DocketNumber： S16G1463
Judges： Melton, Peterson
Filed Date： 11/2/2017
Status： Precedential
Modified Date： 10/19/2024
A government agency owns and operates a large and complex hospital as part of its mission to provide healthcare throughout Fulton County. Perhaps concerned that providing healthcare might not be the sweet spot of government competence, the agency decides that a private, nonprofit corporation should be created to do it instead. The agency leases its considerable assets (including the hospital) to the newly-created corporation for 40 years at a relatively minimal rent, and delegates to the corporation nearly all of its governmental powers and responsibilities. The corporation’s organizing documents reflect that its purpose aligns very well with the agency’s: to provide healthcare for the benefit of the public.
Thirty years later, the corporation has become massive, with considerable assets in surrounding counties. With the agency barely even a dwindling dot in the rear-view mirror, the corporation now argues that it doesn’t really do anything on behalf of the agency (in part because the now nearly-nonexistent agency has no idea what the corporation is doing), and thus the corporation’s records of a series of healthcare-related acquisitions aren’t subject to public inspection. If the corporation’s aggressive position were wholly correct, it may well cast serious doubt on the legality of the whole arrangement between the corporation and the agency A lawyer who seeks records from the corporation under this state’s sunshine laws, on the other hand, takes the opposite (but equally aggressive) position, contending that everything the corporation does is for the agency’s benefit and thus all of its records are public. Both are wrong. The corporation’s operation of the hospital and other leased facilities is a service it performs on behalf of the agency, and so records related to that operation are public records. But whether the acquisition-related records sought here are also public records depends on how closely related the acquisition was to the operation of the leased facilities, a factual question for the trial court to determine on remand.
E. Kendrick Smith, an Atlanta lawyer, brought this action to compel the corporation — Northside Hospital, Inc. and its parent
The facts relevant to this appeal are largely undisputed. In 1966, the Commissioners of Roads and Revenues of Fulton County passed a resolution creating the Fulton County Hospital Authority (the “Authority”), which would “have and exercise all of the powers granted and prescribed in the Hospital Authority Laws.” The Authority was created because of the need in Fulton County for improved and increased hospital facilities to serve the community. And to that end, the Authority opened Northside Hospital, which it owned and operated for approximately the next 25 years. In the early 1990s, the Authority, recognizing “the rapidly changing healthcare environment in which it operate[d],” undertook a study to determine how best to improve the hospital’s operations. Ultimately, the Authority concluded that the best option to achieve its goals was to restructure through a long-term lease of the hospital and related assets for operation by a private, charitable, nonprofit corporation. The Authority further determined that “[r]ecent developments and opportunities affecting the ability of the [h]ospital to remain competitive and to enhance its position as a principal provider of specialty healthcare services... reinforced the importance of restructuring to the long term competitive position of the [h]ospital.”
Based on the foregoing assessments, the Authority on November 1, 1991, executed a lease and transfer agreement (“the Agreement”) with the newly-formed Northside Hospital, Inc., a private, nonprofit corporation. Under the Agreement, the Authority leased the hospital’s facilities and transferred all of its “Operating Assets” and “Existing Operations” — terms defined in the Agreement as discussed in detail below — to Northside for a term of 40 years. The “Leased Facilities” — again, a defined term in the Agreement — included certain tracts of real property in Fulton County and the facilities located thereon: Northside Hospital, a surgery center, office buildings, and improvements. The Authority agreed to use its best efforts to cause the issuance of tax-exempt revenue anticipation
To the extent the Authority has maintained a post-lease existence apart from Northside, it is minimal. Northside board members and officers serve as Authority members. The Authority has no employees or staff of its own. Northside’s director of legal services serves as the Authority’s secretary and maintains the Authority’s records, which are stored at Northside’s legal offices. The Authority generally holds quarterly meetings (usually at Northside) of about 30 minutes each.
Relevant to this dispute, between 2011 and 2013, Northside entered into transactions to acquire four privately-owned physician groups.
