BANNER ADVERTISING PAYS ONLY FOR WEBSITE Davis & Wilkerson, P.C. Attorneys At Law Austin, Tx. October 28, 1999 Via Hand Delivery Open Records Division Office of the Attorney General P.O. Box 12548 Austin, Texas 78711-2548 Price Daniels Building 209 W. 14th Street 6th Floor Austin, Texas 78701 Re: Request for Attorney General Decision regarding Exception from Disclosure Dear Sir or Madame: This law firm represents Llano County Memorial Hospital Authority, created pursuant to Texas Health & Safety Code, Chapter 264. As such, the Llano Memorial Healthcare System is a public entity and subject to the provisions of the Texas Open Records Act as codified in the Texas Gov't Code 552.001 et. seq. The purpose of this letter is to request your decision as to whether or not certain information is excepted from public disclosure pursuant to 552.104 and/or 552.110 of the Texas Open Records Act. Attached to this letter and marked as Exhibit "A" is a copy of the Open Records request which gives rise to this letter. By way of factual background, Llano County Hospital Authority (the "Authority") has been developing studies and plans to evaluate the feasibility of constructing and operating an acute care hospital in Marble Falls, Texas. Other than the recent announcement that the Authority was considering the construction of a hospital in Marble Falls, Texas, no information concerning the studies and plans has been publically disseminated. Presently, the Authority is still evaluating this matter and has not reached a final decision on whether to proceed or not on this project. Because this request for decision is based on two exceptions from disclosure, we will discuss the application of each section below. Open Records Act 552.104 states: Information is excepted from the requirements of 552.021 if it is information that, if released, would give advantage to a competitor or bidder. As noted above, attached hereto as Exhibit "A" is the text of the Open Records Act request which has been presented to the Authority. In order to allow you to evaluate this request and the documents it seeks, attached to this letter please find the following documents which the Authority believes are exempt from disclosure: 1. Exhibit B: Notice of Meeting of the Board of Directors of Llano County Hospital Authority for September 23; 2. Exhibit C: Three documents prepared by Llano County Hospital Authority's accountants, the first being a letter dated September 22, 1999; the second being an "accountant's report" dated August 30, 1999; and the third being an "accountant's compilation report" dated June 22, 1999; 3. Exhibit D: Document titled "Feasibility Study Background Information", dated June 23, 1999; and 4. Exhibit E: Document titled "Feasibility Study" dated June 23, 1999. According to 552.104 of the Texas Open Records Act, documents in Exhibits C, D, and E attached to this letter should be exempt from disclosure as this information, if released, would give an extremely valuable advantage to a competitor. In fact, this is precisely the type of information which 552.104 of the Texas Open Records Act is intended to protect. By way of review, Exhibit C includes a demographic study as contained in the letter of September 22, 1999 and in the accountant's report of August 30, 1999. Further, the accountant's compilation report, also in Exhibit C, has projected financial information for each year for the next five years based on the contemplated construction and operation of this new hospital facility. Exhibit D is the feasibility study background information and discusses the current competitive market for healthcare services. Finally, Exhibit E, the feasibility study, discusses background information, demographic data, physician need, space program, preliminary budget and the design and site plan. Again, the release of these documents, as identified in Exhibits C, D, and E attached to this letter would result in providing to a competitor all of the benefits of the Authority's efforts in compiling this information and preparing this study and, would evaporate any lead time or potential developmental advantage which the Authority may have at this time. The Authority readily concedes that the need to protect this information from disclosure will diminish with the passage of time. Once the proposed Marble Falls facility reaches a stage in development where this information will no longer provide substantial benefit to a competitor, this information can and should be subject to release. Section 552.110 of the Open Records Act excepts trade secrets and commercial or financial information obtained from a person and privileged or confidential by statute or judicial decision. The determination of whether any particular information is a trade secret under Texas law is a fact question. The Texas Supreme Court has adopted the definition of "trade secret" from the restatement of torts section 757, which holds a "trade secret" to be any formula, pattern, device or compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it. It may be a formula for a chemical compound, a process of manufacturing, treating or preserving materials, a pattern for a machine or other device, or a list of customers, Hyde Corp.v. Huffines, 314S.W.2d763,776(Tex.1958). Noting that an exact definition of a trade secret is not possible, the Restatement lists six factors to be considered in determining whether particular information constitutes a trade secret: 1)the extent to which the information is known outside of (the company's) business; 2)the extent to which it is known by employees and others involved in (the company's) business; 3)the extent of measures taken by (the company) to guard the secrecy of the information; 4)the value of the information to (the company) and to (its) competitors; 5)the amount of effort or money expended by (the company) in developing this information; 6)the ease or difficulty with which the information could be properly acquired or duplicated by others. Restatement of Torts section 757, comment b(1939). See also ORD-552. With regard to factor number 1 listed above, the extent to which the attached information contained in Exhibits C, D and E and are not known outside of the Authority's Board of Directors and its consultants. As noted in Exhibit B, the Authority's agenda of September 23, 1999 attached hereto, the Authority has only discussed these matters in Executive Session and has taken great precautions to ensure that this information is not disclosed outside of a properly