Q: I am seeking some clarification regarding the use of Government Code Section 6255(a) by the San Diego County Employees Retirement System and am wondering if there is any case law that shows the use of this law is not being applied correctly.
I have included the information below that the plan provided me.
“…documents evaluating performance of managers and any documents relating to a manager change before the change is made, are confidential under Government Code Section 6255(a) because the interest in disclosure is clearly outweighed by the interest in nondisclosure. Specifically, release of such information would damage SDCERA’s relationship with managers, SDCERA’s position in the market, and possibly even the value of an investment if changes are telegraphed in advance. In addition, section 6254.26 provides specific protection to certain information about alternative investments, including due diligence materials of the public fund. SDCERA’s due diligence is ongoing, which includes the internals evaluations as to possible manager changes. SDCERA and its portfolio strategist, Lee Partridge, properly report changes after they are made.”
A: Section 6255(a) of California’s Public Records Act provides simply that “[t]he agency shall justify withholding any record by demonstrating that the record in question is exempt under express provisions of this chapter or that on the facts of the particular case the public interest served by not disclosing the record clearly outweighs the public interest served by disclosure of the record.” Gov’t Code § 6255.
When an agency cites § 6255(a) (often called the “catch-all” or “balancing” exemption of the PRA) as justification for withholding a particular record, this typically means that there is no specific authorization for the agency to withhold the record but the agency nevertheless maintains that the public is better off with the record’s being kept secret.
By its express language, § 6255(a) imposes a high burden on the agency. It must provide specific facts establishing that the public interest in withholding the record “clearly outweighs” the public interest in disclosing the record.
Note that there is always a public interest in disclosure of records that relate to the conduct of the people’s business. See, e.g., Connell v. Superior Court, 56 Cal. App. 4th 601, 616-617 (1997) (“If the records sought pertain to the conduct of the people’s business there is a public interest in disclosure. The weight of that interest is proportionate to the gravity of the governmental tasks sought to be illuminated and the directness with which the disclosure will serve to illuminate.”).
You may be aware that California’s Court of Appeal recently affirmed the public interest in disclosing certain information about benefits from the Sonoma County Employees’ Retirement Association.
In that case, the court noted that “the taxpaying public has substantially the same interest in [SCERA’s] operations and payout levels as it does in the salaries of county employees.” Sonoma County Employees’ Retirement Assn. v. Superior Court, 198 Cal. App. 4th 986, 1005 (2011) (finding “SCERA’s claim that releasing information to the public about pension benefits will expose its retirees to annoyance and abuse too speculative to outweigh the public’s interest in securing information about how public money is spent”).
Whether any public interest in withholding the records you have requested clearly outweigh the public interest in disclosure would be based on a fact-intensive analysis of the respective interests, including an evaluation of the claims that release of the relevant records “would damage SDCERA’s relationship with managers, SDCERA’s position in the market, and possibly even the value of an investment if changes are telegraphed in advance.” You may be in a good position to evaluate, as a practical matter, whether these claims have merit. If they do not, you might consider articulating in a follow-up letter why release of the requested records would not be likely to result in the harms articulated by SDCERA.
Finally, as SDCERA notes, § 6254.26 of the PRA provides additional guidance as to particular records that are exempt from disclosure or that must be disclosed:
(a) Notwithstanding any provision of this chapter or other law, the following records regarding alternative investments in which public investment funds invest shall not be subject to disclosure pursuant to this chapter, unless the information has already been publicly released by the keeper of the information:
(1) Due diligence materials that are proprietary to the public investment fund or the alternative investment vehicle.
(2) Quarterly and annual financial statements of alternative investment vehicles.
(3) Meeting materials of alternative investment vehicles.
(4) Records containing information regarding the portfolio positions in which alternative investment funds invest.
(5) Capital call and distribution notices.
(6) Alternative investment agreements and all related documents.
(b) Notwithstanding subdivision (a), the following information contained in records described in subdivision (a) regarding alternative investments in which public investment funds invest shall be subject to disclosure pursuant to this chapter and shall not be considered a trade secret exempt from disclosure:
(1) The name, address, and vintage year of each alternative investment vehicle.
(2) The dollar amount of the commitment made to each alternative investment vehicle by the public investment fund since inception.
(3) The dollar amount of cash contributions made by the public investment fund to each alternative investment vehicle since inception.
(4) The dollar amount, on a fiscal yearend basis, of cash distributions received by the public investment fund from each alternative investment vehicle.
(5) The dollar amount, on a fiscal yearend basis, of cash distributions received by the public investment fund plus remaining value of partnership assets attributable to the public investment fund’s investment in each alternative investment vehicle.
(6) The net internal rate of return of each alternative investment vehicle since inception.
(7) The investment multiple of each alternative investment vehicle since inception.
(8) The dollar amount of the total management fees and costs paid on an annual fiscal yearend basis, by the public investment fund to each alternative investment vehicle.
(9) The dollar amount of cash profit received by public investment funds from each alternative investment vehicle on a fiscal year-end basis.
(c) For purposes of this section, the following definitions shall apply:
(1) “Alternative investment” means an investment in a private equity fund, venture fund, hedge fund, or absolute return fund.
(2) “Alternative investment vehicle” means the limited partnership, limited liability company, or similar legal structure through which the public investment fund invests in portfolio companies.
(3) “Portfolio positions” means individual portfolio investments made by the alternative investment vehicles.
(4) “Public investment fund” means any public pension or retirement system, and any public endowment or foundation.
Gov’t Code § 6254.26.
To the extent the records you requested clearly fall within one of the categories listed in § 6254.26(a), then SDCERA may be on solid footing in refusing to disclose them.
Bryan Cave LLP is general counsel for the First Amendment Coalition and responds to First Amendment Coalition hotline inquiries. In responding to these inquiries, we can give general information regarding open government and speech issues but cannot provide specific legal advice or representation.