State ex rel. Luken v. Corp. for Findlay Market of Cincinnati , 135 Ohio St. 3d 416 ( 2013 )

[Cite as State ex rel. Luken v. Corp. for Findlay Market of Cincinnati, 135 Ohio St.3d 416,
2013-Ohio-1532.]
THE STATE EX REL. LUKEN, APPELLANT AND CROSS-APPELLEE, v.
CORPORATION FOR FINDLAY MARKET OF CINCINNATI, APPELLEE AND CROSS-
APPELLANT; THE CITY OF CINCINNATI, APPELLEE.
[Cite as State ex rel. Luken v. Corp. for Findlay Market of Cincinnati,
135 Ohio St.3d 416, 2013-Ohio-1532.]
Public records—Trade secrets of public office not subject to disclosure—R.C.
149.43(A)(1)(v) and 1333.61(D)—Public office as commercial landlord—
Lease terms as trade secrets.
(No. 2012-0992—Submitted January 22, 2013—Decided April 24, 2013.)
APPEAL and CROSS-APPEAL from the Court of Appeals for Hamilton County,
No. C-100437, 2012-Ohio-2074.
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Per Curiam.
{¶ 1} This is the appeal and cross-appeal of a public-records mandamus
case, filed initially in the First District Court of Appeals for Hamilton County.
Relator-appellant/cross-appellee, Kevin P. Luken, seeks records from respondent-
appellee, the city of Cincinnati, and respondent-appellee/cross-appellant,
Corporation for Findlay Market of Cincinnati. Findlay Market is a public market
historically owned and operated by the city until 2004, when the city and the
corporation entered into lease and management agreements under which the
corporation was to manage the market for the city.
{¶ 2} Luken wants unredacted copies of the lease agreements between
the corporation and merchants who sublease retail space at the market. Luken has
received copies of the leases from the city, but the term and rent provisions have
been redacted by the corporation.
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{¶ 3} The corporation claims that it is a private entity not subject to
Ohio’s Public Records Act because, first, it is not a public entity under the
functional-equivalency test of State ex rel. Oriana House, Inc. v. Montgomery,
110 Ohio St.3d 456, 2006-Ohio-4854, 854 N.E.2d 193, and, second, because it is
not an entity responsible for public records under State ex rel. Cincinnati
Enquirer v. Krings, 93 Ohio St.3d 654, 758 N.E.2d 1135 (2001). The corporation
further argues that even if it were a public entity or responsible for public records,
the redacted provisions are trade secrets under R.C. 1333.61 and therefore not
public records under R.C. 149.43(A)(1)(v) and State ex rel. Besser v. Ohio State
Univ., 89 Ohio St.3d 396, 732 N.E.2d 373 (2000).
{¶ 4} Even were the corporation a public entity or an entity responsible
for public records, the redacted portions of the record are trade secrets and not
public records. Luken has not established that he is entitled to the unredacted
records, and therefore we affirm.
Facts
{¶ 5} The city of Cincinnati has historically owned and run public
markets in various neighborhoods of the city. At one time, the city owned as
many as nine such markets. Before 2004, the city had owned and operated
Findlay Market and leased market spaces to farmers and other merchants for more
than 150 years. Before leasing Findlay Market to the corporation, the city
invested substantial amounts of public money to renovate Findlay Market.
{¶ 6} In 2000, at the city’s request, the corporation was formed to
operate and manage Findlay Market “to preserve and promote the historical,
traditional and cultural aspects of Findlay Market as a treasured living landmark
of the greater Cincinnati community.” The corporation is a private, nonprofit
corporation, and no member of the board of directors is or was a councilman,
mayor, or city employee at the time he or she was on the board. The city has no
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direct governing control over the corporation. The trustees at the time of
incorporation were not on the payroll of or serving as employees of the city.
