Sealed 1 v. Sealed

• Court: Court of Appeals for the Fifth Circuit
• Decided: October 14, 1999
• Docket: 98-20538
• Status: Unpublished

Opinion

IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

______________

No. 98-20538 ______________

SEALED APPELLEE #1; SEALED APPELLEE #2,

Plaintiffs-Appellees,

versus

SEALED APPELLANT,

Defendant-Appellant.

_________________________________________________________

Appeal from the United States District Court for the Southern District of Texas (H-96-CV-3113) _________________________________________________________

October 14, 1999

Before EMILIO M. GARZA and PARKER, Circuit Judges, and FITZWATER, District Judge.*

FITZWATER, District Judge:**

In this reverse-FOIA1 case arising from an administrative

agency’s decision to release a draft report concerning a chemical plant explosion, the agency does not challenge on appeal the

district court’s determination that all the information that the

plant owner provided the agency during its investigation fell

* District Judge of the Northern District of Texas, sitting by designation. ** Pursuant to 5th Cir. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5th Cir. R. 47.5.4. 1 Freedom of Information Act, 5 U.S.C. § 552. within FOIA exemption 4, 5 U.S.C. § 552(b)(4). Because the

agency’s failure to contest this holding leads to the conclusion

that the Trade Secrets Act (“TSA”), 18 U.S.C. § 1905, prohibits

disclosure of the materials at issue, we affirm.

I

Plaintiffs-appellees Sealed Appellee #1 and Sealed Appellee #2

(collectively, the “Company”) provided defendant-appellant Sealed

Appellant (the “Department”) with voluminous documents and

information in connection with the Department’s investigation of a

catastrophic explosion at the Company’s chemical plant. Later, the

Department advised the Company that, in response to a newspaper

reporter’s FOIA request, it intended to release some of this

information in a draft report (“Draft Report”). The Company

objected and sued in district court, seeking a declaratory judgment

that the Draft Report contained confidential commercial information

that was exempt from disclosure under the FOIA and barred from

disclosure under the TSA, and requesting an injunction to prevent

the Department from disclosing the Draft Report and underlying

documents. Although the district court relied on grounds that were

not entirely favorable to the Company, it granted the injunction

and ordered the Department to release a redacted version of the

Draft Report that, to the extent possible, was devoid of any

exempted materials.

In reaching its decision, the district court held that “all

information [the Company] provided [the Department] during [its]

investigation falls within exemption 4.” The Department does not

- 2 - challenge this holding before us. See Appellant Br. at 25 & n.12;

Appellant Rep. Br. at 14 n.4. When we asked its counsel at oral

argument whether the Department “concede[s] that all of the

information that [the Company] provided falls within exemption 4,”

Department counsel responded, “Well, we do for purposes of this

appeal[.]”2

Among its arguments on appeal, the Company contends that “the

applicability of FOIA exemption 4 also determines whether the Trade

Secrets Act prohibits an agency from disclosing the confidential

information[.]” Appellee Br. at 40. It cites the well-recognized

principle that “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.” Id.

(quoting McDonnell Douglas Corp. v. Widnall, 57 F.3d 1162, 1164

(D.C. Cir. 1995)); see id. at 15-16 (arguing that FOIA exemption 4

and TSA are at least coextensive and because Draft Report is

subject to exemption 4, its disclosure is prohibited by TSA).

2 Elsewhere in his argument, counsel stated: “The government’s position is that although we think that’s [the Company’s assertion that all the information that it submitted and everything in the Draft Report was confidential commercial information] flawed, we do not urge that as a basis for reversing the district court’s decision.”

- 3 - II

FOIA exemption 4 excuses from mandatory disclosure “trade

secrets and commercial or financial information obtained from a

person and privileged or confidential.” 5 U.S.C. § 552(b)(4).

This exemption grants an administrative agency discretion to

withhold information that is otherwise disclosable. It does not

mandate nondisclosure. Chrysler Corp. v. Brown, 441 U.S. 281, 291-

94 (1979). If another statute or regulation bars release of the

information, however, the agency lacks discretion to disclose it.

Id. at 293-94.

The TSA operates as a limit on agency discretion. See

Chrysler, 441 U.S. at 317-18. It forbids any agency officer or

employee from disclosing trade secrets “to any extent not

authorized by law.”3 Assuming, as the Department argues, that §

3 The TSA provides:

Whoever, being an officer or employee of the United States or of any department or agency thereof, any person acting on behalf of the Office of Federal Housing Enterprise Oversight, or agent of the Department of Justice as defined in the Antitrust Civil Process Act (15 U.S.C. 1311—1314), 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 or by reason of any examination or investigation made by, or return, report or record made to or filed with, such department or agency or officer or employee thereof, 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, firm, partnership, corporation, or association; or

- 4 - 8(g) of the Occupational Safety and Health Act (the “OSH Act”), 29

U.S.C. § 657(g), confers such authority on the Department, § 8(g)

is in turn subject to § 15 of the OSH Act, 29 U.S.C. § 664.4 With

exceptions not pertinent here,5 § 15 precludes the Department from

disclosing any information that “might reveal a trade secret

referred to in section 1905 of Title 18.” Section 15 thus

incorporates the TSA definition of trade secret.

