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General Electric Co. v. Dep't of the Air Force

August 28, 2009

GENERAL ELECTRIC COMPANY, PLAINTIFF,
v.
DEPARTMENT OF THE AIR FORCE, DEFENDANT.



The opinion of the court was delivered by: Catherine C. Blake United States District Judge

MEMORANDUM OPINION

In this case brought pursuant to the Freedom of Information Act ("FOIA"), 5 U.S.C. § 552 et seq., and the Administrative Procedure Act ("APA"), 5 U.S.C. § 706 (2000), plaintiff General Electric ("GE") seeks to prohibit defendant United States Department of the Air Force ("Department" or "Air Force") from disclosing unit pricing information contained in two contracts GE negotiated with the Air Force. Because the disclosure of unit pricing information is barred in this case by the Trade Secrets Act, 18 U.S.C. § 1905, the court will deny the Air Force's renewed motion for summary judgment and grant GE's renewed cross-motion for summary judgment.

I. Factual Background

The underlying facts in this "reverse FOIA" case were thoroughly set out in Judge Reggie Walton's March 31, 2004 memorandum opinion.*fn1 In brief, this dispute centers around the disclosure of unit pricing information contained in two contracts between GE and the Air Force for spare parts for GE-manufactured jet engines. These contracts, F34601-99-D-2000 ("D-2000 contract") and F41608-00-D-0323 ("D-0323 contract"), are for the procurement of spare parts for GE's F101, F110, and F118 series jet engines and J85, TF34, and TF39 jet engines respectively. The first was entered into on February 12, 1999, and the second was entered into on September 12, 2000.

The Air Force received a FOIA request for the D-2000 contract and related documents in May 2000 from John J. Fausti and Associates, LLC, and it notified GE of this request via letter on May 22, 2000. After some initial communications between GE and the Air Force, GE expressed its opposition to the disclosure of the D-2000 contract's unit pricing information in a March 13, 2001 letter, stating that such disclosure would cause it substantial competitive harm, therefore bringing it within the scope of FOIA Exemption 4,*fn2 which exempts from disclosure "trade secrets and commercial or financial information obtained from a person and privileged or confidential." 5 U.S.C. § 552(b)(4). Nevertheless, the Air Force informed GE on July 16, 2001 that it intended to release the disputed information on July 30, 2001, basing its decision on its conclusion that the release of this information would not cause GE substantial competitive harm. This decision was a reversal of two prior decisions by the Air Force -- one on October 7, 1999 and one on November 2, 1999 -- not to disclose this information on the basis of FOIA Exemption 4.

The Air Force received a FOIA request for the D-0323 contract and related documents on September 18, 2000 from Sabreliner Corporation, and it notified GE of this request via letter on February 15, 2001. Again after some communications between GE and the Air Force, in which GE expressed its opposition on the ground that such disclosure would cause it substantial competitive harm, the Air Force informed GE on June 21, 2001 that it intended to release the disputed information on or after July 12, 2001 (fourteen working days later), stating that such information was not exempt under FOIA Exemption 4.*fn3

In response, GE promptly filed suit in the District of Columbia on July 17, 2001, seeking to prevent the disclosure of unit pricing information in the D-2000 and D-0323 contracts. Cross-motions for summary judgment were submitted to the district court, and on March 31, 2004, Judge Walton issued a memorandum opinion in which he found that the Air Force had failed to justify adequately its decision to disclose the disputed information in the face of GE's objections. Specifically, he found that "the Air Force neglect[ed] to . . . address GE's argument that releasing the unit price information could cause its customers, such as foreign governments, to leverage GE's negotiated prices against it in future competitions" (March 31, 2004 Mem. Op. at 9-10 (internal footnotes omitted)), and suggested that this specter of customer competition "could qualify the pricing information at issue here as exempt under FOIA Exemption Four." (Id. at 10 (citing McDonnell Douglas Corp. v. Nat'l Aeronautics & Space Admin., 180 F.3d 303, 307 (D.C. Cir. 1999) ("NASA")).) He also found that the Air Force's decision "was in direct contradiction to what it had previously decided regarding the same unit prices at issue," and that this departure from precedent was not sufficiently explained. (Id. at 17 (citing Am. Fed'n of Labor & Congress of Indus. Orgs. v. Brock, 835 F.2d 912, 917 (D.C. Cir. 1987), for the proposition that such a departure requires proper justification). The court therefore vacated the Air Force's decision and remanded the case to the Air Force, ordering it to issue a new decision within thirty days "regarding whether to disclose the unit pricing information at issue in accordance with the concerns raised in the Court's Memorandum Opinion." (March 31, 2004 Order.)

