Essex Electro Engineers, Inc. v. United States Secretary of the Army ( 2010 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
ESSEX ELECTRO ENGINEERS, INC., )
)
Plaintiff, )
)
v. ) Civil Case No. 09-372 (RJL)
)
UNITED STATES SECRETARY OF )
THE ARMY, )
Defendant. ``_
MEMORAND``PINION
(February 16,2010) [# 13, 15]
Plaintiff, Essex Electro Engineers, Inc. ("Essex"), brings this action against the
u.s. Secretary of the Army (the "Secretary" or "defendant"), for failing to disclose unit
prices pursuant to a request under the Freedom of Information Act ("FOIA"), 5 U.S.C.
§ 552. Before the Court is the defendant's Motion for Summary Judgment and the
plaintiffs Cross-Motion for Summary Judgment. Upon consideration of the parties'
pleadings, relevant law, and the entire record herein, the defendant's motion is
GRANTED and the plaintiffs motion is DENIED.
BACKGROUND
Essex is an Illinois company that submitted an offer on a U.S. Army (the "Army")
solicitation involving electrical feeder and distribution systems. CompI.,-r,-r 1, 5, & 7. On
July 10, 200S, the Army awarded Contract WI5P7T-OS-D-A007 ("Contract-A007") to a
competitor of Essex, Fidelity Technologies Corporation ("Fidelity"). Id. ,-r S. On July 25,
200S, Essex submitted a FOIA request for "the award document along with the CLIN
[Contract Line Item] pricing for Contract WI5P7T-08-D-A007." Def.'s Mot. for Summ.
J. ("Def.'s Mot.") Ex. B, Dec!. of Caryn L.M. Hargrave ("Hargrave Decl."), Attach. 1. In
response to an Army inquiry regarding the FOIA request, Fidelity indicated that it
"object[ ed] to the release of information contained within Section B of the Contract that
would reveal UNIT PRICE information for all ITEM NUMBERS, 0001 through 0005
(inclusive)." Id. at Attach. 4. Fidelity claimed that such information was proprietary and
that it believed "to release pricing data could cause us financial harm as a competitor
could derive information related to our business strategy and cost structure." Id. On
August 28, 2008, the Army sent Essex a letter responding to its FOIA request and
attaching a copy ofContract-A007 with the unit prices for CLINs 0001 through 0010
redacted. Id. at Attach. 5.
On September 24,2008, Fidelity sent a letter to the Army expressing Fidelity's
legal bases for redacting the unit prices for CLINs 0001 through 0005. Id. at Attach. 11.
Fidelity stated that it believed the unit price data were exempt from release under
Exemption 4 of FOIA as confidential information, arguing that disclosure would permit
"under bidding by competitors on future procurements for the same or similar systems"
and "severely limit the ability of FTC to effectively negotiate competitive prices from its
subcontractors." Id. Fidelity further asserted that the unit price data would allow
competitors and vendors to estimate its mark-up on materials and services and reveal,
through range pricing, Fidelity's economies of scale, pricing strategies, and risks it was
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willing to accept. ld. On October 7,2008, the Army's contracting officer sent the
Army's Office of the General Counsel ("OGC") a memorandum for record concurring
with Fidelity's decision to redact the unit prices, stating that release of the unit prices
"will reveal methodology and business decisions unique to Fidelity and thereby provide
an advantage to their competition." ld. at Attach. 13.
After some correspondence between Essex and the OGC, on November 20,2008,
Essex requested that the OGC release an unredacted copy ofContract-A007. Def.'s Mot.
Ex. A, Decl. of Ronald 1. Buchholz ("Buchholz Decl."), Attach. 3. On December 9,
2008, the OGC acknowledged receipt of the appeal letter and forwarded it to the Army's
Initial Denial Authority ("IDA"). ld. at Attach. 4, 5. In the meantime, the IDA sent a
decision letter to Essex on December 3,2008, informing the plaintiff that the unit prices
had been appropriately withheld under Exemption 4 and that the decision was considered
a partial denial of its FOIA request and could be appealed. Hargrave Decl. Attach. 15.
On December 16, 2008, Essex again requested an unredacted copy of Contract-A007.
Buchholz Decl. Attach. 6. On April 13,2009, the OGC denied the plaintiffs appeal. ld.
at Attach. 7. On February 23,2009, Essex filed the instant action.
ANALYSIS
Defendant moves for summary judgment pursuant to Fed. R. Civ. P. 56. Summary
judgment shall be granted when the record demonstrates "that there is no genuine issue as
to any material fact and that the movant is entitled to judgment as a matter of law." Fed.
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R. Civ. P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing
same). In a FOIA case, an agency bears the burden of establishing that the search was
adequate and that each responsive document is either produced, unidentifiable, or exempt
from production. See Weisberg v. Us. Dep 't ofJustice, 745 F.2d 1476, 1485, 1489 (D.C.
Cir. 1984). In this case, there is no dispute between the parties regarding the adequacy of
the Army's search for responsive documents. The only issue is the propriety of the
agency's decision to withhold the unit pricing for CLINs 0001 through 0010 pursuant to
Exemption 4 to FOIA.!
The Court's review of an agency's justification is de novo, see 5 U.S.C.
