Case No. VFA-0336, 26 DOE ¶ 80,230
November 3, 1997
DECISION AND ORDER
OF THE DEPARTMENT OF ENERGY
Appeal
Name of Petitioner: The Oregonian
Date of Filing: September 30, 1997
Case Number: VFA-0336
On September 30, 1997, The Oregonian filed an Appeal from a determination issued to it on September 10, 1997, by the Department of Energy's (DOE) Bonneville Power Administration (BPA). In that determination, BPA denied in part a request for information the Oregonian filed under the Freedom of Information Act (FOIA), 5 U.S.C. § 552, as implemented by the DOE in 10 C.F.R. Part 1004. This Appeal, if granted, would require BPA to release the information the Oregonian requested.
The FOIA generally requires that documents held by the federal government be released to the public upon request. However, Congress has provided nine exemptions to the FOIA that set forth the types of information agencies are not required to release. Under the DOE's regulations, a document exempt from disclosure under the FOIA shall nonetheless be released to the public whenever the DOE determines that disclosure is not contrary to federal law and is in the public interest. 10 C.F.R. § 1004.1.
I. Background
On August 14, 1997, The Oregonian filed a Request for Information with BPA in which it sought the following information:
". . . any records showing the amounts and receipts of such fees [paid] to Bonneville from individual utilities; any agreements between Bonneville and individual utilities regarding or establishing exit fees; the amount of load that individual utilities diversified, prompting them to be subject to exit fees; any and all correspondence between Bonneville and individual utilities regarding exit fees; and any and all agreements (sic) that purport to invoke ?confidentiality' agreements between Bonneville and individual utilities regarding diversification and exit fees."
BPA issued a determination on September 10, 1997, in which it identified several responsive documents which included contract amendments containing the amounts of load (the amounts of power BPA is obligated to supply to its customers) diversified by individual BPA customers and the applicable exit fees. However, BPA withheld the amounts of load and the specific exit fees under Exemption 5 of the FOIA because it determined that this information is confidential commercial information and that disclosure would harm BPA's ability to compete for future business. (1) See Determination Letter at 1.
On September 30, 1997, The Oregonian filed the present Appeal with the Office of Hearings and Appeals (OHA) contending: that BPA improperly withheld the requested information from disclosure and that the public has an overriding right to know the terms under which BPA has released public utilities from their financial obligations to the government. See Appeal Letter at 3. The Oregonian asks that the OHA direct BPA to release the responsive documents.
II. Analysis
Exemption 5 of the FOIA exempts from mandatory disclosure documents that are "inter-agency or intra-agency memorandums or letters which would not be available by law to a party other than an agency in litigation with the agency." 5 U.S.C. § 552(b)(5); 10 C.F.R. § 1004.10(b)(5). The Supreme Court has held that this provision exempts "those documents, and only those documents, normally privileged in the civil discovery context." NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 149; 95 S. Ct. 1504, 1515 (1975) (Sears). The courts have identified three traditional privileges that fall within this exemption: the attorney-client privilege, the attorney work-product privilege and the executive "deliberative process" or "predecisional" privilege. Coastal States Gas Corp. v. Department of Energy, 617 F.2d 854, 862 (D.C. Cir. 1980) (Coastal States). However, the Supreme Court has recognized that Exemption 5 also incorporates those "privileges which the Government enjoys under the relevant statutory and case law in the pre-trial discovery context." Renegotiation Board v. Grumman Aircraft Engineering Corp., 421 U.S. 168, 184; 95 S. Ct. 1491, 1500 (1975). Accordingly, "[t]he test under Exemption 5 is whether the documents would be ?routinely' or ?normally' disclosed upon a showing of relevance." F.T.C. v. Grolier, 462 U.S. 19, 26; 103 S. Ct. 2209, 2214 (1983) (citing Sears, 421 U.S. at 148-49; 95 S.Ct. at 1515 (1975)). Therefore, if a privilege is well recognized by statute or in the case law, it may properly be invoked under Exemption 5. See United States v. Weber Aircraft Corp., 465 U.S. 797, 799-801; 104 S. Ct. 1488, 1492-93 (1984).
Among the privileges incorporated by the courts under Exemption 5 is the "confidential commercial information privilege." See, e.g., Federal Open Market Comm. v. Merrill, 443 U.S. 340; 99 S. Ct. 2800 (1979) (Merrill) (holding that since disclosure of Domestic Policy Directives would significantly harm the Government's monetary functions or commercial interests, they could properly be withheld under Exemption 5); Government Land Bank v. General Services Administration, 671 F.2d 663 (1st Cir. 1982) (Land Bank) (withholding a government generated real estate appraisal).
"The Federal courts have long recognized a qualified evidentiary privilege for trade secrets and other confidential commercial information." Merrill, 443 U.S. at 356; 99 S. Ct. at 2810. The courts have applied this privilege in the FOIA context to prevent the Government from being placed at a competitive disadvantage and to facilitate the consummation of contracts. Id., 443 U.S. at 360; 99 S. Ct. at 2812. Exemption 5 therefore "protects the government when it enters the marketplace as an ordinary commercial buyer or seller." Land Bank , 671 F.2d 665 (footnote omitted).
