|Office of the Attorney General - State of Texas
January 22, 1999
Ms. Amy L. Sims
Dear Ms. Sims:
You ask whether certain information is subject to required public disclosure under the Texas Open Records Act, chapter 552 of the Government Code. Your request was assigned ID# 121503.
The City of Lubbock (the "city") received a request for information relating to the selection and award of city employee health services contracts. You have submitted Covenant Health System's bid proposal as being responsive to the request.(1) You state that the submitted proposal may contain proprietary information that is protected from disclosure by the Government Code. Gov't Code §§ 552.007, .305. You raise no exception to disclosure on behalf of the city, and make no arguments regarding the proprietary nature of the requested information.
Since the property and privacy rights of a third party may be implicated by the release of the requested information, Covenant Health System was notified of the request. See Gov't Code § 552.305 (permitting interested third party to submit to attorney general reasons why requested information should not be released); Open Records Decision No. 542 (1990) (determining that statutory predecessor to Gov't Code § 552.305 permits governmental body to rely on interested third party to raise and explain applicability of exception in Open Records Act in certain circumstances).
Covenant Health System responded by stating that its proposal is protected under section 552.110 of the Government Code. Section 552.110 protects the property interests of private persons by excepting from disclosure two types of information: (1) trade secrets, and (2) commercial or financial information obtained from a person and privileged or confidential by statute or judicial decision.
The Texas Supreme Court has adopted the definition of "trade secret" from the Restatement of Torts, section 757, which holds a "trade secret" to be:
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 may be a formula for a chemical compound, a process of manufacturing, treating or preserving materials, a pattern for a machine or other device, or a list of customers. 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. . . . [It may] relate to the sale of goods or to other operations in the business, such as a code for determining discounts, rebates or other concessions in a price list or catalogue, or a list of specialized customers, or a method of bookkeeping or other office management.
Restatement of Torts § 757 cmt. b (1939); see Hyde Corp. v. Huffines, 314 S.W.2d 763, 776 (Tex.), cert. denied, 358 U.S. 898 (1958). If a governmental body takes no position with regard to the application of the "trade secrets" branch of section 552.110 to requested information, we accept a private person's claim for exception as valid under that branch if that person establishes a prima facie case for exception and no one submits an argument that rebuts the claim as a matter of law. Open Records Decision No. 552 at 5(1990).(2)
In Open Records Decision No. 639 (1996), this office announced that it would follow the federal courts' interpretation of exemption 4 to the federal Freedom of Information Act when applying the second prong of section 552.110 for commercial and financial information. In National Parks & Conservation Ass'n v. Morton, 498 F.2d 765 (D.C. Cir. 1974), the court concluded that for information to be excepted under exemption 4 to the Freedom of Information Act, disclosure of the requested information must be likely either to (1) impair the Government's ability to obtain necessary information in the future, or (2) cause substantial harm to the competitive position of the person from whom the information was obtained. National Parks & Conservation Ass'n v. Morton, 498 F.2d 765, 770 (D.C. Cir. 1974). A business enterprise cannot succeed in a National Parks claim by a mere conclusory assertion of a possibility of commercial harm. Open Records Decision No. 639 at 4 (1996). To prove substantial competitive harm, the party seeking to prevent disclosure must show by specific factual or evidentiary material, not conclusory or generalized allegations, that it actually faces competition and that substantial competitive injury would likely result from disclosure. Id. We note that Covenant Health System has made only an unsubstantiated, conclusory statement regarding the confidentiality of its proposal. Accordingly, the city must release the submitted proposal in its entirety.
We are resolving this matter with an informal letter ruling rather than with a published open records decision. This ruling is limited to the particular records at issue under the facts presented to us in this request and should not be relied on as a previous determination regarding any other records. If you have any questions regarding this ruling, please contact our office.
Yours very truly,
June B. Harden
Ref.: ID# 121503
Enclosures: Submitted documents
cc: Mr. Mark Vincent
1. Since you have not submitted the remaining requested information, we presume that this information has been released. Gov't Code § 552.301.
2. The six factors that the Restatement gives as indicia of whether information constitutes a
trade secret are: "(1) the extent to which the information is known outside of [the company]; (2) the
extent to which it is known by employees and other 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." Restatement of Torts, § 757 cmt. b (1939);
see also Open Records Decision Nos. 319 at 2 (1982), 306 at 2 (1982), 255 at 2 (1980).
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