§ 552(a)(4)(B), but the Court "may rely on affidavits or declarations submitted by the
agency, if those documents describe 'the justifications for non-disclosure with reasonably
specific detail, demonstrate that the information withheld logically falls within the
claimed exemption, and are not controverted by either contrary evidence in the record nor
by evidence of agency bad faith. '" Suzhou Yuanda Enter., Co. v. Us. Customs & Border
Prot., 404 F. Supp. 2d 9, 12 (D.D.C. 2005) (quoting Military Audit Project v. Casey, 656
F.2d 724, 738 (D.C. Cir. 1981». For the following reasons, the Court finds there are no
genuine issues of material fact as to the validity of the Army's application of Exemption 4
Although Fidelity indicated that it did not object to the release of the unit pricing
for CLINs 0006 through 0010, see Hargrave Decl. Attach. 11, the Army concluded upon
its review of the requested documents that the unit pricing information for CLINs 0001
through 0010 should be withheld pursuant to Exemption 4. See Buchholz Decl. ~ 13,
Attach. 7.
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in this case.
Exemption 4 protects "trade secrets and commercial or financial information
obtained from a person and privileged or confidential." 5 U.S.C. § 552(b)(4). It is
undisputed that the sole question before the Court is whether this information is
confidential.
Our Circuit has set forth a two-part test for determining confidentiality:
[C]ommercial or financial matter is 'confidential' for purposes of the
exemption if disclosure of the information is likely to have either of the
following effects: (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.
Nat 'I Parks & Conservation Ass 'n v. Morton, 498 F.2d 765,770 (D.C. Cir. 1974)
(footnote omitted). This test was later reaffirmed for situations when the information
disclosed is "required" by the government. Critical Mass Energy Project v. Nuclear
Regulatory Comm 'n, 975 F.2d 871, 872 (D.C. Cir. 1992) (en banc). Here, Fidelity was
required to provide the Army with the unit pricing information in order to compete for
Contract-A007. See Buchholz Decl. ~ 11; Hargrave Decl. ~ 25. Furthermore, as
explained below, it is clear that release of the requested information would likely cause
substantial harm to Fidelity's competitive position.
When determining whether Exemption 4 applies, actual harm does not need to be
demonstrated; evidence supporting the existence of potential competitive injury or
economic harm is enough for the exemption to apply. See Gulf & w: Indus., Inc. v.
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United States, 615 F.2d 527, 530 (D.C. Cir. 1979). In this case, despite Essex's argument
that any harm from releasing the unit prices is highly speculative because unit prices are
based on multiple factors, the Army has demonstrated that releasing the withheld
information would cause substantial competitive harm because the requested information
could reveal Fidelity's business strategy and cost structure. See Pub. Citizen Health
Research Group v. Food & Drug Admin., 704 F.2d 1280, 1291 & n.30 (D.C. Cir. 1983);
see also Canadian Commercial Corp. v. Dep't a/the Air Force, 514 F.3d 37, 40 (D.C.
Cir. 2008) (in a reverse-FOIA case, holding that line-item pricing in a contract with the
Air Force falls within Exemption 4). As the Army explained, revealing the unit pricing
information could: (1) damage Fidelity's ability to competitively vie for future projects
which are the same or similar to Contract-A007; (2) limit Fidelity's bargaining power
with its subcontractors; and (3) disclose the economies of scale Fidelity hopes to achieve
in contract performance or the pricing strategies and risks Fidelity is willing to accept.
See Buchholz Decl. `` 12-13, Attach. 7; Hargrave Decl. `` 27-28, Attach. 13.
Furthermore, Fidelity was the first private entity to be awarded the items in Contract-
A007, thus the prices were not known in the industry, further supporting the need to
prevent their release. See Hargrave Decl. at Attach. 13. Finally, as required by 5 U.S.C.
§ 552(b), the Army has demonstrated that all "reasonably segregable" information was
disclosed after deletion of the exempt information, as Contract-A007 was disclosed to
Essex with the pricing information blacked out. See Hargrave Decl. Attach. 5.
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Having concluded that the unit pricing information is confidential, Essex's
remaining arguments in opposition are without merit. First, the plaintiff asserts that
Federal Acquisition Regulation ("FAR") § 15.506 mandates disclosure of Fidelity's unit
prices. See Pl.'s Opp'n to Def.'s Mot. for Summ. J. ("Pl.'s Opp'n") 6. Not so! What
Essex fails to acknowledge is that FAR § 15.506 has an exception: "the debriefing shall
not reveal any information ... exempt from release under the Freedom of Information
Act (5 U.S.C. § 552)." 48 C.F.R. § 15.506(e). In fact, one of the FOIA exemptions
explicitly included in FAR § 15.506 is "[ c]ommercial and financial information that is
privileged or confidential," id. at § 15.506(e)(3), language that tracks Exemption 4. Thus,
because the unit pricing information falls within Exemption 4, Essex's argument that the
FAR mandates release of that information is inaccurate and must fail.
In addition, the plaintiffs contention that the Department of Defense ("DOD")
regularly makes available this sort of unit pricing information is similarly inaccurate.
Indeed, to the contrary, DOD recognizes a FOIA exception for commercial or financial
information that is submitted in confidence and likely to cause substantial competitive
harm. See Pl.'s Opp'n Appx. 18, Dep't of Army FOIA Program; id. at 23, Sec'y of Air
Force DOD FOIA Program. Finally, the plaintiffs argument that unit prices for "a
business" are "normally provided" because otherwise "the public would buy nothing" is
an overly general statement wholly irrelevant to the inquiry here. See Pl.'s Opp'n 18-19.
Accordingly, the Court is easily satisfied that the Army properly withheld the unit pricing
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infonnation pursuant to Exemption 4 of FOIA.
CONCLUSION
For all of the foregoing reasons, the Court GRANTS the defendant's Motion for
Summary Judgment and DENIES the plaintiff's Cross-Motion for Summary Judgment.
The Court also DISMISSES the action in its entirety. An order consistent with this
decision accompanies this Memorandum OPiniO``
RlC~
United States District Judge
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