Confidential Lease Terms Versus Public Access to Government-Held Documents

An Expiated Zoning Approval

Calvert Tract is the owner of approximately 36 acres of land in northern Prince George's County, MD. In October 2011, Calvert Tract submitted a zoning application to the Prince George's Planning Board of the Maryland-National Capital Park and Planning Commission, seeking permission to build a mixed-use town center on that land tract. In furtherance of this plan, Calvert Tract contracted with the Whole Foods grocery store chain for it to serve as the anchor store for the proposed development.

As part of its submissions in connection with the zoning application, Calvert Tract voluntarily provided to Prince George County Executive Rushern L. Baker a redacted version of the Whole Foods store lease. According to Calvert Tract, it gave the redacted lease to the County Executive as “part of the ongoing discussions of the development of the property.” The Planning Board approved the zoning application, as did the District Council after it, and the application was fully approved by the summer of 2012.

Petitioner Jayson Amster filed a request with County Executive Baker for a copy of the redacted lease in April 2012, claiming that the Maryland Public Information Act (MPIA) gave him the right to see it. Amster wanted to find out if the lease indeed contained the deadlines for performance that Calvert Tract cited in its zoning application as necessitating quick action by the District Council — Calvert Tract had claimed that if it did not meet its contractual deadlines, the Whole Foods lease would fall through.

The Prince George's County Office of Law denied Amster's request on the basis that it believed the lease was not subject to disclosure under the MPIA. This denial prompted Amster to file a complaint against County Executive Baker in the Circuit Court for Prince George's County. Calvert Tract was allowed to intervene in the action, and the County of Prince George was eventually substituted as defendant in place of Baker.

The Competing Interests

In the trial court, the defendants moved for summary judgment, asserting that the Calvert Tract/Whole Foods lease was confidential commercial information, and thus exempt from disclosure under the MPIA. The MPIA states that “[a]ll persons are entitled to have access to information about the affairs of government and the official acts of public officials and employees.” Md. Code (1957, 2014 Repl. Vol.), § 4-103(a) of the General Provisions Article (GP). Commercial landlords with multiple properties, or developments with more than one tenant, are generally loath to disclose to potential tenants the terms of leases into which they have previously entered. Concessions or discounts given to one party are not necessarily being offered to another, and bargaining position can be compromised when too much information is available to a lease-negotiating prospect. So, what happens when a government entity has demanded or been given a lease as part of a governmental process, such as when a landowner is seeking permission to build? A “public record” is defined in the code as “the original or any copy of any documentary material that: (i) is made by a unit or an instrumentality of the State or of a political subdivision or received by the unit or instrumentality in connection with the transaction of public business.” GP § 4-101(j)(1)(i).

There are certain exceptions in the MPIA to the unfettered right to inspect public records. One of them is found in GP § 4-335, which provides that a government custodian may not permit inspection of the part of a public record obtained from a person or government entity that contains: 1) a trade secret; 2) confidential commercial information; 3) confidential financial information; or 4) confidential geological or geophysical information. In the instant case, it was exemption #2 — confidential commercial information — that was at issue.

In support of its motion for summary judgment, Calvert Tract submitted the affidavit of its employee, Jane Cafritz, attesting to her belief that:

• The lease was the product of extensive negotiations between Whole Foods and Calvert Tract;
• The county had been given only a redacted copy of the lease;
• Calvert Tract does not customarily make its commercial leases available to the public, and did not do so, or intend to do so, when providing its Whole Foods lease to County Executive Baker;
• Whole Foods also did not make the lease available to the general public; and
• Should the lease be made public, it would put Calvert Tract at a disadvantage when negotiating future commercial leases for the remaining rental units in the shopping center property.

Amster opposed the defense's motion, presenting as evidence an affidavit from an attendee of a public meeting concerning the Calvert Tract building project. The meeting attendee stated that Calvert Tract's project manager had told the assemblage that the Whole Foods lease required “grading [to] begin by August 2013″ and that the store “must open by February 2015.” Based on these statements, Amster argued that the information he sought had already been made public, and that the County should not refuse to release information to him that had previously been made public.

The Courts Interpret The MPIA

Because the MPIA's exemption for confidential commercial information from the requirement of public access is similar to that found in the federal Freedom of Information Act (FOIA), the Circuit Court for Prince George's County looked for guidance to the test set out in Critical Mass Energy Project v. Nuclear Regulatory Commission, 975 F.2d 871, 298 U.S. App. D.C. 8 (D.C. Cir. 1992), concerning what type of information constitutes “commercial information” not subject to disclosure under FOIA. (The FOIA exempts from the requirement of disclosure “matters” that are “trade secrets and commercial or financial information obtained from a person and [that is] privileged or confidential.” 5 U.S.C. § 552(b)(4) (2012).) Using the Critical Mass test — which asks whether the information the petitioner seeks is customarily released to the public by the person volunteering it to the government — the court concluded that the Calvert Tract/Whole Foods lease was not subject to disclosure under the MPIA.

The Court of Special Appeals affirmed, even though Petitioner Amster presented evidence that a representative of Whole Foods had revealed information on a radio program about terms of a lease for a different commercial property — attempting to show that Whole Foods does make this sort of information public.

