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Lyft, Inc. v. City of Seattle

Supreme Court of Washington, En Banc

May 31, 2018

LYFT, INC. and RASIER, LLC, Respondents,
v.
CITY OF SEATTLE, Appellant, And JEFF KIRK, Defendant.

          STEPHENS, J.

         This case is before the court on direct review of a King County Superior Court order enjoining the release of records the trial court concluded were trade secrets under the Uniform Trade Secrets Act (UTSA), ch. 19.108 RCW. We must decide whether records containing trade secrets are categorically excluded from public disclosure under the Public Records Act (PRA), ch. 42.56 RCW. We hold that they are not. Applying the injunction standard set forth in RCW 42.56.540, such records may be enjoined from disclosure only if disclosure would clearly not be in the public interest, and would substantially and irreparably damage a person or a vital government interest.

         The superior court erred by applying the general injunction standard of Civil Rule (CR) 65 articulated in Tyler Pipe Industries, Inc. v. Department of Revenue, 96 Wn.2d 785, 792, 638 P.2d 1213 (1982), and by not adequately considering the PRA's more stringent standard. We therefore reverse the decision below and remand for the trial court to apply the proper standard under RCW 42.56.540.

         BACKGROUND FACTS AND PROCEDURAL HISTORY

         Respondents Lyft Inc. and Rasier LLC[1] operate car-hailing or "transportation networking companies" (TNC) in several locations, including the city of Seattle (City). TNC mobile and Internet-based technology enables consumers to use their smartphones to retain drivers for trips. Drivers connected to the network can access real-time information to respond to consumer requests for rides and carpools. Rasier, in a dominant position with 14, 000 drivers in Seattle, competes with Lyft for local market share.

         After the City passed a 2014 ordinance that limited the number of TNC drivers active at any given time, respondents Lyft and Rasier (collectively L/R) organized a coalition to overturn the ordinance through a voter referendum. In response to mediation among the City, L/R, and taxi and for-hire stakeholders in the ground transportation industry, the referendum proposal was withdrawn. The parties agreed that L/R would submit quarterly standardized reports to the City that include the total number of rides, the percentage of rides completed in each zip code, pick-up and drop-off zip codes, the percentage of rides requested but unfulfilled, collision data, and the number of requested rides for accessible vehicles.[2]

         In response to L/R concerns regarding data confidentiality, a mediation provision stated that '"[t]he city will work to achieve the highest possible level of confidentiality for information provided within the confines of state law.''" Clerk's Papers (CP) at 2703-04 (emphasis added) (alteration in original) (quoting Ex. 101). The mediation terms, including acknowledgement that their ultimate adoption was subject to city council approval, were subsequently enacted as Seattle Municipal Code (SMC) 6.310.540. The for-hire vehicle regulatory ordinance provides that "[i]f a public records request is made of the City for documents that have been designated by the providing party as confidential or proprietary, the City shall provide third party notice to the providing party prior to disclosure." SMC 6.310.540(D). Likewise, under a confidentiality agreement between the City and Rasier subject to the requirements of the PRA, the City notifies Rasier upon receipt of a PRA request implicating disclosure of Rasier-designated confidential records.[3]

         L/R's zip code reports to the City are extracted through queries from L/R's databases containing driver and passenger records collected using L/R's software programs. In consultation with L/R, the City established a secure, encrypted file transfer protocol (FTP) website for L/R submissions of required quarterly reports. Access to this FTP site is controlled using log-in credentials, both externally and within city government. The City limits access to L/R quarterly reports and derivative public records to persons with a need to know this information within its departments of transportation, and financial and administrative services.

         Besides using the L/R zip code reports for regulatory enforcement, the City considers the records to analyze overall TNC impact on transportation systems and infrastructure; enforcement staffing needs and allocation; vehicle-miles traveled and traffic congestion; service levels for all sections of the city; and service disparities such as redlining and discrimination based on impermissible factors, including race and religion. The for-hire vehicle ordinance requires that City staff prepare an annual report for the chair of the Taxi, For-hire, and Limousine Regulations Committee of the city council, summarizing TNC-reported public records. SMC 6.310.100(B). Although this city reporting requirement was not included in the mediation terms, neither Lyft nor Rasier objected to this language in the proposed ordinance. The City delayed circulation or release of the draft 2015 report to the committee and city council, after L/R objected and threatened litigation.

