State ex rel. Besser v. Ohio State Univ.

• Decision Date: 09 August 2000
• Docket Number: No. 99-394.,99-394.
• Citation: 732 NE 2d 373,89 Ohio St.3d 396
• Parties: THE STATE EX REL. BESSER ET AL., APPELLANTS, v. OHIO STATE UNIVERSITY ET AL., APPELLEES.
• Court: Ohio Supreme Court

89 Ohio St.3d 396

732 NE 2d 373

THE STATE EX REL. BESSER ET AL., APPELLANTS, v. OHIO STATE UNIVERSITY ET AL., APPELLEES.

No. 99-394.

Supreme Court of Ohio.

Submitted May 9, 2000.

Decided August 9, 2000.

Kenneth R. Besser, for relators.

Betty D. Montgomery, Attorney General, Mark R. Weaver, Special Counsel to the Attorney General, Lisa Wu Fate and Jan Alan Neiger, Assistant Attorneys General, for respondents.

Per Curiam.

In reviewing the records withheld by OSU, the precept guiding our analysis is that the inherent, fundamental policy of R.C. 149.43 is to promote open government, not restrict it. State ex rel. The Miami Student v. Miami Univ. (1997), 79 Ohio St.3d 168, 171, 680 N.E.2d 956, 959. Consistent with this policy, exceptions to disclosure must be strictly construed against the public records custodian, and the custodian bears the burden to establish the applicability of an exception. State ex rel. McGowan v. Cuyahoga Metro. Hous. Auth. (1997), 78 Ohio St.3d 518, 519, 678 N.E.2d 1388, 1389.

With these guidelines in mind, we initially consider OSU's assertion that two of the withheld records are excepted from disclosure as intellectual property records under R.C. 149.43(A)(1)(m). The intellectual-property-record exception was designed to prevent private persons from using the Public Records Act to appropriate intellectual property for private gain. State ex rel. Rea v. Ohio Dept. of Edn. (1998), 81 Ohio St.3d 527, 533, 692 N.E.2d 596, 602. R.C. 149.43(A)(5) defines "intellectual property record" as "a record, other than a financial or administrative record, that is produced or collected by or for faculty or staff of a state institution of higher learning in the conduct of or as a result of study or research on an educational, commercial, scientific, artistic, technical, or scholarly issue, regardless of whether the study or research was sponsored by the institution alone or in conjunction with a governmental body or private concern, and that has not been publicly released, published, or patented." (Emphasis added.)

In construing R.C. 149.43(A)(5), the words used must be construed in accordance with rules of grammar and common usage. Nibert v. Ohio Dept. of Rehab. & Corr. (1998), 84 Ohio St.3d 100, 102, 702 N.E.2d 70, 72. Financial records relate to the business system of managing money and investments, and administrative records concern the management and performance of the executive duties of a government, institution, or business. See Garner, Black's Law Dictionary (7 Ed.1999) 44 and 644; Webster's Third New International Dictionary (1986) 28 and 851.

Under R.C. 149.43(A)(5), financial and administrative records do not constitute intellectual property records that are exempt from disclosure under R.C. 149.43. The two records claimed by OSU to be intellectual property records are OSU's preliminary business plan and pro forma for the Park Medical Center transaction, which include charts and tables outlining financial calculations and projections. These records are both financial records. They contain financial calculations concerning the acquisition of Park Medical Center, as well as administrative records, i.e., they concern OSU's administrative decision to acquire the hospital.

Therefore, the intellectual-property-record exception of R.C. 149.43(A)(1)(m) and (A)(5) does not exempt these records from disclosure.

OSU next contends that all of the withheld records, including the preliminary business plan and the pro forma, are exempt from disclosure under R.C. 149.43 because they are trade secrets. Trade secrets are exempt from disclosure under the "state or federal law" exemption of R.C. 149.43. Besser, 87 Ohio St.3d at 540, 721 N.E.2d at 1049.

R.C. 1333.61(D), part of Ohio's adoption of the Uniform Trade Secrets Act, defines "trade secret" to include "any 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."

We have also adopted the following factors in 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; (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. The Plain Dealer v. Ohio Dept. of Ins. (1997), 80 Ohio St.3d 513, 524-525, 687 N.E.2d 661, 672, citing Pyromatics, Inc. v. Petruziello (1983), 7 Ohio App.3d 131, 134-135, 7 OBR 165, 169, 454 N.E.2d 588, 592.

