Opinion
Opinion By: Andy Beshear,Attorney General;Michelle D. Harrison,Assistant Attorney General
Open Records Decision
Reporter Chris Otts, WDRB News, initiated this appeal by letter dated October 12, 2017, challenging the denial by Braidy Industries, Inc. ("Braidy") of his October 9, 2017, request for "access to and copies of all records sufficient to document the use(s) of the $ 15 million invested by Commonwealth Seed Capital ["CSC"] investment in Braidy Industries since May 4, 2017, including but not limited to, Braidy Industries' current fiscal year budget." Mr. Otts also requested "any records documenting Braidy Industries' complete list of shareholders and corresponding share ownership, including the percentage of outstanding shares owned by [CSC] in relation to that of the other investors in the company." In a timely written response per KRS 61.880(1), Timothy J. Eifler, Stoll Keenon Ogden PLLC, denied Mr. Otts' request on behalf of Braidy. Mr. Eifler asserted that Braidy "is a private, Delaware corporation that does not satisfy the criteria for a 'public agency' within the meaning of KRS 61.870(1)(h) for a number of reasons. Moreover, Braidy was organized in March 2017 and has not completed its first fiscal year. " Because Braidy is not a "public agency" subject to provisions of the Open Records Act, Mr. Eifler continued, "Braidy denies your request, which seeks competitive, confidential, proprietary and personal information." Mr. Eifler also noted that "even for a 'public agency' within the meaning of KRS 61.870(1)(h), records are 'public records' only if they are related to functions, activities, programs, or operations funded by state or local authority, " 1 citing KRS 61.870(2). Even if records are "public records" under KRS 61.870(2), Mr. Eifler concluded, such records are not subject to public disclosure if excluded under any of the statutory exceptions codified at KRS 61.878(1)(a)-(n). 2
On appeal, Mr. Otts noted that Braidy made no attempt to list any of the "number of reasons" it does not fall within the parameters of KRS 61.870(1) or substantiate its claim. However, in 17-ORD-198, the Office of the Attorney General "reviewed the facts surrounding the investment of $ 15 million in public funds by Commonwealth Seed Capital, an agency of the state, in the stock of Braidy. . . . It is undisputed that Commonwealth Seed received a stake worth at least 20 percent of Braidy[.]" Attached to Mr. Otts' appeal was a copy of the June 29, 2017, Kentucky Economic Development Finance Authority "KEIA Report" confirming that Craig T. Bouchard -- Naples, Florida, and Commonwealth Seed Capital -- Lexington, Kentucky, each own a "20% or more" interest in Braidy. 3 Mr. Otts also included a copy of an e-mail from Jack Mazurak, Communications Director, Cabinet for Economic Development, confirming, "Mr. Bouchard and CSC are the only owners with 20 percent or more." Notwithstanding this documented investment of significant public funds in Braidy, the origin and nature of which are not disputed, this office is currently unable to conclusively determine whether Braidy is a "public agency, " i.e. , whether Braidy derives at least twenty-five percent (25%) of the funds it expends in the Commonwealth from state or local authority funds, within "any fiscal year" inasmuch as Braidy has not completed a single fiscal year.
In relevant part, KRS 61.872(1) provides that "[a]ll public records shall be open for inspection by any person . . . and suitable facilities shall be made available by each public agency for the exercise of this right." Pursuant to KRS 61.870(2), "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.
The determinative question here, as indicated, is whether Braidy is a "public agency" within the meaning of KRS 61.870(1), which broadly defines public agency to include:
(a) Every state or local government officer;
(b) Every state or local government department, division, bureau, board, commission, and authority;
(c) Every state or local legislative board, commission, committee, and officer;
(d) Every county and city governing body, council, school district board, special district board, and municipal corporation;
(e) Every state or local court or judicial agency;
(f) Every state or local government agency, including the policy-making board of an institution of education, created by or pursuant to state or local statute, executive order, ordinance, resolution, or other legislative act;
(g) Any body created by state or local authority in any branch of government;
(h) Any body which, within any fiscal year, derives at least twenty-five percent (25%) of its funds expended by it in the Commonwealth of Kentucky from state or local authority funds . However, any funds derived from a state or local authority in compensation for goods or services that are provided by a contract obtained through a public competitive procurement process shall not be included in the determination of whether a body is a public agency under this subsection;
(i) Any entity where the majority of its governing body is appointed by a public agency as defined in paragraph (a), (b), (c), (d), (e), (f), (g), (h), (j), or (k) of this subsection; by a member or employee of such a public agency; or by any combination thereof;
(j) Any 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), (b), (c), (d), (e), (f), (g), (h), (i), or (k) of this subsection; and
(k) Any interagency body of two (2) or more public agencies here each public agency is defined in paragraph (a), (b), (c), (d), (e), (f), (g), (h), (i), or (j) of this subsection[.]
(Emphasis added.)
