Sears, Roebuck & Co. v. General Services Admin.

• Decision Date: 01 April 1977
• Docket Number: No. 75-2127,75-2127
• Citation: 180 U.S.App.D.C. 202,553 F.2d 1378
• Parties: 14 Fair Empl.Prac.Cas. 945, 13 Empl. Prac. Dec. P 11,606, 180 U.S.App.D.C. 202 SEARS, ROEBUCK AND CO., Appellant, v. GENERAL SERVICES ADMINISTRATION et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1378

553 F.2d 1378

14 Fair Empl.Prac.Cas. 945,

13 Empl. Prac. Dec. P 11,606, 180 U.S.App.D.C. 202

SEARS, ROEBUCK AND CO., Appellant, v. GENERAL SERVICES ADMINISTRATION et al.

No. 75-2127.

United States Court of Appeals District of Columbia Circuit.

Argued Dec. 15, 1976.

Decided April 1, 1977.

S. Richard Pincus, Chicago, Ill., with whom Lawrence M. Cohen, Chicago, Ill., Paul J. Cherner, Alan Raywid and Burt Braverman, Washington, D. C., were on the brief, for appellant.

Paul Blankenstein, Atty., Dept. of Justice, Washington, D. C., with whom Rex E. Lee, Asst. Atty. Gen., Earl J. Silbert, U. S. Atty., and Leonard Schaitman, Atty., Dept. of Justice, Washington, D. C., were on the brief, for federal appellees.

Collot Guerard, Washington, D. C., with whom Thomas R. Asher, Washington, D. C., was on the brief, for appellee Council on Economic Priorities.

Before ROBB and WILKEY, Circuit Judges, and GESELL, ^* United States District Judge for the District of Columbia Circuit.

Opinion for the Court filed by Circuit Judge WILKEY.

WILKEY, Circuit Judge:

This is a "reverse" freedom of information case in which appellant Sears, Roebuck & Company has responded with a declaratory judgment action to prevent the intervenor Council on Economic Priorities from securing under the Freedom of Information Act (FOIA) ¹ certain EEO-1 reports and affirmative action plans from the defendant General Services Administration. The EEO-1 reports contain data on Sears employees broken down by race and sex, while the affirmative action plans are proposed future action to correct effects of past employment discrimination.

This action is one of several judicial challenges to the Secretary of Labor's new disclosure rules of 2 February 1973, ² which altered the previous policy of confidentiality guaranteed data submitted by Government contractors in compliance with Executive Orders 11246 and 11375 ³ on nondiscrimination. Without reciting in detail the previous procedural steps in both the District Court and this court, which are duly reported, ⁴ this appeal is from the opinion and order of 26 September 1975 of the District Court. ⁵

In that opinion the District Court reaffirmed its previous rulings that the records here do not fall within two of the Act's exempted categories, 5 U.S.C. § 552(b)(3) (exempted by statute) and (b)(7) (investigatory files), and similarly ruled that the data was not protected by two other exemptions pressed by Sears, (b)(4) (trade secrets and confidential data) and (b)(6) (personnel records). The District Court thus granted summary judgment for the intervenor and summary judgment in part for the defendant GSA.

I. JURISDICTION AND STANDARD OF REVIEW

The jurisdictional basis for this suit is to be found in 28 U.S.C. § 1331(a). ⁶ The action arises under the FOIA ⁷ and relief is sought pursuant to the Declaratory Judgment Act, ⁸ since the FOIA provides for actions requiring disclosure but not actions to prevent disclosure of documents that are in the custody of Government agencies. We agree with the District Court that the "actual controversy" here is whether the records sought are exempt from disclosure under the FOIA, and that Sears has a right to a declaratory judgment on this issue.

The Government's position has shifted somewhat. It initially indicated that it desired to release the records, even if not compelled to do so by the FOIA, but its final position in the District Court and here on appeal is that it has not yet determined whether it will release the data, if the ultimate conclusion of the court is that the data is protected by one or more of the exemptions, and thus its release not compelled by the FOIA.

