DAVID LEON FREDERICK, APPELLEE, CROSS-APPELLEE, AND CROSS-APPELLANT, V. CITY OF FALLS CITY, A CITY AND POLITICAL SUBDIVISION OF THE STATE OF NEBRASKA, APPELLEE AND CROSS-APPELLANT, AND FALLS CITY ECONOMIC DEVELOPMENT AND GROWTH ENTERPRISE, INC., APPELLANT AND CROSS-APPELLEE.
No. S-13-275
Nebraska Supreme Court
January 16, 2015
289 Neb. 864
Judgments: Statutes: Appeal and Error. Questions of law and statutory interpretation require an appellate court to reach a conclusion independent of the decision made by the court below. - Mandamus: Proof. A party seeking a writ of mandamus under
Neb. Rev. Stat. § 84-712.03 (Reissue 2008) has the burden to satisfy three elements: (1) that the requesting party is a citizen of the state or other person interested in the examination of the public records, (2) that the documents sought are public records as defined byNeb. Rev. Stat. § 84-712.01 (Reissue 2014), and (3) that the requesting party has been denied access to the public records as guaranteed byNeb. Rev. Stat. § 84-712 (Cum. Supp. 2012). - Administrative Law: Pretrial Procedure: Records. A four-part functional equivalenсy test is the appropriate analytical model for determining whether a private entity which has an ongoing relationship with a governmental entity can be considered an agency, branch, or department of such governmental entity within the meaning of
Neb. Rev. Stat. § 84-712.01(1) (Reissue 2014), such that its records are subject to disclosure upon request under Nebraska‘s public records laws. The factors to be considered in applying this test are (1) whether the private entity performs a governmental function, (2) the level of governmental funding of the private entity, (3) the extent of government involvement with or regulation of the private entity, and (4) whether the private entity was created by the government. - Pretrial Procedure: Evidence: Proof. In applying the functional equivalency test to determine whether a private entity is the equivalent of a public agency, branch, or department, it is not necessary that an entity strictly conform to each factor, but the factors should be considered and weighed on a case-by-case basis.
Appeal from the District Court for Richardson County: DANIEL E. BRYAN, JR., Judge. Vacated and reversed, and remanded with directions.
Jerald L. Rauterkus and Bonnie M. Boryca, of Erickson & Sederstrom, P.C., L.L.O., for appellant.
Stephen D. Mossman, J.L. Spray, and Joshua E. Dethlefsen, of Mattson, Ricketts, Davies, Stewart & Calkins, for appellee David Leon Frederick.
David J.A. Bargen, of Rembolt Ludtke, L.L.P., for amicus curiae League of Nebraska Municipalities.
HEAVICAN, C.J., WRIGHT, CONNOLLY, STEPHAN, MCCORMACK, MILLER-LERMAN, and CASSEL, JJ.
STEPHAN, J.
The issue presented in this appeal is whether certain documents in the possession of a private corporation which has an ongoing contractual relationship with a city are “public records” within the meaning of
1. PARTIES
David Leon Frederick is a Nebraska citizen and a resident of Richardson County, Nebraska. EDGE is a mutual benefit corporation incorporated under the Nebraska Nonprofit Corporation Act1 in 2006 by eight private individuals, none of whom are employed by Falls City. According to its articles of incorporation, EDGE was formed “[t]o operate as a nonprofit corporation for the purpose of encouraging economic development and growth and improving business conditions” in Falls City, Nebraska, and the surrounding area, and to “engage in any lawful activity permitted under the Nebraska Nonprofit Corporation Act.” EDGE employs an executive director and one part-time assistant. Neither are employees of Falls City.
EDGE is governed by a 21-member board of directors, which includes the mayor of Falls City and one member of the city council. The Falls City administrator is an ex-officio member of EDGE‘s board. Each director is required to sign a confidentiality agreement which provides that he or she
shall keep confidential all information obtained as a result of the performance of duties as a Director of EDGE, including but not limited to all information obtained regarding the identity or characteristics of prospects, contracts, terms of any agreements, terms or existence of any proposals, financial matters, and the subjеct matter and contents of any Board or Committee meetings.
