Wisconsin Elec. Power Co. v. Public Service Commission of Wisconsin

• Decision Date: 22 December 1981
• Docket Number: No. 80-1402,80-1402
• Court: Wisconsin Court of Appeals
• Parties: WISCONSIN ELECTRIC POWER COMPANY, Wisconsin Power and Light Company, Wisconsin Public Service Corporation, Madison Gas & Electric Company, Westinghouse Electric Corporation, and Stone & Webster Engineering Company, Petitioners- Appellants, v. PUBLIC SERVICE COMMISSION OF WISCONSIN, Respondent. *

Page 120

316 N.W.2d 120

106 Wis.2d 142

WISCONSIN ELECTRIC POWER COMPANY, Wisconsin Power and Light

Company, Wisconsin Public Service Corporation, Madison Gas &

Electric Company, Westinghouse Electric Corporation, and Stone & Webster Engineering Company, Petitioners- Appellants, v. PUBLIC SERVICE COMMISSION OF WISCONSIN, Respondent.^*

No. 80-1402.

Court of Appeals of Wisconsin.

Argued Sept. 21, 1981.

Opinion Released Dec. 22, 1981.

Opinion Filed Dec. 22, 1981.

Robert E. Zahler, Washington, D. C., argued, for appellants; Wm. Bradford Reynolds, Hannah E. M. Lieberman and Shaw, Pittman, Potts & Trowbridge, Washington, D. C., Barton Z. Cowan, John R. Kenrick and Eckert, Seamans, Cherin & Mellott, Pittsburgh, Pa., Hugh T. Lee and Stone & Webster Engineering Corp., Boston, Mass., and David E. Beckwith, Frederick C. Moore and Foley & Lardner, Milwaukee, on brief.

Jon Kingstad, Middleton, argued, for respondent; Bronson C. La Follette, Atty. Gen., Steven M. Schur, Chief Counsel, and Curt Rogers, Asst. Chief Counsel, on brief.

Before FOLEY, P. J., and DEAN and CANE, JJ.

CANE, Judge.

Appellants are Wisconsin power companies, (which will be collectively referred to as WEPCO), Westinghouse Electric Corporation and Stone & Webster Engineering, vendors of nuclear power plant components. They appeal from the circuit court's affirmance of an administrative decision to deny trade secret protection to certain information submitted to the PSC. Because we conclude that the information for which appellants sought protection was not shown to fall within the statutory definition of "trade secret," we affirm.

WEPCO filed an application with the PSC to construct a nuclear power plant in the Town of Koshkonong, Jefferson County, Wisconsin. The PSC later ordered applicants to submit a complete list of all expenditures made or proposed, all irretrievable losses, and all contractual commitments in connection with the Koshkonong plant. At the PSC's request, the applicants submitted bids, letters of negotiation, and proposed contracts from the vendor-suppliers. Trade secret protection was requested for a minor portion of the documents in the record, which allegedly had a direct and material bearing on cost or pricing data central to the competitive interests of WEPCO and the vendors. ¹

Hearing examiner Wolter inspected the documents in camera. ² He gave the documents protection under sec. 227.09(7)(a), Stats., ordering that the information not be disclosed to the public. (Access of the PSC staff to the information was not restricted.) The PSC overruled the examiner after exceptions were taken to this decision. ³ The circuit court, Byrne, J., affirmed the PSC, though rejecting much of its reasoning. Protective orders have prevented public disclosure of the information during the appeal process.

Westinghouse, Stone & Webster, and the utilities argue on appeal that the circuit court's interpretation of the statute was erroneous, that the evidence establishes their entitlement to trade secret protection, and that the PSC abused its discretion by rejecting the uncontroverted evidence that the documents contained trade secrets.

Section 227.09(7) provides:

Notwithstanding any other provision of law, the hearing examiner presiding at a hearing may order such protective measures as are necessary to protect the trade secrets of parties to the hearing.

