Opinion
Opinion By: Jack Conway, Attorney General; Amye L. Bensenhaver, Assistant Attorney General
Open Records Decision
This matter having been presented to the Attorney General in an open records appeal, and the Attorney General being sufficiently advised, we find that the Kentucky League of Cities did not meet its burden of proof in relying on KRS 65.312(1)(b) and (c) to deny Brandon Voelker's August 16, 2010, request for a copy of "all attorneys fees which were paid defending the case Czirr v. Sanitation District 1. " KLC's nondisclosure of the requested records therefore violated the Open Records Act.
In an August 19, 2010, response, KLC advised Mr. Voelker that KRS 65.312(1)(b) and (c) authorize "nondisclosure of proprietary or confidential information in responsive records if the disclosure would provide an unfair commercial advantage to competitors. " KLC explained that "release of the total amount of attorney fees paid by an insurer in a claim could be used to create an unfair competitive or commercial advantage. " Mr. Voelker subsequently appealed KLC's denial, arguing that attorney's fees do not "involve competitive rates regarding insurance prices . . . [or] permit an unfair commercial advantage to [KLC's] competitors . . . ." He maintained that "lawyer bills to the Commonwealth are always disclosed" and therefore cannot be considered confidential or proprietary.
In supplemental correspondence directed to this office, KLC disputed Mr. Voelker's argument relative to state government disclosure of attorney billing records. KLC maintained that his analogy to state government was flawed because the state "is not engaging in a competitive business" and because:
amounts paid to law firms for members participating in the insurance program are included as part of the overall loss costs used to calculate insurance rates for subsequent years. Data relating to KLC's costs in providing coverage under a contract is an integral part of an insurer's ability to price its product, which primarily determines competitiveness and is crucial to the success of its business. Allowing records which reflect the costs to KLC of providing a legal defense to any or all of its insured members to be subject to disclosure would open to all potential competitors the ability to retrieve valuable pricing information, not otherwise available, to be used in calculating the pricing of a competitive product.
In the absence of proof supporting the argument that release of records reflecting attorneys fees paid on a claim could create an unfair competitive advantage for private sector insurance companies, we disagree with KLC's assertion that "[t]his is exactly the type of information that the General Assembly sought to exempt from disclosure when it carefully crafted and enacted the provisions of SB 88," now KRS 65.310, 65.312, and 65.314.
KRS 65.312 extends the application of the Open Records and Open Meetings Act to the governing body of a public entity and affiliated organizations as defined at KRS 65.310(1) and (2), but provides additional exceptions to public inspection other than those provided in the Acts. KLC invokes two of these, KRS 65.812(1)(b) and (c), to deny Mr. Voelker access to records reflecting attorneys fees in Czirr v. Sanitation District 1. These exceptions authorize nondisclosure of a record that:
(b) Includes information that would provide an unfair competitive advantage to private sector competitors providing insurance coverage or financing services in the Commonwealth;
(c) Is generated by the public entity or an affiliated organization, is generally recognized as confidential or proprietary, and which, if openly disclosed, would permit an unfair commercial advantage to competitors of the public entity or an affiliated organization [.]
These provisions are similar, but not identical, to KRS 61.878(1)(c)1. which authorizes public agencies to withhold "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."
The requested attorney billing records are not protected by KRS 65.312(1)(c) because they are not "generated by the public entity [KLC] or an affiliated organization [Kentucky League of Cities Insurance Services]" but are instead generated by the attorneys hired to represent KLC's members and submitted to KLC. The records do not satisfy the threshold requirement for reliance on that provision. Compare, 01-ORD-153 (plant board improperly relied on KRS 61.878(1)(c)1. to deny access to board minutes insofar as those minutes were generated by the board and not confidentially disclosed to the board). Nor do we find that they are protected by KRS 65.312(1)(b). Information in the billing records is, by KLC's own admission, only "part of the overall loss costs used to calculate insurance rates." Attorneys fees are "raw data" that is factored, along with other undisclosed data, into "overall loss costs" as a component of KLC's insurance rates. KLC offers no insight into what the other factors are or how its insurance rates are calculated. Accordingly, the record on appeal contains insufficient proof that disclosure of information relating to attorneys fees would, standing alone, provide an unfair advantage to private sector competitors providing insurance coverage.
Conversely, we note the exclusion of any reference to discussions of attorneys fees in KRS 65.312(2)(b), establishing an additional exception for KLC's public meetings. That exception focuses exclusively on "insurance rates, proposed rates, or anything that relates to rates if that discussion would jeopardize the competitiveness of the public entity or affiliated organization . . . ." Additionally, we note that on at least one prior occasion, the Attorney General determined that records relating to payments for legal services by the Kentucky Association of Counties, a public entity pursuant to KRS 65.310(1) after July 15, 2010, and previously deemed to be a public agency pursuant to KRS 61.870(1)(h) and/or (k), were not confidential and must be disclosed to the public. 95-ORD-116. 1 In 2008, the Kentucky Court of Appeals adopted the view that "billing statements prepared by attorneys retained by the agency reflecting the general nature of legal services rendered" must be released. Cabinet for Health and Family Services v. Scorsone, 251 S.W.3d 328 (Ky. App. 2008). 2 No agency subject to the Open Records Act has argued that attorney billing records are "generally recognized as confidential or proprietary, " as those terms are commonly understood, or that their disclosure would provide an unfair advantage to private sector competitors, and this position finds no support in existing law.
We are fully aware that KLC occupies a unique position as a public entity, subject to the Open Records Act, that is engaged in a competitive business. Nevertheless, KLC offers no proof of competitive harm from disclosure of the records. It postulates potential harm and possible competitive advantage, explaining that the information "could be used to create an unfair competitive or commercial advantage" and "would open to all potential competitors the ability to retrieve valuable pricing information." The legislature's apparent goal in enacting these provisions was to expose KLC, and similarly situated public entities, to the light of public scrutiny and not, simultaneously, to establish exceptions that swallow the rule of openness and accountability. Given the speculative nature of this response, and the absence of supporting proof, we disagree that "[t]his is exactly the type of information that the General Assembly sought to exempt from disclosure when it carefully crafted and enacted the provisions of SB 88."
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.
Brandon N. VoelkerJames D. Chaney
Footnotes
Footnotes
1 95-ORD-116 involved the Kentucky Association of Counties which had resisted disclosure of billing records under the attorney client privilege.
2 Scorsone, above, involved a number of state agencies which also resisted disclosure of attorney billing records under the attorney client privilege.
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