Smith subsequently filed this lawsuit against Northside, requesting that the trial court compel Northside to comply with his open records request. The trial court later permitted three of the four private practices that Northside acquired to intervene in the case, two as defendants and the third as a third-party plaintiff seeking declaratory relief. The case ultimately proceeded to a bench trial, which was bifurcated to resolve the two dispositive issues before the trial court: (1) whether the documents in question were “public records” under the Act; and (2) if so, whether the records contained exempt trade secrets. After Smith presented his evidence as to the first issue, Northside and the intervenors moved for an involuntary dismissal of the case, and the trial court denied the motion. But when Northside and the intervenors renewed the motion after the close of all the evidence on the first issue, the court granted it. The Court of Appeals affirmed, and we granted certiorari.
“In reviewing a bench trial, we view the evidence in the light most favorable to the trial court’s rulings, defer to the trial court’s credibility judgments, and will not set aside the trial court’s factual findings unless they are clearly erroneous.” Gibson v. Gibson , 301 Ga. 622, 624(801 SE2d 40) (2017). Atrial court’s involuntary dismissal of a claim pursuant to OCGA § 9-11-41 (b) “may be reversed only if the evidence demands a contrary finding.” Id. (citation and punctuation omitted). But a trial court’s conclusions of law are subject to de novo review. Second Refuge Church of Our Lord Jesus Christ, Inc. v. Lollar, 282 Ga. 721, 724 (2) (653 SE2d 462) (2007). And the application of the wrong legal standard may be reversible error. See Great American Dream, Inc. v. DeKalb County, 290 Ga. 749, 752 (1) (727 SE2d 667) (2012).
1. A public agency need not always have direct involvement in or even knowledge of a particular action of a private entity for that action to qualify as the performance of a service or function “on behalf of” the agency.
Under the Act, “[a] 11 public records shall be open for personal inspection and copying, except those which by order of a court of this state or by law are specifically exempted from disclosure. . . .” OCGA § 50-18-71 (a). The Act previously defined “public records” as only those records “prepared and maintained or received in the course of the operation of a public office or agency” or “received or maintained by a private person or entity on behalf of a public office or agency[.]” See Ga. L. 1992, pp. 1061, 1064, § 5 (codified at prior
The parties agree that the Authority is an “agency” and North-side is not; the only question posed by this appeal is whether the documents sought by Smith were “prepared and maintained or received by” Northside “in the performance of a service or function for or on behalf of” the Authority In construing a statute, “we must afford the statutory text its plain and ordinary meaning, we must view the statutory text in the context in which it appears, and we must read the statutory text in its most natural and reasonable way, as an ordinary speaker of the English language would.” Deal v. Coleman, 294 Ga. 170, 172-173 (1) (a) (751 SE2d 337) (2013) (citations omitted).
Both the trial court and the Court of Appeals employed a narrower standard, requiring Smith to show that the Authority approved, directed, or was involved with the specific transactions at issue. In concluding that Smith had not shown that the documents that he sought were public records, the trial court stated that there was no evidence that Northside “entered into or performed any of the transactions for or on behalf of the Authority, or exercised any of the Authority’s powers when doing so[,]” no evidence “that the Authority discussed in advance, requested, approved, or authorized Northside to enter into the transactions at issue[,]” and no evidence that “the Authority was involved in any way in the negotiating of the transactions or preparing, executing, maintaining, or receiving the documents sought.” The trial court found that it could not conclude
that Northside functioned under the direction and control of the Authority as its vehicle to implement the Authority’s duty to provide public health, or that there is a shared ownership and control between the Authority and Northside such that the documents at issue were generated or maintained by Northside on behalf of the Authority.
In affirming the trial court, the Court of Appeals wrote:
Smith seeks documents related to commercial transactions between private entities, which the Authority had no knowledge, interest, or involvement in to any degree. Indeed, these acquisitions were negotiated and executed solely by Northside for its own private purposes, and it did not seek the Authority’s approval or even inform the Authority of its plans in advance. Moreover, Smith presented no evidence that any public officials participated in the negotiations, and it was undisputed that no public funds were used to finance the acquisitions.
Northside Hosp., 336 Ga. App. at 856-857 (1).
Considering a hypothetical example of a more typical contractual arrangement between a public agency and a private entity helps explain how this is so. A city ordinance charges city government with collecting trash in city parks. The city elects to contract with a private waste management company to perform that function; records related to the company’s performance of that contract would be public records. The company also collects trash from nearby residents; a rumor gets out that the city is paying for it. To determine whether the company’s records related to the collection from residents are public, a court would consider whether the government had approved, knew about, or was otherwise involved in extending the company’s service from city parks to the residents.