called Executive Meeting of the Llano County Hospital Authority. This information has not been otherwise discussed or disseminated outside the Hospital's Board of Directors, its senior staff or its agents. With regard to factor number 2 above, the only employees of Llano County Hospital Authority who are aware of the details of this information are the executive senior staff of the Authority and its Board of Directors. This information has not been disseminated beyond those employees of the Authority who are at the executive level or a member of the Board of Directors. With regard to factor number 3 above, the Authority has gone to great lengths to maintain the privacy of this information as such it has been discussed in Executive Session only (see Exhibit "B"). Further, all documents which were distributed for review in Executive Session have been retained by the Authority following the meeting. As such, none of the documents identified in Exhibits C, D or E have left an Executive Session meeting of the Authority. With regard to factor number 4 above, there is an extremely high value of this information to potential competitors of the Authority. In fact, the Authority has spent in excess of $40,000 in developing this information and, if divulged through this open records act request would alleviate any potential competitor of the expense and time of compiling this sort of information at its own time and expense. Essentially, the release of the information identified in Exhibits C, D, and E attached hereto would provide the blueprints and feasibility study for an acute care hospital to any competitor of the Authority without the expenditure of the time and financial resources to gather and develop this information independently. Further, the Marble Falls service area contributes approximately 17% of the total admissions to Llano Memorial Hospital and contributed more than seven million dollars in gross revenue to the Llano County Hospital Authority in fiscal year 1999, which represents an estimated 35% of the Authority's total revenue. Should the information contained in Exhibits C, D and E give a competitor an advantage in development of a new facility in the Marble Falls service area, the Llano County Hospital Authority risks a potential significant financial loss. Factor 5 considers the amount of money expended in developing this information. As noted above, the Authority has spent in excess of $40,000.00 in gathering information to prepare these studies. With regard to factor number 6 above, the Authority has expended a great deal of time and effort in acquiring this information. Any potential competitor of the Authority would have to expend similar time and financial resources in order to acquire or duplicate this information. However, if this information were to be released pursuant to this Open Records Records Act request, a potential competitor of the Authority would be relieved of this difficulty. Based upon the foregoing analysis under 552.104 and alternatively, if necessary, 552.110 of the Texas Open Records Act it is the Authority's position that the documents identified and contained in Exhibits C, D and E, attached hereto are exempt from disclosure under both or one of these exceptions to disclosure. Thank you in advance for your consideration in this matter. We look forward to receipt of your open records decision in the near future. Until such time, should you have any questions or concerns regarding this request for decision, please feel free to contact either Kevin Reed or myself at (512) 482-0614, at your convenience. Very truly yours, Fletcher H. Brown Enclosure cc: Ernie Parisi ****************************************** LMHS Llano Memorial Healthcare System Llano Memorial Hospital-Hoerster Clinics January 12, 2000 via/Certified Mail/RRR Mr. Tim Chorney, Publisher The Llano Ledger Rt. 2 Box 464A Buchanan Dam, Texas 78609 Re: Open Records Act Request of October 14, 1999 Dear Mr. Chorney: The Office of the Attorney General for the State of Texas has provided its response to Llano County Memorial Hospital Authority's request for an Open Records Act decision concerning your request for documents of October 14, 1999. Accordingly, the Attorney General's Office has determined that the documents responsive to your request are subject to disclosure. In keeping with the Attorney General's opinion, please be advised that the documents subject to your Open Records Act request will be made available for your review and/or copying at the office of the Llano County Memorial Hospital Authority, 200 W. Ollie, Llano, Texas on Wednesday, January 19, 2000 at 10:00am. In the event you wish to make copies of these documents, we advise you that the General Services Commission for the State of Texas has established a copy charge for standard size (8 1/2 x 11) paper as .10 cents per page or part of a page. Further, according to the General Services Commission, each side of a page which has a printed image is considered a page. Again, note that these documents will be available for your inspection and/or copying on Wednesday, January 19, 2000 at the Llano County Memorial Hospital Authority office. Very truly yours, Mindy Smith Chief Financial Officer ************************************* Office of the Attorney General State of Texas John Cornyn January 6, 2000 Mr. Fletcher H. Brown David & Wilkerson, P.C. Attorneys at Law 1801 South Mopac, Suite 300 Austin, Tx. 78746 OR2000-0066 Dear Mr. Brown: You ask whether certain information is subject to required public disclosure under chapter 552 of the Government Code. Your request was assigned ID#130931. The Llano County Memorial Hospital Authority (the "authority") received a request for the following information: (1) the feasibility study for the proposed Marble Falls acute healthcare facility; and (2) verification documentation from the outside auditing firm. You have submitted the following documents as responsive to this request: 1. Exhibit B: Notice of Meeting of the Board of Directors of Llano County Hospital Authority for September 23; 2. Exhibit C: Three documents prepared by Llano County Hospital Authority's accountants; 3. Exhibit D: Document titled "Feasibility Study Background Information," dated June 23, 1999; and 4. Exhibit E: Document titled "Feasibility Study," dated June 23, 1999. You contend that these documents are excepted from disclosure under sections 552.104 and 552.110 of the Government Code.1 We have considered the exceptions you claim and have reviewed