Second Circuit Appeal Raises FOIA Question of First Impression
In 2016, Congress amended the Freedom of Information Act to strengthen citizens’ access to information. In resolving the pending appeal filed by the MFIA Clinic in Seife v. FDA, No. 20-4072, the Second Circuit will likely become the first appellate court in the nation to interpret how the new requirements imposed on agencies that wish to withhold information apply to information falling within FOIA’s Exemption 4, the exemption that protects from disclosure “trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential.”1 The Second Circuit’s decision will have consequences not just for MFIA’s client, but for government transparency and access to corporate information more broadly.
MFIA brought this case in 2017, on behalf of journalist Charles Seife.2 Seife submitted a FOIA request for information regarding the FDA’s controversial approval of an unproven drug for a rare, incurable disease. He sought clinical trial test results that the drug’s manufacturer had provided to the FDA during the approval process. The FDA refused to disclose much of the information, contending that it was confidential commercial information that it was permitted to withhold under FOIA Exemption 4.
At the time MFIA filed the case, appellate courts had agreed for decades that Exemption 4 allowed an agency to withhold confidential commercial information only if it could show that its disclosure would cause substantial competitive harm to the company that had given it to the agency or would impair the agency’s ability to obtain necessary information in the future. This interpretation of Exemption 4 was first articulated in the D.C. Circuit’s 1974 decision in National Parks & Conservation Association v. Morton, as consistent with congressional intent.
While Seife’s case was progressing through summary judgment briefing, the Supreme Court drastically expanded the scope of Exemption 4. In its 2019 decision in FMI v. Argus Leader3, the Court held that the term “confidential” as used in Exemption 4 should be given its ordinary meaning at the time of FOIA’s enactment, “private” or “secret,” and that nothing in the plain language of Exemption 4 required a showing of competitive harm for it to apply. After FMI, all confidential information obtained from a company falls within Exemption 4.
FMI radically re-interpreted Exemption 4, but the records at issue in that case were requested before the 2016 FOIA Improvement Act (FIA) was signed into law by President Obama to strengthen agencies’ disclosure obligations. Under those amendments, except where disclosure is otherwise prohibited by law, an agency may withhold information that falls within a FOIA exemption only if the agency “reasonably foresees that disclosure would harm an interest protected by [the FOIA] exemption.”4 The unanswered question the Second Circuit will need to answer in Seife v. FDA is just what “interest” Exemption 4 is meant to protect.
No appellate court has yet addressed this question, but two district court opinions have reached conflicting conclusions. The D.C. district court has held that the relevant interest protected by Exemption 4 is economic in nature, so that some type of economic harm must be foreseeable from disclosure for an agency in order to withhold confidential commercial information, which largely reinstates the pre-FMI scope of the exemption.5 The Northern California district court, however, reached a very different conclusion, finding the relevant interest protected by Exemption 4 to be mere confidentiality.6
The D.C. approach makes better sense of the language of the FIA and the disclosure objectives of both the FIA and FOIA itself. As MFIA argues in its brief on behalf of Seife, Exemption 4 seeks to protect the economic value of a submitter’s intangible property. Confidentiality, by contrast, is not an interest specific to Exemption 4—every FOIA exemption protects some form of confidentiality against the law’s presumption in favor of disclosure. What Exemption 4 particularly seeks to accomplish is the protection of commercially valuable confidential information.
Interpreting the relevant interest protected by Exemption 4 as mere confidentiality would turn the 2016 amendments on their head. Once information is found to be protected under Exemption 4, an agency would never have to disclose it because disclosure would always harm confidentiality. This interpretation nullifies the additional agency burden introduced by the FIA. Courts generally refrain from interpreting statutes to produce absurd results, and they certainly should not interpret the FIA in a way that frustrates its basic purpose of establishing a meaningful new burden for withholding by agencies. Under FIA’s new standard, properly construed, an agency seeking to withhold disclosure of confidential commercial information under Exemption 4 must reasonably foresee that disclosure will harm the economic value of the submitter’s information. This interpretation is grounded in FOIA’s text, and properly balances the pro-disclosure purpose of the FIA and FOIA with the interests protected by Exemption 4.
The stakes of this interpretive debate are high: whenever agencies regulate based on information submitted by private parties, public oversight of the regulatory process could be thwarted by the claim that submitted information is confidential and therefore exempt from disclosure. Public regulatory oversight would be severely damaged, the very opposite of the increased transparency the FIA seeks to achieve. Indeed, that is precisely the issue in Seife, where public oversight of a controversial FDA decision is being frustrated by overbroad Exemption 4 claims.
With the FOIA Improvement Act, Congress took action to strengthen government transparency and accountability. The success of the FIA, however, will depend on how courts interpret and apply it. Will the first court of appeals to rule on the meaning of the FIA as applied to Exemption 4 reach a result that advances Congress’ aims or one that undercuts them? In answering that question, the Second Circuit’s decision in Seife v. FDA will have a significant impact on government transparency beyond the facts of this particular case.
1 5 U.S.C. §552(b)(4)
2 MFIA filed the appeal in the case along with co-counsel from Cornell Law School’s First Amendment Clinic and Vinson & Elkins.
3 Food Marketing Institute v. Argus Leader, 139 S. Ct. 2356 (2019) (FMI).
4 U.S.C. §552(a)(8)(i)
5 Ctr. for Investigative Reporting v. U.S. Customs and Border Protection, 436 F. Supp. 3d 90 (D.D.C. 2019).
6 Am. Small Bus. League v. U.S. Dep’t of Defense, 411 F. Supp. 3d 824 (N.D. Cal. 2020).