State ex rel. Luken v. Corp. for Findlay Mkt. of Cincinnati

[Cite as State ex rel. Luken v. Corp. for Findlay Mkt. of Cincinnati, 2012-Ohio-2074.]

IN THE COURT OF APPEALS

FIRST APPELLATE DISTRICT OF OHIO

HAMILTON COUNTY, OHIO

STATE OF OHIO : CASE NO. C-100437

EX REL. KEVIN P. LUKEN,

:

Relator, O P I N I O N.

:

vs.

:

CORPORATION FOR

FINDLAY MARKET OF CINCINNATI, :

and :

CITY OF CINCINNATI, :

Respondents. :

Original Action in Mandamus

Judgment of the Court: Writ Denied

Date of Judgment Entry: May 11, 2012

Kevin P. Luken, for Relator,

Rendigs, Fry, Kiely & Dennis, LLP, Felix J. Gora and Ann K. Schooley, for

Respondent Corporation for Findlay Market of Cincinnati,

John P. Curp, City Solicitor, and Terrance Nestor, Assistant City Solicitor, for

Respondent City of Cincinnati.

Please note: This case has been removed from the accelerated calendar.

OHIO FIRST DISTRICT COURT OF APPEALS

F ISCHER , Judge.

{¶1} In this original action, relator Kevin Luken has petitioned for a writ of

mandamus to compel the respondents—the Corporation for Findlay Market of

Cincinnati (“CFMC”) and the city of Cincinnati—to provide certain records concerning

Findlay Market under the Ohio Public Records Act, R.C. 149.43. Findlay Market is a

public market located in the Over-the-Rhine neighborhood of Cincinnati. The city

leases the property comprising the market to CFMC, which manages and operates the

market under an exclusive agreement with the city.

{¶2} The records at issue are license agreements between CFMC and

merchants for retail space at Findlay Market. The license agreements are essentially

commercial subleases. Luken has received copies of the license agreements; however,

their term and rent provisions have been redacted. CFMC maintains that it is not

subject to R.C. 149.43 because the nonprofit corporation is neither a public office under

the functional-equivalency test of State ex rel. Oriana House, Inc. v. Montgomery, 110

Ohio St.3d 456, 2006-Ohio-4854, 854 N.E.2d 193, nor a person responsible for public

records under State ex rel. Cincinnati Enquirer v. Krings, 93 Ohio St.3d 654, 758

N.E.2d 1135 (2001). CFMC further argues that the redacted provisions are trade secrets

under the Ohio Uniform Trade Secrets Act, R.C. 1333.61 et seq., and therefore not

public records under State ex rel. Besser v. Ohio State Univ., 87 Ohio St.3d 535, 721

N.E.2d 1044 (2000).

{¶3} We referred this matter to a magistrate for trial under App.R. 34(A).

Following trial, the magistrate prepared a decision denying the writ. Luken has filed

amended objections to the magistrate’s decision; therefore, we must now “undertake an

independent review as to the objected matters to ascertain that the magistrate has

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properly determined the factual issues and appropriately applied the law.” Civ.R.

53(D)(4)(d); App.R. 34(C). We, therefore, review the magistrate’s decision de novo

with respect to fact and law. See Azarova v. Schmitt, 1st Dist. No. C-060090, 2007-

Ohio-653, ¶ 32.

Factual Background

{¶4} Having repeatedly, thoroughly, and independently reviewed the record,

we find the following facts.

{¶5} Findlay Market has served the people of Cincinnati since the 1850s.

Before July 2004, the city managed the market under the Cincinnati Municipal Code,

which authorizes the city manager to designate a market manager to make operational

decisions for the market. Cincinnati Municipal Code 845-3.

{¶6} In August 2003, at the city’s request, U-B Corporation incorporated

CFMC as an Ohio nonprofit corporation “to preserve and promote the historical,

traditional, and cultural aspects of Findlay Market as a treasured living landmark of the

greater Cincinnati community.” Jt. Ex. 1. To advance this purpose, the articles of

incorporation granted CFMC the powers to

d) Secure and maintain a lease and/or management

contract with the City of Cincinnati for city-owned

facilities located in the Findlay Market District of the

Over-the-Rhine neighborhood * * *

e) Sublease appropriate space to merchants, social service

agencies, and community groups to support community

economic development and educational and cultural

activities in the Findlay Market District of the Over-the-

Rhine neighborhood * * * [and]

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g) Work with appropriate City of Cincinnati officials

whose jurisdiction includes City property and public

market concerns. Jt. Ex. 1.

