04-ORD-175 | KOGC

Opinion

Opinion By: Gregory D. Stumbo,Attorney General;Michelle D. Harrison,Assistant Attorney General

Open Records Decision

At issue in this appeal is whether the Environmental and Public Protection Cabinet, Department of Labor violated the Kentucky Open Records Act in partially denying the request of Kara L. McCall for specified appendices from the "CSHO Option Report # S0138-019-03, in connection with Federal Inspection # 3059010440 at the CTA Acoustics, Inc., establishment," and "the CHSO/Option Report # H0076-0005-03, in connection with Federal Inspection # 3059016579 at the CTA Acoustics-Acquisition Corp. establishment." Consistent with governing precedent, this office concludes that the Department has not adduced sufficient proof to support its invocation of KRS 61.878(1)(c)1. 1

By letter dated February 10, 2004, Margaret Goodlett Miles, Paralegal, responded on behalf of the Department. Because the files containing the requested appendices concerned ongoing litigation, the Department initially denied Ms. McCall's request on the basis of KRS 61.878(1)(h). 2 As explained by the Department, "the premature release of information could jeopardize administrative adjudication by releasing strategies for hearing or witnesses." Accordingly, the Department advised Ms. McCall to resubmit her request in ninety days if she needed additional information from the file in question.

In a letter received by this office on August 19, 2004, Ms. McCall appealed the Department's denial of her request. Attached to Ms. McCall's letter of appeal are lists of the appendices to which she is requesting access. 3 According to Ms. McCall:

The Department has refused to produce the requested appendices pursuant to KRS 61.878(1)(h), on the ground that the files are currently in litigation, and that the "premature release of information could jeopardize adjudication by releasing strategies for hearing or witnesses." However, it appears that most, if not all of the appendices are documents produced by CTA Acoustics, Inc., in the course of the Department's investigation, which would not reveal the Department's strategies. Specifically, all of the appendices to the report # S0138-019-03, other than Appendix F, J, K, S, and T, appear to be documents produced to the Department by CTA Acoustics, Inc. With regard to Report # H076-005-03, all of the appendices, other than Appendix D, P, Q, and X, appear to be documents produced by CTA Acoustics, Inc., or documents that are otherwise publicly available.

Further, it is our understanding that the Department has now issued two reports of its investigation and its conclusions and has issued various citations against CTA Acoustics, Inc., which have been paid and abated.

Upon receiving notification of Ms. McCall's appeal from this office, Ms. Miles supplemented the Department's response via facsimile. As explained by Ms. Miles:

The CTA Acoustics case has been settled and a Final Order received since Ms. McCall's February request. The most expeditious route to receive[] the non-exempt material from the file is for Ms. McCall to resubmit her request. Copies of all non-exempt appendices will be provided[.] [H]owever, those portions classified as "trade secrets" will be withheld pursuant to KRS 61.878(1)(c)1., which includes records confidentially disclosed to an agency 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.

On September 9, 2004, however, Ms. Miles forwarded copies of the Department's final responses to Ms. McCall dated August 30, 2004, and August 31, 2004, respectively, to this office via facsimile. 4 As agreed, the Department released certain appendices to Ms. McCall but denied her request as to the remaining appendices listed on the following basis:

Pictures and information involving the company's procedures for processing materials have been removed as they are considered "Trade Secrets" pursuant to KRS 61.878(1)(c)1, which includes records confidentially disclosed to an agency generally recognized as confidential or proprietary. The company has identif[ied] the following appendices as trade secrets: A, B, C, E, F, G, H, I, J, K, L, M, N, O, R, T, U, V, W, Z, AA, BB, CC, FF, and GG. Copies of all other appendices are enclosed.

* * *

. . . [With respect to Inspection # 305910440,] [t]he company has identif[ied] the following appendices as trade secrets: A, B, C, D, E, G, H, I, L, M, N, O, P, Q, R, U, V. 5

Although our research has revealed no authority that is directly on point, both the courts and this office have been asked to interpret KRS 61.878(1)(c)1. in various contexts. To successfully invoke KRS 61.878(1)(c)1., a public agency must establish that the public records in dispute are:

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.

03-ORD-064, p. 5; 02-ORD-125; 99-ORD-88. As consistently recognized by this office:

The General Assembly has declared "that the basic policy of KRS 61.870 to 61.884 is that free and open examination of public records is in the public interest and the exceptions provided for by KRS 61.878 or otherwise provided by law shall be strictly construed . . . ." KRS 61.871. Consistent with this policy, the General Assembly has assigned the burden of proof to the public agency in an open records appeal to this office or the circuit court. KRS 61.880(2)(c); KRS 61.882(3). The Attorney General is thus bound by a rule of strict construction in interpreting the exceptions to the Open Records Act, and all doubts must be resolved in favor of disclosure.

