State ex rel. Luken v. Corp. for Findlay Mkt. of Cincinnati , 2012 Ohio 2074 ( 2012 )

[Cite as State ex rel. Luken v. Corp. for Findlay Mkt. of Cincinnati, 2012-Ohio-2074.]
IN THE COURT OF APPEALS
FIRST APPELLATE DISTRICT OF OHIO
HAMILTON COUNTY, OHIO
STATE OF OHIO : CASE NO. C-100437
EX REL. KEVIN P. LUKEN,
:
Relator, O P I N I O N.
:
vs.
:
CORPORATION FOR
FINDLAY MARKET OF CINCINNATI, :
and :
CITY OF CINCINNATI, :
Respondents. :
Original Action in Mandamus
Judgment of the Court: Writ Denied
Date of Judgment Entry: May 11, 2012
Kevin P. Luken, for Relator,
Rendigs, Fry, Kiely & Dennis, LLP, Felix J. Gora and Ann K. Schooley, for
Respondent Corporation for Findlay Market of Cincinnati,
John P. Curp, City Solicitor, and Terrance Nestor, Assistant City Solicitor, for
Respondent City of Cincinnati.
Please note: This case has been removed from the accelerated calendar.
OHIO FIRST DISTRICT COURT OF APPEALS
F ISCHER , Judge.
{¶1} In this original action, relator Kevin Luken has petitioned for a writ of
mandamus to compel the respondents—the Corporation for Findlay Market of
Cincinnati (“CFMC”) and the city of Cincinnati—to provide certain records concerning
Findlay Market under the Ohio Public Records Act, R.C. 149.43. Findlay Market is a
public market located in the Over-the-Rhine neighborhood of Cincinnati. The city
leases the property comprising the market to CFMC, which manages and operates the
market under an exclusive agreement with the city.
{¶2} The records at issue are license agreements between CFMC and
merchants for retail space at Findlay Market. The license agreements are essentially
commercial subleases. Luken has received copies of the license agreements; however,
their term and rent provisions have been redacted. CFMC maintains that it is not
subject to R.C. 149.43 because the nonprofit corporation is neither a public office under
the functional-equivalency test of State ex rel. Oriana House, Inc. v. Montgomery, 110
Ohio St.3d 456, 2006-Ohio-4854, 854 N.E.2d 193, nor a person responsible for public
records under State ex rel. Cincinnati Enquirer v. Krings, 93 Ohio St.3d 654, 758
N.E.2d 1135 (2001). CFMC further argues that the redacted provisions are trade secrets
under the Ohio Uniform Trade Secrets Act, R.C. 1333.61 et seq., and therefore not
public records under State ex rel. Besser v. Ohio State Univ., 87 Ohio St.3d 535, 721
N.E.2d 1044 (2000).
{¶3} We referred this matter to a magistrate for trial under App.R. 34(A).
Following trial, the magistrate prepared a decision denying the writ. Luken has filed
amended objections to the magistrate’s decision; therefore, we must now “undertake an
independent review as to the objected matters to ascertain that the magistrate has
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OHIO FIRST DISTRICT COURT OF APPEALS
properly determined the factual issues and appropriately applied the law.” Civ.R.
53(D)(4)(d); App.R. 34(C). We, therefore, review the magistrate’s decision de novo
with respect to fact and law. See Azarova v. Schmitt, 1st Dist. No. C-060090, 2007-
Ohio-653, ¶ 32.
Factual Background
{¶4} Having repeatedly, thoroughly, and independently reviewed the record,
we find the following facts.
{¶5} Findlay Market has served the people of Cincinnati since the 1850s.
Before July 2004, the city managed the market under the Cincinnati Municipal Code,
which authorizes the city manager to designate a market manager to make operational
decisions for the market. Cincinnati Municipal Code 845-3.
{¶6} In August 2003, at the city’s request, U-B Corporation incorporated
CFMC as an Ohio nonprofit corporation “to preserve and promote the historical,
traditional, and cultural aspects of Findlay Market as a treasured living landmark of the
greater Cincinnati community.” Jt. Ex. 1. To advance this purpose, the articles of
incorporation granted CFMC the powers to
d) Secure and maintain a lease and/or management
contract with the City of Cincinnati for city-owned
facilities located in the Findlay Market District of the
Over-the-Rhine neighborhood * * *
e) Sublease appropriate space to merchants, social service
agencies, and community groups to support community
economic development and educational and cultural
activities in the Findlay Market District of the Over-the-
Rhine neighborhood * * * [and]
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OHIO FIRST DISTRICT COURT OF APPEALS
g) Work with appropriate City of Cincinnati officials
whose jurisdiction includes City property and public
market concerns. Jt. Ex. 1.
