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PETKAS v. STAATS

August 23, 1973

Peter J. PETKAS, Plaintiff,
v.
Elmer B. STAATS, Chairman Cost Accounting Standards Board, Defendant


Parker, District Judge.


The opinion of the court was delivered by: PARKER

PARKER, District Judge.

 This action is brought under the Freedom of Information Act (the Act), 5 U.S.C. § 552 (1970). Plaintiff, an attorney associated with the Corporate Accountability Research Group, a public interest organization, seeks disclosure by the Cost-Accounting Standards Board (the Board) of certain Disclosure Statements (Statements) filed by Lockheed Aircraft Corporation, International Telephone and Telegraph Corporation and General Motors Corporation and their reporting subdivisions. The Board, pursuant to the Defense Production Act of 1950 as amended on August 15, 1970, 50 App.U.S.C. § 2168 and Part 351 of the Board's Regulations, 4 C.F.R. 351.2, et seq., requires corporations contracting in defense material with the United States to disclose the cost-accounting principles and procedures which they observe. Named as defendant was Elmer B. Staats, Chairman of the Board.

 The plaintiff's request was denied at the Board level. While one Company -- Lockheed -- agreed to release certain limited parts of the answers included in the Statement, the plaintiff did not regard the proffered data as substantive and insisted upon full disclosure as to all. In denying the request the Board contended that when the Statements were filed by the companies they notified the Board that they contained trade secrets and commercial or financial information which was privileged and confidential. The defendant thus relies upon the fourth exemption of the Act. *fn1"

 The defendant moved to dismiss the complaint or, in the alternative, requested the Court to grant summary judgment on the merits. The plaintiff cross-moved for summary judgment.

 During the course of the proceedings the National Security Industrial Association, a trade association of industrial, research and educational organizations, and a spokesman for defense contractors, sought and obtained permission to file a memorandum as amicus curiae, supportive of non-disclosure. The memorandum was restricted to the issue whether the Statements of the companies were covered by the Fourth exemption.

 The Court finds that the Disclosure Statements of the three companies should be excluded under the fourth exemption and grants summary judgment for the defendant.

 In § 2168(g) of the Defense Production Act (1970) Congress established the Cost-Accounting Standards Board charged with the responsibility of promulgating cost-accounting principles to be followed by national defense contractors and subcontractors under certain Federal contracts. When promulgated, the standards are to be followed by such contractors in estimating, accumulating, and reporting costs in connection with the pricing, administration and settlement of all negotiated contracts. In § 2168(h)(1) of that Act the Board was empowered to promulgate regulations requiring contractors as a condition of contracting to disclose in writing the full detail of their cost-accounting principles, including methods of distinguishing direct costs from indirect costs and the basis for allocating indirect costs. Should the contractor fail to comply with promulgated standards or fail to adhere to his announced standards he would be subject to a contract price adjustment with interest for any increased costs paid to him by the government.

 Pursuant to authority, the Board also promulgated a regulation of particular relevance which provides that if a contractor certifies that the Statement contains trade secrets and commercial or financial information which is privileged and confidential the Statement will be protected and not released to the public. 4 C.F.R. § 331.5.

 The pertinent language of § 552 of the Freedom of Information Act provides:

 
"(3) . . . each agency, on request for identifiable records . . . shall make the records promptly available to any person . . .
 
* * *
 
(b) This section does not apply to matters that are . . .
 
(4) trade secrets and commercial or financial information obtained from a person and privileged ...

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