THE STATE EX REL. BESSER ET AL., APPELLANTS, v. OHIO STATE UNIVERSITY ET AL., APPELLEES.
No. 99-394
SUPREME COURT OF OHIO
August 9, 2000
89 Ohio St.3d 396 | 2000-Ohio-207
Submitted May 9, 2000
IN MANDAMUS.
{¶ 1} On February 18, 1999, relator Kenneth R. Besser (“Besser“), an attorney, sent a letter to respondent Ohio State University (“OSU“), stating that he represented his wife, relator Susan L. Besser, M.D., and Bexley Family Medicine in their lawsuit against OSU, and that he was requesting under
{¶ 2} On February 23, the Bessers filed this action for a writ of mandamus to compel respondents, OSU, OSU Hospitals Board, Manuel Tzagournis, M.D., OSU Vice-President for Health Sciences, OSU Hospitals Board, Grayce M. Sills, Chairperson of the OSU Hospitals Board, and R. Rеed Fraley, M.D., Secretary of the OSU Hospitals Board and Executive Director of the Ohio State Hospital Systems (collectively referred to as “OSU“), to provide access to the requested records under
{¶ 3} The matter was referred to the court‘s mediation program, and during that process, on April 8, 1999, OSU publicly announced its acquisition of Park Medical Center. Following mediation, the matter was returned to the regular docket, and we granted an alternative writ and issued a schedule for the presentation of evidence and briefs. 86 Ohio St.3d 1439, 713 N.E.2d 1050. We also dismissed as moot the Bessers’ claims relating to OSU Hospitals Board and OSU Strategic Planning Committee minutes. Id.
{¶ 4} The parties clarified the scope of the Bessers’ records requests and OSU provided them with some responsive records relating to the Pаrk Medical Center acquisition. OSU withheld the remainder of the requested records, claiming that
{¶ 5} Upon a consideration of the evidence and briefs, we held that “trade secrets remain exempt from disclosure under
{¶ 6} This cause is now before the court upon our in camera review of the records.
Kenneth R. Besser, for relators.
Betty D. Montgomery, Attorney General, Mark R. Weaver, Special Counsel to the Attorney General, Lisa Wu Fate and Jan Alan Neiger, Assistant Attorneys General, for respondents.
Per Curiam.
{¶ 7} In reviewing the records withheld by OSU, the precept guiding our analysis is that the inherent, fundamental policy of
{¶ 8} With these guidelines in mind, we initially consider OSU‘s assertion that two of the withheld records are excepted from disclosure as intellectual property records under
{¶ 9} In construing
{¶ 10} Under
{¶ 11} Therefore, the intellectual-property-record exception of
{¶ 12} OSU next contends that all of the withheld records, including the preliminary business plan and the pro forma, are exempt from disclosure under
{¶ 13}
“(1) It derives 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.
“(2) It is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”
{¶ 14} We have also adopted the following factors in analyzing a trade secret claim:
“(1) The extent to which the information is known outside the business; (2) the extent to which it is known to those inside the business, i.e., by the employees; (3) the precautions taken by the holder of the trade secret to guard the secrecy of the information; (4) the savings effected and the value to the holder in having the information as against competitors; (5) the amount of effort or money expended in obtaining and developing thе information; and (6) the amount of time and expense it would take for others to acquire and duplicate the information.” State ex rel. The Plain Dealer v. Ohio Dept. of Ins. (1997), 80 Ohio St.3d 513, 524-525, 687 N.E.2d 661, 672, citing Pyromatics, Inc. v. Petruziello (1983), 7 Ohio App.3d 131, 134-135, 7 OBR 165, 169, 454 N.E.2d 588, 592.
{¶ 15} An entity claiming trade secret status bears the burden to identify and demonstrate that the material is included in categories of protected information under the statute and additionally must take some active steps to maintain its secrecy. See Fred Siegel Co., L.P.A. v. Arter & Hadden (1999), 85 Ohio St.3d 171, 181, 707 N.E.2d 853, 862.
2/4/99 Memorandum to OSU Officials from OSU Employee Regarding Asset Purchase Agreement for Park Medical Center and Draft Asset Purchase Agreement
{¶ 17} OSU claims that the memorandum is a trade secret because of a conclusory statement in an affidavit of the executive director of Ohio State Hospitals Systems that it “derives potential economic value from not being generally known to, and not being readily ascertainable to, persons who can obtain economic value from its disclosure.” The memorandum, however, in and of itself, does not disclose any information that retains any potential economic value for either OSU or its competitors. See Plain Dealer, 80 Ohio St.3d at 527, 687 N.E.2d at 674. Instead, it merely references a copy of an asset purchase agreement without disclosing its terms. Id.
