Case No. VFA-0710

May 2, 2002

DECISION AND ORDER
OF THE DEPARTMENT OF ENERGY

Appeal

Name of Petitioner: Martin Becker

Date of Filing: December 18, 2001

Case Number: VFA-0710

On December 18, 2001, Martin Becker (Becker) filed an Appeal from a determination that the Savannah River Operations Office (SR) of the Department of Energy (DOE) issued to him. The determination responded to a request for information 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. In that determination, SR released redacted copies of responsive documents. This Appeal, if granted, would require the DOE to release the documents in their entirety.

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 which 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 in the public interest. 10 C.F.R. § 1004.1. Only FOIA Exemption 4 is at issue in the instant case.

I. Background

Westinghouse Savannah River Company (WSRC) is the management and operating contractor for SR. Westinghouse Safety Management Solutions (WSMS), created in 1997 by WSRC, rents office space in Building 3 of Centennial Corporate Center, located at 1993 S. Centennial Avenue in Aiken, South Carolina. The building, part of an "office park," is owned by Centennial, L.L.C. (Centennial). In September 2000, Becker submitted a FOIA request to SR for "any documents reflecting any notice of election to extend any Westinghouse Savannah River Company (WSRC) or affiliate lease of the premise at Centennial Corporate Center." See Martin Becker, 28 DOE ¶ 80,133 (2001) (Becker I). In response to this request, SR sent Becker a determination stating that the responsive records were the property of the contractor and were not agency records. Letter from SR to Becker (October 26, 2000). Becker filed an appeal on November 13, 2000, the first of five appeals that he has filed in response to this request. Becker I. On December 11, 2000, OHA granted the appeal and determined that the lease may be subject to disclosure under DOE regulations, specifically 10 C.F.R. § 1004.3(e)(1).

On December 21, 2000, SR issued a new determination letter to Becker and stated that the responsive documents did not exist. Becker filed another appeal on February 7, 2001, insisting that WSRC must have a copy of the lease. OHA agreed, and ordered DOE to provide a copy of the non-exempt portions of the lease to Becker. Martin Becker, 28 DOE ¶ 80,153 (2001) (Becker II).

SR issued a third determination letter denying Becker's request and he again appealed on April 16, 2001. OHA found that the lease was subject to disclosure under DOE's contractor records regulations, and for the third time granted Becker's appeal and remanded the case to SR yet again for disclosure of all responsive, non-exempt material. Martin Becker, 28 DOE ¶ 80,187 2001) (Becker III).

On October 18, 2001, SR released a redacted copy of the third amendment to the lease, but denied in part Becker's request for information. On October 29, 2001, Becker appealed SR's determination. He argued, and OHA agreed, that SR had applied the wrong standard to its analysis of the issue. Becker argued that the material was submitted involuntarily to WSRC, and that WSRC must prove that disclosure would cause substantial competitive harm to its competitive position. OHA again granted Becker's appeal, and remanded the matter to SR for processing under the appropriate test, found in National Parks & Conservation Ass'n v. Morton, 498 F.2d 765 (D.C. Cir. 1974) (National Parks). See Martin Becker, 28 DOE ¶ 80,201 (2001) (Becker IV).

On December 10, 2001, SR sent Becker a fifth determination along with three additional responsive documents: the lease, the first amendment to the lease, and the second amendment to the lease. Letter from SR to Becker (December 10, 2001) (Determination). However, SR withheld the following portions of the responsive documents under FOIA Exemption 4, this time applying the National Parks test: rate per square foot, rentable square feet (space actually rented by WSMS), lease term, expiration date, lease renewal option period, monthly rent, security deposit, phone service reimbursement, annual minimum rent, total rentable area in building, and utility reimbursement. Id. SR claimed that the withheld information was confidential commercial information and if released would substantially harm the competitive position of both parties to the contract. Id. Becker filed this Appeal on December 18, 2001, and argued that (1) there is no evidence that disclosure of the responsive material will impair the government's ability to obtain future documents, and (2) there is no competitive harm to the provider of the lease because Centennial owns the only office space in Aiken that is suitable for WSMS' offices. Becker asked OHA to remand this Appeal to SR with directions to release the lease documents in their entirety. Letter from Becker to OHA (December 18, 2001) (Appeal). (1)

II. Analysis

A. Exemption 4

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, 770 (D.C. Cir. 1974) (National Parks).