99-ORD-88, p. 5, citing 96-ORD-221, p. 2. In determining whether the Department has met its burden of proof relative to KRS 61.878(1)(c)1., therefore, our analysis is necessarily guided by this fundamental principle.

KRS 61.880(1) dictates the procedure which a public agency must follow in responding to a request submitted pursuant to the Open Records Act. KRS 61.880(1), in relevant part, provides that an "agency response denying, in whole or in part, inspection of any record shall include a statement of the specific exception authorizing the withholding of the record and a brief explanation of how the exception applies to the record withheld. " 6 In construing the mandatory language of this provision, the Kentucky Court of Appeals has observed: "The language of the statute directing agency action is exact. It requires the custodian of records to provide particular and detailed information in response to a request for documents." Edmondson v. Alig, Ky. App., 926 S.W.2d 856, 858 (1996). A "limited and perfunctory response," does not "even remotely compl[y] with the requirements of the Act . . . ." Id. Although the Department cited the statutory exception which arguably applies, the Department failed to provide even a brief explanation of how the exception applies to the records withheld. Absent proof that the records in dispute were confidentially disclosed to the Department or required to be disclosed to it, are generally recognized as confidential or proprietary, and are of such a character that disclosure would provide an unfair commercial advantage to competitors of ATC, this office must conclude that the Department has failed to substantiate its position.

At issue in 96-ORD-135 was whether the Kentuckiana Regional Planning and Development Agency had properly relied upon KRS 61.878(1)(c)1. in partially denying the request of ElderServe, Inc. for copies "of the 1996-1999 contract proposals, including the unit price calculation worksheets, the provider staffing matrix and the documents included in the sealed bid packages . . ." for Title 111-B proposals submitted by competing agencies. In denying Elderserve's request as to the documents included in the sealed bid packages, the KRPDA merely parroted the language of KRS 61.878(1)(c)1. Id., p. 1. On appeal, the KRPDA indicated that the records which had been withheld were marked "confidential proprietary information" by the agencies required to disclose the records as a basis for determining the adequacy of their respective bids. Id., p. 2. According to the KRPDA, ElderServe knew "that unit price calculations and the staffing matrix are the essentials generally recognized confidential proprietary data [sic] of the business in which they and their competitors are engaged." Id. Citing prior decisions of this office, the KRPDA argued that the records in dispute were "'confidential in nature, disclosed and marked [as] confidential, proprietary in content, partaking of the value of a trade secret . . . [and] would, if disclosed, provide[] unfair business advantages." Id.

Noting that KRS 61.878(1)(c)1. had generally been construed to exclude bid proposals, the Attorney General also reiterated that "once those bids are open and a vendor selected," bid proposals which contains secret commercial valuable plans and formulas may qualify for exclusion under this provision. Id. Resolution of the appeal therefore turned on whether the records in dispute could be analogized to the bids at issue in OAG 83-256, OAG 83-302, OAG 88-1, and 92-ORD-1132, or were more closely akin to bids on advertised specifications which had traditionally been viewed as open to public inspection. Id., p. 3. In concluding that the KRPDA had not met its burden of proof, this office employed the following analysis:

For example, in OAG 83-256 we recognized that a proposal submitted in response to an RFP for an automated certification and issuance system for the food stamp program administered by CHR contained material in which the entity submitting the proposal had a proprietary interest within the meaning of KRS 61.878(1)(c), formerly codified as KRS 61.878(1)(b). At page 6 of that opinion, we noted:

See also, OAG 83-302 (adopting the reasoning of OAG 83-256).

Similarly, in OAG 88-1 we held that a bid proposal submitted in response to an RFP issued by the Finance and Administration Cabinet, Division of Purchases, contained secret commercially valuable plans and formulas which if openly disclosed would permit an unfair advantage to competitors of the entity submitting the proposal, including consolidated financial statements, project narratives, summary experience charts, work plans, and pricing schedules.

In 92-ORD-1134, we identified the distinguishing feature which led to the results in these decisions:

92-ORD-1134, p. 5-6. In the latter decision, we held that the City of Paducah properly relied on KRS 61.878(1)(c)1. in withholding a proposal for an 800 MHZ Trunked Radio Communication System which contained specific detail relative to items of equipment to be used in implementing the system, as well as site selection, charts, maps, and diagrams designed by the entity submitting the proposal for the purpose of carrying out the city's objectives. The city amply demonstrated that the system might serve as a prototype for similar systems elsewhere, and that the entity submitting the proposal therefore had a proprietary interest in that proposal such that disclosure would provide its competitors with an unfair commercial advantage.

