Request By:
Ben Elgin
Frank Butler
Barbara Jones
Katherine A. Adams
Opinion
Opinion By: Jack Conway, Attorney General; Amye L. Bensenhaver, Assistant Attorney General
Open Records Decision
The question presented in this appeal is whether the University of Kentucky properly relied on KRS 61.878(1)(c)1. in denying Business Week correspondent Ben Elgin's February 12, 2008, open records request for "copies of credit card agreements and contracts entered into by the University of Kentucky, its athletics department, and/or its alumni association." For the reasons that follow, we find that although its original response to Mr. Elgin's request was improper, the University's ultimate reliance on KRS 61.878(1)(c)1. to support nondisclosure of the requested record was proper. We therefore affirm the University's denial of that request.
In a response dated February 14, 2008, Records Custodian Frank Butler advised that neither the University nor its Athletics Department had entered into any agreements with credit card companies "as described." He explained that because the Alumni Association "is not a state agency [or] an affiliated corporation of the University of Kentucky," he was not the Association's custodian of records and did "not have custody or control of the requested agreement."
In response to a subsequent request, the University furnished Mr. Elgin with a copy of "a memorandum dated December 5, 2007, from [Mr. Butler] to the Alumni Association Director, relating to the authorization for credit card representation with the University of Kentucky Alumni Association." Based on his review of that memorandum, Mr. Elgin questioned Mr. Butler's position that he did "not have custody or control of the requested agreement," and by correspondence dated February 21, 2008, resubmitted his request for a copy of the affinity credit card contract.
On March 7, 2008, the University acknowledged possession of the contract 1 but denied Mr. Elgin's resubmitted request, invoking for the first time KRS 61.878(1)(c)1. Mr. Butler cited language from 03-ORD-235, asserting:
[I]n addition to the fact that the parties to this agreement view the agreement as confidential, the University has made its own independent examination of the agreement. The credit card industry and affinity agreements are routinely reported to be highly competitive, with a great deal of competition for a limited amount of business. The terms contained in this agreement would both appear to provide otherwise proprietary information to competitors, and provide a competitive advantage. This same set of facts is exactly the reasoning that led the Attorney General to conclude in 03-ORD-235 that under similar findings, even a contract directly with the state was exempt. In this instance, the contract is not with the University or another state agency, the terms were confidentially disclosed to the University, the agreement is recognized by all parties as confidential (this determination is based both upon the advice of the Alumni Association and confirmed by our own independent review), and disclosure of the requested agreement would permit an unfair commercial advantage to competitors.
Shortly thereafter, Mr. Elgin initiated this appeal.
On appeal, Mr. Elgin argued that "[r]oyalties and other payments under credit card contracts with universities and alumni associations are not top secret," and that the public is entitled to know the degree to which University students are targeted by the contract, the University's obligations to make students available to solicitations, and the amount of remuneration received by the Association and/or the University. In support, he identified a university, a university athletics department, and a university alumni association that released unredacted copies of their contracts with First USA/Chase, and other universities, university athletic departments, and university alumni associations that released unredacted copies of their contracts with "First USA/Chase's primary competitor in affiliate credit cards, MBNA (now Bank of America)."
In supplemental correspondence directed to this office following commencement of Mr. Elgin's appeal, Associate General Counsel Katherine A. Adams expanded on the University's position. Ms. Adams emphasized that the University "has produced for Mr. Elgin the only responsive document which outlines its involvement or obligations," specifically, the December 5, 2007, memorandum from Frank Butler to the Association, and apparently offered to provide him with a redacted copy of the agreement that excluded "the financial arrangements between two private parties . . . ." She reemphasized that "the credit card and affinity credit card program is a highly competitive market and business terms are generally recognized as confidential and proprietary. " Citing two internet articles on this topic, she concluded:
[B]oth Chase Bank USA, N.A. and [the Association] have determined that sharing the terms of the agreement, and not just the financial terms but the business and operational terms, would harm them.
In support, Ms. Adams attached the affidavit of Karen W. Albright, Senior Manager of Partnership Marketing for Chase Bank USA, N.A., in which Ms. Albright averred:
Not only are the specific royalties and payments proprietary, but all of the various terms and commitments which make up the agreement are proprietary. Disclosure of the agreement to Chase's competitors would permit an unfair commercial advantage to the parties who compete with Chase.
Having considered the arguments advanced by each of the parties, we agree with the University.
As the University correctly observes, the Kentucky Attorney General has never been called upon to review a public agency's denial of a request for a contract between that agency and a credit card company much less a contract between an ostensibly private entity 2 and a credit card company that is "casually possessed" 3 by the agency. We have, however, on a number of occasions, reviewed public agency denials of request for records characterized by the agency as confidential and proprietary for which exemption is claimed under KRS 61.878(1)(c)1., consistently recognizing that to qualify for exclusion under this exception, 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; 01-ORD-87.
