Erg Transit Systems (Usa), Inc. v. Washington Metropolitan Area Transit Authority ( 2009 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
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ERG TRANSIT SYSTEMS (USA), INC., )
)
Plaintiff, )
)
v. ) Civil Action No. 07-1924 (RMC)
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WASHINGTON METROPOLITAN )
AREA TRANSIT AUTHORITY, )
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Defendant, )
)
and )
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CUBIC TRANSPORTATION )
SYSTEMS, INC., )
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Intervenor Defendant. )
)
MEMORANDUM OPINION
In this “reverse” Freedom of Information Act (“FOIA”)1 case, ERG Transit Systems
(USA), Inc. (“ERG”) sues the Washington Metropolitan Area Transit Authority (“WMATA”) to
prevent WMATA from releasing certain ERG records to its competitor, Cubic Transportation
Systems, Inc. (“Cubic”), under WMATA’s Public Access to Records Policy (“PARP”), which, for
purposes of this case, is identical to, and interpreted in accordance with, the FOIA.2 ERG argues that
the records are exempt from compelled disclosure under FOIA Exemption 4, 5 U.S.C. § 552(b)(4).
Both WMATA and Cubic disagree. All parties have moved for summary judgment. The Court will
grant in part and deny in part ERG’s motion and deny WMATA’s and Cubic’s motions.
1
5 U.S.C. § 552.
2
Accordingly, the Court will refer only to FOIA law.
I. FACTS
ERG is a California corporation that develops and supplies integrated fare
management software systems and “smart card” systems and services for the transit industry. Cubic
is a Delaware corporation that directly competes with ERG. In 2001, WMATA issued a request for
proposals for the procurement of an automatic fare collection system. Both ERG and Cubic
submitted proposals. WMATA awarded the contract to both ERG and Cubic, giving part of the
work to ERG and part to Cubic. Delays resulted from difficulties in integrating ERG’s and Cubic’s
operating systems, which apparently were less than perfectly compatible, and ERG incurred
additional costs because of the shared work relationship with Cubic. In response, ERG submitted
to WMATA several requests for change orders and, ultimately, a request for an equitable adjustment
to the contract with supporting documentary evidence.3
These submissions are the subject of Cubic’s PARP request and this lawsuit.
WMATA informed ERG that it intends to release the records to Cubic, subject to certain redactions
of, inter alia, information that WMATA determined would aid a competitor, and ERG filed this suit
to enjoin WMATA from doing so. ERG argues that much of the information WMATA intends to
disclose to Cubic is exempt from compelled disclosure under Exemption 4, 5 U.S.C. § 552(b)(4),
because it is confidential commercial and financial information that is not routinely disclosed to the
public and which ERG voluntarily submitted to WMATA. WMATA determined that Exemption
4 is inapplicable because ERG submitted the documents to it involuntarily and disclosure of the
information would not cause ERG substantial competitive harm.
3
“The term ‘equitable adjustment’ is a legal term of art; it signifies a principle designed
to keep a contractor whole when the Government modifies a contract.” Gen Ry. Signal Co. v.
WMATA, 875 F.2d 320, 324-25 (D.C. Cir. 1989) (quotation marks and citation omitted).
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ERG asks the Court to enjoin WMATA from releasing its “confidential and
proprietary commercial and financial information and trade secrets to a direct competitor.” Pl.’s
Mot. for Summ. J. at 2. WMATA requests that, should the Court determine the threshold issue of
the voluntariness of the submissions in ERG’s favor, “the Court remand this matter to WMATA for
revision of its redactions in accordance with the standard for voluntarily submitted records.” Def.’s
Mot. for Summ. J. at 2.4
II. LEGAL STANDARDS
Under Rule 56 of the Federal Rules of Civil Procedure, summary judgment must be
granted when “the pleadings, depositions, answers to interrogatories, and admissions on file, together
with the affidavits, if any, show that there is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law.” Fed. R. Civ. P. 56(c); Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 247 (1986). Moreover, summary judgment is properly granted against
a party who “after adequate time for discovery and upon motion . . . fails to make a showing
sufficient to establish the existence of an element essential to that party’s case, and on which that
party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
In ruling on a motion for summary judgment, the court must draw all justifiable
inferences in the nonmoving party’s favor and accept the nonmoving party’s evidence as true.