The agency applying the statute must determine (1) whether a trade secret is involved and (2) whether the right of the public to be apprised of the basis of agency action outweighs demonstrated concern for the protection of the competitive position enhanced by nondisclosure. ⁴ The first question may be broken down into questions of fact, whether each of the statutory criteria have been met. We review the agency's findings to ascertain whether the record supports them. The burden of showing the existence of a trade secret is, however, on the party seeking protection. The failure to meet this burden on the record may justify the agency's refusal to find that a document contains trade secrets. Besly-Welles Corp. v. Balax, Inc., 291 F.Supp. 328, 345-46 (E.D.Wis.1968). We conclude that the agency was justified in finding no trade secrets on this record and was entitled to deny protection without exercising the discretion given by the statute. Consequently, we need not address the second question in this case.

Section 227.09(7) adopts the definition of "trade secret" from sec. 943.205(2), Stats:

"Trade secret" means the whole or any portion or phase of any scientific, technical, laboratory, experimental, development or manufacturing information, equipment, tooling, machinery, design, process, procedure, formula or improvement, or any business information used or for use in the conduct of a business, which is manifestly intended by the owner not to be available to anyone other than the owner or persons having access thereto with the owner's consent and which accords or may accord the owner a competitive advantage over other persons.

In order to qualify it for protection under sec. 227.09(7), appellants must establish that the information submitted to the PSC (1) was "business information used or for use in the conduct of a business" or fit into one of the other listed categories, (2) was manifestly intended to be kept confidential, and (3) accords or may accord the owner a competitive advantage. The PSC's findings on these questions of fact will be affirmed if supported by substantial evidence in the record. Stacy v. Ashland County Department of Public Welfare, 39 Wis.2d 595, 603, 159 N.W.2d 630, 634 (1968).

The PSC's finding that nothing in the documents is "business information" within the meaning of the statute is consistent with the evidence in the record. The vendors do not dispute that the information they seek to protect is pricing information provided to WEPCO during negotiations for plant components and construction. Negotiating strategies and pricing information are conspicuously absent from the statutory list and are of a different type than the "scientific, technical, laboratory, experimental, development or manufacturing information" to which trade secret protection is generally accorded. Restatement of Torts § 757, Comment b (1939), ⁵ notes that a trade secret

differs from other secret information in a business ... in that it is not simply information as to single or ephemeral events in the conduct of the business, as, for example, the amount or other terms of a secret bid for a contract or the salary of certain employees, or the security investments made or contemplated, or the date fixed for the announcement of a new policy or for bringing out a new model or the like.

A trade secret "is a process or device which is continually used in the operation of the business and thereby differs from secret information which may refer only to an isolated transaction. Milgrim on Trade Secrets, 1968, § 2.01." Future Plastics, Inc. v. Ware Shoals Plastics, Inc., 340 F.Supp. 1376, 1383 (D.S.C.1972). Witnesses for Westinghouse and Stone & Webster admitted that specific information was not applicable to plants other than Koshkonong; the costs given were not "for continuous use," but applied only to that particular project.

The vendors argued that the percentage-of-cost profit figure that they had revealed to WEPCO would enable other vendors to underbid them. Mr. White, a witness for Stone & Webster, contended that protection would have to be extended indefinitely to prevent other companies from using the proprietary information to make a prediction about Stone & Webster's future activities. Yet, he indicated that the same percentage would not necessarily be used in bidding for other projects.

He also admitted that competitors were aware of Stone & Webster's method of fee calculation. Secrecy is an indispensable feature of a trade secret. Abbott Laboratories v. Norse Chemical Corp., 33 Wis.2d 445, 457, 147 N.W.2d 529, 535 (1967).

Not every piece of information created in the ordinary course of business that appellants wish to keep confidential qualifies as a trade secret. Pricing policies, cost markups or the amount of a company's bid for a particular project, while ordinarily kept confidential in the business world, are not "trade secrets." See Central Specialties Co. v. Schaefer, 318 F.Supp. 855, 859 (N.D.Ill.1970); Haggerty v. Burkey Mills, Inc., 211 F.Supp. 835, 839 (E.D.N.Y.1962). Since appellants have not sought protection for any other type of information, we rule this point against them.

Appellants have satisfied the second statutory criterion by showing that the information was "manifestly intended by the owner not to be available to anyone other than the owner or persons having access thereto with the owner's consent ...." The witnesses' testimony on the practice of confidentiality in the utility industry generally was supported by statements in the documents themselves. ⁶ It supports no other conclusion than that Westinghouse and Stone & Webster intended the proprietary status of the...