In August 2004, AT&T discovered it may have overcharged the government for services and equipment the company provided to schools through the Federal Communications Commission-administered E-Rate program. AT&T voluntarily reported the billing irregularities to the FCC, which investigated, and by December of that year the matter was settled, with AT&T agreeing to pay $500,000 and enter a corporate compliance program. Case closed.

But the business records the FCC amassed from AT&T during that investigation may still become an open book–they include invoices, internal e-mails giving pricing and billing information, responses to FCC questions, names of employees involved in the billing irregularities, and AT&T’s self-assessment of whether and to what extent employees involved may have violated the company’s internal code of conduct. In April 2005, CompTel, a trade group representing some of AT&T’s competitors, submitted a Freedom of Information Act (FOIA) request to the FCC’s Enforcement Bureau for “all pleadings and correspondence contained in” the AT&T E-Rate investigation file.

AT&T objected to the release of information based on a novel interpretation of one of the exemptions to FOIA, 7(c), which protects personal information in law enforcement records when its disclosure “could reasonably be expected to constitute an unwarranted invasion of personal privacy.” The FCC found that Exemption 7(c)’s “personal privacy” protection doesn’t cover corporations, but AT&T appealed the matter, and the 3rd Circuit last year agreed with the company that Exemption 7(c) “unambiguously” applies to corporations. “After all,” Judge Michael Chagares wrote for the 3rd Circuit, “‘personal’ is the adjectival form of ‘person,’ and FOIA defines ‘person’ to include a corporation.” The 3rd Circuit also reasoned that excluding corporations from Exemption 7(c) would vitiate its purpose of “encouraging corporations–like human beings–to cooperate and be forthcoming in [law enforcement] investigations.”

In September, the Supreme Court granted cert in the case, which could have a significant impact on FOIA exemptions if the 3rd Circuit’s reasoning is upheld.

“This is the first time in 35 years that an appellate court has looked at that language and seen [this interpretation],” says Max Kennerly, an associate at The Beasley Firm. Kennerly, who has covered the case for his Litigation and Trial Blog, adds that the Supreme Court has repeatedly said the purpose of FOIA is to release information. “It may indeed be good policy to create some sort of privacy exemption so that corporations can share records with federal law enforcement,” he says, “but it’s almost certainly not what the Congress that drafted [FOIA] thought of it.”

Parsing ‘Personal’

The 3rd Circuit’s decision surprised Mary Albert, assistant general counsel of CompTel, which made the FOIA request for information on the AT&T investigation. All bets are off for the Supreme Court’s interpretation of the issue, she says–while other companies have invoked the personal privacy exemption to attempt to prevent FOIA releases, courts have struck them down. FCC v. AT&T marks the first time the argument has been taken so far.

“It’s really going to be a matter of statutory interpretation,” Albert says. “There are very strong arguments in our favor, but I was so shocked that the 3rd Circuit went down this road that I can’t place my money anywhere on what the Supreme Court will look at.”

Experts expect the high court to parse through definitions of “personal privacy” as it relates to FOIA exemptions.

“[The Supreme Court may] come to another conclusion from the defined term ‘person,’” says Kristen Mathews, head of Proskauer Rose’s Privacy and Data Security group. “To me, ‘personal,’ especially followed by the word ‘privacy,’ doesn’t seem to me to be derived from the word ‘person,’ as defined to include corporations. … I would venture to say that most privacy practitioners, including myself, would not have thought that a corporation could have personal privacy rights.”

Give and Take

The fact the court even took the case has some lawyers expecting the emergence of a clear rule on FOIA exemptions.

“There are a lot of questions why the Supreme Court granted cert in this particular case,” Kennerly says. “One option is that the Supreme Court looked at the ruling and said, ‘This is just wrong, we need to correct what the 3rd Circuit did.’ Another option is that the Supreme Court wants to clarify how courts in general should look at FOIA.”

That would impact Kennerly, who as a litigator frequently uses FOIA to obtain information in cases that follow a government investigation. And it would of course impact companies that have been subject to federal investigations.

“FOIA requests are a common issue,” Mathews says. “Regulators often request that companies provide information in connection with investigations that are pending, and companies often provide it–this case impacts whether a third party can then obtain that information under FOIA.”

And if a company believes a FOIA request could provide it with valuable information about a competitor, the company will make the request. If a company believes its competitor is using illegal business practices, for instance, and wants to find out what a government investigation has uncovered about it, a blanket exception would mean the company can’t reach that information at all. So in FCC v. AT&T, corporations might be able to see the issue from different perspectives.

“If I’m a GC, my concern is, what if I cooperate with the government in a criminal investigation, and those records can be released to anyone who asks for them? … The default position of corporate counsel would be to hope the Supreme Court affirms that corporations can invoke the unwarranted personal privacy exemption,” Kennerly says. “On the same token, every time one corporation is able to conceal information, another corporation can’t get that information.”

Processing for Privacy

If the Supreme Court affirms the 3rd Circuit, Albert says it will have a significant impact on how the government processes FOIA requests. First it will have to figure out what “personal privacy” might encompass for a corporation.

“How that would be interpreted for a corporation is something the government’s going to have to figure out if we don’t win here,” Albert says.

Indeed, the government’s brief in the Supreme Court matter says such a sea change would “require a massive administrative effort to process and litigate the newly found ‘privacy’ right.”

Adina Rosenbaum, an attorney at Public Citizen, which is co-counsel to CompTel in the Supreme Court case, says the questions of interpretation the 3rd Circuit’s reasoning raised could lead to some corporations taking advantage of the exemption.

“[The 3rd Circuit's interpretation] inserts into the processing of these records a consideration that’s never been there before,” she says. “There’s a risk of it leading to corporations, if they don’t want embarrassing things to get out about them, objecting to information being released through FOIA requests just to delay the process.”

In the wake of the outcry over Citizens United v. FEC, which dealt with corporations’ First Amendment rights in the campaign speech context (see “Corporate Personification,” p. 20), FCC v. AT&T is also gaining notice by a public that hasn’t forgotten about the shady corporate scandals of recent years, from Enron to Toyota.

A recent Slate article on the case declared, “It used to be the case that embarrassment, harassment and stigma were the best check against corporate wrongdoing. But that was before corporations had feelings.”

In a court brief, the Obama Administration cited some high-profile corporate disasters to show what kind of information the public might lose if the Supreme Court upholds the 3rd Circuit’s broader interpretation of Exemption 7(c).

“Under the court of appeals’ reasoning,” wrote Neal Kumar Katyal, the acting solicitor general, “information obtained by law-enforcement agencies, including agencies that may investigate BP’s offshore drilling practices or Goldman Sachs’ trading practices, could be withheld simply to protect a corporation from purported ‘embarrassment’ or ‘stigma.’ That decision is clearly wrong.”