COMMONWEALTH of Pennsylvania, DEPARTMENT OF PUBLIC WELFARE v. James EISEMAN, Jr., and the Public Interest Law Center of Philadelphia
125 A.3d 19
Supreme Court of Pennsylvania
October 27, 2015
In summary, it is my position that Appellees were not afforded sufficient process to sustain their summarily-imposed contempt convictions, and the Superior Court correctly afforded them due relief.
Justice TODD joins this dissenting opinion.
Eric L. Cramer, Esq., Philadelphia, Nicholas Urban, Esq., Berger & Montague, P.C., for Polsky, Daniel, Appellant Amicus Curiae.
Leonard Whitney Crumb, Esq., Harrisburg, for Department of Public Welfare.
Daniel B. Huyett, Esq., Neil Coleman Schur, Esq., Stevens & Lee, P.C., Philadelphia, for The Pennsylvania Coalition of Medical Assistance Managed Care Organizations, Appellee Amicus Curiae.
Jeffrey L. Poston, Esq., Crowell & Moring, L.L.P., for America‘s Health Insurance Plans, Appellee Amicus Curiae.
Karl Stewart Myers, Esq., Stradley, Ronon, Stevens & Young, L.L.P., Philadelphia, for Aetna Better Health, Inc., CoventryCares.
SAYLOR, C.J., EAKIN, BAER, TODD, STEVENS, JJ.
OPINION
Chief Justice SAYLOR.
These appeals, as well as a companion set, concern the extent of the public‘s statutory right of access to discrete information about the implementation of the Medical Assistance Program.
As is pertinent here, HealthChoices encompasses the provision of dental care to low-income children, certain adults, and some persons with disabilities in Pennsylvania. The five MCOs serving enrollees in the Southeast Zone engaged DPW-approved dental subcontractors (“Subcontractors“) to fulfill the larger measure of the MCOs’ contractual obligations. See generally Dental Benefit Providers, Inc. v. Eiseman, 86 A.3d 932, 937 (Pa.Cmwlth.2014) (indicating that “[s]ubcontractors have built sophisticated networks of providers, enabling them to provide services to enrollees in a cost-effective manner.“). Subcontractors then contracted with and paid providers of dental health care services to examine and treat Medicaid enrollees. In a few instances, however, MCOs arranged for services directly with providers.
In June 2011, James Eiseman, Jr. and the Public Interest Law Center of Philadelphia (“Requesters“) tendered requests to DPW seeking records revealing, among other things, the
DPW denied the requests in relevant part. As is most germane to our present consideration, with regard to the MCO Rates, the Department indicated that it had been informed by each of the MCOs that the rates were “trade secrets and/or confidential proprietary information” protected against disclosure. See
Requesters lodged an appeal in the Office of Open Records (the “OOR“). See
At an evidentiary hearing, the MCOs offered expert and lay testimony to support the claimed exemptions. Additionally, the organizations adduced evidence that the disclosure of rate information would lessen the value of their investment in negotiating favorable rates.
The OOR, however, issued a final determination granting the relevant records requests. Initially, the appeals officer observed that records in the possession of a Commonwealth agency are presumed to be public, unless they qualify for an
Of particular significance to his legal analysis, the appeals officer noted that the trade-secrets/confidential-proprietary-information exception does not extend to one statutorily-defined subset of public records, namely “financial records.” Id.
In the alternative, the appeals officer also considered whether the rates of payment to MCOs could be considered trade secrets or confidential proprietary information. He explained that a “trade secret” is defined by the RTKL, as well as in Pennsylvania‘s Uniform Trade Secrets Act,5 as:
Information, including a formula, drawing, pattern, compilation including a customer list, program, device, method, technique or process that: ... [d]erives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and ... [i]s the subject of efforts
Although the appeals officer accepted that DPW and the MCOs treat the Capitation Rates as confidential information, he indicated that it was “not clear that [their] disclosure ... would provide any economic value to the Department‘s counter-parties in future negotiations or would cause substantial competitive harm to the Department.” Final Determination in Eiseman, No. AP 2011-1098, slip op. at 14. Accordingly, the appeals officer determined that DPW and the MCOs had failed to meet their burden of proof as to an exemption.