The Department’s failure to challenge the district court’s

permits any income return or copy thereof or any book containing any abstract or particulars thereof to be seen or examined by any person except as provided by law; shall be fined under this title, or imprisoned not more than one year, or both; and shall be removed from office or employment.

18 U.S.C. § 1905. 4 29 U.S.C. § 664:

All information reported to or otherwise obtained by the Secretary or his representative in connection with any inspection or proceeding under this chapter which contains or which might reveal a trade secret referred to in section 1905 of Title 18 shall be considered confidential for the purpose of that section, except that such information may be disclosed to other officers or employees concerned with carrying out this chapter or when relevant in any proceeding under this chapter. In any such proceeding the Secretary, the Commission, or the court shall issue such orders as may be appropriate to protect the confidentiality of trade secrets. 5 Section 15 permits disclosure of trade secrets to other officers or employees of the agency, or when relevant to any proceeding. The Department does not contend that either exception applies in this case. Cf. Appellant Br. at 31 n.15 (asserting that there were no pending proceedings).

- 5 - holding that all the information that the Company provided to the

Department fell within exemption 4, coupled with § 15’s

incorporation of the TSA definition of trade secret, means that the

Department was precluded from disclosing the information in

question. The TSA “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) (footnote omitted). “Accordingly, when a person can

show that information falls within Exemption 4, then the government

is precluded from releasing it under the Trade Secrets Act.”

McDonnell Douglas Corp. v. NASA, 180 F.3d 303, 305 (D.C. Cir.

1999). With exceptions not relevant here, the TSA applies with

full force to the Department because § 15 of the OSH Act

incorporates the TSA definition of trade secret. Therefore, given

the district court’s unchallenged holding, the Company has

“succeed[ed] in demonstrating that its materials fall within

Exemption 4, [and] the government is precluded from releasing the

information by virtue of the Trade Secrets Act.” McDonnell Douglas

v. Widnall, 57 F.3d at 1164.

III

We can discern from the Department’s briefing two principal

reasons why it did not consider to be dispositive of this appeal

its failure to challenge the district court’s exemption 4 holding.

First, FOIA exemptions do nothing more than vest an agency

with discretion to withhold information that must otherwise be

disclosed. Therefore, the Department’s reasoning goes, even if it

concedes for appellate purposes that the materials at issue fall

- 6 - within exemption 4, it still retains the discretion to disclose

them. See Appellant Br. at 25; Appellant Rep. Br. at 14 n.4. The

flaw with this approach is that if exemption 4 and the TSA are

coextensive, then regardless of the discretion that the Department

retains under FOIA, the TSA (through § 15 of the OSH Act) prohibits

disclosure.

The Department’s second reason appears to rest on its view

that the term “trade secret” in § 15 of the OSH Act, which

incorporates the TSA definition of “trade secrets,” is narrower

than the scope of exemption 4. Therefore, even if all the

information at issue falls within exemption 4, at least some

consists of confidential commercial information that is not a trade

secret, and thus is not subject to the TSA’s prohibition against

disclosure. Such materials, in the Department’s view, would still

be disclosable as a matter of agency discretion. See Appellant

Rep. Br. at 13-15 & 14 n.4.

One need only turn to CNA Financial, in which the District of

Columbia Circuit held that the TSA is at least coextensive with

exemption 4, to see that this rationale lacks force in this case.

In CNA the court discussed the significance of the coextensiveness

question:

If the range of the [Trade Secrets] Act is narrower than the scope of Exemption 4, there will be some commercial and financial data that these agencies will be free to release in their discretion, though they are not required to do so by FOIA. If, on the other hand, the reach of the [Trade Secrets] Act is at least coextensive with that of Exemption 4, a finding that requested material falls within that exemption will be tantamount to a

- 7 - determination that these agencies cannot reveal it.

830 F.2d at 1144 (footnote omitted) (emphasis added). See

McDonnell Douglas v. Widnall, 57 F.3d at 1164 (stating that

although exemption 4 and the TSA “perform distinct legal

functions,” “they are nevertheless closely related in terms of the

materials to which they each apply”).

Moreover, courts hold in broad terms that the government is

prohibited by the TSA from disclosing information or materials that

fall within FOIA exemption 4. See McDonnell Douglas v. NASA, 180

F.3d at 305(“Accordingly, when a person can show that information

falls within Exemption 4, then the government is precluded from

releasing it under the Trade Secrets Act.”); McDonnell Douglas v.

Widnall, 57 F.3d at 1164 (“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.”); Pacific Architects & Eng’rs Inc. v.