         L/R insist that their quarterly zip code reports to the City consist of trade secrets protected under the UTSA. See Resp't Lyft's Answering Br. at 16; Resp't Rasier LLC's Answering Br. at 1. L/R can consider data compilations and extracts to assess demand for their services, new product launch targets, marketing and pricing strategies, and market competition. While each L/R driver possesses knowledge contained in the records corresponding to individual trips driven, L/R limit employee access to the quarterly zip code reports submitted to the City. L/R do not share their quarterly zip code reports with each other.

         In January 2016, appellant Jeff Kirk, a resident of Texas, submitted a PRA request to the City seeking L/R reports for the final two quarters of 2015. Kirk obtains this information from Seattle taxi companies, and researchers examine this information to detect evidence of redlining in the provision of ground transportation to the detriment of persons or communities of color. Specifically, Kirk seeks release of records submitted by L/R to the City as required by SMC 6.310.540, including the percentage and number of rides picked up in each zip code, and the pick-up and drop-off zip codes of each ride.

         In response to his PRA request, the City advised Kirk that the subject reports were labeled by L/R as confidential. The City provided notice of the request to L/R, which then sought an injunction under the PRA to prevent disclosure of the requested reports to Kirk. The King County Superior Court issued a temporary injunction granting partial relief as to zip code records but denying injunctive relief as to data indicating L/R's total number of rides, total number of rides requesting an accessible vehicle, and crime reports. Following an evidentiary hearing in which the court considered live and deposition testimony, the court granted L/R's request for a permanent injunction preventing disclosure of the records, concluding that the zip code reports are trade secrets under the UTSA and, therefore, exempt from disclosure under the PRA. Kirk and the City sought direct review of the injunction by this court, and we granted review.[4]

         ANALYSIS

         Under the PRA, public records[5] may be withheld only '"in accordance with a statute that exempts or prohibits disclosure in whole or in part of specific information or records.'" Progressive Animal Welfare Soc'y v. Univ. of Wash., 125 Wn.2d243, 251-52 884 P.2d 592 (1994) (PAWS) (plurality opinion) (quoting former RCW 42.17.340(1) (1992), recodified as RCW 42.56.550(1)). To determine whether the records at issue in this case may be withheld from disclosure, we consider the relevant provisions of both the PRA and the UTS A. While we conclude that L/R's zip code records likely meet the definition of "trade secrets" under the UTSA, L/R are not entitled to an injunction under the applicable PRA standard, RCW 42.56.540, unless they can establish on remand that disclosure is clearly not in the public interest and in fact poses substantial and irreparable harm.

         A. The PRA and "Other Statute" Exemptions

         The PRA "begins with a mandate of full disclosure of public records; that mandate is then limited only by the precise, specific, and limited exemptions which the Act provides." PAWS, 125 Wn.2dat258. The PRA requires that "[e]ach agency, in accordance with published rules, shall make available for public inspection and copying all public records, unless the record falls within the specific exemptions of subsection (8) of this section, this chapter, or other statute which exempts or prohibits disclosure of specific information or records."[6] RCW 42.56.070(1) (emphasis added). "The 'other statutes' exemption incorporates into the Act other statutes which exempt or prohibit disclosure of specific information or records. [Former] RCW 42.17.260(1) [(1992), recodified as RCW 42.56.070(1)]. In other words, if such other statutes mesh with the Act, they operate to supplement it. However, in the event of a conflict between the Act and other statutes, the provisions of the [PRA] govern." PAWS, 125 Wn.2d at 261-62 (footnote omitted);[7] see RCW 42.56.030 ("In the event of conflict between the provisions of this chapter and any other act, the provisions of this chapter shall govern."). The PRA is "liberally construed and its exemptions narrowly construed to promote this public policy [to keep Washington residents informed and in control over the instruments they have created] and to assure that the public interest will be fully protected." RCW 42.56.030. "The language of the [PRA] does not authorize us to imply exemptions but only allows specific exemptions to stand." Brouillet v. Cowles Publ'g Co., 114 Wn, 2d 788, 800, 791 P.2d 526 (1990).

