|Office of the Attorney General - State of Texas
May 4, 2000
Mr. Michael Kregg Phillips
Dear Mr. Phillips:
You ask whether certain information is subject to required public disclosure under chapter 552 of the Government Code. Your request was assigned ID# 134875.
The Department of Protective and Regulatory Services (the "department") received three requests for information related to a solicitation for offer and resulting contract. The department assigned PRS reference number 119 to the request from Strategic Partnerships, Inc. ("SPI"), and this office assigned ID# 134874 to this request. Pursuant to your representation that this request was "canceled," the SPI request was withdrawn. The request from McGinnis, Lochridge & Kilgore ("MLK"), assigned PRS reference number 120 by the department, was originally assigned ID #134874 by this office, but is now consolidated in this decision with the request from Information Solutions ("EDS"), which was assigned PRS reference number 135 by the department. Both MLK and EDS seek the contract, designated IT SFO 99-020, between Northrop Grumman Technical Service, Inc. ("Grumman") and the department. You have provided the requested contract to this office for our review.
You assert that release of the requested contract may implicate the proprietary interests of Grumman. Pursuant to Government Code section 552.305 you have supplied responsive information to this office without taking a position regarding any exception to disclosure that may apply to this information other than to relate that the responsive information may be excepted from public disclosure by section 552.101, 552.110 or 552.131 of the Government Code.
The department informed Grumman of the requests and explained its opportunity to claim the exceptions to disclosure it may contend applies to the requested information, and to submit arguments in support of those exceptions. See Gov't Code § 552.305 (permitting interested third party to submit to attorney general reasons why requested information should not be released); Open Records Decision No. 542 (1990) (determining that statutory predecessor to Government Code section 552.305 permits governmental body to rely on interested third party to raise and explain applicability of exceptions in certain circumstances). Grumman responded, asserting that "the cost data identified in paragraphs G and H on page 18 of the contract as well as Attachment 1 and 4 thereto" are excepted from disclosure by section 552.110 of the Government Code, and that release of this information is "prohibited by the Trade Secrets Act, 18 U.S.C. § 1905."(1)
Section 552.101 excepts from disclosure "information considered to be confidential by law, either constitutional, statutory, or by judicial decision." This section encompasses information protected by other statutes. In pertinent part the Trade Secrets Act provides,
[w]hoever, being an officer or employee of the United States or of any department or agency thereof, any person acting on behalf of the Office of Federal Housing Enterprise Oversight, or agent of the Department of Justice as defined in the Antitrust Civil Process Act, publishes, divulges, discloses, or makes known in any manner or to any extent not authorized by law any information coming to him in the course of his employment or official duties or by reason of any examination or investigation made by, or return, report or record made to or filed with, such department or agency or officer or employee thereof, which information concerns or relates to the trade secrets, processes, operations, style of work, or apparatus, or to the identity, confidential statistical data, amount or source of any income, profits, losses, or expenditures of any person, firm, partnership, corporation, or association; or permits any income return or copy thereof or any book containing any abstract or particulars thereof to be seen or examined by any person except as provided by law; shall be fined under this title, or imprisoned not more than one year, or both; and shall be removed from office or employment.
18 U.S.C. § 1905 (emphasis added).
By its terms, this statute pertains only to employees and agents of the federal government. State employees who are assigned to federal government agencies in some circumstances may be deemed federal employees for certain purposes. 5 U.S.C. § 3374. However, in this case there is no indication of such an assignment pertinent to the responsive information. The federal courts have held that no basis exists to justify transforming officers and employees of state agencies into federal officers and employees for purposes of the Trade Secrets Act. St. Michael's Convalescent Hospital v. State of Cal., C.A.9 (Cal.) 1981, 643 F.2d 1369. We conclude that the Trade Secrets Act does not prohibit the department from disclosing the responsive information. Therefore, the subject information is not excepted from public disclosure under section 552.101 of the Government Code in conjunction with the Trade Secrets Act.
Grumman also asserts section 552.110 of the Government Code and argues that the responsive information is excepted from disclosure under this section pursuant to the test articulated in Critical Mass Energy Project v. Nuclear Regulatory Comm'n 975 F.2d. 871 (D.C. Cir, 1992) (en banc), cert. denied, 507 U.S. 984 (1992) (articulating standard of review for Freedom of Information Act "commercial or financial information" exception). Our offices have previously held that information could be withheld under section 552.110 if it is likely either (1) to impair the government's ability to obtain necessary information in the future or (2) to cause substantial harm to the competitive position of the person from whom the information was obtained, applying findings of federal court cases interpreting the federal Freedom of Information Act. See, e.g., Open Records Decision No. 652 (1997). However, this rationale was expressly rejected by the Third Court of Appeals, which held that such holdings are not judicial decisions within the meaning of Government Code section 552.110. Birnbaum v. Alliance of Am. Insurers, 994 S.W.2d 766 (Tex. App. - Austin 1999) (rejecting National Parks & Conservation Ass'n v. Morton, 498 F.2d 765 (D.C. Cir. 1974) as a "judicial decision"). Subsequent to the Birnbaum decision, the Seventy-sixth Legislature amended section 552.110, which now provides:
(a) A trade secret obtained from a person and privileged or confidential by statute or judicial decision is excepted from the requirements of Section 552.021.
(b) Commercial or financial information for which it is demonstrated based on specific factual evidence that disclosure would cause substantial competitive harm to the person from whom the information was obtained is excepted from the requirements of Section 552.021.
