Chester Water Auth. v. Pa. Dep't of Cmty. & Econ. Dev.
| Decision Date | 29 April 2021 |
| Docket Number | No. 45 EAP 2019,No. 44 EAP 2019,44 EAP 2019 |
| Citation | 249 A.3d 1106 |
| Parties | CHESTER WATER AUTHORITY, Appellant v. PENNSYLVANIA DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT, Appellee Chester Water Authority, Appellant v. Pennsylvania Department of Community and Economic Development, Appellee |
| Court | Pennsylvania Supreme Court |
Megan Anne Guernsey, Andrew Kabnick Garden, Conrad O'Brien PC, Kevin Dooley Kent, Philadelphia, for Appellant.
Scott William Longwell, J. Michael Adams, Jr., Sean Christopher Campbell, Pennsylvania Department of Community & Economic Development, Harrisburg, Justin Andrew Zimmerman, for Appellee.
Zachary Nicholas Gordon, Patrick Kennedy Cavanaugh, Del Sole Cavanaugh Stroyd, LLC, Pittsburgh, for The Pittsburgh Post-Gazette, Appellant Amicus Curiae.
Scott Everett Coburn, Pennsylvania State Association of Township Supervisors, Enola, for Pennsylvania State Association of Township Supervisors, Appellee Amicus Curiae.
OPINION
In these consolidated appeals arising under the law generally requiring public access to governmental records in Pennsylvania, the lead issue is whether a statutory deliberative-process exception extends to records exchanged between a Commonwealth agency and private consultants.
For almost twenty-five years, the City of Chester has been designated as a distressed municipality under the Financially Distressed Municipalities Act or "Act 47,"1 which is administered by the appellee, the Department of Community and Economic Development (the "Department" or "DCED"). See 53 P.S. § 11701.121. Per this enactment, among the Department's other responsibilities, the agency is tasked with appointing coordinators, which may be DCED employees or a private consultants, to formulate plans to address the financial problems of distressed municipalities. See id. § 11701.221(a), (b).
In 2016, DCED entered into a professional services contract with Econsult Solutions, Inc., a private consulting firm, to act -- in the capacity of an independent contractor -- as the recovery coordinator for the City of Chester. Econsult, in turn, subcontracted with Fairmount Capital Advisors, Inc. and McNees, Wallace & Nurick, LLC to serve as subcontractors, respectively providing professional financial and legal services.2
Significantly, Act 47 recovery plans must address numerous factors potentially useful in mitigating financial distress, including "[a]n analysis of whether ... privatization of existing municipal services is appropriate and feasible[.]" Id. § 11701.241(8). Accordingly, Econsult was obliged to assess the potential privatization of local municipal authorities -- including Appellant, Chester Water Authority (the "Authority") -- and estimate the impact on the City's financial health. It was (and is) the Authority's position, however, that a cash infusion from the sale of the water authority is not in the best interests of the public, but rather, would benefit only those with an interest in an appearance of a successful financial turnaround for the City in the short term. The Authority therefore sought to remain abreast of the recovery planning.
In late 2017, the Authority submitted two lengthy requests to DCED under the Right to Know Law,3 which generally requires Commonwealth agencies to provide access to public records upon request. See 65 P.S. § 67.301. The Authority requested copies of documents reflecting communications among the Department, Econsult, and the Fairmount Capital and McNees firms related to the potential sale of the water authority.4 The Department made a partial tender but redacted and/or withheld a substantial quantity of materials.
As relevant here, DCED asserted that disclosure of the withheld materials was not required under Section 708(b)(10)(i)(A) of the Law, which excepts from the general requirement for disclosure of public records:
A record that reflects:
(A) The internal , predecisional deliberations of an agency, its members, employees or officials or predecisional deliberations between agency members, employees or officials and members, employees or officials of another agency ....
65 P.S. § 67.708(b)(10)(i) (emphasis added).5 The Department explained that the materials contained "internal staff and contractor recommendations, comments to documents, draft proposals, and discussions that played a role in the Department's Act 47 decision making process."6 DCED also invoked the privilege applicable to lawyer-client communications and the attorney work-product doctrine. See 65 P.S. § 67.102 ().
