Sealed 1 v. Sealed ( 1999 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
______________
No. 98-20538
______________
SEALED APPELLEE #1; SEALED APPELLEE #2,
Plaintiffs-Appellees,
versus
SEALED APPELLANT,
Defendant-Appellant.
_________________________________________________________
Appeal from the United States District Court
for the Southern District of Texas
(H-96-CV-3113)
_________________________________________________________
October 14, 1999
Before EMILIO M. GARZA and PARKER, Circuit Judges, and FITZWATER,
District Judge.*
FITZWATER, District Judge:**
In this reverse-FOIA1 case arising from an administrative
agency’s decision to release a draft report concerning a chemical
plant explosion, the agency does not challenge on appeal the
district court’s determination that all the information that the
plant owner provided the agency during its investigation fell
*
District Judge of the Northern District of Texas, sitting by
designation.
**
Pursuant to 5th Cir. R. 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this opinion should not be published and is not precedent except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 Cir. R. 47.5.4.
1
Freedom of Information Act, 5 U.S.C. § 552.
within FOIA exemption 4, 5 U.S.C. § 552(b)(4). Because the
agency’s failure to contest this holding leads to the conclusion
that the Trade Secrets Act (“TSA”), 18 U.S.C. § 1905, prohibits
disclosure of the materials at issue, we affirm.
I
Plaintiffs-appellees Sealed Appellee #1 and Sealed Appellee #2
(collectively, the “Company”) provided defendant-appellant Sealed
Appellant (the “Department”) with voluminous documents and
information in connection with the Department’s investigation of a
catastrophic explosion at the Company’s chemical plant. Later, the
Department advised the Company that, in response to a newspaper
reporter’s FOIA request, it intended to release some of this
information in a draft report (“Draft Report”). The Company
objected and sued in district court, seeking a declaratory judgment
that the Draft Report contained confidential commercial information
that was exempt from disclosure under the FOIA and barred from
disclosure under the TSA, and requesting an injunction to prevent
the Department from disclosing the Draft Report and underlying
documents. Although the district court relied on grounds that were
not entirely favorable to the Company, it granted the injunction
and ordered the Department to release a redacted version of the
Draft Report that, to the extent possible, was devoid of any
exempted materials.
In reaching its decision, the district court held that “all
information [the Company] provided [the Department] during [its]
investigation falls within exemption 4.” The Department does not
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challenge this holding before us. See Appellant Br. at 25 & n.12;
Appellant Rep. Br. at 14 n.4. When we asked its counsel at oral
argument whether the Department “concede[s] that all of the
information that [the Company] provided falls within exemption 4,”
Department counsel responded, “Well, we do for purposes of this
appeal[.]”2
Among its arguments on appeal, the Company contends that “the
applicability of FOIA exemption 4 also determines whether the Trade
Secrets Act prohibits an agency from disclosing the confidential
information[.]” Appellee Br. at 40. It cites the well-recognized
principle that “whenever a party succeeds in demonstrating that its
materials fall within Exemption 4, the government is precluded from
releasing the information by virtue of the Trade Secrets Act.” Id.
(quoting McDonnell Douglas Corp. v. Widnall, 57 F.3d 1162, 1164
(D.C. Cir. 1995)); see id. at 15-16 (arguing that FOIA exemption 4
and TSA are at least coextensive and because Draft Report is
subject to exemption 4, its disclosure is prohibited by TSA).
2
Elsewhere in his argument, counsel stated: “The government’s
position is that although we think that’s [the Company’s assertion
that all the information that it submitted and everything in the
Draft Report was confidential commercial information] flawed, we do
not urge that as a basis for reversing the district court’s
decision.”
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II
FOIA exemption 4 excuses from mandatory disclosure “trade
secrets and commercial or financial information obtained from a
person and privileged or confidential.” 5 U.S.C. § 552(b)(4).
