Opinion
Opinion By: Andy Beshear,Attorney General;Gordon R. Slone,Assistant Attorney General
Open Records Decision
The issue presented in this case is whether Commonwealth Seed Company, LLC ("CSC"), violated the Open Records Act in denying a request to produce unredacted records of Braidy Industries, Inc. where the names of company shareholders had been withheld. Adopting the reasoning of 17-ORD-198, on essentially identical facts, we find that CSC violated the Act and must release the requested records.
Background . Chris Otts, WDRB-TV ("Appellant") first made an open records request to CSC on May 31, 2017. Appellant sought various records concerning CSC's investment of $ 15 million, appropriated by the Kentucky General Assembly in HB 482, in Braidy Industries, Inc. ("Braidy"). CSC 1 responded on June 8, 2017, by providing more than 100 pages of documents. CSC's response explained that it had redacted information from the records provided, and withheld certain other documents, claiming confidentiality exceptions to the Open Records Act. CSC had also redacted what it considered "personal and private investor information."
On June 30, 2017, the Louisville Courier-Journal requested documents listing the stockholders or investors in Braidy from the Kentucky Cabinet for Economic Development ("KCED"). The KCED produced certain records but withheld the identities of Braidy's stockholders or investors. The Courier-Journal appealed KCED's decision to this Office, arguing that the identities of Braidy's stockholders or investors should be disclosed. On October 3, 2017, this Office issued 17-ORD-198, which determined that the public interest in the identities of shareholders in Braidy (where KCED through CSC, made an extraordinary investment of public funds ($ 15 million) in Braidy) outweighed the privacy interest in the identity of the individual stockholders. That decision held that the identities of shareholders in Braidy are not exempt from disclosure under the Open Records Act's exemption for personal privacy, KRS 61.878(1)(a), 2 or the Act's exemption for confidential disclosures made under KRS 61.878(1)(c)1. and 2.
On October 9, 2017, after the Attorney General released 17-ORD-198, Appellant renewed his open records request to CSC, specifically requesting that CSC provide the same records it had already produced, but without redacting the names or identities of Braidy shareholders. 3 CSC timely responded that it would not produce this information until all appeals of 17-0RD-198 are exhausted. This appeal followed.
CSC requested that we hold this appeal in abeyance pending resolution of KCED's appeal of 17-ORD-198. "17-0RD-198 concerns the same information that WDRB seeks from CSC, that is, the identities of Braidy's private shareholders. It would be duplicative and inefficient to force CSC to litigate this issue when the matter will, regardless, ultimately be resolved in the courts." CSC also opined that our decision at 17-ORD-198 was in error in holding that the identities of shareholders of Braidy must be disclosed.
Analysis - Request to hold appeal in abeyance . We decline CSC's request to hold this appeal in abeyance "pending resolution of the KCED's appeal of 17-ORD-198." Pursuant to KRS 61.880(3), "Each agency shall notify the Attorney General of any actions filed against that agency in Circuit Court regarding the enforcement of KRS 61.870 to 61.884." This Office has not been notified of an appeal of 17-ORD-198. More importantly, there is no provision in the Open Records Act that permits this Office to hold an appeal in abeyance pending resolution of an appeal of an earlier open records decision. KRS 61.880(2)(a) defines the role of the Office of the Attorney General: "The Attorney General shall review the request and denial and issue within twenty (20) days, excepting Saturdays, Sundays and legal holidays, a written decision stating whether the agency violated provisions of KRS 61.870 to 61.884." 4 This Office has no statutory authority to comply with CSC's request to hold this appeal in abeyance.
Confidential disclosures under KRS 61.878(1)(c)1. and 2., and personal privacy exemption under KRS 61.878(1)(a) .
