Adams County Record v. Greater North Dakota Ass'n

MESCHKE, Justice,

dissenting.

I respectfully dissent. All private records of a private entity should not be exposed to random public inspection because the private entity does some business with governmental bodies.

At a hearing on all pending matters, the Adams County Record group entered twenty-one exhibits as evidence of payments by state agencies to GNDA for memberships “and otherwise” (TR 3-4), agreed with the trial court that the question “before the Court is [whether] a writ of mandamus [is] appropriate and, if so, should the relief requested be granted” (TR 5), and, in closing, told the court that “I think the record is full” (TR 21). The trial court denied a writ of mandamus on the record before it, finding and reasoning:

1. GNDA is a private, non-profit corporation.
2. Article XI, Section 6 [the open records law] does not apply since the GNDA does hot fall within the definition of a public agency. In addition, an “organization or agency supported in whole or in part by public funds” are those agencies to whom money is appropriated.
3. The mere contracting by an agency for services with a private company does not bring the company within the purview of the foregoing section of the Constitution.

As Chief Justice VandeWalle observes in his concurrence, “the issues in this appeal were presented to us as pure questions of law without any factual disputes.”

Indeed, the Adams County Record group did not frame an argument on this appeal that an improper summary judgment had been entered, or that the trial court improperly denied it an opportunity to present evidence for a writ of mandamus. Rather, the *840group stated the question for review as a “straight forward” legal one:

Whether the receipt of public funds, byway of membership dues from state agencies and legislative grants, constitutes partial support of private organization activities and brings all of the records of the private organization under the purview of North Dakota’s constitution and statutory provisions requiring open inspection of records.

The group did not complain on appeal about denial of access to any records on the organization and structure of GNDA, the benefits and services the state agencies received from it, or identifying “support” by public funds to GNDA.

For relief on appeal, the Adams County Record group asked only that “the decision of the trial court be reversed and a writ of mandamus be issued, requiring GNDA to allow inspection of all its records, including the records of the North Dakota Coalition for Liability Reform.” Therefore, I believe the question here is one of law: Does the open records law apply to a private, non-profit corporation, one that engages in some business with governmental bodies as GNDA does, to open all of its private records for public inspection?

Justice Sandstrom’s opinion begins with some appropriate analyses that I agree with: Interpretation and application of the open records law is a question of law, fully reviewable by this court. “[N]ot every transfer of public funds to a private entity is support” that would subject “every corporation, contractor, and association of the state ... to the open records law each time the government paid for services or goods or awarded a contract.” I also agree with Justice Sand-strom that “[t]his is not the intent of the open records law,” that “support means something other than an exchange of services or goods for money,” and that “[w]hen there is a bargained-for exchange of value, a quid pro quo, the entity is not supported by public funds.”

Then, however, Justice Sandstrom’s opinion drifts away from appropriate analyses and shifts to an unlikely mode of interpretation: The exchange of value in contracting with a governmental agency must be for “identifiable and specific goods and services,” and membership “dues which are for the general support of the [private] organization constitute ‘support’ for purposes of the open records law.”1 Also, to imply that regular membership dues paid to GNDA by state agencies might be general support and not for the services that each agency gets with its membership, Justice Sandstrom suggests “[t]he only way a taxpayer can see how state funds were used is to access the private organization’s records to see how that organization used the money.” That notion would open the entire records of every private organization accepting a membership from a governmental body. Absent the well-defined services that Justice Sandstrom expects, a governmental body’s membership in a private association would expose its complete records to public inquisitiveness. On this aspect, I agree with Chief Justice Vande-Walle’s concurrence that “the payment of dues by the State agencies which are not greater in amount than those paid by nonpublic agencies” does not convert a private, non-profit corporation into an “organization ... supported ... by public funds.”2

*841The adequacy of the agreed consideration in a contract is not usually weighed by the courts under contract law. See Maragos v. Norwest Bank Minnesota, N.A., 507 N.W.2d 562, 565 (N.D.1993); Harrington v. Harrington, 365 N.W.2d 552 (N.D.1986).

