Long v. City of Burlington ( 2017 )

Long v. City of Burlington, No. 996-11-16 Cncv (Mello, J., Oct. 11, 2017).
[The text of this Vermont trial court opinion is unofficial. It has been reformatted from the original. The accuracy of the text and the
accompanying data included in the Vermont trial court opinion database is not guaranteed.]
VERMONT SUPERIOR COURT
CHITTENDEN UNIT
CIVIL DIVISION
│
MICHAEL LONG, et al., │
Plaintiffs │
│
v. │ Docket No. 996-11-16 Cncv
│
CITY OF BURLINGTON, et al., │
Defendant │
│
RULING ON DEFENDANTS’ MOTION TO DISMISS AND MOTION FOR SUMMARY
JUDGMENT
This action stems from the denial of a public records act request. Plaintiffs in this action
are several Burlington residents/taxpayers and an advocacy organization, all of whom oppose a
proposed development project by BTC Mall Associates, LLC.1 Plaintiffs have sued the City of
Burlington (“the City”) and BTC Mall Associates (“BTC”), alleging that the City improperly
denied its public records act request for an unredacted market feasibility study related to the mall
project (count IV). Now before the Court is BTC’s motion to dismiss count IV, and the City’s
motion for summary judgment on that same count.2 John L. Franco, Jr., Esq. represents Plaintiffs.
Richard W. Haesler, Jr., Esq. represents the City. Brian S. Dunkiel and Jonathan T. Rose, Esqs.
represent BTC Mall Associates.
Preliminarily, the court observes that BTC’s motion to dismiss is premised on the grounds
that it is not a public agency, and therefore is an improper defendant in a public records act case.
The court agrees with that analysis. The act provides that “[a]ny person may inspect or copy any
public record of a public agency . . . .” 1 V.S.A. § 316(a). “Public agency” or “agency” means “any
agency, board, department, commission, committee, branch, instrumentality, or authority of the
State . . . .” 1 V.S.A. § 317(a)(2). Plaintiffs do not allege that BTC is a public agency or the
1
It appears that some of the individual plaintiffs have since withdrawn as parties to the action. See Notice of
Withdrawal of Individual Plaintiffs as Parties in Count IV (July 31, 2017). That fact does not appear to be material to
the disposition of the currently pending motions.
2
In counts I through III, brought against only the City, plaintiffs challenged the November 8, 2016 referendum, where
voters had approved a ballot question authorizing the City to borrow $21.83 million to be funded by tax increment
financing, and which would help finance street improvements related to the project. Plaintiffs alleged that the City
committed several errors in the tax increment financing approval and election process. In a written decision dated May
19, 2017, this court granted the City’s motion to dismiss those claims. Therefore, the only remaining issue in the case
is the public records act claim (count IV). It bears noting that while it moves to dismiss count IV, BTC also supports
the City’s motion for summary judgment as to that count.
“functional equivalent” of a public agency. However, plaintiffs maintain that BTC is a necessary
party in the event the court determines that the market feasibility study is subject to disclosure and
is now held solely by BTC. See Pls.’ Opp’n at 4 (June 20, 2017). In other words, the party status
of BTC is dependent on whether the unredacted market feasibility study is a public record subject
to disclosure. The court will first address the City’s motion for summary judgment. A ruling for
the City on that motion would negate any purpose for BTC’s status as a defendant in this case.
Undisputed Material Facts
In December 2014, the Burlington City Council took initial steps toward redevelopment of
several downtown city blocks currently housing the Burlington Town Center Mall by approving a
process to create a public-private partnership with the property’s owners, Devonwood Investors,
LLC and BTC Mall Associates, LLC. To provide support and technical assistance, the City
contracted with various “experts,” including an independent, Seattle-based consulting firm called
ECONorthwest, which specializes in economics, finance, and planning. ECONorthwest’s services
are based on microeconomics analysis. The City’s interest in the firm arose from the firm’s
experience providing economic and technical expertise to state and local governments on
economic development projects. The City retained ECONorthwest to help with technical,
economic analysis of the project and to assist the City in structuring the public-private partnership.
After the City Council’s authorization of the redevelopment process, the City and BTC
worked together for 17 months to conceptualize and refine the project, during which the City
received technical assistance from ECONorthwest. This process resulted in a Predelopment
Agreement (“PDA”) memorializing the basic project concept and identifying next steps. The PDA
was approved by the City Council.