On the other hand, an arrangement with a broader scope would entail a different, analysis. The same city is charged with providing waste management services to its residents, but determines that the private sector would do the job more effectively The city contracts with the private company to provide waste management services for all the city’s residents. The city’s direction to the company is both broad and simple: pick up the trash. Records of the private company related to the company’s provision of waste management services to the city’s residents pursuant to the contract with the city would be public records under the Act (while, of course, other records of the private company would not). And if the private company decided it needed more help and hired subcontractors to assist on the city contract, records related to that arrangement would be public records regardless of whether the city council knew about it.
It’s difficult to imagine an arrangement with a broader scope than the Authority’s lease of virtually all of its property and delegation of nearly all of its authority to Northside, for the stated purpose of better fulfilling the Authority’s mission. And so whether evidence of specific Authority involvement in a particular transaction is present here is the wrong question to ask, given the nature of the relationship between the Authority and Northside and the complex task with which Northside is charged under that relationship.
Northside would have us believe that the Act applies even less to its work than to the work of our hypothetical waste management company, because Northside isn’t doing anything on behalf of the Authority; it simply is a tenant of the landlord Authority Northside is wrong. And we see why when we consider Northside’s account of its relationship with the Authority: that, “[a]s the Hospital Authorities Law authorized it to do, the Authority privatized the hospital and got out of the healthcare business altogether — removing politics and itself from hospital operations — and allowed Northside to independently conduct its private operations without interference, input, oversight, direction, or control.” This is simply not a correct statement of the law or of what the Authority actually did.
To understand the nature of the Authority’s relationship with Northside, it is important to understand the Georgia Hospital Authorities Law (OCGA § 31-7-70 et seq.), the statute authorizing their arrangement. Known for the name of our decision explaining the parameters under which they are properly established, see Richmond County Hosp. Auth. v. Richmond County, 255 Ga. 183 (336 SE2d 562) (1985), “Richmond County hospitals” are permissible under a provision in the statute that allows county hospital authorities “[t]o lease for any number of years up to a maximum of 40 years for operation by others any project[.]” OCGA § 31-7-75 (7). The statute requires that the hospital authority must first determine that the lease “will promote the public health needs of the community by making additional facilities available in the community or by lowering the cost of health care in the community.” Id. The authority also must retain “sufficient control over any project so leased so as to ensure that the lessee will not in any event obtain more than a reasonable rate of return on its investment in the project,” in keeping with the statutory prohibition on hospital authorities operating or constructing any project for profit. Id.
The law thus does not permit the Authority to get “out of the healthcare business altogether.” The Hospital Authorities Law does not allow the Authority to surrender all “input, oversight, direction, [and] control” of its public assets to a private entity. And we must reject any interpretation of Northside’s relationship with the Authority that is contrary to the Hospital Authorities Law. It is axiomatic that government officials are presumed to act in accordance with the law; we said as much in the first case decided by this Court. See Doe ex dem. Truluck v. Peeples, 1 Ga. 1, 1 (1846) (“the court will presume in favor of public officers, in the absence of all proof to the contrary, that they discharge their duty in compliance with the law”). “[U]ntil the
In our first decision blessing a hospital authority’s lease of its hospital to a private corporation, we made clear the corporation was promoting the purpose of the government: “There is no apparent reason why a suitable private corporation could not properly operate the hospital, either as lessee or as owner, so as to likewise promote the public health functions of government.” Bradfield v. Hosp. Auth. of Muscogee County, 226 Ga. 575, 583 (1) (176 SE2d 92) (1970). The same is true here; notwithstanding Northside’s arguments to the contrary, the Authority has entrusted Northside with far more than simply an ordinary lease of premises.