As to MCO Rates, the appeals officer relied substantially on Lukes v. DPW, 976 A.2d 609 (Pa.Cmwlth.2009), to conclude that records containing such information also were not exempt. See id. at 627 (“[A] party that voluntarily participates in a public program and is receiving and disbursing public funds in furtherance of that program has no legitimate basis to assert that these activities are private and should be shielded from public scrutiny.“). Although Lukes had been decided under the Law‘s predecessor, the appeals officer highlighted this Court‘s recent citation with approval to the decision. See SWB Yankees LLC v. Wintermantel, 615 Pa. 640, 665 n. 19, 45 A.3d 1029, 1044 n. 19 (2012). The appeals
In a divided opinion, the Commonwealth Court sustained the portion of the OOR‘s determination concerning Capitation Rates, as the members of an en banc panel unanimously agreed that contracts between DPW and the MCOs were financial records under the Law. See DPW v. Eiseman (Eiseman I), 85 A.3d 1117, 1124 (Pa.Cmwlth.2014) (en banc) (explaining that “[t]he Capitation Rates are records within DPW‘s possession that evidence its transaction of paying MCOs pursuant to the Medicaid HealthChoices Program” and otherwise are financial records pursuant to the statutory definition); accord id. at 1133 (McCullough, J., concurring and dissenting) (“I join the Majority in its conclusion that the Capitation Rates negotiated between DPW and the MCOs are subject to disclosure.“). Although the majority agreed with the OOR‘s conclusion that the statutory trade-secrets/confidential-proprietary-information exception contained within the RTKL did not apply to financial records, it took the position that the Uniform Trade Secrets Act implicated a distinct analysis.
The majority explained that the RTKL prescribes that: “Nothing in this act shall supersede or modify the public or nonpublic nature of a record or document established in Federal or State law, regulation or judicial order or decree.”
That MCOs disbursed funds they received from DPW to their subcontractors does not render the MCOs mere conduits for public funds. Based on the language of the current RTKL, the funds lose their character as public funds once they leave an agency‘s hands and enter the private sector.
Having concluded that the MCO Rates were not contained within financial records, the majority turned to the broader set of exceptions to disclosure attaching to “public records,” which include the express trade-secrets/confidential-proprietary-information exception. See
Throughout its opinion, the majority expressly departed from the intermediate court‘s previous analysis in Lukes, taking the position that Lukes lacked relevance, given that the matter had been decided under the prior law. See id. at 1125, 1127.
Judge McCullough authored a concurring and dissenting opinion, in which she took the majority to task for what she characterized as a “cursory” and inapt treatment of Lukes. Eiseman I, 85 A.3d at 1136-37 (McCullough, J., concurring and dissenting) (“[T]he Majority‘s reliance upon its cited case law to abrogate Lukes on a completely unrelated and separate point of law is misplaced.“). In her view, since the relevant substantive terms, as between the previous and new open-records laws, could not be distinguished by the majority (and, in fact, were materially identical), Lukes represented governing authority and commanded adherence. See id. at 1134-35. According to Judge McCullough, the majority also inappropriately glossed over material, functional terms within the statutory definition of “financial records.” Along these lines, she explained:
[T]he Majority‘s interpretation ... effectively renders the words “any,” “dealing,” and “disbursement” superfluous and without meaning, and also ignores the fact that the funds originate with DPW.... [S]ection 102 of the RTKL is broad enough to include public funds that trickle down through contractor and subcontractor contracts (“any contract“) because these contracts nevertheless “deal” with, or simply pass along down the line, the “disbursement of funds by an agency.”
Id. at 1136-37 (citation omitted).
Consistent with the reasoning and holding of Lukes, Judge McCullough also stressed DPW‘s delegation of a governmental function and disbursement of public monies to the MCOs to fulfill that essential purpose. See id. at 1134-35. On this point, she reasoned:
[T]he public funds originate with DPW, and no matter how many private entities the funds pass through, the funds end up in the hands of those performing the actual dental services and are the same funds that began with DPW. That is, public funds are used to pay for public dental insurance.
