State Records Committee Appeal Decision 2023-31

BEFORE THE STATE RECORDS COMMITTEE OF THE STATE OF UTAH

TAYLOR BARNES (Inkstick Media), Petitioner, vs

GOVERNOR’S OFFICE OF ECONOMIC OPPORTUNITY, Respondent,

NORTHROP GRUMMAN SYSTEMS CORPORATION, Intervenor, Interested Party,

DECISION AND ORDER

Case No. 23-31

By this appeal Taylor Barnes (“Petitioner”), requests records allegedly held by the Governor’s Office of Economic Development (“Respondent”). Northrup Grumman Systems Corporation (“NG”) intervenes as an interested party.

FACTS

On August 18, 2018, the Respondent entered into an “Agreement Regarding Records that are Designated Protected Under GRAMA” (the “Confidentiality Agreement”) with NG. The Confidentiality Agreement was part of NG’s application to the Respondent for an “Economic Development Tax Increment Finance Agreement” (“Economic Development Agreement”) that would give NG certain tax benefits in exchange for NG’s expanding its operations in Utah which would create new jobs for Utahans.

Ultimately, NG’s application was successful, and over the course of nearly four years, the parties formally negotiated the Economic Development Agreement, finally coming to terms and signing it on May 2, 2022.

On December 5, 2022, Petitioner filed a records request with the Respondent pursuant to the Government Records Access and Management Act (“GRAMA”). Specifically, the Petitioner requested “the [Economic Development Agreement] for the tax credits offered to Northrop Grumman for the Ground-Based Deterrent.” Two weeks later, the Respondent provided a copy of the agreement but with some redactions. After some back-and-forth questions and answers through email with the Respondent, Petitioner eventually appealed the redactions to the Respondent’s chief administrative officer (“CAO”).

On January 17, 2023, the CAO responded to the appeal with a detailed decision. The CAO determined that the redactions were proper. To the extent that Petitioner’s own research had found some of the redacted information online (through websites, press releases, and other public records), the CAO acknowledged that the information Petitioner found was made public as part of the award process and, as a result, the redactions were not required to be lifted under Utah Code § 63G-2-201(8)(d)(e). As for the redacted information that was not ever made public, the CAO determined those redactions were also proper and would remain.

Petitioner has now appealed to the State Records Committee (“Committee”), challenging the CAO’s decision to leave the redactions in place. On July 20, 2023, the Committee held a hearing during which the parties were allowed to participate. At the hearing, the Committee considered the written materials, oral testimony, and oral arguments of the parties. After having carefully considered all evidence presented to the Committee, the Committee issues the following Decision and Order.

ISSUES FOR REVIEW

We must determine whether the redactions within the Economic Development Agreement are proper or if they should be lifted.

STATEMENT OF REASONS FOR DECISION

The Respondent claims that the redactions are proper for two reasons: First, the redacted information is warranted under Subsections 63G-2-305(1)-(2) and pursuant to the Confidentiality Agreement, which, according to Section 63G-2-309, allows NG and the Respondent to assert a business confidentiality claim over the redacted information. Second, the redacted information is protected under Section 63G-2-305(35) and (83).

1. The Respondent’s and NG’s Business Confidentiality Claim

1.a. Requirements to Classify Records as “Protected” Under a Business Confidentiality Claim

The GRAMA states that a person “has the right to inspect a public record free of charge, and the right to take a copy of a public record during normal working hours . . . .” Utah Code § 63G-2-201(1)(a). Further, a record that is private, controlled, or protected under the Code is not a public record, and the governmental entity may not disclose that record unless the GRAMA expressly permits it. Utah Code §§ 63G-2-201(3)(a); and -201(5). When analyzing whether a governmental entity has correctly classified redacted information as protected, this Committee has the authority to view the records in camera and review the information unredacted. Utah Code § 63G-2-403(9)(a)(ii). At the hearing, the Committee moved to view the unredacted contract in camera to aid it in its analysis. While reviewing the record, we also reviewed the Confidentiality Agreement.

After review, the Committee sought clarification on when the Confidentiality Agreement was executed. The Respondent confirmed that the parties entered into that agreement in 2018 and in conjunction with NG’s application for the Economic Development Contract. Once the Confidentiality Agreement was signed, NG then applied for the Economic Development Agreement award. After it received the award, the parties then negotiated the terms of the Economic Development Agreement until it was formally signed in May 2022. NG testified that it considered expanding its operations into other states where it would realize significant economic benefit, but it chose Utah largely because our GRAMA laws allowed it to assert a business confidentiality claim over the contract, or, at least certain parts of the contract, and restrict its access from routine record requests. With that in mind, and the records reviewed, the Committee focuses on the correctness of the classifications.

NG asserts business confidentiality over the redacted Economic Development Contract in accordance with two GRAMA provisions: (1) Subsection 63G-2-305(1), which protects trade secrets; and (2) Subsection 63G-2-305(2), which protects certain commercial information. We examine each.