As set forth in resolutions adopted by the Authority in August 1991, Northside was created because the Authority had
concluded that the accomplishment of its mission and its responsibilities under the Hospital Authorities Law, as well as the continuation of the high quality and level of its health care services, can best be accomplished by the lease and*526 transfer of its projects, including its assets and operations to, subject to the assumption of its liabilities and other obligations by, a Georgia nonprofit corporation^]
In accordance with that conclusion, the Authority gave Northside a broad mandate: operate and expand the Authority’s health system in the Authority’s stead. In the original Agreement, the Authority delegated to Northside “the power and authority to stand in the place of the Authority and to do and perform all things that the Authority is authorized or empowered to do by law in the transaction of all business in connection with the operation of the Leased Facilities” and provided that “Northside shall have full power to act for the Authority, in the Authority’s name, place and stead in any and all circumstances, except as prohibited by law or otherwise provided in this Agreement.” Northside notes that the Agreement provided that Northside would operate the hospital system “in furtherance of Northside’s purposes[.]” But the Agreement identified the only permissible such purposes as those “set forth in [Northside’s] Articles of Incorporation and as otherwise permitted by this Agreement.” Those Articles of Incorporation require Northside to “operate, directly and indirectly, health care facilities for the benefit of the general public [.] ”
Moreover, in assenting to its arrangement with Northside, the Authority affirmed in multiple instances that Northside’s work was fulfilling the mission of the Authority:
• In the August 1991 resolutions, the Authority certified that the arrangement with Northside would “promote the public health needs of the community by making additional facilities and services available in the community and by lowering the cost of health care in the community, and the proposed restructuring plan retains sufficient public control of the Authority’s projects as is contemplated by the Hospital Authorities Law to ensure the continued fulfillment of the Authority’s mission of providing quality health care at reasonable costs to the community served by the Authority.”
• The Authority also certified in those resolutions that North-side’s Articles of Incorporation and bylaws were “sufficient to promote the operation of the Authority’s projects consistent with the Hospital Authorities Law, to safeguard the assets and operations of the Authority, and to carry out the mission of the Authority.”
• The originalAgreement dated November 1,1991, reiterated the Authority’s determination that the Agreement would “promote*527 the public health needs of the community by making additional facilities available in the community and by lowering the cost of health care in the community, . . . that this Agreement retains sufficient control by the Authority over the Hospital as is contemplated by the Hospital Authorities Law[,]” and that “continuation of the high quality and level of health care services currently rendered at the Hospital can best be accomplished by transferring the operations, assets and liabilities of the Hospital, as well as other Authority facilities and assets, to a nonprofit corporation [.] ”
• ANovember 1,1991, assumption agreement among the Authority, Northside, and Wachovia Bank of Georgia, NA, whereby Northside agreed to assume the Authority’s debt to Wachovia, said the Authority had determined that it could “best accomplish its mission and responsibilities under the Hospital Authorities Law” through its arrangement with Northside.
The Authority has continued to reaffirm that its arrangement with Northside fulfills the Authority’s mission, and that it retains sufficient control over the arrangement to ensure that continues to be the case:
• In a February 2, 2010 resolution approving the renewal of the lease, the Authority confirmed that it “retains sufficient control of the Authority’s objects as is contemplated by the Hospital Authorities Law to ensure the continued fulfillment of the Authority’s mission of providing quality health care at reasonable costs to the community serviced by the Authority and to ensure that all such leased projects are operated in a manner consistent with the mandate in the Hospital Authorities Law specifying that no authority shall operate or construct any project for profit.”
• The renewal agreement dated January 7, 2013, included the Authority’s reaffirmation that the agreement “will promote the public health needs of the community by making additional facilities available in the community or by lowering the cost of healthcare in the community, and that this Agreement retains sufficient control by the Authority over the Hospital as contemplated by” the Georgia Hospital Authorities Law and that “the Authority believes that continuation of the high quality and level of healthcare services currently rendered at the Hospital can best be accomplished by transferring the operations, assets*528 and liabilities of the Hospital, as well as other Authority facilities and assets, to a nonprofit corporation^]”
Although the Authority may not be involved in the day-to-day operations of the hospital system it leases to Northside, Northside remains accountable to the Authority — at least if it wants the relationship to continue. The Agreement between the two places a host of obligations on Northside, including that it will never attempt to operate the hospital as a for-profit business entity, and that it will charge rates consistent with that constraint. The Authority may terminate the Agreement prior to its expiration if Northside fails to fulfill any of those obligations. In addition, a reversion provision in the Agreement requires that in the event of termination or expiration, Northside must return more than just the real property and buildings that the Authority leased to it. It also requires the return of “Operating Assets,” defined in the Agreement by a list that includes, with the exception of certain retirement plans, “[a] 11 cash, bank accounts, savings and loan accounts, certificates of deposit, money market accounts, treasury bills, other investments and revenues . . . owned by the Authority in connection with the Leased Facilities or otherwise[.]” The Agreement specifies that the term “Operating Assets” includes “all subsequent accumulations and additions thereto, and less all deletions and deductions therefrom, as may have occurred in the ordinary course of business of Northside or as otherwise may have been permitted by the terms of this Agreement.” The reversion provision also requires the return of “Existing Operations,” defined as “all of the hospital, health care, administrative and related activities conducted by” the Authority or Northside “in the ordinary course of owning and operating the Leased Facilities.” The reversion provision specifically provides for the disposition of assets the Authority cannot legally own or operate, with the proceeds going to the Authority. The reversion provision also provides that the Authority will assume Northside’s liabilities at the termination of the lease, to the extent it can legally do so. Thus, Northside stands to lose much of its efforts at the expiration of the Agreement — or sooner if it does not comply with the Agreement — and the Authority stands to gain.