Under the National Parks test, the agency must first determine whether the information in question is commercial or financial. It is well settled that any information relating to business or trade meets this criterion. 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). Thus, we find that the lease terms, rates and square footage withheld by SR are commercial information. Next, the agency must determine whether the information is "obtained from a person." 5 U.S.C. § 552(b)(4). We find that SR obtained this material from a person, WSRC, because the FOIA considers a corporation a person for the purposes of Exemption 4. See William E. Logan, Jr., 27 DOE ¶ 80,198 (1999).

Finally, the agency must determine whether the withheld information is "privileged or confidential." In order to determine whether the information is "confidential," the agency must first decide whether the information was involuntarily or voluntarily submitted. Critical Mass Energy Project v. NRC, 975 F.2d 871, 879 (D.C. Cir. 1992), cert. denied, 113 S. Ct. 1579 (1993) (Critical Mass). In Becker IV, we found that the material at issue in the instant case was submitted involuntarily to SR by WSMS, a subcontractor to WSRC, based on WSRC's contract with DOE. See Becker IV. Under Exemption 4, in order to withhold information that has been involuntarily submitted, 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.

Using the "competitive harm" prong of the National Parks test, SR withheld the following items from the lease and its amendments: rate per square foot, rentable square feet (space actually rented by WSMS), lease term, expiration date, lease renewal option period, monthly rent, security deposit, phone service reimbursement, annual minimum rent, total rentable area in building, and utility reimbursement. Determination Letter at 1. SR alleges that release of the withheld information is likely to cause substantial competitive harm to WSMS and its landlord Centennial. Id. SR goes on to state that "[a] competitor could use the release of these lease terms to easily determine how to adjust its own lease rates to offer more favorable terms than [Centennial] and/or limit the ability of WSMS to negotiate for space in the future. WSMS and [Centennial] could be limited to rates no more favorable than those found in the current lease." Letter from SR to OHA (December 28, 2001).

B. Becker's Arguments

First, Becker argues that Centennial has no competition in Aiken, South Carolina. Appeal at 1. He contends that even though there is another office building in Aiken with 30,000 to 50,000 square feet of space (a size similar to Becker's estimate of the area of WSMS' current office space), that building should not be considered in a competitive analysis because WSMS is growing and could not keep all of its offices in one location if it leased space in that building. Memorandum of telephone conversation between Becker and Valerie Vance Adeyeye, OHA (January 15, 2001). He insists that Aiken is the only city that should be considered a viable option for the location of WSMS' offices, because the closest cities (North Augusta, South Carolina and Augusta, Georgia) are very different real estate markets that were previously considered and rejected by WSMS in its search for an office site. (2) Becker also alleges that WSRC or its predecessor made a commitment to SR to keep its offices in Aiken. Memorandum of telephone conversation with Becker (April 22, 2002).

Second, Becker contends that WSMS has no competition because WSRC, its parent, created WSMS solely to serve its own business purposes, thereby giving WSMS a monopoly on all work involving WSRC. Therefore, he argues, WSMS has no competition for the work it performs for WSRC.(3) He states that the disclosure of the redacted information in the lease would not cause any competitive harm to the contract between WSMS and WSRC, nor could a competitor use those figures to determine what WSMS charges WSRC for its services at SR. Memorandum of telephone conversation between Becker and Valerie Vance Adeyeye (April 22, 2002). Third, Becker submits that the information that he is requesting is "stale" because of its age, and thus its disclosure could not cause substantial competitive harm to either of the parties to the lease. Voice mail message from Becker to W. Schwartz, OHA (April 14, 2002). (4)

C. Submitters' Comments

As is customary in an Exemption 4 case, OHA extended an opportunity to both WSMS and Centennial to state their views as to whether the responsive information should be released. Both parties submitted responses as follows.

1. WSMS's Response

WSMS submitted a statement claiming that it faces competition "on a daily basis for various commercial and government opportunities. . . ." Electronic mail message from Matt Alan, Esq., WSMS to SR (January 15, 2002). We find this brief sentence conclusory. See Public Citizen Health Research Group v. Food and Drug Administration, 185 F.3d 898, 906 (D.C. Cir. 1999) (conclusory and generalized allegations of substantial competitive harm cannot support withholding responsive material). However, we are familiar with WSMS and its operations, and the WSMS website www.wxsms.com presents information on several contracts that the company was recently awarded in competitions. WSMS also argues that a competitor with access to rental payments, the rentable square footage, and telephone improvement reimbursements could use this information to identify a specific indirect cost. Id. WSMS further responds that the security deposit and broker information could, if disclosed, be copied by a competitor to negate a competitive advantage. Id. According to WSMS, a competitor could use the lease start date, term, and option periods to identify a period of time to which a specific indirect cost applies, and could use the total lease cost to identify an indirect cost and profit margin. Id.