Id. at 1133. Since the MCO Rates qualified as financial records, Judge McCullough continued, the exemptions contained in Section 708(b) of the RTKL, including for trade secrets and confidential proprietary information, did not apply. See
Finally, she asserted that the Uniform Trade Secrets Act does not serve as an independent exemption to open-records disclosure, particularly given that the definitions of “trade secret” in the Uniform Trade Secrets Act and the RTKL are materially identical. See Eiseman I, 85 A.3d at 1138 (McCullough, J., concurring and dissenting). This similarly, Judge McCullough explained, evinced a legislative intent to transpose the effect of the Uniform Trade Secrets Act into Section 708(b)(11) of the RTKL. Thus, she concluded, the import of Section 708(c)—in terms of explicitly withholding the trade-secrets exception from any application to financial records—trumped any independent application of the Uniform Trade Secrets Act. Id. at 1138-39 (“Indeed, it would be anomalous for our legislature to explicitly exclude trade secrets as an exception to disclosure of financial records in section 708(c) of the RTKL, while simultaneously implying that trade secrets are an exception requiring disclosure of the same financial records in section 3101.1 of the RTKL.“).
Subsequent to the issuance of the Commonwealth Court‘s opinion, DPW disclosed the Capitation Rates to Requesters, and no party has further pursued a challenge to such tender. Therefore, only the MCO Rates remain in issue before us.
In the present briefing, consistent with Judge McCullough‘s concurring and dissenting opinion, Requesters maintain that records documenting the MCO Rates are financial records under the Law, including because they are contained within contracts “dealing with” the “disbursement of funds” and
Additionally, Requesters rely on the analysis contained in Lukes, which they contend is even more salient under the new Law, given that that the enactment was designed to provide greater, not lesser, openness. Cf. Bowling v. OOR, 621 Pa. 133, 140, 75 A.3d 453, 457 (2013) (“In 2008, the General Assembly enacted the RTKL, which replaced the [Right to Know Act] and provided for significantly broadened access to public records.“); Levy v. Senate of Pa., 619 Pa. 586, 618, 65 A.3d 361, 381 (2013) (“[T]he enactment of the RTKL in 2008 was a dramatic expansion of the public‘s access to government documents.“). According to Requesters, “[i]t is impossible to square the Commonwealth Court‘s discarding of Lukes with the conclusion of SWB Yankees that the RTKL expands access to public records and with [SWB Yankees‘] favorable treatment of Lukes.” Brief for Appellants at 20. Requesters also depict the majority decision of the Commonwealth Court as a departure from a long line of decisions of this Court, such as Sapp Roofing Co. v. Sheet Metal Workers’ International Association, Local Union No. 12, 552 Pa. 105, 109, 713 A.2d 627, 629 (1998) (plurality) (holding that payroll records of a private roofing contractor in the custody of a local agency were public records, because they evidenced a disbursement by a governmental unit).6
In terms of the trade-secrets issue, Requesters maintain that Section 708(c) of the RTKL reflects a policy judgment, on the part of the General Assembly, that openness of records related to public-funds expenditures is so important to the promotion of confidence in government that the trade-secrets and confidential-proprietary-information exceptions must yield to disclosure. The Commonwealth Court‘s decision, they assert, nullifies this salutary aim. Requesters reject as perverse the notion that the Uniform Trade Secrets Act may be interposed independently of Section 708(c), particularly given the express displacement of the self-contained trade-secrets protection within the four corners of the Law itself.
As a policy matter, Requesters urge that the Commonwealth Court‘s decision thwarts essential public access to a wide range of records documenting the administration of vital and costly public programs through private contractors. In an amicus submission, Daniel Polsky, PhD, of the University of Pennsylvania elaborates extensively on the salient policy considerations. See, e.g., Brief for Amicus Daniel Polsky, PhD, at 9-10 (positing that restrictions on access to negotiated rate information pertaining to the administration of the Medicaid program diminishes government accountability by imped-
The MCOs, on the other hand, take a different position concerning the relevant policies. From their point of view,
[f]ar from being mere conduits of public funds, the MCOs act as risk-bearing entities, responsible for providing all covered medical services, including dental services, to their members. Whether those services can be delivered at more or less cost to the MCO directly impacts the bottom-line of the MCO, not the finances of the Commonwealth.
