North Carolina Elec. Membership Corp. v. North Carolina Dept. of Economic and Community Development

• Decision Date: 02 February 1993
• Docket Number: No. 9110SC1173,9110SC1173
• Citation: 425 S.E.2d 440,108 N.C.App. 711
• Parties: NORTH CAROLINA ELECTRIC MEMBERSHIP CORPORATION, Plaintiff, v. NORTH CAROLINA DEPARTMENT OF ECONOMIC AND COMMUNITY DEVELOPMENT, North Carolina Rural Electrification Authority, Everett Roberson in his Official Capacity as Administrator of the North Carolina Rural Electrification Authority, Defendants, and Duke Power Company, Intervenor.
• Court: North Carolina Court of Appeals

Page 440

425 S.E.2d 440

108 N.C.App. 711

NORTH CAROLINA ELECTRIC MEMBERSHIP CORPORATION, Plaintiff, v. NORTH CAROLINA DEPARTMENT OF ECONOMIC AND COMMUNITY DEVELOPMENT, North Carolina Rural Electrification Authority Everett Roberson in his Official Capacity as Administrator of the North Carolina Rural Electrification Authority, Defendants and Duke Power Company, Intervenor.

No. 9110SC1173.

Court of Appeals of North Carolina.

Feb. 2, 1993.

Moore & Van Allen by Joseph W. Eason and Denise Smith Cline, Raleigh, for plaintiff-appellant.

Atty. Gen. Lacy H. Thornburg by William W. Finlator, Jr., Associate Atty. Gen., and Jo Anne Sanford, Sp. Deputy Atty. Gen., Raleigh, for defendants-appellees.

Kennedy, Covington, Lobdell & Hickman by James P. Cooney III and Myles E. Standish, Charlotte, for intervenor-appellee.

WYNN, Judge.

The basis of this appeal concerns documents filed by the plaintiff, North Carolina Electric Membership Corporation ("NCEMC"), with the defendant, North Carolina Rural Electrification Authority ("NCREA"), which documents the intervenor, Duke Power Company ("Duke"), has requested be disclosed pursuant to the Public Records Act. See N.C.Gen.Stat. § 132-6 (1991).

NCEMC is a cooperative electric membership corporation which provides electric energy at wholesale prices to twenty-seven members, which in turn supply electricity to approximately 500,000 North Carolina retail customers. Electric membership corporations such as NCEMC, when applying for federal funds, are required by statute to apply through NCREA rather than with the federal agencies directly. See N.C.Gen.Stat. § 117-26 (1986). Pursuant to this requirement, NCEMC filed certain documents with NCREA over a period of years. Duke requested disclosure of these documents alleging that they are public records and as such must be disclosed pursuant to North Carolina's Public Records Act.

Duke and NCEMC are competitors in the wholesale purchase and sale of bulk power, and Duke, in fact, provides some power and related services to NCEMC. Duke constructed the Catawba Nuclear Station ("Catawba") in the 1970's and 1980's. In an agreement which required Duke to buy back a portion of the power generated, Duke sold part of Catawba to NCEMC. In one of many arbitration proceedings to which the two are adverse parties, Duke and NCEMC have been arbitrating a contractual dispute arising out of the purchase and sale of Catawba. In that proceeding, the arbitrator entered a protective order to resolve a dispute regarding documents similar to those in the present case. The protective order granted a limited number of Duke personnel authority to review certain documents, but prohibited the use or disclosure of the documents for any purpose other than the arbitration. In the course of this arbitration Duke requested that the federal Rural Electrification Authority release, pursuant to the Freedom of Information Act, certain documents deposited with it by NCEMC. From refusal of that request, Duke appealed. That appeal is currently pending in the federal district court for the Western District of North Carolina.

On 11 January 1991, NCREA received a request from Duke for disclosure of the three documents which are the subject of the present appeal: 1) NCEMC Long Range Financial Forecast and Member Rate Forecast for Mobile Substation Programs (October 1987); 2) Summary of Feasibility Studies in Support of Deficiency Loan for Participation in Catawba (June 1983); 3) Financial Forecast for NCEMC-Catawba (September 1980). The Financial Forecast for NCEMC-Catawba was the only one of the three documents specifically designated as "Confidential" when it was submitted to NCREA.

NCREA notified NCEMC of Duke's request and asked for a response. NCEMC expressed its belief that the documents were protected because they contained trade secrets which are exempt from the Public Records Act. Duke, in turn, was permitted to respond to NCEMC's claim. To resolve the dispute over the documents, NCREA, through the Office of the Attorney General, held a meeting of all parties involved and conducted an item by item review of the documents in question. Subsequent to this meeting, NCREA issued its decision that the NCEMC Long Range Financial Forecast and Member Rate Forecast for Mobile Substation Programs (October 1987) and the Summary of Feasibility Studies in Support of Deficiency Loan for Participation in Catawba (June 1983) could be disclosed but that the Financial Forecast for NCEMC-Catawba (September 1980) was exempted from disclosure as containing trade secrets.

