Christopher W. Madel v. U.S. Department of Justice , 784 F.3d 448 ( 2015 )

United States Court of Appeals
For the Eighth Circuit
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No. 14-2210
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Christopher W. Madel
lllllllllllllllllllll Plaintiff - Appellant
v.
United States Department of Justice; Drug Enforcement Administration
lllllllllllllllllllll Defendants - Appellees
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Appeal from United States District Court
for the District of Minnesota - Minneapolis
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Submitted: February 10, 2015
Filed: April 21, 2015
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Before BYE, BEAM, and BENTON, Circuit Judges.
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BENTON, Circuit Judge.
Christopher W. Madel sued the Department of Justice and Drug Enforcement
Administration for a response to two Freedom of Information Act requests. DEA
withheld some documents as confidential commercial information. The district court
granted summary judgment to DEA, finding it produced all non-exempt information.
The court denied declaratory and injunctive relief and attorney fees. Madel appeals.
Having jurisdiction under 28 U.S.C. § 1291, this court reverses and remands.
I.
In November 2012 and February 2013, Madel submitted FOIA requests to DEA
seeking information on oxycodone transactions in Georgia by five private companies:
Cardinal Health, Inc., CVS Caremark, Walgreen Co., AmerisourceBergen Corp., and
McKesson Corp.1 See 5 U.S.C. § 552. Madel also requested seven reports from
DEA’s Automation of Reports and Consolidated Orders System (ARCOS).2 DEA
acknowledged each request within the statutory timeframe, but did not indicate
whether it would comply. Id. § 552(a)(6) (providing that agency must inform
requester whether it will comply within 20 days after receiving request, unless
exceptional circumstances apply).
In May 2013, DEA requested processing fees, which Madel paid. In October,
after contacting DEA and receiving no response, Madel sued. In December, DEA
produced ARCOS reports 2, 3, 4, 5, and 7. In January 2014, DEA, citing Exemption
4’s protection of confidential commercial information, informed Madel it was
withholding five documents: ARCOS report 1 and four spreadsheets of oxycodone
sales, one each for Cardinal Health, Walgreens, AmerisourceBergen, and McKesson.
See id. § 552(b)(4). (DEA found no responsive documents for CVS Caremark or
report 6.) Report 1 documents quarterly and annual drug distributions to individual
1
For example, “For each month (or quarter) and year since January 1, 2006, all
documents that state and/or include data regarding Cardinal Health, Inc.’s distribution
of oxycodone to persons located in the State of Georgia, including, but not limited to,
for each month (or quarter) and year since January 1, 2006, the identity of each person
in the State of Georgia that Cardinal Health, Inc. distributed the oxycodone to, and the
quantity of oxycodone that Cardinal Health, Inc. distributed to that person (in dosage
units and grams).” (internal footnote omitted). Madel defined “person” to include,
among others, individuals, corporations, and government entities.
2
“For each month (or quarter) and year since January 1, 2007, reports ## 1, 2,
3, 4, 5, 6, and 7 from the ARCOS-2 database (in dosage units and grams).”
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retail registrants (for example, retail pharmacies or hospitals) by three-digit zip code.
It includes data on every state and over 1,260 DEA registrants. The spreadsheets
document sales in Georgia by each company, identifying every buyer, location of sale,
and amount of drug.
The district court granted summary judgment to DEA, finding the withheld
documents exempt under Exemption 4. It dismissed Madel’s request for declaratory
and injunctive relief as moot and denied attorney fees.
II.
Madel argues that DEA did not justify withholding the five documents under
Exemption 4, and that DEA failed to meet FOIA’s segregability requirement. The
district court held that DEA produced all non-exempt responsive information. This
court reviews de novo a grant of summary judgment. Missouri Coal. for Env’t
Found. v. U.S. Army Corps of Eng’rs, 542 F.3d 1204, 1209 (8th Cir. 2008).
