In re Office of Info. Practices Op. Letter No. F19-04

150 Hawai‘i 335

501 P.3d 304

IN RE OFFICE OF INFORMATION PRACTICES OPINION LETTER NO. F19-04

NO. CAAP-20-0000470

Intermediate Court of Appeals of Hawai‘i.

OCTOBER 11, 2021

On the briefs:

Ryan H. Ota, Deputy Corporation Counsel, City and County of Honolulu, for Petitioner-Appellant Department of Budget and Fiscal Services.

Robert Brian Black, for Amicus Curiae Civil Beat Law Center for the Public Interest.

LEONARD, PRESIDING JUDGE, HIRAOKA AND NAKASONE, JJ.

OPINION OF THE COURT BY HIRAOKA, J.

The issue in this case is whether the "frustration of a legitimate government function" exception applies to Complainant-Appellant City and County of Honolulu's obligation to disclose a particular public record under the Hawai‘i Uniform Information Practices Act (Modified), Hawaii Revised Statutes (HRS ) Chapter 92F (UIPA ).¹ The record at issue is an appraisal of the value of an easement the requestor desires to purchase from the City. After making "an individualized determination [whether] disclosure [of the easement appraisal report] would frustrate a legitimate government function," Peer News LLC v. City & Cnty. of Honolulu, 143 Hawai‘i 472, 475, 431 P.3d 1245, 1248 (2018) ( Peer News II ),² we hold that the State of Hawai‘i Office of Information Practices (OIP ) correctly determined that the report must be disclosed. We do so, however, for reasons other than those stated by OIP.

BACKGROUND

Brad and Logan Johnasen Halas (collectively, the Halases ) own property in Kahalu‘u, O‘ahu. The property is landlocked. The Halases seek to purchase an access and utility easement over the City-owned Kahalu‘u Flood Control maintenance road.

The City's Department of Budget and Fiscal Services (BFS ) requested an appraisal of the value of the proposed easement from the City's Department of Design and Construction (DDC ). The resultant appraisal reported the "suggested value range for the subject easement" "as a guideline for negotiation purposes." After obtaining the appraisal information, BFS made an offer to sell an easement to the Halases.

Logan Johnasen Halas , apparently unhappy with the City's price, requested a copy of the easement appraisal report. BFS denied Johnasen Halas's request, citing HRS § 92F-13(3). The statute provides, in relevant part:

§ 92F-13 Government records; exceptions to general rule . This part shall not require disclosure of:

....

(3) Government records that, by their nature, must be confidential in order for the government to avoid the frustration of a legitimate government function[.]

HRS § 92F-13 (2012). BFS explained:

Deliberative process privilege . Government records that, by their nature, must be confidential in order for the government to avoid the frustration of a legitimate government function.

(Bold italics added.)

Johnasen Halas appealed BFS's denial to OIP. She informed OIP:

The City has appraised this area for $300,000. Is it [sic] not clear at all how they are coming up with this ridiculous amount which [is] why I have required a copy to better understand the metholody [sic] they are trying to use.

In response, the City sent a copy of the easement appraisal report to OIP for in-camera inspection, and explained:

In a recent Memorandum Opinion dated March 5, 2015, U Memo 15-8, regarding a request from the Aina Haina Community Association to BFS, OIP confirmed that BFS is not required to disclose internal communications between City departments when the communications contain predecisional and deliberative material that falls within the deliberative process privilege . When the requested records contain such internal communications, they may be withheld under the UIPA's exception to disclosure to avoid the frustration of a legitimate government function. HRS Section 92F-13(3).

As part of the decision-making process in selling the City's real property interests, BFS solicits an estimate of value from DDC, another City agency, for use in BFS's negotiations in reaching a purchase price. There is no City ordinance or State statute that expressly requires public disclosure of such communications. In the instant case, BFS received the subject appraisal prior to the decision on the purchase price for the easement. DDC's appraisal provided an estimated range of value for negotiation purposes, which was a direct part of the decision-making process. Such communications must be withheld from public disclosure, and especially cannot be disclosed to the proposed purchaser, when the City has not yet completed negotiations of a purchase price. Such disclosure would have a chilling effect upon BFS obtaining such an estimate of value for negotiation purposes, and would thus impede BFS's negotiation efforts. Disclosure of the appraisal at this point in the negotiation and decision-making process would frustrate the legitimate government function of negotiating and ultimately determining a fair purchase price for City assets. Therefore, BFS may withhold the appraisal from public disclosure under the "frustration of a legitimate government function" exception under HRS Section 92F-13(3). See OIP Opinion Letter Nos. 90-8 and 04-15.

