Opinion
Opinion By: Jack Conway, Attorney General; Michelle D. Harrison, Assistant Attorney General
Open Records Decision
The question presented in this appeal is whether the Southern Kentucky Performing Arts Foundation, Inc. ("Foundation" or "SKyPAC Foundation") 1 violated the Kentucky Open Records Act in denying the March 19 request of Bowling Green Daily News (" The Daily News") reporter Katie Brandenburg for "access to and a copy of 990 tax forms and financial audits from organization creation to present for the S[K]yPAC Foundation." Ms. Brandenburg referenced KRS 61.805 (the definitional section of the Open Meetings Act), implicitly relying upon subsections (2)(f) and (g) specifically, in support of her position that the Foundation is a "public agency" subject to the Open Records Act because it "was created by the [Southern Kentucky Performing Arts Center, Inc. Board] -- which, according to its article[s] of incorporation, is to act as the 'agent and instrumentality and the constituted authority of the County of Warren, Kentucky . . . ' -- and [] the [SKyPAC Foundation Board's] initial board of directors was appointed by [SKyPAC]." By letter dated March 21, 2014, attorney Kevin C. Brooks advised that the Foundation is not a "public agency" within the meaning of "KRS 61.805, and is therefore not subject to open records requests." Mr. Brooks disputed The Daily News' position that the Foundation's Board of Directors "is appointed and/or controlled by any public agency. Likewise, the initial board of directors was not appointed by [SKyPAC] or any other public agency. SKyPAC Foundation therefore does not fall within the definition of 'public agency, " as defined within these subsections or any other portion of KRS 61.805 ." Ms. Brandenburg subsequently renewed her initial request and correctly invoked the definitional section of the Open Records Act, codified at KRS 61.870, relying upon KRS 61.870(1)(j) in particular. 2 Following an exchange during which Mr. Brooks inquired regarding the basis for Ms. Brandenburg's assertion that the Foundation was created by a public agency, she advised that said "information was provided by a member of [SKyPAC] Board at the time of the foundation's creation." Ms. Brandenburg initiated this appeal on behalf of The Daily News when the Foundation declined to reconsider its position.
Resolution of the instant appeal turns on the application of KRS 61.870(1)(j), pursuant to which "public agency" is defined to include "[a]ny board, commission, committee, subcommittee, ad hoc committee, advisory committee, council, or agency, except for a committee of a hospital medical staff, established created, and controlled by a public agency as defined in paragraph [(a)-(i) and (k)] of this subsection[.]" The record on appeal indicates that the Foundation was established and created by SKyPAC, a public agency; 3 however, based upon the following, SKyPAC does not appear to maintain control over the Foundation and the Foundation therefore does not fall within the definition of "public agency" codified at KRS 61.870(1)(j) notwithstanding the clearly established nexus between it and SKyPAC. Accordingly, the Foundation is not subject to the Open Records Act nor did it violate the provisions thereof in failing to comply with Ms. Brandenburg's request(s).
By letter dated April 1, 2014, Ms. Brandenburg supplemented her appeal, enclosing a copy of the minutes from the March 18, 2010, meeting of the SKyPAC Board of Directors. The minutes reflect that Board Chairman Rick McCue "brought up the idea of creating a SKyPAC Foundation." Rick Kelley, a member of the Board, made a motion to approve this idea, which Dr. Bill Scott, another Board member, seconded. The minutes indicate that said "Motion passed" but do not reflect whether the vote was unanimous. Ms. Brandenburg correctly noted that Articles of Incorporation were filed with the Kentucky Secretary of State for the Foundation "roughly two months after the meeting took place."
Upon receiving notification of the instant appeal from this office, attorney Timothy L. Edelen supplemented the Foundation's initial response. Mr. Edelen maintained that the Foundation "was not created and is not controlled by" SKyPAC or any other public agency; rather, the Articles of Incorporation, a copy of which Mr. Edelen provided, specify that the "original incorporators and directors of SKyPAC Foundation were Robert R. McCue Rick Kelley, and David D. Lee." SKyPAC, he continued, is not mentioned anywhere in the Articles of Incorporation. Mr. Edelen also included a copy of the By-Laws for the Foundation, observing that Article II, Section 1 provides that "[t]he government, conduct, operation and maintenance of SKyPAC Foundation shall be vested in the Board of Directors . . . ." Article II also establishes the process for electing members to the Board, Mr. Edelen explained, outlining a system whereby "a Committee created by the Foundation nominates and elects new Directors. Notably, [SKyPAC] is mentioned nowhere in the SKyPAC Foundation By-Laws."