         "[T]o determine if a law applies as an 'other statute' under the PRA, the law must be individually reviewed." Wash. State Bar Ass'n, Public Records Act Deskbook: Washington's Public Disclosure and Open Public Meetings Laws § 15.2 at 15-3 (2d ed. 2014). When the PRA injunction statute is invoked, this court has described the analysis as follows:

[W]e start with the proposition that the [PRA] establishes an affirmative duty to disclose public records unless the records fall within specific statutory exemptions or prohibitions. It follows that in an action brought pursuant to the injunction statute ([former] RCW 42.17.330 [(1975), ] [recodified as RCW 42.56.540]), the initial determination will ordinarily be whether the information involved is in fact within one of the act's exemptions or within some other statute which exempts or prohibits disclosure of specific information or records. If it is not so exempted or prohibited, then the records are to be released subject to the agency's right in certain situations to delete identifying details from the record, in accordance with another specific provision of the act. If it is exempted or prohibited, then the judicial inquiry commences.

Spokane Police Guild v. Liquor Control Bd., 112 Wn.2d 30, 36, 769 P.2d 283 (1989) (emphasis added) (footnotes omitted). In sum, when a PRA request is made and a third party asserts an "other statute" exemption, the court first looks at whether the other statute exempts disclosure in the particular context. If the court finds the information is exempt under the "other statute, " then "judicial inquiry commences" with the court applying the PRA injunction standard. Id.

         B. L/R Zip Code Reports Qualify as Trade Secrets under the UTS A, Which Is Incorporated as an "Other Statute" under the PRA

         It is undisputed that no provision of the PRA exempts trade secrets from disclosure, so any exemption would need to be pursuant to an "other statute." Trade secrets are addressed in the UTSA, which was enacted to subsume claims of civil liability for misappropriation of trade secrets. See RCW 19.108.900(1) ("This chapter displaces conflicting tort, restitutionary, and other law of this state pertaining to civil liability for misappropriation of a trade secret."). The UTSA contains no specific exemption of trade secrets from public disclosure laws. Recognizing this, Lyft cites several narrowly focused statutes outside the UTSA for the proposition that the protection of trade secrets enjoys broad policy support.[8] However, none of these statutes provides a relevant disclosure exemption in this case.

         In PAWS, we concluded the UTSA may qualify as a PRA "other statute" in some contexts. 125 Wn.2d at 262 ("Two state statutes [including the UTSA] qualify as 'other statutes' in the present context, although neither justifies withholding the grant proposal in its entirety."). PAWS requires that courts determine whether the UTSA is an "other statute" based on individual review-in this case, in regard to the L/R zip code reports. Under the UTSA, a "trade secret" consists of "information, including a formula, pattern, compilation, program, device, method, technique, or process that: (a) Derives 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 or use; and (b) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy." RCW 19.108.010(4). "The parties seeking to prevent disclosure ... bear the burden of proof." Confederated Tribes of Chehalis Reservation v. Johnson, 135 Wn.2d 734, 744, 958 P.2d 260 (1998). We review interpretation of the UTSA de novo as a question of law, while we review whether specific information satisfies the statute's definition of a "trade secret" in any given case as a question of fact. Ed Nowogroski Ins., Inc. v. Rucker, 137 Wn.2d 427, 436-37, 971 P.2d 936 (1999). Although it is a close question, the trial court sustainably found that the L/R zip code records meet the standards for trade secret protection under the UTSA.

         The City contends that the trial court neglected to make concrete findings on the required UTSA elements. RCW 19.108.010(4). First, the City argues that the court failed to specifically find, based on the facts, that the L/R zip code reports constitute a compilation under the UTSA. Opening Br. of Appellant City at 38-39. Because the UTSA provides no definition for the term "compilation, " we look to its usual and ordinary dictionary definition. Fraternal Order of Eagles, Tenino Aerie No. 564 v. Grand Aerie of Fraternal Order of Eagles, 148 Wn.2d 224, 239, 59 P.3d 655 (2002). Webster's defines "compilation" as "something that is a product of the putting together of two or more items: as ... an accumulation of many things, elements, or influences." Webster's Third New International Dictionary at 464(1981).

         Lyft argues that its zip code reports constitute an "'accumulation' of all zip code data for each and every Lyft ride [documented] on the quarterly reports, . . . contain[ing] the entire universe of zip code data for Lyft for any given quarter." Resp't Lyft's Answering Br. at 17-18. L/R zip code reports are distinguishable from the discrete reports for which the superior court denied injunctive relief. CP at 266 (Order Granting in Part & Den. in Part Pis.' Mot. for Prelim. Inj. at 3 (Mar. 21, 2016)). The trial court inferred that zip code report queries that extract data equate to an ability to compile information. CP at 2705. The facts demonstrate these L/R zip code reports consist of extracts from larger, more granular L/R database compilations. We conclude that substantial evidence supports the superior court's factual determination that the zip code reports constitute a compilation of information consistent with the UTSA.

