Giving away the store

From the Summer 2001 issue of The News Media & The Law, page 37.

When a reporter in Providence, R.I., got a tip that the city’s new Convention Center Authority and the hotel it owns were giving complimentary rooms and cut-rate banquet deals based on political motivations, he tried to find out, through the state’s open records law, what was going on.

Michael Stanton’s request failed. So, too, did the ensuing lawsuit that The Providence Journal carried to the state’s highest court.

Adopting the rationale of a federal appeals court, the state court allowed the Convention Center Authority to withhold business information just because it would not “customarily” be disclosed by the business that provided it, not because disclosure would cause competitive harm. In the past, courts usually require a government body to justify withholding business information by demonstrating competitive harm.

In 1996, Stanton asked the Convention Center Authority for records relating to the August 1995 Mobil Celebrity Golf Invitational Tournament held at the Westin Hotel, owned by the authority, and for the May 1996 Verrazano Day Banquet held at the Convention Center. He also sought records (without identifying details) showing the frequency with which the Westin awarded complimentary rooms.

Stanton said he understood that it is sometimes good business to give out complimentary rooms, but it is important to know that the practice is sound. The Convention Center presumably makes money off its rooms and off its banquet services and if people are benefitting from the discounts for political reasons, the public needs to know, he said.

“With Rhode Island’s record of political chicanery, it’s important to see what is going on,” he said. The Convention Center had been built with public money despite controversy and criticism that it would not pay its own way.

Stanton would have liked to know who got the complimentary rooms at the golf tournament — tournament officials or politicians — but knew he faced problems in getting that information. Instead, he asked for records without identifying details, hoping to at least get a general sense of the cost breakdown.

By and large, business exemptions to open records laws keep governments from giving away the store. They allow information to be withheld so a business that made disclosures to the government can still keep its competitive edge.

The federal government also allows an agency to withhold voluntarily submitted business information if it believes a disclosure would jeopardize its chances of getting information in the future. For instance, coal companies might choose to tell the Department of the Interior where they think coal reserves might be located in order to help the agency in its planning efforts. The department benefits but keeps mum, assuring that it will get such voluntarily given information in the future.

However, in 1992 the U.S. Court of Appeals in Washington, D.C., (D.C. Cir.) expanded the use of the second arm of the business information exemption to the federal Freedom of Information Act. In a 7-4 decision, the full bench allowed the Nuclear Regulatory Commission to avoid disclosing industry reports about “significant” safety-related events, such as the accident at Three Mile Island, by accepting them as “voluntary,” rather than compelling their submission.

Rejecting arguments that the proprietary exemption was intended to protect competition, not reputations, the court ruled that federal agencies may protect voluntarily submitted business information if it customarily would not be released by the submitter. The U.S. Supreme Court refused to review the case. (Critical Mass Energy Project v. Nuclear Regulatory Commission; See NM&L, Fall 1992).

Although many state open records statutes are patterned after the federal FOI Act, no state high court had adopted the controversial holding in Critical Mass. But in late June, the Rhode Island Supreme Court adopted the Critical Mass test denying the Journal’s request for records showing how the city’s Convention Center Authority tallied gains and losses and what discounts it offered.

Quoting directly from the Critical Mass decision, the majority said “financial or commercial information provided to the Government on a voluntary basis is ‘confidential’ for purposes [of the exemption] if it is of a kind that would customarily not be released to the public by the person from whom it was obtained.”

The newspaper brought its suit against the Convention Center Authority in June 1997 in Providence County Superior Court. It pointed out that the law creating the authority required it to operate to “the greatest public benefit and at the least public cost.” If information would not be forthcoming, the public could not know if the authority carried out its mandate.

The authority said the primary reason it can attract high profile, long-term and repeat customers is because of the attractive package it provides. Disclosure of information on how it woos its customers would hurt its ability to attract and keep them, because it would be obligated to inform prospective customers that all the information they provided would be made public, it said.

The county court in May 1999 ruled against the newspaper. It held that documents reflecting the negotiation process “must, of necessity,” include confidential business information that would not customarily be disclosed. The newspaper appealed.

In a decision written by Justice Maureen McKenna Goldberg, the high court held that negotiations between customers and the Convention Center Authority are privileged and confidential and would not be made available. Because language in the Rhode Island FOI Act mirrors the language in the federal act, the state would follow the court interpretations of the federal FOI Act. It would adopt for Rhode Island the Critical Mass ruling that information not “customarily” released by a business could be protected when it is given to the government. The usual test for protecting only information that could cause competitive harm would be reserved for information businesses are obliged to provide the government.

The court did reverse with regard to the terms of final contracts with the authority and it sent the case back, telling the lower court to remove voluntarily submitted information from the contract.

Justice Robert Flanders in dissent said a contract and all information leading up to it should be public. The blanket denial by the lower court encompassed all documents regarding negotiations that led to the booking of events, the offering of complimentary rooms, the hotel’s ultimate gains and losses, and banquet-discount records. He agreed that federal case law should set an example, but said the court should follow U.S. Supreme Court rulings that freedom of information laws exist to open agency action to the light of public scrutiny.

Flanders also said much of the information the reporter requested would not have been obtained from someone outside the authority but would have been created by the authority itself. The exemption should never have applied to that information, he said. — RD