the documents at issue. ******************************************** 1 As noted above, Exhibit B is a copy of the authority's notice of a specific board meeting. This notice appears to comport with the requirements of section 551.041 of the Government Code, which states that a government body must provide written _public notice of the date, time, place, and subject of each meeting it holds. Since the contents of Exhibit B are clearly public, we presume that the document was sumitted solely for informational purposes. ******************************************** You initially argue that the submitted exhibits must be withheld under section 552.110 of the Government Code as the authority's trade secrets. The documents at issue were created by the authority's agents to determine the feasibility of opening a new hospital facility. Thus, the documents are the property of the authority, not a private party. We note that the trade secret prong of section 552.110 (stating that trade secret is information obtained from _person and is privileged or confidential by statute or judicial decision); _cf. Restatement of Torts 757 cmt.b (1939)(defining trade secret as process of device for _continuous use in operation of business, not simply information as to single or ephemeral events in conduct of business); Open Records Decision No. 605 (1992)(mere fact that information was discussed in executive session does not make it confidential under Public Information Act). Therefore, we conclude that Exhibits C, D, and E may not be withheld under section 552.110(a). You also argue that Exhibits C, D, and E are excepted from disclosure under section 552.104. Section 552.104 protects from required public disclosure "information that, if released, would give advantage to a competitor or bidder." The purpose of section 552.104 is to protect the government's interest when it is involved in certain commercial transactions. For example, section 552.104 is generally invoked to except information submitted to a governmental body as part of a bid or similar proposal. _See, e.g., Open Records Decision No. 463 (1987). In these situations, the exception protects the government's interests in obtaining the most favorable proposal terms possible by denying access to proposals prior to the award of a contract. When a governmental body seeks protection as a competitor, however, we have stated that it must be afforded the right to claim the "competitive advantage" aspect of section 552.104 if it meets two criteria. The governmental body must first demonstrate that it has specific marketplace interests. Open Records decision No. 593 at 4 (1991). Second, a governmental body must demonstrate actual or potential harm to its interests in a particular competitive situation. A general allegation of a remote possibility of harm is not sufficient to invoke section 552.104 _Id. at 2. Whether release of particular information would harm the legitimate marketplace interests of a governmental body requires a showing of the possibility of some specific harm in a particular competitive situation. _Id. at5, 10. You generally allege that disclosing information about the authority's new hospital facility will harm the authority's competitive interests. However, you have not provided us with specific facts or arguments to support this allegation. Consequently, Exhibits C, D, and E may not be withheld from disclosure under section 552.104 _See also Gov't Code 552.022(5)(stating that all information used to estimate need for or expenditure of public funds or taxes by governmental body is public upon completion of estimate). Accordingly, the authority must release the submitted information to the requestor. This letter ruling is limited to the particular records at issue in this request and limited to the facts as presented to us; therefore, this ruling must not be relied upon as a previous determination regarding any other records or any other circumstances. This ruling triggers important deadlines regarding the rights and responsibilities of the governmental body and of the requestor. For example, governmental bodies are prohibited from asking the attorney general to reconsider this ruling. Gov't Code 552.301(f). If the governmental body wants to challenge this ruling, the governmental body must appeal by filing suit in Travis County within 30 calendar days. _Id. 552.324(b). In order to get the full benefit of such an appeal, the governmental body must file suit within 10 calendar days. _Id. 552.353(b)(3), (c). If the governmental body does not appeal this ruling and the governmental body does not comply with it, then both the requestor and the attorney general have the right to file suit against the governmental body to enforce this ruling. _Id. 552.321(a). If this ruling requires the governmental body to release all or part of the requested information, the governmental body is responsible for taking the next step. Based on the statute, the attorney general expects that, within 10 calendar days of this ruling, the governmental body will do one of the following three things: 1) release the public records; 2) notify the requestor of the exact day, time, and place that copies of the records will be provided or that the records can be inspected; or 3) notify the requestor of the governmental body's intent to challenge this letter ruling in court. If the governmental body fails to do one of these three things within 10 calendar days of this ruling, then the requestor should report that failure to the attorney general's Open Government Hotline, toll free, at 877/673-6839. The requestor may also file a complaint with the district or county attorney. _Id. 552.3215(e). If this ruling requires or permits the governmental body to withhold all or some of the requested information, the requestor can appeal that decision by suing the governmental body. _Id. 552.321(a); _Texas Dep't of Public Safety v. Gilbreath, 842 S.W.2d 408, 411 (Tex. App. -Austin 1992, no writ). If the governmental body, the requestor, or any other person has questions or comments about this ruling, they may contact our office. Although there is no statutory deadline for contacting us, the attorney general prefers to receive any comments within 10 calendar days of the date of this ruling. Sincerely, June B. Harden Assistant Attorney General Open Records Division JBH/KLK/ljp Ref: ID# 130931 Encl. Submitted documents cc: Mr. Tim Chorney Publisher The Llano Ledger Route 2, Box 464A Buchanan Dam, Texas 78609 (w/o enclosures)