Opinion
Opinion By: Andy Beshear,Attorney General;James M. Herrick,Assistant Attorney General
Open Records Decision
The question presented in this appeal is whether the Kentucky Retirement Systems ("KRS") violated the Open Records Act in partially denying Reuters News reporter Michael Erman's September 15, 2016, request for the "Partnership agreement and other documents outlining Kentucky Retirement Systems' strategic partnership with KKR Prisma." For the reasons stated below, we find a partial violation of the Act.
KKR Prisma, a private entity, has formed a "strategic partnership" with KRS to manage its investments. Although Mr. Erman's original request encompassed a number of records, the partnership agreements are the only items in controversy in this appeal. KRS initially withheld the agreements under a confidentiality agreement, citing KRS 61.878(1)(c)1. and KRS 61.645(20). Specifically, KRS' September 20, 2016, response stated:
These documents contain information regarding investment strategy and fee information that would provide an unfair commercial advantage to competitors and would interfere with Kentucky Retirement Systems' ability to competitively negotiate vendor fees or invest in certain asset classes.
Mr. Erman initiated his appeal on October 5, 2016.
During the pendency of this appeal, KRS' Assistant General Counsel Jennifer A. Jones advised that "KRS has provided the fee information to Mr. Erman after obtaining explicit permission to do so from Prisma." Therefore, it is our understanding that the confidentiality of the vendor fees is no longer an issue in this particular case, although KRS still maintains that they were properly withheld under KRS 61.878(1)(c)1. While the fee information has become moot for purposes of this appeal, we must determine whether the information regarding KKR Prisma's investment strategy was lawfully withheld from the material provided to Mr. Erman.
KRS 61.878(1)(c)1. excludes from the obligation of public disclosure:
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.
KRS 61.645(20), also cited by the agency, 1 provides:
Notwithstanding the requirements of subsection (19) of this section, the retirement systems shall not be required to furnish information that is protected under KRS 61.661, exempt under KRS 61.878, or that, if disclosed, would compromise the retirement systems' ability to competitively invest in real estate or other asset classes, or to competitively negotiate vendor fees.
KRS argues:
The partnership agreement . . . contains provisions regarding the investment strategy utilized by the investment manager and other proprietary information about the investment manager's services. If other investment managers can obtain the investment strategy utilized and other proprietary information, then those investment managers can utilize the same strategy and proprietary information harming the business of the investment manager under contract with KRS. KRS 61.878(1)(c)1. was designed to protect an entity that confidentially disclosed records to a public agency from the public dissemination of those records thus providing an unfair commercial advantage to competitors. No investment manager will enter into a contract with KRS knowing that the investment strategies and proprietary information it utilizes will be made publically available.
We believe KRS has sufficiently established that KKR Prisma's investment strategy was confidentially disclosed and gives details which, if revealed, "would clearly be more than a 'trivial' unfair advantage" to competitors. . 01-ORD-143 (citing
Marina Management Services, Inc. v. Cabinet for Tourism, 906 S.W.2d 318 (Ky. 1995)). Since investment services are the essence of KKR Prisma's business, conducted in a competitive field, 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 KRS to withhold information relating to KKR Prisma's investment strategy. The same information would likewise be excludable under KRS 61.645(20), by virtue of its being exempt under KRS 61.878 and in light of the compromising effect disclosure would have on KRS' ability to make competitive investments. 2
Nonetheless, we do not find justification for KRS to withhold the partnership agreements in their entirety. While the investment strategy is confidential, KRS has not specified or made a case for any claimed categories of "other proprietary information." Therefore, we find that KRS' burden of proof under KRS 61.880(2)(c) 3 has been met only as to the information pertaining to KKR Prisma's investment strategy.
KRS 61.878(4) provides: "If any public record contains material which is not excepted under this section, the public agency shall separate the excepted and make the nonexcepted material available for examination." There is nothing to indicate that it would be impossible to redact the confidential information and provide Mr. Erman with the remainder of the partnership agreements.
The mere existence of a confidentiality agreement between KRS and KKR Prisma does not render the partnership agreements entirely exempt from the Open Records Act:
[T]he Open Records Act does not allow public records to be exempt from disclosure by contract. Accordingly, we find the [agency's] argument that it could withhold certain information in the contracts under a confidentiality agreement alone is misplaced. If they are exempt from disclosure, it must be under the authority of a statutorily recognized exemption, such as KRS 61.878(1)(c)1., or other applicable exception set forth in KRS 61.878(1).
03-ORD-065. The disputed vendor fee information has already been disclosed to Mr. Erman, and the only remaining material for which KRS has made a case for confidentiality under KRS 61.878(1)(c)1. and KRS 61.645(20) is the investment strategy and proprietary information. Since the whole of the partnership agreements presumably does not consist of proprietary information, we conclude that investment strategy and proprietary information should be redacted and the remainder of the partnership agreements disclosed.
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 must 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 Since KRS 61.880(1) requires an agency denying inspection of a record to state "the specific exemption authorizing the withholding of the record." For this reason, when invoking KRS 61.645(20), KRS should have also cited KRS 61.878(1)(l), which authorizes the withholding of "[p]ublic records or information the disclosure of which is prohibited or restricted or otherwise made confidential by enactment of the General Assembly."
2 KRS 61.661, referenced in KRS 61.645(20), refers only to the confidentiality of KRS members' account information.
3 The burden of proof in sustaining the action shall rest with the agency."