NCREA set 12 July 1991 as the disclosure date, but on 11 July 1991 NCEMC obtained a temporary restraining order barring such disclosure. At that time Duke intervened as a party defendant. On 2 August 1991 a hearing was held on NCEMC's Motion for a Preliminary Injunction. From denial of that motion, NCEMC appealed.

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I.

The denial of a preliminary injunction is interlocutory and as such an appeal to this Court is not usually allowed prior to a final determination on the merits. However, review is proper if "such order or ruling deprives the appellant of a substantial right which he would lose absent a review prior to final determination." A.E.P. Indus., Inc. v. McClure, 308 N.C. 393, 400, 302 S.E.2d 754, 759 (1983). The present case involves a substantial right that the appellant may lose if review is not undertaken at this time. Without the preliminary injunction, the NCREA would be required to release the NCEMC documents at issue to Duke. With that done, there would be no reason to proceed with a trial on the merits, the whole basis for such action already having been decided by the appellant's compliance with the court order. It is proper, therefore, for this Court to hear the interlocutory appeal from the denial of NCEMC's request for a preliminary injunction.

The defendant intervenor, Duke, asserts that there is no jurisdictional provision which allows NCEMC to bring this action. We cannot agree with Duke that the courts have no jurisdiction to issue injunctions to prevent the disclosure of documents. While we recognize the strong policy in favor of disclosure, we must also be cognizant of the protection given certain documents that would otherwise be considered Public Records. The fact that the statute provides an exemption for certain documents leads this Court to the logical conclusion that those claiming that their documents are exempt must have some recourse in our court system. To conclude otherwise, we believe, would offer no protection from agency error or from an agency's abuse of its discretion. We, therefore, hold that this issue is properly presented for resolution in the court system.

II.

Although the appellant, NCEMC, sets forth seven assignments of error, there is but one issue that this Court must resolve on appeal. That is, did the trial court properly deny appellant's motion for a preliminary injunction. For the reasons that follow, we conclude that it did not.

The burden of proof in a case regarding a preliminary injunction is on the plaintiff, the presumption being that the decision of the trial court is correct. Huggins v. Wake County Bd. of Ed., 272 N.C. 33, 41, 157 S.E.2d 703, 708 (1967). This Court is not, however, bound by the findings of the trial court and may essentially review the case de novo. Iradell Digestive Disease Clinic v. Petrozza, 92 N.C.App. 21 26, 373 S.E.2d 449, 452 (1988), aff'd, 324 N.C. 327, 377 S.E.2d 750 (1989).

In general, a preliminary injunction will issue where 1) the plaintiff is able to show a likelihood of success on the merits of the case, and 2) the plaintiff is likely to suffer irreparable harm, or, in the opinion of the court, the injunction is necessary to protect the plaintiff's rights during the course of the litigation. McClure, 308 N.C. at 401, 302 S.E.2d at 759-60.

In determining whether the plaintiff in the case at bar has shown a likelihood of success on the merits, we must examine the law related to the disclosure of public documents. The appellant basically sets forth three bases upon which it believes it has a substantial likelihood of success on the merits: 1) The documents are protected under common law; 2) The documents are protected under statutory trade secret law prior to 1989; and 3) The documents are protected under the 1989 exception to the Public Records Act. We examine each of these in turn and conclude that the appellant has met its burden of showing that it is likely to succeed on the merits.

1. Common Law Protection

With regard to common law protection, the plaintiff contends that, based on the decision in S.E.T.A. UNC-CH, Inc. v. Huffines, 101 N.C.App. 292, 399 S.E.2d 340 (1991), protection for trade secrets existed at common law. While our research indicates that some type of protection for trade secrets may have existed at common law, the extent of that protection is not clearly defined. See generally North Carolina Trade Secrets Protection Act, 18 Wake Forest L.Rev. 823 (1982). Appellant argues that S.E.T.A. recognizes a common law right to protection of trade secrets. We, however, find appellant's analysis of that case to be erroneous, in that any rights recognized by the S.E.T.A. court derived from the trade secret exemption under the Public Records Act. We likewise conclude that if appellant in the case at bar has any right to block the disclosure of alleged trade secrets, that right arises under the Public Records Act.

2. Trade Secrets Protection Act

Appellant next contends that it enjoyed protection under the Trade Secrets Protection Act of 1981. N.C.Gen.Stat. §§ 66-152--66-162 (1992). Specifically, appellant contends that its documents contain "trade secrets" as defined by N.C.Gen.Stat. § 66-152(3), which provides:

"Trade secret" means business or technical information, including but not limited to a formula, pattern, program, device, compilation of information, method, technique, or process...