Thirty, Inc. v. Gil Smart & Lancaster Newspapers, Inc.

Thirty, Inc., d/b/a Best Western Premier Eden Resort & Suites,Treztark II Ltd., as owner of Sleep Inn & Suites and Mainstay Suites,Unique Inns of Lancaster d/b/a Fulton Steamboat Inn, Sleep Tight, Inc.,d/b/a Inn at Leola Village, Historic Revere Tavern, Inc.,d/b/a Best Western Plus Revere Inn and Suites,Dommel's Hotels d/b/a Country Inn of Lancaster, Cork Factory Hotel, LLC,Continental Inn, Inc., Hospitality Associate of Lancaster L.P.,Milestone Hospitality International, LLC, t/a Lancaster Host & Conference Center,44 Lancaster Associates, LLC d/b/a Comfort Suites, 44 Strasburg Associates,LLC d/b/a Clarion Inn at Historic Strasburg, BM Hospitality,Inc. d/b/a Holiday Inn Express Lancaster Rockvale Outlets,Horst Hotels d/b/a Hilton Garden Inn, Fairfield Inn,Country Inns & Suites and Homewood Suites v. Gil Smart and Lancaster Newspapers, Inc., Appellants

No. 805 C.D. 2013

COMMONWEALTH COURT OF PENNSYLVANIA

Argued: December 11, 2013

April 14, 2014

BEFORE: HONORABLE DAN PELLEGRINI, President Judge HONORABLE BERNARD L. McGINLEY, Judge HONORABLE BONNIE BRIGANCE LEADBETTER, Judge HONORABLE RENÉE COHN JUBELIRER, Judge HONORABLE MARY HANNAH LEAVITT, Judge HONORABLE P. KEVIN BROBSON, Judge HONORABLE PATRICIA A. McCULLOUGH, Judge

OPINION NOT REPORTED

MEMORANDUM OPINION BY JUDGE McGINLEY

Gil Smart (Mr. Smart) and Lancaster Newspapers, Inc. (collectively "Newspaper") appeal from the order of the Court of Common Pleas of Lancaster County (trial court) which granted in part and denied in part the appeal of a group of seventeen Lancaster County "Hoteliers¹" from the Final Determination of the Pennsylvania Office of Open Records (OOR).

On September 15, 1999, the Lancaster County Commissioners passed ordinances authorizing the imposition of Hotel Room Rental and Excise Taxes. Those taxes went into effect on January 1, 2000. The Hotel Room Rental Tax is 3.9% and the Excise Tax is 1.1%. The Hoteliers remit the taxes on a monthly basis on a form entitled "Combined Monthly Report of the Lancaster County Hotel Room Rental Tax and the Lancaster County Hotel Excise Tax" (Monthly Report). The Monthly Report requires the Hoteliers to furnish the following: (Line 1) total potential room nights; (Line 2) total number of occupied room nights; (Line 3) taxable receipts (total gross receipts less exempted receipts); (Line 4) room tax computation; (Line 5) excise tax computation; and (Line 6) total tax due. The taxcalculation is made by multiplying the taxable receipts by the applicable tax rates to arrive at the tax due. Combined Monthly Report of the Lancaster County Hotel Room Rental Tax and the Lancaster County Hotel Excise Tax at 1; Reproduced Record (R.R.) at 29a.

On February 12, 2012, the Newspaper, through Smart,² submitted a request under the Right-to-Know Law³ (RTKL) to Lancaster County (County) seeking "tax records for all County hotels that paid the hotel tax/excise tax from 2007 to 2011." Open Records Request Form, February 12, 2012, at 1; R.R. at 10a. The Newspaper's request stated further "Specifically, we seek yearly totals of room rental tax remitted to the County for each hotel, for each year, and also occupancy data on a year by year basis, where that information is available." Id.

On March 16, 2012, the County denied the Newspaper's request because the records contained "confidential and proprietary information" pursuant to Section 708(b)(11) of the RTKL, 65 P.S. §67.708(b)(11) and "personal financial information" pursuant to Section 708(b)(6)(A) of the RTKL, 65 P.S. §67. 708(b)(6)(A).

The Newspaper appealed to the OOR pursuant to Section 1101(a) of the RTKL⁴, 65 P.S. §67.1101(a).

On April 3, 2012, Hoteliers asserted a direct interest in the appeal and requested the right to participate pursuant to Section 1101(c) of the RTKL⁵, 65 P.S. §67.1101(c), which was granted by the OOR the same day. The Hoteliers submitted Affidavits of seventeen local hotel owners in support of their position that the information contained on the Monthly Forms was confidential proprietary information and constituted a trade secret.

On April 27, 2012, the OOR issued a Final Determination which granted the Newspaper's appeal in part and denied it in part and required the County "to release the information identifying the lodging facility, the total amount of the Hotel Tax (Line 4) and the total amount of the Excise Tax (Line 5). The County may redact the occupancy data (Line 2) as confidential proprietary information." OOR Final Determination, April 27, 2012, at 7; R.R. at 159a.

