SUPPLEMENTAL STATEMENTS SUBMITTED FOR THE RECORD [Exhibit 9] STATEMENT OF DIANE B. COHN, FREEDOM OF INFORMATION CLEARINGHOUSE, WASHINGTON, D.C. I am Diane Cohn, an attorney with the Freedom of Information Clearinghouse. The Clearinghouse is an organization sponsored by Ralph Nader which is designed to assist members of the public and the press in pursuing their rights to obtain government-held information under the Freedom of Information Act and other access laws. I very much appreciate the opportunity to address what we now all recognize to be the many problems presented by the trade secrets exemption of the Freedom of Information Act and the so-called "reverse litigation" which has resulted from it. We are pleased that the Administrative Practice and Procedure Subcommittee is undertaking this oversight hearing with a view towards exploring what legislative changes might be appropriate for resolving the myriad problems and uncertainties which exist under the present state of the law. There is now an ever-growing list of conflicting judicial opinions which have attempted to delineate the rights of submitters of information to enjoin the disclosure of information which is claimed to be confidential and commercial within the meaning of exemption 4. Many of these actions have arisen in response to requests by public interest groups for access to information such as civil rights compliance reports and affirmative action plans. In one such case, the United States Court of Appeals for the Fourth Circuit found that these reports constituted confidential commercial information, disclosure of which was absolutely barred by 18 U.S.C. § 1905, a broad criminal statute which applies only to disclosure "not authorized by law." Westinghouse Electric Corp. v. Schlesinger, 542 F.2d 1190 (4th Cir. 1976), cert. denied, 45 U.S.L.W. 3749 (May 16, 1977) (No. 76-1192). Despite conflicts between this decision and other opinions rendered in the D.C. Circuit, see, e.g., Charles River Park "A", Inc. v. HUD, 519 F.2d 935 (1975), the Supreme Court refused the opportunity to resolve these questions of law. Just last week, however, the Third Circuit correctly concluded, we think, that the FOIA exemptions are merely permissive in nature, and therefore allow the Department of Labor to promulgate regulations authorizing disclosure of civil rights compliance information-notwithstanding the applicability of an exemption-when the public interest would be furthered thereby. Chrysler Corp. v. Schlesinger, Nos. 76–1970 and 76-2238 (3rd Cir., Sept. 26, 1977). In addition, that Court held that if this civil rights information is properly released pursuant to such a valid agency regulation, it is an authorized disclosure for purposes of 18 U.S.C. § 1905. See also Westinghouse Electric Corp. v. NRC, 555 F.2d 82 (3rd Cir. 1977). Although the Supreme Court will once again have an opportunity to attempt to reconcile these conflicting interpretations, the fact will remain that the process of applying the prevailing National Parks competitive harm test may continue to require expensive and time-consuming trials,' a result which has virtually obscured two of the FOIA's most fundamental precepts: (1) that disclosure should be promptly made and (2) that the average citizen should have an available judicial remedy for challenging agency withholding. 1 See Sears, Roebuck and Co. v. GSA, No. 75-2127 (D.C. Cir., April 1, 1977). 21-656-78- -20 Aside from grappling with the question of whether the particular documents in each case are confidential and commercial, the courts have also had to face difficult procedural problems in reverse suits. Of particular concern in this area is the fact that a requester of information may suddenly find that a submitter has obtained an injunction in a far-away court, a situation which may as a practical matter deprive the requester of the opportunity to participate in the very proceedings which will determine his or her right of access to the documents. In the one judicial opinion thus far which has addressed these issues, the D.C. Circuit recently recognized for the first time that requesters are "necessary parties" to such reverse suits, and if they are not joined or do not intervene in the forum in which the reverse suit is filed, requesters are not deprived of their right to obtain a judicial determination in a forum of their own choice which is specifically authorized under the FOIA. See Consumers Union v. Consumer Product Safety Commission, No. 75–2059 (D.C. Cir., July 5, 1977); pet. for rehearing denied, Aug. 25, 1977 (per curiam). Of course, in this particular case, the resolution of just this preliminary issue consumed more than three years time. We recognize that there are many complex problems in this area and that there are no simple answers. But our experience points to two basic propositions which we believe need to be addressed as an initial matter in attempting to resolve these problems. The first proposition stems from the fact that while Congress did intend to protect the interest of submitters in the confidentiality of business proprietary information, we believe that the National Parks test has been interpreted far too broadly by submitters, by several agencies, and by somecourts. As a result, information is being withheld which we believe Congress never intended would be encompassed within exemption 4. Prime examples are the equal employment opportunity information which has spurred so much of the reverse