PA Dept. of Revenue v. D. Flemming ( 2015 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Pennsylvania Department :
of Revenue, :
Petitioner :
: No. 2318 C.D. 2014
v. : Submitted: June 26, 2015
:
Derrick Flemming, :
Respondent :
BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge
HONORABLE ROBERT SIMPSON, Judge
HONORABLE ANNE E. COVEY, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY JUDGE SIMPSON FILED: August 21, 2015
The Pennsylvania Department of Revenue (Department) petitions for
review from a final determination of the Office of Open Records (OOR), granting
the request of Derrick Flemming (Requester) under the Right-to-Know Law
(RTKL).1 Requester sought records regarding the Department’s administration of
the Pennsylvania Lottery (the “Lottery”) pursuant to Section 303 of the State
Lottery Law, 72 P.S. §3761-3032 (State Lottery Law). The Department denied
access under Section 708(b)(1)(ii) of the RTKL, 65 P.S. §67.708(b)(1)(ii) (the
Personal Security exception), and Section 708(b)(11) of the RTKL, §67.708(b)(11)
(the Trade Secrets exception). The Department raises a procedural challenge and
appeals OOR’s determination on the merits. Upon review, we affirm.
1
Act of February 14, 2008, P.L. 6, 65 P.S. §§67.101-67.3104.
2
Act of August 26, 1971, P.L. 351, as amended.
I. Background
Requester submitted a RTKL request to the Department for “[(1)] data
for all of your retail agents info[rmation] [(Agent Information),] and [(2)] all
purchased and winning tickets by each game (Scratch-off and Draw), by day and
retailer[,] from January 1, 2012 to current [(Ticket Information)]. I am not looking
for any winner names. For winning tickets[,] can you tell where they were
purchased?” Reproduced Record (R.R.) at 18a (Request). As to Agent
Information, he sought: Agent number; store name; address; city; retailer type; and,
Agent start date. As to Ticket Information for purchased and winning tickets, he
sought: Agent number; game; date; number of tickets purchased; number of
winning tickets; dollar(s) spent; and dollar(s) paid out. Id.
The Department denied the Request in part based on the public safety
exception in Section 708(b)(2) of the RTKL, 65 P.S. §67.708(b)(2). Requester
appealed the denial of part 2 of the Request (Ticket Information) to OOR.
On appeal to OOR, the Department asserted the requested records
were protected by the Personal Security and Trade Secrets exceptions under the
RTKL. In support, the Department submitted a position statement verified by
Jeffrey Kaylor, Records Legal Liaison for the Department, and a sworn affidavit of
James Morgan, Director of Security for the Lottery (Affidavit).
Upon review of the materials the Department submitted, OOR
concluded the Department did not establish either exception asserted. See
Flemming v. Dep’t of Revenue, OOR Dkt., No. AP 2014-1658 (issued Nov. 25,
2
2014) (Final Determination). OOR did not dismiss the appeal as defective, noting
Requester submitted a copy of the Request once ordered to do so. Id. at 2 n.2.
As to the Personal Security exception, OOR reasoned the Affidavit
was too speculative to qualify as sufficient evidence. In particular, OOR noted the
Department did not explain how releasing records regarding past ticket sales and
winnings posed a threat to retailers in the present. Id. at 6.
As to the Trade Secrets exception, OOR likewise found the Affidavit
too vague. For instance, although the Department alleged that Lottery competitors
would use the information to the detriment of Lottery’s economic goals, the
Department did not identify any competitors, or indicate how disclosure of the
information would harm Lottery’s economic, business and policy goals.
The Department then filed a petition for review.
II. Discussion
On appeal,3 the Department raises procedural and substantive issues.
Procedurally, it asserts Requester’s appeal is defective because he did not submit a
copy of his original request to OOR. Substantively, it contends the information is
protected by the Personal Security exception contained in Section 708(b)(1)(ii) of
the RTKL, and as trade secret information protected by the Trade Secrets exception
in Section 708(b)(11) of the RTKL.
3
In a RTKL appeal involving a Commonwealth agency, this Court has the discretion to
rely upon the record created below or to create its own. Dep’t of Labor & Indus. v. Heltzel, 90
A.3d 823 (Pa. Cmwlth. 2014) (en banc).
3
A. Procedure
At the outset, the Department challenges Requester’s appeal to OOR
as procedurally deficient. It argues OOR erred in failing to “summarily dismiss
[Requester’s] appeal even though [he] failed to comply with the OOR’s Order
dated October 27, 2014.” See Pet. for Review at ¶10(a). The Department’s sole
complaint is that Requester did not submit the original request with his appeal to
OOR as required by OOR’s Interim Guidelines.