We also agree with the District Court as to the standard of and procedure in review by that court of the agency's action. The District Court is not precluded from a de novo consideration of the issues, since this reverse FOIA case is brought as a declaratory judgment action, not for review of agency action under the APA. The review standard of the FOIA in a suit to compel disclosure is also the appropriate standard in the reverse FOIA case. Charles River Park "A" Inc. v. HUD. ⁹

II. EXEMPTION 4: TRADE SECRETS AND CONFIDENTIAL COMMERCIAL DATA

5 U.S.C. § 552(b)(4) exempts from disclosure "trade secrets and commercial or financial information obtained from a person and privileged or confidential." The data which Sears claims falls under exemption 4 is in: First, the EEO-1 reports, which detail employment totals in nine occupational categories, specifically broken down by sex and minority group status of employees in each Sears unit; second, the affirmative action plan, drawn up on the basis of 19 job categories, broken down by race and sex, with specific totals for hiring, promotions, terminations, training, and projected time tables for attaining the objectives.

The critical issue in this case, under exemptions 4 and 3, is whether this data contains "trade secrets" or other confidential material whose disclosure will "cause substantial harm to the competitive position of" the appellant Sears. National Parks and Conservation Association v. Morton. ¹⁰ On this issue the evidence offered the District Court was conflicting on which statement is predicated the action we take on this appeal.

Sears filed six affidavits from five experts asserting that from the EEO-1 reports and affirmative action plan employment category totals a knowledgeable competitor could deduce Sears' labor costs, sales volume, plans for expansion, and secure other data valuable to a competitor of Sears. Sears claims these affidavits make a prima facie case for "substantial competitive harm." The intervenor and defendant countered with an affidavit by Dr. Sar Levitan, which asserted that "EEO-1 and the affirmative action reports could not be of great usefulness to a Sears competitor. The information which would be released could provide only the roughest approximation of sales volume, growth patterns, or labor costs. Equally accurate approximations are already possible without the use of these data." ¹¹

It is at this point that we part company with the District Judge. In reference to the affidavit of Dr. Levitan, the District Judge stated, ¹² "The court embraces his affidavit and adopts his conclusion . . . ." This statement and the recitation from Dr. Levitan's affidavit, quoted in toto above, conclude the District Court's discussion of the exemption 4 issue. The District Court did not specify its reasons for adopting the particular conclusion advanced by Dr. Levitan. The District Court did not recite any facts in the record to which the court gave credence, either as being undisputed or as being preferable in validity to those facts relied upon in the six Sears affidavits.

The question of what this data in the reports would mean to an intelligent competitor is a factual issue. The answer to that issue is in the nature of a fact, a factual conclusion if you prefer, but still partaking of the nature of fact. The Sears affidavits make certain factual assertions concerning the nature of the material in the reports and how this material could be used by intelligent competitors to gain a competitive advantage. For example, the Sears affiants state that the information in the EEO-1 reports and the affirmative action plans cannot be obtained from commercial publications, research services, or other governmental sources. In addition, the claim is made that on-site inspections of Sears' retail units cannot yield the same type or quality of information as provided in the reports. As an example of the use to which the information in the reports could be put by competitors, the Sears affiants assert that the information would be of great use to a competitor in determining where to locate future retail stores. In addition, these affiants state that the reports clearly reveal "promotable" individuals who may be induced to leave Sears and move to a competitor. Dr. Levitan's affidavit attempts to refute the claims of competitive harm put forth in the Sears affidavits. Sears asked more than once for an evidentiary hearing, particularly for the purpose of cross-examining Dr. Levitan after his rebuttal affidavit was filed.

The District Judge believed that there were no factual conflicts which would preclude him from granting summary judgment. "While there are conflicts between the Sears affidavit and those of defendant and intervenor, these conflicts do not raise issues of material fact, but rather concern expert opinions as to the adverse consequences to Sears of release of the EEO-1 and AAP reports." ¹³ We think the existence and nature of any "adverse consequences to Sears" are in themselves facts to be ascertained by inquiry. While the "adverse consequences" may be considered as ultimate facts, to be derived from certain undisputed facts in the documents filed by Sears, yet the ultimate facts as to the probable future adverse consequences can only be determined by putting with those undisputed facts other facts within the experts' knowledge to reach the conclusion as to consequences. It is apparent that the five Sears experts and Dr. Levitan relied upon different experience factors to put with the facts in the documents in reaching their differing conclusions as to consequences.

Where there is a conflict in the affidavits as to what adverse consequences will flow from the revelation of the facts contained in the documents sought to be disclosed, then it appears that there is indeed a conflict regarding very material facts which calls for some type of adversary procedure. The District Court thus attempted to resolve the conflict in the ultimate facts without having the evidence before it. There also appears to be a fact conflict as to the availability of this allegedly confidential data to other persons. Summary judgment was not appropriate.

In regard to the kind of adversary proceeding which the District Judge should conduct, he...