Request By:
[NO REQUESTBY IN ORIGINAL]
Opinion
Opinion By: Albert B. Chandler III, Attorney General; James M. Ringo, Assistant Attorney General
Open Records Decision
The issue presented in this appeal is whether the Eastern Kentucky Correctional Complex (EKCC) and the Department of Corrections properly relied upon KRS 61.878(1)(c)1. in denying the open records request of Barbara Ross for a copy of the "contract between Proctor & Gamble and Eastern Kentucky Correctional Complex - Prison Industry Coupons. "
Responding on behalf of EKCC, Martha Stacy, Records Custodian, denied the request, stating:
Per KRS 61.878, contract information pertaining to the processing of data, information and pricing, if disclosed, could provide competitors with an unfair advantage, can be denied.
After receipt of Notification to Agency of Receipt of Open Records Appeal, Tamela Biggs, Staff Attorney, Department of Corrections, provided this office with a response to the issues raised in the appeal. Elaborating on the agency's original response, Ms. Biggs explained:
The response to the request was partially correct: however, the full citation of the appropriate statutory provision was not included. KRS 61.878(1)(c)(1) exempts from disclosure "records confidentially disclosed to an agency or required by an agency to be disclosed to it, generally recognized as confidential or proprietary, which if openly disclosed would permit an unfair commercial advantage to competitors of the entity that disclosed the records." The contract includes language regarding formulas or processes and codes that Proctor and Gamble (P&G) requires the institution utilize to fulfill the processing of the coupons and special offers. Release of such information would permit a competitor access to practices and information that could then be pirated for its own use to the detriment of P&G. If P&G entered into the same agreement with a private entity, the information would be recognized as proprietary and not subject to disclosure. The fact that P&G entered into the agreement with a state institution via Correctional Industries should not automatically strip the proprietary information of its status. To hold otherwise, would impact the state's ability to enter into agreements with private industry.
To facilitate this offices review of this appeal, we requested that the Department provide us with a copy of the record in question for an in camera review of its contents. That document was not disclosed to other parties and has since been destroyed. KRS 61.880(2)(c); 40 KAR 1:030, Section 3.
We are asked to determine whether EKCC's denial of the request for a copy of the contract was consistent with the Open Records Act. For the reasons that follow, we conclude that the agency's blanket denial of the request was a violation the Act, as it failed to meet the required burden of proof to sustain such an action. However, we conclude that the EKCC may properly redact that portion of the contract that contains sensitive formulas or processes and codes or other proprietary information, generally recognized as confidential or proprietary, the disclosure of which would allow an unfair commercial advantage to P&G's competitors. KRS 61.878(1)(c)1.
This office has consistently recognized that in order to qualify for exclusion under KRS 61.878(1)(c)1., public records must be:
1. confidentially disclosed to an agency or required by an agency to be disclosed to it;
2. generally recognized as confidential or proprietary; and
3. of such a character that disclosure would permit an unfair commercial advantage to competitors of the entity that disclosed them.
See, e.g., 96-ORD-135; 97-ORD-66; 97-ORD-132. On at least two occasions, the Kentucky Supreme Court has analyzed this provision, concluding that the public agencies, which had invoked it, met their statutory burden of proof. In
Marina Management Services, Inc. v. Cabinet for Tourism, Ky., 906 S.W.2d 318 (1995), the Court held that records containing financial information of privately owned marina operators were exempt from disclosure. The Court reasoned that disclosure would provide an unfair advantage to competitors by allowing them to ascertain the economic status of the marina operators. At page 319 of that opinion, the Court observed:
The records submitted to the Parks Department include information on asset values, notes payable, rental amounts on houseboats, related party transactions, profit margins, net earnings, and capital income. These are records of privately owned marina operators, disclosure of which would unfairly advantage competing operators. The most obvious disadvantage may be the ability to ascertain the economic status of the entities without the hurdles systematically associated with acquisition of such information about privately owned organizations. Further, the facts on the record indicate that the audit statements were disclosed confidentially to Tourism and the Auditors Office. On these facts alone, the exemption clearly applies.
Thus, the Parks Department adduced sufficient proof to support invocation of the exemption.
Similarly, in
Hoy v. Kentucky Industrial Revitalization Authority, Ky., 906 S.W.2d 766 (1995), the Court found:
The financial information required to be submitted by GE in its application to KIRA detailed the company's business and revitalization project. Under administrative regulations adopted by KIRA, such information included a financial history of the corporation, projected cost of the project, the specific amount and timing of capital investment, copies of financial statements and a detailed description of the company's productivity, efficiency and financial stability. . . . It does not take a degree in finance to recognize that such information concerning the inner workings of a corporation is "generally recognized as confidential or proprietary" and falls within the wording of KRS 61.878(1)(c)(2).
Here again, the public agency from which access to confidentially disclosed records of a private corporation was sought established that those records were generally recognized as confidential or proprietary. These cases, along with the cited open records decisions, confirm that the burden of proving that the records withheld for exclusion, under KRS 61.878(1)(c)1. or 2., rests with the agency.
In the instant appeal, the agency denied access to the contract in its entirety. It did not present evidence that all the information contained in the document was of a confidential or proprietary nature, thus authorizing its nondisclosure. Thus, we conclude it failed to meet its burden of establishing that the entire contract was exempt under KRS 61.878(1)(c)1.
The Department's response generally described the information in the contract which it considered confidential or proprietary, such as the formulas or processes and codes that P&G required the institution to use in its processing of the coupons and special offers under the contract. It further explained that disclosure of this information to P&G's competitors would provide them access to practices and information that could be then pirated for their own use to the detriment of P&G. Our in camera review of the contract substantiated the Department's general description of the confidential or proprietary information contained within the contract.
Based on these facts, we conclude that confidential or proprietary information in the contract, such as the formulas or processes and codes, which was submitted to the agency in confidence to enable the institution to process the coupons, as required by the contract, could be properly withheld from disclosure under KRS 61.87891)(c)1.
KRS 61.878(4) provides:
If any public record contains material which is not excepted under this section, the public agency shall separate the excepted and make the nonexcepted material available for examination.
This provision applies to all public records in which exempt and nonexempt information is commingled, including those qualifying for partial exemption under KRS 61.878(1)(c)1. Accordingly, the Department, pursuant KRS 61.878(4), may redact the confidential or proprietary information, such as described in its response, and make the remainder of the contract available for Ms. Ross' inspection. The Department must specifically identify those portions of the contract withheld and explain how each portion qualifies for exclusion pursuant to KRS 61.878(1)(c)1., and articulate the basis for denial in terms of the requirements of that exception.
In view of the time that has already elapsed since Ms. Ross submitted her request, the Department should move expeditiously to redact protected information in the contract, and make the nonexcepted material available for inspection within the statutory three day period of limitation. KRS 61.878(4); KRS 61.880(1).
A party aggrieved by this decision may appeal it by initiating action in the appropriate circuit court pursuant to KRS 61.880(5) and KRS 61.882. Pursuant to KRS 61.880(3), the Attorney General should be notified of any action in circuit court, but should not be named as a party in that action or in any subsequent proceeding.