Town of Burlington v. H.A.D. #1
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MAINE SUPREME JUDICIAL COURT Reporter of Decisions
Decision:	2001 ME 59
Docket: 	Pen-00-426
Argued:  	February 13, 2001
Decided:	April 12, 2001

Panel: 	WATHEN, C.J., and CLIFFORD, RUDMAN, DANA, SAUFLEY, ALEXANDER, and
CALKINS, JJ.
Majority:WATHEN, C.J., and CLIFFORD, RUDMAN, DANA, SAUFLEY, ALEXANDER, and
CALKINS, JJ.
Concurring:ALEXANDER, J.

TOWN OF BURLINGTON

v.

HOSPITAL ADMINISTRATIVE DISTRICT NO. 1 et al.

CALKINS, J.
	[¶1]  Hospital Administrative District No. 1 (HAD #1), Ronald Victory,
Cedric Russell, and Quorum Health Resources, LLC, (collectively, the
hospital parties) appeal from the judgment of the Superior Court (Penobscot
County, Hjelm, J.) ordering them to disclose certain records to the Town of
Burlington.  HAD #1 operates the Penobscot Valley Hospital in Lincoln,
Maine.  Victory is the chief executive officer of HAD #1, and Russell is
president of the board of HAD #1.  HAD #1 contracts with Quorum, a
Delaware corporation, to manage the hospital.  
	[¶2]  The judgment was issued after trial of two consolidated actions. 
The first was brought by the Town, pursuant to Maine's Freedom of Access
Act (FOAA), 1 M.R.S.A. § 409 (1989), seeking disclosure of certain records
from the hospital parties.  The second is a declaratory judgment action by
HAD #1 against Ronald Minott, a selectman of the Town, seeking a
declaration as to whether it is required to produce the documents
requested by the Town.  The Superior Court concluded that FOAA and
section 10-A (P.L. 1993, ch. 707, § S-1) of the enabling legislation for HAD
#1 require the hospital parties to disclose the requested information.  The
hospital parties contend that FOAA is not applicable because HAD #1 is not a
public agency or political subdivision; the requested documents are not
public records; and the trade secret exception of FOAA exempts the
disclosure.  The hospital parties further argue that section 10-A of the
enabling legislation is unconstitutional.  We agree with the Superior Court
that the hospital parties are required to disclose the records requested by
the Town, and we affirm.

I.  BACKGROUND

	[¶3]  The Legislature created HAD #1 in 1967 by a private and special
law, P. & S.L. 1967, ch. 58.  This enabling legislation provides that the
inhabitants of fourteen towns "are constituted and confirmed a body politic
and corporate . . . in order to provide for the health, welfare and public
benefit of the inhabitants of the district."  P. & S.L. 1999, ch. 84, § A-1,
repealing and replacing P. & S.L. 1967, ch. 58, § 1.{1}  The law further states
that "[t]he hospital district shall maintain and operate a hospital or critical
access system . . . and generally provide for the health, welfare and public
benefit of the inhabitants of the district."  Id.  HAD #1 owns and operates
Penobscot Valley Hospital, a small hospital offering acute care, diagnostic
services, and an ambulance service.  Quorum manages HAD #1 under a
management services agreement, and it employs Victory. 
	[¶4]  HAD #1 is governed by a board of directors who are elected by
the voters in the towns in the district.  Id. § A-2, repealing and replacing
P. & S.L. 1967, ch. 58, § 2.  When there is a vacancy on the board the
municipal officers of the town in which the vacancy occurred appoint a
member.  Id.  The enabling legislation declares that HAD #1 is a quasi-
municipal corporation for purposes of 30-A M.R.S.A. § 5701 (1996).  Id.
§ A-5, amending P. & S.L. 1967, ch. 58, § 3.  Section 5701 provides that the
property of residents located within the boundaries of a quasi-municipal
corporation can be taken to pay any debt of the corporation.{2}  See Casco N.
Bank v. Bd. of Trs. of Van Buren Hosp. Dist., 601 A.2d 1085, 1086 n.1, 1088
(Me. 1992) (stating that judgment creditor of hospital was entitled to
execute on property within Van Buren under 30-A M.R.S.A. § 5701 because
hospital district's enabling act declared that the district was a "quasi-
municipal corporation").{3}
	[¶5]  HAD #1's enabling legislation gives it the authority to issue bonds. 
Id. § A-3, amending P. & S.L. 1967, ch. 58, § 3.  When the directors of HAD
#1 authorize the issuance of any bonds, the inhabitants of the towns in the
district are to be notified of the vote authorizing the bonds through
publication in a newspaper with circulation in the district.  Id. § A-7,
repealing and replacing P. & S.L. 1967, ch. 58, § 4.  Ten percent or more of
the voters may request that the bond question be submitted to the voters of
the district, in which event a special meeting of voters must be held.  Id. 
The enabling legislation also gives HAD #1 the ability to obtain money
through taxation.  Id. § A-11, amending P. & S.L. 1967, ch. 58, § 9.  The
directors are given the same authority to collect district taxes as county
officials have to collect county taxes.  Id.  HAD #1 has issued bonds, but it has
never taxed the communities within its district.  HAD #1 obtains its
operating revenues from the sale of services, charges to patients, vending
machines, and donations.
	[¶6]  HAD #1 is required to produce an annual written report to the
inhabitants of the district "showing the financial condition of the district
and other matters pertaining to the district and showing the inhabitants of
the district how said directors are fulfilling the duties and obligations of the
respective trusts."  Id.  Upon dissolution of HAD #1, all of its property is to
be liquidated and the proceeds distributed to the towns in the district. 
P. & S.L. 1967, ch. 211, § 11.  HAD #1 is a "political subdivision" for
purposes of the Maine Tort Claims Act, 14 M.R.S.A § 8102(3) (Supp. 2000),
which means that it has the same immunity from tort claims as
municipalities.{4}  
	[¶7]  In 1993 the Legislature amended the enabling legislation of HAD
#1 by adding a new section:

