Corporations With Government Contracts Should Have Notice If Records Are Sought

April 21, 2021

If your company has a government contract, your corporate records are at great risk to your competitors or anyone that asks for them. Often, your team never even knows of the transaction.

By Terry Mutchler

Here’s some shocking news for those in every C-Suite of multinational corporations, including life sciences, gaming, cannabis pharmaceuticals—and the law firms that represent them.

If your company has a government contract, your corporate records are at great risk to your competitors or anyone that asks for them. Often, your team never even knows of the transaction.

These situations are coming at an alarming speed. In one case the records were valued at $750 million, and the government kept the company in the dark for more than 60 days that their records could be headed out the door.

This problem is a result of an unintended flaw in the Pennsylvania Right to Know Law that must be fixed.

The Right to Know law is important open government law that enables citizens to monitor the actions of their government and government officials. The Pennsylvania Supreme Court described it as a law that “empowers citizens by affording them access to information concerning the activities of their government.” See. SWB Yankees v. Wintermantel, 45 A.3d 1029, 1041 (Pa. 2012). It is designed to promote access to official government information in order to prohibit secrets, scrutinize the actions of public officials and make public officials accountable for their actions.” See, Bowling v. Office of Open Records, 990 A.2d 813, 824 (Pa. Commw. Ct. 2010), aff’d, 75 A.3d 453 (Pa. 2013).

It is a keystone of democracy for a better government. The law outlines that records are presumed to be public unless they fall into one of 30 categories of protected records when the agency, or the company, can demonstrate by a preponderance of the evidence that the records is off-limits. For example, the law protects confidential proprietary and trademark secrets of a company.

Here’s the problem: agencies are failing to provide proper notice to the third-party companies that their records are being sought.

Here’s just two of the several examples I’ve dealt with in the last two years.

I was vacationing in Iceland when my phone rang. The general counsel of a Viennese-based multinational corporation had a big problem—a competitor had sought the companies records under the Right to Know law after winning a $750 million government contract.

The state agency failed to give the company notice that its records were sought for more than 60 days. Worse, the deadline for submitting legal argument to protect the records had passed. Given only a 24-hour extension to submit argument for thousands of records, the company had lost their administrative battle to protect their records and they were poised to be released to a competitor.

What could they do?

 I filed a petition for reconsideration of the administrative decision and filed an immediate appeal to stay the records with the Commonwealth Court.

Failure to give a third party under the RTKL an opportunity and sufficient time to meaningfully defend their records is a flagrant abuse of power and is manifestly unreasonable.

It is well established that a third party has an interest in protecting its records in an agency’s possession and that such interest may not be waived by the agency.

But critically and here is where the flaw lies, the court properly explained that “neither the requester, the agency, nor the Office of Open Records (OOR) have a duty under the RTKL to provide notice to a third party whose interests may be implicated by a RTKL request,” There is the hole in the law that should have every C-Suite quaking.

Thankfully, the  court went on to say: we have “consistently recognized the serious due process concerns implicated by this lack of notice, particularly where the confidential information of a private entity is at stake.” See, Department of Corrections v. Maulsby, 121 A.3d 585, 590 (Pa. Cmwlth. 2015) (citing Bari, 20 A.3d at 648); see also Bagwell v. Pennsylvania Department of Education, 76 A.3d 81, 91 (Pa. Cmwlth. 2013) (recognizing “the necessity of protecting rights of third parties because the RTKL lacks a mechanism for providing notice and ensuring full participation”).

And so they held that the RTKL is construed to “afford due process to third parties, including the ability to submit evidence and assert exemptions at the appeals officer level.”

That company was lucky. There had been an initial denial of records (even though they didn’t know it) triggering an appeal to the Office of Open Records. However, if the agency had decided to release the records—there would be no appeal to the Office of Open Records and thus not ability to protect those records.

The law must be changed to add in a due-process protection.

And citizens should care deeply about this flaw in the law as well. Here’s why. In many states other than Pennsylvania, records of a company are off-limits period even when a taxpayer-funded contract is given. Only the contract itself is public. Pennsylvania is on the cutting edge, as it should be, that records related to a contract are public—but only if they are not confidential and proprietary or trade secreted.

I don’t want to see the Legislature revert to what other states do and cordon off all records related to a contract. Less transparency is not the answer. I’d rather see companies have due process, proper notice to meet their burden of proof under the law, and to have the opportunity to meaningfully defend their confidential and proprietary records.

In the meantime, corporations must undergo training on how to protect their records and to incorporate protections into their contracts.

The gaping hole is further broadened when an agency disagrees that that any of the records are confidential.

In fact, I was appointed the founding executive director of the Office of Open Records to oversee implementation and enforcement of the law. 

In one case I handled on behalf of electronic tolling company, the agency failed to provide notice to the company for more than 60 days that its corporate financial and proprietary records were sought. The company was alerted less than two days after an administrative agency closed the record for submissions to protect its records.

In another case, the local agency failed to provide notice for 59 days that a citizen requested records, appealed to the Office of Open Records.

Terry Mutchler is a partner at Dilworth Paxson where she concentrates her practice on media companies and multinational corporations alike. She has represented defense contractors, pharmaceuticals, colleges and universities and healthcare providers to develop and execute strategies to maximize records access laws to competitive edge. She served as the founding executive director of Pennsylvania’s Office of Open Records. She can be reached at tmutchler@dilworthlaw.com.

Reprinted with permission from the April 19, 2021 edition of The Legal Intelligencer, © ALM Media Properties LLC. All rights reserved

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