(Emphasis added.)

This all happened in 2016. On December 21, 2018, before OIP issued a decision on Johnasen Halas's appeal, the Hawai‘i Supreme Court decided Peer News II. The supreme court held that the deliberative process privilege,³ which shielded all pre-decisional, deliberative agency records from public access "without an individualized determination that disclosure would frustrate a legitimate government function," was "clearly irreconcilable with the plain language and legislative history of Hawai‘i's [sic] public record laws." Peer News II, 143 Hawai‘i at 475, 431 P.3d at 1248. The supreme court vacated the City's summary judgment and remanded to the circuit court for "a redetermination of whether the records withheld pursuant to the purported privilege fall within a statutory exception to the disclosure requirement." Id.

By letter dated January 2, 2019, OIP notified BFS and Johnasen Halas of Peer News II. BFS was informed that "OIP will no longer recognize the [deliberative process privilege] under the UIPA's frustration exception to disclosure." OIP gave BFS until February 1, 2019, "to provide a new argument as to why the records subject to this appeal may be withheld from the requester under one or more subsections of section 92F-l3, HRS."

By letter dated February 1, 2019, BFS reminded OIP that it had also relied upon the "frustration of a legitimate government function" exception of HRS § 92F-13(3). BFS reiterated:

In this case, the City is denying the request under HRS Section 92F-13(3) because the appraisal report is a government record that by its nature must be confidential in order for the government to avoid the frustration of a legitimate government function. The value of the easement Ms. Johnasen Halas is seeking is based on an appraisal report that was prepared by the City Department of Design and Construction (DDC), Land Division at the request of BFS. The purpose of the appraisal report is to provide an estimated range of values for the easement so that the purchase price could be negotiated. The appraisal report is to be used as the basis for BFS' [sic] negotiation strategy for the purchase of the easement. As the City has not yet completed negotiations for a purchase price, it would frustrate a legitimate government function to prematurely disclose the appraisal report. By disclosing the appraisal report, it would reveal the high and low range of values that the City would negotiate for the easement and severely hinder BFS' [sic] ability in achieving a fair purchase price for the easement. The City would lose any and all leverage in the negotiating decision[-]making process.

On April 24, 2019, OIP issued opinion letter no. F19-04 (the OIP Opinion Letter ). The OIP Opinion Letter addressed the question: "Whether an appraisal report prepared for the sale of an interest in county land must be disclosed to the public upon request under the UIPA." OIP found:

As a general rule, even when the government agency is the seller rather than the purchaser, OIP finds that it is still a legitimate function of a government agency to be a prudent steward of public assets, whether they comprise government funds, public lands, or other government property. OIP also agrees with BFS that disclosure of the range of potential values for the easement, and the market analysis that produced that range of values, will impair BFS's ability to negotiate the highest possible purchase price. The market price for the easement, according to the appraisal report, could be anything within the range of values set out in the report. Disclosure of this range of values would tell [Johnasen Halas] the lowest price BFS was willing to accept, and [Johnasen Halas] would presumably be unwilling to offer anything higher than that, thus eliminating any room for BFS to negotiate a higher price for the proposed easement.

(Citation omitted.) Nevertheless, OIP concluded:

[T]he disclosure of an appraisal report relating to the sale of an interest in City land would not frustrate a legitimate government function such that it may be withheld under the UIPA's frustration exception. See HRS § 92F-13(3). The City must therefore disclose the requested appraisal report.

The City appealed the OIP Opinion Letter to the circuit court under HRS § 92F-43. The City served Johnasen Halas and OIP with the complaint (as required by HRS § 92F-43(b) (2012)) but neither Johnasen Halas nor OIP intervened in the proceeding (as allowed by HRS § 92F-43(b) ). The circuit court granted a request by Amicus Curiae Civil Beat Law Center for the Public Interest to file a memorandum.

The City's appeal was heard on June 12, 2020.⁴ Counsel for Civil Beat participated in the oral argument. The following exchange took place between the court and the deputy corporation counsel (DCC ) representing the City:

THE COURT: ... Do you have to sell the easement? Or can

...