Opinion
07/10014.
Decided on August 10, 2007.
McGuire Woods LLP, Attorneys for Petitioner, New York, NY.
Wormser, Keily, Galef Jacobs LLP, Attorneys for Respondents, White Plains, New York.
Hogan Hartson LLP, Attorneys for Respondent-Intervenor, New York, NY.
This is a proceeding brought pursuant to Article 78 of the Civil Practice Law and Rules, wherein petitioner seeks a judgment vacating the Village of Elmsford's decision to disclose revenue and sales information to Cablevision Systems Corporation, Inc. ("Cablevision") under the Freedom of Information Law ("FOIL"). The Village respondent does not oppose the petition but "ask[s] the Court to decide whether the requested documents should be disclosed pursuant to the Applicant's FOIL request." By stipulation of the parties, Cablevision has been joined as a party and opposes the petition. The petition is granted.
In January 2007, the Village of Elmsford granted Verizon New York, Inc. ("Verizon") a cable television franchise, the terms of which were set forth in a "Cable Franchise Agreement." Under the agreement, Verizon is required to submit quarterly reports to the Village indicating revenue and sales data broken down on a monthly basis. The reports detail monthly revenue from providing cable service, one time use based charges such as pay-per-view movies and installation fees, and other miscellaneous sources. This data is used to calculate the franchise fee Verizon must pay to the Village.
In May 2007, Verizon provided the Village with a report for the first quarter of 2007. Anticipating a FOIL request from Cablevision, Verizon also sent the Village a letter stating that the report was not subject to disclosure under FOIL. The letter stated that release of the report would cause Verizon substantial competitive injury and thus, Public Officers Law § 87(2)(d) precluded its disclosure.
On May 24, 2007, Cablevision submitted a FOIL request to the Village seeking a copy of the report. That same day, the Village informed Verizon via electronic mail that it intended to honor the FOIL request. The e-mail stated, in relevant part:
Although the Village is under no obligation to do so, this shall serve as notice to you, as requested in your said letter, that we have received the above request from Cablevision's counsel. However, the Village of Elmsford does not intend to become an arbiter of pending disputes between Verizon and Cablevision. Accordingly, the Village intends to provide a copy of the requested document within five (5) days of our receipt of the request, to wit on May 29th.
The Village subsequently informed Verizon that it planned to disclose the report on June 1, 2007. This petition followed.
On consent of the parties, this court enjoined disclosure of the report during the pendency of this proceeding.
Verizon claims that the report contains confidential and competitively sensitive information and that its disclosure to Cablevision would cause substantial competitive harm. Thus, Verizon asserts that the Village is prohibited from disclosing the report under the competitive injury exemption set forth in Public Officers Law § 87(2)(d).
Standing
As a threshold matter, this court must determine whether Verizon has standing to bring this proceeding. Cablevision claims that Verizon lacks standing because FOIL does not expressly authorize an action against a municipality to prohibit disclosure. A fundamental tenet of our system of remedies is that when a government agency seeks to act in a manner adversely affecting a party, judicial review of that action may be had. See Dairylea Cooperative, Inc. v. Walkely, 38 NY2d 6 (1975). To establish standing, a party must establish that the administrative action will, in fact, have a harmful effect on the party and that the interest asserted is arguably within the zone of interest to be protected by the statute. Id. Thus, a party does not need specific statutory authorization to commence a legal action, and "[o]nly where there is a clear legislative intent negating review or lack of injury in fact, will standing be denied." Id.
Petitioner has substantiated its claim that the release of revenue and sales information to Cablevision, its primary competitor, would cause economic and competitive injury. It has also established that its injury falls within the zone of interest sought to be protected by FOIL. While FOIL's purpose is to promote open government and public accountability, [See Gould v. New York City Police Dept., 89 NY2d 267 (1996)], the statute further reflects a clear legislative intent to prevent unfair competition. See Dairylea, supra, at 11. Public Officers Law § 87(2)(d) gives an agency the authority and discretion to deny public access to records that would cause substantial competitive injury to the party that provided the records. Therefore, petitioner's claim that the Village's disclosure of the report would cause competitive injury clearly lies within the "zone of interest" that the legislature sough to protect in enacting FOIL. Accordingly, petitioner has standing.
