Court Opinion

ID: 9282714
Source: CourtListenerOpinion
Date Created: 2022-11-29 01:00:30.099306+00
Date Added: 2024-06-11T17:12:57.550259
License: Public Domain

Case: 22-10373     Document: 00516558219         Page: 1     Date Filed: 11/28/2022

              United States Court of Appeals
                   for the Fifth Circuit                             United States Court of Appeals
                                                                              Fifth Circuit

                                                                            FILED
                                                                    November 28, 2022
                                  No. 22-10373
                                Summary Calendar                       Lyle W. Cayce
                                                                            Clerk

   Ryan, L.L.C.,

                                                           Plaintiff—Appellant,

                                       versus

   United States Department of Interior; Office of
   Inspector General of the United States Department of
   the Interior,

                                                         Defendants—Appellees.

                  Appeal from the United States District Court
                      for the Northern District of Texas
                                 3:22-cv-3014

   Before Clement, Southwick, and Engelhardt, Circuit Judges.
   Per Curiam:*
          Before us is a “reverse-FOIA action,” or a case where “a plaintiff
   seeks to prevent a governmental agency from releasing” sensitive
   information to a third-party pursuant to a Freedom of Information Act

          *
            Pursuant to 5th Circuit Rule 47.5, the court has determined that this
   opinion should not be published and is not precedent except under the limited
   circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 22-10373      Document: 00516558219          Page: 2   Date Filed: 11/28/2022

                                    No. 22-10373

   (FOIA) request. John Doe #1 v. Veneman, 380 F. 3d 807, 810 (5th Cir. 2004).
   One legal mechanism—Exemption 4—allows parties to block the release of
   “privileged or confidential information” to the public per FOIA. 5 U.S.C. §
   552(b)(4). The Supreme Court recently unpacked the meaning of
   “confidential” and, in turn, the boundaries of Exemption 4 in Food Marketing
   Institute v. Argus Leader Media, 139 S. Ct. 2356 (2019). In reading Argus, we
   VACATE and REMAND this matter for further consideration of the
   Supreme Court’s instructions.
                                          I
          Ryan, LLC is a tax consulting firm that helps energy companies shave
   down the royalties they owe on public land leases. Royalties are paid to the
   U.S. Department of the Interior’s collection agency, the Office of Natural
   Resources Revenue (ONRR). Ryan, through “trial-and-error,” has
   discovered a particularly successful—and allegedly confidential—process
   for “capturing” large tax deductions and recovering overpaid royalties. The
   process involves using a proprietary combination of documents and
   calculations to prove up “historical capital expenditures” that entitle
   companies to royalty refunds. Because this recipe isn’t “known to Ryan’s
   competitors” and the ONRR provides little guidance on what works, Ryan
   safeguards its secret formula through “electronic security measures” and
   confidentiality agreements.
          Five years ago, Ryan put together a refund request for a client—using
   its allegedly confidential process—and sent it to the ONRR. The ONRR,
   suspecting the request was fraudulent, forwarded the matter to its internal
   investigation team, the Office of the Inspector General (OIG). Following a
   probe, the OIG found the concern lacking and detailed its findings in two
   reports. Then, a third-party government watchdog filed a FOIA request for
   one of the reports. Ryan contested the disclosure and, after a lawsuit, the OIG

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                                     No. 22-10373

   agreed not to release the report. But, the third-party filed a second FOIA
   request seeking the other report. The OIG, without telling Ryan, obliged.
   Then, the third-party filed a third FOIA request seeking the report’s
   attachments plus a couple of interview summaries. At that time, the OIG
   sought Ryan’s position on whether they should be disclosed. Ryan, hearing
   about the prior disclosure for the first time, vigorously objected to any further
   disclosures. Ryan maintained the documents were confidential as they
   related to its secret refund application formula. The OIG denied Ryan’s
   objections, so Ryan filed this lawsuit. On summary judgment, the district
   court agreed with the OIG’s reasoning and dismissed the case, so Ryan
   appealed.
                                          II
          In line with Chrysler Corp. v. Brown, 441 U.S. 281 (1979), a district
   court may review an agency’s decision to release information pursuant to
   FOIA, but it can “set aside that decision [only] if it is ‘arbitrary, capricious,
   an abuse of discretion, or otherwise not in accordance with law.’”
   Veneman¸380 F.3d at 813–14 (quoting 5 U.S.C. § 706(2)(A)). Although this
   standard is deferential, our review of the agency’s decision must be
   “searching and careful” to “ensure that the agency did not ‘entirely fail[ ] to
   consider an important aspect of the problem’ that it seeks to address.” Univ.
   of Texas M.D. Anderson Cancer Ctr. v. United States Dep’t of Health & Hum.
   Servs., 985 F.3d 472, 475 (5th Cir. 2021) (alteration in original) (citation and
   quotations omitted). “Put simply, we must set aside any action premised on
   reasoning that fails to account for ‘relevant factors’ or evinces ‘a clear error
   of judgment.’” Id. (quoting Marsh v. Oregon Nat’l Res. Council, 490 U.S. 360,
   378 (1989)).
          Exemption 4 is a FOIA-related tool that permits parties to block the
   disclosure of “commercial or financial information” that is “obtained from