Brief for Appellees Health Partners of Philadelphia, Inc., et al., at 15. According to the MCOs, public dissemination of otherwise confidential contractual payment rates would discourage private entities from doing business with the Commonwealth, thus limiting that option for securing goods and services necessary to public service. Such access would not serve the purpose of governmental transparency laws, they argue, since the contracts involved concern negotiations and relationships among private, rather than governmental, entities. According to the MCOs and their amici, preserving secrecy for the MCO Rates promotes investment, innovation and competition; maintains lower Medicaid costs; and affords Medicaid enrollees broader provider choices. See, e.g., Brief for Amicus America‘s Health Ins. Plans at 14-23; Brief for Amicus the Pa. Coalition of Med. Assistance Managed Care Orgs. at 6-16 (elaborating extensively on policy considerations attending disclosure or non-disclosure of the MCO Rates).
One faction of the MCOs—UnitedHealthcare of Pennsylvania, HealthAmerica Pennsylvania Inc., and Aetna Better Health, Inc.—urge that this Court‘s review should be closely confined to the question of whether the MCO Rates constitute confidential proprietary information. See, e.g., Brief for Appellees UnitedHealthcare, et al., at 15 (“This Court should affirm because the record supports the Commonwealth Court‘s finding below: that the rates paid by the private
All of the MCOs, as well as dental-services subcontractor Dentaquest LLC, suggest that “financial records,” under the Law, subsume “only those showing the agency‘s own disbursements.” See id. at 25 (emphasis in original). Furthermore, they contend, in effect, that the MCO Rates are simply too remote from Department contracts and disbursements to qualify as records “dealing with” such contracts and disbursements. See
In terms of the confidential-proprietary-information exception, the MCOs stress the protection of confidentiality expressed in their subcontracts. Furthermore, they elaborate upon the ample lay and expert witness testimony evidencing that the MCO Rates have been kept secret and that the plans would be harmed by public disclosure. See, e.g., Brief for
Two of the MCOs, joined by subcontractor Dentaquest LLC, lead with the proposition that records reflecting the MCO Rates—including agreements between MCOs and Subcontractors—are not “public records” at all, because they are not in the Department‘s possession. See
DPW also now asserts that it simply does not possess records reflecting the MCO Rates. Therefore, the Department requests that, if this Court concludes that the Law requires disclosure, we should direct the MCOs to supply the records to Requesters. Otherwise, DPW relies upon the content of the MCOs’ briefs in support of its own position favoring affirmance.
Our present review turns on matters of statutory construction, over which our review is plenary. Additionally, we are obliged to liberally construe the Law to effectuate its salutary purpose of promoting “access to official government information in order to prohibit secrets, scrutinize actions of public officials, and make public officials accountable for their actions.” Levy, 619 Pa. at 619, 65 A.3d at 381 (quoting Allegheny Cnty. Dep‘t of Admin. Servs. v. A Second Chance, Inc., 13 A.3d 1025, 1034 (Pa.Cmwlth.2011)).
In light of this course of development, we granted discretionary review to consider the Commonwealth Court‘s conclusions relative to the financial-records issue and trade-secrets/confidential-proprietary-information exceptions. See DPW v. Eiseman, 630 Pa. 215, 106 A.3d 610 (2014) (per curiam). To the extent that the Department may encounter difficulties flowing from our present focus on those questions, these would appear to be substantially of its own making. The Legislature designed the RTKL to afford reasonable and efficient access to public information; it contravenes this salutary purpose for the Department to advance shifting positions in opposing disclosure; and, accordingly, we will confine our review and mandate to the matters upon which appeal was allowed.