litigation, the television accident reports at issue in the Consumers Union case, and the animal test data submitted to FDA as evidence of a new drug's safety and effectiveness. In such cases, we are truly concerned that many of the exemption 4 claims raised are primarily motivated not out of fear of substantial competitive harm, but instead out of fear of possible Title VII suits or adverse public reaction to an unsafe product. Surely, these types of harms are not protectable under the FOIA's exemptions from disclosure. While we are not suggesting at this time that Congress need clarify its intent by amending the language of exemption 4, we would suggest that this Subcommittee ask every agency to submit a list of the categories of documents for which requests relating to the 4th exemption have been received. After having a true picture of the parameters of the problem, it may be simpler for Congress to enact legislation which establishes that certain types of information are specifically not exempt from disclosure and must therefore be disclosed. In fact, Congress has already utilized this very method of enacting such statutes, which might be called "reverse (b)(3) statutes". The IRS statute requiring the disclosure of revenue rulings and related documents is just one case in point. See Section 6110 of the Internal Revenue Code, as added by the Tax Reform Act of 1976. While our first concern is thus that too much information is being withheld under the guise of exemption 4, the second proposition which we find equally compelling is that each submitter has the right to be given an opportunity to make its interests known. In this regard, we believe that a number of procedural changes may be appropriate with respect to the treatment of documents submitted in the future. We would therefore make the following recommendations which are designed to help protect the interests of all concerned parties, without undermining the FOIA's policy of the fullest responsible disclosure. We believe that such procedures would at the same time relieve some of the burdens and delay which are now an inherent part of the processing of requests for records which are claimed to be protected under exemption 4. 1. Identification Upon Submission of Exemption 4 Material. In order to expedite the processing of a request for material that may be exempt, the submitter should be required to specify at the time of submission what portions of the information are claimed to be trade secrets or confidential commercial information. Each claim should include a brief statement of the basis upon which the company asserts that exemption 4 applies, as well as an indication of whether the necessity for confidentiality will be altered in any way by time or future event. Finally, the submitter should identify the individuals who are prepared to come forward and explain in greater detail the need for confidentiality. While these procedural rules may impose a greater burden on the submitters of information who will in each instance be required to make a fairly particularized showing, we anticipate that such procedures will ultimately stimulate what the D.C. Circuit has recognized would be "the simplest and most effective solution"-the voluntary disclosure of more information and the creation of internal procedures that will assure that disclosable information can be easily separated from that which is exempt. See Vaughn v. Rosen. 484 F. 2d 820, 828 (D.C. Cir. 1973), cert. denied, 415 U.S. 977 (1974). Indeed, EPA recently testified in oversight hearings in the Senate that such procedures, combined with the fact that businesses are aware that they will be called upon to substantiate their confidentiality claims, have tended to limit the scope of information claimed to be exempt. See Statement of Michael A. James, Deputy General Counsel, EPA, Before the Subcommittee on Administrative Practice and Procedure of the Senate Committee on the Judiciary, September 15, 1977. 2. Notice to Submitter of Information. Whenever a request is received that pertains to material for which no exemption 4 claim was asserted at the time of submission, that information should be immediately disclosed. If, however, a claim has been asserted in the manner indicated above, the agency should immediately notify the submitter by telephone or certified mail and request that the submitter provide whatever additional information is deemed relevant to the exemption 4 claim. In cases where the present 10-day time limit for an initial response does not permit the agency to reach a decision, or permit the submitter to adequately make its case before the agency, we believe that some modification of the time deadlines may be in order. But we believe such an exception should only be permitted in the case of a request for material submitted to the government by private parties where there is a reasonable basis for believing that trade secrets or confidential commercial information are involved. In that event, agencies should be permitted to combine the present 10 working day time limit for initial requests and 20 working day time limit for appeals into a single period of thirty working days during which time the agency will render a final decision as to whether the information is deemed to be exempt and whether the agency will nonetheless exercise its discretion to disclose. 