Sec. 10-A.  Public records.  The administrative records of the
district, including the financial and compensation records of any
agent employed by, under contract with or utilized in any other
managerial capacity by, the district to administer that district,
are public records within the meaning of the Maine Revised
Statutes, Title 1, chapter 13.

P.L. 1993, ch. 707, § S-1.  The statutory reference in section 10-A is to
FOAA.  HAD #1 claims that it was not aware of section 10-A until
approximately five years after its enactment.
	[¶8]  In the spring of 1999, the Town requested certain financial
information from HAD #1.  In response to the request, HAD #1 provided
information regarding outstanding bonds but did not provide other
information.  The requests that remain unsatisfied are for the contract
between HAD #1 and Quorum and for the 1998 compensation records for
Victory and the hospital's chief financial officer, also a Quorum employee.
	[¶9]  Because the Town would make the records available to the public
once it obtained them, the hospital parties do not want to disclose the
records.  They claim that the Penobscot Valley Hospital competes for
patients and personnel from surrounding hospitals.  They argue that the
compensation of management employees must be kept confidential because
release of the records would damage their ability to compete and effectively
manage the hospital.
	[¶10]  The Superior Court found that legislation proposed in 1999
prompted the Town to seek the information from the hospital parties.  The
proposed legislation would have increased the bonding authority of HAD #1,
changed the manner of issuing bonds, and amended the administrative
framework.  The legislation, however, was not enacted.
	[¶11]  In its thorough decision, the Superior Court ruled that section
10-A of HAD #1's enabling legislation made the documents requested by the
Town "public records" within the meaning of FOAA.{5}  The Superior Court
rejected the hospital parties' argument that the records are "trade secrets"
exempted from disclosure by 1 M.R.S.A. § 402(3)(B) (Supp. 2000). 
Furthermore, the court concluded that section 10-A does not violate the
Maine Constitution.{6}

II.  APPLICABILITY OF FOAA

	[¶12]  This case involves the construction of two statutory schemes. 
Statutory construction is an issue of law; therefore, we review the Superior
Court's construction of the statutes de novo.  Springfield Terminal Ry. Co. v.
Dep't of Transp., 2000 ME 126, ¶ 8, 754 A.2d 353, 356.  
	[¶13]  The first statutory scheme at issue is FOAA.  FOAA mandates a
liberal construction "to promote its underlying purposes and policies . . . ." 
1 M.R.S.A. § 401 (1989).  The purpose of FOAA is to open public
proceedings and require that public actions and records be available to the
public.  Id.   The burden of proof is on the agency or political subdivision to
establish just and proper cause for the denial of a FOAA request.  Springfield
Terminal, 2000 ME 126, ¶ 9, 754 A.2d at 356; see also 1 M.R.S.A. § 409(1)
(1989).
	[¶14]  FOAA provides that every person has the right to inspect and
copy any public record.  1 M.R.S.A. § 408 (1989).  FOAA defines "public
record" as:

[A]ny written [or] printed . . . matter . . . that is in the possession
or custody of an agency or public official of this State or any of its
political subdivisions, . . . and has been received or prepared for
use in connection with the transaction of public or governmental
business . . . . 