As to those issues, first, we agree with Requesters, the OOR appeals officer, and Judge McCullough that documents
The MCOs’ position that “[t]his dispute does not relate to [i.e., ‘deal with‘] any payments actually made by the Pennsylvania government,” Brief for Appellees UnitedHealthcare, et al., at 4, greatly understates the relationship between government contracts with managed care organizations and the subcontracts by which such entities chose to fulfill their contractual undertakings with the Commonwealth. In other words, subcontracts containing MCO Rates plainly “deal with” DPW‘s disbursement of billions of dollars of public monies to
According to the MCOs, reliance on the above rationale to conclude that MCO Rates are contained within “financial records” yields disclosure of private-contractor records without rational limitation. See, e.g., Brief for Appellees UnitedHealthcare, et al., at 27 (“[U]nder [Requesters‘] reading of the statute, all a requestor [sic] would need to do to defeat any of [the] exemptions would be to establish some connection, however remote, to ‘public funds.‘” (emphasis added)); Brief for Appellees Health Partners of Philadelphia, Inc., et al., at 16-17 (“The fundamental flaw in [Requesters‘] arguments is their reliance on the purported existence of a broad right of public access ... to all documents having any connection whatsoever with the carrying out of any governmental function, regardless of their remoteness from a government agency[.]” (emphasis added)). We differ with this criticism for several reasons.
First, not all private-contractor documents must be submitted to a government agency for approval. It is this initial requirement which separates subcontracts containing the MCO Rates from third-party records (to which a distinct legal analysis applies, see
Second, since the Legislature did not choose to address disclosure of records pertaining to Medicaid disbursements on specific terms, it has fallen to the courts to provide necessary clarification incrementally through the decisional law process. Cf. SWB Yankees, 615 Pa. at 662-64, 45 A.3d at 1042-43 (elaborating upon the task of construing a new statutory regime and making an inroad into development in a discrete setting). It is not a satisfactory solution, in our view, to disregard the policy of liberal interpretation of a remedial statute in favor of a bright-line rule which, while facilitating ease of application, is plainly under-inclusive given the governing statute‘s utilization of language establishing a broader nexus.
the Right to Know Act, to be available for inspection, the records must be both public records and records of a state agency.” (emphasis added)). Parenthetically, contrasting with the approach under the Right to Know Act, the RTKL decouples the “of an agency” criterion from the statute‘s main operative provision for access. Compare
65 P.S. § 66.2 (“Every public record of an agency shall, at reasonable times, be open for examination and inspection by any citizen of the Commonwealth of Pennsylvania.“) (repealed), with id.§ 67.701(a) (prescribing that “[u]nless otherwise provided by law, a public record, legislative record or financial record shall be accessible for inspection and duplication in accordance with this act,” without reference to whether the record is “of an agency“). Notably, the Law‘s definition of “public record” contains an of-an-agency delimiter, see id.§ 67.102 , but the definition of “financial record“—which is specifically and independently referenced in the Law‘s core access provision (i.e. Section 701)—does not include such element, see id. It is not necessary to the resolution of these appeals to consider whether this omission from the definition of “financial record” may have been by intention or oversight. In any event, it is worth noting that Section 506(d)(2) of the RTKL places a limitation on mandatory disclosure of third-party records, or at least those in possession of a third party which has contracted with an agency. See id.§ 67.506(d)(2) .
With regard to such financial records, it is essentially undisputed that Section 708(c) renders the Law‘s own internal trade-secrets/confidential-proprietary-information exception inapplicable. See
Initially, we observe that contractual payment rates are not a close fit with the concept of a “trade secret,” as it is
In any event, we agree with Judge McCullough that the Law‘s self-contained trade-secrets exception supplants the more general application of the Uniform Trade Secrets Act based, inter alia, on the principle of statutory construction that more specific provisions control over general ones. See
The order of the Commonwealth Court is reversed relative to the MCO Rates, and the matter is remanded for further proceedings consistent with this opinion.
Justices BAER, TODD and STEVENS join the opinion.
Justice EAKIN files a dissenting opinion.
Justice EAKIN, dissenting opinion.
I agree with the Commonwealth Court‘s majority that documents containing MCO Rates are not “financial records” within § 102 of the RTKL,
secrets aspect of the exception in Section 708(b)(11) would be rendered into a mere redundancy. Such a holding, however, would contravene the presumption that the Legislature does not fashion statutory prescriptions as surplusage. See
1 Pa.C.S. § 1921(a) ; Commonwealth v. Ostrosky, 589 Pa. 437, 450, 909 A.2d 1224, 1232 (2006).
I would remand the matter to the OOR to decide, in the first instance, whether the MCO Rates are exempt from disclosure under