The PDA included a set of provisions requiring BTC to share certain information related
to the economics underlying the project, as well as its financial qualifications to complete the
project. That information included “copies of any market studies and feasibility analyses prepared
for the benefit of [BTC]’s project lender(s) and/or investors and available to [BTC].” That
information was needed to test the assumptions in BTC’s economic pro forma, and would
necessarily involve disclosure of information that, if disclosed to BTC’s competitors, could harm
BTC commercially. To satisfy BTC’s confidentiality concerns, the parties agreed in the PDA “to
cooperate as needed to facilitate the completion of the[] disclosures and assessments, including
appropriate treatment of proprietary and confidential information.”
In August 2016, BTC and ECONorthwest entered into a non-disclosure agreement
(“NDA”). Under the NDA, BTC agreed to provide the confidential business information needed
for ECONorthwest to conduct its own assessment of the project, and ECONorthwest agreed that
it would not disclose that information to anyone, including the City. The City, through its attorney,
acknowledged the terms of the NDA.
BTC then provided ECONorthwest with a copy of its market feasibility study prepared by
its own consultants over the summer of 2016. The study included a review of the project’s major
components in light of current and anticipated market conditions, and concluded that the “project
is economically feasible and represents a viable investment for the developer.” On September 23,
2
2016, ECONorthwest issued an independent analysis of the study, which it found to be “generally
well conceived” and noted that it was in “agreement with its findings.”
BTC also provided a copy of the feasibility study to the City and the public, although all
confidential information was redacted, including figures showing estimated rents, revenues, costs,
and other proprietary financial information associated with the project. This type of information is
treated as confidential in the real estate industry because public disclosure of a developer’s pricing,
cost, and revenue information can be competitively harmful. Consistent with the NDA,
ECONorthwest did not share a full, unredacted copy of the feasibility study with the City.
On October 6, 2016, opponents of the project, including plaintiffs, requested a copy of the
unredacted feasibility study and any related documents from the City pursuant to the Vermont
Public Records Act. The City denied the request on grounds that (1) it did not have an unredacted
copy of the study, and (2) the unredacted study would be exempt from disclosure under the act as
a confidential business record. An appeal was denied by the Mayor.
Discussion
The City argues, first, that the unredacted feasibility study is not a public record under the
public records act. The court agrees. The act provides that “[a]ny person may inspect or copy any
public record of a public agency . . . .” 1 V.S.A. § 316(a). “Public agency” or “agency” means “any
agency, board, department, commission, committee, branch, instrumentality, or authority of the
State . . . .” 1 V.S.A. § 317(a)(2). “[P]ublic record” or “public document” is defined as “any written
or recorded information, regardless of physical form or characteristics, which is produced or
acquired in the course of public agency business.” 1 V.S.A. § 317(b). Accordingly, documents not
so produced or acquired are not subject to mandatory disclosure under the act.
The City did not produce the feasibility study. Instead, it acquired a redacted version of it
from BTC, which is a public record and has been available to the public. The unredacted version,
however, it not in the City’s possession or custody, nor does the City have any legal right to obtain
an unredacted copy pursuant to the NDA, which expressly prohibits disclosure of that information
to the City. The City never produced nor acquired an unredacted copy of the feasibility study.
Thus, it is not a public record subject to disclosure.
Plaintiffs cite to general agency principles to argue that the requested information is subject
to disclosure because it was disclosed to an agent of the City pursuant to city business. See Carter
v. Gugliuzzi, 168 Vt. 48, 54 (1998) (quoting Estate of Sawyer v. Crowell, 151 Vt. 287, 291 (1989))
(“A fundamental tenet of agency law holds that ‘the knowledge of an agent acting within the scope
of his or her authority is chargeable to the principal, regardless of whether that knowledge is
actually communicated.’”); see also Restatement (Second) of Agency § 272 (1958). However,
plaintiffs cite no authority applying general agency principles in this context. Vermont cases
involving alleged public records in possession of private entities have applied the “legal
ownership” or “functional equivalence” analyses.3 See Whitaker v. Vermont Information
3
The “functional equivalence” test considers whether a private entity from which records are sought is the “functional
equivalent of a public agency,” and whether the records sought “are within the scope of that equivalency. Prison Legal
News v. Corrections Corp. of America, No. 332-5-13 Wncv, 2014 WL 2565746, *6 (Vt. Super. Jan. 10, 2014) (Bent,
3
Technology Leaders, Inc., No. 781-12-15 Wncv, 2016 WL 8260068, *2 (Vt. Super. Oct. 28, 2016)
(Teachout, J.) (applying “functional equivalence” test to determine whether documents produced
and acquired by state contractor were public records); Prison Legal News v. Corrections Corp. of
America, No. 332-5-13 Wncv, 2014 WL 2565746, *6 (Vt. Super. Jan. 10, 2014) (Bent, J.)
