Opinion
Opinion By: Jack Conway, Attorney General; Amye L. Bensenhaver, Assistant Attorney General
Open Records Decision
The question presented in this appeal is whether records maintained on behalf of The Bank of Kentucky Center by SMG under its contractual relationship with Northern Kentucky University as owner of the Center are governed by the Open Records Act and access to those records was properly denied. For the reasons that follow, we find that those records maintained by SMG for the Center are public records, within the meaning of KRS 61.872(2), but that the Center and SMG properly relied on KRS 61.878(1)(i) and (j) in denying James E. Parsons' August 22, 2008, request to inspect records "regarding contacts" from General Manager Les Crooks and his employees or agents "to or from employees, agents, or representatives of Feld Entertainment, Inc., relating to the circus being scheduled as an event at The Bank of Kentucky Center."
By letter dated August 27, 2008, Mr. Crooks acknowledged that SMG has contracted with NKU "to manage all operations at The Bank of Kentucky Center, including the booking of sports and entertainment events," but maintained that the Open Records Act "does not require independent contractors doing business with public agencies to disclose proprietary records to the general public." Relying on OAG 88-44 for the latter proposition, Mr. Crooks also asserted that the information sought "is highly confidential and any disclosure would seriously undermine SMG's ability to perform under the contract."
Following an unsuccessful request for reconsideration, Mr. Parsons initiated this appeal asserting that:
SMG is much more than a mere vendor [as described in OAG 88-44]. It is the designated operator of a public building constructed at a considerable expense by the Commonwealth of Kentucky. Likewise, the income it generates from the operation of the Center is income of NKU, held in trust for NKU to be used as provided in the Agreement.
In support, he cited paragraph 5.6 of NKU's contract with SMG which expressly provides that all revenues collected by SMG, and arising from the operation of the Center, "are the sole property of [NKU] held in trust by SMG for [NKU] . . . ." Recognizing the necessity of limited redactions for "certain business records" containing confidential information, he nevertheless concluded that public agencies should not otherwise "be able to shield from the reach of the Open Records Act the operation of a major public building simply by contracting their operation to a private company."
On appeal, SMG responds, through its attorney John G. Treitz, Jr., that "SMG is not a 'public agency' subject to the Act[, but] merely performs a service for NKU pursuant to a contract for which it is paid." It is his position that Mr. Parsons' request should be redirected to NKU inasmuch as "information and records regarding the funds generated by The Bank of Kentucky Center . . . are already subject to full accounting to the general public because they are the sole property of NKU and are deposited into NKU's designated accounts." To adopt Mr. Parsons' position, Mr. Treitz concludes, "would subject all contractors and vendors who contract primarily with government or public entities to the requirements of the Act" to the contractor's and vendor's detriment.
Alternatively, Mr. Treitz argues that the requested records are excluded from public inspection by KRS 61.878(1)(c)1. and KRS 61.878(1)(i) and (j). With reference to the former provision, authorizing nondisclosure of records containing information that is "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," he observes:
The contacts, negotiations, and discussions between SMG and Field Entertainment, Inc. ("Feld") related to the circus event at The Bank of Kentucky Center involve terms that are indisputably confidential and proprietary. The terms that SMG is able to negotiate with entertainment groups are part of what makes it both a commercially successful company providing venue management services in many states and a valuable service-provider for NKU. . . . Requiring disclosure of that information to others - which would inevitably include venues competing with the Bank of Kentucky Center to book entertainment groups - would harm SMG, the entertainment groups with whom it negotiates and, ultimately, NKU. It would function to deprive SMG and Feld from any benefit they can derive from their commercial positions, thereby placing them at a competitive disadvantage. This is of particular concern in the instant situation given the stage of negotiations between SMG and Feld. SMG is particularly concerned about its local competitors in the Northern Kentucky-Cincinnati area gaining proprietary information.
In support, Mr. Treitz cites 01-ORD-92.