Summary judgment is proper when “there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). It
is available “where the agency proves that it has fully discharged its obligations under
FOIA, after the underlying facts and the inferences to be drawn from them are
construed in the light most favorable to the FOIA requester.” Missouri Coal., 542
F.3d at 1209. See also 5 U.S.C. § 552(a)(4)(B) (“[T]he burden is on the agency to
sustain its action.”).
A.
Madel disputes the application of Exemption 4. Once an agency record is
requested under FOIA, “the government must provide the information unless it
determines that a specific exemption applies.” In re DOJ, 999 F.2d 1302, 1305 (8th
Cir. 1993) (en banc). See 5 U.S.C. § 552(b) (exempting nine categories of
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information from disclosure); Missouri Coal., 542 F.3d at 1208 (noting exemptions
are “narrowly construed”). Exemption 4 prevents disclosure of “trade secrets and
commercial or financial information obtained from a person and privileged or
confidential.” 5 U.S.C. § 552(b)(4). Information is “confidential” when a company
is legally required to provide it to the government if its disclosure is likely: “‘(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.’” Contract Freighters, Inc. v. Sec’y of U.S. Dep’t of
Transp., 260 F.3d 858, 861 (8th Cir. 2001), quoting Nat’l Parks & Conservation
Ass’n v. Morton, 498 F.2d 765, 770 (D.C. Cir. 1974). See also id. at 862 (noting
different standard for information voluntarily provided to the government), citing
Critical Mass Energy Project v. Nuclear Regulatory Comm’n, 975 F.2d 871, 879
(D.C. Cir. 1992).
To claim an exemption, an agency must “provide affidavits which justify the
claimed exclusion of each document by correlating the purpose for exemption with
the actual portion of the document which is alleged to be exempt.” Miller v. U.S.
Dep’t of State, 779 F.2d 1378, 1387 (8th Cir. 1985). While agency affidavits receive
“substantial weight,” they must include more than “barren assertions” that a document
is exempt. Id. (internal quotation marks omitted). See also Missouri Coal., 542 F.3d
at 1210 (“Boilerplate or conclusory affidavits, standing alone, are insufficient to show
that no genuine issue of fact exists as to the applicability of a FOIA exemption.”);
Quiñon v. FBI, 86 F.3d 1222, 1227 (D.C. Cir. 1996) (“The affidavits will not suffice
if the agency’s claims are conclusory, merely reciting statutory standards, or if they
are too vague or sweeping. If the affidavits provide specific information sufficient to
place the documents within the exemption category, if this information is not
contradicted in the record, and if there is no evidence in the record of agency bad
faith, then summary judgment is appropriate without in camera review of the
documents.” (internal quotation marks omitted)).
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As noted, DEA withheld five documents: report 1 and one spreadsheet of
oxycodone-distribution data per company. Companies are legally required to submit
the information in these documents. Madel does not dispute that the information is
“commercial or financial” and “obtained from a person.” He argues it is not
“confidential.” DEA counters that release “is likely to cause substantial harm to the
competitive position of the person from whom the information was obtained.”
Supporting its claim of substantial competitive harm, DEA submitted a
declaration from Katherine L. Myrick, Chief of DEA’s FOIA/Privacy Act Unit. The
Declaration says report 1 contains information traceable to individual manufacturers
and distributors, such as market shares in specific geographic areas, estimates of
inventories, and sales. The Declaration notes that the information could identify
individual registrants and “[i]f competitors were to obtain such data, they would be
able to use it to target specific markets, forecast potential business of new locations,
or to gain market share in existing locations.” This could cause harm to “potentially
a large number of companies that distribute to retail registrants.” The Declaration
distinguishes already-produced reports 2, 3, 4, 5, and 7 because they are too diluted
to reveal any particular company’s market share, listing oxycodone amounts sold or
distributed in a state or the entire United States.
The four companies, informed of Madel’s request, objected to the spreadsheets’
disclosure. See 28 C.F.R. § 16.8(d) (providing for notice before DOJ discloses
business information in response to FOIA request). Summarizing their concerns, the
Declaration states that the data in the withheld spreadsheets could be used to
determine the companies’ market shares, inventory levels, and sales trends in
particular areas. The Declaration notes that competitors could use this information,
like the data in report 1, to “target specific markets, forecast potential business of new
locations, or to gain market share in existing locations,” thereby gaining competitive
advantage. The Declaration highlights that the release of the data would permit
competitors to circumvent two of the companies’ existing anti-diversion measures.
