Opinion ID: 784738
Heading Depth: 2
Heading Rank: 1

Heading: The Trade Secrets Exemption

Text: 12 USDA withheld the Line Check Sheets of Lion's competitors pursuant to the trade secrets exemption. See 5 U.S.C. § 552(b)(4). The trade secrets exemption allows government agencies to withhold documents that contain commercial or financial information obtained from a person and privileged or confidential. Id. 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. G.C. Micro Corp. v. Defense Logistics Agency, 33 F.3d 1109, 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. G.C. Micro, 33 F.3d 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. 13 We 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. Church of Scientology, 611 F.2d at 742 (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.). District courts have discretion to order in camera inspection of the actual documents the government wishes to withhold. 5 U.S.C. § 552(a)(4)(B). In camera inspection of documents is disfavored, however, where the government sustains its burden of proof by way of its testimony or affidavits. Lewis v. IRS, 823 F.2d 375, 378 (9th Cir.1987). 14 In support of its claim to the trade secrets exemption, USDA submitted blank Line Check Sheet forms and two declarations from Trykowski. Lion disputes Trykowski's expertise in the area of raisin marketing and competition and contends that his declaration consists of utter legal conclusions. But according to his declaration, Trykowski's position as Senior Compliance Officer for AMS, a position that he has held for over eight years, has made him very familiar with the raisin marketing order that governs Lion, and put him in almost daily contact with raisin graders and supervisors. Trykowski's experience lends considerable weight to his testimony. More importantly, Trykowski's conclusions are supported by detailed and specific descriptions of each category of information included on the Line Check Sheets and the ways in which each category of information could be turned to Lion's competitive advantage. 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 does not advocate in camera review of the withheld Line Check Sheets. 7 Indeed, nothing could have been gained by reviewing the withheld Line Check Sheets in camera because there is no dispute as to the type of information contained in the Line Check Sheets. Cf. Harvey's Wagon Wheel, Inc. v. NLRB, 550 F.2d 1139, 1143 (9th Cir.1976) (holding that in camera inspection is not required where no factual dispute exists as to the nature of the statements sought). Because Trykowski's declarations identify the documents sought and the exemptions claimed, and they specify the competitive harm that USDA fears would be caused by release of the requested documents, the district court had an adequate factual basis to decide whether the trade secrets exemption applied. 15 Next we must decide whether the district court clearly erred in determining that Lion's competitors' Line Check Sheets fell within the trade secrets exemption to FOIA. The parties agree that there is actual competition in the relevant market. As Trykowski points out, prices for raisins are at a 15-year low and bids for raisin contracts can succeed or fail on margins of less than one cent per pound. The parties disagree, however, as to whether releasing the Line Check Sheets would cause substantial competitive harm to Lion's competitors. 16 In G.C. Micro, the plaintiff sought information from a government agency regarding several large defense contractors' compliance with the minority contracting provisions of the Small Business Act. 8 33 F.3d at 1111. The documents sought for each contractor included forms showing the total dollar value of all subcontracts and the percentage of those amounts that went to minority-owned businesses. Id. The documents did not show the subject matter of any of the contracts, nor did they show how many subcontracts each contractor had, how the subcontracts were distributed, or to whom they were awarded. Id. Nonetheless, the government argued that disclosing the documents would cause competitive harm because they would provide competitors with a road-map of the corporations' subcontracting plans and strategies. Id. at 1113. We held that the trade secrets exemption did not apply and compelled disclosure of the documents because [t]he data [were] made up of too many fluctuating variables for competitors to gain any advantage.... Id. at 1115. 17 As in G.C. Micro, Lion contends that the information it seeks from the Line Check Sheets would not allow it to infer confidential information about its competitors because significant variables would be redacted. 9 USDA contends, however, that revealing even the limited information Lion seeks would allow Lion to infer critical information about its competitors' volume, market share, and marketing strategy. The district court gave credence to USDA's position and held that releasing the documents would cause substantial competitive harm. 18 We cannot conclude that the district court's decision was clearly erroneous. At minimum, producing the Line Check Sheets of Lion's competitors would reveal the type of raisins Lion's competitors produced at the time of the inspection at issue because the format for Line Check Sheets is distinct depending on the type of raisin inspected. Thus, unlike the documents sought in G.C. Micro, in which the subject matter of the government contracts was obscured, see 33 F.3d at 1114, the Line Check Sheets identify the exact type of raisins sold. Moreover, revealing the sampling time information from the Line Check Sheets would allow Lion to infer the volume of its competitors' raisin sales because raisin packers work irregular hours when they have a high volume of business. With knowledge of the hours its competitors worked, Lion could deduce whether its competitors were producing a high volume of a particular type of raisin at the time of a given inspection. Finally, the remarks column of the Line Check Sheets typically includes information, such as container size and Inspection Certificate numbers, from which the identity of the packer being inspected could be inferred. Lion could use information from the Line. Check Sheets to its advantage by cutting its prices for the types of raisins its competitors pack in large volumes in order to underbid them. See id. at 1115; Gulf & W. Indus. v. United States, 615 F.2d 527, 530 (D.C.Cir.1979) (holding that information that would permit competitors to estimate and undercut bids causes substantial competitive harm). Therefore, the district court's application of the trade secrets exemption to Lion's competitors' Line Check Sheets was not clearly erroneous.