McDonnell Douglas Corp. v. Widnall, s. 94-5156

• Citation: 57 F.3d 1162
• Decision Date: 30 June 1995
• Docket Number: Nos. 94-5156,94-5157,s. 94-5156
• Parties: , 40 Cont.Cas.Fed. (CCH) P 76,809 McDONNELL DOUGLAS CORPORATION, Appellant, v. Sheila E. WIDNALL, Secretary, Department of the Air Force, and United States Air Force, Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

Page 1162

57 F.3d 1162

313 U.S.App.D.C. 77, 40 Cont.Cas.Fed. (CCH) P 76,809

McDONNELL DOUGLAS CORPORATION, Appellant, v. Sheila E. WIDNALL, Secretary, Department of the Air Force and United States Air Force, Appellees.

Nos. 94-5156, 94-5157.

United States Court of Appeals District of Columbia Circuit.

Argued April 17, 1995.

Decided June 30, 1995.

Appeals from the United States District Court for the District of Columbia (92cv2211 & 94cv0091).

Jerald S. Howe, Jr., Washington, DC, argued the cause for appellant. With him on the briefs was Peter L. Wellington, Washington, DC.

Michael J. Ryan, Asst. U.S. Atty., Washington, DC, argued the cause for appellees. With him on the brief were Eric H. Holder, Jr., U.S. Atty. and R. Craig Lawrence, Asst. U.S. Atty., Washington, DC. Douglas A. Wickham and John O. Birch, Asst. U.S. Attys., Washington, DC, entered appearances.

Before: SILBERMAN, HENDERSON and RANDOLPH, Circuit Judges.

Opinion for the Court filed by Circuit Judge SILBERMAN.

SILBERMAN, Circuit Judge:

McDonnell Douglas appeals from a district court order denying its request for an injunction to restrain the Air Force from publicly releasing the prices of certain satellite launch services purchased from McDonnell Douglas. We remand to the district court with instructions to in turn remand the proceeding to the Air Force.

I.

Under Defense Department acquisition regulations (DFARs) providing for "[p]ublic [a]nnouncement" of contract awards, Air Force procurement personnel are directed to "[r]eport all contractual actions, including modifications, that have a face value, excluding unexercised options, of more than $5 million." 48 C.F.R. Sec. 205.303(a)(i) (1994) (emphasis added). These reports are forwarded to the Assistant Secretary of Defense (Public Affairs), id. Sec. 205.303(a)(ii)(A), who publicizes the information, as well as to "members of Congress in whose state or district the contractor is located and the work is to be performed," id. Sec. 205.303(a)(iii). In keeping with these obligations, the Air Force regularly proposed to announce the costs incurred by it in exercising certain options under two contracts previously entered into with McDonnell Douglas. The Air Force considers the decision to exercise options a "contractual action," and the costs to it of requesting the additional services exceeded the $5 million threshold. Fearing that competitors would find knowledge of its pricing practices useful when competing for future launch projects, McDonnell Douglas on two occasions initiated litigation to block the Air Force from making price announcements associated with its exercise of options under the two contracts. Both cases are at issue in this appeal.

The first of the two contracts, which the parties refer to as the Delta II contract, was entered into on November 1, 1991. Under its terms, McDonnell Douglas was to provide the Air Force with equipment and services for a series of satellite launches, each a complex and costly operation. In addition to the launch services actually purchased, the Air Force also secured options to buy additional services from McDonnell Douglas at specified prices. As the basic total price of the contract (i.e., the total cost not including unexercised options) well exceeded $5 million, DFAR Sec. 205.303(a)(i) obligated the Air Force to make the cost public. The figure released, however, represented the aggregated charges for all the services undertaken to be performed. The Air Force did not disclose McDonnell Douglas' pricing policies with regard to each item covered by the contract, nor did it reveal the terms of the agreement, including the option prices.