{¶7} On July 1, 2004, CFMC entered into a management agreement and
lease agreement with the city. These agreements were renewed on June 8, 2009, and
remain in effect until July 1, 2014. Under the management agreement, CFMC has the
exclusive right to manage and operate Findlay Market. CFMC may establish “such
rules and regulations as CFMC deems in its discretion to be reasonable and proper
concerning Market Operations.” Jt. Ex. 2. Indeed, CFMC maintains day-to-day control
over the market.
{¶8} Section 6(a) of the management agreement provides that
The City assigns its rights under existing contracts with
subtenants at the Market to [CFMC]. [CFMC] shall enter
into license or lease agreements with existing and new
subtenants regarding occupying space in the Market and
the Market Facilities. [CFMC] shall have the discretion to
determine the amounts of consideration to be paid, and
the responsibility for collecting those amounts and using
the revenues to pay for Market Operations. Id.{¶9} Section 6(e) provides that
[CFMC] shall maintain a complete set of books and
records in a form and manner approved by the City,
showing all revenue collected and all expenditures made
in connection with the cooperation of the Market Facilities
along with such supporting data and documents as
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OHIO FIRST DISTRICT COURT OF APPEALS
prescribed by the City. Such books and records shall be
kept in such a manner as to make them easily reconcilable
with the reports and forms to be submitted to the City by
[CFMC]. The City shall have the right at any time to
examine the records, books, data and documents kept by
[CFMC] regarding the operation and maintenance of the
Market Facilities. Id.{¶10} In addition, Section 5 requires the city to reimburse CFMC for certain
expenses incurred in operating the market. These reimbursements totaled 45.4 percent
of CFMC’s revenue in the fiscal year ending June 30, 2010, and 31.2 percent in the
fiscal year ending June 30, 2009.
{¶11} In April 2010, Luken requested CFMC to provide various records under
R.C. 149.43, including “[a]ll leases, license agreements or any other agreements the
Corporation has with any person or entity that leases, licenses, uses or occupies any
space managed by the Corporation since January 1, 2009.” Jt. Ex. 8. CFMC claimed
that it was not subject to R.C. 149.43, and advised Luken to obtain the records from the
city. In May 2010, Luken asked the city to request the records from CFMC under
Section 6(e) of the management agreement, and to provide him with any records it
received.
{¶12} There is no dispute that the city provided Luken with the records that
CFMC produced, including two redacted license agreements for retail space at the
market. There is also no dispute that the redactions obscure the term and rent
provisions of those agreements. There is a dispute, however, as to whether these
provisions are trade secrets.
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{¶13} Robert Pickford, the president and chief executive officer of CFMC,
testified that CFMC maintains an unwritten policy to keep the license agreements
confidential. Pickford claimed that CFMC keeps the license agreements in a locked
cabinet, and does not “share the information to anyone who doesn’t absolutely have to
have it.” T.p. 251. Although Pickford maintained that the term and rent provisions are
not shared with the city despite Section 6(e) of the management agreement, he
conceded that in May 2009 he had sent city officials a memorandum detailing
negotiations between CFMC and one merchant for a license agreement. He also
admitted that in September 2006 he had sent Luken’s brother—a Findlay Market
merchant— a letter describing the method for setting the rent provisions in his license
agreement. Pickford explained that CFMC has since transitioned away from formulaic
rent calculations, and has adopted a market-oriented approach.
{¶14} Commercial real estate expert Karman Stahl testified that the release of
the term and price provisions would place CFMC at a competitive disadvantage in
negotiating with current and prospective merchants. Stahl maintained that such
information is generally kept secret by commercial landlords, and that competitors in
the commercial real estate market spend “a lot of time looking for that information.”
T.p. 314. “If everybody knew when everybody’s leases were expiring,” she explained,
“we would just pursue their tenants and try to pull them out of their building at the time
* * * right before their lease expired.” Id. When asked whether keeping the term and
price provisions confidential provides an economic benefit to the landlord or property
manager, Stahl replied, “Definitely.” T.p. 322.
The Magistrate’s Decision and Luken’s Objections
{¶15} Following trial, the magistrate prepared a decision denying the writ,
concluding that the redacted provisions are trade secrets and, therefore, exempt from
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disclosure under R.C. 149.43(A)(1)(v). See Besser, 87 Ohio St.3d at 540, 721 N.E.2d
1044. The magistrate further decided that CFMC is not subject to mandamus under
R.C. 149.43 because the private entity is neither a “public office” under the functional-
equivalency test of Oriana House, 110 Ohio St.3d 456, 2006-Ohio-4854, 854 N.E.2d
193, nor a “person responsible for public records” under Krings, 93 Ohio St.3d 654, 758
N.E.2d 1135.