Although it is unclear whether this issue was raised before the fact-
finder, R.R. at 19a-34a, because the Department questions OOR’s authority to
render a decision, we address it. Upon consideration, we reject the Department’s
procedural challenge for several reasons.
First, OOR’s “Interim Guidelines” are a dubious basis for a dismissal.
As our Supreme Court noted, OOR’s Interim Guidelines “do not constitute duly
promulgated regulations” entitled to deference. Bowling v. Office of Open
Records, 75 A.3d 453, 471 n.20 (Pa. 2013); Office of Open Records v. Center
Twp., 95 A.3d 354, 369 n.20 (Pa. Cmwlth. 2014).
Second, the guidelines purportedly require an appeal to include a copy
of the complete request. The Department does not allege the Request was
incomplete. Relevant here, OOR’s guidelines do not require submission of an
identical copy of a request in the original format. Indeed, were OOR to construe its
guidelines so strictly, compliance would not be possible as the original copy of a
request is submitted to an agency subject to the RTKL.
4
Third, contrary to the Department’s characterization, Requester did
not “[fail] to comply with the OOR’s Order .…” Pet. for Review at ¶10(a). OOR
allowed Requester an opportunity to cure the alleged deficiency and deemed his
later submission sufficient. In so doing, OOR construed its guidelines to require
the original content of the request submitted to an agency, not the original format.
On review, the content of the Request is identical to the submission to the
Department, and the Department does not dispute its accuracy. Based on that
construction, Requester did not violate OOR’s guidelines or OOR’s procedural
directive.
Thus, Requester’s alleged failure to include a copy of the Request
with his appeal is not fatal. See, e.g., Kokinda v. Cnty. of Lehigh (Pa. Cmwlth.,
No. 1146 C.D. 2013, filed Jan. 8, 2014), 2014 WL 61317 (unreported) (noting trial
court held copy of request was not necessary for review). Accordingly, OOR did
not err in accepting Requester’s appeal and deciding it on the merits.
B. Merits
Next, we assess the Department’s arguments that Ticket Information is
protected by the Personal Security and the Trade Secrets exceptions of the RTKL.
The RTKL is remedial in nature and “is designed to promote access to
official government information in order to prohibit secrets, scrutinize the actions
of public officials, and make public officials accountable for their actions.” Pa.
State Police v. McGill, 83 A.3d 476, 479 (Pa. Cmwlth. 2014) (en banc).
5
Consistent with the RTKL’s goal of promoting government transparency, the
exceptions to disclosure must be narrowly construed. Id.
Under the RTKL, records in possession of a Commonwealth agency
are presumed to be public unless they are: (1) exempt under Section 708 of the
RTKL; (2) “protected by a privilege; or[,] (3) … exempt from disclosure under any
other Federal or State law or regulation or judicial order or decree.” Section 305 of
the RTKL, 65 P.S. §67.305 (emphasis added). Pursuant to Section 708(a) of the
RTKL, an agency bears the burden of proving a RTKL exception by a
preponderance of the evidence. 65 P.S. §67.708(a).
1. Personal Security Exception
The Personal Security exception protects any record, the disclosure of
which “would be reasonably likely to result in substantial and demonstrable risk of
physical harm to or the personal security of an individual.” Section 708(b)(1)(ii)
of the RTKL, 65 P.S. §67.708(b)(1)(ii). To meet its burden of proof, an agency
must show both: (1) a “reasonable likelihood” of (2) “substantial and
demonstrable risk” to an individual’s security if the information is not protected.
Governor’s Office of Admin. v. Purcell, 35 A.3d 811 (Pa. Cmwlth. 2011). We
define substantial and demonstrable as actual or real and apparent. Id. “More than
mere conjecture is needed.” Governor’s Office of Admin. v. Pennsylvanians for
Union Reform, Inc., 105 A.3d 61, 66 (Pa. Cmwlth. 2014) (quoting Purcell, 35 A.3d
at 820).
6
Recently, this Court construed this exception strictly to require some
explanation as to “how the disclosure … would be reasonably likely to result in a
substantial and demonstrable risk of harm to [individuals’] personal security.”
State Emps.’ Ret. Sys. v. Fultz, 107 A.3d 860, 869 (Pa. Cmwlth. 2015) (emphasis
added). We rejected “general and broad-sweeping” conclusory statements
contained in identical affidavits regarding the perceived threat. Id.
Here, the harm the Department articulates relates to the potential for
criminal activity involving retail establishments because the Lottery is a largely
cash business. The Department contends that divulging the number of winning
tickets purchased at a specific retailer would divulge the amount of cash on hand,
which in turn, would encourage robberies of these retailers. Specifically, the
Department submits: “If information about the total number of tickets purchased
at a specific Pennsylvania Lottery retailer would be disclosed, it is my opinion that
criminals would use this information to target specific Pennsylvania Lottery
retailers and their employees.” Affidavit at ¶20, R.R. at 28a. The Department also
posits that “criminals would use this information to target … Lottery winners.” Id.
