Gulf & Western Industries, Inc. v. U.S.

Citation615 F.2d 527
Decision Date06 November 1979
Docket NumberNo. 79-1646,79-1646
Parties, 26 Cont.Cas.Fed. (CCH) 83,809, 27 Cont.Cas.Fed. (CCH) 80,128 GULF & WESTERN INDUSTRIES, INC., Appellant, v. UNITED STATES of America et al.
CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)

Appeal from the United States District Court for the District of Columbia (D.C. Civil Action No. 77-1816).

Gregory J. Battersby, New York City, Glade F. Flake, Washington, D. C., and Thomas E. Harrison, Jr., New York City, were on the brief, for appellant.

Carl S. Rauh, U. S. Atty., John A. Terry, Karen I. Ward and Michael J. Ryan, Asst. U. S. Attys., Washington, D. C., were on the brief, for appellees.

Before LEVENTHAL and ROBINSON, Circuit Judges, and VAN DUSEN, * Senior Circuit Judge for the United States Court of Appeals for the Third Circuit.

Opinion for the Court filed by Senior Circuit Judge VAN DUSEN.

VAN DUSEN, Senior Circuit Judge:

This appeal is from a June 5, 1979, district court order granting defendants' motion for summary judgment 1 in an action arising under the Freedom of Information Act (FOIA), 5 U.S.C. § 552(a)(4)(B), 2 in which plaintiff sought disclosure of complete, unexpunged copies of documents in the Rule 4 file in an Armed Services Board of Contract Appeals (ASBCA) proceeding (Appeal of Norris Industries, Inc. (Norris), ASBCA No. 21651). 3 Because we have concluded that the information sought was properly withheld pursuant to exemption 4 4 of the FOIA as held by the district court, we affirm the June 5, 1979, order.

The ASBCA reviewed the documents requested and concluded that certain portions of the documents were exempt pursuant to exemption 4. As a result, the ASBCA deleted those portions of the documents before releasing them to plaintiff. Plaintiff contends that the ASBCA was incorrect in making the above-mentioned deletions. Generally, the information withheld concerned Norris' profit rate, actual loss data, general and administrative expense rates, projected scrap rates and learning curve data.

The plaintiff appealed the ASBCA decision to the Assistant Secretary of Defense for Public Affairs, who, for the most part, affirmed the ASBCA decision. The plaintiff then filed suit in the district court, seeking the release of those portions of the documents that had been deleted by the ASBCA. As noted above, the district court concluded that the information sought was properly deleted pursuant to exemption 4.

In order for information to come within exemption 4, the information must be (1) commercial or financial, (2) obtained from a person outside the government, and (3) privileged or confidential. National Parks and Conservation Ass'n v. Morton, 162 U.S.App.D.C. 223, 498 F.2d 765 (D.C. Cir. 1974); Soucie v. David, 145 U.S.App.D.C. 144, 448 F.2d 1067 (D.C. Cir. 1971); Grumman Aircraft Engineer. Corp. v. Renegotiation Board, 138 U.S.App.D.C. 147, 425 F.2d 578 (D.C. Cir. 1970).

It is undisputed that the information in this case is financial or commercial. In addition, the information in this case that was deleted by the ASBCA was obtained from a person 5 outside the government.

The plaintiff argues that deleted portions of the Defense Contract Audit Agency Audit Report contains information produced by the government and not information obtained from an outside party. 6 It is apparent that the ASBCA deleted portions of the report which contained information supplied by Norris or from which information supplied by Norris could be extrapolated.

The deleted portions of the report included, among other things, "actual costs for units produced," "actual scrap rates," "break-even point calculations" and "actual cost data." See footnote 6. Therefore, the release of this information would disclose data supplied to the government from a person outside the government. Fisher v. Renegotiation Board, 355 F.Supp. 1171 (D.D.C.1973).

The information in question meets the final requirement of exemption 4 in that it is privileged or confidential. Information is privileged or confidential if it is not the type usually released to the public and is of the type that, if released to the public, would cause substantial harm to the competitive position of the person from whom the information was obtained. National Park and Conservation Ass'n v. Morton, supra, 162 U.S.App.D.C. at page 228, 498 F.2d at page 770. Accord, Charles River Park "A," Inc. v. Department of H. & U. D., 171 U.S.App.D.C. 286, 519 F.2d 935 (D.C. Cir. 1975); Continental Oil Company v. F. P. C., 519 F.2d 31 (5th Cir. 1975); Pacific Architects & Eng. Inc. v. Renegotiation Bd., 164 U.S.App.D.C. 276, 505 F.2d 383 (D.C. Cir. 1974).