Anderson, 477 U.S. at 255. A nonmoving party, however, must establish more than “the mere
existence of a scintilla of evidence” in support of its position. Id. at 252. In addition, the nonmoving
party may not rely solely on allegations or conclusory statements. Greene v. Dalton, 164 F.3d 671,
4
WMATA admits that were it “to apply the standard urged by ERG, the records would
be more extensively redacted than WMATA decided, to the extent ERG can substantiate the
records are not customarily made available to the public.” Def.’s Mot. for Summ. J. at 2.
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675 (D.C. Cir. 1999). Rather, the nonmoving party must present specific facts that would enable a
reasonable jury to find in its favor. Id. at 675. If the evidence “is merely colorable, or is not
significantly probative, summary judgment may be granted.” Anderson, 477 U.S. at 249-50(citations omitted).
“A person whose information is about to be disclosed pursuant to a FOIA request may
file a ‘reverse-FOIA action’ and seek to enjoin the Government from disclosing it.” Canadian
Commercial Corp. v. Dep’t of Air Force, 514 F.3d 37, 39 (D.C. Cir. 2008). Reverse FOIA cases are
deemed informal agency adjudications, and thus are reviewable under Section 706 of the
Administrative Procedure Act, 5 U.S.C. § 706. See Occidental Petroleum Corp. v. SEC, 873 F.2d
325, 337 (D.C. Cir. 1989); see also Chrysler Corp. v. Brown, 441 U.S. 281, 317-18 (1979) (reverse
FOIA cases are reviewed under the Administrative Procedure Act). Accordingly, the Court must
decide whether WMATA’s FOIA determination was “arbitrary, capricious, an abuse of discretion,
or otherwise not in accordance with the law.” 5 U.S.C. § 706(2)(A); see also CNA Fin. Corp. v.
Donovan, 830 F.2d 1132, 1154-55 (D.C. Cir. 1987).
III. ANALYSIS
The FOIA mandates the disclosure of agency records unless the records are exempt
from compelled disclosure by one of nine exemptions. See NLRB v. Sears, Roebuck & Co., 421 U.S.
132, 136 (1975); 5 U.S.C. § 552(b). In addition to trade secrets, Exemption 4 protects from public
disclosure information that is “(1) commercial or financial, (2) obtained from a person, and (3)
privileged or confidential.” Pub. Citizen Health Research Group v. FDA, 704 F.2d 1280, 1290 (D.C.
Cir. 1983); see also 5 U.S.C. § 552(b)(4). The only issue in dispute is whether the information ERG
submitted to WMATA in connection with its request for an equitable adjustment to the contract is
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“confidential.”5
Whether the information is “confidential” within the meaning of Exemption 4
depends on whether ERG provided the information to WMATA “on a voluntary basis” or “under
compulsion.” Critical Mass Energy Project v. NRC, 975 F.2d 871, 879 (D.C. Cir. 1992) (en banc).
“[F]inancial or commercial information provided to the Government on a voluntary basis is
‘confidential’ for the purposes of Exemption 4 if it is of a kind that would customarily not be
released to the public by the person from whom it was obtained.” Id. However, “[i]nformation that
a person is required to submit to the Government is considered confidential only if its disclosure is
likely either ‘(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.’” Pub. Citizen Health Research Group v. FDA, 185 F.3d 898, 903 (D.C. Cir. 1999)
(quoting Nat’l Parks & Conservation Ass’n v. Morton, 498 F.2d 765, 770 (D.C. Cir. 1974)).
