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Texas High Court Ruling Shields Contract Details

A recent ruling by the Texas Supreme Court has made it easier for private companies to keep secret details of their contracts with the state of Texas and local governments, a move that public information advocates warn is ripe for abuse.

A Boeing 737 jetliner under assembly in Renton, Washington on Feb. 4, 2014.

Over the objections of Attorney General Ken Paxton's office, the Texas Supreme Court issued a ruling in June making it easier for private companies to keep secret details of their contracts with the state of Texas and local governments, a move that public information advocates warn is ripe for abuse.

In a 7-1 opinion, the justices ordered Paxton's office to block the release of some information contained in a lease between Boeing and the Port Authority of San Antonio because the aerospace manufacturer said making the details public could prove useful to Boeing’s competitors. That’s a lower threshold than what the state had previously observed, that information could be withheld only to protect proprietary information and trade secrets.

“For followers of open government, it’s the biggest decision in recent memory simply because the exception is so broad,” said Bill Cobb, a former deputy in the Attorney General’s office. “I think it’s going to prevent a lot of information from being released.”

The ruling initially drew little attention but has since gained notice around Austin as lawyers for state agencies and private businesses consider its reach. In the past three months, the Attorney General’s office has cited the ruling at least three times in siding with private firms seeking to block public disclosure of details in government contracts.

“For many years, this office concluded the terms of a contract and especially the pricing of a winning bidder are public and generally not excepted from disclosure,” Assistant Attorney General Rahat Huq wrote this month in an opinion on a public information request regarding a contract between the Texas Department of Insurance and Houston-based Masterword Services for language interpretation services. Huq went on to explain that “pursuant to Boeing,” the office’s view on disclosing all of the terms of a government contract has changed. Huq made similar decisions recently at the behest of software firm Blackboard, Inc., and healthcare providers Blue Cross Blue Shield of Texas and Evercare of Texas.

The Boeing case revolved around the aerospace manufacturer’s lease for a manufacturing facility at the former Kelly Air Force Base with the Port Authority of San Antonio. For the past decade, Boeing has worked to block a 2005 request for the full lease made by a former employee. The issue reached the Attorney General’s office, which argued that the aspects of the lease that Boeing wanted to redact did not qualify for one of the exceptions under the state's Public Information Act.

Historically, the AG’s office has maintained that a company could block the release of information in a government contract if it’s considered a trade secret or proprietary information. The kind of details in the lease Boeing wanted to shield from disclosure — such as figures used to calculate the company’s share of the maintenance costs, and the amount of insurance coverage Boeing was required to provide — did not meet that threshold, according to the Attorney General’s office. Boeing argued that the information at issue could allow a competitor to calculate the company’s overhead costs at its San Antonio facility, which would put Boeing at a disadvantage for future government projects.

After two lower courts sided with the Attorney General’s office, the Texas Supreme Court reversed course in June. With just one justice in dissent, the court ruled that Boeing could block information in the lease from being disclosed. The test for disclosure, Justice John Devine wrote in his majority opinion, “is whether knowing another bidder’s overhead costs would be an advantage, not whether it would be a decisive advantage.”

“It’s one of the worst rulings to ever come out of the Texas Supreme Court,” said Joe Larsen, an open government attorney who also serves on the Freedom of Information Foundation of Texas. “Contracts with governmental bodies have always been what are called ‘super public.’ That is, they couldn’t be withheld unless they are expressly confidential under another statute.”

Devine noted in his majority opinion that the Attorney General’s office had recently ruled that records related to Gov. Greg Abbott’s meetings with out-of-state businesses he is trying to bring to Texas are confidential because his office is a “competitor” for those jobs.

“It was an exception that wasn’t really available to private parties until now,” Cobb said. “Now it’s an additional weapon that private parties have to avoid disclosure of those documents.”

In his dissent, Justice Jeffrey Boyd concluded that Boeing’s claims were “too hypothetical and speculative” to allow for blocking the release of information in government documents.

“Boeing has not identified any particular federal contract for which it is currently or will soon be competing or any competitor against whom it is or will be competing for such a contract,” Boyd wrote. “Nor has Boeing shown any actual specific advantage that any competitor would recognize by obtaining the information.”

Across state government, the ruling has raised questions about its impact, particularly in light of changes the Texas Legislature made earlier this year regarding government contracts in response to allegations of corruption and cronyism. Those changes, most of which were in Senate Bill 20, were signed into law before the court ruled on Boeing vs. Paxton.

Lawyers at the General Land Office wondered how to address a provision in Senate Bill 20 that requires agency contracts to be posted online. The agency decided to add a “boilerplate provision” in new contracts making clear that the contracts would be publicly posted, spokeswoman Brittany Eck said.

“Upon signing, the vendor accepts this as a term of the contract,” Eck said. “If this provision is challenged, and the contract is requested, the GLO will seek a ruling from the Attorney General's Office."

Other agencies said they were still working out the impact of the ruling.

“We are considering the implications of the Boeing v. Paxton decision in our SB 20 implementation planning, but we haven’t made any final decisions on such implementation,” said Lauren Willis, spokeswoman for the Comptroller’s office.

Disclosure: Boeing has been a financial supporter of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.

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