This exemption grants an administrative agency discretion to
withhold information that is otherwise disclosable. It does not
mandate nondisclosure. Chrysler Corp. v. Brown, 441 U.S. 281, 291-
94 (1979). If another statute or regulation bars release of the
information, however, the agency lacks discretion to disclose it.
Id. at 293-94.
The TSA operates as a limit on agency discretion. See
Chrysler, 441 U.S. at 317-18. It forbids any agency officer or
employee from disclosing trade secrets “to any extent not
authorized by law.”3 Assuming, as the Department argues, that §
3
The TSA provides:
Whoever, being an officer or employee of the
United States or of any department or agency
thereof, any person acting on behalf of the
Office of Federal Housing Enterprise
Oversight, or agent of the Department of
Justice as defined in the Antitrust Civil
Process Act (15 U.S.C. 1311—1314), publishes,
divulges, discloses, or makes known in any
manner or to any extent not authorized by law
any information coming to him in the course of
his employment or official duties or by reason
of any examination or investigation made by,
or return, report or record made to or filed
with, such department or agency or officer or
employee thereof, which information concerns
or relates to the trade secrets, processes,
operations, style of work, or apparatus, or to
the identity, confidential statistical data,
amount or source of any income, profits,
losses, or expenditures of any person, firm,
partnership, corporation, or association; or
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8(g) of the Occupational Safety and Health Act (the “OSH Act”), 29
U.S.C. § 657(g), confers such authority on the Department, § 8(g)
is in turn subject to § 15 of the OSH Act, 29 U.S.C. § 664.4 With
exceptions not pertinent here,5 § 15 precludes the Department from
disclosing any information that “might reveal a trade secret
referred to in section 1905 of Title 18.” Section 15 thus
incorporates the TSA definition of trade secret.
The Department’s failure to challenge the district court’s
permits any income return or copy thereof or
any book containing any abstract or
particulars thereof to be seen or examined by
any person except as provided by law; shall be
fined under this title, or imprisoned not more
than one year, or both; and shall be removed
from office or employment.
18 U.S.C. § 1905.
4
29 U.S.C. § 664:
All information reported to or otherwise
obtained by the Secretary or his
representative in connection with any
inspection or proceeding under this chapter
which contains or which might reveal a trade
secret referred to in section 1905 of Title 18
shall be considered confidential for the
purpose of that section, except that such
information may be disclosed to other officers
or employees concerned with carrying out this
chapter or when relevant in any proceeding
under this chapter. In any such proceeding
the Secretary, the Commission, or the court
shall issue such orders as may be appropriate
to protect the confidentiality of trade
secrets.
5
Section 15 permits disclosure of trade secrets to other
officers or employees of the agency, or when relevant to any
proceeding. The Department does not contend that either exception
applies in this case. Cf. Appellant Br. at 31 n.15 (asserting that
there were no pending proceedings).
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holding that all the information that the Company provided to the
Department fell within exemption 4, coupled with § 15’s
incorporation of the TSA definition of trade secret, means that the
Department was precluded from disclosing the information in
question. The TSA “is at least co-extensive with that of Exemption
4 of FOIA.” CNA Fin. Corp. v. Donovan, 830 F.2d 1132, 1151 (D.C.
Cir. 1987) (footnote omitted). “Accordingly, when a person can
show that information falls within Exemption 4, then the government
is precluded from releasing it under the Trade Secrets Act.”
McDonnell Douglas Corp. v. NASA, 180 F.3d 303, 305 (D.C. Cir.
1999). With exceptions not relevant here, the TSA applies with
full force to the Department because § 15 of the OSH Act
incorporates the TSA definition of trade secret. Therefore, given
the district court’s unchallenged holding, the Company has
“succeed[ed] in demonstrating that its materials fall within
Exemption 4, [and] the government is precluded from releasing the
information by virtue of the Trade Secrets Act.” McDonnell Douglas
v. Widnall, 57 F.3d at 1164.
III
We can discern from the Department’s briefing two principal
reasons why it did not consider to be dispositive of this appeal
its failure to challenge the district court’s exemption 4 holding.