However, the protection afforded by this privilege is limited in scope and lasts only as long as necessary to protect the government's commercial interests. Id. Moreover, the application of this privilege is not automatic. Merrill, 443 U.S. at 362; 99 S. Ct. at 2813. The burden is upon the agency to show that the records it seeks to withhold under the privilege are confidential and that their disclosure might be harmful. American Standard v. Pfizer, Inc., 828 F.2d 734, 746 (Fed. Cir. 1987) (applying the privilege in the civil discovery context). In the civil discovery context, once these burdens are met, the burden shifts to the party seeking disclosure to prove that disclosure should occur by establishing a substantial need for those documents. R&D Business Systems v. Xerox Corp., 152 F.R.D. 195; 196-197 (D. Colo. 1993) (Xerox). In the FOIA context, however, the individual FOIA applicant's need for information is not to be taken into account in determining whether materials are exempt under Exemption 5. See Merrill, 443 U.S. at 362-63; 99 S. Ct. at 2813, and cases cited therein. Accordingly, courts have found that documents which are immune from discovery absent a showing of substantial need are not "routinely" or "normally" available to parties in litigation and therefore are exempt from mandatory disclosure under Exemption 5. F.T.C. v. Grolier, Inc., 462 U.S. 19, 27; 103 S. Ct. 2209, 2214 (1983).
Accordingly, if the agency has shown that it has maintained the confidentiality of the withheld records and that their release might result in harm to the government's commercial interests, the agency could properly withhold records under Exemption 5. In the present case, there is no indication in the record that BPA has not maintained the confidentiality of the documents in question. We therefore turn to the next issue before us: whether release of the amounts of load and the specific exit fees would likely result in harm to BPA's commercial interests or its ability to consummate future contracts.
In the past, we have analyzed whether the disclosure of confidential commercial information would harm BPA's commercial interests. See Ball, Janik and Novack, 25 DOE ¶ 80,197 (1996) (Ball). In Ball, the documents in question involved marketing research such as customer lists. Id. In that case, our office found that release of this information would provide BPA's competitors with otherwise unavailable insight into BPA's potential future marketing strategies. Id. at 80,744. OHA further found that if BPA's customers obtained the marketing information, "it would provide them with undue leverage in future contract negotiations." Id. Likewise, in the present case, we find that BPA has met its burden of showing that the customer information at issue would result in harm to its commercial interests and its ability to consummate future contracts. BPA has indicated that it is "currently competing against other suppliers for short-term sales to the same customers that elected to pay exit fees and reduce their long-term obligation to purchase from BPA." See Memorandum from Timothy A. Johnson, Office of General Counsel, BPA, to Kimberly Jenkins Chapman, Attorney- Examiner, OHA (October 15, 1997). In light of the fact that BPA calculated their customers' exit fees based on market conditions, we agree that the amounts of load and the specific exit fees are commercial information that would provide BPA's competitors with valuable insight into its view of the market and its pricing strategy over the next several years. The release of the withheld information would provide competitors with an unfair advantage to compete for BPA's customers. Accordingly, BPA has established a likelihood that significant competitive harm would result from release of the amounts of load and specific exit fees. We therefore find that this information was properly withheld under Exemption 5.
III. Public Interest Determination
The fact that material requested falls within a statutory exemption does not necessarily preclude release of the material to the requester. The DOE regulations implementing the FOIA provide that "[t]o the extent permitted by other laws, the DOE will make records available which it is authorized to withhold under 5 U.S.C. § 552 whenever it determines that such disclosure is in the public interest." 10 C.F.R. § 1004.1.
We find that release of the withheld material would not be in the public interest. In its Appeal, The Oregonian argues, inter alia, that the public has an overriding right to know whether BPA is adequately fulfilling its financial responsibility. Although the public does have a general interest in learning about the manner in which the government operates, we find that interest to be attenuated by the fact that the withheld information consists of confidential commercial information that if released would affect BPA's ability to compete for future business. Any slight benefit that would accrue from the release of the withheld information is far outweighed by the likelihood of harm to BPA's commercial interests. Accordingly, we conclude that release of the withheld information would result in foreseeable harm to the interests that are protected by the confidential commercial information privilege. See FOIA Update, U.S. Department of Justice, Office of Information and Privacy (Spring 1994); Memorandum from Janet Reno, Attorney General, to Heads of Departments and Agencies (October 4, 1993) (in order to withhold material, agency must first determine that release would foreseeably harm basic institutional interests that underlie Exemption 5.)
It Is Therefore Ordered That:
(1) The Appeal filed by The Oregonian, OHA Case No. VFA-0336, on September 30, 1997, is hereby denied.
(2) This is a final Order of the Department of Energy from which any aggrieved party may seek judicial review pursuant to the provisions of 5 U.S.C. § 552(a)(4)(B). Judicial review may be sought
in the district in which the requester resides or has a principal place of business, or in which the agency records are situated, or in the District of Columbia.
George B. Breznay
Director
Office of Hearings and Appeals
Date: November 3, 1997
(1)BPA has entered into a number of power contracts with public utilities. However, some of these utilities have found cheaper sources of power on the market. BPA allowed these customers, through provisions in their contracts, to diversify their loads. Thus, diversification occurs when customers purchase some of their power needs from other sources. In turn, customers pay fees (exit fees) to BPA for the right to diversify their loads, that is to buy some of their power elsewhere and to reduce their contractual obligations.