{¶7} On July 1, 2004, CFMC entered into a management agreement and

lease agreement with the city. These agreements were renewed on June 8, 2009, and

remain in effect until July 1, 2014. Under the management agreement, CFMC has the

exclusive right to manage and operate Findlay Market. CFMC may establish “such

rules and regulations as CFMC deems in its discretion to be reasonable and proper

concerning Market Operations.” Jt. Ex. 2. Indeed, CFMC maintains day-to-day control

over the market.

{¶8} Section 6(a) of the management agreement provides that

The City assigns its rights under existing contracts with

subtenants at the Market to [CFMC]. [CFMC] shall enter

into license or lease agreements with existing and new

subtenants regarding occupying space in the Market and

the Market Facilities. [CFMC] shall have the discretion to

determine the amounts of consideration to be paid, and

the responsibility for collecting those amounts and using

the revenues to pay for Market Operations. Id.

{¶9} Section 6(e) provides that

[CFMC] shall maintain a complete set of books and

records in a form and manner approved by the City,

showing all revenue collected and all expenditures made

in connection with the cooperation of the Market Facilities

along with such supporting data and documents as

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prescribed by the City. Such books and records shall be

kept in such a manner as to make them easily reconcilable

with the reports and forms to be submitted to the City by

[CFMC]. The City shall have the right at any time to

examine the records, books, data and documents kept by

[CFMC] regarding the operation and maintenance of the

Market Facilities. Id.

{¶10} In addition, Section 5 requires the city to reimburse CFMC for certain

expenses incurred in operating the market. These reimbursements totaled 45.4 percent

of CFMC’s revenue in the fiscal year ending June 30, 2010, and 31.2 percent in the

fiscal year ending June 30, 2009.

{¶11} In April 2010, Luken requested CFMC to provide various records under

R.C. 149.43, including “[a]ll leases, license agreements or any other agreements the

Corporation has with any person or entity that leases, licenses, uses or occupies any

space managed by the Corporation since January 1, 2009.” Jt. Ex. 8. CFMC claimed

that it was not subject to R.C. 149.43, and advised Luken to obtain the records from the

city. In May 2010, Luken asked the city to request the records from CFMC under

Section 6(e) of the management agreement, and to provide him with any records it

received.

{¶12} There is no dispute that the city provided Luken with the records that

CFMC produced, including two redacted license agreements for retail space at the

market. There is also no dispute that the redactions obscure the term and rent

provisions of those agreements. There is a dispute, however, as to whether these

provisions are trade secrets.

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OHIO FIRST DISTRICT COURT OF APPEALS

{¶13} Robert Pickford, the president and chief executive officer of CFMC,

testified that CFMC maintains an unwritten policy to keep the license agreements

confidential. Pickford claimed that CFMC keeps the license agreements in a locked

cabinet, and does not “share the information to anyone who doesn’t absolutely have to

have it.” T.p. 251. Although Pickford maintained that the term and rent provisions are

not shared with the city despite Section 6(e) of the management agreement, he

conceded that in May 2009 he had sent city officials a memorandum detailing

negotiations between CFMC and one merchant for a license agreement. He also

admitted that in September 2006 he had sent Luken’s brother—a Findlay Market

merchant— a letter describing the method for setting the rent provisions in his license

agreement. Pickford explained that CFMC has since transitioned away from formulaic

rent calculations, and has adopted a market-oriented approach.

{¶14} Commercial real estate expert Karman Stahl testified that the release of

the term and price provisions would place CFMC at a competitive disadvantage in

negotiating with current and prospective merchants. Stahl maintained that such

information is generally kept secret by commercial landlords, and that competitors in

the commercial real estate market spend “a lot of time looking for that information.”

T.p. 314. “If everybody knew when everybody’s leases were expiring,” she explained,

“we would just pursue their tenants and try to pull them out of their building at the time

* * * right before their lease expired.” Id. When asked whether keeping the term and

price provisions confidential provides an economic benefit to the landlord or property

manager, Stahl replied, “Definitely.” T.p. 322.

The Magistrate’s Decision and Luken’s Objections

{¶15} Following trial, the magistrate prepared a decision denying the writ,

concluding that the redacted provisions are trade secrets and, therefore, exempt from

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OHIO FIRST DISTRICT COURT OF APPEALS

disclosure under R.C. 149.43(A)(1)(v). See Besser, 87 Ohio St.3d at 540, 721 N.E.2d

1044. The magistrate further decided that CFMC is not subject to mandamus under

R.C. 149.43 because the private entity is neither a “public office” under the functional-

equivalency test of Oriana House, 110 Ohio St.3d 456, 2006-Ohio-4854, 854 N.E.2d

193, nor a “person responsible for public records” under Krings, 93 Ohio St.3d 654, 758

N.E.2d 1135.