3. Agency Rulemaking. We believe that much of the litigation which exists today could be eliminated if Congress were to reaffirm the fact that agencies possess the discretion to release categories of exempt information pursuant to validly promulgated rules. In formulating such disclosure regulations, the notice and comment provisions of the APA would permit both information providers and requesters to make their views known to the agency. Some courts, however, have interpreted Congress' intent as prohibiting agencies from exercising any discretion to release exempt information. Under that view, if an exemption applies, agencies are absolutely foreclosed from balancing the important public and private interests involved. See Westinghouse Electric Corp. v. Schlesinger, supra; Charles River Park “A”, Inc. v. HUD, supra. Such cases, however, have ignored the legislative history of the FOIA, which clearly indicates that the exemptions were intended to be permissive only, thereby leaving room for agencies to establish guidelines for determining when disclosure would benefit the public interest. See Chrysler Corp. v. Schlesinger, supra; Clement, "The Rights of Submitters to Prevent Agency Disclosure of Confidential Business Information: The Reverse Freedom of Information Lawsuit," 5 Texas Law Review, 587 (March 1977) at 598-600, 619-624. In this context, Congress should also clarify that 18 U.S.C. § 1905, which is a criminal prohibition against disclosure that is "not authorized by law," is clearly inapplicable to situations where disclosure is made pursuant to a validly promulgated regulation. Even in the absence of such regulations, however, we believe that § 1905 has not been construed in accordance with the legislative history of that provision, and a clarification of the scope of this broad criminal statute would go far towards eliminating much of the time-consuming litigation now underway. For an excellent discussion of the legislative history and judicial interpretation of 18 U.S.C. § 1905, see Clement, supra, at 607-619. We do not, however, believe that agencies should necessarily be encouraged to designate by rule categories of information that are deemed to be exempt under exemption 4. Such a determination is essentially a legal one, which would not deprive a requester or a submitter of his or her right to challenge that legal conclusion in court. 4. Jainder of Requesters under Rule 19 and Attorneys' Fees in Reverse Cases. So as to guarantee that requesters of information also have a full opportunity to be heard, we would suggest that Congress legislate changes which would eliminate the present forum shopping problems which reverse suits have created. As already indicated above, the choice of an inconvenient forum by the submitter who files a reverse suit may effectively bar participation by the requester of the information and, as courts have recognized, the government may not always adequately represent the pro-disclosure interest. See Consumers Union v. CPSC, supra, slip op. at p. 17. At the same time, under present law, agencies may be required to defend several suits in different forums involving the very same documents, and ultimately be subjected to conflicting judgments. See id; Robertson v. Dept. of Defense, 402 F.Supp. 1342 (D.D.C. 1975). In order to alleviate these problems and to preserve the requesters' right to a liberal choice of forum in enforcing the provisions of the FOIA, we would suggest that whenever a request for information has been made, the submitter who files a reverse suit be required to join the requester as a party defendant, and the requester should then be given the right to transfer the action to any other district court where the requester could have filed suit under the FOIA, i.c., where the requester resides or has his or her principal place of business, where the documents are located, or in the District of Columbia. We would note that the procedure we have suggested might require a legislative modification of the general venue statute applicable in all civil litigation, 28 U.S.C. § 1404 (a), which provides that a case may be transferred to any district in which the case may originally have been brought. It may be possible that a requester could not have obtained original jurisdiction over a company in one of various forums designated in the FOIA, since that company may neither be incorporated nor have its principal place of business in one of those districts. Another recognized barrier to enforcement of the FOIA by average citizens is the high cost of legal fees associated with exercising one's right to obtain judicial review of agency withholding. To assure that requesters can seek enforcement of their rights under the FOIA, Congress has authorized courts to order the United States to pay the attorneys' fees of a plaintiff which has prevailed in an FOIA suit. 5 U.S.C. § 552(a) (4) (E). Where it is the submitter of the information which is advancing the claim that information should be withheld, however, it is unclear whether the current FOIA provision would permit the assessment of attorneys' fees on behalf of an intervening requester. Some provision for award of attorneys' fees to a requester who is forced to pursue his or her claim for information in the face of a reverse suit would further the original purposes of the existing FOIA fees provision. 