Nothing in the case law on which the Court of Appeals focused requires a different, conclusion. Prior to this case, the Court of Appeals’ case law was in accord with the notion that the records of Richmond County hospitals generally are considered “public records” under the Act, even under a prior, narrower definition of “public records.” See Northwest Ga. Health System, Inc. v. Times-Journal, Inc., 218 Ga. App. 336, 339 (1) (461 SE2d 297) (1995) (records of a private entity, its holding company, and subsidiaries were subject to the Act given that the subsidiaries contractually agreed to operate public hospital authority assets for the public good and the entity’s stated corporate purpose was in part to operate those assets for the benefit of and performing the function of several hospital authorities). See also Richmond County Hosp. Auth., 255 Ga. at 192 (2) (c) (noting that open records and open meetings issues did not arise because the lease agreement made clear the corporation would comply with the laws).
In this case, the Court of Appeals relied primarily on The Corp. of Mercer Univ. v. Barrett & Farahany, LLP, 271 Ga. App. 501 (610 SE2d 138) (2005), but that decision, later superseded by a statute that specifically addressed campus police records, see Ga. L. 2006, pp. 519, 522-523, § 5, came in a case in which the police force whose records were sought was established by an indisputably private entity, a private university; although the plaintiff pointed to the police force’s obligations to report certain matters to other law enforcement agencies, there was “no evidence that any public office or agency ha[d] expressly requested the [police force] to perform a service or function on its behalf.” Mercer Univ., 271 Ga. App. at 505 (1) (b). In the other cases relied on by the Court of Appeals here, the appellate court ruled that the records sought were “public records,” even though many of those were decided under a previous, narrower definition of that term. See Macon Telegraph Pub. Co. v. Bd. of Regents of the Univ. System of Ga., 256 Ga. 443, 445 (350 SE2d 23) (1986) (accounting records of association to which public university assigned task of operating its athletics program were “prepared and maintained in the course of the operation of a public office”) (citation and punctuation omitted); Hackworth v. Bd. of Ed. for City of Atlanta,
3. A remand is required for the trial court to apply the correct standard.
Which of Northside’s actions qualify as “on behalf of” the Authority may be a trickier question. As alluded to by our earlier city trash collection hypothetical, the question would be easier to answer if the Authority had contracted an established nonprofit to manage North-side Hospital’s operations; the nonprofit’s other endeavors would not be subject to the Act. But here Northside was created for the purpose of carrying out the Authority’s mission. Moreover, as we observed in Richmond County Hosp. Auth., seemingly tangential operations may actually be closely tied to the operation of a hospital:
A hospital must attract private paying patients or else it will become a deficit-ridden, indigent-only hospital, dependent upon tax dollars to keep its doors open. The private paying patient is often located outside the bounds of Richmond County, and innovative health-care delivery systems are needed to attract these patients and their dollars to University Hospital.*531 Maintaining physicians on the staff of University Hospital is essential to retaining a private-paying-patient base and ensuring the continued viability of the hospital. Joint ventures with physicians of University Hospital, permissible under the lease, are essential to maintaining the loyalty of such physicians. Joint ventures with physicians in health care, permissible under the lease, would allow the development of additional health-care facilities without the need to raise all of the capital in the public sector, thereby saving taxpayer dollars.