An entity claiming trade secret status 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. See Fred Siegel Co., L.P.A. v. Arter & Hadden (1999), 85 Ohio St.3d 171, 181, 707 N.E.2d 853, 862.

We apply the foregoing factors in determining OSU's trade secret claims regarding the various records it has withheld from the Bessers.

2/4/99 Memorandum to OSU Officials from OSU Employee Regarding Asset Purchase Agreement for Park Medical Center and Draft Asset Purchase Agreement

OSU claims that the memorandum is a trade secret because of a conclusory statement in an affidavit of the executive director of Ohio State Hospitals Systems that it "derives potential economic value from not being generally known to, and not being readily ascertainable to, persons who can obtain economic value from its disclosure." The memorandum, however, in and of itself, does not disclose any information that retains any potential economic value for either OSU or its competitors. See Plain Dealer, 80 Ohio St.3d at 527, 687 N.E.2d at 674. Instead, it merely references a copy of an asset purchase agreement without disclosing its terms. Id.

OSU also withheld the draft asset purchase agreement referred to in the memorandum. The draft agreement relates to the since-completed acquisition of Park Medical Center by OSU. In Plain Dealer, we relied on commentary from the Restatement of Torts to hold that "[i]nformation related to a single, ephemeral event in the conduct of a business does not meet the requirement that a trade secret be `a process or device for continuous use in the operation of the business.'" Id., 80 Ohio St.3d at 526, 687 N.E.2d at 673, quoting Restatement of the Law, Torts (1939), Section 757, Comment b; see, also, Wisconsin Elec. Power Co. v. Pub. Serv. Comm. of Wisconsin (1983), 110 Wis.2d 530, 329 N.W.2d 178, holding that documents relating to draft contracts, bids, and letters of negotiation are not trade secrets.

The Commissioners on Uniform State Laws who drafted the Uniform Trade Secrets Act, as adopted in Ohio, noted "[t]hat the definition of `trade secret' [in the Uniform Act] contains a reasonable departure from the Restatement of Torts (First) definition which required that a trade secret be `continuously used in one's business.'" Uniform Trade Secrets Act, Sec. 1, Comment (1990), 14 U.L.A. 437, 439; Minuteman, Inc. v. Alexander (1989), 147 Wis.2d 842, 852-853, 434 N.W.2d 773, 777. The broader definition in the Act, as well as R.C. 1333.61(D), "extends protection to a plaintiff who has not yet had an opportunity or acquired the means to put a trade secret to use" and "includes information that has commercial value from a negative viewpoint, for example the results of lengthy and expensive research which proves that a certain process will not work could be of great value to a competitor." (Emphasis sic.) 14 U.L.A. 439.

Therefore, the mere fact that the draft asset purchase agreement relates to a single event, i.e., OSU's acquisition of a private hospital, and is not continuously used in OSU's business does not preclude it from being a trade secret that is exempt from disclosure.

But there still must be evidence that the draft agreement constitutes a trade secret. OSU did not introduce sufficient evidence to establish that the draft agreement retains potential, independent economic value from not being readily ascertainable by proper means by competitors. R.C. 1333.61(D)(1). In fact, even OSU's conclusory affidavit statement covers only the February 4, 1999 memorandum and not the draft agreement to which it refers. There is also no evidence that the draft agreement was actually adopted or which, if any, of its terms have potential economic value in future transactions involving OSU.

Consequently, the February 4, 1999 memorandum and the draft agreement do not constitute trade secrets and are subject to disclosure under R.C. 149.43.

1/28/99 OSU Preliminary Business Plan for Park Medical Center

OSU claims that the preliminary business plan drafted by Arthur Andersen Healthcare Services for OSU's proposed acquisition of Park Medical Center is also a trade secret. Like the other withheld records, OSU relies on conclusory affidavit statements to support its claims. For example, OSU provided affidavit evidence that "[r]elease of strategic plans and other negotiation information surrounding The Ohio State University's purchase of Park Medical Center even after the conclusion of negotiations would put The Ohio State University Hospitals at a significant economic disadvantage." (Emphasis sic.)

OSU argues that based on this evidence, if it enters into any future negotiations...