We next consider CSC's arguments that the names of shareholders are confidential pursuant to KRS 61.878(1)(c)1. and 2., and may also be withheld under the personal privacy exemption of KRS 61.878(1)(a). In 17-ORD-198, copy attached, we fully reviewed these arguments in response to KCED's same claims that KRS 61.878(1)(c)1. and 2., and KRS 61.878(1)(a) protected the identities of Braidy's shareholders. We believe the analysis contained in 17-ORD-198 is controlling on the facts presented and adopt that decision as the basis of our determination herein that the identities of Braidy shareholders must be disclosed.
Personal Privacy Exemption . In 17-ORD-198, we reviewed the standard by which we judge whether a public agency may rely on KRS 61.878(1)(a) which exempts: "Public records containing information of a personal nature where the public disclosure thereof would constitute a clearly unwarranted invasion of personal privacy [.]" We now very briefly summarize the reasoning of 17-ORD-198 with respect to the privacy exemption. The standard, set forth in
Kentucky Board of Examiners of Psychologists v. Courier-Journal and Louisville Times Co., 826 S.W.2d 324 (Ky. 1992), for determining whether a disclosure would constitute an unwarranted invasion of personal privacy, provides that there must be a "comparative weighing of the antagonistic interests" between the privacy interest on one hand, and, on the other hand, the "general rule of inspection and its underlying policy of openness for the public good." Id., at 327. "The question of whether an invasion of privacy is 'clearly unwarranted' is intrinsically situational, and can only be determined within a specific context." Id., at 328. In 17-ORD-198, under the same set of facts, we determined that "revealing the identities of the shareholders of Braidy serves the purposes of the Open Records Act because it will allow the public to evaluate the Cabinet's decision to invest substantial resources [$ 15 million] in that company." 17-ORD-198, p. 8. We again find that the interest in disclosure of Braidy shareholder names outweighs the privacy interest.
Confidential Disclosure under KRS 61.878(1)(c)1 . In 17-ORD-198 we reviewed the three-prong test for a public record to qualify for exclusion under KRS 61.878(1)(c)1. 5 :
(1) confidentially disclosed to an agency or required by an agency to be disclosed to it;
(2) generally recognized as confidential or proprietary; and
(3) of such a character that open disclosure would permit an unfair commercial advantage to competitors of the disclosing entity.
Our analysis in 17-ORD-198 assumed that the first prong of the three-part test had been met, but not the second prong. In that appeal we noted that KRS 271B.16-020(2)(c) permits shareholders in a corporation to access a list of the other shareholders for certain purposes. Furthermore, there is nothing in the record (of 17-ORD-198 or the current appeal) to indicate a general custom or usage regarding such information as confidential.
In the current appeal, CSC cites to the case of
Marina Management Service, Inc. v. Commonwealth of Ky., Cabinet for Tourism, 906 S.W.2d 318 (Ky. 1995), as precedent to uphold their denial of the shareholder names as confidential and proprietary under KRS 61.878(1)(c)1. and 2. In 17-ORD-198, we determined that Marina Management Service is not applicable to the request for the names of Braidy shareholders because that request was "not a case in which a requester seeks detailed personal financial information that could provide an advantage to competitors" as was the case in Marina Management Service . We again find Marina Management Service is not applicable in the context of a request for the names of Braidy shareholders and that CSC has failed to satisfy the second prong of the test for exclusion under KRS 61.878(1)(c)1.
In regards to the third prong of the test, KCED argued, in pertinent part, that releasing the names of shareholders would unfairly permit competitors access to significant private financial information. In 17-ORD-198, we determined that KCED had not met its burden of proof, as required by KRS 61.880(2)(c), to show that the names of Braidy's corporate shareholders, in isolation, are confidential or proprietary information under KRS 61.878(1)(c)1:
Our decisions have "recognized that records relating to private financial affairs can be exempted under the Kentucky Open Records Act. " 01-ORD-143 (citation form modified to current practice); see also 10-ORD-191. We do not, however, believe that the identities of the shareholders reveal anything of substance about the economic status of either Braidy or its shareholders. Specifically, the fact that an individual is an equity holder does not reveal how well-capitalized the company is, and it says nothing about how much money the investor has. This is not a case in which a requester seeks detailed personal financial information that could provide an advantage to competitors. See, e.g., Marina Mgmt. Serv., Inc. v. Com., Cabinet for Tourism, 906 S.W.2d 318, 319 (Ky. 1995) (permitting agency to withhold records that reflected "asset values, notes payable, rental amounts on houseboats, related party transactions, profit margins, net earnings, and capital income").