The Affidavit consists of speculation as to possible harms without
containing any facts to indicate their likelihood. As such, the threat the
Department describes is pure conjecture. Fultz. Given the absence of any facts
regarding likelihood, the Court agrees with OOR that the perceived threat of
robberies is not a reasonably likely result of disclosing the number and amount of
winning tickets by retailer. Id.
7
Further, the Ticket Information would pertain to the history of
winning tickets. There is no evidence that such historical information correlates to
any present or future winnings.
Significantly, the Ticket Information does not implicate the personal
information of any Lottery winners or individual employees. Neither winners nor
employees are identified in the Ticket Information. Also, the Department did not
assert that disclosure of the Ticket Information puts any individual’s personal
information at risk. The information the disclosure of which constitutes a threat is
the number of winning tickets and the total number of dollars paid to winners. The
Department did not set forth any facts that show potential criminals pose a real, as
opposed to a perceived, threat. Purcell.
As the Department’s evidence does not offer sufficient facts to
support a “reasonable likelihood” of harm to personal security, we uphold OOR’s
determination as to the Personal Security exception.
2. Trade Secrets Exception
The Trade Secrets exception protects records that reveal a “trade
secret.” Section 708(b)(11) of the RTKL, 65 P.S. §67/708(b)(11). Trade secrets
are defined in the RTKL as:
[i]nformation including a formula, drawing, pattern, compilation,
including a customer list, program, device, method, technique or
process that:
(1) derives economic value, actual or potential, from not being
generally known to and not being readily ascertainable by
8
proper means by 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.
Section 102 of the RTKL, 65 P.S. §67.102. This definition is identical to that
contained in the Uniform Trade Secrets Act. See 12 Pa. C.S. §5302.
Pennsylvania courts confer “trade secret” status based on the
following factors: (1) the extent to which the information is known outside of the
business; (2) the extent to which the information is known by employees and
others in the business; (3) the extent of measures taken to guard the secrecy of the
information; (4) the value of the information to the entity’s business and to
competitors; (5) the amount of effort or money expended in developing the
information; and, (6) the ease or difficulty with which the information could be
properly acquired or duplicated by others. Dep’t of Pub. Welfare v. Eiseman, 85
A.3d 1117 (Pa. Cmwlth. 2014), appeal granted,4 106 A.3d 610 (Pa., Nos. 129 EAL
2014, 130 EAL 2014, 131 EAL 2014, filed Oct. 23, 2014) (applying trade secret
definition in RTKL context; citing Crum v. Bridgestone/Firestone N. Amer. Tire,
907 A.2d 578 (Pa. Super. 2006) (citing and adopting standard from RESTATEMENT
(SECOND) OF TORTS §757)). To constitute a “trade secret,” the information must be
an “actual secret of peculiar importance to the business and constitute competitive
value to the owner.” Parsons v. Pa. Higher Educ. Assistance Agency, 910 A.2d 177,
4
Upon granting the petition for allowance, the consolidated appeals were transferred to
docket numbers 45 EAP 2014, 46 EAP 2014 and 47 EAP 2014 respectively. The Supreme Court
heard argument on these consolidated appeals on May 5, 2015.
9
185 (Pa. Cmwlth. 2006). The most critical criteria are “substantial secrecy and
competitive value.” Crum, 907 A.2d at 585 (citations omitted).
The Department asserts the disclosure would reveal the minimum
amount of cash-on-hand that Lottery retailers have. R.R. at 27a (Affidavit at ¶¶5-
7). Ticket Information, if disclosed, would also reveal “how many people leave a
specific [Lottery] retailer with a winning” ticket. Id. (Affidavit at ¶8).
As to the Trade Secrets exception, the Affidavit contains scant
information. After repeating that the Ticket Information sought is not publicly
available, whether by the Lottery or its retailers, the Department’s affiant attests:
“If the [Ticket Information] w[as] to be made publicly available, it is my opinion
that [Lottery] competitors would utilize the same to further their economic goals to
the detriment of the [Lottery’s] economic, business and policy goals.” R.R. at 29a
(Affidavit at ¶28). However, the Department does not identify any competitors, or
explain how the information is of any competitive value.
