Canadian Commercial v. Department of Air Force

• Decision Date: 03 August 2006
• Docket Number: Civil Action No. 04-1189 (JDB).
• Citation: 442 F.Supp.2d 15
• Parties: CANADIAN COMMERCIAL CORP., et al., Plaintiffs, v. DEPARTMENT OF the AIR FORCE, Defendant.
• Court: U.S. District Court — District of Columbia

442 F.Supp.2d 15

CANADIAN COMMERCIAL CORP., et al., Plaintiffs, v. DEPARTMENT OF the AIR FORCE, Defendant.

Civil Action No. 04-1189 (JDB).

United States District Court, District of Columbia.

August 3, 2006.

Kristen Elizabeth Ittig, Holland & Knight LLP, Washington, DC, for Plaintiff.

Oliver W. McDaniel, U.S. Attorney's Office, Washington, DC, for Defendant.

MEMORANDUM OPINION

BATES, District Judge.

Plaintiffs Canadian Commercial Corp. ("CCC") and Orenda Aerospace Corp. ("Orenda") (collectively "plaintiffs") filed this "reverse FOIA" action on July 14, 2004, seeking to enjoin defendant Department of the Air Force ("defendant" or "Air Force") from releasing to a competitor Sabreliner Corporation ("Sabreliner"), certain financial data submitted by plaintiffs in connection with a bid for a contract to provide J85 turbojet engine repair and maintenance services. Plaintiffs challenge defendant's administrative decision to release the information in response to Sabreliner's request under the Freedom of Information Act ("FOIA"), 5 U.S.C. § 552, as a violation of the Administrative Procedure Act ("APA"), 5 U.S.C. § 706(2)(A), (C). Specifically, plaintiffs submit that the information sought by Sabreliner is exempt from disclosure under 5 U.S.C. § 552(b)(4) ("Exemption 4") and McDonnell Douglas v. Air Force, 375 F.3d 1182 (D.C.Cir.2004) ("McDonnell Douglas",) and that it constitutes trade secrets under the Trade Secrets Act ("TSA"), 18 U.S.C. § 1905, the disclosure of which is not "authorized by law." The parties have filed cross-motions for summary judgment. For the reasons that follow, the Court will grant plaintiffs' motion in part and deny it in part, and will grant defendant's motion in part and deny it in part.

FACTUAL BACKGROUND

On January 16, 2002, the Air Force issued a solicitation for the performance of maintenance and repair work on J85 turbojet engines ("solicitation"). Admin. Rec. Exh. 15. Plaintiff Orenda submitted a proposal through plaintiff CCC, in accordance with the Federal Acquisition Regulations ("FAR"). Pl.'s Stmt. at 2 ¶ 2. The solicitation stated that responders were "requested" to submit certain pricing information, and that a failure to do so could result in the proposal's disqualification. See Admin. Rec. Exh. 28 at § 1.0. By law, the government is required to consider price when it decides which proposal to accept. See Admin. Rec. Exh. 14 at 8 (citing FAR §§ 15.304(c)(1), 15.101). Plaintiffs' proposal contained detailed pricing information for the base year of the contract in addition to five subsequent option years. Plaintiffs submitted a formal offer on March 4, 2002. See Admin. Rec. Exh. 5 at 1. At this time, Sabreliner also submitted an offer in response to the solicitation, Pl.'s Stmt. at 2 ¶ 3, but the Air Force awarded the contract to plaintiffs on May 7, 2002, see Admin. Rec. Exh. 15.

Although the contract is between CCC and the Air Force, CCC contracted its duties to Orenda, such that Orenda performs the actual labor. Pl.'s Stmt. at 2 n. 1. The contract has a base term of three years and four option years, over which time plaintiffs agreed to repair, overhaul, and modify J85 turbojet engines. Admin. Rec. Exh. 15; Pl.'s Stmt. at 2-3 ¶ 4. The contract expressly incorporated the pricing information (for both the base term and the subsequent option years) by reference to Orenda's original proposal. Admin. Rec. Exh. 15. Plaintiff Orenda began performing under the terms of the contract, and continues to do so today (the contract expires in 2008). Pl.'s Stmt. at 2 ¶ 5.

Sabreliner contested the contract award before the General Accountability Office ("GAO") and sought to gain access to plaintiffs' detailed pricing information. Pl.'s Stmt. at 3 ¶ 6. During the bid protest, Sabreliner's attorneys were permitted to review the information, but Sabreliner itself was screened from it. Id. Ultimately, Sabreliner's protest of the contract award was unsuccessful. Id. On September 12, 2003, Sabreliner filed a FOIA request with the Air Force. Admin. Rec. Exh. 1. The FOIA request sought release of the contract and all orders and modifications to it. Id. The Air Force notified plaintiffs of Sabreliner's request, asking them to review all of the pricing information and stated subcontracting goals attached to the contract in order to determine whether Sabreliner's request sought protected trade secret, commercial, or financial information. Admin. Rec. Exh. 2. Plaintiffs were directed to identify any particular information that they sought to protect from disclosure, and to provide evidentiary support and detailed analysis to assist the Air Force in determining whether the information came within any FOIA exemptions. Id. In response, Orenda submitted three documents—an opposition letter dated November 13, 2003, Admin. Rec. Exh. 7 at 2-12; a clarification letter dated December 3, 2003, Admin. Rec. Exh. 9 at 2-3; and a supplemental letter dated January 23, 2004, Admin. Rec. Exh. 9 at 8-11. Together, Orenda submits that those filings proffered "several layers of clear and robust arguments against disclosing its information to [Sabreliner]." Pl.'s Stmt. at 15 ¶ 30.