Furthermore, the relevant "competitive" interest in this case is not in the nature of trade secrets, investment strategies, economic status, or business structures, but rather the competition for funding that has already concluded, which resulted in the investment of $ 15 million of the Commonwealth's resources (along with the approval by KEDFA of $ 10 million in tax incentives for Braidy Industries). Since no unfair commercial disadvantage to Braidy or its investors has been shown, we find that the Cabinet has not met its burden of proof with respect to KRS 61.878(1)(c)1.
17-ORD-198, p. 11.
Under the same analysis as above, we find that CSC has shown "no unfair commercial disadvantage to Braidy or its investors, " and has thus failed to meet its burden of proof to show that releasing shareholder names would permit an unfair commercial advantage to competitors of the disclosing entity. Thus, CSC has failed to show that release of the shareholder names are exempt under KRS 61.878(1)(c)1.
Confidential disclosures under 61.878(1)(c)2.b . As to KRS 61.878(1)(c)2.b., also invoked by CSC, that subsection applies to:
records confidentially disclosed to an agency or required by an agency to be disclosed to it, generally recognized as confidential or proprietary, which are compiled and maintained ? [i]n conjunction with an application for or the administration of assessments, incentives, inducements, and tax credits as described in KRS Chapter 154.
CSC's initial answer to Appellant claimed that the redactions "prevent the disclosure of confidential, private information pertaining to Braidy's internal corporate structure, financial outlook, and investors (other than CSC). Such information is "generally recognized as confidential and proprietary" in the business community, and its disclosure would place Braidy at a competitive disadvantage. " CSC referenced
Hoy v. Kentucky Industrial Revitalization Authority, 907 S.W.2d 766 (Ky. 1995) as authority that such information is exempted from the Open Records Act. In 17-ORD-198, we reviewed the Hoy case and determined that it:
. . . recognized certain information as confidential or proprietary, but that information "included a financial history of the corporation, projected cost of the project, the specific amount and timing of capital investment, copies of financial statements and a detailed description of the company's productivity, efficiency and financial stability." 907 S.W.2d at 768. Here, only the names of the Braidy shareholders are at issue. As we have already found in regard to KRS 61.878(1)(c)1., there has not been an adequate showing that this specific information is "generally recognized as confidential or proprietary. "
17-ORD-198, p. 12.
CSC also cites to the Marina Management Service decision as authority under KRS 61.878(1)(c)2 to withhold shareholder identities, but, as determined in 17-ORD-198, that case applies where a requester seeks detailed personal financial information that could provide an advantage to competitors but a request for shareholder names is not such a case. We find no reason in the present appeal to disturb our determination in 17-ORD-198 that the names of shareholders are not confidential under KRS 61.878(1)(c)2.b.
CSC has failed to meet its burden of proof under KRS 61.880(2)(c) to show that the Braidy shareholder names should not be disclosed. Accordingly, the requested names must be 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 At no time in the course of Mr. Otts's open records requests, or this appeal, has CSC denied that it is a "public agency" as defined at KRS 61.870.
2 KRS 61.878(1(a) exempts from disclosure: "Public records containing information of a personal nature where the public disclosure thereof would constitute a clearly unwarranted invasion of personal privacy[.]"
3 Appellant, on October 9, 2017, identified the specific redactions, that should be removed, in an email to counsel for CSC: "These redactions appear [on] (but are not limited to) the following pages in your document production:
Exhibit A schedule of purchasers, page 41
Signature pages 72-75; 92-96
Exhibit A stockholders, pages 77, 97"