2. Centennial's Response

In response to Becker's arguments, Centennial states that it has "numerous competitors in Aiken, North Augusta, and Augusta." Electronic mail message from Centennial to Valerie Vance Adeyeye, OHA (April 8, 2002). Centennial also says that it owns and manages in Aiken only. Electronic mail message from Centennial to Valerie Vance Adeyeye, OHA (April 5, 2002). One Aiken competitor, Centre South, has a vacant 40,000 square foot building. Electronic mail message from Centennial to Valerie Vance Adeyeye, OHA (April 8, 2002). According to Centennial, the two companies compete "on every occasion for every potential lease." Id. Centennial also lists the BASF building in North Augusta (150,000 square feet) as a potential competitor, and further submits that there is a substantial amount of "class A office space in large blocks that is currently available for lease" in Augusta. Id.

Centennial further informs us that, according to their tenants, the difference in the commute to Aiken, North Augusta and Augusta is "negligible." Id. Some of its clients had considered Augusta but chose Aiken. Id. According to Centennial, they are "at this moment in serious negotiations regarding another lease," and disclosure of the redacted information could seriously harm this negotiation and give its competitor an unfair advantage. Id.; electronic mail message from Centennial to Valerie Vance Adeyeye, OHA (April 5, 2002). Centennial greatly fears the competitive disadvantages that would result from the release of the specifics of its rates and terms to the public or to the tenants in its office campus. Id.

D. Competitive Harm Analysis

This office has conducted a de novo review of this matter. We find that actual competition exists for both parties, and that disclosure of all of the redacted information would cause substantial competitive harm to Centennial. We cannot, however, conclude that WSMS would suffer substantial harm to its competitive position if the withheld data were released.

1. Centennial

First, we find that Centennial has presented sufficient evidence that it faces competition not only in Aiken but in the entire Central Savannah River Area (CSRA) for WSMS' business. Centennial has identified by name one other property in Aiken that is not owned by Centennial and that could house most or all of WSMS' operations. Further, we have no solid evidence that WSMS requires all of its offices to be in Aiken and in the same building, nor has Becker offered any. We also have no real evidence that WSMS has committed to keeping its offices in Aiken. Centennial has also identified competitors in North Augusta and Augusta. (5) As additional proof that the CSRA could be considered one metropolitan area, SR informs us that approximately 40% of its employees live in Georgia, and the remainder live in South Carolina. Telephone conversation between Timothy Fischer, SR, and Valerie Vance Adeyeye, OHA (April 8, 2002). Thus, we agree with Centennial that the pertinent market area includes the entire CSRA.

In addition, we conclude that Centennial has presented evidence that disclosure of the redacted information could lead to substantial competitive harm. Centennial is currently in negotiations for another sizable lease, and makes a valid argument that releasing its lease terms and rates on the WSMS space to the public, especially at this time and in this limited market area, could derail those negotiations. In a similar case, the State of Utah submitted a FOIA request to the Bureau of Indian Affairs (BIA) of the Department of the Interior seeking disclosure of the terms of a lease allowing a group of electric utility companies to store spent nuclear fuel on land belonging to an Indian tribe. State of Utah v. Department of the Interior, 256 F.3d 967 (10th Cir. 2001) (Utah). As in the instant case, the BIA released a copy of the lease with certain important sections redacted (including provisions governing the termination of the lease, lease payment, and payment of rent and interest). Id. at 968. Utah sued BIA for full disclosure of the lease terms, and lost at trial and on appeal. Id. at 970 (stating that release of redacted lease information could put party in a weaker position at the bargaining table in negotiating future deals because prior business agreements would be in public domain). Centennial, in its statements, presented arguments against disclosure that contained a similar level of detail as the affidavits that the Utah court found legally sufficient. Id. at 970-971.

Thus, we find that Centennial has presented evidence demonstrating the existence of potential economic harm. See Public Citizen Health Research Group v. Food and Drug Admin., 704 F.2d 1280, 1291 (D.C. Cir. 1983) (stating that evidence demonstrating the existence of potential economic harm is sufficient); William Logan, Jr., 27 DOE ¶ 80,198 (1999) (upholding redaction of negotiated payment equations in a lease between Shell Pipeline Corporation and the DOE).