{¶ 18} OSU also withheld the draft asset purchase agreement referred to in the memorandum. The draft agreement relates to thе since-completed acquisition of Park Medical Center by OSU. In Plain Dealer, we relied on commentary from the Restatement of Torts to hold that “[i]nformation related to a single, ephemeral event in the conduct of a business does not meet the requirement that a trade secret be ‘a process or device for continuous use in the operation of the business.’ ” Id., 80 Ohio St.3d at 526, 687 N.E.2d at 673, quoting Restatement of the Law, Torts (1939), Section 757, Comment b; see, also, Wisconsin Elec. Power Co. v. Pub. Serv. Comm. of Wisconsin (1983), 110 Wis.2d 530, 329 N.W.2d 178, holding that documents relating to draft contracts, bids, and letters of negotiation are not trade secrets.
{¶ 19} The Commissioners on Uniform State Laws who drafted the Uniform Trade Secrets Act, as adopted in Ohio, noted “[t]hat the definition of ‘trade secret’ [in the Uniform Act] contains a reasonable departure from the Restatement
{¶ 20} Therefore, the mere fact that the draft asset purchase agreement relates to a single event, i.e., OSU‘s acquisition of a private hospital, and is not continuously used in OSU‘s business does not prеclude it from being a trade secret that is exempt from disclosure.
{¶ 21} But there still must be evidence that the draft agreement constitutes a trade secret. OSU did not introduce sufficient evidence to establish that the draft agreement retains potential, independent economic value from not being readily ascertainable by proper means by competitors.
{¶ 22} Consequently, the February 4, 1999 memorandum and the draft agreement do not constitute trade secrets and are subject to disclosure under
1/28/99 OSU Preliminary Business Plan for Park Medical Center
{¶ 23} OSU claims that the preliminary business plan drafted by Arthur Andersen Healthcare Services for OSU‘s proposed acquisition of Park Medical Center is аlso a trade secret. Like the other withheld records, OSU relies on
{¶ 24} OSU argues that based on this evidence, if it enters into any future negotiations similar to the Park Medical Center transaction, opposing parties could use these secrets to determine OSU‘s valuation process, negotiating style, and internal process for making and receiving offers, and that competitors can use this information even now to attack, undermine, and circumvent OSU‘s business strategies.
{¶ 25} Notably lacking, however, is any factual evidence to support these conclusory statements and argument. The assumptions made as wеll as the process of valuing Park Medical Center‘s future five-year financial performance if acquired by OSU are restricted to that transaction, based mainly on interviews with the hospital‘s staff. There is no credible evidence that this specific valuation process would in any way benefit OSU in future transactions involving the acquisition of other private hospitals or that the assumptions underlying OSU‘s valuation of a potential purchase target would be comparable in future purchases. Nor is there evidence that the valuation process is sufficiently unique in the hospital industry that competitors would obtain a cognizable economic benefit from its disclosure. In fact, OSU has already publicly disclosed a detailed appraisal of Park Medical Center that OSU used in its acquisition determination. The disclosed appraisal also includes a projection of income and expenses for Park Medical Center for five years and beyond.
{¶ 26} In addition, a record is entitled tо trade secret status ” ‘only if the information is not generally known or readily ascertainable to the public.’ ” State ex rel. Lucas Cty. Bd. of Commrs. v. Ohio Environmental Protection Agency (2000), 88 Ohio St.3d 166, 173, 724 N.E.2d 411, 418, quoting Plain Dealer, 80 Ohio St.3d at 529, 687 N.E.2d at 675. Some of the information contained in the preliminary business plan is already readily ascertainable to the public from financial reports and other public sources, e.g., Ohio Hospital Association records.
{¶ 27} Further, the plan contains seven pages of numerical “service-line definitions,” and there is no evidence that OSU retains any economic benefit in keeping these numerical designations private.
{¶ 28} There is, however, one page of the preliminary business plan that satisfies the definition of a trade secret. This page lists the names of the top patient-volume physicians of Park Medical Center and their characteristics. The disclosure of this page would permit OSU‘s competitors to determine which physicians affiliated with Park Medical Center produce the most revenue, and competitors could target thesе physicians in order to increase their revenues, to the detriment of OSU. This list is similar to a business‘s customer list, which constitutes an intangible asset that is presumptively a trade secret when the owner of the list takes measures to prevent its disclosure in the ordinary course of business to persons other than those selected by the owner. State ex rel. Toledo Blade Co. v. Univ. of Toledo Found. (1992), 65 Ohio St.3d 258, 264, 602 N.E.2d 1159, 1163; see, also, 1 Milgrim on Trade Secrets (1999), 1-475-476, Section 1.09[8][g], noting that the effectiveness and good performance of key sales and other personnel can be protected trade secrets.
{¶ 29} Therefore, aside from one page of the preliminary business plan containing the names and characteristics of the high-patient-volume physicians of Park Medical Center, the plan does not contain trade secrets.