1.a.1. Protection of Trade Secrets

Utah Code § 63G-2-305(1) protects trade secrets, as that term is defined in Section 13-24-2, if the person submitting the trade secret provides the governmental entity with a business confidentiality claim in accordance with Section 63G-2-309. Looking to the definition of “trade secret,” Section 13-24-2(4) states:

(4) “Trade Secret” means information, including a formula, pattern, compilation, program, device, method, technique, or process, that:
(a) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and
(b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Utah Code § 13-24-2(4).

Upon reviewing the unredacted information in camera, we find that it meets this definition. Satisfied that the redactions constitute trade secrets for purposes of Section 63G-2-305(1), the remaining question is whether NG properly submitted a confidentiality claim under Section 63G-2-309 to preserve confidentiality over them. We will analyze the business confidentiality claim infra.

1.a.2 Protection of Commercial Information

With respect to whether commercial information may be protected under the GRAMA, Subsection 205(2) provides a three-pronged test. The statute states that the following records are protected if properly classified:

(2) commercial information or nonindividual information obtained from a person if:
(a) disclosure of the information could reasonably be expected to result in unfair competitive injury to the person submitting the information or would impair the ability of the governmental entity to obtain necessary information in the future:
(b) the person submitting the information has a greater interest in prohibiting access than the public obtaining access; and
(c) the person submitting the information has provided the governmental entity with the information specified in Section 63G-2-309.

Utah Code § 63G-2-305(2)(a)-(c).

The Respondent and NG both argue that the defense industry is highly competitive. Although NG is a predominant defense contractor in the United States, it faces respectable competition from other notable companies such as Boeing, Ratheon, and Lockheed Martin. To this, NG’s Director of Tax Accounting 2, Lori Nieto, stated in her Declaration of Support of NG’s Request for Intervention, that:

If the confidential information redacted in [the Economic Development Agreement] were released to the public, [NG] would suffer economic harm. . . . Often even small variances in a corporation’s phasing of its jobs and the various jobs a project employs will mean the difference between winning or losing a contract . . . the [Economic Development Agreement] award at issue here directly relates to the initial phase of an ongoing federal program of importance to [NG]. That means that the U.S. Air Force will likely request bids for additional phases of [its defense contract]. Moreover, disclosure of [NG’s] confidential and proprietary information outlining the company’s expected pay rates for [NG] jobs would provide [NG’s] competitors with an unfair advantage, enabling them to use that information to hire away key talent by offering salary increases. Disclosure of the redacted information . . . will impede [NG’s] ability to remain competitive, to win future contracts in Utah and other locations, and to retain key talent.

Declaration of Lori Neito in Support of Northrop Grumman Systems Corporation’s Request for Intervention, at 3-4 (emphasis original).

We see no reason to question NG’s claims that if the information were released, it would incur an unfair competitive injury, nor has any evidence been presented to contradict it. Therefore, we are satisfied the first prong of Subsection 305(2) is met.

With respect to the second prong, we can’t see how NG’s commercial information concerning its private operations would be of benefit to the public, certainly not to the extent that it outweighs NG’s interests in keeping it private. We acknowledge that at least some of the redacted information has been released to the public by way of websites and press releases. True as that may be, just because protected information from a contract can be found online or in press releases, that doesn’t necessarily mean that the redacted information loses its protective classification. Therefore, just because Petitioner has obtained some of the redacted information in the public square does not mean that the Respondent’s interest in protecting it is now outweighed and disclosure is warranted. To the contrary, however, in light of some of the redactions becoming public knowledge, it could be said that the Respondent and NG now have an even stronger interest in preserving the remaining redactions given the economic harm at stake in NG’s competitive industry. We don’t see that mere curiosity about the contract or the propriety of tax dollars being used are strong enough interests to countervail NG’s interests in protecting what remains out of the public eye. Because of these factors, we see no evidence to contradict the fact that the Respondent and NG hold a privacy interest in the redactions that outweighs the public obtaining access to them.

Finally, for the third prong, we must determine whether the business confidentiality claim was properly asserted in accordance with Section 63G-2-309.

1.b. The Business Confidentiality Claim

In establishing that both Subsections 305(1) and (2) could justify the redactions as long as NG properly provided a confidentiality claim in accordance with Utah Code § 63G-2-309, we now turn to Section 309 to make that determination. Pursuant to that section,

(1)(a)(i) Any person who provides a governmental entity a record that the person believes should be protected under Subsection 63G-2-305(1) or (2) . . . shall provide with the record:
(A) a written claim of business confidentiality; and
(B) a concise statement of reasons supporting the claim of business confidentiality.

Utah Code § 63G-2-309(1)(a)(i)(A)-(B).