Public Officers Law § 87(2)(d)FOIL's purpose is to facilitate access to public documents and its disclosure provisions are to be narrowly construed. See Matter of Encore Coll. Bookstores v. Auxiliary Serv. Corp. of State Univ. NY at Farmingdale, 87 NY2d 410 (1995). Its statutory scheme mandates that "[e]ach agency . . . shall make available for public inspection and copying all records" unless the records fall within a statutory exemption. A party advocating non-disclosure has the burden of showing that the records fall within the ambit of one of the statutory exemptions. See In the Matter of Verizon v. Bradbury, 40 AD3d 1113 (2 Dept. 2007); See also Public Officers Law § 89(5)(e), which is applicable to a party advocating non-disclosure before a state agency.
Public Officers Law § 87(2)(d) provides that an agency "may deny access to records or portions thereof that . . . are trade secrets or are submitted to an agency by a commercial enterprise . . . and which if disclosed would cause substantial injury to the competitive position of the subject enterprise." The purpose of this exemption is "to protect the interests of a commercial enterprise in avoiding a significant competitive injury as a result of disclosure of information it provided to an agency, thereby fostering the state's economic development efforts to attract business to New York." See In the Matter of Verizon v. Bradbury, supra.
Whether "substantial competitive harm" exists for purposes of FOIL's exemption for commercial information turns on "the commercial value of the requested information to competitors and the cost of acquiring it through other means." Matter of Encore Coll. Bookstores, supra. In applying this standard, this court must consider how valuable the information will be to Cablevision, as well as the resultant damage to Verizon. Id.
Verizon asserts that disclosure of the information in the quarterly report, in conjunction with similar reports it provides to other municipalities in the region, would give Cablevision an unfair competitive advantage. It claims that the collective reports will provide Cablevision with continuously updated information detailing Verizon's market performance in the region. With this information, Cablevision will then have the ability to devise more targeted and precise marketing and pricing strategies.
More specifically, Verizon maintains that its rates for video services are public knowledge, as is the fact that it primarily attracts customers seeking the benefits of digital cable service. Verizon further claims that Cablevision's vast experience as a cable provider in the region gives Cablevision the ability to approximate how many subscribers to digital service opt for multiple cable boxes, premium channels and other premium services. Therefore, Verizon asserts that Cablevision will use the quarterly reports, in conjunction with its industry experience and knowledge of Verizon's rates, to determine with a high degree of accuracy the number of households in each community and in the larger region that obtain cable service from Verizon on a month-by-month basis. This information will allegedly give Cablevision the ability to assess the relative success of Verizon's regional and local marketing campaigns. Cablevision may then devise competitive responses precisely targeted to specific markets and demographics.
In addition, Verizon claims that disclosure of the usage-based charges will also give Cablevision an unfair competitive advantage. This revenue is primarily derived from providing video on-demand and pay-per-view services. Verizon asserts that if its revenue from these services is disclosed, Cablevision will know which of these services have been successful or unsuccessful and then can tailor the content of its own offerings and promotions accordingly. Similarly, Verizon asserts that the Village's disclosure of "other miscellaneous charges," which is primarily advertising revenue, will give Cablevision an unfair advantage in competing for local advertising revenue.
Verizon claims that none of this revenue information is available to Cablevision from any other source, and to obtain comparable information, Cablevision would have to hire a third party to conduct extensive market research. Thus, it maintains that disclosure of the information under FOIL would give Cablevision an unfair economic benefit.
Cablevision denies that disclosure will result in substantial competitive injury to Verizon. It has not, however, offered any evidence on the issue. Hence, the issue before the court is whether Verizon has met its burden of showing that disclosure of the report will result in a likelihood of substantial competitive injury. See Matter of Encore Coll. Bookstores, supra.
In opposition to the petition, Cablevision has submitted two affidavits stating that: (1) Verizon is obligated to file the report under New York Public Service Law § 215, which requires "the filing of all franchise applications and related documents as public records"; (2) Cablevision willingly files its franchise fee reports and has never opposed their disclosure; and (3) many municipalities include franchise fee reports as a line-item in their municipal budgets. The court rejects Cablevision's claim that the report is a public record under New York Public Service Law. Section 215(2)(a) of that law is specifically focused on the franchise application process and thus establishes that franchise applications and related documents shall be filed as public records. The report at issue in this case, which details revenue and specific sales information for the limited purpose of calculating franchise fees, is clearly distinguishable from a document submitted as part of an initial franchise application. Moreover, the fact that Cablevision has not objected to the disclosure of its own reports has little, if any, relevance to the issues before the court.