[T]he courts do not ordinarily go into the question of equality or inequality of considerations, but act upon the presumption that parties capable to contract are capable of regulating the terms of their contracts, granting' relief only when the inequality is shown to have arisen from mistake, misrepresentation, or fraud. A different rule would, in every case, impose upon the court the necessity of inquiring into, and of determining the value of, the property received by the party giving the promise. Such a course is deemed to be impracticable.

17A AmJur2d Contracts § 135 (1991). I know of no reason why a contract by a governmental body should be treated differently.

What’s more, under separation-of-powers doctrine, judges should avoid interfering with the discretion of executive agencies expending their funds appropriated by the Legislature, unless there is clear illegality in the expenditure. As with any procurement by a governmental body from a private entity, the governmental body can contract for the necessary private records to be made available for audit, inspection, or filing. The Legislature can specify what private records must be obtained by or made accessible to the agency in carrying out its governmental activity. Indeed, the Legislature has decreed that a member is entitled to inspect the books and records of a nonprofit corporation “for any proper purpose at any reasonable time.” NDCC 10-24-25. No doubt that permits a governmental member to do so. The judicial branch should not write a new condition into a governmental body’s membership in a private association when neither the governmental body nor the Legislature has done so.

On the agreement by the North Dakota Tourism Department with GNDA for publication of Horizons magazine, Justice Sand-*842strom quotes only that contract’s recitals and then criticizes the deal because it “does not specify the quantity of promotion the state receives in return for its $60,000,” and says it lacks a “specified relationship between the quantity of information it disseminates ... and the amount of money [GNDA] receives.” The implication seems to be that the magazine is a flimflam or flummox, rather than a valid promotional effort. Even without copies of the publication in this record, that’s an implausible implication.

This curious analysis also infers that, after years of outright losses, GNDA now makes a modest profit on Horizons, “there appears no language in the agreement limiting the use of revenues from Horizons,” and “GNDA is apparently free to use this revenue in support of its other undertakings.” Justice Sandstrom would conclude this permits an inference that “GNDA is supported by public funds and is subject to the open records law,” and “GNDA’s net gain on publishing Horizons, greater than the State grant, creates a potentially reasonable inference of general support.”

The operative clauses of the Tourism Department’s agreement with GNDA say:

IT IS AGREED, that the Department will pay to [GNDA] ... $7,500 per issue or a total of $60,000 for the 93-95 biennium to publish North Dakota Horizons, subject to the following conditions and limitations:
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3. That each payment shall be made to [GNDA] only after publication of an issue.
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[GNDA] will continue to utilize an advisory board, with representation from the Tourism Department to review and give input to the publication on a periodic basis. That [GNDA] will furnish to the Department, with documentation to substantiate the expenditures and revenues generated by Horizons on an annual basis.

Reports of the magazine’s revenues and expenses for the years 1992 and 1991 were produced by GNDA in this lawsuit, and put in evidence as Exhibit 22 by the Adams County Record group at the trial. (Appendix 60). I believe, as a matter of law, there is a clearly valid agreement between the agency and GNDA for publication of the Horizons magazine. There is no rational basis here for an inference that GNDA is supported by public funds.

Justice Sandstrom’s reasoning on this facet would also unsettle settled contract law, as I summarized earlier. See also Sebastian County Chapter of The American Red Cross v. Weatherford, 846 S.W.2d 641 (Ark.1993) (Dollar-a-year lease to Red Cross not a direct allocation of funds for support by public funds that would open all Red Cross records for public disclosure). Once lawfully spent, public funds lose their identity in the hands of a non-governmental entity. Champ v. Poelker, 755 S.W.2d 383, 388 (Mo.App.1988). For these reasons, I agree with Chief Justice VandeWalle: “Whether or not GNDA makes a profit or loss on Horizons magazine is not determinative” and “from the face of this record ... there was a valid quid pro quo contract between the State and GNDA [for] the continued publication of Horizons.”