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                                     No. 22-10373

   a person and [is] privileged or confidential.” 5 U.S.C. § 552(b)(4). In Food
   Marketing Institute v. Argus Leader Media, the Supreme Court laid out the
   new Exemption 4 standard: information may be exempt from a FOIA release
   as “confidential” if it is (1) “both customarily and actually treated as private
   by its owner” and (2) “provided to the government under an assurance of
   privacy.” 139 S. Ct. 2356, 2363–66 (2019). Importantly, the Supreme Court
   did not clearly answer whether the latter prong is even necessary, finding
   “there’s no need to resolve that question in this case” because the
   government’s confidentiality was mandated by way of federal regulations. Id.
   at 2363.
          Here, it’s not clear the district court and the OIG properly
   “consider[ed] an important aspect of the problem,” namely the “relevant
   factors” of Exemption 4 laid out in Argus. M.D. Anderson, 985 F.3d at 475. In
   its decision, the OIG found Ryan didn’t treat its refund formula as
   confidential and didn’t receive any “assurance of confidentiality” from the
   government. The district court agreed on the latter part, holding Ryan never
   received any promise from the OIG that it would keep Ryan’s refund formula
   secret. But, there’s two problems with those findings.
          First, it’s not evident that the OIG and the district properly applied
   the “assurance” prong of Argus. The OIG found it told Ryan—through a
   standard disclaimer—that it would “publicly disseminate the information”
   it receives from “submitters of information” if “required by law.” The
   district court echoed this reasoning, stating the OIG is only required to
   “notify” someone in the face of a FOIA request—not keep their information
   private—per 43 C.F.R. § 2.27. But, an “assurance of confidentiality” can
   exist by way of a federal regulation. See Argus, 139 S. Ct. at 2363 (holding an
   “assurance” existed when, as evidenced by 43 Fed. Reg. 43275 (1978) and 7
   C.F.R. § 278.1(l), the “government has long promised” the “retailers who
   participate in SNAP” that “it will keep their information private”). Here,

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                                    No. 22-10373

   under a federal regulation named “Does ONRR protect information that I
   provide,” the ONRR warrants that “[t]o the extent that applicable laws and
   regulations permit, ONRR will keep confidential any data that you or your
   affiliate submit(s) that is privileged, confidential, or otherwise exempt from
   disclosure.” 30 C.F.R. § 1206.149. Yet, the district court and the OIG didn’t
   address this federal law.
          Second, it’s not clear the OIG or the district court seriously
   considered whether Ryan “customarily and actually treat[s] as private” its
   refund application process. Argus, 139 S. Ct. at 2363. The OIG ruled Ryan’s
   online “advertis[ing]” of its services rendered the information in question
   non-confidential. But, the connection between ads on Ryan’s website and its
   secretive refund formula isn’t obvious. Ryan didn’t publicize its confidential
   process. As for the district court, it didn’t consider this Argus prong except
   to say in passing that the “confidentiality agreements between Ryan and its
   clients do not promise confidentiality from the government because OIG was
   not a party to any such agreements.” But, under Argus, information may be
   considered confidential if it is “both customarily and actually treated as
   private by its owner.” Id. (emphasis added). So, Ryan’s agreement with its
   clients—as well as its lawsuits against the OIG and other unexplored facts—
   may evidence a secretive approach to the refund application process that
   might satisfy the prongs of Argus.
                                        * * *
          Because the district court and the OIG didn’t fully explore the record
   or the Supreme Court’s decision in Food Marketing Institute v. Argus Leader
   Media, 139 S. Ct. 2356 (2019), we VACATE and REMAND this matter for
   further consideration.

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