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Rents Charged To Vendors Are Trade Secrets, Exempt From Disclosure Under Public Records Act

The rents charged by a nonprofit corporation that manages Cincinnati’s city-owned Findlay Market to vendors who sublease space at the market are trade secrets and therefore exempt from disclosure under the Ohio Public Records Act, according to a decision announced today by the Supreme Court of Ohio.

The court’s 7-0 per curiam (not assigned to a specific justice) opinion affirmed a decision of the First District Court of Appeals.

The case involved a public records request submitted to the city by Timothy Luken, in which Luken sought to obtain copies of the lease agreements between merchants who sublease space at the city-owned Findlay Market and a non-profit corporation that has managed and operated the market under a lease agreement with the city since 2004.

The city provided Luken with copies of the lease agreements, but information in the documents disclosing the agreed terms and rents charged to vendors for various spaces at the market had been redacted (blacked out) in the copies provided to Luken.  The city advised Luken that the corporation understood itself not to be a public institution subject to the provisions of the public records act, but in any case the terms and rent amounts in its lease agreements with market tenants were legally protected trade secrets, and therefore were exempt from disclosure even if the corporation were subject to the public records act.

Luken filed suit in the First District Court of Appeals seeking a writ of mandamus to compel the corporation to provide him with unredacted copies of the requested documents.  After a trial before a magistrate, the magistrate denied the writ.  Luken filed objections to the magistrate’s opinion.  A three-judge panel affirmed the magistrate’s decision, holding  that the corporation: 1) did not fall within the legal definition of a public institution; 2) was nevertheless subject to the public records act as an “entity responsible for public records;” but 3) was not required to provide Luken with unredacted copies of its lease agreements because the terms and rent amounts contained in those documents were trade secrets as defined in  R.C. 1333.61 (D), and redaction of that information was therefore permitted under the exemption from disclosure set forth in R.C. 149.43(A)(1)(v).

Luken exercised his right to appeal the First District’s rulings that were adverse to him to the Supreme Court. The corporation cross-appealed the portion of the court of appeals’ decision holding that it was subject to the public records act as an entity responsible for public records.

In today’s unanimous decision, the Supreme Court affirmed the court of appeals’ determination that the redacted items in the corporation’s sublease agreements were trade secrets not subject to disclosure.  The justices declined to address the First District’s holdings regarding the legal status of the corporation, on the basis that it was not necessary to address those questions in order to resolve the underlying dispute between the parties.

With regard to the dispositive trade secrets issue, the court explained that R.C. 149.43(A)(1)(v) excepts from the definition of public records “records the release of which is prohibited by state or federal law,” and that R.C. 1333.61(D) allows for an injunction against the misappropriation of trade secrets.

Quoting from its 2000 decision in State ex rel. Besser v. Ohio State University the court wrote: “We have held that a public office’s own trade secret, in its possession, is a record ‘the release of which is prohibited by state or federal law.’  ... ‘Trade secret’ is defined as ‘information, including ...  any business information or plans, financial information, or listing of names ... that satisfies both of the following: (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.’”

“The entity claiming trade-secret status, in this case the corporation, ‘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.’ ...  Applying these factors to the facts here, the corporation has satisfied the first part of the Besser analysis.  The corporation put on an expert who testified that the term and rental rate for subleases in the commercial context are secrets closely guarded by property managers and that knowledge of these items about competitors would be invaluable to property managers.  Moreover, if such knowledge became public, it would impair the landlord’s ability to get and keep tenants and “create a poisonous environment” among the tenants, who would inevitably compare notes.  Disclosure of the information would put the corporation and Findlay Market at a competitive disadvantage.”

“The second factor of the Besser analysis is a closer call.  On one hand, the corporation keeps the only unredacted copies of the leases in a locked filing cabinet and allows access only to employees who need the information.  While the leases do not require tenants to keep the information secret, the corporation’s expert testified that most tenants do not divulge the information, because they realize that it is to their benefit not to disclose. ...  (T)he corporation’s expert testified that the precautions used by the corporation are standard for commercial property managers.  Luken provided no evidence to contradict this testimony. ... While the corporation could have taken more care in keeping the information secret, it is within the purview of the court to determine whether or not such measures were adequate.”

“Although it is a close question, the corporation has taken reasonable measures to keep the lease terms a secret under the standard precautions for the industry.  Therefore, we hold that the redacted terms are trade secrets under the Besser analysis and exempt from public records. Luken has not established his entitlement to relief in mandamus for the unredacted leases, as they are trade secrets and not public records.”

Please note: Opinion summaries are prepared by the Office of Public Information for the general public and news media. Opinion summaries are not prepared for every opinion, but only for noteworthy cases. Opinion summaries are not to be considered as official headnotes or syllabi of court opinions. The full text of this and other court opinions are available online.

2012-0992. State ex rel. Luken v. Corp. for Findlay Market of Cincinnati, Slip Opinion No. 2013-Ohio-1532.
Hamilton App. No. C-100437, 2012-Ohio-2074.  Judgment affirmed.
O’Connor, C.J., and Pfeifer, O’Donnell, Lanzinger, Kennedy, French, and O’Neill, JJ., concur.
Opinion: http://www.supremecourt.ohio.gov/rod/docs/pdf/0/2013/2013-Ohio-1532.pdf

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