Request By:
Mr. Henry J. Curtis, Attorney Chief
Kentucky Department of Parks
Capital Plaza Tower
Frankfort, Kentucky 40601-1974
Opinion
Opinion By: Frederic J. Cowan, Attorney General; Amye B. Majors, Assistant Attorney General
Mr. John L. Dotson has appealed to the Attorney General pursuant to KRS 61.880 your denial of his March 1, 1991, request to inspect various documents in the possession of the Department of Parks. The requested documents are identified as, "All year-end audit reports and other financial data submitted to [the] Department of Parks in connection with the operation of Lake Cumberland State Dock and Lake Cumberland State Park, Jamestown, Kentucky."
In a letter dated April 1, 1991, you denied Mr. Dotson's request, advising him that the Office of Counsel had determined "that audit reports and financial data submitted to the Department by the licensee, Marina Management Services, Inc., is proprietary information which may not be released under the Open Records Act. " Although you attached a copy of an earlier Attorney General Opinion, OAG 88-1, you did not cite a statutorily prescribed exemption authorizing nondisclosure of the records, as required by KRS 61.880(1), or offer any explanation as to how that exemption applies to the records. In the cited opinion, this Office upheld a denial by the Finance and Administration Cabinet of a competitor's open records request for data submitted by a vendor in response to a Request For Proposal (RFP). We reasoned that the records and documents withheld, including consolidated financial statements, project narratives, summary experience charts, work plans and pricing schedules, could "be considered as secret commercially valuable plans and formulae which if openly disclosed would permit an unfair advantage to competitors . . . " of the vendor under KRS 61.878(1)(b).
In his letter of appeal to this Office, Mr. Dotson distinguishes the earlier cited opinion, noting:
The documents sought in this request are not secret commercially valuable plans and formula as were those at issue in OAG 88-1. In OAG 88-1, the documents sought were submitted by a computer company in response to a Request for Proposal for a project. The party requesting the information was a competitor of the submitting company. In upholding the Finance Cabinet's denial of the request, the Office of the Attorney General found that the open disclosure of the information would permit an unfair advantage to competitors.
The information sought herein solely relates to the operation of the State Dock, including income and expenses of the operation. The information is not being sought by a competitor nor is the information such that, if disclosed, would permit an unfair advantage to a competitor.
Mr. Dotson asks that we review the denial of his request to determine if your actions were consistent with the Open Records Act. For the reasons set forth below, we conclude that you failed to comply with the requirements of the Act in responding to Mr. Dotson's request and that your denial was improper.
OPINION OF THE ATTORNEY GENERAL
Before proceeding to the ultimate issue in this open records appeal, we direct your attention to KRS 61.880(1), which contains specific guidelines for an agency's response to a request under the Act. That statute provides:
Each public agency, upon any request for records made under KRS 61.870 to 61.884, shall determine within three (3) days (excepting Saturdays, Sundays and legal holidays) after the receipt of any such request whether to comply with the request and shall notify in writing the person making the request, within the three (3) day period, of its decision. An agency response denying, in whole or in part, inspection of any records shall include a statement of the specific exception authorizing withholding of the record and a brief explanation of how the exception applies to the record withheld. The response shall be issued by the official custodian or under his authority, and it shall constitute final agency action.
Your response to Mr. Dotson's request was deficient in several respects. Some twenty workdays elapsed between the date of the request and the date of the response. Allowing for delays in the mail, your response was nevertheless untimely. Moreover, you failed to cite the specific exception athorizing nondisclosure and to provide an explanation of how the exceptions applies to the records withheld. We urge you to review these provisions to insure that future responses conform to the Open Records Act.