In order to show the likelihood of substantial competitive harm, it is not necessary to show actual competitive harm. Actual competition and the likelihood of substantial competitive injury is all that need be shown. National Parks and Conservation Ass'n v. Kleppe, 178 U.S.App.D.C. 376, 547 F.2d 673 (D.C. Cir. 1976). The record in this case indicates that Norris has actual competition. 7 Flinchbaugh has produced the M549 warhead for the government and has submitted bids in competition with Norris. Furthermore, we were informed in the spring of 1979 that bids would be solicited by the Army on this product.

Norris' competitors would be able to accurately calculate Norris' future bids and its pricing structure from the withheld information. The deleted information, if released, would likely cause substantial harm to Norris' competitive position in that it would allow competitors to estimate, and undercut, its bids. This type of information has been held not to be of the type normally released to the public and the type that would cause substantial competitive harm if released. National Parks and Conservation Ass'n v. Kleppe, supra, 178 U.S.App.D.C. at 384-386, 547 F.2d at 681-83; Sterling Drug, Inc. v. FTC, 146 U.S.App.D.C. 237, 450 F.2d 698 (D.C. Cir. 1971).

In its supplemental brief, plaintiff contends that Chrysler Corp. v. Brown et al., 441 U.S. 281, 99 S.Ct. 1705, 60 L.Ed.2d 208, states "that Congress had not intended the FOIA exemptions be mandatory bars to disclosure." The simple fact is that: in Chrysler the Court was dealing with a case where the government agency wished to make disclosure, and it was objected (in vain) that FOIA was a bar; in contrast, the government agency in our case does not wish to make disclosure, and it is objected that FOIA compels the disclosure. The two situations are diametrically different.

Furthermore, Chrysler simply cannot be viewed as a judicial indication that FOIA is pointed to universal disclosure. We take note of the following language used by the Court in that case (441 U.S. at 291-294, 99 S.Ct. at 1712-1714):

"Chrysler contends that the nine exemptions in general, and Exemption 4 in particular, reflect a sensitivity to the privacy interests of private individuals and nongovernmental entities. That contention may be conceded without inexorably requiring the conclusion that the exemptions impose affirmative duties on an agency to withhold information sought. 11 In fact, that conclusion is not supported by the language, logic or history of the Act.

" . . . The Act is an attempt to meet the demand for open government while preserving workable confidentiality in governmental decision-making. 12 Congress appreciated that with the expanding sphere of governmental regulation and enterprise, much of the information within Government files has been submitted by private entities seeking Government contracts or responding to unconditional reporting obligations imposed by law. There was sentiment that Government agencies should have the latitude, in certain circumstances, to afford the confidentiality desired by these submitters. 13 But the congressional concern was with the agency's need or preference for confidentiality; the FOIA by itself protects the submitters' interest in confidentiality only to the extend that this interest is endorsed by the agency collecting the information.

"Enlarged access to governmental information undoubtedly cuts against the privacy concerns of non-governmental entities, and as a matter of policy some balancing and accommodation may well be desirable. We simply hold here that Congress did not design the FOIA exemptions to be mandatory bars to disclosure. 14

(Emphasis supplied.)

"This conclusion is further supported by the legislative history. The FOIA was enacted out of dissatisfaction with § 3 of the Administrative Procedure Act, which had not resulted in as much disclosure by the agencies as Congress later thought desirable. Statements in both the Senate and House Reports on the effect of the exemptions support the interpretation that the exemptions were only meant to permit the agency to withhold certain information, and were not meant to mandate nondisclosure. For example, the House Report states:

'(The FOIA) sets up workable standards for the categories of records which may be exempt from disclosure . . ..

' . . . There may be legitimate reasons for nondisclosure and (the FOIA) is designed to permit nondisclosure in such cases.

'(The FOIA) lists in a later subsection the specific categories of information which may be exempted from disclosure.'

"We therefore conclude that Congress did not limit an agency's discretion to disclose information when it enacted the FOIA."

In this case, the agency had determined that the portions of the documents which plaintiff seeks should be deleted before disclosure (see pages --- - --- of 199 U.S.App.D.C., pages 528-529 of 615 F.2d above). 8

Also, the plaintiff argues that the deleted information is not confidential because it has already been made public by Norris and, therefore, is not confidential. It is conceded that Norris allowed the plaintiff's attorney to review the Rule 4 file in connection with another...

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