I. Orenda's First Submission: Opposition Letter of November 13, 2003

In its initial opposition, Orenda sought to protect four categories of cost and pricing information from disclosure: (1) "[a]ll line-item price and price-related information under [the current contract]"; (2) "[a]ll line-item price and price-related information contained in every option year Exhibit (Exhibits A to E)"; (3) "[all! Fixed Hourly Labor Rates for Over and Above Prices"; and (4) "[a]ll cost, price, and price-related information contained in Orenda's Subcontracting Plan." Pl.'s Stmt. at 9 ¶ 20. In order to provide guidance and clarity for the Air Force, Orenda appended redacted materials to its opposition letter, and stated that it found "no legal authorization for disclosure of such information ... [which] is expressly prohibited by federal law." Pl.'s Stmt. at 9-10 ¶ 21. A redacted copy of the contract was also attached, in order to show the Air Force which pricing information was allegedly exempt. Id; see also Admin. Rec. Exh. 7. In a nutshell, Orenda claimed that the line-item unit and other pricing information was protected by the TSA, could be withheld from disclosure pursuant to Exemption 4 of FOIA, and was not authorized for release by FAR or any other provision of law. Admin. Rec. Exh. 7 at 2.

Orenda argued that although §§ 15.503 and 15.506 authorize the general disclosure of unit price information, both provisions protect that information if it is "confidential, trade secret, or otherwise exempt under Exemption 4 [of FOIA]." Id. According to Orenda, the information at issue qualifies as confidential, trade secret, and exempt under Exemption 4, which allows the government to withhold information in response to a FOIA request if it is "commercial or financial" and "privileged or confidential." Admin. Rec. Exh. 7 at 3. Orenda claimed that the information was privileged and confidential because it was submitted voluntarily—defendant's solicitation did not require the information— and Orenda continuously represented the sensitive and confidential nature of the information, informing the Air Force that only certain persons were authorized to review the information and including a confidentiality footer on the cover page of the submission. Pl.'s Stmt. at 15-16 ¶¶ 30-31; 5-6 ¶ 14. Because the information is of a type that "would not customarily be released to the public by the person from whom it was obtained," see Pl.'s Stmt. at 15-16 ¶ 30, Orenda continued, Exemption 4 justified its nondisclosure.

In the alternative, Orenda argued that even if the submission was involuntary, the information would still be privileged and confidential because its release was likely to seriously impair the Air Force's ability to obtain necessary information in the future. Pl.'s Stmt. at 6 ¶ 15. Specifically, disclosing this type of information would allegedly deter competitors from bidding on future solicitations, which would compromise the quality of goods and services performed—as well as the integrity and fairness of the bidding process—by undermining the government's "fundamental policy of open competition." Pl.'s Stmt. at 6-7 ¶¶ 16-17; 15-17 ¶¶ 29, 31-33. Additionally, Orenda anticipated that its competitive advantage would be substantially undermined by the release of the information because Sabreliner—and other companies with whom Orenda competes on the open market—would be able to reverse-engineer Orenda's pricing formulae, ascertain its pricing strategy, "raid its subcontractor portfolio," and undercut its future bids. Pl.'s Stmt. at 7-8 ¶ 18; 15-17 ¶¶ 31-33. Because the TSA protects proprietary information that comes within the ambit of Exemption 4, Orenda further asserted that the Air Force was actually prohibited by law from disclosing this information to Sabreliner. Pl.'s Stmt. at 9 ¶ 19.

II. Orenda's Second Submission: Clarification Letter of December 3, 20031¹

The Air Force then asked Orenda on November 24, 2003 to clarify the scope and application of its objections. Within two weeks, Orenda submitted the December 3, 2003 "opposition clarification" letter. Admin. Rec. Exh. 8. This time, Orenda described the material it sought to protect as "commercially sensitive information," Pl.'s Stmt. at 10 ¶ 22, which

specifically means all cost and pricing figures, including, but not limited to, all current and projected line-item prices, all fixed hourly labor rates for its over and above prices, all pricing and price-related information contained in its subcontracting plan, and all other information contained in any relevant document that could be used to derive this cost and pricing information.

Admin. Rec. Exh. 9 at 1-2. Orenda concluded by referring the Air Force to the redacted versions of Exhibits A—E, and including redacted versions of the contract...