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October 6, 1998

 

Mr. Daniel H. Hays
Assistant Editor
The National Underwriter Company
P.O. Box 770
Hoboken, NJ 07030-0770

The staff of the Committee on Open Government is authorized to issue advisory opinions.
The ensuing staff advisory opinion is based solely upon the information presented in your
correspondence.

Dear Mr. Hays:

I have received your letter of September 25, as well as the materials attached to it.
You have sought an advisory opinion concerning the propriety of a denial of access to records
by the New York State Insurance Department.

According to an article that you prepared and forwarded, there are provisions of
federal law (18 USC §§1033 and 1034) that prohibit individuals convicted of "a crime of
dishonesty or breach of trust" from working in the insurance industry. You added that
"persons with such convictions are only supposed to work...with a signed consent from a
state insurance commissioner." The Metropolitan Life Insurance Company filed an
application with the Superintendent of Insurance to seek consent to continue the employment
of a particular employee and asked that the application and materials filed in support thereof
be treated as confidential. The Superintendent consented to the continued employment of the
Company's employee. Your request for the contents of the file on the matter was denied "as
both an unwarranted invasion of privacy and a trade secret."

From my perspective, while portions of the records sought might properly be
withheld, it is unlikely that the Insurance Department could justifiably withhold the records
in their entirety. In this regard, I offer the following comments.

As a general matter, the Freedom of Information Law is based upon a presumption
of access. Stated differently, all records of an agency are available, except to the extent that
records or portions thereof fall within one or more grounds for denial appearing in §87(2)(a)
through (i) of the Law.

Section 87(2)(b) permits an agency to deny access to records insofar as disclosure
would constitute "an unwarranted invasion of personal privacy." In general, because a
conviction occurs in open court during a public proceeding, and because records reflective
of convictions are available from a court and usually other sources, I do not believe that
disclosure of the fact of one's conviction would constitute an unwarranted invasion of
personal privacy.

I note that the general repository of arrest and conviction data is the Division of
Criminal Justice Services (DCJS), which maintains a centralized database including criminal
history information. The functions and duties of that agency are described in Article 35 of
the Executive Law, §§835 to 846. In Capital Newspapers v. Poklemba (Supreme Court,
Albany County, April 6, 1989), it was held that conviction records maintained by DCJS are
confidential in view of the legislative history of the statutes that govern the practices of that
agency. Specifically, it was found that:

"Both the language of the statute and the consistent history of
limited access to the criminal records maintained by DCJS lead
this court to conclude that an exception to the mandate of
FOIL exists with respect to the disclosure sought by
petitioner.

"Having determined that POL, §87(2)(a) is applicable to the
records sought by petitioner, this court shall not address the
issue of whether a further exemption might be had pursuant to
POL 87(2)(b) as an unwarranted invasion of personal privacy,
or whether the records may be available from any other
centralized source."

The Court, however, inferred that the records should be available from sources other than
DCJS, for it was stated that:

"...petitioner is correct when it asserts that the transmittal of
an otherwise publicly available document to a centralized
facility for inclusion in a government computer bank does not
per se render it immune from disclosure. However, the issue
is not whether the records under the control of DCJS should
be released, but rather whether the provisions of FOIL and the
Executive Law, as presently constituted, mandate the result
sought by petitioner.

"Certainly, the Legislature has the authority to provide for
public access from a centralized location. It is equally clear
that, unless otherwise sealed, a conviction record is a public
document. Much has been said about potential abuses, given
the ease with which these records may be obtained if the
petition is sustained. Such fears are not determinative
however. To argue that a criminal conviction obtained in a
public proceeding in an open court system suddenly should be
clothed with secrecy merely because an individual doesn't have
to struggle to obtain it, makes a mockery of the right of public
access. To suggest that public disclosure of conviction
records is available only when it is through a difficult and
time-consuming search of individual courthouse files or in
local police stations, when the exact same information might
be freely available if housed within a centralized computer
bank, would be to create an irrational burden. Resolution of
the question should not be resolved by how hard it is to
discover the information sought. However, as aforesaid, the
issue is not whether the information should be available, but
rather, whether the Division of Criminal Justice Services has
been statutorily directed to guard against public disclosure,
thereby exempting it from the provision of FOIL" (emphasis
added by the court).

As such, the court determined the issue by finding that the records maintained by DCJS were
exempted from disclosure by statute, not because disclosure would constitute an unwarranted
invasion of personal privacy. Additionally, the court inferred that conviction records are
generally available from the courts in which proceedings resulted in convictions were
conducted "or in local police stations."

While I believe that a record indicating a conviction must be disclosed, it is possible
that the file includes intimate personal information submitted in order to explain circumstances
or to justify one's continued employment. In my opinion, to the extent that the file includes
intimate personal details, those portions may be withheld to protect privacy.

The other exception to which the Department made reference, §87(2)(d), states that
an agency may withhold records or portions thereof that:

"are trade secrets or are submitted to an agency by a
commercial enterprise or derived from information obtained
from a commercial enterprise and which if disclosed would
cause substantial injury to the competitive position of the
subject enterprise..."

