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Texas Supreme Court Opens the Floodgates to Open Records Litigation

Private parties may now protect any information that would give “advantage to a competitor.”

On June 19, 2015, the Texas Supreme Court clarified the expansive nature of the competition or bidding exception to the Texas Public Information Act (“TPIA”), providing an additional avenue for private parties to seek protection for information provided to governmental bodies.  Upon request, the TPIA requires disclosure of public information.  That is, as a general rule, the public has a right to request or inspect information that is “written, produced, collected, assembled, or maintained under a law or ordinance or in connection with the transaction of official business” by or for a governmental body.  Tex. Gov’t Code §§ 552.002(a), 552.021.  Of course, the TPIA has many exceptions (approximately sixty) that protect certain types of information from disclosure.

One such exception is the “competition or bidding” exception, which protects “information that, if released, would give advantage to a competitor or bidder” from disclosure.  Tex. Gov’t Code § 552.104(a).  Under the Attorney General’s long-standing interpretation, this exception was “designed to protect the interests of governmental bodies and not the interests of private parties submitting information to the government.” Texas Attorney General, Open Records Decision No. 592 (1991) (emphasis added).  Consequently, the Attorney General did not recognize objections from private parties under this exception.  Now, however, the Attorney General must respect a private party’s right to invoke what the State described at oral argument as a “super-exception to disclosure.”

In Boeing Company v. Paxton, the Texas Supreme Court rejected the Attorney General’s argument that “the exception is only for the government’s benefit,” holding that “a private party may assert the exception to protect its competitively sensitive information.”  No. 12-1007 (Tex. June 19, 2015), available here. In response to an open records request, Boeing invoked the “competition or bidding” exception to protect certain information in its lease with the San Antonio Port Authority such as rental rates, share of maintenance costs, insurance coverage, liquidated damages provisions, and lease incentives utilizing the competition or bidding exception.  The trial court, however, determined that Boeing could not seek protection under Section 552.104 as a private party, and the court of appeals affirmed.  But the Texas Supreme Court disagreed, unequivocally holding that “Section 552.104’s exception applies to both the government and private parties and may be invoked by either to protect the privacy and property interests of a private party in accordance with its terms.”

Over the objection of the Attorney General that the “competition or bidding” exception should be read to exclude finalized contracts, like the Boeing lease, the Supreme Court disagreed, noting that the exception is not limited to “ongoing competitive bidding.”  In doing so, the Texas Supreme Court necessarily determined that Boeing’s “competition” information was rendered “confidential” pursuant to Section 552.104, and thus, exempt from Section 552.022, which the Attorney General argued protected “core” or “super public” information—including “information in . . . [a] contract relating to the receipt or expenditure of public or other funds by a governmental body.” Tex. Gov’t Code § 552.022(a)(3).

The Attorney General also argued that Section 552.104 should not be read to protect simply any information that would give advantage to a competitor, because Section 552.110(a) and (b) of the TPIA address the standards for the protection of “trade secrets” or “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.”  Indeed, both the trial court and appellate court found that Boeing had failed to keep its lease terms secret, and therefore, was not entitled to trade secret protection.  The Texas Supreme Court, however, was not persuaded to adopt the Attorney General’s interpretation of Section 552.104.  Rather, the Court articulated the “competition” standard for exemption as whether knowing Boeing’s overhead costs “would be an advantage, not whether it would be a decisive advantage.”  Unsurprisingly, then, the Supreme Court concluded, “that the information at issue if released would give advantage to a competitor or bidder,” and thus, was not subject to disclosure under the TPIA.

This ruling clarifies this exception, expanding its prior interpretation and application by the Attorney General in several ways.  First, it allows private parties to claim Section 552.104’s “competition or bidding” exception.  Second, a private party invoking this exception need only show that the information “would” give competitors an advantage, not that the advantage is decisive to the competition.  Third, and perhaps most significantly, the opinion does not limit the exception’s application to an ongoing bidding process, or indeed, to a bidding process at all, but grants private parties the right to claim the exception where release of the information would give an advantage to a competitor, regardless of the context.  Private parties seeking to protect information provided to the State have always been able to invoke the “trade secret” and “commercial or financial information” exceptions of Section 552.110, which require a demonstration that a party’s information was “secret” and valuable or would cause “substantial competitive harm.”  Now, private parties simply need to demonstrate that disclosure of their information would provide a competitor “some advantage,” which presupposes competitive harm.

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