Id. § 402(3) (Supp. 2000).  To determine whether the requested documents
are public records we first look to whether HAD #1 is an agency or political
subdivision.{7}  Because the definitional provisions of FOAA do not explicitly
state that hospital districts come within its coverage, we turn to the second
statutory scheme at issue in the case, the enabling statute for HAD #1, to
glean whether it provides that HAD #1 is an agency or political subdivision.
	[¶15]  We have recited at length the authority given to HAD #1 in the
enabling legislation.  On the basis of the burdens and duties granted to HAD
#1 by the Maine Legislature, we conclude that HAD #1 functions as a political
subdivision because it has many of the same characteristics of a political
subdivision.  It is a "body politic" and a creature of the Legislature.  We found
the term "body politic and corporate" to be significant in determining that a
transit district is a political subdivision for purposes of the Maine Tort
Claims Act.  Young v. Greater Portland Transit Dist., 535 A.2d 417, 418 (Me.
1987).  HAD #1 is charged with carrying out a public purpose, that is,
providing for the health care of the inhabitants of the district.  It has the
power to raise revenue through the issuance of bonds and levying taxes.  The
towns in the district are responsible for the debts of the district.  HAD #1 is
governed by a board of directors elected by the qualified voters of the towns
in the district.  Upon dissolution of the district, its assets revert to the
towns.  The significant powers and duties granted to HAD #1 by the
Legislature are characteristics generally reserved for political subdivisions.
	[¶16]  When determining whether an entity is a public agency or body
for purposes of public disclosure laws, other jurisdictions have looked to the
function that the entity performs.  See, e.g., Conn. Humane Soc'y v. Freedom
of Info. Comm'n, 591 A.2d 395, 398 (Conn. 1991) (holding that humane
society is not equivalent of public agency); Mem'l Hosp.-West Volusia, Inc. v.
News-Journal Corp., 729 So. 2d 373, 380 (Fla. 1999) (holding hospital
system functioned as public agency);{8} News & Observer Publ'g Co. v. Wake
County Hosp. Sys., Inc., 284 S.E.2d 542, 549 (N.C. Ct. App. 1981) (holding
expense and other records of hospital subject to disclosure);{9} Cleveland
Newspapers, Inc. v. Bradley County Mem'l Hosp. Bd. of Dirs., 621 S.W.2d
763, 766 (Tenn. Ct. App. 1981) (holding payroll records of hospital created
by private legislation subject to disclosure).{10}  Factors which courts generally
consider include:  (1) whether the entity is performing a governmental
function; (2) whether the funding of the entity is governmental; (3) the
extent of governmental involvement or control; and (4) whether the entity
was created by private or legislative action.  Conn. Humane Soc'y, 591 A.2d
at 397.  See also Telford v. Thurston County Bd. of Comm'rs, 974 P.2d 886,
893-95 (Wash. Ct. App. 1999) and cases cited therein.  The courts do not
require that an entity conform to all factors, but that the factors be
considered and weighed.{11}  Conn. Humane Soc'y, 591 A.2d at 397; Telford,
974 P.2d at 894.
	[¶17]  What the above-cited cases have in common is an inspection of
the functions of the entity under examination and a determination of
whether, on balance, the entity functions as a public agency.  Our review of
the functions of HAD #1 convinces us that it functions as a political
subdivision.  First, it performs what has been viewed as a governmental
function, that of providing health care.  Second, although tax-generated
funds are not currently used to finance the operations of HAD #1, it has
issued bonds under its legislative authority, and it has the power to tax. 
Furthermore, the towns in the district are ultimately responsible for the
debts of HAD #1, and its assets will revert to the towns upon dissolution. 
Third, the control of HAD #1 is in the hands of citizens elected from each
town in the district.  The number of directors and manner of election is
directed by statute.  Finally, it was created by the Maine Legislature.  Because
HAD #1 functions as a political subdivision, we conclude that it meets the
definition of "political subdivision" in FOAA.
	[¶18]  Having concluded that HAD #1 is a political subdivision for the
purposes of FOAA, we next determine whether the records requested from
HAD #1 by the Town come within the definition of "public records" in
section 402(3) of FOAA.  Records that are "received or prepared for use in
connection with the transaction of public or governmental business" are
public records.  1 M.R.S.A. § 402(3).  We conclude that the contract with
Quorum is a document connected with public business; the contract relates
to the management of a hospital which was constructed and is maintained
for the benefit of the public with the use of fund-raising authority granted by
the Legislature, which authority is exercised by elected citizens.  For the
same reason, we conclude that the compensation records of the
management employees are records prepared for public business.  
	[¶19]  Although section 10-A, added to HAD #1's enabling legislation,
defines HAD #1's administrative records as "public records" for purposes of
FOAA, we do not rely on it but instead rely upon the general legislation of
FOAA.  We chose not to rely on section 10-A for two reasons:  (1) HAD #1's
enabling legislation sufficiently details its governmental functions for us to
conclude that it is a political subdivision for purposes of FOAA and that the
requested records are public records; and (2) the hospital parties have
challenged the constitutionality of section 10-A, and we decline to rule on
the constitutionality of an enactment when it is not essential to do so.  "As a
general rule courts should endeavor to resolve the controversies before
them without deciding constitutional issues, reaching such an issue only '[if]
it is entirely necessary to a decision on the cause in which it is raised.'" 
Osier v. Osier, 410 A.2d 1027, 1029 (Me. 1980) (quoting State v. Good, 308
A.2d 576, 579 (1973)).  We simply note that section 10-A is not inconsistent
with our interpretation of the enabling act as granting sufficient
governmental powers on HAD #1 to classify it as a political subdivision for
purposes of FOAA.{12}