This section protects the property interests of those supplying information to governmental entities by excepting from disclosure two types of information: (1) trade secrets, and (2) commercial or financial information. "Trade secret" in section 552.110(a) has the meaning specified in section 757 of the Restatement of Torts. Hyde Corp. v. Huffines, 314 S.W.2d 763, 776 (Tex.1958), cert. denied, 358 U.S. 898 (1958). Trade secrets are: 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. It differs from other secret information in a business . . . in that it is not simply information as to a single or ephemeral event in the conduct of the business. . . . A trade secret is a process or device for continuous use in the operation of the business. . . . [It may] relate to the sale of goods or to other operations in the business, such as a code for determining discounts, rebates or other concessions in a price list or catalogue, or a list of specialized customers, or a method of bookkeeping or other office management.
Restatement of Torts § 757 cmt. b (1939). In applying the "trade secret" exception, our office finds that a claim for this exception will be accepted when a third party making the claim asserts factual allegations sufficient to present a prima facie case for the exception, provided that a governmental body takes no position on the claim and no one submits an argument that rebuts that claim as a matter of law. Open Records Decision No. 552 (1990).
The following criteria determines if information constitutes a trade secret:
(1) the extent to which the information is known outside of [the company];
(2) the extent to which it is known by employees and others involved in [the company's] business; (3) the extent of measures taken by [the company] to guard the secrecy of the information; (4) the value of the information to [the company] and [its] competitors; (5) the amount of effort or money expended by [the company] in developing the information; (6) the ease or difficulty with which the information could be properly acquired or duplicated by others.
Restatement of Torts, supra; see also Open Records Decision Nos. 319 at 2 (1982), 306 at 2 (1982), 255 at 2 (1980).
In this case, other than asserting that the information is protected as a trade secret, Grumman provides no specific factual support for withholding the contract information as a trade secret. We conclude that the information which Grumman seeks to withhold may not be withheld under section 552.110(a) of the Government Code.
Commercial or financial information may be withheld under section 552.110(b) of the Government Code on a demonstration based on specific factual evidence that disclosure would cause substantial competitive harm to the supplier of the information. Grumman asserts that it faces active competition for work similar to the work being performed under the subject contract. It further asserts that because the professional salaries it pays its employees is generally known, release of the cost, fixed fee amount, and pricing information in the contract would enable competitors to calculate the overhead rate that the company applied and thus allow them to underbid Grumman in future procurement. We note, however, that such a calculus also requires knowledge of the employee hours allocated to the work to be performed by the bidder. Since hourly allocation information is not at issue, and cannot be determined from the contract information Grumman seeks to have withheld, we conclude that Grumman has not provided sufficient specific factual evidence that disclosure of the subject information in the contract would cause it substantial competitive harm. See Open Records Decision No. 494 (1988) ( balancing public interest in disclosure of information with competitive injury to company); see generally Freedom of Information Act Guide & Privacy Act Overview (1995) 136-138, 140-141, 151-152 (disclosure of prices is cost of doing business with government). Therefore, the responsive information may not be withheld under section 552.110(b) of the Government Code.
We conclude that the subject information must be released. This letter ruling is limited to the particular records at issue in this request and limited to the facts as presented to us; therefore, this ruling must not be relied upon as a previous determination regarding any other records or any other circumstances.
This ruling triggers important deadlines regarding the rights and responsibilities of the governmental body and of the requestor. For example, governmental bodies are prohibited from asking the attorney general to reconsider this ruling. Gov't Code § 552.301(f). If the governmental body wants to challenge this ruling, the governmental body must appeal by filing suit in Travis County within 30 calendar days. Id. § 552.324(b). In order to get the full benefit of such an appeal, the governmental body must file suit within 10 calendar days. Id. § 552.353(b)(3), (c). If the governmental body does not appeal this ruling and the governmental body does not comply with it, then both the requestor and the attorney general have the right to file suit against the governmental body to enforce this ruling. Id. § 552.321(a).
If this ruling requires the governmental body to release all or part of the requested information, the governmental body is responsible for taking the next step. Based on the statute, the attorney general expects that, within 10 calendar days of this ruling, the governmental body will do one of the following three things: 1) release the public records; 2) notify the requestor of the exact day, time, and place that copies of the records will be provided or that the records can be inspected; or 3) notify the requestor of the governmental body's intent to challenge this letter ruling in court. If the governmental body fails to do one of these three things within 10 calendar days of this ruling, then the requestor should report that failure to the attorney general's Open Government Hotline, toll free, at 877/673-6839. The requestor may also file a complaint with the district or county attorney. Id. § 552.3215(e).
If this ruling requires or permits the governmental body to withhold all or some of the requested information, the requestor can appeal that decision by suing the governmental body. Id. § 552.321(a); Texas Department of Public Safety v. Gilbreath, 842 S.W.2d 408, 411 (Tex. App.-Austin 1992, no writ).
If the governmental body, the requestor, or any other person has questions or comments about this ruling, they may contact our office. Although there is no statutory deadline for contacting us, the attorney general prefers to receive any comments within 10 calendar days of the date of this ruling.
Michael Jay Burns
Ref: ID# 134875
Encl Submitted documents
cc: Mr. Gary Fuchs
Ms. Janis Carter
Rachel J. Feit
1. We note that section 552.022(a)(3) of the Government Code requires release of information contained in a contract relating to the expenditure of funds by a governmental body, unless the information is "confidential under other law." As the exceptions raised here are based on such confidentiality, these exceptions are addressed.
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