2. WSMS

As an initial matter, we find that WSMS faces actual competition for its services, as shown by the list of contracts awarded to WSMS after successful competition against other firms. See Section C.1., supra. We also find that Becker's attempted focus on competition for services provided under the IWR is too narrow and does not afford WSMS the protection intended by Exemption 4. WSMS faces competition in the larger market for its services. However, even though we conclude that WSMS could suffer an undefined level of competitive harm if the documents were disclosed in their entirety, it is not clear that WSMS would suffer substantial competitive harm if the redacted information were released. Further, we need not address this issue since we have concluded that Centennial would suffer substantial competitive harm if SR released the redacted information to the public.

3. Analysis of Becker's Supplemental Arguments

We reject Becker's supplemental argument that the release of the information he requests could not cause competitive harm to either submitter because the material is "stale." See Sec. II.B., supra. The lease and its amendments were signed between 1997 and 2001. Thus the responsive data are fairly recent, between 1 and 5 years old. In addition, SR does not believe that the information is stale or outdated because it states that the terms have not changed significantly over the period of the lease. Memorandum of telephone conversation between Timothy Fischer, SR and Valerie Vance Adeyeye, OHA (April 22, 2002). See Niagara Mohawk Power Corporation, 28 DOE ¶ 80,105 (2000) (finding that 5 to 8 year old responsive information is not "stale" because the information did not change significantly from year to year). (6)

In conclusion, we find that WSMS and Centennial have presented evidence of actual competition in the relevant markets. In addition, Centennial has presented sufficient evidence that disclosure of the redacted information would cause substantial competitive harm to its operations. See Utah, 256 F.3d at 971 (submitter must present evidence that actual competition exists and that disclosure would lead to substantial competitive injury). The redacted information is clearly proprietary to Centennial and thus exempt from disclosure under Exemption 4. Accordingly, this Appeal should be denied.

E. The Public Interest in Disclosure

The DOE regulations provide that the DOE should release to the public material exempt from mandatory disclosure under the FOIA if the DOE determines that federal law permits disclosure and it is in the public interest. However, in cases involving material determined to be exempt from mandatory disclosure under Exemption 4, we do not make the usual inquiry into whether release of the material would be in the public interest. Disclosure of confidential information that an agency can withhold pursuant to Exemption 4 would constitute a violation of the Trade Secrets Act, 18 U.S.C. § 1905, and is therefore prohibited. See, e.g., Chicago Power Group, 23 DOE ¶ 80,125 at 80,560 (1993). Accordingly, we may not consider whether the public interest warrants discretionary release of the information properly withheld under Exemption 4.

It Is Therefore Ordered That:

(1) The Appeal filed by Martin Becker on December 18, 2001, OHA Case No. VFA-0710, is hereby denied.

(2) This is a final order of the Department of Energy of 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: May 2, 2002

1. During the processing of this Appeal, Becker requested that the Appeal be held in abeyance until March 8, 2002. Electronic mail message from Becker to Valerie Vance Adeyeye, OHA (January 25, 2002).

2. Aiken, North Augusta, and Augusta are located in an area called the Central Savannah River Area.

3. WSMS provides support to WSRC via a contractual document referred to as an "Interworks Requisition (IWR)." WSRC pays for the services on a cost-reimbursement basis, and then charges those costs to DOE. Becker III.

4. The arguments described in this paragraph were submitted by Becker after the filing of this Appeal. However, we will address his arguments in the interest of administrative efficiency, given the long history of appeals in this case.

5. The DOE-WSRC contract does not permit WSRC to bind itself in perpetuity to a leasehold. Memorandum of telephone conversation between Timothy Fischer, SR and Valerie Vance Adeyeye, OHA (April 22, 2002).

6. Becker also alleged that Centennial did not face competition because a competing landlord, if one existed, would approach WSMS directly, ask WSMS how much it pays Centennial for rent, and then offer WSMS a better price. Voice mail message from Becker (April 17, 2002). We disagree. Even though this scenario is possible, we cannot assume that WSMS would willingly disclose its rental payments under those conditions. In fact, this scenario supports Centennial's premise that public disclosure of its lease terms would enable a competitor to undercut Centennial and thus lure away an important customer.