KRS 61.878(1)(c)1. thus authorizes public agencies to withhold:
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.
On at least two occasions, the Kentucky Supreme Court has affirmed public agency denials of open records requests based on this exception. In Marina Management Services, Inc. v. Cabinet for Tourism, 906 S.W.2d 318 (Ky. 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, 907 S.W.2d 766 (Ky. 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 and proprietary" . . . .
Hoy at 768. Again the public agency from which access to confidentially disclosed records of a private entity were sought established that those records were generally recognized as confidential or proprietary.
These cases, along with the cited open records decisions, demonstrate that the burden of proving that the records withheld qualify for exclusion under KRS 61.878(1)(c)1. rests with the public agency. That exception "is aimed at protecting records of private entities which, by virtue of involvement in public affairs, must disclose confidential or proprietary records to a public agency, if disclosure of those records would place the private entities at a competitive disadvantage." 97-ORD-66, p. 10 (emphasis added). In the appeal now before us, that involvement arises from the Association's voluntary, and clearly confidential, submission of the agreement to the University to secure the University's consent to use its logo, to provide lists of students, to permit the Association to "set up tables at athletic events" (presumably for the purpose of marketing the credit cards), and to "forbear from offering other bank affinity cards . . . ."
The University has effectually promoted the public interest in monitoring its conduct vis-a-vis the affinity credit card agreement between the Association and Chase Bank USA, N.A. by releasing the December 5, 2007, memorandum from Mr. Butler to the Association. Although there is a countervailing public interest in scrutinizing the Association's and Chase Bank USA, N.A.'s conduct, which Mr. Elgin eloquently articulates, that interest is not an "Open Records Act related public interest in disclosure" to which we must give deference. Zink v. Commonwealth, 902 S.W.2d 825, 829 (Ky. App. 1994). Analyzing the rationale supporting the public's right to know, in Zink the Kentucky Court of Appeals observed:
While binding precedent has yet to clearly speak to the point, we believe that the only relevant public interest in disclosure to be considered is the extent to which disclosure would serve the principal purpose of the Open Records Act. This is the approach the United State Supreme Court has taken in a similar analysis of requests under the Freedom of Information Act (FOIA). See Dept. of Justice v. Reporters Comm. For Freedom of Press, 489 U.S. 749, 774-75, 109 S. Ct. 1468, 1482-83, 103 L. Ed. 2d 774, 796-97 (1989). As stated in Board of Examiners [v. Courier-Journal and Louisville Times Co., 826 S.W.2d 324 (Ky. 1992)], "[t]he public's 'right to know' under the Open Records Act is premised upon the public's right to expect its agencies properly to execute their statutory functions. In general, inspection of records may reveal whether the public servants are indeed serving the public and the policy of disclosure provides impetus for an agency steadfastly to pursue the public good." 826 S.W.2d at 328. At its most basic level, the purpose of disclosure focuses on the citizens' right to be informed as to what their government is doing. That purpose is not fostered however by disclosure of information about private citizens that is accumulated in various government files that reveals little or nothing about an agency's own conduct. The relevant public interest supporting disclosure in this instance is nominal at best.
Zink at 828, 829.
The University provides ample support for its position that disclosure of the terms and conditions of the Association's contract with Chase Bank USA, N.A., from which competitive marketing strategies can be extrapolated, would permit an unfair commercial advantage to its competitors. The fact that other universities, university athletic departments, and university alumni associations, apparently including the University of Louisville, have elected to waive any statutory protection these records might otherwise enjoy does not alter our analysis. 4 We affirm the University of Kentucky's reliance on KRS 61.878(1)(c)1. to support nondisclosure of the Alumni Association's contract with Chase Bank USA, N.A. because that contract was confidentially disclosed to the University, is generally recognized as confidential or proprietary, and of such a character that disclosure of its terms and conditions would permit an unfair advantage to competitors.
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.
Footnotes
Footnotes
1 The University offers no explanation for this factual discrepancy. Whatever the reason for the University's original denial of Mr. Elgin's request on the basis that it did not possess a copy of the contract, that response was erroneous.
2 Because Mr. Elgin's request was directed to the University of Kentucky, not the Association, and the University maintains a copy of the contract, we need not address the issue of whether the Association is a public agency for open records purposes.
3 Although the concept of casual possession has been all but abandoned by this office, we have, on rare occasions, recognized that "[w]hen legal authority vests absolute custody and control of records in the entity from which the casual possessor obtained the records, and that entity has made clear its intent to retain custody and control, the casual possessor is largely relieved of its duties under the Open Records Act. " 00-ORD-129; 98-ORD-100; 94-ORD-155; OAG 83-342; compare 07-ORD-045.
4 See OAG 79-275 (recognizing that "[t]he exemptions are convenient shields which public officials may use when they desire to do so, not restraints to keep them from opening up any records in their custody" ). The exemptions are thus permissive and not mandatory.