Opinion
Opinion By: Jack Conway, Attorney General; James M. Herrick, Assistant Attorney General
Open Records Decision
The question presented in this appeal is whether the University of Louisville Foundation, Inc. ("the Foundation") and Nucleus: Kentucky's Life Sciences and Innovation Center, LLC ("Nucleus") violated the Open Records Act in denying Courier-Journal reporter Joe Gerth's July 31, 2012, request for "access to and copies of any signed leases or letters of intent to occupy the first new building in the Nucleus Innovation Park -- Market Street." Evidently Nucleus and the Foundation are intended to be the lessors of the buildings under development. We find no violation of the Act.
On August 7, 2012, Kenyatta Martin of the Foundation responded to Mr. Gerth's request, on behalf of the Foundation and Nucleus, stating as follows:
With respect to your request relating to signed leases, the Foundation does not maintain records responsive to your request. Additionally, KRS 61.878(1)(i) and (j) exclude from the Foundation's general disclosure obligations under the Act "[p]reliminary drafts, notes, correspondence with private individuals, other than correspondence which is intended to give notice of final action of a public agency; " and "[p]reliminary recommendations, and preliminary memoranda in which opinions are expressed or policies formulated or recommended." The letters of intent you have requested are preliminary in nature and are not final agency action because the transactions between the parties are still subject to negotiations. Therefore, the Foundation will not make the letters of intent available as it is excluded from the Foundation's disclosure obligations under these provisions. See OAG 91-21.
Should you wish to resubmit your request once the leases have been finalized and executed, the Foundation will honor your request subject to any applicable exemptions in the Act.
The Foundation and Nucleus do not contest that they are "public agencies" within the meaning of KRS 61.870(1). An appeal was initiated on August 30, 2012, by attorney Jon L. Fleischaker.
The Courier-Journal contends, in essence, that the Foundation's response did not clearly state whether any signed leases existed, and that the exemptions in KRS 61.878(1)(i) and (j) do not apply to the letters of intent because:
The Attorney General has consistently refused to apply the exceptions to a document submitted to a public agency with the expectation that the public agency will take some action upon it. [Citations omitted.] Here, the signed letters of intent are submitted to Nucleus and the Foundation precisely for those agencies to rely upon them in taking actions. The letters of intent are binding legal documents upon which the Foundation, Nucleus and the tenants rely for such things as financing, construction specifications, the ability to offer space to other tenants, and the provision of services by Nucleus to the tenants.
In regard to Mr. Gerth's request for signed leases, we note that a public agency cannot afford a requester access to a record that it does not have or that does not exist. 99-ORD-98. The agency discharges its duty under the Open Records Act by affirmatively so stating. 99-ORD-150. In this instance, the Courier-Journal argues that the Foundation did not affirmatively state this to be the case. See 02-ORD-144, p. 3 ("[A]n agency's inability to produce records due to their nonexistence is tantamount to a denial and ? it is incumbent on the agency to [state their nonexistence] in clear and direct terms? While it is obvious that an agency cannot furnish that which it does not have or which does not exist, a written response that does not clearly so state is deficient"). We believe, however, that the statement "the Foundation does not maintain records responsive to your request" was sufficiently clarified by the last sentence, "Should you wish to resubmit your request once the leases have been finalized and executed, the Foundation will honor your request subject to any applicable exemptions in the Act." (Emphasis added.) Therefore, we conclude that the Foundation did not violate KRS 61.880(1), which provides that a public agency "shall notify in writing the person making the request, within the three (3) day period, of its decision" regarding the records in question.
The Foundation and Nucleus responded to the appeal on September 17, 2012, with a letter from attorney David E. Saffer. Mr. Saffer explicitly states that there are no signed lease agreements and argues that the Foundation's original response sufficiently indicated that fact, an argument with which we agree. With regard to the applicability of KRS 61.878(1)(i) and (j) to the letters of intent, he states:
[T]he extent of the actions taken by the Foundation and Nucleus regarding the leasing of space in the Nucleus Innovation Center -- Market Street has been to receive the seven letters of intent in question. The letters of intent are preliminary because they are nonbinding and relate to the possible leasing of space in the new Market Street building. They all provide that the possible leasing of space is subject to the completion of the construction of the building, execution of a binding lease agreement on terms mutually acceptable to the parties, and approval of the lease agreement by the governing body of each of the parties. None of these conditions have been satisfied. Additionally, the letters of intent have not been used as a basis to obtain financing for the project. Premature disclosure of the letters of intent could seriously compromise the project by jeopardizing negotiations among the parties and would have a chilling effect with respect to attracting new potential tenants.
Mr. Saffer also adds an argument that KRS 61.878(1)(d) applies:
Additionally, six of the letters of intent are exempt from the Act's general disclosure obligation pursuant to KRS 61.878(1)(d), which applies to "[p]ublic records pertaining to a prospective location of a business or industry where no previous public disclosure has been made of the business' or industry's interest in locating in, relocating within or expanding within the Commonwealth." With the exception of the potential tenants The Center for Lifelong Wellness and Aging Care and the International center for Long Term Care Innovation, there has been no previous public disclosure regarding the potential tenants' interest in locating in, relocating within or expanding within the commonwealth. The fact that there has been no previous public disclosure of those names is one reason why the Foundation and Nucleus have declined to release the names. The letters of intent pertain to prospective locations of each of the potential tenants [.]
