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June 7, 1999

Ms. Joan Carol Bates
Medicaid Program Attorney
Office of General Counsel
Texas Department of Health
1100 West 49th Street
Austin, Texas 78756-3199

OR99-1575

Dear Ms. Bates:

You ask whether certain information is subject to required public disclosure under the Public Information Act, chapter 552 of the Government Code. Your request was assigned ID# 124967.

The Texas Department of Health (the "department") received a request for a copy of National Heritage Insurance Company's ("NHIC") response to the department's RFPs for the Texas Health Network Administrator and the Texas Medicaid Claims Administrator. The requestor also seeks a copy of the Maximus, Inc. response to the department's Enrollment Broker RFP. You state that you have released the information relating to Maximus, Inc. in accordance with Open Records Letter No. 99-0496 (1999). You state that you have released the requested information relating to NHIC's response to the Claims Administrator RFP in accordance Open Records Letter No. 99-0374 (1999). You claim, however, that certain portions of NHIC's response to the department's Texas Health Network Administrator RFP may be protected from disclosure by section 552.110 of the Government Code. Gov't Code 552.007, .305.(1) You raise no exception to disclosure on behalf of the department, and make no arguments regarding the proprietary nature of the submitted information.

Since the property and privacy rights of a third party may be implicated by the release of the submitted information, this office notified NHIC about 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). NHIC responded to our notice by arguing that the submitted proposal sections are protected from disclosure by 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.

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. Thus, this office relied on National Parks & Conservation Association v. Morton, 498 F.2d 765 (D.C. Cir. 1974), as a judicial decision and applied the standard set out in National Parks to determine whether information is excepted from public disclosure under the commercial and financial prong of section 552.110. However, the Third Court of Appeals recently held that National Parks is not a judicial decision within the meaning of section 552.110. Birnbaum v. Alliance of Am. Insurers, 1999 WL 314976 (Tex. App.-Austin May 20, 1999, no pet. h.). Because neither you nor NHIC has cited to a statute or judicial decision that makes the commercial or financial information privileged or confidential, you may not withhold the submitted information under the commercial or financial information prong of section 552.110.

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.(2) Open Records Decision No. 552 at 5 (1990).

After careful review, we conclude that NHIC has not established that the submitted information is protected as a trade secret under section 552.110. See Open Records Decision No. 552 at 5 (1990) (party must establish prima facie case that information is trade secret), 542 at 3 (1990). Accordingly, the department must release the submitted proposal sections.

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.

Sincerely,

June B. Harden
Assistant Attorney General
Open Records Division

JBH/ch

Ref: ID# 124967

Encl. Submitted documents

cc: Ms. Debra Glickfield
Staff Attorney
Birch & Davis Management Corporation
8905 Fairview Road
Silver Spring, Maryland 20910
(w/o enclosures)

Mr. Leo Lopez
Eligibility Services, Inc.
4144 North Central Expressway, Suite 200
Dallas, Texas 75204
(w/o enclosures)

Ms. Allison Davidson
National Heritage Insurance Company
11044 Research Boulevard
Austin, Texas 78759
(w/o enclosures)


 

Footnotes

1. The department states, and we agree, that it has not sought an open records decision from this office within the statutory ten-day deadline. See Gov't Code 552.301. The department's delay in this matter results in the presumption that the requested information is public. See id. 552.302; Hancock v. State Bd. of Ins., 797 S.W.2d 379 (Tex. App.--Austin 1990, no writ). In order to overcome the presumption that the requested information is public, a governmental body must provide compelling reasons why the information should not be disclosed. Hancock, 797 S.W.2d at 381. The applicability of section 552.110 provides such a compelling reason.

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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