Additionally, Mr. Treitz notes, "there is no final contract between SMG and Feld 'relating to the circus being scheduled as an event at The Bank of Kentucky,'" no final action on the matter has been taken, and the requested records fall squarely within the parameters of KRS 61.878(1)(i) and (j) as correspondence, drafts, notes and memoranda "regarding the negotiation of the terms and conditions under which the circus event would be held, prior to the execution of a final contract." Having considered these and all other arguments subsequently advanced by the parties to this appeal, we find that although the records to which Mr. Parsons requests access are public records within the meaning of KRS 61.870(2), because they are prepared, owned, and used at the instance of NKU and held by SMG as custodian on NKU's behalf, they are not open records because they qualify for exclusion from public inspection under KRS 61.878(1)(i) and (j).
KRS 61.870(2) provides:
"Public record" means all books, papers, maps, photographs, cards, tapes, discs, diskettes, recordings, software, or other documentation regardless of physical form or characteristics, which are prepared, owned, used, in the possession of or retained by a public agency. "Public record" shall not include any records owned or maintained by or for a body referred to in subsection (1)(h) of this section that are not related to functions, activities, programs, or operations funded by state or local authority. 1
Perforce, records generated by SMG and the entities with which it is conducting negotiations in the discharge of its contractual obligation "to promote, operate, and manage the [Center]" for NKU 2 are prepared, owned, and used at the instance of NKU. They are, fundamentally, NKU's records supporting the fulfillment of these duties. As SMG acknowledges in one of several supplemental responses:
NKU [has] vast contractual oversight of SMG's operations at The Bank of Kentucky Center. NKU has the right to access, review, and audit SMG's books and records and SMG is required to submit a balance sheet, statement of profits and losses, and a statement of cash flows for the Center to NKU on an annual basis. (Agreement Section 6.1.) Additionally, SMG is required to submit an annual budget which is subject to the approval of NKU's Contract Administrator or the Board of Regents. (Agreement Section 5.3(c).) Any modifications to that budget are subject to the same approval and NKU can even initiate its own modifications to the budget. (Agreement Sections 5.4, 5.5.) Further, SMG is required to submit annual plans and monthly reports to NKU regarding the activities and finances of the Center. (Agreement Sections 6.2 - 6.3.)
Disputing Mr. Parsons' characterization of SMG as "exclusive operator of a major public building, " Mr. Treitz observes:
SMG does not have sole and exclusive authority to operate the Center however it wishes. Its authority under the contract is subject to many limitations and NKU reserved much authority. In addition to the budgetary approval and financial and activity reporting discussed above, SMG is required to "follow all policies and guidelines" of NKU. (Agreement Section 2.1.) Other such limitations and reservations include NKU's right to enter all portions of the Center for inspection and observation and "to install, remove, adjust, repair, replace or otherwise handle any equipment, utility lines or other matters in, on, or about the premises, or to do any act or thing which the University may be obligated or have the right to do . . ." (See § 2.4.) NKU also has full ownership of the Center as well as the right to use it and to direct its use for both University and non-University events. (Agreement Sections 9.1, 13.1.) Similarly, the booking and rental rate policy for the Center is subject to NKU's approval. (Agreement Ex. A. P B.2.)
Continuing, Mr. Treitz identifies five other sections of the contract between SMG and NKU in which "NKU reserve[s] control and oversight . . . ."
We find that these factors militate in favor of, rather than against, a determination that SMG holds the disputed records at the instance of and as custodian on NKU's behalf within the meaning of KRS 61.870(6). 3 This office has long recognized that resolution of the issue of a record's status as public or nonpublic turns on the record's nature and purpose, not its location. But for the contractual relationship between NKU and SMG, the requested records would not exist or reside in the custody of the latter. They are public records because they are prepared, owned, and used at the instance of NKU under the contractual relationship.
