Construction Law Insight: Minnesota Supreme Court Rules In Favor Of Contractors In Government Data Practices Act Case

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On November 20, 2013, the Minnesota Supreme Court issued its long-awaited decision in the case of Helmberger v. Johnson Controls, Inc. The Court ruled in favor of Johnson Controls, Inc. (JCI) and its subcontractor, Architectural Resources, Inc. (ARI), which was represented by Steve Lindemann and Amy Conway of Leonard, Street and Deinard. The Court found that because the contracts at issue did not include certain language required by the Minnesota Government Data Practices Act to impose disclosure obligations on the contractors, those contractors were not required to allow public access to their private files.

What Was at Stake in This Case?

An independent school district in northern Minnesota contracted with JCI to obtain design services for the purpose of renovating some existing schools and building some new schools as part of a comprehensive plan for the school district. JCI subcontracted with a prominent architectural firm to assist JCI in performing the design work. JCI's contract with the school district did not include any language requiring JCI or its subcontractors to be responsible for compliance with the Minnesota Data Practices Act.

Marshall Helmberger, the editor of a small newspaper based in Ely, Minnesota, requested that JCI provide a copy of its subcontract with ARI, even though that subcontract had never been submitted to the school district or shared with any third parties. Helmberger based his request on the argument that JCI was performing a "government function" and therefore was subject to the Data Practices Act. JCI refused to produce the subcontract, and Helmberger filed a complaint with the Minnesota Office of Administrative Hearings. At that point, ARI sought and received permission to intervene in the case to protect its interest in keeping its files and contracts confidential, rather than having to disclose sensitive pricing and other information that could be used by competitors or others in a way that could harm ARI.

Together ARI and JCI won Round One of their battle with Helmberger and got the case dismissed. Helmberger won Round Two by persuading the Minnesota Court of Appeals that the Office of Administrative Hearings had wrongly determined that JCI and ARI were not performing a government function. Recognizing the serious ramifications of this ruling for anyone who does business with the government, JCI and ARI petitioned the Minnesota Supreme Court for review.

What Did the Supreme Court Decide?

The Supreme Court could have decided that JCI and ARI were not performing a government function and therefore were not obligated to comply with the Data Practices Act, but it didn't. Instead, a majority of the Court punted on that issue and ruled on much narrower grounds. Specifically, the Court decided that a contractor does not have to disclose information under the Data Practices Act if its contract does not include language making it clear that the contractor is subject to the Act. This bright line rule overruled WDSI, Inc. v. County of Steele, a decision of the Minnesota Court of Appeals that had reached the opposite conclusion.

A concurring opinion by Justice Page, which was joined by Justice Wright, went further. He found that JCI and ARI were not performing a government function. He articulated a 3-factor test and found that JCI's duties did not satisfy the test. Justice Page stressed that the legislature did not intend to allow public access to private files under these circumstances.

What Does This Mean for Government Contractors?

If you have a contract with the Minnesota government, and it does not include language requiring you to comply with the Data Practices Act, you have no duty to allow public access to your files. If you are presented with a contract that includes such language, and you do not believe you are performing a government function, you should object. For support, you can cite to Justice Page's concurrence. Be careful not to sign contacts that include the language in question because you could be deemed to have waived the right to object later. You may be able to argue that the government acted beyond the scope of its authority, but you may find yourself in a costly and uncertain legal battle.

What Does It Mean for the Government?

If a government agency doesn't put the prescribed language into its contracts, it cannot expect private contractors to comply with the Data Practices Act. But agencies should be careful about inserting language in contracts where it doesn't belong. Good contractors may be deterred from bidding on jobs if they know that doing so might open their files to public disclosure. Unwarranted use of the specified contract language could provoke unnecessary disputes with contractors and drive up the cost of the work. The 3-factor test proposed by Justice Page can help agencies decide when to use the language. Those factors include:

  • Whether a statue confers upon the government the duty to perform the services.
  • The degree to which the government entity has delegated decision-making authority.
  • Whether the government has performed the contracted-for services in the past.

This list is not exclusive, but it provides good guidance for determining whether the Data Practices Act should apply. For most design and construction contracts, the answer is no.

 

Topics:  Architects, Contractors, Disclosure Requirements, School Districts, Subcontractors

Published In: Construction Updates, Government Contracting Updates, Privacy Updates, Science, Computers & Technology Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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