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City Confidential: What Exemptions to Texas’s Public Information Act Allow a City to Protect a Private Company’s Confidential Information?

City Confidential: What Exemptions to Texas’s Public Information Act Allow a City to Protect a Private Company’s Confidential Information?

Cities in Texas and elsewhere conduct business with private entities, such as real estate developers, and in some circumstances, may be asked to keep certain details out of the public’s eye. Here, we examine to what extent that is allowed in the Lone Star State.

The Texas Public Information Act (“TPIA”) allows a city to withhold “trade secrets” and certain “commercial or financial information” in certain circumstances, but a developer would need to affirmatively demonstrate that the confidential material was exempt from disclosure.

TPIA, codified as Chapter 552 of the Texas Government Code, makes almost all public information — “information that is written, produced, collected, assembled, or maintained… in connection with the transaction of official business by a governmental body” – available by default upon request by any citizen. There are a number of exceptions to this general rule, many of which are permissive, meaning the government entity may withhold the information, but is not required to.

For example, a Confidentiality Agreement between a private entity and a city could provide for a city to agree to withhold, to the extent allowed by law, including the Texas Public Information Act, the following “Confidential Information”:

Technical and business information relating to Discloser’s proprietary ideas, patentable ideas copyrights and/or trade secrets, existing and/or contemplated products and services, software, schematics, research and development, production, costs, profit and margin information, finances and financial projections, customers, clients, marketing, and current or future business plans and models, regardless of whether such information is designated as “Confidential Information” at the time of its disclosure.

Section 552.110 of the TPIA provides a disclosure exemption for both “a trade secret obtained from a person and privileged or confidential by statute or judicial decision” and “commercial or financial information for which it is demonstrated based on specific factual evidence that disclosure would cause substantial competitive harm to the person from whom the information was obtained.”

In a 2012 opinion, the Texas Attorney General, which evaluates whether certain public information falls under one of the TPIA exemptions, notes that the Supreme Court has adopted the following definition of trade secret: “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 differs from other secret information in a business . . . in that it is not simply information as to a single or ephemeral event in the conduct of the business . . . . A trade secret is a process or device for continuous use in the operation of the business.”

Does the “Confidential Information” referred to in the above Confidentiality Agreement language qualify as trade secrets? Without knowing specifically what the information is, it is difficult to say, but the AG’s office uses the Supreme Court’s adopted definition and the six-part test from the Restatement of Torts:

(1) the extent to which the information is known outside of [the company];

(2) the extent to which it is known by employees and others involved in [the company’s] business;

(3) the extent of measures taken by [the company] to guard the secrecy of the information;

(4) the value of the information to [the company] and [its] competitors;

(5) the amount of effort or money expended by [the company] in developing the information;

(6) the ease or difficulty with which the information could be properly acquired or duplicated by others.

According to the Texas Public Information Act Handbook (2018) (the “Handbook”), a company need not satisfy all six factors to prevail — the Attorney General will accept a claim for an exemption as a trade secret “when a prima facie case is made that the information in question constitutes a trade secret and no argument is made that rebuts that assertion as a matter of law.”

To avoid the disclosure of “commercial or financial information,” the developer would need to make “a specific factual or evidentiary showing, not conclusory or generalized allegations, that substantial competitive injury would likely result from disclosure.” (Handbook, p. 108) Minutes of corporate meetings, for example, do not qualify as commercial information exempted from disclosure. There is not much case law regarding the disclosure of “commercial or financial information,” but there are several cases that allowed the disclosure because the objecting party did not present any specific factual evidence that the disclosure would harm the company.

A procedural note (TPIA Section 552.305(d)): If the City were to receive an open records request that included some materials received from the developer, the City would have ten business days to notify the developer of the request, and the developer would then have ten business days to contact the Attorney General and object to the release of the information.

Conclusion: Without knowing what the “Confidential Information” is, it is impossible to say definitively whether the information would be exempt from disclosure, but the Attorney General does give clear guidelines and definitions for the case the developer would have to make.

Please do not rely on this article as legal advice. We can tell you what the law is, but until we know the facts of your given situation, we cannot provide legal guidance. This website is for informational purposes and not for the purposes of providing legal advice. Information about our municipal law practice can be found here.

 

 

Drew Shirley is a Houston attorney with experience in tort and business litigation and business and real estate transactions. Shirley graduated cum laude from Duke University, then received two advanced degrees – a master’s in journalism and a law degree – from the University of Texas at Austin. He joined the Randle Law Office in 2015.

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