Directors do not have access to all information maintained by the corporation.
EDGE receives both public and private funding. During the first 9 months of 2012, it received $85,840.23 from Falls City, $20,000 from Richardson County, and $77,215 from private entities.
EDGE performs services for Falls City and Richardson County which include hosting, communicating with, and
EDGE and Falls City have entered into various agreements, including a memorandum of understanding dated December 19, 2011. This document recites that Falls City and EDGE “desire to work together to implement an aggressive, targeted approach to creating a positive image of Falls City and marketing the community as a preferred business locаtion that will generate new wealth and create quality employment opportunities.” This document defines the relationship between Falls City and EDGE as serving
the purpose of undertaking the planning and implementation of the City‘s economic development marketing and new business development recruitment, the retention and expansion of existing businesses and entrepreneurial development as well as other economic development services designed to strengthen the competitiveness of the business climate and expand еconomic development in the City.
The memorandum of understanding specifies the services which EDGE agreed to provide in furtherance of this objective and is revocable by either party giving 60 days’ written notice.
EDGE maintains a separate Web site which can be accessed through a link on the Falls City Web site. It retains its own accountant for preparation of payroll, taxes, and financial statements. EDGE‘s offices are in a building located in Falls City which is not part of any municipal or governmental building. In addition to its activities within Falls City, EDGE has been involved with еconomic development projects outside the city limits, including the Missouri River bridge at Rulo, Nebraska, and a wind farm.
CGB Enterprises, Inc. (CGB), a national grain processing and transportation company, contacted EDGE in April 2012 regarding the proposed development of a large grain terminal and transportation facility on a site in Richardson County, Nebraska. This site is located near an existing grain elevator co-owned by Frederick.
According to EDGE‘s executive director, EDGE‘s investors supported the development and encouraged EDGE to “рrovide assistance to CGB as much as possible.” This included serving as a liaison between CGB and various local, state, and private business entities. EDGE signed a confidentiality agreement with CGB to protect “confidential and proprietary information” with respect to the project.
3. PUBLIC RECORDS REQUESTS
On August 29, 2012, Frederick sent a public records request to the Falls City administrator. The request sought records in the physical custody of Falls City and EDGE relating to CGB. The administrator responded with a letter providing the requested documents which were in the physical custody of Falls City. He also sent а copy of his letter and the public records request to EDGE‘s executive director. On September 7, EDGE‘s president told the Falls City administrator that EDGE had already declined a similar public records request which it had received directly. On September 24, Falls City asked EDGE to provide the city with all public records concerning the CGB project which were the subject of the request. EDGE denied this request on the basis that it was not a public entity and that its records were not public records.
4. MANDAMUS PROCEEDING
Frederick subsequently filed a verified complaint and motion for a writ of mandamus, naming оnly Falls City as the respondent. The court issued an alternative writ of mandamus directing Falls City to either produce the requested records or file an answer to the verified complaint and show cause why it did not produce them. Falls City filed an answer in which it denied that records in the possession of EDGE were public
After conduсting an evidentiary hearing, the district court found that Falls City had delegated its economic development goals to EDGE and that therefore, the requested records in the possession of EDGE were public records subject to disclosure. The court also determined that EDGE was a necessary party to the mandamus proceeding and ordered that EDGE be joined as a party and be given an opportunity to appear and “show cause why [it] should not be held in contempt.” The court stated that no further evidence would be received from Falls City аnd that the requested records “are public records and should be disclosed to [Frederick], subject to [EDGE‘s] opportunity to show cause why they are exempt from public disclosure.”
