Trucking company loses disclosure case in 8th Circuit

From the Fall 2001 issue of The News Media & The Law, page 36.

The U.S. Court of Appeals in St. Louis (8th Cir.) ruled in August that financial reports a Joplin, Mo., trucking company gave the U.S. Department of Transportation must be disclosed to the public even though the company itself would have kept that information secret.

Contract Freighters, Inc. was surprised. Company officials say they believed that customary business practice would play a decisive role in determining whether information would be released, and the company customarily did not release the information it provided in the reports.

A 1992 Freedom of Information Act appeals court decision had favored withholding customarily protected business information voluntarily submitted to the government. And although here the truckers’ financial reports were mandatory, not voluntary, they believed that decision’s favorable nod to customary practice would affect the ruling in this case. (Critical Mass Energy Project v. Nuclear Regulatory Commission; See NM& L, Fall 1992)

They also believed that wording of a separate statute outlining how the FOI Act would apply to these reports — and its legislative history that acknowledged strong competition in the motor carrier industry — should force the agency to withhold reports from the public, namely Contract Freighters’ competitors.

Not so, the court said.

The case would turn on a time-tested formula first articulated in 1974 in National Parks & Conservation Association v. Morton. FOIA’s exemption for trade secrets and commercial and financial information protects information when release would cause considerable competitive harm or when the release of voluntarily submitted information would curb the government’s ability to get that information in the future.

The truckers are required by law to submit the reports, and the truckers had not shown they would suffer “substantial” competitive harm from their release, so that exemption does not apply, the court said.

In the Critical Mass Energy decision, a federal appellate panel ruled that customary commercial disclosure practices govern whether the government must release voluntarily submitted commercial information. Agencies were to continue to release information the government required businesses to submit unless disclosure would cause substantial competitive harm. But if the reports came in “voluntarily,” customary practice would rule.

As a result, the government greatly increased its protection of business information from FOI Act requesters. Whether businesses “customarily” keep information confidential has weighed heavily in decisions about granting or denying that information, so long as submissions are voluntary.

In fact, agencies have accepted voluntary submissions of information that they could otherwise require in order to protect against disclosure.

In Critical Mass, the court allowed the Nuclear Regulatory Commission to avoid disclosing nuclear industry safety reports because the company did not itself customarily disclose the requested information, and because the government had accepted the reports on a “voluntary” basis rather than compelling their submission.

Records that the company customarily kept secret — even reports on significant safety-related events such as Three Mile Island — could remain secret in the hands of the government if they had been handed to the government voluntarily and contained information not customarily released. The rule would apply even if the agency could, but did not, require delivery of that information.

Even though Critical Mass Energy would not apply to the Contract Freighters’ case — the motor carrier reports were required by law — the decision signaled that courts would reach deep to protect business information.

The truckers said the “substantial” competitive harm test should not apply either, since the agency had found no substantial competitive harm.

A statute directing release of truckers’ reports under the FOI Act said information could be withheld if it caused “competitive harm.” This was a different standard from the “substantial competitive harm” showing in the National Parks test, the truckers said.

Contract Freighters operates 6,000 trailers and 2,000 tractors through Canada and the United States and works with Mexican carriers at the border.

Until Congress closed it down in 1996, the now defunct Interstate Commerce Commission collected longer and more detailed reports and usually made them available.

The ICC Termination Act of 1995 abolished the ICC and transferred its regulatory responsibilities to the Department of Transportation. That law directed the government to disclose reports unless a motor carrier shows an exemption is “necessary to avoid competitive harm” and that it qualifies for protection under the FOI Act’s proprietary exemption.

The department’s Bureau of Transportation Statistics allows motor carriers to request confidential treatment of their reports, but in March 2000, the bureau denied 18 of 24 requests, including one from Contract Freighters. Contract Freighters had not shown how the generalized data it presented could give others meaningful detail on innovative technologies, processes or strategies for developing international markets, the bureau said.

In its suit, the company told the court that if it looked at what the industry would customarily withhold from its competitors, it would find “competitive harm” from disclosure. Contract Freighters said other motor carriers could benefit from the disclosures.

But the court accepted the government’s argument that to be exempt, the reports must show some unique competitive idea, that routine entitlement to the exemption trivializes the statutory scheme and cannot be reconciled with the proprietary exemption of the FOI Act. (Contract Freighters Inc. v. Sec’y of Transportation) –RD