This article provides an overview of the rules, statutes, caselaw, and proposed legislation regarding disclosure of information regarding Small Business Administration (“SBA”) loans to businesses impacted by Coronavirus.
A consortium of newspapers filed a lawsuit against the SBA seeking information on Paycheck Protection Program (“PPP”) loans under the Freedom of Information Act (“FOIA”). Although the SBA has published statistical data on PPP loans issued to date, it has not yet provided loan-specific information. At least part of the SBA’s rationale is that it is busy processing PPP loans. However, the PPP is one of the largest government programs ever benefitting private businesses, and the press and others will expend considerable effort on scrutinizing these loans. The SBA has been compelled to provide information on specific SBA loans in the past. See e.g. Buffalo Evening News, Inc. v. Small Business Admin., 666 F. Supp. 467 (W.D.N.Y. 1987).
In addition to claiming to be busy, the SBA also claims that some of the materials requested by the news organizations may be FOIA-exempt. FOIA’s exemptions are arrayed at 5 U.S.C. § 552(b). Among these is FOIA Exemption 4, which exempts “trade secrets and commercial or financial information obtained from a person¹ and privileged or confidential.” Id. at 552(b)(4). In Chrysler v. Brown, 441 U.S. 281, 293-94 (1979), the United States Supreme Court found that although the FOIA exemptions allow the government to withhold information, they do not compel the government to withhold information, and thus application of the FOIA exemptions by the government is discretionary. Accordingly, reverse FOIA plaintiffs ordinarily argue that an agency’s contemplated release would be “arbitrary and capricious” within the meaning of the Administrative Procedures Act (“APA”). This is an exceptionally deferential standard of review.
Businesses applying for PPP loan forgiveness are advised to mark their documents “FOIA Confidential Commercial Information, Exemption 4,” and to detail the basis for this confidentiality in a cover letter accompanying the submission. Businesses applying for a loan are also advised to mark such documents as well. The FOIA itself neither allows the submitter of information to insist that the Government deny a FOIA request nor obligates the Government to inform the submitter of any request. However, fortunately for PPP borrowers, where the requested information is determined to contain “confidential commercial information,” the agency is required by executive order to notify the submitter of that information prior to its release. Exec. Order No. 12,600, 52 Fed. Reg. 23781 (June 23, 1987). Thus, PPP borrowers who mark their submissions to the SBA as FOIA Confidential are likely to be provided a right to contest the release of any of their information in response to FOIA requests.
The Supreme Court recently reviewed FOIA Exemption 4 in Food Marketing Institute v. Argus Leader Media, 139 S. Ct. 2356, 2363 (2019). In that case, the Court determined that “confidential” information must be closely held by the submitter in order to be “confidential” under FOIA Exemption 4. Id. at 2363. The Court did not resolve the second question posed, which was whether the submitter must obtain an assurance from the Government that the information will be kept confidential. Id. (This was clearly the case in Argus Leader and so it was not necessary to adjudicate the issue.) However, subsequent Department of Justice guidance indicates that if the submitter keeps the information closely held, then unless the Government indicated that it would release the information, the submitter need not obtain a specific assurance of confidentiality from the Government. Step-by-Step Guide for Determining if Commercial or Financial Information Obtained from a Person is Confidential Under Exemption 4 of the FOIA, United States Department of Justice, October 7, 2019, available at: https://www.justice.gov/oip/step-step-guide-determining-if-commercial-or-financial-information-obtained-person-confidential.
In this case, the Government first indicated in a court filing that it might apply a FOIA Exemption to requests for individual borrower information. Treasury Secretary Mnuchin then said that he believes that the names of borrowers and the amounts they receive are “proprietary” and “confidential” and that he will not release the information. After facing backlash from Congress (and unsuccessful legislative attempts to provide for disclosure), Secretary Mnuchin later indicated flexibility on this issue. On June 19, 2020, the Government announced that, for PPP loans over $150,000, it would provide “the business names, addresses, NAICS codes, zip codes, business type, demographic data, non-profit information, jobs supported, and loan amount ranges . . . .”
Businesses that previously submitted information to the Government may claim that the reversal of position is “arbitrary and capricious” because they submitted information based upon previous implicit or explicit assurances of confidentiality. Parties arguing for disclosure may respond that all borrowers submitted information knowing that previous SBA loan programs resulted in disclosure of borrower information. News outlets and other parties seeking disclosure may argue that even the information that the Government proposes to disclose is insufficient since it does not include details including exact loan amounts, and does not cover all borrowers. Further, Congress might yet provide for disclosure by statute. In any event, controversy and litigation over disclosure of PPP information will continue, and borrowers are advised to be wary of disclosure of information they submit to the Government in connection with the PPP program.
¹This exemption is construed to apply to corporate entities. 5 U.S.C. § 551(2)