(Emphasis added.) Finally, Mr. Saffer argues for the application of KRS 61.878(1)(c)(1):
Importantly, the letters of intent were entered into with an expectation that they would be kept confidential by the Foundation and Nucleus until such time as final agency action was taken. KRS 61.878(1)(c)(1) excludes from the Act's general disclosure obligation "[r]ecords 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." The letters contain information relating to potential rental square footage, potential rent and, of course, potential tenants. Disclosure of the potential tenants ['] names, potential rental square footage, and potential rent would give an unfair commercial advantage to the potential tenants' competitors. Such disclosure would reveal tentative future business plans to relocate or expand as well as future profit projections of the potential tenants. Therefore, the portions of the letters of intent that disclose the potential tenants ['] names, potential rent, and potential rental square footage are excluded from the Act's general disclosure obligation[.]
(Emphasis added.)
With regard to KRS 61.878(1)(d), invoked by Nucleus and the Foundation on appeal, there appears to be no dispute that the names of most of the potential tenants have not been publicly disclosed. In 93-ORD-25, we hypothesized that subsection (1)(d) could justify withholding the Governor's schedule from inspection to the extent that it "contains notations relative to meetings with previously undisclosed business or industrial prospects." Furthermore, in 05-ORD-179, we allowed subsection (1)(d) to be invoked in appropriate cases for records relating to a "preapplication" process for planning, development, and zoning, described as "preliminary discussions among potential buyers/developers and staff, the former of whom may later choose to file a formal application for rezoning, subdivision, street closure, or for a conditional use permit" (internal quotation marks and brackets omitted), when the preapplication process had not culminated in a formal application. Similarly, in this case, the letters of intent are expressly made subject to the parties' negotiation of mutually acceptable terms, provisions, and conditions of a future lease agreement and execution of such an agreement, with approval of the necessary governing bodies. We find nothing, beyond the appellant's assertion, to indicate that the letters of intent are "binding legal documents." Therefore, as to those entities whose names have not been previously disclosed, we find that KRS 61.878(1)(d) applies. 1
As to KRS 61.878(1)(c)(1), we agree that the type of business information conveyed by the letters of intent was confidentially disclosed and gives details about tentative future plans and prospects which, if revealed, "would clearly be more than a 'trivial' unfair advantage, especially since it would allow competitors to 'ascertain the economic status'" of prospective tenants. 01-ORD-143 (quoting Marina Management Services, Inc. v. Cabinet for Tourism, 906 S.W.2d 318 (Ky. 1995)). "The Attorney General has recognized that records relating to private financial affairs can be exempted under the Kentucky Open Records Act. See 93-ORD-85 and Hoy v. Kentucky Industrial Revitalization Authority, 906 S.W.2d 766 (Ky. 1995) and 01-ORD-92." 01-ORD-143 (citation form modified to current practice); see also 10-ORD-191. There is no reason to doubt that such information is generally recognized as confidential or proprietary. Therefore, it was lawful under KRS 61.878(1)(c)(1) for Nucleus and the Foundation to withhold the letters pertaining to those potential tenants whose names had already been revealed.
We turn finally to the issue of "preliminary" documents, which was the basis originally given for denying inspection of the letters of intent. KRS 61.878(1)(i) and (j) authorize public agencies to withhold from public inspection the following categories of records:
(i) Preliminary drafts, notes, correspondence with private individuals, other than correspondence which is intended to give notice of final action of a public agency; [and]
(j) Preliminary recommendations, and preliminary memoranda in which opinions are expressed or policies formulated or recommended.
The Courier-Journal contends that representatives of business entities are not "private individuals." That argument is not in keeping with past decisions of this office, which have often found correspondence with businesses to be covered by the cited exemptions.
In OAG 91-21, a request had been made for a "final incentive package" offered to Scott Paper Company by Daviess County and the City of Owensboro concerning the possible locating of a facility in the county. At the time, the only action that had been taken by the city and county was to issue a "Letter of Intent." Our analysis was as follows:
The Letter of Intent is not final agency action, because the "incentive package" is subject to negotiation and change until such time as final agreement is reached among the parties. Therefore, the Letter of Intent is a preliminary document that may be withheld from inspection pursuant to KRS 61.878(1)(g) and (h) [subsequently renumbered as (i) and (j)]. At this time, there is no "final incentive package" for the City of Owensboro and Daviess County because no final agency action has been taken in this matter. Accordingly, the City of Owensboro and Daviess County were justified in withholding this document pursuant to KRS 61.878(1)(g) and (h).
Similarly, in 93-ORD-29, we held that information exchanged between the City of Louisville and a manufacturing corporation "concerning alternative sites, utility costs, and possible incentives" could be withheld as preliminary when an incentive package had not been finalized. Again, in 04-ORD-081, we found that proposals, financial incentives, and negotiations between a manufacturing corporation and the Cabinet for Economic Development "remain[ed] preliminary and inchoate" when no final agreement had been reached, and thus they were lawfully withheld under KRS 61.878)(1)(i) and (j).
The Courier-Journal, citing prior decisions of this office, argues that the letters of intent should be disclosed because they are "submitted to a public agency with the expectation that the public agency will take some action upon" them. In this case, however, it is apparent that the only "action" expected as a direct result of the letters is further negotiation. Therefore, the letters remained preliminary and inchoate and were properly so deemed under KRS 61.878(1)(i) and (j). Accordingly, we find no violation of the Open Records Act.
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.
Distributed to:
Jon L. Fleischaker, Esq.David E. Saffer, Esq.Ms. Kenyatta Martin
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