Despite the expansive language of these provisions, which operate in tandem, and the clearly expressed legislative intent that the Open Records Act must be strictly construed so as to ensure the broadest possible access to public records, 4 the Attorney General has recognized on a number of occasions that a private corporation or company, whether not-for-profit or for-profit, is not a public agency for purposes of the Open Records Act unless it "derives at least twenty-five percent (25%) of its funds expended by it in the Commonwealth of Kentucky from state or local authority funds." 5 See KRS 61.870(1), as construed in OAG 81-377; OAG 82-216; OAG 84-237; OAG 88-61; 92-ORD-1114; 94-ORD-98; 96-ORD-99; 97-ORD-114; 99-ORD-65; 05-ORD-012; 06-ORD-220; 08-ORD-024; 09-ORD-042; 11-ORD-040; 11-ORD-142; 12-ORD-010. No evidence has been presented to suggest that Braidy would qualify as a public agency under KRS 61.870(1)(a), (b), (c), (d), (e), (f), (g), (j), or (k). 6 Likewise, no evidence has been presented to suggest Braidy's governing body is appointed by a public agency, rendering KRS 61.870(1)(i) inapplicable. Accordingly, KRS 61.870(1)(h) is the only subsection that potentially applies. 7 See 11-ORD-109.
The meaning of "public agency" for purposes of KRS 61.870(1)(h) underwent significant revision in 2012 with the addition of the phrase "within any fiscal year" in the first sentence, and the addition of the second sentence (see note 3). Even prior to KRS 61.870(1)(h) being amended to include the "within any fiscal year" language, this office had, in the absence of a statutory timeframe, based its determination of whether a particular "body" satisfied the 25% threshold using a fiscal year as the relevant timeframe on many occasions. See 04-ORD-222 (Because the Ballard County Economic and Industrial Development Board ("BCEIDB") denied receipt of any state or local authority funds in the fiscal year that began on July 1, 2004, and ended on June 30, 2005, and provided supporting documentation, and because it did not otherwise fall within the parameters of KRS 61.870(1)(a) through (k), BCEIDB was not a public agency in the relevant timeframe as the request was dated October 9, 2004); 05-ORD-151 (Attorney General followed 04-ORD-222 as the request to BCEIDB was dated October 5, 2004, a date which also fell within the fiscal year during which BCEIDB had substantiated that it did not receive any state or local authority funds, unlike in the prior fiscal year when it satisfied the 25% funding threshold) ; 09-ORD-033. 8
More recently, the Supreme Court noted that in Chilton v. M.A. Mortenson Co . (Jefferson Circuit Court, Div. 13 Nov. 24, 2009), "the court appropriately identified a shortcoming in the 1994 version of KRS 61.870(1)(h), i.e. , the absence of any timeframe for which to assess the 25% threshold. "
Utility Management Group v. Pike County Fiscal Court, 207 WL 5037118, *6 (Ky. Nov. 2, 2017). However, the 2012 amendment "addressed this specific concern by adding the language 'within any fiscal year, ' leading to the logical interpretation that if the records sought are for a fiscal year in which the 25% threshold is met, there is an obligation to produce." Id. Conversely then, if the records in dispute are for a fiscal year in which the 25% threshold is not met, a "body" does not have any obligation to produce. In holding that UMG was a "public agency" when the Pike County Fiscal Court made its request in 2011, the Supreme Court noted that the 1994 version of KRS 61.870(1)(h) was constitutional. Utility Management Group, 207 WL 5037118 at *7. "The absence of a definition for the word 'body' does not render unintelligible the phrase '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." Id.
Under the "logical interpretation" of KRS 61.870(1)(h), Braidy would be required to provide any existing nonexempt documents responsive to Mr. Otts' request if Braidy satisfied the 25% threshold in the fiscal year. On appeal, Mr. Eifler reiterated that a determination of whether a "body" is a "public agency" within the meaning of KRS 61.870(1) "requires an examination of the source of the body's funds and the amount of its expenditures within Kentucky in any fiscal year. " As previously indicated, "Braidy was organized in March 2017 and has not completed a fiscal year. Prior to the completion of a fiscal year, it is impossible to determine" whether Braidy satisfies the 25% threshold of KRS 61.870(1). "Because the statutory computation requires calculation be made as to a fiscal year, " Mr. Eifler asserted, "Braidy cannot be a 'public agency' within the meaning of KRS 61.870(1)(h) as a matter of law." This case is unique insofar as Braidy has not existed for an entire fiscal year as of yet. When viewed in light of the relevant statutory language, the unrefuted facts validate Braidy's position. The obligation to comply with provisions of the Open Records Act "presumes jurisdiction over the public agency involved." 03-ORD-251; see also 08-ORD-064 (overruled in part on different grounds by 09-ORD-033); 13-ORD-105. Until Braidy has completed a fiscal year, the Attorney General is unable to determine whether Braidy, "within any fiscal year, " derives at least 25% of the funds it expends in the Commonwealth from state or local authority funds. Accordingly, this office cannot find that Braidy violated the Open Records Act in denying Mr. Otts' request.