{¶ 7} The city and the corporation entered into a management agreement
that granted the corporation exclusive rights to manage and operate Findlay
Market according to the terms of the management agreement. Specifically,
according to the agreement, the corporation may establish reasonable rules and
regulations in its discretion to operate Findlay Market. Section 6(a) of the
agreement provides that the city has assigned its right to contract with subtenants
who occupy space in the market:
The City assigns its rights under existing contracts with subtenants
at the Market to [the corporation]. [The corporation] shall enter
into license or lease agreements with existing and new subtenants
regarding occupying space in the Market and the Market Facilities.
[The corporation] shall have the discretion to determine the
amounts of consideration to be paid, and the responsibility for
collecting these amounts and using the revenues to pay for Market
Operations.
The agreement also provides that the city has oversight over the corporation’s
operation of the market:
[The corporation] shall maintain a complete set of books and
records, in a form and manner approved by the City, showing all
revenue collected and all expenditures made in connection with the
operation of the Market Facilities along with such supporting data
and documents as prescribed by the City. Such books and records
shall be kept in such a manner as to make them easily reconcilable
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with the reports and forms to be submitted to the City by [the
corporation]. The City shall have the right at any time to examine
the records, books, data and documents kept by [the corporation]
regarding the operation and maintenance of the Market Facilities.
[The corporation] shall provide its annual audited financial
statement to the City by September 15th of each year. On a
quarterly basis, [the corporation] shall deliver to the City a report,
in a format acceptable to the City, by no later than the 30th day of
the month following the end of each quarter.
{¶ 8} The corporation, under the management agreement, is expected to
manage Findlay Market efficiently, but also to promote it “as a catalyst for
economic development in the Over-the-Rhine section” of the city. Policy
objectives for the management agreement include compliance with various parts
of the city’s Municipal Code, including those promoting equal employment
opportunities, enhancement of the Small Business Enterprise Program, and
compliance with the city’s living-wage ordinance. Funds for operations are
obtained in part from support payments from the city. The city leases the physical
market to the corporation for one dollar per year.
{¶ 9} The corporation has discretion in management and operation of
Findlay Market; it sets the terms of lease agreements with tenants, including the
consideration paid, and has the responsibility to collect the amounts and to use the
revenues to pay for operations. Current funding from the city to the corporation
for the operation of Findlay Market is approximately 40 to 45 percent of total
revenue. However, the city reimburses the corporation for a large part of its
operating expenses, including wages and benefits for employees, cost of
contractual services including security, taxes, utilities, insurance, preventive
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January Term, 2013
maintenance, accounting and office expenses, approved operating equipment, and
other items approved by the city.
{¶ 10} Luken requested various records from the corporation under
Ohio’s Public Records Act. The corporation declined to provide the records,
asserting that it is not subject to the act. However, it directed Luken to request the
records from the city.
{¶ 11} Luken then requested that the city obtain the documents on his
behalf. The city provided Luken with the records it had already received from the
corporation. Among these records were lease agreements between the
corporation and merchants who operate in Findlay Market. But the agreed terms
and rents for various spaces at the market had been blacked out, apparently by the
corporation, and the city provided the corporation’s reasons for the redactions.
The corporation stated that the redacted information constituted a trade secret and
was therefore within an exception to the Public Records Act.
{¶ 12} Luken filed an original action in mandamus in the First District
Court of Appeals. After the parties submitted a stipulated record, that court
denied all motions for summary judgment and referred the matter to a magistrate
for trial. After trial, the magistrate issued a decision denying the writ. Luken
filed objections.
{¶ 13} The court of appeals ruled first that the corporation was not a
public institution under State ex rel. Oriana House, Inc. v. Montgomery, 110 Ohio
St.3d 456, 2006-Ohio-4854, 854 N.E.2d 193. However, the court did hold that
the corporation was an entity responsible for public records and therefore subject
to the Public Records Act under State ex rel. Cincinnati Enquirer v. Krings, 93
Ohio St.3d. 654, 758 N.E.2d 1135 (2001). Finally, the court ruled that the
unredacted documents contained trade secrets as defined in R.C. 1333.61(D) that
were exempt from disclosure under R.C. 149.43(A)(1)(v). Luken appealed to this
court on the issues of whether the corporation is a public institution and whether
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the unredacted leases are trade secrets. The corporation cross-appealed the
holding that it is an entity responsible for public documents under Krings.
