California Supreme Court Holds Public Records Act Does Not Require Public Agencies to Disclose Competitive Proposals During the Negotiation Process

In Michaelis, Montanari & Johnson v. Superior Court (June 22, 2006) Supreme Court No. S133464, the California Supreme Court considered when competitive proposals submitted to a public agency in response to a Request for Proposals (“RFP”) for a public contract or lease must be disclosed under the Public Records Act, Government Code section 6250 et seq. (the “Act”).

At issue were responses submitted to an RFP for a lease of airport property at the Van Nuys Airport, part of Real Party in Interest Los Angeles World Airports (“LAWA”). LAWA’s position was that it would keep the proposals confidential while it negotiated a proposed lease, and make the proposals available for public review at the time the contract was submitted to the awarding authority, but before final award of the contract. LAWA’s reasoning was that this timing allowed the public agency, on behalf of its residents and taxpayers, to complete the negotiations without the proposer being aware of the competing bids, and still allow the public to obtain the information prior to the awarding authority’s consideration and award of the contract.

The trial court agreed with LAWA’s position, finding that, under the “catch all” exemption in Government Code section 6255, the public interest in nondisclosure clearly outweighs the public interest in disclosure. By a 2-1 vote, the Court of Appeal disagreed. The majority found that LAWA’s reasons for nondisclosure were vague and speculative, and that the public had a significant interest in knowing, prior to the completion of the negotiating process, whether LAWA acted properly and in accordance with its own guidelines. Justice Mosk dissented, arguing that substantial evidence supported the trial court’s findings that little if any public benefit would derive from premature disclosure of the competing proposals, and that such disclosure could impair LAWA’s negotiating process.

In a 7-0 decision, the Supreme Court reversed the Court of Appeal decision. In balancing the public interest in disclosure versus the public interest in nondisclosure under section 6255, the Court agreed that there was a “legitimate and substantial” public interest in reviewing the agency’s selection of a winning proposal. However, the Court found, there was no compelling reason why public scrutiny of this process could not as effectively take place after the negotiations were completed but before final approval of the lease. As to the public interest in nondisclosure, the Court upheld the trial court’s conclusion that there were substantial public benefits from delaying disclosure of the proposals until LAWA had selected a proposal and completed its negotiations. Specifically, “premature disclosure would reveal specific, confidential details of the competing proposals to the other proposers, thereby potentially impairing the city’s negotiation and selection process.”

Accordingly, 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.” The Court also held that the agency’s failure to comply with the Act’s timing requirements did not warrant the “unduly harsh” penalty of “requiring disclosure of otherwise exempt records.”

Meyers Nave is special counsel to Los Angeles World Airport (LAWA). Joe Quinn and Julia Bond worked with in-house counsel to seek rehearing in the Court of Appeal, petition the California Supreme Court for review, and brief the merits and argue the case to the state high court.