Frederick filed an amended verified complaint joining EDGE as a party, and the court issued an alternative writ to Falls City and EDGE. EDGE filed an answer asserting several defenses, including (1) that the requested documents were not public records and (2) that they were exempt from disclosure under
After conducting another evidentiary hearing, the district court entered an order determining the documents at issue were public records subject to disclosure. Applying the test utilized by this court in Evertson v. City of Kimball,2 the court determined that Falls City had delegated its “economic development goals” to EDGE, that EDGE had prepared the records under this delegation of authority, that the City was entitled to possess the materials to monitor the performance of EDGE, and that the records were used to make a decision affecting the public interest. Based upon its in camera review, the court
In a subsequent order entered on March 6, 2013, the district court ordered Falls City and EDGE, jointly and severally, to pay Frederick‘s attorney fees and costs in the amount of $17,109.59, pursuant to
II. ASSIGNMENTS OF ERROR
EDGE assigns, restated, that the district court erred in (1) holding that its records are public records subject to disclosure pursuant to
On cross-appeal, Falls City assigns, restated and consolidated, that the district court erred in finding (1) that there was a clear duty existing on the part of Falls City to provide the records of EDGE; (2) that Falls City, through a delegation of authority to perform a governmental function, contracted with a private party to carry out a governmental function; (3) that EDGE prepared records under Falls City‘s delegation of authority; (4) that Falls City was entitled to possess the materials to monitor EDGE‘s performance; (5) that the records of EDGE are used by Falls City to make a decision affecting public interest; and (6) that Falls City was jointly and severally liable for attorney fees and costs in the amount оf $17,109.59. Falls City also assigns error to the district court‘s initial determination that the records in question were public records, because EDGE had not been made a party to the case at the time of that determination.
III. STANDARD OF REVIEW
[1] Questions of law and statutory interpretation require an appellate court to reach a conclusion independent of the decision made by the court below.4
IV. ANALYSIS
1. LEGAL PRINCIPLES
[2] This case involves a citizen‘s statutory right, as articulated in
The disputed issue in this case involves the second element, i.e., whether the reсords Frederick requested from EDGE are “public records” as defined by
But we also recognized in Evertson that public records laws should not permit scrutiny of all of a private party‘s records simply because it contracts with a government entity to provide services.8 In Evertson, a city‘s mayor commissioned an investigation in response to complaints of racial profiling by а city police officer. The mayor retained a private attorney from another state who hired a private investigative firm to assist him. Based on a verbal report of the results of the investigation, the city terminated the police officer‘s employment. Two citizens sought disclosure of a written report in the possession of the investigative firm, and a district court held that the document was a public record which must be disclosed, even though the city never physically possessed it.
On appeal, we examined case law from other jurisdiсtions addressing when documents in the possession of a private party constitute public records. We recognized that many courts have adopted functional equivalency tests which focus on whether the documents are in the possession of a “hybrid public/private entity: an entity created by, funded by, and regulated by the public body.”9 We noted that such tests “appear appropriate when a private entity performs an ongoing government function.”10 But recognizing that the facts in Evertson did not involve an ongoing relationship between the city and the private entity, we observed that a functional equivalency test would not be appropriate because “requiring citizens to show that a private party functions as a hybrid government entity creates a loophole that would often allow public bodies
Evertson involved a document prepared in the course of a single investigation which the city contracted with a private entity to perform, and the test we applied focused on the requested document. But in this case, Frederick sought multiple documents prepared over a period of time by an entity which had an ongoing relationship with Falls City. He argues all of the documents in the possession of EDGE relating to the CGB project are public records because EDGE is a hybrid public/private entity in that it functions as the economic development “agency,” “branch,” or “department” of Falls City within the meaning of
Courts in Connecticut, Tennessee, Ohio, Oregon, and Maine utilize a similar test to determine whether a private entity is the functional equivalent of a public or governmental agency within the meaning of the public records laws of those states.14
