Tag Archives: Michael Kaplan

SCOTUS Expands Scope of FOIA Trade Secrets and Commercial Information Exemption

by Michael S. Flynn, Randall D. Guynn, Michael Kaplan, Neil H. MacBride, Paul J. Nathanson, Annette L. Nazareth, Margaret E. Tahyar, and Eric B. Lewin

The Supreme Court has updated an important Freedom of Information Act (“FOIA”) exemption for the digital age.  In Food Marketing Institute v. Argus Leader Media (PDF: 125 KB), the Supreme Court last week significantly expanded the scope of FOIA Exemption 4.  FOIA Exemption 4 is the exemption most commonly claimed by private-sector entities when seeking to protect competitively sensitive information that must be disclosed to a federal agency.  It shields from disclosure “trade secrets and commercial or financial information obtained from a person and privileged or confidential.”[1]  Beginning with a D.C. Circuit decision in 1974, National Parks & Conservation Ass’n v. Morton, 498 F.2d 765 (D.C. Cir. 1974), courts have interpreted FOIA Exemption 4 narrowly.  For commercial or financial information to be “confidential,” a number of federal courts of appeals have required a showing of “substantial competitive harm” from disclosure.  Proving “substantial competitive harm” has proven difficult in practice, and, in this digital age, there is an increasing awareness that information and data are valuable.  The majority opinion in Food Marketing, written by Justice Gorsuch, squarely repudiated the “substantial competitive harm” test in favor of a less difficult standard, thereby broadening Exemption 4.

It is significant that the justices were unanimous in rejecting the “substantial competitive harm” test.  They disagreed about whether harm has any role to play in Exemption 4.  In an opinion concurring in part and dissenting in part, Justice Breyer explained that he “would clarify that a private harm need not be ‘substantial’ so long as it is genuine.”[2]  In contrast, the majority wouldn’t apply a harm test at all, arguing that such a test is not supported by the statute.  Instead, the majority explained its test as follows: Continue reading

SEC Debuts Roadmap for Resolving Illegal ICOs

by Joseph A. Hall, Michael Kaplan, Edmund Polubinski III, Byron B. Rooney, and Ryan Johansen 

In a pair of settled enforcement actions announced on November 16 in which it concluded that initial coin offerings conducted by Paragon Coin, Inc. (PDF: 232 KB) and AirFox (PDF: 223 KB) were illegal unregistered securities offerings, the SEC imposed an agreed-upon remedy that it will likely seek to use as the template for resolving its backlog of investigations into recent ICOs. Significantly, both ICOs took place after the SEC issued its July 2017 Section 21(a) report (PDF: 168 KB) addressing a crypto-token offering by The DAO, where the SEC warned the market (PDF: 169 KB) that some ICOs may violate the federal securities laws.

Neither Paragon nor AirFox agreed to conduct a “rescission offer” whereby the company would offer to repurchase the illegally offered tokens and any investor who declined the offer would retain freely tradable tokens (a remedy that Google undertook shortly after its IPO in order to resolve claims that certain pre-IPO compensatory equity grants were made in violation of the registration provisions of the Securities Act of 1933). Instead, each company agreed to distribute a “claim form” to all token purchasers offering return of the consideration paid, plus interest, in exchange for tender of the tokens, or offering damages to token purchasers who no longer hold their tokens. Purchasers of tokens located outside the United States are apparently not excluded from participation. Each company was also fined $250,000 and required to register its token as a security and become an SEC-reporting company for at least one year. Continue reading