A&A: City gives tax-free deal to developer, details kept secret

Q: The city recently entered into an agreement with a developer of a multi-million dollar resort hotel to forgo collecting transit occupancy taxes (TOT) of many million dollars. The city’s financial consultant analyzed the request from the developer and created several reports that were not made available to the public. The reports were presented to council but the City Attorney stated they included “proprietary information,” and were therefore not public records. The city’s consultant apparently entered into a confidentiality agreement, and the council is unable to disclose the information as well. Given that it was the developer’s request to forgo collecting taxes–public funds–is there adequate grounds under the PRA to pursue said documents? In addition, the consultant’s reports were executed through the city attorney’s office instead of the City Manager, so they are citing attorney-client privilege as opposed to an exemption under CPRA.

A: Under Public Records Act (”PRA”), public records (which include “any writing containing information relating to the conduct of the public’s business prepared, owned, used, or retained by any state or local agency regardless of physical form or characteristics,” Govt. Code Section 6252(e)), are open to the public unless a specific provision of the PRA or other law exempts them from disclosure. With respect to the reports from the city’s financial consultants, these documents are likely subject to disclosure unless they contain trade secret or otherwise privileged information. Section 6254(k) exempts from disclosure “[r]ecords the disclosure of which is exempted or prohibited pursuant to federal or state law.” Trade secrets are generally protected from disclosure to the public under both state and federal law. “Trade secret” is defined under California law as: “information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” Cal. Civ. Code § 3426.1. “Trade secret” is defined under federal law as: “all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if: (A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, the public.” 18 U.S.C. § 1839. However, where the trade secret owner failed to designate the information as trade secret when submitting it to the public agency, you may have an argument that such information has lost its status as trade secret — and, thus, that it is subject to disclosure to the public — on the grounds that the trade secret owner failed to take reasonable measures to keep the information secret. Moreover, even if the trade secret owner designated the information as trade secret, where a record contains information that is exempt from disclosure but otherwise public in character, the PRA imposes a duty on the agency to redact the exempted information and produce the nonexempted information (unless the exempt and nonexempt information are so interwoven as not to be reasonably segregable).

The city seems to be withholding the reports on the grounds that they contain proprietary information of the developer and that therefore they are not subject records. In light of a California court of appeals decision in San Gabriel Tribune v. Superior Court, 143 Cal. App. 3d 762 (1983), proprietary information cannot be withheld as exempt under the PRA. In the San Gabriel Tribune case, the court rejected any claim by the city that financial information submitted to the city by a waste disposal company in bidding for a contract was exempt from disclosure as confidential proprietary information. San Gabriel Tribune v. Superior Court, 143 Cal. App. 3d 762 (1983). Thus, under San Gabriel Tribune, you have an argument that the reports, unless they constitute trade secret or are otherwise privileged, are subject to disclosure under the PRA.

As also noted, section 6254(k) exempts from disclosure any information that is exempt pursuant to state or federal law. Confidential attorney-client communication (as that term is defined by the rules of procedure) is privileged under state law. “The attorney-client privilege applies to communications in the course of professional employment that are intended to be confidential.” Roberts v. City of Palmdale, 5 Cal. 4th 363, 371 (1993). “Confidential communication” is defined as including “a legal opinion formed and the advice given by the lawyer in the course of that [attorney-client] relationship.” Id. (citing to Evid. Code, § 952). “[U]nder the Evidence Code, the attorney-client privilege applies to confidential communications within the scope of the attorney-client relationship even if the communication does not relate to pending litigation; the privilege applies not only to communications made in anticipation of litigation, but also to legal advice when no litigation is threatened.” Id. In addition, materials created by an attorney in the course of representing a client, known as “work product,” are also generally protected from disclosure. An attorney’s conclusions, opinions, legal research or theories are nearly always protected. Other kinds of work product, such as factual information gathered by an attorney, is given only qualified protection and may be subject to disclosure if a sufficient need is shown. Cal. Civ. Pro. § 2018.030. Thus, while any communication between the agency and its attorney can be withheld pursuant to this privilege, any other documents that do not constitute communication and that do not constitute attorney-work product would not be covered by the privilege, even if such documents were sent to the agency’s attorney.

If you have not already done so, I suggest you submit a written request under the PRA for copies of the reports. The PRA requires agencies to provide you with the documents requested, or notify you that your request has been denied, within 10 days. (Gov’t Code § 6253). If the written request is denied, the agency is obligated to back its denial by citing an exemption in the PRA or other state or federal law allowing it to withhold the records you seek. (Gov’t code § 6255). A sample PRA request letter is found on CFAC’s website at the following link: http://www.cfac.org/templates/cpraletter.html.