First, FOIA exemptions do nothing more than vest an agency
with discretion to withhold information that must otherwise be
disclosed. Therefore, the Department’s reasoning goes, even if it
concedes for appellate purposes that the materials at issue fall
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within exemption 4, it still retains the discretion to disclose
them. See Appellant Br. at 25; Appellant Rep. Br. at 14 n.4. The
flaw with this approach is that if exemption 4 and the TSA are
coextensive, then regardless of the discretion that the Department
retains under FOIA, the TSA (through § 15 of the OSH Act) prohibits
disclosure.
The Department’s second reason appears to rest on its view
that the term “trade secret” in § 15 of the OSH Act, which
incorporates the TSA definition of “trade secrets,” is narrower
than the scope of exemption 4. Therefore, even if all the
information at issue falls within exemption 4, at least some
consists of confidential commercial information that is not a trade
secret, and thus is not subject to the TSA’s prohibition against
disclosure. Such materials, in the Department’s view, would still
be disclosable as a matter of agency discretion. See Appellant
Rep. Br. at 13-15 & 14 n.4.
One need only turn to CNA Financial, in which the District of
Columbia Circuit held that the TSA is at least coextensive with
exemption 4, to see that this rationale lacks force in this case.
In CNA the court discussed the significance of the coextensiveness
question:
If the range of the [Trade Secrets] Act is
narrower than the scope of Exemption 4, there
will be some commercial and financial data
that these agencies will be free to release in
their discretion, though they are not required
to do so by FOIA. If, on the other hand, the
reach of the [Trade Secrets] Act is at least
coextensive with that of Exemption 4, a
finding that requested material falls within
that exemption will be tantamount to a
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determination that these agencies cannot
reveal it.
830 F.2d at 1144 (footnote omitted) (emphasis added). See
McDonnell Douglas v. Widnall, 57 F.3d at 1164 (stating that
although exemption 4 and the TSA “perform distinct legal
functions,” “they are nevertheless closely related in terms of the
materials to which they each apply”).
Moreover, courts hold in broad terms that the government is
prohibited by the TSA from disclosing information or materials that
fall within FOIA exemption 4. See McDonnell Douglas v. NASA, 180
F.3d at 305(“Accordingly, when a person can show that information
falls within Exemption 4, then the government is precluded from
releasing it under the Trade Secrets Act.”); McDonnell Douglas v.
Widnall, 57 F.3d at 1164 (“Consequently, whenever a party succeeds
in demonstrating that its materials fall within Exemption 4, the
government is precluded from releasing the information by virtue of
the Trade Secrets Act.”); Pacific Architects & Eng’rs Inc. v.
United States Dep’t of State, 906 F.2d 1345, 1347 (9th Cir. 1990)
(“Accordingly, material qualifying for exemption under (b)(4) falls
in the material, disclosure of which is prohibited under section
1905.”); Acumenics Research & Tech. v. United States Dep’t of
Justice, 843 F.2d 800, 806-07 (4th Cir. 1988) (“Thus, for
information falling within exemption (4), the Trade Secrets Act
does bar an agency decision to release the information.”); General
Motors Corp. v. Marshall, 654 F.2d 294, 297 (4th Cir. 1981) (“It
followed logically . . . that any material exempt from disclosure
under (b)(4) is within the prohibition against disclosure under §
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1905.”); Westinghouse Elec. Corp. v. Schlesinger, 542 F.2d 1190,
1204 n.38 (4th Cir. 1976) (“Accordingly, material qualifying for
exemption under (b)(4) falls within the material, disclosure of
which is prohibited under § 1905.”).
The Department’s assertion that “courts have rejected the
argument that ‘trade secrets’ encompasses all confidential,
commercial information covered by Exemption 4,” Appellant Rep. Br.
at 14, relies on cases that (not surprisingly) interpret the
definition of the term “trade secrets” contained in exemption 4.