{¶16} Luken has filed eight amended objections to the magistrate’s decision.
The first three concern whether CFMC is a “public office,” the fourth challenges the
magistrate’s application of Krings, and the last four regard whether the redacted
provisions are trade secrets.
Analysis
{¶17} The Ohio Public Records Act provides that upon request, “all public
records responsive to the request shall be promptly prepared and made available for
inspection to any person at all reasonable times during regular business hours.” R.C.
149.43(B)(1). A person allegedly aggrieved by the failure to make a public record
available “may commence a mandamus action to obtain a judgment that orders the
public office or person responsible for the public record to comply with [R.C. 149.43(B)]
* * * .” R.C. 149.43(C)(1). “In order to be entitled to a writ of mandamus, the relator
must establish a clear legal right to the relief prayed for, that respondent has a clear
legal duty to perform the requested act, and that relator has no plain and adequate
remedy at law.” State ex rel. Seikbert v. Wilkinson, 69 Ohio St.3d 489, 490, 633 N.E.2d
1128 (1994). Relators seeking public records in mandamus, however, need not
establish the lack of an adequate remedy at law. State ex rel. Am. Civ. Liberties Union
of Ohio, Inc. v. Cuyahoga Cty. Bd. of Commrs., 128 Ohio St.3d 256, 2011-Ohio-625,
943 N.E.2d 553, ¶ 24.
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{¶18} Because the city has provided Luken with the records in its possession,
we hold that a mandamus judgment against the city would be improper. See State ex
rel. Striker v. Smith, 129 Ohio St.3d 168, 2011-Ohio-2878, 950 N.E.2d 952, ¶ 28. Our
analysis, therefore, focuses on whether CFMC is a public office or a person responsible
for public records, and whether the requested records are exempt from disclosure as
trade secrets.
CFMC is not a Public Office
{¶19} “ ‘Public office’ includes any state agency, public institution, political
subdivision, or other organized body, office, agency, institution, or entity established by
the laws of this state for the exercise of any function of government.” R.C. 149.011(A).
In Oriana House, 110 Ohio St.3d 456, 2006-Ohio-4854, 854 N.E.2d 193, the Ohio
Supreme Court considered how to determine whether a private entity qualifies as a
“public institution” under R.C. 149.011(A), and thus a “public office” for purposes of
R.C. 149.43. The court adopted the so-called “functional-equivalency test,” under
which courts “must analyze all pertinent factors, including (1) whether the entity
performs a governmental function, (2) the level of government funding, (3) the extent
of government involvement or regulation, and (4) whether the entity was created by the
government or to avoid the requirements of the Public Records Act.” Id. at paragraph
two of the syllabus. Although the court acknowledged that R.C. 149.43 should be
liberally construed, with any doubt resolved in favor of disclosure, it further held that
“the functional-equivalency analysis begins with the presumption that private entities
are not subject to the Public Records Act absent a showing by clear and convincing
evidence that the private entity is the functional equivalent of a public office.” Id. at
¶ 15 and ¶ 26.
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{¶20} In considering the Oriana House factors, the magistrate determined
that (1) CFMC does not perform a governmental function, (2) CFMC receives
significant government funding, (3) government involvement in CFMC is limited, and
(4) CFMC was neither created by the government nor to avoid the requirements of
R.C. 149.43. The magistrate concluded that on balance, there was not clear and
convincing evidence that CFMC is a public office.
{¶21} In his first amended objection, Luken argues that CFMC performs a
government function. He cites the fact that Findlay Market was managed by the city for
over 150 years. This court, however, interprets “governmental function” in this context
not as activities that the government has performed, but rather as activities that are
uniquely governmental. Compare State ex rel. Repository v. Nova Behavioral Health,
Inc., 112 Ohio St.3d 338, 2006-Ohio-6713, 859 N.E.2d 936, ¶ 30 (providing mental-
health care for the uninsured and compensating for the inadequacy of benefits in
commercial health-insurance plan “is uniquely a government function”); Oriana House
at ¶ 28 (administering a community-based correctional facility is a government
function); with State ex rel. Bell v. Brooks, 130 Ohio St.3d 87, 2011-Ohio-4897, 955
N.E.2d 987, ¶ 22 (providing insurance to counties is not a government function); State
ex rel. Dist. Eight Regional Organizing Commt. v. Cincinnati-Hamilton Cty.