Turning to the issue in this appeal, we find that you improperly denied Mr. Dotson's request. KRS 61.878(1)(b) exempts from public inspection in the absence of a court order:
Records confidentially disclosed to an agency and compiled and maintained for scientific research, in conjunction with an application for a loan, the regulation of commercial enterprise, including mineral exploration records, unpatented, secret commercially valuable plans, appliances, formulae, or processes, which are used for the making, preparing, compounding, treating, or processing of articles or materials which are trade commodities obtained from a person and which are generally recognized as confidential, or for the grant or review of a license to do business and if openly disclosed would permit an unfair advantage to competitors of the subject enterprise. This exemption shall not, however, apply to records the disclosure or publication of which is directed by another statute.
This provision has been interpreted to authorize nondisclosure of records pertaining to TF-1, an agent employed in PCB removal, its components and uses, OAG 86-1, and technical proposals submitted in response to Requests for Proposals. OAG 83-256; OAG 88-1. Fundamental to the valid assertion of this exemption is evidence that the requested documents contain information of a proprietary nature.
Although there is scant Kentucky authority on what constitutes a proprietary interest, the term has been defined as "[b]elonging to wonership; belonging or pertaining to a proprietor; relating to a certain owner or proprietor [;] [m]ade and marketed by a person or persons having the exclusive right to manufacture and sell such . . . ." Black's Law Dictionary (5th ed.). "Trade secret, " a term used interchangeably with proprietary interest or information, has been defined by a Kentucky court. In Progress Laundry Co. v. Hamilton, Ky., 270 S.W. 834, 835 (1925), Kentucky's then highest court adopted the following definition:
A trade secret is a plan or process, tool, mechanism, or compound, known only to its owner and those of his employees to whom it is necessary to confide it. It is a property right which equity, in the exercise of its power to prevent breach of trust, will protect. It differs from a patent in that as soon as the secret is discovered, either by an examination of the product or in any other honest way, the discoverer has the full right to use it.
This definition suggests something integral to a product or its production. It does not appear to contemplate audit information such as that withheld by the Department of Parks.
The holding of OAG 88-1, cited by the Department in support of its position, is thus limited to its unique facts. As we noted in that opinion:
[T]he RFP process is a relatively new way for a public agency to advertise for bids on contracts for services. Rather than the agency stating firm specifications to be met by the bidder, the agency sets forth in the RFP the objective to be accomplished and requests that the bidder propose a plan, method, equipment to be used and a demonstration of how the bidder has the personnel and capability to accomplish the objective. Bidders who respond to the RFP must submit, in addition to data about their experience and capability to accomplish the designated objectives, a technical plan and the price they will charge for the services.
OAG 88-1, at p. 2. Although much of the information, including total contract price, were held to be public record, certain of the documents were deemed secret commercially valuable plans in that their disclosure would permit an unfair advantage to competitors.
This reasoning cannot be extended to the annual audits of Lake Cumberland State Dock and Lake Cumberland State Park. An audit is a systematic inspection of accounting records and merely reflects income and expenses of operation. It is not a secret commercially valuable plan of formula. Moreover, this Office has consistently held that final audit reports are public documents and are therefore subject to public inspection unless there is a possibility of prospective law enforcement action or administrative adjudication. OAG 76-633; OAG 82-340; OAG 83-326; OAG 84-225. Audits that fall into the latter category are exempt under KRS 61.878(1)(f). You have not indicated that any possibility of law enforcement action or administrative adjudication exists. Accordingly, the audit report is not exempt.
Our opinion is confirmed by the terms of the licensing agreement between the Department of Parks and Marina Management Services, Inc., which operates the Lake Cumberland State Dock. The agreement requires the licensee:
[to] keep adequate records and books of accounts covering business operations conducted upon the premises in accordance with recognized accounting practices and Parks Regulation 3 . . . which shall be considered a part of this agreement. The Licensee shall transmit a balance sheet and operating statement to Parks in accordance with Parks Regulation 3. All such records and books of accounts shall be open for inspection or audit by agents of Parks at all reasonable times.
The referenced Park Regulation provides:
The audit and review of internal controls shall be performed annually as of the close of business on the day corresponding with the end of the licensee's fiscal year. The audit report and accompanying memorandum must be submitted to the Commissioner of Parks and the Commissioner of Finance on or before the 15th day of the fourth month following the close of the licensee's fiscal year.