This intermediate appellate court approved of the lower court's use of the Critical Mass test, and further explained that even if a party to a commercial lease reveals some minor details of that lease to the public, the confidential-commercial-information exemption to disclosure in the MPIA is not waived for the entire lease. In addition, said that court, even the release of severable portions of the lease must be avoided for public policy reasons, as disclosure in one case could deter others from voluntarily providing pertinent commercial information to the government in future cases. And, finally, the intermediate appeals court determined that the privilege against disclosure found in the MPIA belongs to the government, not to the parties that are the subject of government action, so that even if Calvert Tract's or Whole Foods' disclosure of confidential lease information might seem to render it public information, the County retained the right not to disclose it.

The Court of Appeals of Maryland granted certiorari to consider if and when the invocation of the commercial exemption in the MPIA overrides the statutory bias in favor of public access to government-held information. Judge Sally D. Adkins, writing for the court, noted that this case provided the court's “first opportunity to interpret the MPIA's confidential commercial information exemption in the context of information provided to the government.”

Critical Mass, or No?

Before the Court of Appeals of Maryland, Amster's first argument for vacating the lower courts' summary judgment ruling in favor of the County and Calvert Tract was that the trial court erred in adopting the Critical Mass test. The court therefore began by comparing the holdings in Critical Mass with those in National Parks and Conservation Ass'n v. Morton, 498 F.2d 765, 162 U.S. App. D.C. 223 (D.C. Cir. 1974).

Both Critical Mass and Morton enunciate a test for determining if a government entity should release commercial information to the public in response to a FOIA request, and each is still good law, though one is more protective of confidential information than the other. Critical Mass holds that confidential information should be released in response to a FOIA request only if it is the type of information the business customarily releases to the public. Morton, which involved confidential information that the government required the holder to give to it by law, holds that such information should be released unless doing so would either: 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.

Application of the Morton test leads to more public access than the application of the test in Critical Mass. When should one test be used instead of the other? The difference is this, said the Court of Appeals: Courts must ask whether the confidential information was required to be turned over to the government (generally, by statute or regulation) or if it was instead voluntarily provided to the government entity. Information provided to the government voluntarily, and not in response to a regulatory or statutory mandate, would likely dry up, stated the Critical Mass court, if “the persons whose confidences have been betrayed will, in all likelihood, refuse further cooperation.”

In the interest of encouraging the voluntary provision of confidential information to the government when such will help it to carry out its duties, that court declined to use the two-pronged test of Morton and opted instead to adopt language from a Senate Report explaining the purpose of the FOIA: In that report, the Senate stated that information given to a government entity would be considered “confidential” if it “would customarily not be released to the public by the person from whom it was obtained.” This is the Critical Mass Test.

The later-formulated Critical Mass test, said the Maryland Court of Appeals, was created by the D.C. Circuit on public policy grounds: to encourage the voluntarily provision of information. The court noted that this test has been widely approved by courts nationwide, for the same reason. See, e.g., Brown v. Perez, 835 F.3d 1223, 1231 (10th Cir. 2016); Contract Freighters, Inc. v. Sec'y of U.S. Dep't of Transp., 260 F.3d 858, 862 (8th Cir. 2001) (addressing FOIA request for information compelled by the government, but noting Critical Mass test for information voluntarily provided); Cozen O'Connor v. U.S. Dep't of Treasury, 570 F. Supp. 2d 749, 777 (E.D. Pa. 2008) (“For purposes of Exemption 4, the test of confidentiality differs depending upon whether the information was required by, or was voluntarily provided to, the agency.”). On this point, the Maryland Court of Appeals concluded:

We agree that the Critical Mass test properly balances the need to protect confidential information voluntarily provided to the government with the public interest in disclosure — under both the FOIA and the MPIA. See Critical Mass, 975 F.2d at 878-79. Accordingly, we adopt the Critical Mass test for determining what information is “confidential” under the MPIA exemption. Thus, we hold that commercial information is “confidential” — and therefore exempt from MPIA disclosure — if it “would customarily not be released to the public by the person from whom it was obtained.”

Critical Mass, 975 F.2d at 879.

The Calvert Tract/Whole Foods lease was voluntarily provided to Prince George County Executive Rushern L. Baker. Therefore, the correct test to use to determine if that lease should be made available in response to Amster's request through the MPIA was the Critical Mass test, Maryland's high court confirmed. This being so, the question had to be, was the lease between Calvert Tract and Whole Foods a document memorializing an agreement that Calvert Tract would customarily release to the public? The answer to that question had to be no, since commercial property leases entered into by Calvert Tract were not generally released to the public. This might seem to end the inquiry in Calvert Tract's and the St. George County's favor, mandating affirmation of the lower court's rulings. But there was more.

Does the FOIA Exempt More Than the MPIA Does?

Amster's second argument on appeal was that the trial court should have considered the contents of the commercial lease before determining that the entire document was exempt from disclosure. He asserted that while the FOIA exempts entire documents containing confidential information, the MPIA does not.