(adopting “functional equivalence” test for assessing public records act claims against private
entities, in that case a state prison contractor); Munson Earth Moving Corp v. City of South
Burlington, No. S0805-08 CnC, 2009 WL 8019258 (Vt. Super. Mar. 30, 2009) (Pearson, J.)
(document in possession of private party “acquired” by public agency only when agency had
“legally acquired” the document”). Here, again, the City had no legal right to acquire the
unredacted version of the feasibility study.
Even assuming that general agency principles apply here, that would not aid plaintiffs’
argument. Plaintiffs have correctly cited the general rule that an agent’s knowledge imputes to the
principal if the agent is acting within the scope of his authority. However, as the City also
accurately observes, that general rule does not apply where the agent is under a separate obligation
not to disclose the relevant knowledge to the principal. See Restatement (Second) of Agency § 281
(1958) (“A principal is not affected by the knowledge of an agent who is privileged not to disclose
or act upon it and who does not disclose or act upon it.”); see also id., Reporter’s Notes (“there is
universal agreement to the effect that where an agent’s duties to others prevent him from disclosing
facts to the principal, the latter is not bound because of the agent’s knowledge”). As the most recent
Restatement of Agency reaffirms:
For purposes of determining a principal’s legal relations with a third
party, notice of a fact that an agent knows or has reason to know is
imputed to the principal if knowledge of the fact is material to the
agent’s duties to the principal, unless the agent . . . is subject to a
duty to another not to disclose the fact to the principal.
Restatement (Third) Of Agency § 5.03 (2006); see also id. cmt. e (“when an agent is subject to a
duty to another not to disclose a fact to the principal, the agent’s knowledge is not imputed to the
principal”). Assuming that agency principles apply in the context of a public records act claim and
that ECONorthwest was an agent of the City, ECONorthwest’s knowledge of the information
sought cannot be imputed to the City. The unredacted feasibility study is not a public record.
The City next contends that, even if the redacted feasibility study is a public record under
the act, it is subject to the trade secrets exemption. Again, the court agrees. The statute exempts
“[t]rade secrets,” meaning:
confidential business records or information, including any
formulae, plan, pattern, process, tool, mechanism, compound,
procedure, production data, or compilation of information which is
not patented, which a commercial concern makes efforts that are
reasonable under the circumstances to keep secret, and which gives
J.). If so, the public records act reaches those entities and records. Id. “The non-exclusive factors are: (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.” Id.
4
its user or owner an opportunity to obtain business advantage over
competitors who do not know it or use it . . . .
1 V.S.A. § 317(c)(9). In considering whether certain information deserves trade secret protection,
courts consider whether “the information has independent economic value that is not readily
ascertainable to others” and whether “reasonable efforts were made to maintain the information’s
secrecy.” Dicks v. Jensen, 172 Vt. 43, 47 (2001).
BTC clearly made reasonable efforts to maintain the secrecy of the unredacted feasibility
study. The unredacted study was shared only with the City’s consultant, and only after the
negotiation of a non-disclosure agreement between BTC and ECONorthwest prohibiting the
consultant from disclosing the study with anyone, including the City, and only after the agreement
was acknowledged by the City Attorney. Plainly, this was sufficient.
Plaintiffs contend that these efforts were not reasonabe only because the City Council did
not expressly approve the final non-disclosure agreement. But as the City correctly points out,
nothing requires a binding non-disclosure agreement in these circumstances. The mere fact that
BTC shared the redacted information only after negotiating a non-disclosure agreement
demonstrates reasonable efforts to maintain its secrecy.4
To the extent City Council authorization was required for the City to “acknowledge” the
nondisclosure agreement, such authorization was provided by the predevelopment agreement,
where the City agreed “to cooperate as needed to facilitate the completion of the[] disclosures and
assessments, including appropriate treatment of proprietary and confidential information.” The
City’s acknowledgement of the nondisclosure agreement plainly falls within that authorization to
“cooperate as needed . . . .” The court rejects plaintiffs’ argument that this provision constitutes an
unenforceable “mere agreement to agree.” Miller v. Flegenheimer, 2016 VT 125, ¶ 12; see also
Reynolds v. Sullivan, 136 Vt. 1, 3–4 (1978). As the City notes, the point here is not whether it had
an enforceable agreement with BTC, but that the City Council’s express approval of that contract
authorized the City to “acknowledge,” or sign onto, the nondisclosure agreement.