III.  TRADE SECRET EXEMPTION

	[¶20]  The hospital parties argue that the requested records are
protected trade secrets and exempt under FOAA.  Trade secrets are not
expressly exempted by the terms of FOAA, but public records "that would be
within the scope of a privilege against discovery or use as evidence
recognized by the courts of this State in civil or criminal trials" are exempt
from disclosure.  1 M.R.S.A. § 402(3)(B).  Therefore, because there is a
privilege to refuse to disclose trade secrets, under M.R. Evid. R. 507, HAD
#1 can refuse to disclose them.  See Bangor Publ'g Co. v. Town of Bucksport,
682 A.2d 227, 229 (Me. 1996) (holding FOAA did not require town to
disclose information which Superior Court had protected as trade secret). 
	[¶21]  The term "trade secret" is not defined in Rule 507.  The
definition contained within the Uniform Trade Secrets Act is a useful
guidepost.  The Act defines a trade secret as "information" that "[d]erives
independent economic value, actual or potential, from not being generally
known to and not being readily ascertainable by proper means by other
persons who can obtain economic value from its disclosure . . . ." 
10 M.R.S.A. § 1542(4)(A) (1997).  Furthermore, the information must be the
subject of reasonable efforts to maintain its secrecy.  Id. § 1542(4)(B).
	[¶22]  Because the hospital parties have not suggested how the
Quorum contract would meet a definition of a trade secret, we assume that
they have limited their trade secrets argument to the compensation records. 
At trial the hospital parties contended that they would have difficulty
attracting management employees and that the present employees would be
recruited by other hospitals if the compensation information became known. 
The Superior Court made a factual determination that the requested
documents are not protected trade secrets.  The court found that there was
no evidence that the compensation records were the subject of efforts to
maintain their secrecy.  It found that the employees who are receiving the
compensation are under no duty to keep the information secret.  Factual
findings are reviewed for clear error, and there is no clear error in the
Superior Court's factual determination.  See Rich v. Fuller, 666 A.2d 71, 74
(Me. 1995).  Because the compensation records at issue have not been the
subject of efforts to maintain their secrecy, they are not trade secrets, and
the exemption in section 402(3)(B) of FOAA is not applicable to the
compensation records of Victory and the chief financial officer of the
hospital.
	The entry is:
			Judgment affirmed.

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