Community Action Agency, 192 Ohio App.3d 553, 2011-Ohio-312, 949 N.E.2d 1022,
¶ 9-10 (1st. Dist.) (providing home weatherization and energy-efficiency services to low-
income individuals is not a government function).
{¶22} We hold that the management and operation of a public market, an
activity ubiquitously performed by nongovernmental entities, is not a governmental
function. The first amended objection is overruled.
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OHIO FIRST DISTRICT COURT OF APPEALS
{¶23} In his second amended objection, Luken argues that the city is actively
involved in the management of Findlay Market. “In addressing the question of the
extent of government involvement or regulation, the Ohio Supreme Court has looked to
the control over day-to-day operations of an entity.” Dist. Eight Regional Organizing
Commt. at ¶ 12; see Oriana House at ¶ 33.
{¶24} Under the management agreement, CFMC has the right to create rules
and regulations for Findlay Market, and moreover, to “determine the amounts of
consideration to be paid, and the responsibility for collecting those amounts and using
the revenues to pay for Market Operations.” Although the city retains some rights
under the management agreement and lease agreement, we cannot say that it controls
the day-to-day operations of CFMC. The second amended objection is overruled.
{¶25} In his third amended objection, Luken argues that CFMC was created
by the city. Because the city requested the creation of a nonprofit corporation to
manage and operate Findlay Market, we agree and find that the city created CFMC.
Although there is no indication that CFMC was created or used by the city to avoid the
requirements of R.C. 149.43, we must sustain the third amended objection.
{¶26} We further agree with the magistrate’s conclusion that the city’s funding
of CFMC —which totaled nearly half of its revenue in the fiscal year ending June 30,
2010—is not just significant, but overwhelming.
{¶27} Nevertheless, based on all the relevant factors, we conclude that on
balance, Luken has not demonstrated by clear and convincing evidence that CFMC is a
public institution under the Oriana House functional-equivalency test. The nonprofit
corporation is, therefore, not a public office under R.C. 149.43.
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CFMC is a Person Responsible for Public Records
{¶28} In his fourth amended objection, Luken essentially argues that the
magistrate incorrectly determined that CFMC is not a person responsible for public
records and, therefore, is not subject to mandamus under R.C. 149.43. “In order for a
private entity to be subject to R.C. 149.43, (1) it must prepare the records in order to
carry out a public office’s responsibilities, (2) the public office must be able to monitor
the private entity’s performance, and (3) the public office must have access to the
records for this purpose.” Krings, 93 Ohio St.3d at 657, 758 N.E.2d 1135.
{¶29} In Krings, Hamilton County and the city of Cincinnati entered into an
agreement for the construction of a new football stadium for the Cincinnati Bengals. In
the agreement, the county and the city specified that they had “determined that the
construction of the new Stadium on the Cincinnati riverfront will create an
extraordinary opportunity to eliminate blight and transform the riverfront into a
nucleus of economic development and to make the Riverfront an integral part of a
redeveloped downtown Cincinnati.” Id. at 655. Pursuant to statutory authority, the
board of county commissioners contracted with two private companies to construct the
stadium. Id. at 658. “In these contracts, [the construction companies] were obligated
to prepare records related to construction costs for the publicly funded stadium, the
board [of county commissioners] and the county had the right to monitor their
performance under the contracts, and the board was authorized to access records in
order to monitor their performance.” Id.
{¶30} The Cincinnati Enquirer petitioned for a writ of mandamus to compel
the county administrator and the two construction companies to provide
correspondence relating to cost overruns for the stadium project, including internal
business records.
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{¶31} The Ohio Supreme Court held that mandamus was proper against the
companies, recognizing that they were constructing the stadium on behalf of the
county, which was authorized by law to build it. See R.C. 307.023. Otherwise, the court
concluded, “a private entity performing a government contract that obligates it to act to
further the best interest of the governmental entity could prepare records concerning
massive cost overruns and fail to divulge these records to the public office unless the
office specifically requested the records.” Id. at 559.
{¶32} Although the city has turned over the reins of management to CFMC, it
has not abdicated its responsibility to Findlay Market. After all, the city still owns the
property comprising the market, funds a huge percentage of the operation, and clearly
desires its continued operation. In addition, under Section 6(a) of the management
agreement, the city has required CFMC to enter into license agreements with
merchants for space at the market. Meanwhile Section 6(e) of the management
agreement requires CFMC to
maintain a complete set of books and records in a form
and manner approved by the City, showing all revenue
collected and all expenditures made in connection with
the cooperation of the Market Facilities along with such
supporting data and documents as prescribed by the City.
