Contractors interested in the application of FOIA Exemption 4 should take note of the Ninth Circuit’s decision in American Small Business League v. Dep’t of Defense, No. 15-15120 (9th Cir. Jan. 6, 2017). The issue in the case was whether a declaration submitted by a Sikorsky Aircraft Corporation employee was sufficient to show the competitive harm necessary to withhold small business subcontracting data obtained from Sikorsky. The Sikorsky declaration was short, but it identified Sikorsky’s competitors and asserted that its small business subcontracting data could be used to gain a competitive advantage.
In a November 2014 order, the District Court found the declaration too vague. It lacked “reasonably specific detail” as to the likelihood of competitive injury. It did not show how information found in the subcontracting plan would be “likely to cause substantial competitive injury.” Proof of competitive harm was based only on the fact that a Sikorsky competitor “could” use Sikorsky’s data to cause harm. In the words of District Judge William Alsup, “[t]hat is not enough to grant summary judgment for the agency.” The District Court ordered the government to produce Sikorsky’s master subcontracting plan, subject only to appeal.
On January 6, 2017, a three-judge panel of the Ninth Circuit issued a decision reversing the District Court’s order. As to the sufficiency of the Sikorsky declaration, the court held that it “at least created a genuine issue of fact.” The declaration identified Sikorsky’s competitors in the market for defense contracts and asserted that they “could” use information in the subcontracting plan to gain a significant competitive advantage. “Nothing more is required to gain protection from disclosure under Exemption 4, and the district court erred in ruling otherwise.”
The Ninth Circuit identified its disposition of the appeal as non-precedential, but the case is interesting nonetheless. It arose from a FOIA request seeking the master subcontracting plan submitted by Sikorsky under the Department of Defense’s Comprehensive Small Business Subcontracting Plan Test Program, which began in 1990 and has recently been extended to 2027. The case is one in a series of cases brought by the ASBL seeking information from contractors that participate in this program.
The November 2014 trial court decision was the first that we are aware of finding that small business contracting data like that submitted by Sikorsky falls outside of FOIA Exemption 4 and is subject to public release. The Ninth Circuit’s decision is more consistent with our understanding of the general trend in the Exemption 4 caselaw.
The trial court’s order may also be at least partially explained by the court’s frustration with the government’s handling of the litigation. Despite specific instructions, the government submitted Sikorsky’s subcontracting plan for in camera review without highlighting the portions claimed to be confidential. The government also failed to address four questions the court specifically presented for briefing. We can certainly see a different result without these missteps.
Regardless of how this case ultimately gets resolved, it presents a couple of obvious lessons for contractors facing FOIA requests for information they consider confidential. First, make sure any affidavit supporting the application of a FOIA exemption is sufficiently detailed and timely submitted. Second, intervening in litigation may be necessary to ensure that the contractor’s position is appropriately presented and considered. If there’s no other option, a reverse-FOIA case may be necessary.