Companies that provide information to government entities received new assurance Monday from the U.S. Supreme Court that their confidential information will remain confidential.
In a landmark 6-3 decision, the high court told lower courts to use a dictionary instead of their own interpretations when exempting confidential data under the Freedom of Information Act.
“In statutory interpretation disputes, a court’s proper starting point lies in a careful examination of the ordinary meaning and structure of the law itself,” wrote Justice Neil Gorsuch in a case involving a media request for information on grocery stores that participate in a federal nutrition assistance program.
“We cannot approve such a casual disregard of the rules of statutory interpretation,” Justice Gorsuch wrote in the majority opinion in Food Marketing Institute v. Argus Leader Media, overruling lower court support for authorizing release of the information. “Where, as here, that examination yields a clear answer, judges must stop.”
In effect, the case strikes down a 45-year precedent set by the D.C. Circuit, which the Supreme Court said incorrectly created a two-part test to determine whether information was truly confidential.
Gorsuch was joined in the majority by Chief Justice John G. Roberts and Justices Clarence Thomas, Samuel Alito, Elena Kagan and Brett Kavanaugh.
The decision was not only a major victory for grocery retailers, said Evan Young, a Baker Botts partner in Austin who argued the case; the ruling will also protect the privacy of “a ton of other businesses” that share sensitive information about their sales and business operations to the government.
In its 1974 opinion in National Parks & Conservation Association v. Morton, the D.C. Circuit ruled that the confidentiality of commercial information shared with the government could be protected from release under the federal open records law (commonly known as FOIA), but only if disclosure of the information would likely cause substantial harm to the competitive position of the owner of that information as well as impair the government’s ability to obtain necessary information in the future.
But in Monday’s decision, Gorsuch points out that the National Parks decision has “drawn considerable criticism over the years,” and even the D.C. Circuit has distanced itself from it.
“Not only did National Parks inappropriately resort to legislative history before consulting the statute’s text and structure, once it did so, it went even further astray,” Gorsuch wrote.
The case decided Monday stems from an FOIA request submitted by South Dakota newspaper Argus Leader that asked the U.S. Department of Agriculture to give it a list of all retail stores that participate in the government’s food stamp program (Supplemental Nutrition Assistance Program, or SNAP for short). The paper also asked for each store’s annual SNAP redemption data from fiscal years 2005 to 2010.
The USDA provided Argus Leader with the first string of information, but not the second, invoking the FOIA’s Exemption 4, which shields it from disclosing “trade secrets and commercial or financial information obtained from a person and privileged or confidential.”
The newspaper sued the USDA in South Dakota federal court, requesting the court to compel the agency to release the store-level SNAP data.
During a two-day bench trial, the court heard evidence from USDA witnesses that the disclosure would threaten stores’ competitive positions, but it ultimately sided with the Argus Leader. While the court agreed that some competitive harm would result from a USDA disclosure of the store-level SNAP data, the court was hesitant to say the disclosure would cause substantial competitive harm.
When the USDA declined to appeal, trade association Food Marketing Institute volunteered to intervene and appealed the ruling to the U.S. Court of Appeals for the Eighth Circuit. After the Eighth Circuit affirmed the trial judge’s ruling, the case ended up in the nation’s highest court.
“Our argument was the statute didn’t say anything about competitive harm, it just asks whether it’s confidential,” said Young, who represented FMI. “When the Eighth Circuit added in the substantial competitive harm, it went in the wrong direction. You read statues for what they say, not what you might want them to say.”
Advocates on the other side of the spectrum say the protection Monday’s decision gives businesses comes to the detriment of the press and American people.
“We’re very disappointed in the decision and concerned about how it’s going to restrict the access of information by the press and the public,” Orrick Herrington & Sutcliffe’s Bob Loeb told The Texas Lawbook. “It’s a complete change from the standard that has been applied for the last three decades. It’s just going to be easier for the government to withhold information from the press and the public.”
Young disputes that. He said Monday’s decision was not about restricting access of information to the public — in fact, he said, his client views the FOIA “as an important tool.”
“We’re not opposed to FOIA. We’re strong believers in government transparency,” Young said.
Young said the FOIA request in this case became problematic when it went beyond the act’s general purpose: find out what the government is doing.
“Once information is gathered based on the private actions of SNAP beneficiaries and different retailers to serve their communities, it stops being information about what the government is doing and is private business information,” he said. “That’s what Congress protects. We think FOIA is an important law, but it doesn’t apply to every piece of information that ever existed.”
“A vast amount of FOIA requests are actually by people who want to use it for commercial value,” he added.
What should Texas GCs and Outside Firms Be Doing?
In light of Monday’s opinion, Young advised lawyers who represent Texas companies to be careful about what they consider confidential. He said companies can’t leak information or even make it broadly available internally and then turn around and argue it’s confidential when they become subject to an FOIA request.
“If there’s information clients know the government will receive but they want to protect it for whatever reason, be it for competitive reasons or otherwise, clients need to be able to demonstrate to courts that (they) really, honestly keep it confidential,” he said. “They have to prove (they protected) its confidentiality before an FOIA request ever comes out.”
In this particular case, for example, Young said he learned from speaking to various retailers that store-specific SNAP data is information they never give out because it would give their competitors a significant advantage.
“You can ask a Randalls, or an H-E-B, a Central Market or a Whole Foods or anybody else, ‘How much money do you get from SNAP beneficiaries?’ They’ll never tell you,” Young said. “In this instance, retailers never give this kind of information out.”
“All retailers would love to know this information about their competitors,” he said. “But they wouldn’t want others to know this information about them.”