Jt. Ex. 2.
{¶33} Under the same provision, the city has the “right at any time to examine
the records, books, data and documents kept by [CFMC] regarding the operation and
maintenance of the Market Facilities.” Id. Accordingly, we hold that the license
agreements are created to carry out the city’s responsibilities, the city is able to monitor
CFMC’s performance, and the city has access to the license agreements, under the
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management agreement, for this purpose. We, therefore, sustain the fourth amended
objection.
The Trade Secrets Exception
{¶34} Although we hold that the Krings test has been satisfied, Luken is not
necessarily entitled to unredacted copies of the license agreements. These records must
also be “public records” if they are to be recoverable under R.C. 149.43. In his fifth,
sixth, seventh, and eighth amended objections, Luken challenges the magistrate’s
conclusion that the records at issue are, by definition, not public records.
{¶35} Under R.C. 149.43(A)(1), “public record” is defined generally as any
record “kept by any public office * * * .” The statute exempts from this definition,
however, several categories of records, including those records “the release of which is
prohibited by state or federal law.” R.C. 149.43(A)(1)(v). “Exemptions to disclosure
must be strictly construed against the custodian of public records, and the burden to
establish an exception is on the custodian.” State ex rel. Cincinnati Enquirer v.
Hamilton Cty., 75 Ohio St.3d 374, 376-377, 662 N.E.2d 334 (1996).
{¶36} The Ohio Supreme Court has held that trade secrets—as defined by the
Ohio Uniform Trade Secrets Act, R.C. 1333.61 et seq.—are exempt from disclosure
under R.C. 149.43 because their release is prohibited by state law. Besser, 87 Ohio
St.3d at 540, 721 N.E.2d 1044. R.C. 1333.61(D) defines “trade secret” as
information * * * 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.
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(2) It is the subject of efforts that are reasonable under
the circumstances to maintain its secrecy.
{¶37} “The question whether a particular knowledge or process is a trade
secret is * * * a question of fact to be determined by the trier of fact upon the greater
weight of the evidence.” Fred Siegel Co., L.P.A. v. Arter & Hadden, 85 Ohio St.3d 171,
181, 707 N.E.2d 853 (1999).
{¶38} In this case, the redacted term and rent provisions of the license
agreements are subject to a confidentiality policy, and are not shared with the city,
despite the city’s right under Section 6(e) of the management agreement “to examine
the records, books, data and documents kept by [CFMC] regarding the operation and
maintenance of the Market Facilities.” Although there is evidence that city officials
received a memorandum detailing the negotiations for a license agreement between
CFMC and one merchant at Findlay Market, this disclosure was reasonable, given the
city’s unique relationship with CFMC. Thus, under the circumstances, we find that
CFMC has taken reasonable efforts to keep the redacted provisions secret.
{¶39} We further find that the confidentiality of these provisions provides
CFMC with a competitive advantage in negotiating with current and prospective
employees, thus, an economic benefit. The term and rent provisions of the license
agreements are, therefore, trade secrets under R.C. 1333.61(D). See Ohio Consumers’
Counsel v. Pub. Util. Comm. of Ohio, 121 Ohio St.3d 362, 2009-Ohio-604, 904 N.E.2d
853 (holding that the public utilities commission had reasonably concluded that
termination dates and consideration paid in side agreements were trade secrets);
accord Hymen Cos. v. Brozost, 119 F.Supp.2d 499 (E.D.Pa. 2000). We, therefore,
overrule the fifth, sixth, seventh, and eighth amended objections.
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Conclusion
{¶40} Although we hold that the Krings test has been satisfied, because the
records at issue are trade secrets as defined by R.C. 1333.61(D), they are exempt from
disclosure under R.C. 149.43(A)(1)(v). See Besser, 87 Ohio St.3d at 540, 721 N.E.2d
1044. The third and fourth amended objections are sustained, and the remaining
amended objections are overruled. The magistrate’s decision is adopted as modified,
and the writ of mandamus is denied.
Attorney Fees
{¶41} Luken has also requested attorney fees for pursuing this action.
Because we have determined that he is not entitled to the requested writ of mandamus,
we deny his request for attorney fees. State ex rel. Cincinnati Enquirer v. Streicher, 1st
Dist. No. C-100820, 2011-Ohio-4498, ¶ 34. The parties and their counsel in this case
have performed admirably and acted reasonably in light of the circumstances, and thus
an award of attorney fees would not be proper.
Writ denied.
H ILDEBRANDT , P.J., and S UNDERMANN , J., concur.
Please note:
The court has recorded its own entry this date.
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