{¶16} Luken has filed eight amended objections to the magistrate’s decision.

The first three concern whether CFMC is a “public office,” the fourth challenges the

magistrate’s application of Krings, and the last four regard whether the redacted

provisions are trade secrets.

Analysis

{¶17} The Ohio Public Records Act provides that upon request, “all public

records responsive to the request shall be promptly prepared and made available for

inspection to any person at all reasonable times during regular business hours.” R.C.

149.43(B)(1). A person allegedly aggrieved by the failure to make a public record

available “may commence a mandamus action to obtain a judgment that orders the

public office or person responsible for the public record to comply with [R.C. 149.43(B)]

* * * .” R.C. 149.43(C)(1). “In order to be entitled to a writ of mandamus, the relator

must establish a clear legal right to the relief prayed for, that respondent has a clear

legal duty to perform the requested act, and that relator has no plain and adequate

remedy at law.” State ex rel. Seikbert v. Wilkinson, 69 Ohio St.3d 489, 490, 633 N.E.2d

1128 (1994). Relators seeking public records in mandamus, however, need not

establish the lack of an adequate remedy at law. State ex rel. Am. Civ. Liberties Union

of Ohio, Inc. v. Cuyahoga Cty. Bd. of Commrs., 128 Ohio St.3d 256, 2011-Ohio-625,

943 N.E.2d 553, ¶ 24.

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OHIO FIRST DISTRICT COURT OF APPEALS

{¶18} Because the city has provided Luken with the records in its possession,

we hold that a mandamus judgment against the city would be improper. See State ex

rel. Striker v. Smith, 129 Ohio St.3d 168, 2011-Ohio-2878, 950 N.E.2d 952, ¶ 28. Our

analysis, therefore, focuses on whether CFMC is a public office or a person responsible

for public records, and whether the requested records are exempt from disclosure as

trade secrets.

CFMC is not a Public Office

{¶19} “ ‘Public office’ includes any state agency, public institution, political

subdivision, or other organized body, office, agency, institution, or entity established by

the laws of this state for the exercise of any function of government.” R.C. 149.011(A).

In Oriana House, 110 Ohio St.3d 456, 2006-Ohio-4854, 854 N.E.2d 193, the Ohio

Supreme Court considered how to determine whether a private entity qualifies as a

“public institution” under R.C. 149.011(A), and thus a “public office” for purposes of

R.C. 149.43. The court adopted the so-called “functional-equivalency test,” under

which courts “must analyze all pertinent factors, including (1) whether the entity

performs a governmental function, (2) the level of government funding, (3) the extent

of government involvement or regulation, and (4) whether the entity was created by the

government or to avoid the requirements of the Public Records Act.” Id. at paragraph

two of the syllabus. Although the court acknowledged that R.C. 149.43 should be

liberally construed, with any doubt resolved in favor of disclosure, it further held that

“the functional-equivalency analysis begins with the presumption that private entities

are not subject to the Public Records Act absent a showing by clear and convincing

evidence that the private entity is the functional equivalent of a public office.” Id. at

¶ 15 and ¶ 26.

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OHIO FIRST DISTRICT COURT OF APPEALS

{¶20} In considering the Oriana House factors, the magistrate determined

that (1) CFMC does not perform a governmental function, (2) CFMC receives

significant government funding, (3) government involvement in CFMC is limited, and

(4) CFMC was neither created by the government nor to avoid the requirements of

R.C. 149.43. The magistrate concluded that on balance, there was not clear and

convincing evidence that CFMC is a public office.

{¶21} In his first amended objection, Luken argues that CFMC performs a

government function. He cites the fact that Findlay Market was managed by the city for

over 150 years. This court, however, interprets “governmental function” in this context

not as activities that the government has performed, but rather as activities that are

uniquely governmental. Compare State ex rel. Repository v. Nova Behavioral Health,

Inc., 112 Ohio St.3d 338, 2006-Ohio-6713, 859 N.E.2d 936, ¶ 30 (providing mental-

health care for the uninsured and compensating for the inadequacy of benefits in

commercial health-insurance plan “is uniquely a government function”); Oriana House

at ¶ 28 (administering a community-based correctional facility is a government

function); with State ex rel. Bell v. Brooks, 130 Ohio St.3d 87, 2011-Ohio-4897, 955

N.E.2d 987, ¶ 22 (providing insurance to counties is not a government function); State

ex rel. Dist. Eight Regional Organizing Commt. v. Cincinnati-Hamilton Cty.