[3] We conclude that the four-part functional equivalency approach is the appropriate analytical model for determining whether a private entity which has an ongoing relationship with a governmental entity can be considered an agency, branch, or department of such governmental entity within the meaning of
(a) Governmental Function
The first factor to be considered in determining whether EDGE is the functional equivalent of a city agency, branch, or department is whether it performs a governmental function. The function at issue here is the promotion of economic development. A Nebraska statute, now codified at
may be expended directly by the city, village, or county or may be pаid to the chamber of commerce or other commercial organization . . . or local development corporation to be expended for the purposes enumerated in this section under the direction of the board of directors of the organization.20
This court upheld the constitutionality of a prior codification of these statutory provisions in Chase v. County of Douglas,21 reasoning that “municipal publicity and the general encouragement of growth and industry [are] public purposes” which “may be accomplished by expending the funds through the рrivate organizations specified in the statute.” Based on
(b) Level of Government Funding
EDGE receives approximately 63 percent of its revenue from public sources, including Falls City and Richardson County, with the remainder coming from private sources. In Dow v. CCCI,23 the Maine Supreme Court held that receipt by a private development corporation of at least 60 percent of its annual revenue from a city did not support a conclusion that it was the functional equivalent of a city agency. But in State v. Beaver Dam Area Development Corp.,24 the Wisconsin Supreme Court considered the fact that a development corporation was “almost entirely taxpayer funded” to be a significant factor in its determination that the entity was a “quasi-governmental corporation” subject to state open meetings and public records statutes.
(c) Extent of Government Involvement or Regulation
The statute which permits a city to expend funds to a private entity engaged in economic development does not require the city to retain control over the specific exрenditure of such funds by the entity.25 To the contrary, it provides that such funds are “to be expended for the purposes enumerated in this section under the direction of the board of the organization.”26 Of the 21 voting members of EDGE‘s board of directors, two are city officials. The city administrator is an ex-officio
In contrast, in Meri-Weather v. Freedom of Info. Com‘n,28 a nonprofit economic development corporation formed by a city agency was determined to be subject to the control of the city for purposes of the functional equivalency test. There, the city agency appointed a majority of the corporation‘s board of directors, employed its executive director, and maintained its financial records.
(d) Creation of Entity
EDGE was incorporated by several private individuals, none оf whom were employed by Falls City. In this sense, it is dissimilar to the entity determined to be the functional equivalent of the city in Meri-Weather, and similar to the chamber of commerce which the Maine Supreme Court held in Dow29 was not the functional equivalent of the city.
(e) Resolution
[4] We agree with other courts that in applying the functional equivalency test to determine whether a private entity is the equivalent of a public agency, branch, or department, it is not necessary that an entity strictly conform to each factor, but the factors should be considered and weighed on a case-by-case basis.30 Here, the strongest faсtor supporting Frederick‘s argument that EDGE is the functional equivalent of a city agency, branch, or department is the fact that it performs a governmental function, i.e., the promotion of economic development. But as we have noted, a city does not
The fact that EDGE receives 63 percent of its funding from public sources lends some support to Frederick‘s argument that it is the equivalent of a public agency, branch, or department. But we agree with the observation of the Maine Supreme Court in Dow that the fact that a private entity received substantial financial support from public entities is not by itself sufficient to render it a public agency, because if that were so, “any private organization that received grant money, for example, could arguably be deemed a public agency.”32
The remaining factors lend no support to a determination that EDGE is the functional equivalent of a city agency, branch, or department. EDGE was formed by private parties. Its employees are not Falls City employees, its offices are not housed in city buildings, and its financial and other records are kept separately from those of Falls City. The city does not control EDGE‘s board.
Weighing the various factors, we conclude as a matter of law that EDGE is not the functional equivalent of an agency, branch, or department of Falls City and that therefore, EDGE‘s recоrds requested by Frederick are not “public records” as defined by
V. CONCLUSION
For the foregoing reasons, we vacate and reverse the writ of mandamus and the order awarding attorney fees to Frederick, and we remand the cause to the district court with directions to dismiss.
VACATED AND REVERSED, AND REMANDED WITH DIRECTIONS.