The Authority proceeded to lodge an appeal with the Office of Open Records (the "OOR"). See 65 P.S. §§ 67.1101 -1102 (). The appeals officer declined to conduct a hearing but undertook in camera review of some documents supplied by the Department. Final determinations ensued in which the appeals officer found, in relevant part, that records that DCED had exchanged with Econsult and the Fairmount Capital and McNees firms were internal to the agency, for purposes of the Section 708(b)(10)(i)(A) exception, on account of the contractual relationships among the parties.7 Finnerty v. DCED , No. AP 2018-0194, slip op. at 10-11, 2018 WL 3091381 (OOR May 14, 2018) ; Finnerty v. DCED , No. AP 2018-0247, slip op. at 16-17, 2018 WL 3425352 (OOR July 11, 2018).8
In this regard, the appeals officer's reasoning paralleled the position of some federal courts interpreting the federal Freedom of Information Act, 5 U.S.C. § 552 ("FOIA"). FOIA protects from disclosure "inter-agency or intra-agency memorandums which would not be available by law to a party other than an agency in litigation with the agency." 5 U.S.C. § 552(b)(5) (emphasis added). As the Supreme Court of the United States has explained, some federal circuit courts of appeals have implemented a "functional approach" to the conception of intra-agency documents and adopted a "consultant corollary," extending the exemption to communications between government agencies and outside consultants hired by them. Dep't of Interior and Bureau of Indian Affairs v. Klamath Water Users Protective Ass'n , 532 U.S. 1, 7-11, 121 S. Ct. 1060, 1065-67, 149 L.Ed.2d 87 (2001) (quoting 5 U.S.C. § 552(b)(5) ). These courts generally reason that, in "eliciting candid and honest advice from outside consultants," it is "crucial" that the agency and the consultant can expect that their communications will remain confidential. Nat'l Inst. of Military Justice v. DOJ , 512 F.3d 677, 685 (D.C. Cir. 2008) ; see also id. at 683 (). Notably, to date, the Supreme Court of the United States has declined to address the propriety of this consultant corollary in FOIA jurisprudence. See Klamath , 532 U.S. at 12, 121 S. Ct. at 1067.
The appeals officer also found that an attorney-client relationship existed between the Department and the McNees firm, and that DCED and Econsult were co-clients of that firm. See Finnerty , No. AP 2018-0194, slip op. at 19 ; see also Finnerty , No. AP 2018-0247, slip op. at 15. For these reasons, he concluded that a portion of the withheld records were protected by the attorney-client privilege and the work-product doctrine. See id.
The Authority filed petitions for review in the Commonwealth Court. Just before oral argument convened, the Department made an additional tender, asserting that it was disclosing all documents that had initially been withheld on the basis of the attorney-client and/or work-product privileges. DCED also sought a stipulation that as a result of the production, the issues were moot, but the Authority did not agree.
Upon its review, the Commonwealth Court affirmed. See Finnerty v. DCED , 208 A.3d 178 (Pa. Cmwlth. 2019) ; see also Finnerty v. DCED , 1090 C.D. 2018, slip op. , 2019 WL 1858392 . As concerns the statutory deliberative process privilege, the intermediate court's reasoning was consistent with the functionalist approach and the consultant corollary prevailing in some federal courts. While recognizing the legislative policy generally favoring openness and the concomitant requirement for exceptions to be narrowly construed, see, e.g. , PSP v. Grove , 640 Pa. 1, 25, 161 A.3d 877, 892 (2017), the court nevertheless opined that:
[A]s it pertains particularly to the internal, predecisional deliberation exception, [the statutory deliberative process] exception " ‘benefits the public and not the officials who assert the privilege’ " by recognizing " ‘that if governmental agencies were forced to operate in a fishbowl, the frank exchange of ideas and opinions would cease and the quality of administrative decisions would consequently suffer.’ "
Finnerty , 208 A.3d at 187 ().
As such, the Commonwealth Court reasoned, "it serves, rather than hinders, the RTKL to interpret ‘internal to the agency’ as including the predecisional, deliberative information that was exchanged between the Department and E–consult, McNees, and Fairmount." Id. The intermediate court found this treatment to be particularly apt in the Act 47 setting, in which the Legislature contemplated that DCED might require assistance from consultants to address the many complex problems facing distressed municipalities. See id. at 187-88. And, like the federal courts applying the consultant corollary, the court stressed the desirability of a frank exchange of ideas and opinions between the agency and its consultants. See id....
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