Finally, the redacted information here clearly “has independent economic value that is not
readily ascertainable to others,” Dicks, 172 Vt. at 47, or “gives [BTC] an opportunity to obtain
business advantage over competitors who do not know it or use it . . . .” 1 V.S.A. § 317(c)(9); see
also Springfield Terminal Ry. Co. v. Agency of Transp., 174 Vt. 341, 347 (2002) (recognizing that
§ 317(c)(9) exemption protects “financial information” that “give[s] the user or owner an
opportunity to obtain a business advantage over competitors who do not know or use that
information”).
The first paragraph of the feasibility study identifies the information upon which it relies:
“The financial assessment took into account: Construction and Related Development Costs;
Potential Project Revenues based on the market-tested Absorption and Rent projections
summarized in the report; Potential Project Operating Costs; and Project Debt Payments based on
4
In any event, it is not clear that any City approval or acknowledgement of the nondisclosure agreement was required.
This was an agreement between two private entities who did not need City Council approval to make a binding
contract.
5
project financing model made available by the developer.” Ex. C to City’s Mot. for Summ. J.
(Market Feasibility Assessment) at 4. Plaintiffs contend that it is impossible to tell what
information was redacted without an in camera review. However, a review of the redacted
feasibility study clarifies exactly what information was redacted: projected net operating income
and yield on cost, id. at 7; projected rental rates, id. at 13, 45, 61–62, 68; pre-lease rental rates and
terms, id. at 61, 67; projected parking fees, id. at 14, 69, 70; and tables indicating detailed
construction cost estimates, total project cost estimates, and projections of five-year project
returns. Id. at 72–74. Indeed, virtually all of the redactions are , numbers, dollar figures, or tables
of dollar figures, where the narrative context makes it crystal clear what those redacted dollar
figures represent.
Plaintiffs do not genuinely dispute that information such as estimated rents, revenues, costs,
and other proprietary financial information is treated as confidential in the real estate industry
because public disclosure of a developer’s pricing, cost, and revenue information can be
competitively harmful.5 This fact is also recognized in the case law. See, e.g., State v. Corp. for
Findlay Mkt., 988 N.E.2d 546, 551 (Ohio 2013) (lease terms and rental rates are trade secrets in
the commercial real estate industry, and thus unredacted documents containing that information
were not public records subject to disclosure); State ex rel. Luken v. Corp. for Findlay Mkt. of
Cincinnati, 972 N.E.2d 607, 614 (Ohio Ct. App. 2012), aff’d sub nom. State v. Corp. for Findlay
Mkt., 988 N.E.2d 546 (redacted term and rent provisions of license agreements between
lessee/manager of public market on city property and merchants who subleased spaces in the
market, were trade secrets, exempt from disclosure under public records act; confidentiality
provided competitive advantage and economic benefit); Hyman Companies, Inc. v. Brozost, 119
F. Supp. 2d 499, 505 (E.D. Pa. 2000) “lease terms, conditions and negotiations and the profitability
of [plaintiff’s] stores constitute such confidential and proprietary information as to be worthy of
protection as a trade secret”); BIEC Int’l, Inc. v. Glob. Steel Servs., Ltd., 791 F. Supp. 489, 545
(E.D. Pa. 1992) (recognizing trade secret protection for cost and pricing information of product or
service, business plans, marketing strategies, and financial projections, and the terms of specific
customer accounts including contract expiration dates and revenues generated). There is no
question that the type of information redacted in the feasibility study constitutes a trade secret.
Thus, that information is exempt from public disclosure.
Order
The City of Burlington’s motion for summary judgment on the public records act claim
(count IV) is granted. Accordingly, BTC Mall Associates’ motion to dismiss is also granted.
SO ORDERED this 10th day of October, 2017.
_____________________________
Robert A. Mello
Superior Court Judge
5
To the extent plaintiffs purport to dispute this fact, they offer no contradictory evidence, and rely only on their
argument discussed (and rejected) above that we don’t know what was redacted because it wasn’t disclosed. On this
record, no reasonable fact-finder could conclude that the type of information redacted is not generally protected as a
confidential trade secret in the real estate industry.
6