Written on: July 18th, 2014 in 10001 Declaration of Policy, 10002(l) (1) Exemptions - Personnel, 10002(l) (2) Exemptions - Trade Secrets, 10002(l) (3) Exemptions - Investigatory Files, 10002(l) (4) Exemptions - Criminal Files and Criminal Records, 10002(l) (6) Exemptions - Records Exempted Per Statute or Common Law, 10002(l) (9) Exemptions - Pending or Potential Litigation
OFFICE OF THE ATTORNEY GENERAL OF THE STATE OF DELAWARE
Attorney General Opinion No. 14-IB04
July 18, 2014
VIA EMAIL AND REGULAR MAIL
Mr. Gary Myers
217 New Castle Street
Rehoboth Beach, DE 19971
Re: FOIA Complaint Concerning the Department of Technology and Information
Dear Mr. Myers:
By letter dated December 16, 2013, received by our office on December 19, 2013, you alleged certain violations by the Department of Technology and Information (“DTI”) of the public records provisions of the Delaware Freedom of Information Act, 29 Del. C. §§ 10001-10006 (“FOIA”). In accordance with 29 Del. C. § 10005(e), we are treating this correspondence as a petition for a determination by the Chief Deputy Attorney General as to whether DTI violated FOIA.
By letter dated February 4, 2014, you provided supplemental authority in support of your petition. By letter dated March 13, 2014, I forwarded to you DTI’s response. You provided a reply to DTI’s response by letter dated March 26, 2014. You have graciously acknowledged “the host of legal tangles this FOIA request has fertilized.”
The Delaware Broadband Fund (the “Fund”) is used to support and enhance broadband services in the State’s public schools and public libraries and for rural broadband initiatives in unserved areas of the State. 26 Del. C. § 709(a). The Secretary of DTI administers the Fund and is to develop a plan to carry out these purposes. 26 Del. C. § 709(b). With agreement from the State of Delaware’s Controller General (“Controller General”) and its Director of the Office of Management and Budget (“OMB Director”), the Secretary of DTI may distribute money from the Fund to implement the plan. Id. Al1 monies in the Fund must be distributed by July 1, 2018 at which time the Fund will terminate. 26 Del. C. § 709(c).
Any telecommunication company with gross operating revenues in the State of Delaware (the “State”) greater than $10,000 is to submit an annual return (“Return“) to the State’s Public Service Commission (the “PSC”) and pay an assessment amount (“Assessment”) to the Fund. 26 Del. C. § 115. The Return includes, among other things, each company’s gross operating revenues in the State for each year.
The PSC calculates each company’s Assessment to the Fund based upon that company’s gross operating revenues in the State.
An assessment is imposed upon each public utility subject to regulation by the [PSC] in an amount equal to the product of .003 (3 mills) multiplied by its gross operating revenue for each calendar year. . . . No assessment shall be imposed upon a public utility having gross operating revenue of less than $10,000 in any calendar year.
The PSC also considers 26 Del. C. §§ 115(h) and 710 in determining the Assessment due:
In lieu of the regulatory assessment imposed under § 115 of this title, a service provider shal1 pay an assessment into the Delaware Broadband Fund. On August 1, 2013, the service provider shall pay into the fund one half of the amount of its 2011 regulatory assessment in lieu of the amounts due under § 115 for the period January 1, 2013, through June 2013 and shall continue making payments into the Fund in lieu of any amounts due under § 115 for an additional three years beginning on January 30, 2014, and ending on January 30, 2016, in an amount equal to the regulatory assessment for the year 2017, after which time the obligation under § 115 or to make payments under this section shall cease.
Following the PSC’s calculation, each company is individually notified of its amount due for the Assessment and pays its Assessment to DTI. The Secretary of DTI is tasked by statute with merely administering the Fund and will decide, with consensus from the OMB Director and Controller General, how the Assessments in the Fund will be distributed. Presumably, anyone with knowledge of a company’s Assessment amount paid to the Fund – including a competitor — could use the publicly-available statutory formula above with the Assessment amount to reverse-calculate a company’s gross operating revenue in the State.