         Next, the City argues that the superior court failed to make concrete findings regarding the effort and expense L/R undertook in extracting quarterly zip code records using the City's reporting template, that neither Lyft nor Rasier met its burden to demonstrate the zip code reports have independent economic value because little or no effort or expense was incurred in producing these reports, and that the real value resides in other L/R data not reported to the City. Opening Br. of Appellant City at 40-42. It notes that "neither [Lyft nor Rasier] attempted to 'quantify in any meaningful way the competitive advantage' the other 'would enjoy' if the information was released." Id. at 42. Information possesses independent economic value under the UTSA when effort and expense were incurred to develop the information. McCallum v. Allstate Prop. & Cas. Ins. Co., 149 Wn.App. 412, 424, 204 P.3d 944 (2009); Nowogroski Ins., 137 Wn.2d at 438. The information must not be readily ascertainable from another source. Spokane Research & Def. Fund v. City of Spokane, 96 Wn.App. 568, 577-78, 983 P.2d 676 (1999).

         The trial court found value in the zip code reports as a spatial indicator of L/R revenue generation and as a strategic indicator for marketing new products. CP at 2705. The court also found that both L/R are interested in obtaining the other's zip code reports, though this was hotly debatable. Id. The superior court found the zip code reports are not readily ascertainable by competitors by proper means. CP at 2717. While it is a close call, the record sufficiently demonstrates the independent economic value of the data reflected by the zip code reports, including as an indicator for potential routes for launching new ride pool and sharing products, and markets for subscription services. Substantial evidence supports the superior court's finding of independent economic value in the zip code reports.

         Finally, the City argues that every L/R driver accesses company data, even when also driving for the competitor TNC, and thus the zip code data is not a trade secret that is the "subject of efforts that are reasonable under the circumstances to maintain its secrecy." RCW 19.108.0 10(4)(b); see also Opening Br. of Appellant City at 47. Respondents reply that although the driver may have access to the beginning and ending zip codes for each trip driven, the driver lacks access to other records in the quarterly zip code report. Resp't Rasier LLC's Answering Br. at 28. The superior court found that the respondents L/R do not share the zip code reports between each other because of the perceived competitive disadvantages of doing so. CP at 2705-06. L/R restrict access to the zip code reports internally within their companies, with corresponding policies and procedures. CP at 2706. The limited data drivers have is not the same data L/R protect. Substantial evidence supports the superior court's finding that L/R make reasonable efforts under the circumstances to maintain the secrecy of the zip code reports.

         In sum, while the evidence is mixed and the question is not beyond debate, the superior court sustainably concluded that L/R's zip code reports are "trade secrets" within the meaning of the UTSA. For this reason, the UTS A is properly regarded as an applicable "other statute" in this context. See PAWS, 25 Wn.2d at 261-62. Concluding that L/R records contain trade secrets does not end the inquiry, however. As noted, there is no categorical exemption for trade secrets under the PRA, and we must therefore determine whether L/R are entitled to an injunction to prevent the City from disclosing the records in response to a public records request.

         C. Whether L/R Are Entitled to an Injunction Preventing the City from Disclosing Zip Code Records Turns on Application of the PRA Injunction Standard in RCW 42.56.540

         The central question concerning L/R's motions for injunctive relief is which injunction standard applies. L/R argue that trade secrets must be protected from disclosure under the UTSA without regard to the PRA injunction standard. Injunctive relief for trade secrets under the UTSA follows the general standard of CR 65. Specifically, '"one who seeks relief by temporary or permanent injunction must show (1) that he has a clear legal or equitable right, (2) that he has a well-grounded fear of immediate invasion of that right, and (3) that the acts complained of are either resulting in or will result in actual and substantial injury to him"'. Tyler Pipe Indus., 96 Wn.2d at 792 (quoting Port of Seattle v. Int'l Longshoremen's & Warehousemen's Union, 52 Wn.2d 317, 319, 324 P.2d 1099 (1958)).

         The City counters that the PRA injunction standard applies rather than the UTSA standard because L/R seek to enjoin the City from complying with its duty to disclose records under the PRA. The City criticizes the superior court for "failing to apply the proper injunction standard under the PRA, opting instead to apply the lesser standard governing injunctions under CR 65." Consol. Reply Br. of Appellant City at 5 ("The trial court failed to make the requisite findings to ...


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