After receiving an extension of time, the Air Force issued its follow-up decision in a letter dated May 28, 2004 ("May Decision Letter"). In this letter, the Air Force explained that its previous decisions to withhold unit pricing information for the D-2000 contract were made pursuant to the D.C. Circuit's decision in NASA, which it understood as potentially creating a per se rule that unit pricing information must always be withheld. It stated that its later decision to release the unit pricing information in both the D-2000 and D-0323 contracts was made after reading the D.C. Circuit's denial of rehearing en banc in that case, in which the court clarified that government disclosure of unit pricing information need not always be withheld. This clarification of the law, it stated, explained its apparent departure from past agency precedent.

The Air Force also abided by the district court's request that it address GE's arguments about competitive harm. The Air Force first asserted that GE faces no actual competition over these contracts because they are "sole source" contracts, i.e. contracts for which only GE can supply the parts needed. The Air Force then asserted that, even if GE faced actual competition over these contracts, it had failed to demonstrate precisely how the disclosure of unit pricing information would cause it substantial competitive harm, but rather had offered only "conclusory allegations." (A.R. Tab 60, May Decision Ltr. at 5.) It also argued that, as a general matter, a customer's demand for prices comparable to those in the D-2000 and D-0323 contracts "is not by itself competitively harmful." (Id. at 7.) Lastly, the Air Force contended that GE had no other customers who would order parts in quantities as large as those the Air Force orders, and so none of GE's other customers were in a position to demand price concessions based on the unit pricing GE offered to the Air Force. (Id. at 8.)

Because the Air Force found that GE had failed to demonstrate adequately substantial competitive harm, it concluded once again that the unit pricing information was not confidential and therefore not exempt from disclosure under FOIA Exemption 4. Accordingly, the Air Force ordered the disclosure of the disputed information. GE submitted two additional letters requesting that the Air Force reconsider this decision, but the Air Force was unpersuaded and reiterated its reasons for disclosure in a February 8, 2006 letter ("February Reconsideration Letter"). As an additional reason for disclosure, this letter also argued that the legislative history of FOIA and related regulations shows a congressional intent to put unit pricing information beyond the reach of Exemption 4. Renewed cross-motions for summary judgment were subsequently filed.

II. Analysis

A. Standard of Review

Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment "should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). The Supreme Court has clarified this does not mean that any factual dispute will defeat the motion. "By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (emphasis in original).

In reverse FOIA cases like this one, the court's reviewing authority arises under Section 706 of the APA. See Occidental Petroleum Corp. v. S.E.C., 873 F.2d 325, 337 (D.C. Cir. 1989) (citing Chrysler Corp. v. Brown, 441 U.S. 281, 317-18 (1979)). Section 706 directs reviewing courts to set aside agency decisions that they find to be "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). This "arbitrary and capricious" review is narrow in scope; "a court is not to substitute its judgment for that of the agency." Mount Royal Joint Venture v. Kempthorne, 477 F.3d 745, 753 (D.C. Cir. 2007) (quoting Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)). Nevertheless, a court should not "defer to the agency's conclusory or unsupported suppositions." McDonnell Douglas Corp. v. U.S. Dept. of the Air Force, 375 F.3d 1182, 1187 (D.C. Cir. 2004) ("USAF II") (citing State Farm, 463 U.S. at 43). Also, a court's review under Section 706 should be ...


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