5. Eliminate Delay. While we strongly believe that every person should be permitted one opportunity to have his or her case heard by a federal district judge, we also believe that parties seeking to enjoin disclosure should not be permitted to indefinitely delay the final resolution of such cases by seeking interminable stays of judgment should the submitter not prevail on the first go-round. In keeping with Congress' direction that all FOIA cases be given expedited consideration, 5 U.S.C. 552(a) (4) (D), we would suggest that some of the delay associated with reverse cases could be eliminated if Congress directed that stays of judgments ordering disclosure be permitted only in extraordinary circumstances. This would require that as to FOIA cases, Congress reverse the very liberal presumption favoring the entry of stays which was recently articulated in Washington Metropolitan Area Transit Commission v. Holiday Tours, No. 77–1379 (D.C. Cir., July 5, 1977). Congress should place a greater burden on the party seeking to prevent disclosure to demonstrate that the likelihood of its being successful on appeal is "probable". These are merely a few suggested approaches for addressing the many problems which the upsurge of reverse litigation has created. Our experience in attempting to work out legislation in just one narrow area of concern involving the disclosure of IRS letter rulings indicates that it may require extraordinary efforts and bargaining skills to negotiate acceptable solutions. In that one instance, however, the IRS, the American Bar Association, numerous accountants, and various public interest representatives working in conjunction with the Joint Economic Committee, were able to agree on effective and workable legislation. I would again like to express my appreciation for the opportunity to voice our particular concerns and to identify some initial areas in which we would hope to work with the Subcommittee in reaching appropriate legislation solutions. OCTOBER 4, 1977. [Exhibit 10] STATEMENT OF JAMES T. O'REILLY, ATTORNEY, CINCINNATI, OHIO Re Freedom of Information Act Oversight Senator JAMES ABOUREZK, SEPTEMBER 27, 1977. Chairman, Subcommittee on Administrative Practice and Procedure, Senate Committee on the Judiciary, Washington, D.C. DEAR MR. CHAIRMAN: I learned last Friday of your Subcommittee's conduct of oversight hearings regarding the Freedom of Information Act, and in particular the commercial confidentiality and reverse-Freedom of Information Act litigation issues. Though the hearing sessions have passed, I would like to submit a statement for consideration by your staff, with the hope that it may be included in the record of the hearing as a supplementary submission. BACKGROUND On August 22, McGraw-Hill Book Company published my text, Federal Information Disclosure: Procedures, Forms, and the Law. The book is the first comprehensive sourcebook on the Freedom of Information Act and the Privacy Act, and includes chapters also on the Government in the Sunshine Act, Federal Advisory Committee Act, and federal agency publicity practices. Of its 800 pages, approximately 120 are devoted to business confidentiality matters under the Freedom of Information Act. Prior to the book, I have published articles on the reverse-FOIA litigation problem in Business Lawyer of the American Bar Association, on law enforcement confidentiality in the journal of the International Association of Chiefs of Police, Police Chief, and on the (b) (1) exemption's impact, in U.S. Naval Institute Proceedings, and I have authored three reports in the University of Missouri series, Freedom of Information Center Reports. Though my professional practice in federal regulatory law is with the legal division of a major corporation, my writing in this field has predated that affiliation, and my work is not endorsed or approved by my employer. The text was funded by a grant from McGraw-Hill and was produced on my own efforts as an independent research project apart from employment duties. The views herein are based upon my experience with information law issues involving federal agencies including the Food and Drug Administration, Environmental Protection Agency, Consumer Product Safety Commission, Navy Department, Justice Department. Labor Department, Federal Trade Commission, General Services Administration, Customs Service, and Veterans Administration. However, the views are my own and not those of any institution. ISSUE The most important issue in federal information law today is the position of confidence to be accorded to private, valuable commercial information. Threatened disclosure of commercially sensitive information which had been voluntarily or involuntarily supplied for the use of federal agencies creates a climate in which uncertainty fosters adversariness. Apart from the permissive withholding under Freedom of Information Act exemption (b) (4), Congress has not given federal agencies an affirmative direction to broadly respect the confidential nature of sensitive business data. The courts have not found clear guidance, and have called for legislative solutions to this complex issue. Agencies fluctuate in ability, attitude and desire to protect business submissions. The matter is ripe for some legislative resolution. PROPOSED LANGUAGE As suggested in Chapter 10 of my text at page 10-37, a first step to resolve the controversial issue would be consideration of the following proposal: Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Act of June 5, 1967 (Public Law 23, Ninetieth Congress), as amended by the Act of November 21, 1974 (Public Law 502, Ninety-third Congress), is amended to add at the end thereof a new section (f) as follows: |