I am puzzled by the suggestion that the Horizons agreement might be “a subterfuge to give a donation to GNDA,” even though the Chief Justice carefully clarifies that this is “a fact not evident from this record.” Fraud on the government is always potential, as in private dealings. But there is a different framework of law and procedure to address mistake, misrepresentation, and fraud. Indeed, fraud has specific procedural rules and heightened proof standards, including NDRCivP 9(b): “In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.” The Adams County Record group made no claim of fraud, mistake, or subterfuge, either in the trial court or in this appeal. I do not comprehend how fraud, pretext, or subterfuge became a question in this case.

Apart from Qui tarn actions, where a citizen can be authorized to sue on behalf of the state as well as herself, an individual has no standing to sue on behalf of a governmental body absent an illegal expenditure by the governmental body, an idea that even Justice Sandstrom doesn’t assert. See Krebs v. Board of Trustees of Teachers’ Retirement *843System, 410 Ill. 435, 102 N.E.2d 321, 326 (1951) (“If the payment is legal, as we have heretofore found, it ceases to be public money in the hands of the recipients.”); 63A AmJur2d Public Funds § 2 (1984) (“Money legally paid by the state ceases to be public money in the hands of the recipient.”).

Ordinarily, support by public funds is evidenced by a legislative enactment, either a direct appropriation or an authorization to a governmental unit to directly transfer public funds or tax revenues to another entity for a public purpose. N.D. Const, art. X, § 12(1): “All public moneys ... shall be paid out and disbursed only pursuant to appropriation first made by the legislature.... ” See Menz v. Coyle, 117 N.W.2d 290, 302 (N.D.1962) (“an ‘appropriation’ ... is the setting apart of a definite sum for a specific object in such a way that the public officials can use the amount appropriated, and no more than the amount appropriated”). Thus, an organization that receives a direct appropriation from the Legislature, like the North Dakota State Fair, 1993 N.D. Laws ch. 20, § 1, and ch. 32, is one “supported ... by public funds.” Compare 1993 N.D. Laws ch. 14, § 1, subd. 2, appropriating funds to the Tourism Department, not to GNDA. The trial court concluded here that “an ‘organization or agency supported in whole or in part by public funds’ are those agencies to whom money is appropriated.” In this context, the trial court reached a valid conclusion. I would affirm it.

The conclusion reached by the trial court results from a correct interpretation of the open records law. The adjectival phrase, “all records of public or governmental,” modifies each of the bodies named in the open records law. NDCC 44-04-18(1); N.D. Const, art. XI, § 6. Those listed bodies are linked by the repeated conjunction “or.” This interpretation results from the ordinary rules of grammar, the usual rules of statutory interpretation, and public policy.

The policy purposes of the open records law were summarized in an early case:

What the Legislature was attempting to accomplish was to provide the public with the right and the means of informing itself of the conduct of the business in which the public has an interest, in order that the citizen and taxpayer might examine public records to determine whether public money is being properly spent, or for the purpose of bringing to the attention of the public irregularities in the handling of public matters.

Grand Forks Herald v. Lyons, 101 N.W.2d 543, 546 (N.D.1960) (marriage license records in county courts are “public” records). These purposes require “public” records to be examined to assess whether “public” money is spent properly. The examination is to identify “public” irregularities in the handling of “public” matters. These purposes are fulfilled by examination of records that belong to or come into the possession of public or governmental organizations. The law does not expressly or impliedly open all of the records of any private organization that does business with public bodies.

This interpretation of the open records law is confirmed by the ordinary definition of “or” as a conjunction: “used as a function word to indicate ... (2) choice between alternative things, states, or courses; (3) the synonymous, equivalent, or substitutive character of two words or phrases; _” Webster’s Third New International Dictionary 1585 (1971). “Words used in any statute are to be understood in their ordinary sense, unless a contrary intention plainly appears,....” NDCC 1-02-02. “Words and phrases must be construed according to the context and the rules of grammar and the approved usage of the language.” NDCC 1-02-03 (part). The conjunction “or” in Art. XI, § 6 and NDCC 44-04-18(1) should be given its ordinary meaning, construed according to its approved usage, and understood to mean that the adjectival phrase, “all records of public or governmental,” modifies the entire list that it precedes. The modifying phrase does not affect private records in private hands.