{¶ 14} This cause is now before the court for our consideration of the
merits.
Legal Analysis
Mandamus
{¶ 15} “Mandamus is the appropriate remedy to compel compliance with
R.C. 149.43, Ohio’s Public Records Act.” State ex rel. Physicians Commt. for
Responsible Medicine v. Ohio State Univ. Bd. of Trustees, 108 Ohio St.3d 288,
2006-Ohio-903, 843 N.E.2d 174, ¶ 6; R.C. 149.43(C)(1). Although the Public
Records Act is accorded liberal construction in favor of access to public records,
“the relator must still establish entitlement to the requested extraordinary relief by
clear and convincing evidence.” State ex rel. McCaffrey v. Mahoning Cty.
Prosecutor’s Office, 133 Ohio St.3d 139, 2012-Ohio-4246, 976 N.E.2d 877, ¶ 16.
Clear and convincing evidence is “that measure or degree of proof which is more
than a mere ‘preponderance of the evidence,’ but not to the extent of such
certainty as is required ‘beyond a reasonable doubt’ in criminal cases, and which
will produce in the mind of the trier of facts a firm belief or conviction as to the
facts sought to be established.” Cross v. Ledford, 161 Ohio St. 469, 120 N.E.2d
118 (1954), paragraph three of the syllabus.
Records: Redactions to the lease agreements
{¶ 16} All the requested documents have been produced by the city to
Luken, with the exception of the redactions to the lease agreements between the
corporation and various tenants in Findlay Market. Therefore, the ultimate
question is whether the contents of the redacted lines on the lease agreements
constitute a trade secret and therefore should not be released to Luken by the
corporation or the city.
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January Term, 2013
The terms and amounts of subleases for Findlay Market tenants are trade secrets
and thus exempt from public-records law
{¶ 17} The redactions in the records are trade secrets and thus are not
public records subject to disclosure. R.C. 149.43(A)(1)(v) excepts from the
definition of “public records” “[r]ecords the release of which is prohibited by state
or federal law.” R.C. 1333.62 allows for an injunction against misappropriation
of trade secrets. We have held that a public office’s own trade secret, in its
possession, is a record “the release of which is prohibited by state or federal law.”
State ex rel. Besser v. Ohio State Univ., 87 Ohio St.3d 535, 721 N.E.2d 1044(2000). “Trade secret” is defined as
information, including * * * any business information or plans,
financial information, or listing of names * * * that satisfies both
of the following:
(1) It 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.
(2) It is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
R.C. 1333.61(D). The court has also adopted other factors for analyzing a trade-
secret claim:
“(1) The extent to which the information is known outside
the business; (2) the extent to which it is known to those inside the
business, i.e., by the employees; (3) the precautions taken by the
holder of the trade secret to guard the secrecy of the information;
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(4) the savings effected and the value to the holder in having the
information as against competitors; (5) the amount of effort or
money expended in obtaining and developing the information; and
(6) the amount of time and expense it would take for others to
acquire and duplicate the information.”
State ex rel. Besser v. Ohio State Univ., 89 Ohio St.3d 396, 399-400, 732 N.E.2d
373 (2000), quoting State ex rel. Plain Dealer v. Ohio Dept. of Ins., 80 Ohio St.3d
513, 524-525, 687 N.E.2d 661 (1997), closely paraphrasing 4 Restatement of the
Law, Torts, Section 757, comment b (1939).
{¶ 18} The entity claiming trade-secret status, in this case the corporation,
“bears the burden to identify and demonstrate that the material is included in
categories of protected information under the statute and additionally must take
some active steps to maintain its secrecy.” Id. at 400, citing Fred Siegel Co.,
L.P.A. v. Arter & Hadden, 85 Ohio St.3d 171, 181, 707 N.E.2d 853 (1999).
