Requirement of Detailed Justification for FOIL Trade Secret Exemptions

Introduction

Matter of Standardbred Owners Assn., Inc. v. New York State Gaming Commission, 2025 NYSlipOp 02123 (App. Div. 3d Dept. Apr. 10, 2025), involved a Freedom of Information Law (FOIL) request by the Standardbred Owners Association, Inc. (“petitioner”) seeking disclosure of a “Mitigation Agreement” between two private gaming entities, MGM Resorts and Montreign Operating Company, LLC. The New York State Gaming Commission (“respondent”) initially redacted parts of the agreement under the FOIL trade‐secret exemption (Public Officers Law § 87(2)(d)). Petitioner challenged the redactions in a CPLR Article 78 proceeding, also seeking counsel fees and costs. After respondent produced the unredacted agreement during litigation, the only issue became whether petitioner should recover fees and costs under Public Officers Law § 89(4)(c)(ii). The trial court denied fees, finding respondent had a reasonable basis for redaction. On appeal, the Third Department reversed, holding that respondent’s cursory, conclusory assertions did not satisfy the obligation to provide specific justification for withholding trade‐secret information.

Summary of the Judgment

The Commission initially redacted certain financial and business‐sensitive provisions from the Mitigation Agreement, invoking the trade‐secret exemption in FOIL § 87(2)(d).
Petitioner appealed internally and then filed an Article 78 petition to compel full disclosure and recover attorney’s fees.
Before the hearing, respondent provided the unredacted agreement, rendering the disclosure request moot.
The Supreme Court (Appellate Term) denied counsel fees, finding respondent’s redactions were based on a reasonable interpretation of the trade‐secret exemption.
On appeal, the Third Department held that respondent’s bare conclusions—unsupported by specific evidence or explanation—did not constitute a reasonable basis for withholding. It reversed the fee denial and remitted for a fee award hearing consistent with FOIL § 89(4)(c)(ii).
Key holding: Agencies must articulate on the record specific, persuasive evidence that redacted FOIL material is a trade secret or would cause substantial competitive injury; conclusory or generalized statements will not suffice to deny fees when the requester substantially prevails.

Analysis

Precedents Cited

Matter of Puig v. New York State Police, 233 A.D.3d 1121 (3d Dept. 2024): Established that a “reasonable basis” for an FOIL denial must be grounded in specific statutory exemption claims, not conclusory assertions.
Matter of New York State Defenders Assn. v. New York State Police, 87 A.D.3d 193 (3d Dept. 2011): Emphasized that courts must scrutinize whether an agency’s invocation of § 87(2) exemptions is supported by a reasoned explanation.
Matter of Competitive Enter. Inst. v. Attorney Gen. of N.Y., 161 A.D.3d 1283 (3d Dept. 2018): Affirmed that FOIL fees may be awarded when an agency has no reasonable basis for denial of access.
Matter of Verizon N.Y., Inc. v. NYS Pub. Serv. Commn., 137 A.D.3d 66 (3d Dept. 2016): Confirmed the applicability of trade‐secret exemption for information that could cause substantial competitive injury, but requires case‐specific analysis.
Matter of Getting the Word Out, Inc. v. NYS Olympic Regional Dev. Auth., 214 A.D.3d 1158 (3d Dept. 2023): Demonstrated that redactions must be apparent on the face of the record or supported by a detailed explanation.
Matter of Encore Coll. Bookstores v. Auxiliary Serv. Corp., 87 N.Y.2d 410 (1995): Articulated the necessity of proving “actual competition and the likelihood of substantial competitive injury” for trade‐secret protection under FOIL.

Legal Reasoning

The Third Department framed the issue under Public Officers Law § 89(4)(c)(ii), which mandates fee awards when a requester “substantially prevails” and the agency “had no reasonable basis for denying access.” Here, there was no dispute that the petitioner substantially prevailed. The Court’s analysis focused entirely on whether the Commission’s redactions had a reasonable basis.

The Court found that:

Respondent’s initial FOIL denial and its FOIL Appeal Officer’s letter offered only blanket statements—that the material was a “trade secret” and contained “financial details” that could hinder competitive positioning—without linking specific redacted passages to the statutory exemption. Such cursory justifications do not allow a reviewing court or FOIL requester to evaluate whether the exemption truly applies.
The face of the Mitigation Agreement did not label any provision as confidential or reveal an inherent trade‐secret nature. Absent external support, the Commission could not rely solely on the third parties’ redaction requests to establish the exemption.
Under Matter of Markowitz v. Serio, 11 N.Y.3d 43 (2008), an agency must present “specific, persuasive evidence” that disclosure would cause actual competitive harm. Speculation or reliance on generalized trade‐secret case law is insufficient.

Based on these principles, the Court concluded the Commission lacked a reasonable basis for its redactions and therefore erred in denying petitioner’s fee application.

Impact

This decision strengthens FOIL’s transparency mandate by clarifying that:

Agencies must independently assess and justify each exemption claim with concrete evidence, rather than rubber‐stamp third‐party redaction requests.
Court review of FOIL exemptions is not perfunctory: conclusory language will not shield agencies from fee awards when their justifications fail scrutiny.
Future requesters may be more inclined to bring fee‐shifting actions under FOIL § 89(4) when agencies offer only generic reasons for withholding records.

In practice, agencies will need to document, contemporaneously with redactions, a detailed analysis of each withheld portion, connecting it to specific statutory criteria (e.g., demonstrating that certain financial terms are actually non‐public and competitively sensitive).

Complex Concepts Simplified

FOIL (Public Officers Law Article 6): New York’s open‐records statute, requiring most government records to be made public unless a specific exemption applies.
Trade‐Secret Exemption (§ 87(2)(d)): Allows withholding of “trade secrets or information the disclosure of which would cause substantial injury to the competitive position of a commercial enterprise.”
CPLR Article 78: The procedure for judicial review of state and local agency determinations in New York, including FOIL appeals.
Fee‐Shifting (§ 89(4)(c)(ii)): If a requester substantially prevails in challenging a FOIL denial and the agency had no reasonable basis to refuse disclosure, the court “shall assess…reasonable counsel fees and litigation costs” against the agency.
“Substantial Prevailing”: Petitioners prevail if they secure disclosure of all or a significant portion of the requested records.
“Reasonable Basis” Test: Agencies must justify exemptions with more than conclusory statements; they need evidence that the statutory exemption applies to the particular information withheld.

Conclusion

Matter of Standardbred Owners Assn. marks a pivotal reaffirmation of FOIL’s core transparency objective. It enforces the principle that agencies cannot shield records simply by invoking exemptions in boilerplate terms or by relying solely on third‐party requests. Instead, agencies must conduct a case‐by‐case analysis and provide specific, persuasive evidence linking each redaction to the exemption’s criteria. This decision will guide lower courts and agencies in handling FOIL disputes, incentivizing thorough justification of withholding decisions and reinforcing the statutory fee‐shifting mechanism as a check against unwarranted secrecy.