96-ORD-135, pp. 2, 3.

Prior to the issuance of 96-ORD-135, the Kentucky Supreme Court examined the scope of KRS 61.878(1)(c) on two occasions, concluding that the public agencies which had invoked 61.878(1)(c)1., and 61.878(1)(c)2., 7 respectively, had met their burden of proof by conclusively establishing that the records withheld were confidentially disclosed or required to be disclosed, generally recognized as confidential or proprietary and otherwise qualified for exclusion under the express terms of the applicable exception. In Marina Management Services, Inc. v. Cabinet for Tourism, Ky., 906 S.W.2d 318, 319 (1995), the Court held that records containing financial information of privately owned marina operators are exempt from disclosure. As 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 Auditor's Office. On these facts alone, the exemption clearly applies.

Id. Because the evidence of record supported the Parks Department's invocation of KRS 61.878(1)(c)1., the Court held that the records qualified for exemption under KRS 61.878(1)(c)1. No such evidence has been presented here.

In Hoy v. Kentucky Industrial Revitalization Authority, Ky., 906 S.W.2d 766, 768 (1995), the Court concluded:

The financial information required to be submitted by GD 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).

As in Marina Management Services, the public agency to which a private corporation was required to confidentially disclose records established that the records being sought were generally recognized as confidential or proprietary. 8 Noticeably lacking from the record on appeal is any evidence establishing that the appendices still at issue were confidentially disclosed to the Department, much less "generally recognized as confidential or proprietary" or of such a character that disclosure would "permit an unfair commercial advantage to competitors" as alleged by the Department. 9

A review of the cited authorities confirms that the public agency has the burden of proving that the records withheld qualify for exclusion under KRS 61.878(1)(c). In support of its position, however, the Department merely cites the language of the statutory exception which purportedly applies and is silent as to how. An unsupported allegation such as "[p]ictures and information involving the company's procedures for processing materials have been removed as they are considered 'trade secrets'" does not constitute sufficient evidence to establish that the records qualify for exclusion under KRS 61.878(1)(c)1. To the contrary:

Without going into an exhaustive and highly technical explanation, and thus defeating the purpose for which the exception was invoked, we believe [the Department] could have [clarified whether the appendices were confidentially disclosed or required to be disclosed to it,] offered a brief description of the competitive harm the private entit[y] might suffer as a result of disclosure, and some proof, beyond a bare assertion, that the disputed records are generally recognized as confidential or proprietary. If, for example, [the Department] had made the case that the [appendices] developed by [ATC are] of such a unique and original character that a competitor might misappropriate [them] for its own use, thus depriving the bidder of its proprietary interest in the [appendices], it would, at least arguably, meet its burden of proof.

96-ORD-135, p. 4.

As long recognized by this office, "a bare allegation, without a supporting explanation, is not sufficient under the Open Records Act. " 96-ORD-135, p. 4, citing 95-ORD-107. 02-ORD-125. Unless the Department can satisfy its statutory burden of proof by articulating a basis for withholding the remaining appendices in terms of the requirements codified at KRS 61.878(1)(c)1., the Department must disclose those appendices to Ms. McCall. 10 In so holding, however, this office does not mean to suggest that the Department cannot develop a successful case under KRS 61.878(1)(c)1. for withholding some or all of the appendices, only that the Department has not developed such a case here. If the Department can articulate a basis for withholding the appendices, or portions thereof, in terms of the applicable statutory exception, the Department may properly withhold those records upon providing Ms. McCall with a particular and detailed explanation of how the exception applies to the records withheld in lieu of the blanket denial which prompted this appeal. With respect to those appendices which the Department has already disclosed, any related issues are now moot. 11

A party aggrieved by this decision may appeal it by initiating an 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.

Kara L. McCallSidley Austin Brown & Wood LLPBank One Plaza10 S. Dearborn StreetChicago, IL 60603

Margaret Goodlett MilesEnvironmental and Public Protection CabinetDepartment of Labor1047 US HWY 127 S STE 4Frankfort, KY 40601

Les RenkeyGeneral CounselEnvironmental and Public Protection CabinetDepartment of Labor1047 US HWY 127 S STE 4Frankfort, KY 40601

Footnotes

Footnotes

1 KRS 61.878(1)(c)1. excludes the following public records from the application of KRS 61.870 to 61.884:

Upon and after July 15, 1992, 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[.]