HISTORY OF YOUR REQUESTS
Your initial request for information related to the Fund was received via email on August 27, 2013. You asked for the following:
All documents (in electronic, paper, or other format) including e-mails, memoranda, correspondence, spreadsheets, and data sets that relate to, discuss, or project:
1. The monetary amounts that Verizon Delaware LLC (or any affiliated company) will pay to fund the Delaware Broadband Fund (26 Del. C. secs. 709 & 710) from the year 2013 to the year 2020;
2. The monetary amounts that any other telecommunications service provider will pay to fund the Delaware Broadband Fund from the year 2013 through the year 2020; and
3. The Department’s plans, intentions, or commitments to disburse the monies from the Broadband Fund, as set forth in 26 Del. C. sec. 709.1
After receiving information directly from the vast majority of the approximately seventy affected carriers, you modified your request on October 16, 2013 to clarify that DTI need not provide:
1) Any PSC Annual Gross Revenue Returns filed by Long Distance Consolidated Billing Company and
2) Any PSC Annual Gross Revenue Returns filed by:
a) Teleconnect Long Distance Services and Systems Co.;
b) TTI National, Inc.;
c) MCImetro Access Transmission Services d/b/a Verizon Access Transmission Services;
d) MCI Communication Services, Inc. d/b/a Verizon Business Solutions; and
e) Verizon Delaware LLC.
You also stated in the same email:
[I]f any communications company will provide to me the information about what dollar amounts they will provide to the Broadband Fund over its life term by letter or e-mail, I do not have to have that company’s PSC Annual Gross Revenue Return included in the documents made available for my review. . . . All I need from any such return is the carrier’s name and the bottom line and accompanying dollar number showing the assessment.
Indeed, if DTI would like to assemble the above information in some consolidated
spreadsheet form (at no cost to me) then none of the PSC Returns would have to be provided to me. The spreadsheet would have to identify the contributing carrier and specifically list the amount paid, or to be paid, for each year of the Broadband Fund tenure . . . .2
Finally, the above agreement and proposal does not pertain to documents that relate to how DTI will spend the Broadband funds. Similarly, the above does not relate to documents that a) related to past or present projections about the amounts to be paid into the fund or b) relate to the history of the creation of the Fund. I do not think that any of those documents would likely include information proprietary of the carriers. I still request the ability to review those documents.3
DTI declined to produce Assessment amounts paid by AT&T Communications of Delaware, Inc., Teleport Communications America, L.L.C. (collectively “AT&T“) and Sprint Communications Company L.P. (“Sprint”) to the Fund because those companies deemed the information they provided to the PSC to be confidential, proprietary, commercially sensitive, or otherwise confidential. Your complaint now demands that “DTI should provide for [your] review all documents that reflect present, past, or projected Broadband Fund contributions made by. AT&T, Teleport Communications America, and Sprint.” (emphasis added).4
FOIA’s Declaration of Policy states that “[i]t is vital in a democratic society that public business be performed in an open and public manner so that our citizens shall have the opportunity to observe the performance of public officials and to monitor the decisions that are made by such officials in formulating and executing public policy.” 29 Del. C. § 10001. It is within this context of public policy and open government that we address the issues resulting from
The preliminary issue is whether the Assessments constitute “public records” under FOIA subject to public disclosure. A “public record” subject to disclosure under FOIA is defined in 29 Del. C. § 10002(l) as “information of any kind, owned, made, used, retained, received, produced, composed, drafted or otherwise compiled or collected, by any public body, relating in any way to public business, or in any way of public interest, or in any way related to public purposes, regardless of the physical form or characteristic by which such information is stored, recorded or reproduced.” Therefore, FOIA starts with the premise that all documents and information falling under this very broad definition of “public records” are subject to public disclosure unless the record, or a portion of the record, falls under one of statutory exemptions from the definition of “public record” set forth in § 10002(l)(1) through (l)(19).
In Op. Att’y Gen. 11-IB13, 2011 WL 4062224 (Aug. 29, 2011), our Office addressed similar FOIA issues in opining whether a contract entered into by the City of Dover for the supply of solar energy was subject to disclosure under FOIA. The City of Dover refused to provide an unredacted copy and relied on § 10002(g)(2) (now § 10002(l)(2))5 as the legal basis for redacting certain financial information, including payment rates for solar energy. Although there was no dispute that the redacted information was “commercial or financial information,” the City asserted that the information was properly redacted because it was “obtained” from the vendor and, further, that the information was “privileged and confidential” due to the competitiveness of the solar energy market, and the disclosure of the rates would give the vendor’s competitors the ability to underbid the vendor. We concluded that the exemption was not applicable and that the City violated FOIA by redacting the pricing terms. Accordingly, the City was required to provide a complete unredacted copy of the contract to the requestor.
1. Trade Secrets and Commercial or Financial Information
There is no dispute the Assessments are “financial information.” See, e.g., Kahn v. Federal Motor Carrier Safety Admin., 648 F.Supp.2d 31, 36 (D.D.C. 2009)(“[W]hether information is ‘financial’ is simply the question of whether that information pertains to money, investments, and the like.”). Similarly, there is no dispute the Assessments are “commercial information.” “‘Commercial’ is defined broadly to include ‘records that reveal basic commercial operations or relate to income-producing aspects of a business as well as situations where the’ provider of the information has a commercial interest in the information submitted to the agency.” Judicial Watch, Inc. v. U.S. Dept. of Treasury, 796 F.Supp.2d 13, 35 (D.D.C. 2011).