Since the MPIA requires government entities to allow inspection of public records unless such inspection is contrary to state or federal law or the contents of the records are deemed “privileged or confidential” (GP § 4-301), the court needed to look at the exemptions from disclosure. “Some of these exemptions are mandatory,” the court noted, requiring “the agency to withhold the protected records. GP § 4-304; GP § 4-328. Others are discretionary — the agency can decide whether it would be 'contrary to the public interest' to disclose the requested records. GP § 4-343.”

The MPIA's mandatory exemptions, requiring the entire document to be kept confidential, include specifically identified records like those concerning adoption and medical care. Others, however, can be produced for public consumption if certain pieces of information are excised from them, and they may be released in this redacted form as long as the information that must be protected from disclosure is not included. See Fioretti v. Maryland State Bd. of Dental Exam'rs, 351 Md. 66, 87 (1998).

The part of the MPIA relevant to this case states that “[a] custodian shall deny inspection of the part of a public record that contains any of the following information provided by or obtained from any person or governmental unit: … (2) confidential commercial information.” GP § 4-335 (emphasis added). It is this language that Amster pointed to in making his argument that the MPIA is more forgiving than the FOIA, because the FOIA would block the entire document even if only a part of it contains confidential information.

Not so, said the Supreme Court of Maryland, which explained:

The FOIA's exemption for confidential commercial information applies to “matters” that fall within that category. 5 U.S.C. § 552(b). It does not apply to entire documents. Indeed, at the end of the section listing the FOIA's exemptions, the statute explains that “[a]ny reasonably segregable portion of a record shall be provided to any person requesting such record after deletion of the portions which are exempt under this subsection.” Id. The protected information should simply be redacted. Additionally, the D.C. Circuit has explained, “The focus of the FOIA is information, not documents, and an agency cannot justify withholding an entire document simply by showing that it contains some exempt material.”

Mead Data Cent., Inc. v. U.S. Dep't of Air Force, 566 F.2d 242, 260, 184 U.S. App. D.C. 350 (D.C. Cir. 1977).

Even when an agency has established that a document contains protected information, “it must nonetheless disclose all reasonably segregable, nonexempt portions of the requested record(s).” Judicial Watch, Inc. v. U.S. Dep't of Treasury, 802 F. Supp. 2d 185, 206 (D.D.C. 2011) (citation omitted). Thus, both the MPIA and the FOIA only protect the specific confidential commercial information within a requested document. Neither Act protects the entirety of any document that contains such information.

One Last Thing: A Factual Inquiry

Having determined that the MPIA and FOIA both allow release of redacted documents that are voluntarily given to government entities, Amster advanced one final argument: that the trial court erred in failing to determine whether aspects of the Calvert Tract/Whole Foods lease were not confidential, and should have been produced in response to his MPIA request. The respondents countered that there was no dispute of material fact as to whether the lease was confidential — it simply was. Therefore, they argued, the trial court had no duty to inquire into the contents of the lease, and properly exercised its discretion in granting summary judgment.

On this point, Maryland's high court agreed with Amster, referencing its previous holdings in Cranford v. Montgomery County, 300 Md. 759, 481 A.2d 221 (1984), a case in which a newspaper sought access to documents regarding the construction of government buildings from the County of Montgomery. The County declined to provide them, citing exemptions under the MPIA, including the confidential commercial information exemption. In denying the disclosure request, the County provided general descriptions of contents of the documents and stated which exemption applied. This, the court said in Cranford, was not enough, because “[t]he custodian who withholds public documents carries the burden of justifying nondisclosure.”

The Cranford court explained that courts have two options when faced with the question whether a document has properly been kept confidential following an MPIA request. First, it can direct the document's custodian to provide “a sufficiently detailed description and explanation to enable the trial court to rule whether a given document, or portion thereof, is exempt.” If the custodian fails in this, or if there is no way for the custodian to create a detailed description without disclosing the document's confidential information, then the court should conduct an in-camera inspection of the document. Neither of these things was done by the trial court or the intermediate appellate court in Amster v. Baker, so remand was necessary.

On remand, the Maryland Court of Appeals directed the trial court to obtain an explanation of the reasons the custodian wants to withhold the Calvert Tract/Whole Foods lease, prepared in accordance with the teachings of Vaughn v. Rosen, 484 F.2d 820, 157 U.S. App. D.C. 340 (D.C. Cir. 1973). (The so-called “Vaughn Index” is prepared by a government agency, subdividing the document in issue into manageable parts cross-referenced to the relevant portion of the government's justification for withholding the information.) If this is unsatisfactory, in-camera review will be necessary.

Conclusion

Commercial real estate landlords and their advisers need to be cognizant that documents voluntarily provided to a government entity as a means to further immediate business interests may be more open to future public access than they would like — even when they contain confidential commercial information that the landowner does not want disseminated. Yes, federal and state laws may offer protections against the release of confidential commercial lease terms, but the road to securing those protections may be a long and expensive one. As always, before making a move that might seem expedient today, it is wise to consider all possible unintended consequences.

***** Janice G. Inman is Editor-in-Chief of Commercial Leasing Law & Strategy.