“[A]ctual legal authority, rather than parties’ beliefs or intentions, governs judicial assessments of
the character of submissions.” Ctr. for Auto Safety v. Nat’l Highway Traffic Safety Admin., 244 F.3d
144, 149 (D.C. Cir. 2001).
“WMATA relied on two main factors in determining that the documents were
required: the contract required ERG to submit the documents if it wanted to pursue a change, and
ERG submitted them in order to obtain additional compensation.” Def.’s Mem. in Supp. of Mot.
for Summ. J. at 6. Neither factor supports WMATA’s determination.
5
Neither WMATA nor Cubic argue that Exemption 4 is inapplicable because the
information submitted was not “commercial or financial” information or because the information
was not “obtained from a person.” Accordingly, the Court finds that WMATA and Cubic have
conceded those arguments.
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WMATA and Cubic argue that General Provisions 2 and 9 of the contract compelled
ERG to submit to WMATA the information that is the subject of this dispute. General Provision 2,
entitled “Changes,” provided, in relevant part, that the “Contracting Officer” could change the
contract by “written order” and that “[i]f any such change causes an increase or decrease in the cost
of, or the time required for, the performance of any part of the work under this Contract, whether
changed or not changed by the order, the Contracting Officer shall make an equitable adjustment in
the Contract price, the delivery schedule, or both, and shall modify the Contract.” Id., Ex. B
(Contract C05034 General Provisions (“GP”) ¶ 2.a. & b.) (under seal).6 The only requirement of
General Provision 2 that could even plausibly apply to ERG is the requirement that “[t]he Contractor
must assert its right to an adjustment under this article within 30 days from the date of receipt of the
written order.” GP ¶ 2.c. However, a condition precedent to that requirement is that WMATA first
have issued a written order changing the terms of the contract; General Provision 2 is silent as to
contractor-initiated adjustments, like here. Even adopting WMATA’s strained interpretation and
assuming that General Provision 2 applies in the absence of a written change order by WMATA, the
most that General Provision 2 required of ERG was that it “assert its right to an adjustment” within
a certain time frame. Id. The contract did not specify how a contractor was to make such an
assertion and General Provision 2 did not expressly require a contractor wanting an adjustment to
submit any particular information. Indeed, General Provision 2 did not require that the assertion of
a right to an adjustment be in writing.
6
“Contracting Officer” is defined as the person executing the contract on behalf of
WMATA and that person’s authorized representative. See GP ¶ 1.b.
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General Provision 9, entitled “Delay of Work,” provided, in relevant part, that “[i]f
the performance of all or any part of the work is delayed or interrupted by an act of the Contracting
Officer in the administration of this Contract, . . . an adjustment . . . shall be made for any increase
in the cost of performance of this Contract caused by such delay or interruption and the contract
modified in writing accordingly.” GP ¶ 9.a. This provision dealt with certain delays caused by
WMATA and it is not at all clear that the provision is applicable to ERG’s request for adjustment.
If General Provision 9 were to apply, the result is no different. The only requirement that General
Provision 9 placed on contractors was to give written notice to WMATA within 20 days of the act
or failure to act that caused the delay or interruption of work, see id. ¶ 9.b.(1), and to submit a written
“claim, in an amount stated, . . . as soon as practicable after the termination of such delay or
interruption, but not later than the date of final payment under the Contract.” Id. ¶ 9.b.(2). Thus,
the most that General Provision 9 required of ERG was that, within a certain time frame, it submit
a written “claim,” an undefined term, and that the claim contain “an amount stated.” Id. Absent is
any language requiring a contractor to submit any other information, including that a contractor
substantiate its claim with documentary evidence of the type that ERG actually submitted to
WMATA and that is at issue here.
The documents relevant to this dispute consist of ERG-initiated proposals for changes
to ERG’s contract with WMATA, including the scope of work, period of performance, and contract
compensation provisions. The impetus for the proposals was ERG’s alleged incurrence of additional
costs resulting from the award by WMATA to both ERG and Cubic.7 Inasmuch as General
Provisions 2 and 9, assuming their applicability, are timing provisions that at most required ERG to
7
The Court expresses no opinion on the underlying pursuit of an equitable adjustment.