Community Action Agency, 192 Ohio App.3d 553, 2011-Ohio-312, 949 N.E.2d 1022,

¶ 9-10 (1st. Dist.) (providing home weatherization and energy-efficiency services to low-

income individuals is not a government function).

{¶22} We hold that the management and operation of a public market, an

activity ubiquitously performed by nongovernmental entities, is not a governmental

function. The first amended objection is overruled.

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OHIO FIRST DISTRICT COURT OF APPEALS

{¶23} In his second amended objection, Luken argues that the city is actively

involved in the management of Findlay Market. “In addressing the question of the

extent of government involvement or regulation, the Ohio Supreme Court has looked to

the control over day-to-day operations of an entity.” Dist. Eight Regional Organizing

Commt. at ¶ 12; see Oriana House at ¶ 33.

{¶24} Under the management agreement, CFMC has the right to create rules

and regulations for Findlay Market, and moreover, to “determine the amounts of

consideration to be paid, and the responsibility for collecting those amounts and using

the revenues to pay for Market Operations.” Although the city retains some rights

under the management agreement and lease agreement, we cannot say that it controls

the day-to-day operations of CFMC. The second amended objection is overruled.

{¶25} In his third amended objection, Luken argues that CFMC was created

by the city. Because the city requested the creation of a nonprofit corporation to

manage and operate Findlay Market, we agree and find that the city created CFMC.

Although there is no indication that CFMC was created or used by the city to avoid the

requirements of R.C. 149.43, we must sustain the third amended objection.

{¶26} We further agree with the magistrate’s conclusion that the city’s funding

of CFMC —which totaled nearly half of its revenue in the fiscal year ending June 30,

2010—is not just significant, but overwhelming.

{¶27} Nevertheless, based on all the relevant factors, we conclude that on

balance, Luken has not demonstrated by clear and convincing evidence that CFMC is a

public institution under the Oriana House functional-equivalency test. The nonprofit

corporation is, therefore, not a public office under R.C. 149.43.

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CFMC is a Person Responsible for Public Records

{¶28} In his fourth amended objection, Luken essentially argues that the

magistrate incorrectly determined that CFMC is not a person responsible for public

records and, therefore, is not subject to mandamus under R.C. 149.43. “In order for a

private entity to be subject to R.C. 149.43, (1) it must prepare the records in order to

carry out a public office’s responsibilities, (2) the public office must be able to monitor

the private entity’s performance, and (3) the public office must have access to the

records for this purpose.” Krings, 93 Ohio St.3d at 657, 758 N.E.2d 1135.

{¶29} In Krings, Hamilton County and the city of Cincinnati entered into an

agreement for the construction of a new football stadium for the Cincinnati Bengals. In

the agreement, the county and the city specified that they had “determined that the

construction of the new Stadium on the Cincinnati riverfront will create an

extraordinary opportunity to eliminate blight and transform the riverfront into a

nucleus of economic development and to make the Riverfront an integral part of a

redeveloped downtown Cincinnati.” Id. at 655. Pursuant to statutory authority, the

board of county commissioners contracted with two private companies to construct the

stadium. Id. at 658. “In these contracts, [the construction companies] were obligated

to prepare records related to construction costs for the publicly funded stadium, the

board [of county commissioners] and the county had the right to monitor their

performance under the contracts, and the board was authorized to access records in

order to monitor their performance.” Id.

{¶30} The Cincinnati Enquirer petitioned for a writ of mandamus to compel

the county administrator and the two construction companies to provide

correspondence relating to cost overruns for the stadium project, including internal

business records.

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{¶31} The Ohio Supreme Court held that mandamus was proper against the

companies, recognizing that they were constructing the stadium on behalf of the

county, which was authorized by law to build it. See R.C. 307.023. Otherwise, the court

concluded, “a private entity performing a government contract that obligates it to act to

further the best interest of the governmental entity could prepare records concerning

massive cost overruns and fail to divulge these records to the public office unless the

office specifically requested the records.” Id. at 559.

{¶32} Although the city has turned over the reins of management to CFMC, it

has not abdicated its responsibility to Findlay Market. After all, the city still owns the

property comprising the market, funds a huge percentage of the operation, and clearly

desires its continued operation. In addition, under Section 6(a) of the management

agreement, the city has required CFMC to enter into license agreements with

merchants for space at the market. Meanwhile Section 6(e) of the management

agreement requires CFMC to

maintain a complete set of books and records in a form

and manner approved by the City, showing all revenue

collected and all expenditures made in connection with

the cooperation of the Market Facilities along with such

supporting data and documents as prescribed by the City.

Jt. Ex. 2.

