Case No. VFA-0678, 28 DOE ¶ 80,177

July 11, 2001

DECISION AND ORDER

OF THE DEPARTMENT OF ENERGY

Appeal

Name of Appellant: Southern California Edison

Date of Filing: June 13, 2001

Case Number: VFA-0678

On June 13, 2001, Southern California Edison (the Appellant) filed an Appeal from a final determination issued on June 4, 2001, by the Department of Energy’s Bonneville Power Administration (BPA). In that determination, BPA responded to a Request for Information filed by the Appellant on April 2, 2001, under the Freedom of Information Act (FOIA), 5 U.S.C. § 552(b), as implemented by the DOE in 10 C.F.R. Part 1004. BPA’s determination released several responsive documents to the Appellant. However, BPA also withheld information under two FOIA exemptions. This Appeal, if granted, would require BPA to release additional information to the Appellant.

This Appeal arises out of a contract dispute between the Appellant and BPA. On April 2, 2001, the Appellant filed a seven-part request for information with BPA. On June 4, 2001, BPA issued a determination letter indicating that it was (1) releasing several responsive documents to the Appellant, and (2) withholding some responsive information under Exemptions 4 and 5. On June 13, 2001, the Appellant submitted the present Appeal in which it contends that BPA's withholdings were improper. (1)

The FOIA generally requires that records held by federal agencies be released to the public upon request. 5 U.S.C. § 552(a)(3). However, the FOIA lists nine exemptions that set forth the types of information that an agency may withhold. 5 U.S.C. § 552(b)(1)-(9); 10 C.F.R. § 1004.10(b)(1)-(9). These nine exemptions must be narrowly construed. Church of Scientology of California v. Department of the Army, 611 F.2d 738, 742 (9th Cir. 1980) (citing Bristol-Meyers Co. v. FTC, 424 F.2d 935 (D.C. Cir.), cert. denied, 400 U.S. 824 (1970)). An agency seeking to withhold information under an exemption to the FOIA has the burden of proving that the information falls under the claimed exemption. See Lewis v. IRS, 823 F.2d 375, 378 (9th Cir. 1987). It is well settled that the agency’s burden of justification is substantial. Coastal States Gas Corp. v. Department of Energy, 617 F.2d 854, 861 (D.C. Cir. 1980) (Coastal States). Only Exemptions 4 and 5 are at issue in the instant case.

The Two Contracts Withheld in Their Entireties

BPA has apparently withheld two contracts in their entireties under Exemption 4, contending that they are “proprietary and confidential” and could cause competitive harm to the parties that contracted with BPA if released. (2) The determination letter fails to explain why BPA concluded that release of these contracts could reasonably be expected to result in competitive harm.

Exemption 4 exempts from mandatory public disclosure "trade secrets and commercial or financial information obtained from a person and privileged or confidential." 5 U.S.C. § 552(b)(4); 10 C.F.R. § 1004.10(b)(4). In order to be withheld under Exemption 4, a document must contain either (a) trade secrets or (b) information that is "commercial" or "financial," "obtained from a person," and "privileged or confidential." National Parks & Conservation Ass'n v. Morton, 498 F.2d 765 (D.C. Cir. 1974) (National Parks). If the agency determines the material is a trade secret for the purposes of the FOIA, its analysis is complete and the material may be withheld under Exemption 4. Public Citizen Health Research Group v. Food & Drug Admin., 704 F.2d 1280, 1286, 1288 (D.C. Cir. 1983) (Public Citizen). If the material does not constitute a trade secret, a different analysis applies. First, the agency must determine whether the information in question is commercial or financial. It is well settled that any information relating to business or trade meets this criteria. See, e.g., Lepelletier v. FDIC, 977 F. Supp. 456, 459 (D.D.C. 1997) (appeal pending). The Court of Appeals for the Second Circuit has specifically held that the term "commercial," as used in the FOIA, includes anything "pertaining or relating to or dealing with commerce." American Airlines, Inc. v. National Mediation Bd., 588 F.2d 863, 870 (2d Cir. 1978). Next, the agency must determine whether the information is "obtained from a person." 5 U.S.C. § 552(b)(4). Finally, the agency must determine whether the information is "privileged or confidential." In order to determine whether the information is "confidential," the agency must first decide whether the information was either involuntarily or voluntarily submitted. If the information was voluntarily submitted, it may be withheld under Exemption 4 if the submitter would not customarily make such information available to the public. Critical Mass Energy Project v. Nuclear Regulatory Comm’n, 975 F.2d 871, 879 (D.C. Cir. 1992), cert. denied, 507 U.S. 984 (1993) (Critical Mass). If the information was involuntarily submitted, before withholding it under Exemption 4 the agency must show that release of the information is likely to either (i) impair the government's ability to obtain necessary information in the future or (ii) cause substantial harm to the competitive position of the person from whom the information was obtained. National Parks, 498 F.2d at 770; Critical Mass, 975 F.2d at 879.