Hence, although Marina Management Services, Inc., is a private corporation, and not a "public agency" within the meaning of KRS 61.870(1), its records are "public records" within the meaning of KRS 61.870(2) to the extent that they are transmitted to, and retained by, the Department of Parks.
KRS 61.870(2) provides that the term "public record" includes records that are "prepared, owned, used, in the possession of or retained by a public agency ." [Emphasis added.] We have previously held that if records of private entities or agents are in the possession of or retained by a state agency, they are, in general, subject to inspection. OAG 89-7. If the records are not retained by a public agency, on the other hand, they are private records and are therefore beyond the reach of the Open Records Act. OAG 89-7.
In OAG 91-15, we discussed the applicability of the Open Records Act to financial documents in the possession of the City of Louisville's five golf professionals, who supervise the municipal golf courses and are under lease to the Louisville and Jefferson County Parks Department for all concessions. The city released the records maintained by the golf professionals in their capacity as employees of the city, including receipts of greens fees they collected on behalf of the city. However, the city could not release records maintained by the professional in thier capacities as lessees which pertained to concessions, inasmuch as those records remained in the possession of the lessees as private individuals. We reasoned that these records were not "in the possession of or retained by a public agency. " It is instructive to quote at length:
The records of 'concession' money earned and collected by these five individuals is not subject to mandatory audit by the City of Louisville or Jefferson County and the 'concession' fees do not at any time become public money so as to constitute funding by state or local authority. Therefore, records pertaining to these transactions are in the possession of private individuals responsible for their generation, maintenance, and storage in their capacity as lessees with the Louisville and Jefferson County Parks Department. These records are therefore not 'in the possession of or retained by a public agency' as argued by the Courier-Journal.
OAG 91-15, at p. 5-6.
The Department of Parks receives a percentage of the licensee's monthly gross income and requires that it submit an annual audit. These characteristics distinguish its situation from that at issue in OAG 91-15. Because a portion of the licensee's receipts become public money, and because its required year-end audit remains in the possession of the Department, that audit is a public record. It is not, as demonstrated above, exempt under KRS 61.878(1)(b).
Moreover, this Office has previously stated that a contractor with a governmental entity must accept certain necessary consequences of involvement in public affairs. OAG 90-7. Such a contractor:
[W]hether a corporation or an individual human being, runs the risk of closer public scrutiny than might otherwise be the case. Such a contractor, in our view, loses any character of a 'private individual,' as such phrase is used in KRS 61.878(1)(g) [pertaining to the exemption for correspondence with private individuals] . . . .
OAG 90-7, at p. 4. In OAG 91-15, we refused to extend this reasoning to all business records of private enterprises under contract with the state" . . . at least . . . where such records are not mandatorily audited by the governmental entity." We see no need to exercise such caution here insofar as the private enterprise is required to submit an annual audit to the Department. That document is, in fact, a public record.
With respect to Mr. Dotson's request for financial data, we find that although the Department improperly relied on KRS 61.878(1)(b) in refusing to release the information, the request was not sufficiently definite to permit it to formulate a response. While the purpose and intent of the Open Records Act is to permit the ". . . free and open examination of public records . . .," the right of access is not absolute. KRS 61.882(4). As a precondition to inspection, a requesting party must identify with "reasonable particularity" those documents which he wishes to review. OAG 89-81. We have previously stated that blanket requests for information on a particular subject need not be honored. OAG 76-375; OAG 83-386; OAG 89-61; OAG 89-88.
It is therefore our opinion that the audit report is not exempt from inspection. However, Mr. Dotson's request for access to "financial data" is too indefinite. It precludes the custodian from determining what records it encompasses, and whether any or all of the records are exempt.
As required by statute, a copy of this opinion will be sent to the requesting party, Mr. John L. Dotson. Both the Department and Mr. Dotson have the right to challenge it, and may initiate proceedings for injunctive or declaratory relief within 30 days in the appropriate circuit court. KRS 61.880(5).