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assert its right to an adjustment and/or submit its claim for an adjustment within a certain time
period, WMATA’s determination that the contract compelled ERG to submit the documents at issue
here was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law.”
5 U.S.C. § 706(2)(A).
Aside from the terms of the contract, WMATA and Cubic argue that ERG’s
submissions were involuntary because ERG provided the information to WMATA in order to obtain
additional compensation from WMATA. They argue that “while ERG’s decision to obtain a contract
with WMATA was voluntary, documents submitted in pursuit of realizing benefits based on its
decision to pursue the contract, such as actually obtaining the contract or obtaining more funds under
the contract, [were] mandatory and thus involuntarily submitted.” Intervenor Def.’s Opp’n at 7.
However, the Court is persuaded to the contrary by the logic of Mallinckrodt Inc. v. West, 140 F.
Supp. 2d 1, 6 (D.D.C. 2000) (rejecting as “flatly inconsistent with the intent of Critical Mass” the
government’s argument that “all of the information submitted in an effort to win a government
contract should be viewed as having been required by the contract solicitation”), and Cortez III
Service Corp., Inc. v. NASA, 921 F. Supp. 8, 13 (D.D.C. 1996) (holding that “additional information
that was not required by the contract proposal document” was submitted voluntarily).
The cases on which WMATA and Cubic rely are distinguishable because in each of
them the specific information in dispute was required to be submitted. See Pub. Citizen Health
Research Group v. FDA, 964 F. Supp. 413, 414 n.1 (D.D.C. 1997) (“In this case, submission of the
protocol was necessary in order to obtain FDA approval and was therefore required”) (citation
omitted); McDonnell Douglas Corp. v. NASA, 895 F. Supp. 316, 318 (D.D.C. 1995) (“NASA
required that the contract itemize the prices for specific services”); Chem. Waste Mgmt., Inc. v.
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O’Leary, No. 94-2230, 1995 WL 115894, at *4 (D.D.C. Feb. 28, 1995) (“plaintiff had no choice but
to submit the unit price information once it chose to submit its proposal [because] [t]he RFP
compelled Chem Waste to submit its unit prices”); Lykes Bros. S.S. Co., Inc. v. Pena, No. 92-2780,
1993 WL 786964, at *4 (D.D.C. Sept. 2, 1993) (“Marad required plaintiffs to submit the documents
as a condition necessary to receiving approval of their application”). Those cases are further
distinguishable because they involved information submitted in connection with bid proposals to
obtain a contract, not information submitted in connection with proposals to negotiate the
administration of an existing contract, as here. Accord Judicial Watch v. Dep’t of Army, 466 F.
Supp. 2d 112, 125-26 (D.D.C. 2006) (concluding information was submitted voluntarily because
“[t]he intervenor provided this information after it had been awarded a contract by the defendant, and
the discussion contained in these documents concerns ongoing contract implementation, not bid
proposals or contract procurement”).
IV. CONCLUSION
For the foregoing reasons, the Court finds that WMATA’s determination that ERG
submitted the information involuntarily was “arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with the law.” 5 U.S.C. § 706(2)(A). The Court will grant in part and
deny in part ERG’s motion for summary judgment [Dkt. # 24], deny WMATA’s and Cubic’s
summary judgment motions [Dkt. ## 22 & 23], and remand Cubic’s PARP request to WMATA to
revise its redactions in accordance with the standard for voluntarily submitted records and report its
results to the Court no later than February 27, 2009. ERG’s request for a permanent injunction will
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be denied without prejudice. The Court retains jurisdiction. A memorializing Order accompanies
this Memorandum Opinion.
Date: January 22, 2009 /s/
ROSEMARY M. COLLYER
United States District Judge
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