A New York court is currently reviewing whether Administrative Law Judges (“ALJs”) at the New York State Public Service Commission (“PSC”) can issue a protective order requiring parties to submit confidential information directly to Department of Public Service Staff (“Staff”) and other agencies without running afoul of the protections from public disclosure provided under New York’s Freedom of Information Law (“FOIL”). The protective order being challenged in the court case was adopted to expedite discovery in the evidentiary proceeding focused on examining the retail supply of energy in New York by Energy Service Companies (“ESCOs”). While the court’s forthcoming decision on the validity of the PSC’s protective order is likely to provide more clarity and direction for confidential information submitted in an ESCO proceeding, it may have a broader impact on requests for confidential treatment made for documents submitted to a New York State agency.

Under FOIL, records submitted to an agency may be protected from public disclosure if the information meets one of the statutory exemptions, such as the trade secret test or if the records contain confidential commercial information that, if publicly disclosed, would cause substantial competitive injury. In accordance with Part 6-1.4 of the PSC’s regulations implementing FOIL, confidential information submitted to a presiding officer as part of an administrative proceeding will be exempt from disclosure until a determination is made for whether the confidential information meets one of the statutory exemptions. Part 6-1.4 also provides that a presiding officer may require that confidential information be immediately submitted under a protective order, as was the case in the ESCO proceeding.

While the protective order at issue in the ESCO proceeding appeared routine, because the ALJs did not require other agencies to execute the protective agreement and because they directed that confidential information should be submitted directly to Staff and not through the ALJs as the presiding officers, a number of parties were concerned that their confidential information would be at risk of disclosure under FOIL. Parties questioned whether information submitted to other agencies could only be protected if submitted through each agency’s Records Access Officers (“RAOs”) and whether each agency’s RAOs would need to make an independent determination under FOIL. Parties further questioned whether it was appropriate to provide confidential information directly to Staff, as this is not expressly provided for in statute or regulation.

At the request of a State agency party, the Committee on Open Government (“COOG”) weighed-in on whether the protective order complied with FOIL. COOG expressed concerns with the protective order, finding that if it was followed, “it would enable [the PSC], as well as others, to claim confidentiality without any specific statutory basis for doing so, and a record could be stamped or marked ‘confidential’ as a means of prohibiting disclosure.” On the inter-agency issue, COOG noted that if there was a written agreement between agencies that referenced the specific records at issue, such an agreement would be valid.

After a failed attempt to seek relief from portions of the protective order that were inconsistent with FOIL through an interlocutory appeal with the Secretary to the Commission, Direct Energy, an ESCO party in the proceeding, filed an Article 78 petition and sought a preliminary injunction in the New York State Supreme Court, Albany County. Direct Energy Services, LLC v. New York State Public Service Commission, No. 02664-2017 (Albany Cty. Apr. 18, 2017). The Court granted the stay and ordered that confidential information could not be submitted directly to Staff or other agency parties, pending the outcome of the Article 78.

In its response, the PSC argued, in part, that a protective order is merely one step in the overall process to determine whether confidential information meets the exemptions from disclosure under FOIL, and that documents are deemed confidential only temporarily until a final determination regarding protected status can be made. Despite the stay, the ALJs subsequently issued an amended protective order to provide agency parties with access to confidential information if the agency agreed to be bound by the PSC’s final determination. This, too, is being challenged as there is no express statutory or regulatory basis for such inter-agency agreements.

A decision from the State Court is expected within the next few months. Regardless of the outcome, the Court’s decision should bring more certainty and direction to both information submitters and regulators regarding the appropriate process to be followed to ensure confidential information meets the substantive exemptions under FOIL and is not at risk of public disclosure. Overall, these issues are an important reminder that simply marking a document “confidential” or relying on informal promises of protection without a formal determination are not sufficient to safeguard against disclosure under FOIL. More importantly, because each agency promulgates its own regulations and internal processes to implement FOIL, it is imperative that any time documents are submitted to an agency, the confidential information contained within them is carefully evaluated to ensure that the statutory exceptions from disclosure are substantively met, and the process provided for under FOIL is precisely followed to avoid irreparable harm by having this information released to the public.