1/5/99 Outline of Emergency Department Staffing Contract and Profit/Loss Analysis
{¶ 30} OSU contends that the outline, which it used to negotiate the emergency department staffing contract for the Park Medical Center transaction, is
Summaries Describing Goals for Park Medical Center Transaction
{¶ 31} OSU claims that its summaries concerning its goals in acquiring Park Medical Center are exempt from disclosure as trade secrets. But the majority of the information in these summaries has already been disclosed to the Bessers through previously released summaries or, like the preliminary business plan, does not retain potential, independent economic value from not being readily ascertainable by proper means by OSU‘s competitors.
December 2, 1998 Electronic Mail
{¶ 32} This electronic mail message specifies the averagе nursing salary, square footage, and total acreage for Park Medical Center before its acquisition by OSU. The message contains information that is either readily ascertainable from other sources or that does not possess potential, independent economic value following the completion of the acquisition of Park Medical Center by OSU. The document must be disclosed.
Pro forma for the Acquisition
{¶ 33} OSU next asserts that its pro forma created for the transaction is exempt as a trade secret. The pro forma contains financiаl projections and the assumptions made in calculating the projections. Like the preliminary business plan, which contains comparable assumptions and financial projections, the pro
2/5/99 Status Report on Park Medical Center Transaction
{¶ 34} The next document for which OSU claims trade secret status is a status report on the acquisition of Park Medical Center. This document contains information that has already been publicly disclosed by OSU in other records as well as information that would not provide potential, independent economic benefit to OSU‘s competitors. The status report is not a trade secret.
Printed Notes of OSU Transaction Meetings, Lists of Team Mеmbers and Working Assumptions
{¶ 35} The printed notes of OSU meetings concerning the transaction and related records also do not constitute trade secrets. Knowledge of this information, including working assumptions for the operation of Park Medical Center in relation to OSU, is either readily ascertainable, e.g., the configuration of the board of trustees of Park Medical Center after it was acquired by OSU, or not of any cognizable benefit to OSU‘s competitors.
January 11, 1999 Memorandum Regarding List of Park Medical Center Staff and Top Admitters
{¶ 36} The memorandum and related list reveal the names of the top patient-volume members of the medical staff at Park Medical Center. Like the one page of OSU‘s preliminary business plan containing similar information, these records constitute trade secrets and are therefore exempt from disclosure under
{¶ 37} Finally, OSU asserts that research on two New York City hospitals specializing in certain surgeries is a trade secret and, hence, not subject to disclоsure. This research, however, appears to have been taken from sources readily available to the public, e.g., American Hospital Association Guide, magazine articles, and financial reports. And there is no evidence concerning either the amount of effort or money expended in obtaining and developing this information. Pyromatics, 7 Ohio App.3d at 135, 7 OBR at 169, 454 N.E.2d at 592. Therefore, these records are subject to disclosure.
Conclusion
{¶ 38} In sum, for the most part, OSU‘s reliance on conclusory affidavit statements is insufficient to satisfy its burden to identify and demonstratе that the records withheld and portions of records redacted are included in categories of protected information under
Writ granted in part and denied in part.
MOYER, C.J., DOUGLAS, F.E. SWEENEY, PFEIFER and COOK, JJ., concur.
RESNICK and LUNDBERG STRATTON, JJ., concur in part and dissent in part.
LUNDBERG STRATTON, J., concurring in part and dissenting in part.
{¶ 40} I concur with the majority that the intellectual-property-record exception does not exempt from disclosure the preliminary business plan and pro forma because they are in the nature of a financial or administrative record, not the product of study or research. See State ex rel. Rea v. Ohio Dept. of Edn. (1998), 81 Ohio St.3d 527, 533, 692 N.E.2d 596, 602.
{¶ 41} However, I believe that the withheld documents constitute trade secrets and therefore are excepted from disclosure under
{¶ 42} OSU produced evidence in the form of affidavits that these documеnts are confidential documents made known only to certain persons within OSU who have a need to know the information within them. These documents comprise a business plan, strategies, negotiations, and financial information utilized by OSU in the Park Medical Center acquisition. They may also apply to other
{¶ 43} I believe that these documents collectively comprise a business plan from which OSU derives economic value because the information is not known to others who can obtain economic value from its disclosure and the documents are subject to efforts to keep them confidential.
{¶ 44} Once these documents are released to the public, competitors of OSU will become privy to OSU‘s confidential strategies, plans, valuation techniques, and negotiating tools utilized in complex financial transactions. These documents are valuable to OSU from not being generally known to or not being readily ascertainable by others who can obtain economic value from them. Relators are Susan L. Besser, M.D., a physician, and her husband, an attorney. They are potential competitors who may obtain economic value and undermine OSU‘s investment as a result of the disclosure of these documents. I believe this opinion effectively eviscerates the trade secret exemption of the Public Records Act.
RESNICK, J., concurs in the foregoing opinion.