Once an agency decides to withhold information, both the FOIA and the Department’s regulations require the agency to provide a reasonably specific justification for its withholding. 5 U.S.C. § 552(a)(6); 10 C.F.R. § 1004.7(b)(1); Mead Data Central, Inc. v. Department of the Air Force, 566 F.2d 242 (D.C. Cir. 1977); National Parks & Conservation Ass'n v. Kleppe, 547 F.2d 673 (D.C. Cir. 1976) (Kleppe); Digital City Communications, Inc., 26 DOE ¶ 80,149 at 80,657 (1997); Data Technology Industries, 4 DOE ¶ 80,118 (1979). This allows both the requester and this Office to determine whether the claimed exemption was accurately applied. Tri-State Drilling, Inc., 26 DOE ¶ 80,202 at 80,816 (1997). It also aids the requester in formulating a meaningful appeal and this Office in reviewing that appeal. Wisconsin Project on Nuclear Arms Control, 22 DOE ¶ 80,109 at 80,517 (1992).

Thus, if an agency withholds material under Exemption 4 on the grounds that its disclosure is likely to cause substantial competitive harm, it must state the reasons for believing such harm will result. Larson Associated, Inc., 25 DOE ¶ 80,204 (1996); Milton L. Loeb, 23 DOE ¶ 80,124 (1993). Conclusory and generalized allegations of substantial competitive harm, on the other hand, are unacceptable and cannot support an agency's decision to withhold requested documents. Public Citizen, 704 F.2d at 1291; Kleppe, 547 F.2d at 680 ("conclusory and generalized allegations are indeed unacceptable as a means of sustaining the burden of nondisclosure under the FOIA"). In the present case, BPA’s conclusory Exemption 4 determinations do not meet the requirements set forth above. Accordingly, we shall remand that portion of the Appeal pertaining to the two contracts to BPA for a more thorough justification of its withholdings. On remand, BPA must then either release the two contracts it has withheld or issue a new determination letter providing a detailed justification for withholding in accordance with the instructions set forth above. If BPA continues to withhold the two contracts, it must issue a new determination letter showing that it has applied the Exemption 4 analysis set forth above and the results of this analysis.

We note that BPA has apparently withheld the two contracts in their entireties. The FOIA requires that "[a]ny reasonably segregable portion of a record shall be provided to any person requesting such record after deletion of the portions which are exempt under this subsection." 5 U.S.C. § 552(b). Accordingly, BPA should have also reviewed the withheld material under the standard set forth in 5 U.S.C. § 552(b). However, there is no indication in the record that BPA has done so. On remand, if BPA determines that withholding the contracts is appropriate, it must review them in order to determine whether any portions of the documents could be released without harming the interests protected by Exemption 4 (or any other applicable FOIA exemption).

Pricing and Quantity Data

BPA has also apparently withheld pricing and quantity data under Exemption 5's confidential commercial information privilege from a number of the documents it released to the Appellant. 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 (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, 617 F.2d at 862. 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 (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 (1983) (citing Sears, 421 U.S. at 148-49) 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 (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 (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 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. Merrill, 443 U.S. at 356. Exemption 5 therefore “protects the government when it enters the marketplace as an ordinary commercial buyer or seller.” Land Bank, 671 F.2d at 665 (footnote omitted). However, it is important to note, 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.

In Merrill, the Court stated that the confidential commercial information privilege protects information generated in the process of awarding a contract. Merrill, 443 U.S. at 360. However, the Court also indicated that the privilege expires upon the awarding of the contract. Id. Since the pricing and quantity data withheld by BPA is contained in existing contracts between BPA and purchasers of electricity, it is not protected by the confidential commercial information privilege, which expires upon the awarding of a contract. Accordingly, we are remanding the pricing and quantity data to BPA for review. On remand, BPA must either release the information it redacted or issue a new determination letter which explains and justifies its withholdings in accordance with the requirements set forth above.

It Is Therefore Ordered That:

(1) The Appeal filed by Southern California Edison, Case No. VFA-0678, is hereby granted as specified in Paragraph (2) below and denied in all other aspects.

(2) This matter is hereby remanded to the Bonneville Power Administration, which shall issue a new determination in accordance with the instructions set forth above.

(3) 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: July 11, 2001

(1)The Appeal originally filed by the Appellant on June 13, 2001, was based upon two separate determinations regarding two different FOIA requests. Those issues arising from the determination letter issued on May 14, 2001, which responded to a request filed on March 21, 2001, were adjudicated under Case Number VFA-0677. Those issues arising from the determination letter issued on June 4, 2001, which responded to a request filed on April 21, 2001, will be adjudicated in the present decision under Case Number VFA- 0678.

(2)BPA also notes that the other parties to these contracts wish that the contracts be treated as exempt from disclosure.