The United States import market exceeds $1 trillion annually. See U.S. Census Bureau U.S. Bureau of Economic Analysis (last visited July 20, 2010). This leaves little doubt that there is actual competition. Recognizing the law does not require the [Agency] to engage in a sophisticated economic analysis of the substantial competitive harm to[the importers] that might result, GC Micro Corp., 33 F.3d at 1115, the Agency's affidavits provide a sufficient factual basis for the district court to conclude that the disclosure of the information in the Notices of Seizure poses a substantial likelihood of competitive injury to importers of non-counterfeit goods who zealously guard their supply chains. Combine this information with already public information and importers' entire distribution network and demand trends could be revealed. See Gilda Indus., Inc. v. U.S. Customs & Border Prot. Bureau, 457 F.Supp.2d. 6, 10-11 (D.D.C.2006). The district court was not clearly erroneous in its finding that the information was confidential and privileged. Exemption 4 applies to Notices of Seizure.
Although Exemption 4 applies to Notices of Seizure, shielding them from public disclosure, CBP waived the confidentiality of the Notices by disclosing them to trademark owners without any limits on further dissemination. The government waives protection under Exemption 4 when it releases purportedly confidential information to the public. See Herrick v. Garvey, 298 F.3d 1184, 1193 (10th Cir.2002) ([W]hether `information is already in the public domain,' i.e., waiver of an exemption, is a `proposition that if true would give victory [to plaintiff] independent' of whether Exemption 4 properly applies.)(quoting Niagara Mohawk Power Corp. v. United States Dep't of Energy, 169 F.3d 16, 19 (D.C.Cir.1999)); CNA Fin. Corp. v. Donovan, 830 F.2d 1132, 1154 (D.C.Cir.1987) (To the extent that any data requested under FOIA are in the public domain, the [government] is unable to make any claim to confidentialitya sine qua non of Exemption 4. (alteration added)). Indeed, the purpose of Exemption 4 is `to protect the confidentiality of information which is obtained by the Government... but which would customarily not be released to the public by the person from whom it was obtained.' Herrick, 298 F.3d at 1193 (citation omitted). Here, disclosure of the Notices of Seizure to an aggrieved trademark owner is mandated by statute. 19 U.S.C. § 1526(e). When disclosure is made to a trademark owner, the government imposes no restrictions on the owner's use of the information in the Notice. He can freely disseminate the Notice to his attorneys, business affiliates, trade organizations, the importer's competitors, or the media in a way that would compromise the purportedly sensitive information about an offending importer's trade operations. This no-strings-attached disclosure thus voids any claim to confidentiality and constitutes a waiver of Exemption 4. FOIA accordingly creates an obligation for the government to disclose the requested documents. While the public domain test articulated by the D.C. Circuit is one persuasive way of determining when the government has waived confidentiality under FOIA, see, e.g., Students Against Genocide v. Dep't of State, 257 F.3d 828, 836 (D.C.Cir. 2001) (requiring information to be preserved in a permanent public record to effectuate waiver), it should not be the only test for government waiver. Most cases applying the public domain test have grappled with requests for sensitive information involving high-level criminal investigations or matters of national security. See id. at 835-36 (seeking disclosure of classified CIA documents and aerial photographs); Cottone v. Reno, 193 F.3d 550 (D.C.Cir.1999) (seeking FBI wiretap recordings relating to a criminal investigation of the Colombian and Sicilian Mafia); Fitzgibbon v. C.I.A., 911 F.2d 755 (D.C.Cir. 1990) (seeking disclosure of various CIA documents and the location of a certain CIA station); Afshar v. Dep't of State, 702 F.2d 1125 (D.C.Cir.1983) (seeking disclosure of CIA and FBI investigation documents). In such cases, the presumption in favor of disclosure must yield to overriding concerns for public safety and national securityconcerns not relevant to the case at bar. Moreover, none of these cases presented a scenario in which the government had already provided a no-strings-attached disclosure of the confidential information to a private third party. [1] In the closest case, Students Against Genocide, the government revealed certain classified photos documenting Bosnian Serb atrocities committed in 1995 to the U.N. Security Council. 257 F.3d at 836. The photos were displayed for Council members, but were neither distributed to nor turned over to members' possession for further analysis. Id. at 837. This careful procedure prevented Council members from learning about the highly-classified technical capabilities of U.S. reconnaissance systems (the basis for the government's exemption claim). Id. By contrast, an aggrieved trademark owner (who receives a Notice of Seizure) can freely disseminate that information in ways that would compromise the purportedly sensitive information about an offending importer's trade operations. Taken to its logical extreme, the public domain test would still shield commercial information under Exemption 4 even if CBP or an aggrieved trademark owner opened up the phonebook and faxed a copy of the seizure notice to every importer in the region, provided the disclosures were not preserved in some public record. Therefore, it should make no difference that the disclosure was not preserved in a permanent public record in this case. While the public domain test will be persuasive in most cases, it does not reach the concerns of confidentiality in circumstances like those presented in this case. Therefore, when an agency freely discloses to a third party confidential information covered by a FOIA exemption without limiting the third-party's ability to further disseminate the information then the agency waives the ability to claim an exemption to a FOIA request for the disclosed information.
Watkins's argument that CBP could not assert a claim of competitive harm without presenting affidavits from entities named in the Notices of Seizure is foreclosed by Lion Raisins. See 354 F.3d at 1079.