A few months later, in early 1992, the Air Force received a request under the Freedom of Information Act, 5 U.S.C. Sec. 552 (1988), from General Dynamics Corp., one of McDonnell Douglas' competitors in providing satellite launch services. Although not directly at issue here, the Air Force's response to this request bears on its later disputes with McDonnell Douglas. General Dynamics sought the release of the Delta II contract--including the specific prices for each item purchased as well as all unexercised options. McDonnell Douglas, having been apprised of General Dynamics' request, objected. It claimed that virtually all the information sought fell within FOIA Exemption 4, which provides that an agency's disclosure obligations do not extend to requests for "trade secrets and commercial or financial information obtained from a person and privileged or confidential." Id. Sec. 552(b)(4). According to McDonnell Douglas, the line item prices contained in the Delta II contract were confidential "trade secrets" or "commercial or financial information" and therefore could be withheld under Exemption 4 pursuant to National Parks & Conservation Ass'n v. Morton, 498 F.2d 765, 770 (D.C.Cir.1974), since their disclosure would result in competitive injury.

McDonnell Douglas also argued that, apart from Exemption 4, the Trade Secrets Act, 18 U.S.C. Sec. 1905 (1988), prohibited the release of the information sought by General Dynamics. That statute provides, in relevant part, that:

Whoever, being an officer or employee of the United States or any department or agency thereof ... 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 ... 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 ... shall be fined not more than $1,000, or imprisoned not more than one year, or both; and shall be removed from office or employment.

18 U.S.C. Sec. 1905. A criminal statute, the Trade Secrets Act does not furnish a private cause of action against governmental disclosure, see Chrysler Corp. v. Brown, 441 U.S. 281, 316, 99 S.Ct. 1705, 1725, 60 L.Ed.2d 208 (1979) (citing Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975)), but it can be relied upon in challenging agency action that violates its terms as "contrary to law" within the meaning of the Administrative Procedure Act, 5 U.S.C. Sec. 706(2)(A) (1988). Chrysler, 441 U.S. at 318-19, 99 S.Ct. at 1725-26.

Although the two provisions relied upon by McDonnell Douglas perform distinct legal functions--Exemption 4 marks the outer boundaries of the government's FOIA privilege by identifying materials that a person making a FOIA request has no right to force the government to divulge, whereas the Trade Secrets Act establishes a private right against unauthorized governmental publications of confidential information--they are nevertheless closely related in terms of the materials to which they each apply. Indeed, we have stated that the scope of the Trade Secrets Act "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). 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.

In response to the FOIA request, the Air Force initially determined, in August 1992, that some of the Delta II contract material sought by General Dynamics was covered by Exemption 4, because its release would likely harm McDonnell Douglas in the bidding for another Air Force launch project, the MLV III program. See National Parks, 498 F.2d at 770. But it did not think that any competitive injury was likely to result from disclosing the rest of the information. McDonnell Douglas responded with additional arguments, primarily relying on this court's then-recent elaborations on the scope of FOIA Exemption 4 in Critical Mass Energy Project v. Nuclear Regulatory Comm'n, 975 F.2d 871 (D.C.Cir.1992) (en banc), cert. denied, --- U.S. ----, 113 S.Ct. 1579, 123 L.Ed.2d 147 (1993). In Critical Mass, we held that "financial 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. at 879. McDonnell Douglas asserted that, in light of Critical Mass, the contract information which the Air Force had thought itself obliged to disclose under National Parks was now plainly not releasable.

The Air Force had yet to reach a final determination on General Dynamics' FOIA request when, in an unrelated move, it decided to exercise certain of its options under the Delta II contract. In keeping with DFAR Sec. 205.303, the Air Force proposed to announce the costs of the options, which exceeded the regulation's $5 million threshold. McDonnell Douglas opposed the announcement, and on the day the option was exercised, September 30, 1992, filed suit in the district court under the APA, initiating the first of the two actions that have occasioned this appeal. McDonnell Douglas' complaint sought a temporary restraining order and preliminary injunction against the Air Force's planned release of the exercised option prices on the ground that such a disclosure would be illegal under the Trade Secrets Act. The court agreed with McDonnell Douglas' arguments and granted the injunction in an oral decision from the bench. The Air Force filed a motion for reconsideration.

While that motion was pending, the Air Force came to a final determination on General Dynamics' FOIA request. In a decision memorandum dated November 5, 1992, the Air Force concluded that, in light of Critical Mass, much of the contract information that it had initially thought itself bound to release actually fell within Exemption 4. In the Air Force's view, however, DFAR Sec. 205.303's provision for announcement of expenditures over $5 million complicated the analysis for the...