FOIL AO 19734
The staff of the Committee on Open Government is authorized to issue advisory opinions. The ensuing staff advisory opinion is based solely upon the information presented in your correspondence, except as otherwise indicated.
I have received your letter and apologize for the delay in response. You have sought an advisory opinion concerning the ability of Warren County to “withhold RFP responses seeking a buyer or a multi-year operator of a 40 mile track of a county-owned rail line during the negotiation process”.
It is your belief that RFP responses “contain information of a confidential nature, such as audited financials of private companies, private revenue expenses, and other non-published financial information”. You added that, in the County’s view, disclosure of this information “would provide an unfair advantage to companies seeking to buy/lease the rail-line, have an effect on the price the county would receive, impact negotiation techniques, and negatively influence additional parties from providing bids”. Moreover, you expressed the view that “release of such information pertaining to negotiations of the sale may jeopardize the county’s critical infrastructure and economic interest in the use of a railway”.
In this regard, I offer the following comments.
First, as a general matter, the Freedom of Information Law (FOIL) is based upon a presumption of access. Stated differently, all records of an agency are available, except to the extent that records or portions thereof fall within one or more grounds for denial appearing in §87(2) of that statute.
It is emphasized that the courts have consistently interpreted FOIL in a manner that fosters maximum access. As stated by the Court of Appeals, the state’s highest court, some forty years ago:
“To be sure, the balance is presumptively struck in favor of disclosure, but in eight specific, narrowly constructed instances where the governmental agency convincingly demonstrates its need, disclosure will not be ordered (Public Officers Law, section 87, subd 2). Thus, the agency does not have carte blanche to withhold any information it pleases. Rather, it is required to articulate particularized and specific justification and, if necessary, submit the requested materials to the courts for in camera inspection, to exempt its records from disclosure (see Church of Scientology of N.Y. v. State of New York, 46 NY 2d 906, 908). Only where the material requested falls squarely within the ambit of one of these statutory exemptions may disclosure be withheld” [Fink v. Lefkowitz, 47 NY 2d 567, 571 (1979)].”
In another decision rendered by the Court of Appeals, it was held that:
“Exemptions are to be narrowly construed to provide maximum access, and the agency seeking to prevent disclosure carries the burden of demonstrating that the requested material falls squarely within a FOIL exemption by articulating a particularized and specific justification for denying access” [Capital Newspapers v. Burns, 67 NY 2d 562, 566 (1986); see also, Farbman & Sons v. New York City, 62 NY 2d 75, 80 (1984)].
Second, based on your contentions, it appears that two of the exceptions to rights of access are pertinent to an analysis of rights of access. As suggested above, the extent to which those exceptions may properly be asserted would be dependent on the content of the records at issue and the effects of disclosure.
Section 87(2)(c) permits an agency to withhold records to the extent that disclosure would “impair present or imminent contract awards or collective bargaining negotiations”. That provision frequently applies, perhaps as in this instance, prior to the award of a contract. In our view, it is intended to ensure that a government agency is not placed at a disadvantage when it is involved in a negotiation process. Assuming that your contentions are accurate, that disclosure would “have an effect on the price the county would receive” and impact negotiation techniques, I believe that the County has the ability to deny access to the extent that those harmful effects of disclosure would be the result.
Also of significance as a basis for denial of access is §87(2)(d), which permits an agency to withhold records or portions of records that "are trade secrets or are submitted to an agency by a commercial enterprise or derived from information obtained from a commercial enterprise and which if disclosed would cause substantial injury to the competitive position of the subject enterprise."
The question under section 87(2)(d) involves the extent, if any, to which disclosure would "cause substantial injury to the competitive position" of persons or firms responding to RFP's. If, for example, the records could be used to ascertain a unique business process or include significant and detailed financial information, it might be contended that certain aspects of the records might, if disclosed, cause substantial injury to an entity’s competitive position.
The concept and parameters of what might constitute a "trade secret" were discussed in Kewanee Oil Co. v. Bicron Corp., which was decided by the United States Supreme Court in 1973 (416 (U.S. 470). Central to the issue was a definition of "trade secret" upon which reliance is often based. Specifically, the Court cited the Restatement of Torts, section 757, comment b (1939), which states that:
"[a] trade secret may consist of any formula, pattern, device or compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it. It may be a formula for a chemical compound, a process of manufacturing, treating or preserving materials, a pattern for a machine or other device, or a list of customers" (id. at 474, 475).
In its review of the definition, the court stated that "[T]he subject of a trade secret must be secret, and must not be of public knowledge or of a general knowledge in the trade or business" (id.).
In my view, the nature of the records and the area of commerce in which a profit-making entity is involved would be the factors used to determine the extent to which disclosure of the records would "cause substantial injury to the competitive position" of the enterprise. Therefore, the proper assertion of §87(2)(d) would be dependent upon the facts and, again, the effect of disclosure upon the competitive position of the entity to which the records relate.
Again, assuming that your contentions are accurate, that items such as “audited financials of private companies, private revenue expenses, and other non-published financial information” would cause “substantial competitive injury” if disclosed and that some elements of the responses “constitute bona fide trade secrets”, the County would be have the ability to withhold those portions of the records.
I note that you wrote that “upon acceptance of a bid, public release of documents would be warranted.” While I would agree that acceptance of a proposal would likely end the County’s ability to rely on §87(2)(c) of FOIL concerning the impairment of contract awards, there may be portions of the proposals which if disclosed would cause substantial competitive harm or that consist of trade secrets that might continue to be deniable, with justification, even after an award is made.
Lastly, as you are aware and as suggested earlier, if an agency denies access to records and the denial is challenged in court, the agency has the burden of defending secrecy. In a decision to which you referred, Markowitz v. Serio [11 NY3d 43 (2008)], the Court of Appeals focused on a denial of access based on §87(2)(d) and determined that the possibility of harm that is “theoretical” is inadequate, and that an agency “cannot merely rest upon a speculative conclusion that disclosure might potentially cause harm” (id., 50). In short, to justify a denial of access based on §87(2)(d), it must be proven that disclosure would cause actual harm to a commercial entity.
I hope that you find the foregoing to be of value and that I have been of assistance.