Marina Management Services, Inc. v. Commonwealth, Cabinet for Tourism

WINTERSHEIMER, Justice,

dissenting.

I must respectfully dissent from the majority opinion because the movants have failed to demonstrate that they would suffer any injury if the audits retain their classification as open records. There is no extraordinary cause or reason to disturb the order of the Court of Appeals and the decision of the Franklin Circuit Court to deny exempt status to the audit of the State park marinas.

This is essentially an open records case in which the Franklin Circuit Court held that the audits of the State park marinas are not confidential or proprietary, and their disclosure would not give an unfair commercial advantage to competitors. The audits are subject to public disclosure pursuant to the Open Records Act, and the Court of Appeals properly denied the request for CR 65.07 relief. This case comes to the Supreme Court under the provisions of CR 65.09 which carries with it a requirement that extraordinary cause be shown in order to overrule the decision of the Court of Appeals.

Initially, we must observe that the Open Records Act itself states that exemptions from disclosure pursuant to KRS 61.878 must be strictly construed even though a free and open examination may cause inconvenience or embarrassment to public officials or others. University of Kentucky v. Courier-Journal, Ky., 830 S.W.2d 373 (1992).

This case involves the annual audits of state facilities which are filed with the Department of Parks pursuant to the requirements of 304 KAR 1:010 and individual contracts which do not mention confidentiality or nondisclosure of the audits. The information contained in the audits is very similar to that which appears in the annual report of any publicly held corporations.

The movants have failed to show that they would suffer any injury if the audits keep their classification as open records. The particular audit reports have been classified as open records since May 14,1991, pursuant to an Attorney General’s opinion rendered at that time. OAG 91-72. The Attorney General determined that because a portion of the receipts for the marinas are from public funds and the mandatory audits are in the custody of the Department of Parks, the audits are open records. OAG 91-72 was never appealed and consequently has had the force and effect of law for over three years. KRS 61.880(5). The Court of Appeals and the Franklin Circuit Court reached the same conclusion as the Attorney General.

Here the movants have not identified any irreparable or immediate injury that they will suffer unless this Court changes the classification of the audits and enjoins their disclosure. In a similar case involving a temporary injunction, this Court held that the remote possibility of some feared wrong in the future or the mere allegation of irreparable injury is insufficient to justify extraordinary relief. Commonwealth ex rel. Cowan v. Wilkinson, Ky., 828 S.W.2d 610 (1992). The allegations in this case are reminiscent of those presented at that time.

Here, the movants are the operators of four of the largest marinas in the State park system. The facilities are leased to the mov-ants who manage them on behalf of the State under exclusive nonbid, long term contracts with the Commonwealth, some of which run well into the next century. They have no competition for the continued operation of the marinas. Although the audit reports have been available to the general public since 1991, there is no evidence that any competing marina has used this information, or could use the information, to the detriment of the movants. The only documents that support the necessity for secrecy are found in the statements of the accountants for the marinas who speculate that public disclosure “could be injurious.”

In considering an open records case, we must abide by the admonition that a case by case approach be used in judicial review of agency actions and that the agency be required to sustain its actions by proof. Kentucky Bd. of Examiners of Psychologists v. Courier-Journal, Ky., 826 S.W.2d 824 (1992). The license agreement under which the mov-ants operate requires them to keep complete and accurate financial records and to provide for inspection or audit. The annual audit allows the Department of Parks to evaluate the records and operation of the businesses as well as verifying the payments made to the State. The licensing agreements do not contain any language suggesting a privacy concern. There is nothing in the administrative regulations which would exempt these audits from disclosure. Two of the movants have renegotiated and extended their licensing agreement since 1991 when the audits were legally classified by the Attorney General as open records. In renegotiating their contracts they did not include any reference to confidentiality, trade secrets or open record provisions.

Eight state park marinas are managed by private operators while seven others are operated by the Department of Parks. The state-operated marinas are subject to audit by the Auditor of Public Accounts, and those audits are open records. KRS 43.090(1). If audits of the state-operated marinas have always been classified as open records, it would appear reasonable that the private operators would understand that the audits of their state-licensed marinas would also be similarly classified. There is no reasonable expectation on the part of the marina owners that the audits would be exempt from public disclosure.

In order to protect trade secrets, the specifications for bid contracts, as well as nonbid agreements such as this, should be complete and very detailed so as to avoid the necessity of the disclosure of any possible trade secrets. However, the veil of secrecy should not mask the right of the public to ascertain pertinent facts.

As the Attorney General so correctly stated in OAG 91-72

A contractor with a governmental entity must accept certain necessary consequences of involvement in public affairs.

Currently, there is a trend in government toward the privatization of various services which have been traditionally performed in the public sector. It is thought that in many cases privatization would improve the efficiency, economy and delivery of services. However, it would be unfortunate that this worthwhile development might be tainted by the cloak of secrecy. It would be unfortunate if by contracting out any service, information which had been available to citizens and taxpayers could be hidden from public scrutiny. The result would be an absence of public oversight of both the private contractor and the public official who awarded such private contracts. When public funds are involved in any way, the public has an absolute right to expect that clear and open accountability be maintained.

The Court of Appeals was correct in affirming the decision of the Franklin Circuit Court because that court did not abuse its discretion when it denied injunctive relief to the movants. Maupin v. Stansbury, Ky. App., 575 S.W.2d 695 (1978). Pursuant to CR 65.09, there is no extraordinary cause requiring this Court to vacate or modify the order of the Court of Appeals denying relief. I would affirm the decision of the Court of Appeals and reinstate the judgment of the Franklin Circuit Court.

SPAIN, J., joins in this dissent.