On appeal from the Superior Court of New Jersey, Law Division, Mercer County, L-3217-05, whose opinion is published at __ N.J.Super. __ (Law Div. 2010).
The opinion of the court was delivered by: Cuff, P.J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Cuff, Payne, and C.L. Miniman.
The opinion of the court was delivered by CUFF, P.J.A.D.
Plaintiffs Communications Workers of America, AFL-CIO (CWA) and the New Jersey Education Association (NJEA) filed this action under the Open Public Records Act, N.J.S.A. 47:1A-1 to -13 (OPRA), and common law right of access to public records against the Department of the Treasury, the State Treasurer, and Barbara O'Hare, Manager of Government Records Access Unit. Plaintiffs seek to inspect all agreements relating to investments made by the Division of Investment in private equity funds with money from state-employee pension funds. They assert that these records have been wrongfully withheld from them and seek their production. The trial judge held that the agreements were confidential and not subject to disclosure either under the statutory or common law. We agree and affirm.
In 2005, the Securities Investment Council (SIC),*fn2
the Department of the Treasury agency that establishes policy
and procedures for the investment of state-employee pension funds,
adopted an alternative investment program (AIP) to expand the types of
investments the Director of the Division of Investment (Director)
could make with money from state-employee pension funds. To implement
the AIP, the SIC adopted regulations (1) creating a common trust fund
known as Fund E in which money from CWA and NJEA pension funds could
participate for the purpose of investing in alternative investments,
N.J.A.C. 17:16-69.1 to -69.10; and (2) authorizing investment in
private equity funds, N.J.A.C. 17:16-90.1 to -90.4.
The AIP was controversial. Although designed to provide additional means to enhance returns on pension fund investments, some feared the alternative investments exposed the funds to greater risk and possible conflicts of interest. CWA and NJEA challenged the SIC regulations authorizing investment in private equity funds and another set of regulations authorizing the Director to engage external investment managers to manage pension fund investments. In Communications Workers of America v. Rousseau, Nos. A-5198-04, A-5378-04, A-6126-04 (App. Div. Aug. 22, 2008) (slip op. at 36), we invalidated the regulations authorizing and engaging external investment managers. We also held the SIC had authority to adopt regulations that allowed investment in private equity funds and the Director could invest in private equity subject to the standard of care set forth in N.J.S.A. 52:18A-89b. Ibid.
In June 2005, plaintiffs submitted to the State Treasurer separate but identical requests for documents relating to investments in private equity funds with money from the state-employee pension fund. In October 2005, O'Hare identified thirteen documents responsive to plaintiffs' request. These documents include the following:
1. Oak Hill Amended and Restated Agreement of Limited Partnership.
2. Quadrangle Amended and Restated Limited Partnership Agreement.
3. Warburg Pincus Amended and Restated Agreement of Limited Partnership.
4. Oak Hill Letter Agreement.
5. Oak Hill Subscription Booklet.
6. Warburg Pincus Investor Questionnaire and Representations.
7. Warburg Pincus Letter Agreement.
8. Quadrangle Letter Agreement.
9. Quadrangle Subscription Documents.
10. Blackstone Subscription Agreement and Investor Questionnaire.
11. Blackstone V Amended and Restated Agreement of Limited Partnership.
12. Blackstone V-S Amended and Restated Agreement of Limited Partnership.
13. Blackstone Letter Agreement.
O'Hare denied access to most of the documents (items one through four, seven, eight, and eleven through thirteen) citing several reasons. She explained that the documents contained trade secrets and proprietary commercial or financial information, competitors would receive an unfair competitive advantage, and the State's interest in nondisclosure outweighed plaintiffs' interest in accessing the documents. The remaining documents were provided to plaintiffs in redacted form.
Plaintiffs filed their complaint in the Law Division seeking production of the withheld documents on December 5, 2005. In their January 2006 answer, defendants denied that the documents were subject to production. The private equity funds, Blackstone Capital Partners V, L.P. and BCP V-S, L.P. (Blackstone), Oak Hill Capital Partners, II, L.P. (Oak Hill), Quadrangle Capital Partners II, L.P. (Quadrangle), and Warburg Pincus IX, LLC (Warburg Pincus) (intervenors), sought and received permission to intervene. After hearing oral argument, Judge Feinberg held the agreements in their entirety are not subject to disclosure under OPRA because they fall within one of the designated exemptions, and are not subject to disclosure under the common law right to access because defendants' interest in preventing disclosure outweighed plaintiffs' interest in disclosure.
On appeal, plaintiffs argue that the trial judge erred by narrowly construing OPRA and erred in her application of the provisions that exempt proprietary commercial or financial information, trade secrets, and/or information by which a competitor might obtain an unfair advantage. Plaintiffs also contend the trial judge should have found that the common law right of access to public documents allows production of the withheld documents. Finally, plaintiffs urge that the trial judge erred by holding that the documents in their entirety were exempt from disclosure.
In order to place the arguments in context, some information about the formation of the investments and the nature of the documents governing each investment is required.
We derive the information from an affidavit submitted by the Director. We discern no dispute concerning the basic information outlined by the Director.
The Director invested pension funds in private equity funds by creating a series of limited partnership agreements with investment companies on behalf of Fund E. The limited partnership agreements created the private equity funds to which Fund E contributed money, designated the investment firms as general partners and managers of the private equity funds, and set parameters in which the investment firms would operate in investing fund money. Each partnership agreement is several hundred pages in length. Each agreement sets forth the name of the fund, its general partner and investment advisor, the general purpose of the fund, and the duration of the fund. According to the Director, the agreements contain representations concerning the investment strategies and processes followed by the general partners [and] . . . the parameters within which the general partners of the funds must operate. . . . They set limits on the types of investments that may be made, the amount of capital that may be invested in the aggregate or in a particular transaction, and the length of time during which capital may be invested. . . . [The agreements] restrict the outside activities of the general partners [,] . . . limit the liability of the general partners and provide them with indemnification by the partnership for certain actions taken on behalf of the funds.
The agreements also set forth the rights of the limited partners. Although there are some differences among the various agreements, generally, limited partners have the right to remove the general partner, to reduce or extend the term of the partnership or the investment period, and to participate on advisory committees that . . . review certain decisions made by the general partner. The partnership agreements also provide mechanisms for limited partners to transfer their interests in the funds under certain conditions, to withdraw from the funds, to be excused from certain investments due to regulatory or other issues, or to co-invest with the fund in certain investments.
The partnership agreements also contain provisions about asset valuation, profit and loss allocation, computation of management fees, the manner in which committed capital may be called by the private equity fund, the manner in which financial information is reported to the limited partners, and the manner in which certain tax issues ...