April 5, 2004

Ms. Sara Shiplet Waitt
Senior Associate Commissioner
Texas Department of Insurance
P. O. Box 149104
Austin, Texas 78714-9104

OR2004-2725

Dear Ms. Waitt:

You ask whether certain information is subject to required public disclosure under chapter 552 of the Government Code. Your request was assigned ID# 198682.

The Texas Department of Insurance (the "department") received a request for information related to four specified filings. Although you take no position with respect to the release of the requested information, you state, and provide documentation showing, that you have notified the three interested parties who object to the release of their information, Old American County Mutual Fire Insurance ("Old American"), Southern County Mutual Insurance ("Southern"), and Home State County Mutual Insurance ("Home State"), of this request and of their right to submit arguments to this office as to why information pertaining to each third party should not be released. See Gov't Code § 552.305(d); see also Open Records Decision No. 542 (1990) (determining that statutory predecessor to section 552.305 permits governmental body to rely on interested third party to raise and explain applicability of exception to disclosure under Public Information Act ("Act") in certain circumstances). We have received correspondence from all three notified third parties. We have considered all of the submitted arguments and reviewed the information submitted by the department.

Southern asserts section 552.101 of the Government Code. Section 552.101 excepts from required public disclosure "information considered to be confidential by law, either constitutional, statutory, or by judicial decision." This exception encompasses information that is deemed to be confidential under other law. See Open Records Decision Nos. 600 at 4 (1992) (constitutional privacy), 478 at 2 (1987) (information made confidential by statute), 611 at 1 (1992) (common-law privacy). Southern has cited no law, nor are we aware of any law, under which any of the submitted information relating to Southern is considered to be confidential for purposes of section 552.101. Therefore, none of the information relating to Southern is excepted from disclosure under section 552.101 of the Government Code.

Southern, Old American, and Home State each raise section 552.110 as an exception to disclosure. This section protects the proprietary interests of private parties by excepting from disclosure two types of information: (1) "[a] trade secret obtained from a person and privileged or confidential by statute or judicial decision," and (2) "commercial or financial information for which it is demonstrated based on specific factual evidence that disclosure would cause substantial competitive harm to the person from whom the information was obtained." See Gov't Code § 552.110(a)-(b).

The Texas Supreme Court has adopted the definition of a "trade secret" from section 757 of the Restatement of Torts, which holds a "trade secret" to be

any formula, pattern, device or compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it. It may be a formula for a chemical compound, a process of manufacturing, treating or preserving materials, a pattern for a machine or other device, or a list of customers. It differs from other secret information in a business . . . in that it is not simply information as to a single or ephemeral event in the conduct of the business . . . . A trade secret is a process or device for continuous use in the operation of the business . . . . [It may] relate to the sale of goods or to other operations in the business, such as a code for determining discounts, rebates or other concessions in a price list or catalogue, or a list of specialized customers, or a method of bookkeeping or other office management.

Restatement of Torts § 757 cmt. b (1939); see also Hyde Corp. v. Huffines, 314 S.W.2d 763, 776 (Tex. 1958). If the governmental body takes no position on the application of the "trade secrets" component of section 552.110 to the information at issue, this office will accept a private party's claim for exception as valid under that component if that party establishes a prima facie case for the exception, and no one submits an argument that rebuts the claim as a matter of law.⁽¹⁾ See Open Records Decision No. 552 at 5 (1990). The private party must provide information that is sufficient to enable this office to conclude that the information at issue qualifies as a trade secret under section 552.110(a). See Open Records Decision No. 402 at 3 (1983).

Section 552.110(b) requires a specific factual or evidentiary showing, not conclusory or generalized allegations, that substantial competitive injury would likely result from release of the information at issue. See Open Records Decision No. 661 at 5-6 (1999) (business enterprise must show by specific factual evidence that release of information would cause it substantial competitive harm).