Nevertheless, we find no error in the Center's and SMG's denial of Mr. Parsons' request on the basis of KRS 61.878(1)(i) and (j). 4 To the same extent that records maintained by SMG, at the instance of and as custodian on NKU's and the Center's behalf, are subject to statutory regulation pursuant to KRS 61.872 to 61.884, those records qualify for statutory protection pursuant to KRS 61.878(1)(a) through (n). KRS 61.878(1)(i) and (j) authorize nondisclosure of:
(i) Preliminary drafts, notes, correspondence with private individuals, other than correspondence which is intended to give notice of final action of a public agency;
(j) Preliminary recommendations, and preliminary memoranda in which opinions are expressed or policies formulated or recommended[.]
In interpreting these exemptions, the Kentucky Supreme Court has declared that:
[d]espite its manifest intention to enact a disclosure statute, the General Assembly has determined that certain records should be excluded from disclosure. Among such records are . . . "preliminary drafts, notes, . . . other than correspondence which is intended to give notice of final action of a public agency" (KRS 61.878(1)(i)), and "preliminary recommendations, and preliminary memoranda in which opinions are expressed or policies formulated or recommended" (KRS 61.878(1)(j)). From these exclusions we must conclude that with respect to certain records, the General Assembly has determined that the public's right to know is subservient to . . . the need for governmental confidentiality.
Beckham v. Board of Education of Jefferson County, 873 S.W.2d 575, 577-78 (Ky. 1994). Guided by these principles, and an evolving body of case law, the Attorney General has consistently recognized that public records that are preliminary in nature qualify for exclusion only if they consist of drafts, notes, or correspondence with private individuals and/or recommendations or memoranda in which opinions re expressed or policies formulated, and that such records forfeit their exempt status if they are adopted by the agency as part of its final action.
City of Louisville v. Courier-Journal and Louisville Times, 637 S.W.2d 658 (Ky. App. 1982);
Kentucky State Board of Medical Licensure v. Courier-Journal and Louisville Times Co., 663 S.W.2d 953 (Ky. App. 1983); University of Kentucky v. Courier-Journal and Louisville Times Co., above; see also, 01-ORD-83; 02-ORD-25; 03-ORD-030; 04-ORD-187; 06-ORD-061.
The records at issue in this appeal are described as "contracts, correspondence, drafts, notes, and memoranda exchanged between Feld and SMG and those generated within SMG regarding the negotiation of the terms and conditions under which the circus event would be held, prior to the execution of a final contract . . . ." Whether generated within SMG or between SMG and Feld, they enjoy protection under the cited exemptions until final action is taken, and after final action is taken if they are not adopted as part of that final action or if they otherwise qualify for statutory exclusion. 5 We therefore affirm the Center's and SMG's reliance on KRS 61.878(1)(i) and (j) as the basis for denying Mr. Parsons' request.
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 KRS 61.870(1)(h) defines as a public agency:
Any body which derives at least twenty-five percent (25%) of its funds expended by it in the Commonwealth of Kentucky from state or local authority funds[.]
Because the records identified in Mr. Parsons' request are public records of NKU, not SMG, because they are prepared, owned, and used at NKU's instance and on its behalf, we are spared debate on the issue of the application of the final sentence of KRS 61.870(2) to the records.
2 Pre-Opening Consulting and Management Agreement Between Northern Kentucky University and SMG, Section 2.1 (dated as of October 15, 2005).
3 KRS 61.870(6) defines "custodian" to mean "the official custodian or any authorized person having personal custody and control of public records. "
4 We find unpersuasive the Center and SMG's reliance on KRS 61.878(1)(c)1. to support nondisclosure of the requested records. That exemption authorizes the withholding of:
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[.]
This 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. "It is, in general, inapplicable to records generated by or for a public agency. " 01-ORD-87, p. 7, cited in 01-ORD-143 and 01-ORD-153. The records at issue in this appeal are, consistent with the analysis set forth above, records held by SMG as custodian on NKU's behalf and not records of a private entity. The only competitive disadvantage described redounds to the detriment of the Center and SMG, not Feld, the private entity, whose records might otherwise qualify for protection under this exemption.
5 It is possible that a persuasive argument could be made that the records for which SMG claims protection under KRS 61.878(1)(c)1. qualify for protection. It is incumbent on SMG and The Center to meet the statutorily assigned burden of proof in making such an argument.