This interpretation avoids floundering, unbounded, and unprecedented analyses, and it facilitates clarity.. I would affirm in all respects the trial court’s refusal to issue a special writ to order GNDA to “open for *844inspection any and all of its records.” Therefore, I respectfully dissent.

LEVINE, J., concurs.

. I do not read Kneeland v. NCAA, 850 F.2d 224, 230 (5th Cir.1988), to support that assertion, as it is cited. That decision determined membership dues used for activities, which the trial court found "vague and amorphous,” should “not be considered unrestricted grants for the general support of the NCAA,” a private association composed of public and private colleges. See also A.H. Belo Corp. v. So. Methodist Univ., 734 S.W.2d 720 (Tex.App.—Dallas 1987) (monies received by private colleges from Southwest Athletic Conference, an association of public and private schools, are contractual payments and not public funds that would open records for inspection).

. To interpret the law to open nonpublic or nongovernmental records to public inspection would seriously conflict with constitutional constraints. See N.D. Const, art. I, § 8 (“The right of the people to be secure in their persons, houses, papers and effects, against unreasonable searches and seizures shall not be violated....”); art. I, § 16 ("Private property shall not be taken or damaged for public use without just compensation having been first made to, or paid into court for the owner_"); art. I, § 5 ("The citizens have a right, in a peaceable manner, to assemble together for the common good_”). A cardinal rule of statutory construction calls for an interpretation that complies with constitution*841al dictates. NDCC 1-02-38(1): "In enacting a statute, it is presumed that ... [c]ompliance with the constitutions of the state and of the United States is intended.”

Governmental regulation (even by a state constitution) that constricts First Amendment freedom can exist only for very narrowly defined reasons. The First Amendment of the United States Constitution protects freedom of speech, assembly, association, and petition that, "though not identical, are inseparable.” Thomas v. Collins, 323 U.S. 516, 530, 65 S.Ct. 315, 323, 89 L.Ed. 430 (1945). See Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961) (protecting publicity campaign designed to influence legislation in the transportation industry from antitrust regulation); First National Bank of Boston v. Bellota, 435 U.S. 765, 98 S.Ct. 1407, 55 L.Ed.2d 707 (1978) (invalidating state criminal statute forbidding expenditures by business corporations for the purpose of influencing popular vote on referendums because statute prohibited protected speech in manner unjustified by compelling state interest); Citizens Against Rent Control/Coalition for Fair Housing v. Berkeley, 454 U.S. 290, 294, 102 S.Ct. 434, 436, 70 L.Ed.2d 492 (1981) (invalidating an ordinance limiting contributions to a committee formed to support or oppose ballot measures, and declaring “the practice of persons sharing common views banding together to achieve a common end is deeply embedded in the American political process."); Federal Election Commission v. Massachusetts Citizens For Life, 479 U.S. 238, 107 S.Ct. 616, 93 L.Ed.2d 539 (1986) (invalidating Federal Election Campaign Act section restricting independent campaign expenditures by nonprofit, nonstock corporation because the section infringed protected speech without a compelling justification). Private records are constitutionally protected from governmental regulation unless the liberty interest is outweighed by a compelling governmental interest and the regulation is narrowly tailored to further that compelling interest.

The Adams County group seeks "inspection of all [GNDA’s] records, including the records of the North Dakota Coalition for Liability Reform.” Of course, for a compelling governmental interest, with adequate warning through preexisting legislation, the Legislature could probably validly require public reporting of lobbying contributions received by any lobbying entity. See Northern States Power Co. v. North Dakota Pub. Serv. Comm'n, 502 N.W.2d 240 (N.D.1993) (private records legislatively required to be filed with a governmental body are public records, unless exempted from public inspection by law); Buckley v. Valeo, 424 U.S. 1, 60-84, 96 S.Ct. 612, 654-66, 46 L.Ed.2d 659 (1976) (upholding provisions of Federal Election Campaign Act of 1971 requiring public disclosure of certain campaign contributions and expenditures, "if narrowly construed,” as within constitutional bounds).