Southern argues that its rating formulas constitute trade secrets and are therefore excepted under section 552.110(a). Old American and Home State each claim that their underwriting guidelines and rules pertaining to that program constitute both trade secrets, excepted under section 552.110(a), and commercial or financial information, the release of which would cause substantial competitive harm, excepted under section 552.110(b). Having considered each entity's arguments, we conclude that Southern, Old American, and Home State have demonstrated that their rating formulas and underwriting guidelines constitute trade secrets under section 552.110(a). We have received no arguments that rebut these claims as a matter of law. We therefore conclude that the department must withhold the portions of Southern's, Old American's, and Home State's proposals that we have marked under section 552.110. We otherwise conclude that neither Southern, Old American, nor Home State has demonstrated that any of the remaining submitted information qualifies as a trade secret under section 552.110(a). We likewise conclude that neither Old American nor Home State has shown, for purposes of section 552.110(b), that the release of any of the remaining submitted information relating to each entity would be likely to cause any substantial competitive harm. Therefore, none of the remaining submitted information is excepted from disclosure under section 552.110.

This letter ruling is limited to the particular records at issue in this request and limited to the facts as presented to us; therefore, this ruling must not be relied upon as a previous determination regarding any other records or any other circumstances.

This ruling triggers important deadlines regarding the rights and responsibilities of the governmental body and of the requestor. For example, governmental bodies are prohibited from asking the attorney general to reconsider this ruling. Gov't Code § 552.301(f). If the governmental body wants to challenge this ruling, the governmental body must appeal by filing suit in Travis County within 30 calendar days. Id. § 552.324(b). In order to get the full benefit of such an appeal, the governmental body must file suit within 10 calendar days. Id. § 552.353(b)(3), (c). If the governmental body does not appeal this ruling and the governmental body does not comply with it, then both the requestor and the attorney general have the right to file suit against the governmental body to enforce this ruling. Id. § 552.321(a).

If this ruling requires the governmental body to release all or part of the requested information, the governmental body is responsible for taking the next step. Based on the statute, the attorney general expects that, within 10 calendar days of this ruling, the governmental body will do one of the following three things: 1) release the public records; 2) notify the requestor of the exact day, time, and place that copies of the records will be provided or that the records can be inspected; or 3) notify the requestor of the governmental body's intent to challenge this letter ruling in court. If the governmental body fails to do one of these three things within 10 calendar days of this ruling, then the requestor should report that failure to the attorney general's Open Government Hotline, toll free, at (877) 673-6839. The requestor may also file a complaint with the district or county attorney. Id. § 552.3215(e).

If this ruling requires or permits the governmental body to withhold all or some of the requested information, the requestor can appeal that decision by suing the governmental body. Id. § 552.321(a); Texas Dep't of Pub. Safety v. Gilbreath, 842 S.W.2d 408, 411 (Tex. App.--Austin 1992, no writ).

Please remember that under the Act the release of information triggers certain procedures for costs and charges to the requestor. If records are released in compliance with this ruling, be sure that all charges for the information are at or below the legal amounts. Questions or complaints about over-charging must be directed to Hadassah Schloss at the Texas Building and Procurement Commission at (512) 475-2497.

If the governmental body, the requestor, or any other person has questions or comments about this ruling, they may contact our office. We note that a third party may challenge this ruling by filing suit seeking to withhold information from a requestor. Gov't Code § 552.325. Although there is no statutory deadline for contacting us, the attorney general prefers to receive any comments within 10 calendar days of the date of this ruling.

Sincerely,

Sarah I. Swanson
Assistant Attorney General
Open Records Division
SIS/lmt
Ref: ID# 198682
Enc. Submitted documents

c: Ms. Lynda Ferguson
Southern County Mutual Insurance
P. O. Box 660302
Dallas, Texas 75266-0302
(w/o enclosures)

Mr. Bruce Robert Milligan
Southern County Mutual Insurance
P. O. Box 660560
Dallas, Texas 75266
(w/o enclosures)

Mr. Bruce McCandless
Long, Burner, Parks & DeLargy
P. O. Box 2212
Austin, Texas 78768
(w/o enclosures)

Footnotes

1. The Restatement of Torts lists the following six factors as indicia of whether information constitutes a trade secret:

(1) the extent to which the information is known outside of [the company];

(2) the extent to which it is known by employees and other involved in [the company's] business;

(3) the extent of measures taken by [the company] to guard the secrecy of the information;

(4) the value of the information to [the company] and [its] competitors;

(5) the amount of effort or money expended by [the company] in developing the information;

(6) the ease or difficulty with which the information could be properly acquired or duplicated by others.

Restatement of Torts § 757 cmt. b (1939); see also Open Records Decision Nos. 319 at 2 (1982), 306 at 2 (1982), 255 at 2 (1980).