See Anderson v. Department of Health & Human Servs., 907 F.2d 936,
943-44 (10th Cir. 1990) (deciding whether exemption 4 definition of
trade secret is narrower than broad definition in first Restatement
of Torts); Public Citizen Health Research Group v. Food & Drug
Admin., 704 F.2d 1280, 1288 (D.C. Cir. 1983) (same) (“we define
trade secret, solely for the purpose of FOIA Exemption 4”). They
do not construe the relationship between exemption 4 and the TSA.
We think that if these decisions resolved how the TSA operates upon
exemption 4 materials, they would have done so in clearer terms.
That they are not apposite is reflected by the fact that the
District of Columbia Circuit, which decided Public Citizen, has
twice in recent years reiterated the broad holding that when a
person shows that information or materials fall within exemption 4,
the government is precluded from releasing them under the TSA. See
McDonnell Douglas v. NASA, 180 F.3d at 305 (information); McDonnell
Douglas v. Widnall, 57 F.3d at 1164 (materials). In its June 1999
opinion in McDonnell Douglas v. NASA, a case in which the submitter
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argued that FOIA exemption 4 protected its “confidential commercial
or financial information,” the circuit court held: “If commercial
or financial information is likely to cause substantial competitive
harm to the person who supplied it, that is the end of the matter,
for the disclosure would violate the Trade Secrets Act.” McDonnell
Douglas v. NASA, 180 F.3d at 306 (emphasis added).
IV
Accordingly, without suggesting approval of the district
court’s reasoning, we hold that the Department did not act
according to law when it sought in the Draft Report to disclose
materials covered by the TSA. Because “any disclosure that
violates § 1905 is ‘not in accordance with law’ within the meaning
of 5 U.S.C. § 706(2)(A),” Chrysler, 441 U.S. at 318, and since the
Administrative Procedure Act authorizes a court to enjoin an
agency’s FOIA decision that is “not in accordance with law,” see
Dowty Decoto, Inc. v. Department of Navy, 883 F.2d 774, 776 (9th
Cir. 1989) (“the APA authorizes this injunction preventing the Navy
from disclosing Decoto’s data, provided that such disclosure
violates the Trade Secrets Act”), the district court did not commit
reversible error.6
6
We do not suggest that, in all circumstances, we will uphold
nondisclosure of otherwise disclosable information based on an
agency’s litigation strategy on appeal. Because we recognize that
the FOIA is intended to inform citizens “what their government is
up to,” United States Department of Justice v. Reporters Committee
for Freedom of the Press, 489 U.S. 749, 773 (1989), we decline to
adopt a universal rule that would permit the government to avoid
disclosure based on appellate concessions. This reverse-FOIA case,
however, is not one in which we are concerned that the Department,
by its failure to challenge the exemption 4 holding below, is
attempting to withhold information from the public.
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V
We need not remand to the Department “to reconsider the
relevant factors and explain the decision it reached based upon
those factors.” Appellant Br. at 37. First, we are not affirming
the district court on the ground that the Department failed to
weigh or explain the public and private interests in question. We
are affirming because the effect of the Department’s decision not
to challenge the exemption 4 holding is to make all information at
issue nondisclosable trade secrets. Second, a remand is not
required where “[t]here is not the slightest uncertainty as to the
outcome of a[n] [agency] proceeding.” A. L. Pharma, Inc. v.
Shalala, 62 F.3d 1484, 1489 (D.C. Cir. 1995) (quoting NLRB v.
Wyman-Gordon Co., 394 U.S. 759, 766-67 (1969)). Under the law of
the case, the TSA precludes the information at issue from being
released. No amount of additional agency discretion or explanation
can result in making this information disclosable. The district
court’s judgment circumscribes the reach of what the Department can
and must do.
* * *
We asked Department counsel during oral argument whether the
Department’s concession concerning exemption 4 ends the appeal.
Although counsel asserted that it does not, we conclude for the
reasons stated that it does. Accordingly, the district court’s
judgment is
AFFIRMED.
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