March 31, 2005
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.
As you are aware, I have received your letter concerning data collected by the Cargill Corporation pertaining to a salt mine that is owned by the State of New York. You indicated that much of the data that you have requested has been made available to the Department of Environmental Conservation ("DEC").
In this regard, I offer the following comments.
First, the Freedom of Information Law pertains to agency records, and §86(4) defines the term "record" to mean:
"...any information kept, held, filed, produced, reproduced by, with or for an agency or the state legislature, in any physical form whatsoever including, but not limited to, reports, statements, examinations, memoranda, opinions, folders, files, books, manuals, pamphlets, forms, papers, designs, drawings, maps, photos, letters, microfilms, computer tapes or discs, rules, regulations or codes."
Based on the foregoing, records in possession of an agency, such as DEC, or those that are kept or produced for an agency, fall within the coverage of the Freedom of Information Law, irrespective of where they are physically located. Insofar as the records of your interest were prepared by Cargill for its purposes and not for an agency and which are not in possession of an agency, I do not believe that the Freedom of Information Law would apply. However, insofar as the records of your interest were prepared for or are in the possession of an agency, I believe that they would fall within the coverage of the Freedom of Information Law.
To the extent that your request involves agency records, 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. It appears that two of the grounds for denial may be pertinent to an analysis of rights of access.
Section 87(2)(d) permits an agency to 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..."
Further, when a commercial entity is required to submit records to a state agency, pursuant to §89(5), it may request, at the time of submission, that the records or portions thereof be kept confidential in accordance with §87(2)(d).
In my opinion, the question under §87(2)(d) involves the extent, if any, to which disclosure would "cause substantial injury to the competitive position" of a commercial entity.
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).
In its review of the definition, the court stated that "[T]he subject of a trade secret must be secret, and must not be of public knowledge or of a general knowledge in the trade or business" (id.). The phrase "trade secret" is more extensively defined in 104 NY Jur 2d 234 to mean:
"...a formula, process, device or compilation of information used in one's business which confers a competitive advantage over those in similar businesses who do not know it or use it. A trade secret, like any other secret, is something known to only one or a few and kept from the general public, and not susceptible to general knowledge. Six factors are to be considered in determining whether a trade secret exists: (1) the extent to which the information is known outside the business; (2) the extent to which it is known by a business' employees and others involved in the business; (3) the extent of measures taken by a business to guard the secrecy of the information; (4) the value of the information to a business and to its competitors; (5) the amount of effort or money expended by a business in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. If there has been a voluntary disclosure by the plaintiff, or if the facts pertaining to the matter are a subject of general knowledge in the trade, then any property right has evaporated."
From my perspective, 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, again, the effect of disclosure upon the competitive position of the entity to which the records relate.
Relevant to the analysis is a decision rendered by the Court of Appeals, 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]). 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."
The Court also observed that the reasoning underlying these considerations is consistent with the policy behind §87(2)(d) to protect businesses from the deleterious consequences of disclosing confidential commercial information so as to further the state's economic development efforts and attract business to New York (id.). In applying those considerations to Encore's request, the Court concluded that the submitting enterprise was not required to establish actual competitive harm; rather, it was required, in the words of Gulf and Western Industries v. United States, 615 F.2d 527, 530 (D.C. Cir., 1979) to show "actual competition and the likelihood of substantial competitive injury" (id., at 421).
I do not have sufficient knowledge to suggest that §87(2)(d) would or would not be applicable. It is noted that under §89(5) of the Freedom of Information Law, when a commercial enterprise seeks a guarantee that the agency to which its records are submitted will not disclose the records, and the agency agrees to do so following an appeal by a person whose request for the record has been denied, the agency has the burden of proof in its defense of the denial in an ensuing judicial proceeding commenced for review of the denial. Stated differently, to continue the protection accorded by §89(5), and agency must believe that it can prove to a court that disclosure would, in fact, cause substantial injury to the competitive position of the commercial enterprise that submitted the record. If the agency does not believe that it can meet that burden proof or does not have sufficient knowledge or information to ascertain the merits of the commercial entity’s contentions, I believe that it should indicate that the request to the person seeking the record will be granted, in which case, following the exhaustion of administrative remedies, the commercial entity that submitted the record has fifteen days to commence a proceeding for the purpose of demonstrating to a court that disclosure would cause substantial injury to its competitive position.
As indicated earlier, agency records are presumptively available under the Freedom of Information Law, including those submitted to an agency by a commercial enterprise. In my opinion, while §89(5) provides additional protection to commercial enterprises that are required to submit records to state agencies, its terms preserve the presumption of access and place the burden of defending secrecy either on a state agency based on its belief that disclosure would cause substantial injury to the competitive possession of a commercial enterprise, or on the commercial enterprise.
The other exception of possible significance is §87(2)(f), which authorizes an agency to deny access to the extent that disclosure "could endanger the life or safety of any person." Again, I am unaware of the extent to which that may be so. I note, however, that §87(2)(f) may be relevant in relation to matters involving "critical infrastructure." That phrase is defined in §86(5) to mean:
"...systems, assets, places or things, whether physical or virtual, so vital to the state that the disruption, incapacitation or destruction of such systems, assets, places or things could jeopardize the health, safety, welfare or security of the state, its residents or its economy."
I note that relatively recent amendments to the Freedom of Information Law authorize a commercial entity to seek the procedural protection accorded by §89(5) when it submits records regarding critical infrastructure to a state agency. I am not suggesting that those records are exempt from disclosure, but rather that they may be subject to the procedure prescribed in §89(5).
I hope that I have been of assistance.
Robert J. Freeman