Richmond County Hosp. Auth., 255 Ga. at 191 (2) (a).
It is plain that Northside’s work in operating the “Leased Facilities,” i.e., the original leased hospital complex in Fulton County and any improvements thereto, is work “on behalf of” the Authority. The Authority owns those facilities, and the definitions of the “Operating Assets” and “Existing Operations” that will revert to the Authority upon expiration or termination of the Agreement are tied to operation of those facilities. But other actions may meet that definition as well, depending on how closely related those actions are to operation of the Leased Facilities.
In dismissing Smith’s action, the trial court decided no disputed issues of fact but, rather, resolved a legal dispute about the proper application of the Act to the undisputed facts. Because the trial court applied the wrong legal standard in so doing, remand is required. See Great American Dream, 290 Ga. at 752 (1). Moreover, application of the right standard requires a fact-intensive inquiry made difficult in this appeal given the divergent, all-or-nothing positions taken by the parties. Northside argues that nothing it does is for or on behalf of the Authority. At the very least, however, Northside’s operation of the Leased Facilities is done on behalf of the Authority. How closely the transactions at issue are tied to operating the Leased Facilities will determine whether documents are “public records.” Smith argues that everything Northside does is for or on behalf of the Authority and thus all of its records are public. Because of this position, he has not endeavored to connect the particular records he seeks to the operation of the Leased Facilities. This is not an issue the parties have briefed in any meaningful way. We remand for the trial court to consider in the first instance whether the records in question are sufficiently connected to the operation of the Leased Facilities to constitute public records under OCGA § 50-18-70 (b) (2), and, if so, whether the records may nevertheless be withheld pursuant to a statutory exemption.
Northside asserts that only some of the practices’ assets have been acquired and that the practices remain independent, for-profit entities. But Northside acknowledges it has a fee simple interest in assets and/or operations related to the transactions.
Specifically, the letter identified 15 different categories of requested documents related to each acquisition, including, for example, “[a]ll contracts, agreements, instruments, and other documents by which the [acquisition was effected in whole or in part”; “any indemnification agreements and any agreements concerning the management or operation ... of any medical or health care practice acquired . . documents that “constitute, evidence or reflect any consideration, compensation, or remuneration of any type provided by or on behalf of North-side”; and “[a] 11 documents that constitute, evidence, or reflect any strategic plan or business forecast for assets, membership interests, or any other property or interest acquired in the [a]cquisition” for the 24 months preceding the acquisition.
The General Assembly has directed us to construe the Act broadly in favor of making “governmental records” available to the public. OCGA § 50-18-70 (a). Drawing a distinction between the terms “public” and “governmental,” Northside argues that a private entity’s records could never be deemed “governmental records,” and urges us to construe the statute narrowly in its favor given the availability of criminal penalties for noncompliance. We need not resolve this question of statutory construction here; instead, we simply construe the Act reasonably.
In the analogous context of a principal/agent relationship, an agent may bind its principal without the principal’s knowledge. See OCGA § 10-6-56 (“The principal shall be bound by all representations made by his agent in the business of his agency and also by his willful concealment of material facts, although they are unknown to the principal and known only by the agent.”).
Completely apart from the requirements of the Hospital Authorities Law, any suggestion that a lease of an exceptionally valuable hospital and related assets for minimal rent and the promise to operate the hospital wholly for its own purposes renders Northside simply an ordinary tenant might well raise constitutional questions. See, e.g., Ga. Const. of 1983, Art. Ill, Sec. VI, Par. VI (a) (“Except as otherwise provided in the Constitution,... the General Assembly shall not have the power to grant any donation or gratuity or to forgive any debt or obligation owing to the public).]”).
Northside emphasizes that the Hospital Authorities Law allows a county hospital authority to not only lease, but sell, its facilities. See OCGA § 31-7-75 (6). Smith points out that a hospital authority’s ability to sell assets is constrained, such as by a requirement for a hearing with the opportunity for public comment. See id.; OCGA § 31-7-400 et seq. But putting aside Northside’s troubling suggestion that a hospital authority could truly “remove itself from the provision of healthcare services altogether [,] that is not what has happened here. As detailed above, the Agreement provides that the Authority will retain control over the arrangement sufficient to ensure compliance with the law. The Agreement and Northside’s Articles of