In Michaelis, Montanari & Johnson v. Superior Court of California, (— Cal.Rptr.3d —, 2006 WL 1699877, Cal., June 22, 2006), the California Supreme Court addressed the issue of whether California’s Public Records Act requires a public agency to disclose competitive lease proposals before the agency has a chance to negotiate with the companies or individuals who submitted the best proposals. The Supreme Court held that “public disclosure of such proposals properly may await conclusion of the agency’s negotiation process, occurring before the agency’s recommendation is finally approved by the awarding authority.”
Facts
The City of Los Angeles Department of Airports (“Department”) issued a “Request for Proposals” (“RFP”) for the lease of a parcel of land at the Van Nuys Airport. The RFP provided that the Department could select the successful proposal based on a number of criteria; reject any or all proposals and advertise for new proposals; and elect to negotiate with the companies or individuals that it found to have submitted the best proposals. After the Department negotiated with the companies or individuals, it would submit a proposed lease to the Board of Airport Commissioners for approval, and if the proposed lease would exceed five years, to the Los Angeles City Council. The public would have five days to review the proposal and proposed lease before the lease could be approved.
After the deadline for submitting proposals had passed, but before the Department had selected a successful bidder, the law firm of Michaelis, Montanari & Johnson requested copies, under California’s Public Records Act, of all proposals submitted in response to the RFP. The Department informed the law firm that it would not provide the requested copies until after it concluded its negotiations with the yet to be named successful proposal. The law firm filed a lawsuit to force the Department to honor the request for copies of the proposals. The trial court found in favor of the Department. The Court of Appeal reversed the trial court’s decision finding that the Department had failed to demonstrate a “clear overbalance” in favor of delaying disclosure until after its negotiation process. The Department appealed the Court of Appeal’s decision.
Decision
California’s Public Records Act provides “as a general rule, public records are open to inspection at all times, during office hours, ‘and every person has a right to inspect any public record, except as hereafter provided.'” The Act contains specific exemptions for certain records, but Government Code section § 6255, subdivision (a), contains a broad- catchall exemption which allows an agency to “justify withholding any record by demonstrating that . . . on the facts of the particular case the public interest served by not disclosing the record clearly outweighs the public interest served by disclosure of the record.” Section 6255 contemplates a case-by-case balancing process, with the burden of proof on the agency trying to withhold disclosure “to demonstrate a clear overbalance on the side of confidentiality.”
The Court noted that the objective of the competitive bidding process is “to assure a healthy degree of competition, to guard against discrimination, favoritism, or extravagance, and to assure the best social, environmental, and economic result for the public.” Although the public may have a legitimate interest in scrutinizing the process utilized to select the winning bid, the law firm failed to offer a compelling reason why this scrutiny cannot be as effective after the Department has conducted negotiations. The Court concluded that public disclosure of the competing bid proposals after the Department completes negotiations, but before the Board approves the award of a contract, would give the public ample time to scrutinize and protest any proposed award.
The Court reasoned that the public will benefit from delaying disclosure until after the Department has completed its negotiations. Disclosure prior to negotiations may hinder the Department’s ability to obtain the most favorable contract. If a negotiating company finds out the details of other proposals, the company would be placed in an advantageous position because it would no longer be in doubt as to its bargaining position in relation to the other companies or individuals who submitted proposals. A company may also refuse to accept the Department’s requests during the negotiation process if it knows what others would offer in relation to the same requests. Disclosure of the various proposals prior to negotiations could ultimately have an adverse affect on the Department’s “ability to maximize its financial return on the lease.” Additionally, individuals or companies submitting proposals might be hesitant to disclose creative or innovative ideas in their initial proposals if there is a threat that their competitors might be able to obtain a copy of the proposal during the negotiation process. This mindset could result in the submission of inferior proposals; a result which would be detrimental to the public interest.
The Court further reasoned that allowing the public to have “‘input into the selection of, and negotiation with, potential lessees would add undesirable pressures, political and otherwise, to the process.'” Although the application of such pressures may also occur when the lease is submitted for final approval, the Court concluded “the public interest seemingly would better be served by allowing [the Department] to negotiate the terms of its lease without facing those pressures.” The Court also observed that the federal Freedom of Information Act, on which California’s Act is modeled, prohibits disclosure of bid or proposal information before a contract is awarded.
After weighing the competing public interest, the Court concluded that the proposals “were, during the negotiation process, exempt under Government Code section 6255 from the disclosure requirements of the Act.”
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