Mr. Edelen further noted that minutes for the meetings of the Foundation's Board of Directors confirm that a nominating committee selects new members of the Board rather than SKyPAC. In support of the Foundation's position, he included the affidavit of Mr. Brooks, Foundation Secretary, and minutes from various meetings of the Foundation at which new directors were appointed, emphasizing that SKyPAC "had no control or authority over those appointments. " Mr. Brooks' affidavit confirmed that "[t]he Foundation was not and is not established, created, or controlled by [SKyPAC. SKyPAC] has no authority to appoint and has never appointed any directors to the Foundation's Board of Directors. " The affidavit of Doc Kaelin, a member of the SKyPAC Board of Directors, reiterated this position and further stated that SKyPAC "was not responsible for SKyPAC Foundation's incorporation. "
The Foundation analogized the present situation to facts presented in 08-ORD-045 (In re: Appalachian News Express/ Forward Pike County Foundation, Inc.), a copy of which it enclosed, insofar as the Foundation "was not established and is not controlled by any public agency. " In rejecting the newspaper's argument regarding application of KRS 61.870(1)(j) there, Mr. Edelen observed, this office recognized that it "'was not created by any federal, state or local government agency; it [did not] receive any funds from a governmental source; and the members of the governing body of [the Foundation] are not appointed by any governmental agency.'" Mr. Edelen reiterated that the Foundation "was established by independent incorporators and is controlled by an independent board of directors, " which the Articles of Incorporation and By-Laws "conclusively demonstrate." Further, the Foundation "receives no funds from a public source" and The Daily News "has failed to present any authority for its position that SKyPAC Foundation is a public agency. "
In addressing the "documents purporting to be corporate minutes for [SKyPAC], which reference the creation of a SKyPAC Foundation," Mr. Edelen asserted that said minutes fail to establish that the Foundation is a public agency because "they wholly fail to indicate or provide any evidence that [SKyPAC] did, in fact, establish SKyPAC Foundation." According to Mr. Edelen, the fact that SKyPAC expressed the intention to establish a foundation "does not indicate that it did so, much less that it was in any way responsible for the establishment of this particular corporation." Finally, the Foundation observed that none of the news articles of record conclusively substantiate The Daily News' position; rather, the articles "merely reference the creation of SKyPAC Foundation and its purpose, without ever addressing the procedural foundation of SKyPAC Foundation or whether it is a public agency. Moreover, it is noteworthy that each of the articles were drafted by and published in [ The Daily News ], the requesting entity. "
Pursuant to KRS 61.880(2)(c) and 40 KAR 1:030, Section 3, this office asked the Foundation to provide additional information -- specifically, to advise whether SKyPAC receives any of the funds donated to the Foundation; to clarify what role SKyPAC plays in oversight of the contributions made directly to the Foundation; to identify all current Board members for the Foundation and explain their affiliation, if any, to SKyPAC; and, to elaborate upon the Foundation's position regarding the proper characterization of the March 2010 minutes of the SKyPAC Board meeting. The agency's response, in relevant part, follows:
1. SKyPAC, Inc. does not receive funds donated to SKyPAC Foundation.
2. SKyPAC Foundation has no role in the oversight of funds and contributions to SKyPAC, Inc.
3. Current board members for SKyPAC Foundation [list omitted]
4. Clarification regarding statement pertaining to corporate minutes
It is undisputed that the Foundation was incorporated on May 10, 2010, and was "organized exclusively for charitable, religious, literary, scientific and educational purposes as set forth in section 501(c)(3) of the Internal Revenue Code. . . ." 4 Pursuant to Article IV, section 1, "Charitable purposes shall include, without limitation, the making of distributions to organizations that qualify as exempt organizations under applicable provisions of the Internal Revenue Code." The record on appeal contains no evidence or suggestion that any "organization" except SKyPAC has a relationship with the Foundation. 5 As indicated, the initial Board of Directors consisted solely of Robert R. McCue, SKyPAC Board Chairman, Rick Kelley and David D. Lee, both members of the SKyPAC Board. The idea of creating a Foundation was proposed by Mr. McCue in his capacity as Board Chairman during the March 18, 2010, meeting of the SKyPAC Board; his motion passed. The Foundation was incorporated less than two months later by Mr. McCue and Mr. Kelley along with Mr. Lee, another SKyPAC Board member.