{¶ 19} Applying these factors to the facts here, the corporation has
satisfied the first part of the Besser analysis. The corporation put on an expert
who testified that the term and rental rate for subleases in the commercial context
are secrets closely guarded by property managers and that knowledge of these
items about competitors would be invaluable to property managers. Moreover, if
such knowledge became public, it would impair the landlord’s ability to get and
keep tenants and “create a poisonous environment” among the tenants, who would
inevitably compare notes. Disclosure of the information would put the
corporation and Findlay Market at a competitive disadvantage.
{¶ 20} Thus, the redacted information derives independent economic
value from not being generally known or readily ascertainable by others who
might obtain economic advantage from knowing the information.
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{¶ 21} The second factor of the Besser analysis is a closer call. On one
hand, the corporation keeps the only unredacted copies of the leases in a locked
filing cabinet and allows access only to employees who need the information.
While the leases do not require tenants to keep the information secret, the
corporation’s expert testified that most tenants do not divulge the information,
because they realize that it is to their benefit not to disclose.
{¶ 22} On the other hand, the corporation could have done more to keep
the information secret. It has a number of written work policies directed at its
employees, for example, on sexual harassment, on conflicts of interest, and on
whistleblowers, but not one on keeping lease terms and amounts secret. It does
not require that tenants keep the information secret, and apparently some of them
have told other vendors their lease terms. For example, the owner of the Taste of
Belgium business apparently had knowledge of the rent paid by another tenant.
However, the corporation’s expert testified that the precautions used by the
corporation are standard for commercial property managers. Luken provided no
evidence to contradict this testimony.
{¶ 23} While the corporation could have taken more care in keeping the
information secret, it is within the purview of the court to determine whether or
not such measures were adequate: “Applying the statute, a trial court should
examine those facts which show the extent to which information is known outside
the business and the precautions taken to guard the secrecy of information.”
Water Mgt., Inc. v. Stayanchi, 15 Ohio St.3d 83, 86, 472 N.E.2d 715 (1984). The
undisputed evidence available on the record indicates that the precautions taken
were standard for the industry.
{¶ 24} Although it is a close question, the corporation has taken
reasonable measures to keep the lease terms a secret under the standard
precautions for the industry. Therefore, we hold that the redacted terms are trade
secrets under the Besser analysis and exempt from public records.
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{¶ 25} Luken has not established his entitlement to relief in mandamus for
the unredacted leases, as they are trade secrets and not public records. Therefore,
the question of whether the corporation is a public entity for purposes of public
records or an entity responsible for public records cannot affect Luken’s
entitlement to the unredacted records and is moot. The “ ‘cardinal principle of
judicial restraint—if it is not necessary to decide more, it is necessary not to
decide more’ ”—counsels against deciding issues rendered moot by our
determination that the redacted information constitutes trade secrets. State ex rel.
Asti v. Ohio Dept. of Youth Servs., 107 Ohio St.3d 262, 2005-Ohio-6432, 838
N.E.2d 658, ¶ 34, quoting PDK Laboratories, Inc. v. United States Drug
Enforcement Administration (D.C.Cir.2004), 362 F.3d 786, 799 (Roberts, J.,
concurring in part and in the judgment).
{¶ 26} We affirm.
Judgment affirmed.
O’CONNOR, C.J., and PFEIFER, O’DONNELL, LANZINGER, KENNEDY,
FRENCH, and O’NEILL, JJ., concur.
__________________
Kevin P. Luken, pro se.
Rendigs, Fry, Kiely & Dennis, L.L.P., Felix J. Gora, and Ann K.
Schooley, for appellee and cross-appellant.
John P. Curp, Cincinnati City Solicitor, and Terrance A. Nestor, Assistant
Solicitor, for appellee.
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