It is clear to this court that Cablevision seeks the reports for the purpose of gaining a competitive advantage. Cablevision and Verizon are competitors in the cable services industry. The franchise fee reports, analyzed over a period of time and in conjunction with similar reports from other municipalities, contain concrete information about Verizon's marketshare and growth in the region. It is reasonable to conclude that Cablevision can and will use this information to tailor its own marketing and pricing strategies. In fact, this court can conceive of no other purpose for which Cablevision would seek the information. Hence, it is likely that disclosure of the sales and revenue data would result in substantial competitive injury to Verizon.
In addition, the specific information in the report is otherwise unavailable. To obtain comparable data would require extensive market research. Moreover, such research would be costly, time consuming and could not replicate the precision with which the quarterly reports detail Verizon's market penetration. Thus, disclosure of the report would enable Cablevision to obtain otherwise unavailable information without expending its resources, further placing Verizon at a competitive disadvantage. See Markowitz v. Serio , 39 AD3d 247 (1st Dept. 2007). This is precisely the type of information that the legislature chose to exempt from FOIL's mandatory disclosure provisions.
As Verizon has demonstrated a likelihood of substantial competitive injury, it has shown that the franchise fee reports fall squarely within the ambit of Public Officers Law § 87(2)(d).
This determination, however, does not end the court's inquiry. Public Officers Law § 87(2) and subsection (d) state that an agency "shall . . . make available for public inspection and copying all records, except that such agency may deny access to records or portions thereof that . . . are trade secrets or are submitted to an agency by a commercial enterprise . . . and which if disclosed would cause substantial injury to the competitive position of the subject enterprise." (emphasis added). Hence, under Public Officers Law § 87(2) an agency has the discretion, with certain exceptions not applicable here, to disclose records even if such records fall within one of the categories of exempted material set forth in the statue. See Captial Newpapers v. Burns, 67 NY2d 562, 567 (1986); See also Hanig v. State Dept. of Motor Vehicles, 79 NY2d 106, 109 (1992).Therefore, the court rejects petitioner's claim that because the quarterly report falls under FOIL's competitive injury exemption, the Village is statutorily barred from disclosing the report. The Village clearly has the discretion to disclose the report. Petitioner, however, also raises a claim that the release of the report was an abuse of discretion.
Explicitly exempt from mandatory disclosure are records that "if disclosed would constitute an unwarranted invasion of personal privacy." Public Officer Law § 87(2)(b).
An Article 78 petition seeking review of a discretionary act is in the nature of mandamus to review. The standard of review in such a proceeding is whether the agency determination was arbitrary and capricious or affected by error of law. See Scherbyn v. Wayne-Finger Lakes Bd. of Educ. Services, 77 NY 753 (1991). An administrative agency's action is arbitrary and capricious if the action "is without sound basis in reason and is generally taken without regard to facts." See Matter of Pell v. Bd. of Educ. of Union Free School Dist., 34 NY2d 222, 231 (1974).
Here, the Village's decision to release the report pursuant to Cablevision's FOIL request was made without regard for relevant facts and lacked a sound basis in reason. Initially, the Village's determination does not reveal whether it was based on a legal determination that the report was not exempt from disclosure under Public Officers Law § 87(2)(d), or whether it found the report exempt from disclosure but nonetheless decided to release it as an exercise of discretion. Despite the fact that Verizon sent the Village a letter expressly stating that the report was not subject to disclosure under FOIL, the Village's only explanation for releasing the report was its desire to not become the arbiter of a pending dispute between Verizon and Cablevision. Thus, the Village's ultimate decision to release the report was based not on facts or an interpretation of the relevant legal standard, but solely on its desire to avoid fulfilling its obligation to make a determination of whether the report was subject to disclosure under FOIL. This is not a reasonable basis upon which a municipality may make a FOIL determination. Hence, the Village's determination to release the report was arbitrary and capricious. See Matter of Fischer v Markowitz, 166 AD2d 444 (2 Dept. 1990).
Notably, the Village has not submitted any evidence substantiating the basis for its determination. See CPLR 7804(e).
Further evidence of the Village's abdication of its responsibilities is its Answer in this proceeding. Such Answer asks the court to determine whether the documents should be disclosed because the "[r]espondents have no stake in the matter."
Accordingly, the petition is granted and the Village's decision to release the quarterly report is vacated.
This constitutes the Decision and Order of the court.