United States Dep’t of State, 906 F.2d 1345, 1347 (9th Cir. 1990)

(“Accordingly, material qualifying for exemption under (b)(4) falls

in the material, disclosure of which is prohibited under section

1905.”); Acumenics Research & Tech. v. United States Dep’t of

Justice, 843 F.2d 800, 806-07 (4th Cir. 1988) (“Thus, for

information falling within exemption (4), the Trade Secrets Act

does bar an agency decision to release the information.”); General

Motors Corp. v. Marshall, 654 F.2d 294, 297 (4th Cir. 1981) (“It

followed logically . . . that any material exempt from disclosure

under (b)(4) is within the prohibition against disclosure under §

- 8 - 1905.”); Westinghouse Elec. Corp. v. Schlesinger, 542 F.2d 1190,

1204 n.38 (4th Cir. 1976) (“Accordingly, material qualifying for

exemption under (b)(4) falls within the material, disclosure of

which is prohibited under § 1905.”).

The Department’s assertion that “courts have rejected the

argument that ‘trade secrets’ encompasses all confidential,

commercial information covered by Exemption 4,” Appellant Rep. Br.

at 14, relies on cases that (not surprisingly) interpret the

definition of the term “trade secrets” contained in exemption 4.

See Anderson v. Department of Health & Human Servs., 907 F.2d 936,

943-44 (10th Cir. 1990) (deciding whether exemption 4 definition of

trade secret is narrower than broad definition in first Restatement

of Torts); Public Citizen Health Research Group v. Food & Drug

Admin., 704 F.2d 1280, 1288 (D.C. Cir. 1983) (same) (“we define

trade secret, solely for the purpose of FOIA Exemption 4”). They

do not construe the relationship between exemption 4 and the TSA.

We think that if these decisions resolved how the TSA operates upon

exemption 4 materials, they would have done so in clearer terms.

That they are not apposite is reflected by the fact that the

District of Columbia Circuit, which decided Public Citizen, has

twice in recent years reiterated the broad holding that when a

person shows that information or materials fall within exemption 4,

the government is precluded from releasing them under the TSA. See

McDonnell Douglas v. NASA, 180 F.3d at 305 (information); McDonnell

Douglas v. Widnall, 57 F.3d at 1164 (materials). In its June 1999

opinion in McDonnell Douglas v. NASA, a case in which the submitter

- 9 - argued that FOIA exemption 4 protected its “confidential commercial

or financial information,” the circuit court held: “If commercial

or financial information is likely to cause substantial competitive

harm to the person who supplied it, that is the end of the matter,

for the disclosure would violate the Trade Secrets Act.” McDonnell

Douglas v. NASA, 180 F.3d at 306 (emphasis added).

IV

Accordingly, without suggesting approval of the district

court’s reasoning, we hold that the Department did not act

according to law when it sought in the Draft Report to disclose

materials covered by the TSA. Because “any disclosure that

violates § 1905 is ‘not in accordance with law’ within the meaning

of 5 U.S.C. § 706(2)(A),” Chrysler, 441 U.S. at 318, and since the

Administrative Procedure Act authorizes a court to enjoin an

agency’s FOIA decision that is “not in accordance with law,” see

Dowty Decoto, Inc. v. Department of Navy, 883 F.2d 774, 776 (9th

Cir. 1989) (“the APA authorizes this injunction preventing the Navy

from disclosing Decoto’s data, provided that such disclosure

violates the Trade Secrets Act”), the district court did not commit

reversible error.6

6 We do not suggest that, in all circumstances, we will uphold nondisclosure of otherwise disclosable information based on an agency’s litigation strategy on appeal. Because we recognize that the FOIA is intended to inform citizens “what their government is up to,” United States Department of Justice v. Reporters Committee for Freedom of the Press, 489 U.S. 749, 773 (1989), we decline to adopt a universal rule that would permit the government to avoid disclosure based on appellate concessions. This reverse-FOIA case, however, is not one in which we are concerned that the Department, by its failure to challenge the exemption 4 holding below, is attempting to withhold information from the public.

- 10 - V

We need not remand to the Department “to reconsider the

relevant factors and explain the decision it reached based upon

those factors.” Appellant Br. at 37. First, we are not affirming

the district court on the ground that the Department failed to

weigh or explain the public and private interests in question. We

are affirming because the effect of the Department’s decision not

to challenge the exemption 4 holding is to make all information at

issue nondisclosable trade secrets. Second, a remand is not

required where “[t]here is not the slightest uncertainty as to the

outcome of a[n] [agency] proceeding.” A. L. Pharma, Inc. v.

Shalala, 62 F.3d 1484, 1489 (D.C. Cir. 1995) (quoting NLRB v.

Wyman-Gordon Co., 394 U.S. 759, 766-67 (1969)). Under the law of

the case, the TSA precludes the information at issue from being

released. No amount of additional agency discretion or explanation

can result in making this information disclosable. The district

court’s judgment circumscribes the reach of what the Department can

and must do.

* * *

We asked Department counsel during oral argument whether the

Department’s concession concerning exemption 4 ends the appeal.

Although counsel asserted that it does not, we conclude for the

reasons stated that it does. Accordingly, the district court’s

judgment is

AFFIRMED.

- 11 -