In my view, the nature of record, the area of commerce in which a commercial entity
is involved and the presence of the conditions described above that must be found to
characterize records as trade secrets would be the factors used to determine the extent to
which disclosure would "cause substantial injury to the competitive position" of a commercial
enterprise. Therefore, the proper assertion of §87(2)(d) would be dependent upon the facts
and the effect of disclosure upon the competitive position of the entity to which the records
relate.

Pertinent is a decision rendered by the Court of Appeals, the State's highest court,
which, for the first time, considered the phrase "substantial competitive injury" [(Encore
College Bookstores, Inc. v. Auxiliary Service Corporation of the State University of New
York at Farmingdale, 87 NY2d 410,[(1995)]. In that decision, the Court reviewed the
legislative history of the Freedom of Information Law as it pertains to §87(2)(d), and due to
the analogous nature of equivalent exception in the federal Freedom of Information Act (5
U.S.C. §552), it relied in part upon federal judicial precedent.

In its discussion of the issue, the Court stated that:

"FOIL fails to define substantial competitive injury. Nor has
this Court previously interpreted the statutory phrase. FOIA,
however, contains a similar exemption for 'commercial or
financial information obtained from a person and privileged or
confidential' (see, 5 USC § 552[b][4]). Commercial
information, moreover, is 'confidential' if it would impair the
government's ability to obtain necessary information in the
future or cause 'substantial harm to the competitive position'
of the person from whom the information was obtained...

"As established in Worthington Compressors v Costle (662
F2d 45, 51 [DC Cir]), whether 'substantial competitive harm'
exists for purposes of FOIA's exemption for commercial
information turns on the commercial value of the requested
information to competitors and the cost of acquiring it through
other means. Because the submitting business can suffer
competitive harm only if the desired material has commercial
value to its competitors, courts must consider how valuable
the information will be to the competing business, as well as
the resultant damage to the submitting enterprise. Where
FOIA disclosure is the sole means by which competitors can
obtain the requested information, the inquiry ends here.

"Where, however, the material is available from other sources
at little or no cost, its disclosure is unlikely to cause
competitive damage to the submitting commercial enterprise.
On the other hand, as explained in Worthington:

Because competition in business turns on the
relative costs and opportunities faced by
members of the same industry, there is a
potential windfall for competitors to whom
valuable information is released under FOIA.
If those competitors are charged only minimal
FOIA retrieval costs for the information,
rather than the considerable costs of private
reproduction, they may be getting quite a
bargain. Such bargains could easily have
competitive consequences not contemplated as
part of FOIA's principal aim of promoting
openness in government (id., 419-420).

Disclosure of the records sought would likely have no impact on "the government's
ability to obtain necessary information." Further, it is doubtful in my view that disclosure
would cause "substantial" injury to the competitive position of the Metropolitan Life
Insurance Company. To the best of my knowledge, Metropolitan operates nationally and is
a multi-billion dollar entity. To suggest that the disclosure of the fact that one of its
employees has been convicted of a crime rises to the level of "substantial injury to its
competitive position" would in my opinion be difficult, if not impossible, to prove.

There are few judicial decisions that have dealt with the application of §87(2)(d), and
I am aware of none that have dealt with analogous records. Typically, the proper assertion
of §87(2)(d) has pertained to information such as computer models that involved a significant
amount of time and money to develop (see Belth v. Insurance Department, 406 NYS 2d 649,
NYLJ, January 9, 1978) or other records that have commercial value to competitors (see
Encore, supra). I do not believe that the records in question could be characterized as a
"trade secret" based upon the historical or traditional definition of that phrase. The concept
and parameters of what might constitute a "trade secret" were discussed in Kewanee Oil Co.
v. Bicron Corp., which was decided by the United States Supreme Court in 1973 (416 (U.S.
470). Central to the issue was a definition of "trade secret" upon which reliance is often
based. Specifically, the Court cited the Restatement of Torts, section 757, comment b
(1939), which states that:

"[a] trade secret may consist of 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" (id. at 474, 475; see also 104
NY Jur 2d 234).

As I understand the nature of the records, they do not involve an opportunity on the part of
Metropolitan Life "to obtain an advantage over competitors."

In sum, with the exception of the intimate personal information to which reference
was made earlier, it is doubtful in my opinion that either of the grounds for denial upon which
the Department relied could justifiably be asserted.

Lastly, in the context of your inquiry, it is assumed that the primary purpose of the
federal law that generally bans employment of persons convicted of dishonesty or breach of
trust in the insurance industry is to protect the public. It is also assumed that the exception
permitting persons convicted of such offenses to continue their employment in the insurance
industry with the consent of a state superintendent represents a means of ensuring that the
public will be adequately protected and served. If those assumptions are accurate, it would
seem that the public has the right to know when an employee of an insurance company who
has been convicted of certain offenses continues to be employed by that company. Disclosure
would represent a means of offering the public a choice in the marketplace and, in essence,
consumer protection. In addition, disclosure in my view would enhance governmental
accountability, especially in the context of the duties of a regulatory agency.

I hope that I have been of assistance.

Sincerely,

 

Robert J. Freeman
Executive Director

RJF:jm

cc: Sidney Glaser
John Mansfield
Bonnie Steingart