Either party may appeal this decision by initiating action in the appropriate circuit court per 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 must not be named as a party in that action or in any subsequent proceeding.
Footnotes
Footnotes
1 In Utility Management Group, LLC v. Pike County Fiscal Court, 207 WL 5037118, *3 (Ky. Nov. 2, 2017), the Kentucky Supreme Court noted that no definition of "body" appears in the Open Records Act but found guidance in the definition of "public record" found at KRS 61.870(2). "As the Court of Appeals aptly noted," the Supreme Court observed, "state and local government bodies function solely for governmental purposes so the second sentence of KRS 61.870(2) is logically unnecessary if the Act does not encompass some private entities." Id. Similarly, the Supreme Court noted that "it is difficult to fathom why the KRS 61.870(1)(h) reference to a body deriving at least 25% of its funds from state or local authority funds would be necessary if non-governmental entities were entirely excluded from the Act since state and local governmental entities derive all, or virtually all, of their funds from the government." Id.
2 See 17-ORD-198 for application of KRS 61.878(1)(c)1 and 61.878(1)(c)2.b in the context of reviewing a partial denial by the Cabinet for Economic Development of a request by The Courier-Journal for "copies of any and all documents that list the stockholders or investors in [Braidy]" in addition to "all documents the cabinet has received that show the names of stockholders/investors in [Braidy] including any original list plus any subsequent lists that may reflect additions or changes in the names of those investors."
3 On April 27, 2017, the Kentucky Economic Development Partnership authorized the investment of $ 15 million capital into CSC. "The contribution came with the requirement that it be used to facilitate an investment in Kentucky of at least $ 1 billion. CSC approved the investment of the $ 15 million to purchase direct equity in Braidy, which resulted in the issue of stock in Braidy to CSC." 17-ORD-198, p. 2. In other words, "$ 15 million of public funds was used to purchase 20% ownership in the stock of Braidy." Id. , p. 3
Neither party has cited, nor has our independent research identified, any prior appeals involving the status of a "body" (private, for-profit corporation here) in which public funds were invested to purchase stock. See 17-ORD-198 (Cabinet for Economic Development, through CSC, made an "extraordinary investment of public funds in Braidy," and in doing so the Commonwealth has conferred "a direct benefit on the Braidy shareholders in the form of a capital injection into Braidy"). This office notes that KRS 61.870(1) does not contain any provision that contemplates or addresses the unusual circumstance presented here as compared to, for instance, the statutory exclusion of "any funds derived from a state or local authority in compensation for goods or services that are provided by a contract obtained through a public competitive procurement process," found in KRS 61.870(1)(h). The status of CSC was not in dispute in 17-ORD-243..
4 KRS 61.871.
5 Since July 15, 1994, KRS 61.870(1)(h) has defined "public agency" to mean "[a]ny 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." (Emphasis added.) The General Assembly altered the language of KRS 61.870(1)(h) by expanding its language to encompass any "body" receiving any state or local funding so long as that funding represents at least twenty-five percent of the total funds it expends in the Commonwealth. "In so doing, the General Assembly did not fix the period within which this determination was to be made (calendar year, fiscal year, calendar year or fiscal year to date of request), or indicate who is responsible for tracing state or local authority funds and how state or local funds are to be traced." 09-ORD-033, pp. 7-8. As discussed herein, the General Assembly partially cured this deficiency in 2012.
6 Though not dispositive standing alone, information publicly available on the Secretary of State's website reveals that Braidy is a "Foreign Corporation," operated for "Profit" (as opposed to "Non-Profit"), with "Active" status, which is currently in "Good" standing. Its principal office is located in Ashland, Kentucky. In addition, Braidy has a registered agent located in Louisville, Kentucky. See https://app.sos.ky.gov/ftsearch/. In other words, by all conventional indicia Braidy is a private corporation that is not subject to the Open Records Act unless it satisfies the KRS 61.870(1)(h) threshold within any fiscal year. See 11-ORD-142; 12-ORD-010; 14-ORD-142; 16-ORD-075.
7 During its 2012 Regular Session, the Kentucky General Assembly amended KRS 61.870(1)(h) to exclude "any funds derived from a state or local authority in compensation for goods or services that are provided by a contract obtained through a public competitive procurement process." This amendment was effective July 12, 2012, but is not implicated here.
8 In 09-ORD-033, the Attorney General acknowledged that KRS 61.870(1)(h) "lacks specific parameters for analysis, and that this office lacks authority to compel disclosure of documents from 'bodies' disputing their status as public agencies," ultimately concluding, based on the affidavit of M.A. Mortenson Company's Chief Financial Officer, which the appellant presented "insufficient probative evidence to refute," that Mortenson was not a "public agency" within the meaning of KRS 61.870(1)(h).