In context, it appears the Department interprets the term “competitors”
broadly to include any retailer or vendor that may compete for a customer’s dollars
for a Lottery ticket. For example, the Department states “Lottery competes with
every product in a retail establishment for a customer’s discretionary spend[,]”
defining competition in terms of products and consumer choices. R.R. at 24a
(verified letter). The Department illustrates its concern about disclosure as follows:
… for instance, someone entering the store with a $5 bill
must choose whether to spend all $5 on Lottery tickets or
whether to spend $4 on Lottery tickets and $1 on a
10
Snickers bar. Should the requested information be
publicly released, Lottery competitors would be able to
determine which stores are doing large volumes of all-
cash, discretionary spend sales. This information, in
turn, would enable Lottery competitors to lure consumers
away from utilizing their discretionary income for
Lottery products and instead attempt to influence them to
purchase other products. If in the earlier hypothetical,
Mars, Inc., knew that a certain store does a large volume
of Lottery sales, they may decide to put up a $2 three-for-
two deal on Snickers to lure Lottery customers away
from Lottery tickets and to their product.
Pet’r’s Br. at 22-23.
Notably, the Department does not protect the secrecy of the requested
information in all circumstances. It concedes that it makes the requested
information available to vendors of the Lottery “for purposes of furthering Lottery
business.” See R.R. at 23a (footnote to verified statement). Thus, the information
is known outside of the Department when it suits the Lottery’s purposes.
The Department also acknowledges “the Requested Records are not
developed per se ….” R.R. at 24a. There is no evidence the Department
undertakes any efforts or expends any resources to develop the Ticket Information.
Considering the factors employed in determining trade secret status,
Ticket Information does not qualify. The Lottery markets a product, lottery tickets,
which are sold in retail stores. The Department defines competitors as both retail
stores and sellers of products that compete for a consumer’s dollar, e.g., Mars, Inc.
We reject as absurd the breadth of the Department’s claim of competition.
11
It is conceivable that the Lottery attracts the same consumers who
participate in small games of chance, or who play bingo, quarter slot machines and
similar modest gaming. Under such an approach, potential competitors are far more
limited than every distributor of every snack, refreshment, or other consumable
product. However, the Department did not identify “gaming” competitors, nor does
it explain how such competitors could use the Ticket Information to the Lottery’s
competitive disadvantage. Indeed, the Department does not explain how
“consumable” competitors could use the Ticket Information to the Lottery’s
disadvantage. Lacking a cohesive explanation, we see no obvious way the Lottery
would be put at a disadvantage by release of the Ticket Information. A connection
between the alleged harm and the information at issue is essential to proving an
exemption under the RTKL. See, e.g., Carey v. Dep’t of Corr., 61 A.3d 367 (Pa.
Cmwlth. 2013) (explaining necessity of remand to tie asserted exemptions to
requested information).
As to the extent to which the information is known by employees and
others, the Department acknowledged it shares the information with vendors, and
the information is known to its many retailers. That the information is not
generally known to its employees does not indicate trade secret status. The
Department did not outline any steps it takes as far as confidentiality or non-
disclosure agreements with vendors, retailers or employees, to show it maintains
the secrecy of the information.
Overall, this information is not readily comparable to trade secrets in
which businesses have dedicated resources and time to develop. Part of that harm
12
is predicated on the concern that a competitor may replicate or modify the
information for its own gains. Here, the Department admittedly did not expend
funds to “develop” the Ticket Information.
In sum, the Department’s evidence is not sufficient to prove trade
secret status. Accordingly, we uphold OOR’s determination that the Trade Secrets
exception does not protect the Ticket Information.
C. Remand
Lastly, we address the Department’s recently raised claim that a
remand is necessary to afford due process to the Lottery retailers and winners
placed at risk by the disclosure of the Ticket Information. The Department
contends our decision in Pennsylvania State Education Association v. Department
of Community & Economic Development, 110 A.3d 1076 (Pa. Cmwlth. 2015) (en
banc) (PSEA), requires agencies to provide notice to individuals “who may be
harmed by such release” to allow them to “show why the requested information is
exempt from disclosure.” Pet’r’s Br. at 18. Because the circumstances presented
here do not jeopardize due process rights, we decline the invitation to remand.
In this case, no individual’s “personal information” is subject to
release as part of the Ticket Information. Consequently, the alleged due process
concerns do not justify remand for additional fact-finding and participation by
unidentified individuals to assert individualized personal security interests.
13
III. Conclusion
For all the foregoing reasons, OOR’s Final Determination is affirmed.
ROBERT SIMPSON, Judge
14
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Pennsylvania Department :
of Revenue, :
Petitioner :
: No. 2318 C.D. 2014
v. :
:
Derrick Flemming, :
Respondent :
ORDER
AND NOW, this 21st day of August, 2015, the final determination of
the Office of Open Records is AFFIRMED.
ROBERT SIMPSON, Judge