Commercial information other than trade secrets falls within the Section 552(b)(4) exemption if it is shown to be commercial or financial, obtained from a person and privileged or confidential.” Public Citizen Health Research Group v. Food and Drug Admin., 704 F.2d 1280, 1290 (D.C. Cir. 1983). Under Delaware law, a trade secret is “confidential and proprietary information” which, if it “falls into a rival’s hands,” will cause “serious competitive disadvantage.” ID Biomedical Corp. v. TM Technologies, Inc., 1994 WL 384605, at * 4 (Del. July 20, 1994); MacLane Gas Co. v. Enserch Corp., Del. Ch., 1989 WL 104931, at 2 (Sept. 11, 1989) (Chandler, V.C.).6 Third-party assertions regarding the existence of a trade secret are not binding upon the State of Delaware. See Op. Att’y Gen. 13-IB07, 2013 WL 6593038, at *2 (November 21, 2013) (rejecting DDOC’s presentation of its vendor’s allegation that contents of its contract had to be withheld as “trade secrets” pursuant to 29 Del. C. § 10002(l)(2)); Op. Att’y Gen. 11-IIB14, 2011 WL 4062225, at *2 (August 30, 2011).
2. Which is of a Privileged or Confidential Nature
“To determine whether the information is privileged or confidential within the meaning of [Section 552(b)(4)], it is necessary to first resolve the issue of whether the information was provided to the government voluntarily or if it was required to be provided.” Parker v. Bureau of Land Management, 141 F.Supp.2d 71, 77 (D.D.C. 2001). “If information was voluntarily provided, defendants must satisfy a lower threshold to prevent disclosure [set forth in Critical Mass Energy Project v. Nuclear Regulatory Comm., 975 F.2d 871 (D.C.Cir. 1992), cert. denied, 507 U.S. 984 (1993)].” Parker at 77. “Under the test set forth in Critical Mass, financial or commercial information provided to the government on a voluntary basis is ‘confidential’ for purposes of [Section 552(b)(4)] if it is the kind of information that would customarily not be released to the public by the submitter.” Id. “If, however, the information was required to be submitted, in order to be considered confidential, defendants must demonstrate that disclosure of the information would either (1) impair the government’s ability to obtain necessary information in the future, or (2) cause substantial harm to the competitive position of the person from whom the information was obtained.” Id. If either one of the two parts of the National Parks test is satisfied, the information is deemed confidential and may be properly withheld under Section 552(b)(4). Judicial Watch, Inc. v. U.S. Dept. of Treasury, 796 F.Supp.2d at 35-36.
In determining whether information submitted to the government is voluntary or required, “linking enforceability and mandatory submissions creates an objective test; . . . if an agency has no authority to enforce an information request, submissions are not mandatory.” Parker, 141 F. Supp. at 77. “In addition to possessing the authority to compel submission, the agency must also exercise that authority in order for a submission to be deemed mandatory.” Id. at 78, n. 6.
Voluntary: Voluntarily submitted information is exempt from disclosure if it would not customarily be released to the public. Critical Mass, 975 F.2d at 879. In such instances, the courts look to a defendant’s customary handling of the information, not how the industry as a whole treats it. Id.
Required: Under National Parks, if a party is legally required to submit commercial or financial information to the government, then in response to a FOIA request, the government must treat the information as “confidential” for the purposes of Section 552(b)(4) and should not disclose it if disclosure would be likely to “(1) impair the government’s ability to obtain such information in the future, or (2) cause substantial harm to the competitive position of the submitting party.” National Parks, 498 F.2d at 770.
Not likely to impair the government’s ability to obtain such information in the future: The government’s interest is in ensuring the continued reliability of required information. Critical Mass, 975 F.2d at 878. Disclosure of Assessments is not likely to impair the State’s ability to obtain similar information in the future. . . .
Not likely to cause substantial harm to the competitive position of the submitting party: “Actual competition and the likelihood of substantial competitive injury is all that need be shown to bring commercial information within the realm of confidentiality.” Gulf & Western, 615 F.2d at 530. . . . This type of information is the type normally released to the public and is of the type that would not cause substantial harm if released. Id.; National Parks and Conservation Ass’n. v. Kleppe, 547 F.2d 673, at 681-83. (D.C.Cir. 1976).