In University of Louisville Foundation, Inc. v. Cape Publications, Inc. , No. 2002- CA-001590-MR, 2003 WL 22748265 at *5 (Ky. App. Nov. 21, 2003), rev'd on other grounds, 260 S.W.3d 818, 822 (Ky. 2008), the Kentucky Court of Appeals held, in relevant part, that the University of Louisville Foundation was a "public agency" within the meaning of KRS 61.870(1)(j) as it "was established and created by members of the Board of Trustees of the University of Louisville, acting in their official capacities." See
Cape Publications v. University of Louisville Foundation, 260 S.W.3d 818, 822 (Ky. 2008)(noting that Court of Appeals' ruling was "predicated on the finding that the Foundation and the University essentially act as one and the same, and that the Foundation was established, created, and wholly controlled by the University" and "has not been disturbed by this Court"). It was undisputed that the University was a public agency; likewise, the status of SKyPAC is undisputed.
The SKyPAC Board passed a motion to create a SKyPAC Foundation and the initial Board of Directors for the Foundation was comprised of three SKyPAC Board members, including the Chairman. According to its By-Laws, the University of Louisville Foundation was created exclusively "'for the charitable and educational purposes of" the University and its Board of Directors was comprised of eleven members, five of which were the president of the University and four trustees. University of Louisville Foundation, *5. The "causal connection" between SKyPAC and the establishment/creation of the Foundation may not be quite as direct as in University of Louisville Foundation , insofar as the subject Articles of Incorporation and By-Laws do not contain any express reference to SKyPAC. 11-ORD-054, p. 5. However, when viewed in light of University of Louisville Foundation, the record on appeal contains adequate proof upon which to base a determination that the Foundation was "created" and "established" by SKyPAC. See 11-ORD-054 (this office agreed "that the suggestion that these physician administrators and/or professors, each the chair or interim chair of their respective medical school departments, came together of their own accord, as private actors, to establish and create [University of Louisville Medical School Practice Association, Inc., d/b/a/ University Physicians Associates] defies logic").
Given this determination, the question becomes whether the Foundation is also "controlled" by SKyPAC. The composition of the Foundation's Board of Directors is not dispositive. In University of Louisville Foundation , above, the Court of Appeals rejected The Courier-Journal's argument that having control of the election of "At-Large" directors allowed the University to maintain perpetual control of the Foundation. Id. , *6. Relying upon
Phelps v. Louisville Water Company, 103 S.W.3d 46, 51 (Ky. 2003)(rejecting argument that entity's ability to "vote in" some members of the board of directors of another entity constituted sufficient "control" to establish agency relationship and holding that City did not control LWC merely because the mayor appoints four members of the LWC Board), the Court of Appeals found that even if the Courier's argument was accepted, control of the election of At-Large directors would not amount to "control" of the Foundation. University of Louisville Foundation, above, *6.
The determination is more straightforward on the facts presented. A review of the Articles of Incorporation and By-Laws of the Foundation here confirm that SKyPAC has no authority or control over the appointment of Board members. Neither the Articles nor the By-Laws reference SKyPAC by name. Article X of the former provides that "authority for all affairs of the corporation shall be in a Board of Directors who shall have and may exercise all the powers of the Corporation as permitted by federal law, state law, these Articles of Incorporation, and the bylaws of the Corporation as from time to time in effect. . . . The number of directors shall not be less than three (3). Subject to said limitation, the exact number of directors shall be fixed by the Corporation's bylaws. " Article II, Section 3 of By-Laws, in turn, provide that when a vacancy occurs, the Chairman of the Board "shall request that the Nominating Committee solicit or receive nominations for the vacancy." Following interviews of the prospective nominees, the Committee shall then "present one or more names to the full Board for its consideration. " Id. Although not dispositive standing alone, 6 SKyPAC and the Foundation currently have only two directors in common.
The facts presented in 11-ORD-054, above, for example, stand in direct contrast as the following excerpt from pp. 5-6 amply illustrates:
The University's continuing control of UPA is equally clear and direct. As noted, UPA's incorporator and its original directors were physician administrators and/or professors employed by the University's School of Medicine. At all times since it was incorporated, UPA's officers and directors have been physician administrators and/or professors in the School of Medicine. UPA's bylaws name 16 "members" consisting of the Dean of the School of Medicine and the chair or interim chair of the 15 departments of the School of Medicine. Each member "shall continue as a member so long as they hold their respective position as Dean of the University of Louisville School of Medicine or department chairperson, or until his or her successor has been appointed and qualified." The Dean and medical school department chairs owe their appointments to the University of Louisville and their membership on UPA's governing body to these University appointments. Through these appointments the University exercises continuing control over UPA.