{¶33} Under the same provision, the city has the “right at any time to examine

the records, books, data and documents kept by [CFMC] regarding the operation and

maintenance of the Market Facilities.” Id. Accordingly, we hold that the license

agreements are created to carry out the city’s responsibilities, the city is able to monitor

CFMC’s performance, and the city has access to the license agreements, under the

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management agreement, for this purpose. We, therefore, sustain the fourth amended

objection.

The Trade Secrets Exception

{¶34} Although we hold that the Krings test has been satisfied, Luken is not

necessarily entitled to unredacted copies of the license agreements. These records must

also be “public records” if they are to be recoverable under R.C. 149.43. In his fifth,

sixth, seventh, and eighth amended objections, Luken challenges the magistrate’s

conclusion that the records at issue are, by definition, not public records.

{¶35} Under R.C. 149.43(A)(1), “public record” is defined generally as any

record “kept by any public office * * * .” The statute exempts from this definition,

however, several categories of records, including those records “the release of which is

prohibited by state or federal law.” R.C. 149.43(A)(1)(v). “Exemptions to disclosure

must be strictly construed against the custodian of public records, and the burden to

establish an exception is on the custodian.” State ex rel. Cincinnati Enquirer v.

Hamilton Cty., 75 Ohio St.3d 374, 376-377, 662 N.E.2d 334 (1996).

{¶36} The Ohio Supreme Court has held that trade secrets—as defined by the

Ohio Uniform Trade Secrets Act, R.C. 1333.61 et seq.—are exempt from disclosure

under R.C. 149.43 because their release is prohibited by state law. Besser, 87 Ohio

St.3d at 540, 721 N.E.2d 1044. R.C. 1333.61(D) defines “trade secret” as

information * * * that satisfies both of the following:

(1) It derives independent economic value, actual or

potential, from not being generally known to, and not

being readily ascertainable by proper means by, other

persons who can obtain economic value from its

disclosure or use.

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(2) It is the subject of efforts that are reasonable under

the circumstances to maintain its secrecy.

{¶37} “The question whether a particular knowledge or process is a trade

secret is * * * a question of fact to be determined by the trier of fact upon the greater

weight of the evidence.” Fred Siegel Co., L.P.A. v. Arter & Hadden, 85 Ohio St.3d 171,

181, 707 N.E.2d 853 (1999).

{¶38} In this case, the redacted term and rent provisions of the license

agreements are subject to a confidentiality policy, and are not shared with the city,

despite the city’s right under Section 6(e) of the management agreement “to examine

the records, books, data and documents kept by [CFMC] regarding the operation and

maintenance of the Market Facilities.” Although there is evidence that city officials

received a memorandum detailing the negotiations for a license agreement between

CFMC and one merchant at Findlay Market, this disclosure was reasonable, given the

city’s unique relationship with CFMC. Thus, under the circumstances, we find that

CFMC has taken reasonable efforts to keep the redacted provisions secret.

{¶39} We further find that the confidentiality of these provisions provides

CFMC with a competitive advantage in negotiating with current and prospective

employees, thus, an economic benefit. The term and rent provisions of the license

agreements are, therefore, trade secrets under R.C. 1333.61(D). See Ohio Consumers’

Counsel v. Pub. Util. Comm. of Ohio, 121 Ohio St.3d 362, 2009-Ohio-604, 904 N.E.2d

853 (holding that the public utilities commission had reasonably concluded that

termination dates and consideration paid in side agreements were trade secrets);

accord Hymen Cos. v. Brozost, 119 F.Supp.2d 499 (E.D.Pa. 2000). We, therefore,

overrule the fifth, sixth, seventh, and eighth amended objections.

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Conclusion

{¶40} Although we hold that the Krings test has been satisfied, because the

records at issue are trade secrets as defined by R.C. 1333.61(D), they are exempt from

disclosure under R.C. 149.43(A)(1)(v). See Besser, 87 Ohio St.3d at 540, 721 N.E.2d

1044. The third and fourth amended objections are sustained, and the remaining

amended objections are overruled. The magistrate’s decision is adopted as modified,

and the writ of mandamus is denied.

Attorney Fees

{¶41} Luken has also requested attorney fees for pursuing this action.

Because we have determined that he is not entitled to the requested writ of mandamus,

we deny his request for attorney fees. State ex rel. Cincinnati Enquirer v. Streicher, 1st

Dist. No. C-100820, 2011-Ohio-4498, ¶ 34. The parties and their counsel in this case

have performed admirably and acted reasonably in light of the circumstances, and thus

an award of attorney fees would not be proper.

Writ denied.

H ILDEBRANDT , P.J., and S UNDERMANN , J., concur.

Please note:

The court has recorded its own entry this date.

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