Thus, to determine whether Section 309 is satisfied, we must look at the Confidentiality Agreement.
Within the Confidentiality Agreement, NG listed several reasons the contract contained protected information. Those reasons include the following:

1. The record is a trade secret;
2. The record is commercial information and disclosure could reasonably be expected to result in unfair competitive injury;
3. The record is commercial information and disclosure could reasonably be expected to impair the Respondent’s ability to obtain necessary information in the future;
4. The record is commercial information and the interest of NG in prohibiting access to the information is greater than that public’s interest in obtaining it; and
5. The information may reveal negotiations about assistance or incentives offered by the Respondent for the purpose of encouraging a person to expand or locate a business in Utah and the disclosure would result in economic harm to NG.

Confidentiality Agreement, at 7.

In addition, NG provided a statement in the agreement to support its business confidentiality claim:
. . . It would harm [NG] if its competitors or other bidders for any of the government contracts were to acquire knowledge of the information provided to [the Respondent] or the incentives negotiated as they may affect the bidding process and the ultimate bid provided by [NG]. [NG] would not be in discussions with [the Respondent] if there were the possibility that the information provided in order to discuss assistance of incentives could be revealed to the public or its competitors.

Confidentiality Agreement, at 8.

It’s clear to us that NG earnestly sought confidentiality over certain information connected to the Economic Development Agreement prior to actually entering into the agreement. Despite some of that information being public, we see from our in camera review of the redacted information that the information it seeks to protect is both trade secrets and commercial information relevant to its operations and business purposes. We see no reason to question NG’s assertions that releasing the information could cause it economic harm by way of the industry’s competitive forces.

As this Committee has the authority to weigh the various interests surrounding disclosing the record and restricting its access, for the reasons set forth supra in this Order, we find that the public interest in lifting the redactions does not outweigh the interests in sustaining them. Although some of the redacted information is already public knowledge (projected number of Utah jobs and average salary), that does not necessitate lifting any or all of the redactions, especially when the redacted information that has not been made public is more oriented and central to NG’s operations and competitive strategy. Those things hold little to no benefit to the public in comparison to the competitive harm NG could suffer if it were released.

NG specifically chose Utah to expand its operations because of the protections our GRAMA laws provide over the information it would convey in an economic contract with the state. NG then worked with the Respondent from the onset to follow the GRAMA with precision and properly lay the necessary foundation to assert a business confidentiality claim over a GRAMA request for final contract with the state. With a private company sharing its trade secrets and commercial information with the state after deliberately choosing Utah for its GRAMA law protection over that information, and then fulfilling the necessary legal requirements to retain the right to assert that protection over that very information that is included in the contract, we believe the public’s interest must be quite significant to outweigh the company’s interests in keeping its information confidential. From the evidence and arguments submitted, we don’t see any such notable interests here that warrant piercing NG’s confidentiality.

2. The Protections of Subsections 63G-2-305(35) and (83).

The Respondent also argues that the redactions in the Economic Development Agreement are required under Utah Code §§ 63G-2-305(35) and (83). However, since we conclude that the redactions are proper and warranted under NG’s business confidentiality claim, we need not address this issue.

ORDER

THEREFORE, for the foregoing reasons, Petitioner’s appeal is hereby DENIED. The redacted information is warranted under Subsection 63G-2-305(1) and (2), pursuant to the business confidentiality claim NG set forth under Section 63G-2-309.

RIGHT TO APPEAL

A party to a proceeding before the Committee may seek judicial review in District Court of a Committee's Order by filing a petition for review of the Committee Order as provided in Utah Code § 63G-2-404. Utah Code § 63G-2-403(14). A petition for judicial review of a Committee Order "shall be filed no later than 30 days" after the date of the Committee Order. Utah Code § 63G-2-404(1)(a). The petition for judicial review must be a complaint which is governed by the Utah Rules of Civil Procedure and include the Committee as a necessary party and contain the required information listed in Subsection -404(2). Utah Code § 63G-2-404(1) & (2). The court shall make its decision de novo but shall allow introduction of evidence presented to the Committee, determine all questions of fact and law without a jury, and decide the issue at the earliest practical opportunity. Utah Code § 63G-2-404(6). In order to protect parties’ rights on appeal, a party may wish to seek advice from an attorney.

PENALTY NOTICE

Pursuant to Utah Code § 63G-2-403(15)(c), if the Committee orders the governmental entity to produce a record and no appeal is filed, the government entity herein shall comply with the order of the Committee and shall: (1) Produce the record; and (2) File a notice of compliance with the Committee. If the governmental entity ordered to produce a record fails to file a notice of compliance or a notice of intent to appeal, the Committee may do either or both of the following: (1) Impose a civil penalty of up to $500 for each day of continuing noncompliance; or (2) Send written notice of the entity's noncompliance to the Governor. Utah Code § 63G-2-403(15)(d)(i)(B). In imposing a civil penalty, the Committee shall consider the gravity and circumstances of the violation, including whether the failure to comply was due to neglect or was willful or intentional. Utah Code § 63G-2-403(15)(d)(ii).

Entered this 1 day of August 2023

BY THE STATE RECORDS COMMITTEE

Ken Williams
Chair, State Records Committee