SCOTUS Rules Proprietary Business Information Shielded from FOIA Disclosure

Many government contractors are familiar with FOIA requests, or requests made by individuals under the Freedom of Information Act for release of information in the federal government’s possession.

In the recent case Food Marketing Institute v. Argus Leader Media, the U.S. Supreme Court held that commercial or financial information is “confidential” and cannot be disclosed under FOIA where it is treated as private by its owner and provided to the government under an assurance of privacy.

Argus Leader Media, a South Dakota Newspaper, laid the foundation for the case. Argus filed a FOIA request with the U.S. Department of Agriculture, asking for the names and addresses of all retail stores participating in the Supplemental Nutrition Assistance Program (SNAP), or as it is more colloquially known, the food stamps program. In addition, Argus also requested each store’s annual food stamp redemption data from 2005-2010. This information is provided to the USDA by businesses participating in SNAP.

The USDA produced the names and addresses of stores participating in SNAP, but refused to produce the redemption data. The USDA argued that the redemption data fell under FOIA’s Exemption 4 (found at 5 U.S.C. § 552(b)(4)), which allows agencies to withhold requested information which are “trade secrets and commercial or financial information obtained from a person and privileged or confidential.” Specifically, the USDA argued that the SNAP redemption data was proprietary business information and releasing it would threaten stores’ competitive positions in retaining customers utilizing SNAP. Argus sued, claiming a right to the withheld information.

The primary questions in the case concerned the meaning of the term “confidential” and determining whether the likelihood of “substantial competitive harm” had to exist in order to justify withholding “confidential information.” This “substantial harm” requirement had been consistently applied by some courts as a threshold for withholding information.

In a 6-3 decision penned by Justice Gorsuch, the Supreme Court agreed with the USDA’s decision to withhold the proprietary business information.

First, the Court held that “confidential” had its ordinary meaning and was synonymous with “private” or “secret.” Here, as the Court pointed out, the redemption information was confidential business information.

Next, the Court held that confidential information could be withheld, regardless of the level of harm that disclosure could potentially cause. The Court determined that the “substantial harm” requirement derived from legislative history, but not from anything in the statute itself. Using legislative history to decide cases is controversial among federal courts, but Justice Gorsuch noted that “[e]ven those of us who sometimes consult legislative history will never allow it to be used to ‘muddy’ the meaning of ‘clear statutory language.’” Ultimately, the Court held that the “substantial harm” test no longer applies.

All in all, the decision strengthens protection for confidential and proprietary business information and limits the reach of FOIA requests for this kind of information.

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