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DEA shows substantial competitive harm is likely. DEA does not make “barren
assertions” that the documents are exempt, but links each document to identifiable
competitive harms. See Miller, 779 F.2d at 1387. Madel has offered no reason or
evidence to disbelieve DEA’s claims of harm. He does not argue that DEA acted in
bad faith, or that he cannot meaningfully contest the exemption’s application. Madel
relies on an out-of-circuit district court case to demonstrate that DEA’s explanation
is conclusory, but the agency there failed to respond to the requester’s specific rebuttal
of its assertions of competitive harm. See Biles v. Dep’t of Health & Human Servs.,
931 F. Supp. 2d 211, 224 (D.D.C. 2013) (noting requester’s arguments that data is
stale; much of it is publicly available; and there is no competitive “harm” because all
companies must disclose the same degree of data). Madel makes no such rebuttal of
DEA’s explanation. The district court did not err in holding that information in the
withheld documents is subject to Exemption 4.
B.
DEA withheld the five documents in their entirety, claiming no reasonably
segregable non-exempt information. Madel argues that the district court failed to
make a finding on segregability, and claims that the Declaration does not justify
DEA’s segregability determination.
An agency may not automatically withhold an entire document when some
information is exempt, but rather must provide “‘[a]ny reasonably segregable
portion.’” Missouri Coal., 542 F.3d at 1212, quoting 5 U.S.C. § 552(b). Non-exempt
portions must be disclosed unless they are “inextricably intertwined” with exempt
portions. Id. (internal quotation marks omitted). The agency has the burden to show
that exempt portions are not segregable from non-exempt portions. Id. (noting court
may require a more specific affidavit if agency justification is inadequate). “In every
case, the district court must make an express finding on the issue of segregability.”
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Id., citing Morley v. CIA, 508 F.3d 1108, 1123 (D.C. Cir. 2007) (noting court has duty
to examine segregability sua sponte if not raised).
The district court erred by failing to make an express finding on segregability.
DEA argues that, because segregability was briefed and argued below, there is a
finding on segregability in the court’s conclusion: “[T]he statements in that
Declaration establish grounds for nondisclosure that are reasonable and consistent
with the law.” This approach was rejected in Missouri Coalition, which requires “an
express finding.” Id. at 1212-13 (remanding case when segregability was properly
raised in district court, but it is unclear from the record if the court considered it).
DEA urges this court to determine segregability in the first instance, relying on
Juarez v. DOJ, 518 F.3d 54, 60-61 (D.C. Cir. 2008), which finds a remand for an
express finding unnecessary when an appellate court reviews the record and
determines no information is segregable. Even assuming this court adopted the out-
of-circuit approach, DEA, relying solely on the Declaration, does not show “with
reasonable specificity why documents withheld pursuant to a valid exemption cannot
be further segregated.” Id. at 61. Although DEA expresses the concern that any
connection between individual buyers and sellers would lead to substantial
competitive harm, this is not supported by the Declaration. The Declaration does not
address how disclosure of the data from, say, 2007, leads to the proffered substantial
competitive harms of a competitor “target[ing] specific markets” or “forecast[ing]
potential business of new locations.” The claims of harm are undermined by DEA’s
public release of four charts showing total dosage units sold per month by Cardinal
Health to four named buyers in Florida over four years. The Declaration also does not
address whether disclosing only distributions over 100,000 or 200,000 units per year,
as Madel offered, would have the same competitive harm as disclosing all the data.
The case is remanded to the district court for an express finding on segregability.
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Given this court’s decision on segregability, the denials of declaratory and
injunctive relief and attorney fees are also reversed and remanded.
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The judgment is reversed, and the case remanded for proceedings consistent
with this opinion.
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