The Hoteliers filed a Petition for Review with the trial court. In Paragraph 15 of their Petition for Review from the OOR's Final Determination the Hoteliers argued that they had standing:

Petitioners [Hoteliers] have standing to file this instant appeal because they were granted the right to participatein the OOR and are interested parties in this matter as it is their confidential and proprietary trade secrets [that] will be disclosed should the County be required to comply with the decision of the OOR.

In its Answer, the Newspaper generally "denied as a conclusion of law" that the Hoteliers had standing to appeal the OOR's Determination to the common pleas court. The Newspaper did not file a motion to quash the Hoteliers' appeal or otherwise raise the issue of the Hoteliers' standing until after the hearing in its post-trial brief.

At the hearing, the Hoteliers presented the testimony of two witnesses with experience in hotel management: Drew Anthon (Mr. Anthon), the owner of the Eden Resort and Suites Hotel, and Joseph McInerney (Mr. McInerney), President and CEO of the American Hotel and Lodging Association. The Hoteliers also called Jan Freitag (Mr. Freitag) of Smith Travel Research and Lancaster County Treasurer, Craig Ebersole (Mr. Ebersole). The Newspaper called Mr. Smart as its only witness.

Mr. Anthon explained that the information contained on Lines 2 through 6 of the Monthly Report was considered confidential information in the hotel industry. Specifically, Line 2 of the Monthly Report required hotels to disclose the total number of occupied room nights which was information the hotels kept confidential because its disclosure would enable competitors to know how another hotel was performing. Hearing Transcript, September 27, 2012, (H.T.) at 9; R.R. at 96a. Line 3 required hotels to declare gross receipts. That part of the Monthly Report had two subparts, gross receipts and tax exempt receipts and a "taxable receipts" line. The gross receipts of a hotel were kept strictlyconfidential. The amount of receipts exempted from tax was another confidential figure because it might be used by competitors to adjust rates to attract that market share. H.T. at 9-12; R.R. at 96a-97a. The difference calculated when tax exempt receipts were deducted from gross receipts was another number that was kept secret by hotels and treated as confidential. H.T. at 11; R.R. at 96a. From the information collected in Line 3, an estimated metric of hotel performance may be calculated. That metric was "revenue per available room" or "RevPAR" which is a measure of performance that, if known to competitors, might allow them to understand the financial performance of the hotel. H.T. at 12-13; R.R. at 97a. Mr. Anthon described RevPAR as the "gold standard in the hotel industry to understand the performance of a hotel." H.T. at 13; R.R. at 97a.

With regard to Lines 4 and 5, Hotel Tax and Excise Tax, (which the OOR held were not confidential), Mr. Anthon explained that "if you know that the tax paid is X dollars and that tax paid is equal to 5 percent, I divide the five into the dollars and you immediately have a result of understanding what the room revenue is." H.T. at 12-13; R.R. at 97a. Then, "once I have the room revenue as a number, then I immediately know ... the ... RevPAR of the hotel, by taking the number of available rooms, which is public knowledge, into the room revenue to develop the number of RevPAR." H.T. at 13; R.R. at 97a. "So by having the tax only...I can achieve the two most significant proprietary and confidential information and data just from having the amount of tax paid." Id.

Mr. McInerney explained that a hotel's revenue, average rate and average daily rate (ADR) were confidential information which might be used by competitors to divert business. RevPAR, ADR and room revenue were the benchmarks of a hotel's performance.

Mr. Freitag also testified to the importance of ADR and RevPAR, why those figures were confidential, and the harm that could come if any individual hotel's RevPAR and ADR were made available to competitors.

Mr. Ebersole testified that the County Treasurer's Office treated the information contained in the Monthly Reports as confidential and proprietary information and that he followed the legal guidance issued by his predecessor's solicitor with regard to maintaining the confidentiality of the information contained on the Monthly Reports.

The Newspaper reiterated its opposition to the Hoteliers' standing in its post-hearing briefs.

The trial court reversed in part the decision of the OOR. The trial court concluded that the Newspaper waived the issue of standing "since this was not properly raised at the first opportunity." Common Pleas Court Decision, April 17, 2013, at 4.

With regard to the merits, the trial court upheld the confidentiality of Line 2 (total number of occupied room nights). However, it found that the OOR erred in determining that the tax information on Lines 5 and 6 of the Monthly Report was not confidential and proprietary information. The trial court concluded that by knowing the name of the hotel, one can easily determine the number of rooms because that information is public knowledge. By knowing the tax paid by the hotel, one can compute revenue (tax paid divided by .05 equals revenue). Then RevPAR may be easily calculated. The trial court found that based on the testimony of the Hoteliers' witnesses, and the submissions made to the...