Information can be exempt from disclosure under the second part of the National Parks test only if disclosure might pose a threat to the competitive position of private businesses who gave the information. Trans-Pacific Policing Agreement v. U.S. Customs Service, 1998 WL 34016806 at *3 (D.D.C. May 14, 1998). It is difficult, if not impossible, to imagine any way in which disclosure of an Assessment through which a carrier can do no more than calculate the gross receipts of a competitor derived from its operations in the State could pose any real threat to the competitive position of the competitor that gave the information. See Jurewicz v. Dept. of Agriculture, ___ F.3d ___, 2014 WL 394107 (D.C. Cir. 2014) (combination of stale data for gross profits and for inventory of kennel owners highly unlikely to cause competitive harm).
The proposition that release of Assessments for various carriers constitutes a threat to their respective competitive positions is undercut by the vast majority of carriers who willingly provided to you the Assessment information you ultimately requested.
While not dispositive of this issue in this Order, this lack of unanimity, or even a consensus as to the need for confidentiality, and lack of consistency in seeking confidential treatment for the same information, among affected Indiana telephone companies, is a factor that weighs against a finding that the responses should be excepted from public disclosure.
Cellco Partnership v. Indiana Utility Regulatory Commission, 810 N.E.2d 1137, 1140 (Ind. App. 2004). See also Cellco Partnership at 1145 (Barnes, J., concurring) (yearly utility assessment amounts paid by a wireless carrier based on formula keyed to the carrier’s prior year gross intrastate operating revenues lacked “independent economic value” to carrier and hence was not “trade secret” under Indiana’s Uniform Trade Secrets Act).7
DTI violated FOIA by its failure to produce Assessment amounts paid by AT&T and Sprint. DTI may remedy the violation by furnishing the Assessments to you within ten (10) days.
Very truly yours,
/s/ Edward K. Black
Edward K. Black
Deputy Attorney General
/s/ Ian R. McConnel
Ian R. McConnel
Chief Deputy Attorney General
CC: Ms. Allison Reardon, State Solicitor
Mr. Frank Broujos, Deputy Attorney General
Mr. Laura L. Gerard, Deputy Attorney General
Mr. Peter O. Jamison, III, Deputy Attorney General
Ms. Elayne M. Starkey, Chief Security Officer, DTI
1 By letter dated October 25, 2013, from Elayne M. Starkey, Chief Security Officer for DTI you were informed that “a plan for how the amounts of the Broadband Fund will be spent is in the developmental stage and there is nothing available to provide at this time.”
2 “FOIA does not require a public body ‘to create a record where the requested record does not exist.’” Furthermore, FOIA does not require a public body “’to compile the requested data from’ other public records that may exist.” Op. Att’y Gen. 96-IB28 (Aug. 8, 1996) (internal citations omitted). FOIA does not require an agency to make a summary or compilation of information in public records. Gabriels v. Curiale, App. Div., 628 N.Y.S.2d 882 (1995).
3 We decline to expand this appeal beyond the narrowed parameters to which you already agreed.
4 Although not addressed by the parties, neither the PSC nor DTI appears to have records of any revenue projections from the service providers because Assessments are based on historical data according to the applicable statutory language, and because there is no provision for inclusion of projections on the Returns themselves. http://depsc.delaware.gov/Forms/assessform_enabled.pdf (last accessed July 17, 2014). We therefore limit our analysis to the issue of Assessments.
5 Delaware’s statutory exemption is identical to its comparable provision under federal law, 5 U.S.C. § 552(b)(4).
6 State of Delaware Attorney General Opinions have routinely employed the definition of “trade secrets” as set forth in these two cases. Op. Att’y Gen. 13-IB07, 2013 WL 6593038, at *2 (November 21, 2013); Op. Att’y Gen. 00-IB15, 2000 WL 1920102, at *2 (October 4, 2000).
7 The State imposes a variety of surcharges to support various government functions. Some examples include: the E911 Emergency Reporting System Fund; the Delaware Manufactured Home Relocation Trust Fund; the Spay/Neuter Fund; and the fund to provide telecommunications service for persons who have deafness, hearing loss, or speech disabilities, to name but a few. In each case, the service provider collects the surcharge on behalf of the State, to which it periodically remits the proceeds of the surcharge. Merely disclosing the amounts collected by each service provider toward funding for these government functions is perfectly consistent with the policy “that public business be performed in an open and public manner so that our citizens shall have the opportunity to observe the performance of public officials and to monitor the decisions that are made by such officials in formulating and executing public policy,” absent some other compelling reason to withhold the information. 29 Del. C. § 10001. This is the balance the foregoing cited cases seek to strike.