UPA's Board of Directors, in turn, is comprised of these 16 "members," and, under the terms of its bylaws, the Vice Dean for Clinical Affairs of the School of Medicine, the President of the University Hospital, and three School of Medicine faculty members. Again, the University exerts its control through these directors, the majority of whom serve on an ex officio basis. Unlike UPA, we are not prepared to casually dismiss these facts as "coincidence born of practicality" aimed at "maintain[ing] the continuity of common missions. " UPA's mission and the School of Medicine's mission are one, and UPA and the School of Medicine "act as one and the same." Cape Publications, Inc. v. University of Louisville Foundation, Inc. , at 822. UPA and the School of Medicine, "acting as one and the same[,] amounts to 'control.'" University of Louisville Foundation, Inc. v. Cape Publications, Inc. , at 7.
See 11-ORD-151 (Articles and By-Laws assigned operation of the Owensboro Daviess County Hospital, Inc. to Owensboro Mercy Health Systems, Inc. but City and County retained control of the Hospital "by virtue of their strong presence on its Board of Directors, the 'residual blocking rights' they retained through OMHS's Articles of Incorporation and bylaws, and their power to convey to a suitable entity the remaining public assets upon dissolution of OMHS"); 11-ORD-157 (Articles of Incorporation and By-Laws of University Medical Center, Inc. assigned operation of University of Louisville Hospital to UMC, but University retained control by strong presence on UMC's Board of Directors and the powers reserved to it under its Affiliation Agreement with UMC where Board was chaired by University President/his designee, the Chair could not be removed and was authorized to appoint four to seven additional directors, including various University officials, and the nominating committee was chaired by the President/his designee and consisted of additional University member and two community members appointed by the Chair) .
In each of these instances, there was more than sufficient evidence from which to conclude that the entity whose status was in dispute and the public agency were acting "as one and the same, " which amounted to "control" under University of Louisville Foundation , above, *6, 7 and Cape Publications, above, at 822. All contributions, whether payable to the Foundation or the University, in the former case, were turned over to the Foundation, which, in turn, "oversees funds donated to the University." University of Louisville Foundation , *7. If the Foundation were not serving as the University's agent, "it could not legally receive the 'Bucks for Brains' money." Id. , *6. The financial statements of record further confirmed that the Foundation "'acts as custodian and administrator for the University of funds derived from gifts and other sources, subject to the review and direction of the University.'" Id., *6. Here, in contrast, nothing of record conclusively refutes the Foundation's assertion that it "maintains no oversight of funds and contributions made to SKyPAC" nor does any evidence contradict its position that "[n]either entity maintains any ability or right to control or oversee the funds and contributions made to the other entity. " Although sufficient evidence has been presented that the Foundation was established and created by SKyPAC, and the record as a whole establishes a relationship or nexus between SKyPAC and the Foundation, the record lacks any objective proof that SKyPAC exerts the requisite control over the Foundation; accordingly, this office must conclude that the Foundation is not a "public agency" within the meaning of KRS 61.870(1)(j) and therefore did not violate the Open Records Act in denying Ms. Brandenburg's request(s).
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:
Katie BrandenburgKevin BrooksTimothy L. Edelen
Footnotes
Footnotes
1 Both parties refer to the Southern Kentucky Performing Arts Foundation, Inc. (the "Foundation") as the "SKyPAC Foundation," notwithstanding SKyPAC's apparent lack of control over the Foundation, and those references contained in quoted material have been left intact.
2 The language of KRS 61.805(2)(g), in relevant part, mirrors that of KRS 61.870(1)(j); consequently, the legal analysis would essentially be the same.
3 The status of SKyPAC is undisputed.
4 Articles of Incorporation of the Foundation, Article IV, section 1.
5 The minutes of the "SKyPAC Foundation Board Meeting -- May 26, 2011," reveal that staff member Tom Tomlison "explained the role of the Foundation going forward as primarily responsible for the daily operation, maintenance, programming and maintenance of SKyPAC and that future board members would be selected for their interest in the success of SKyPAC with special emphasis on their ability to assist in its fundraising efforts." Although SKyPAC and the Foundation may be "entirely separate entities," and the Foundation does not legally maintain control over SKyPAC, the relationship between the two is undeniable.
6 Compare 11-ORD-151(fact that number of members appointed to Board of Owensboro Mercy Health Systems represented less than a majority of the Board's total composition was inconsequential where Daviess County Judge Executive and/or the Mayor of the City of Owensboro appointed seven members of the Board and six could be public officials given that 'selection of directors in itself does not amount to 'control'" under University of Louisville Foundation and the County and City exercised continuing control through these appointments).