                     NOTICE: NOT FOR OFFICIAL PUBLICATION.
 UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
                 AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.




                                    IN THE
             ARIZONA COURT OF APPEALS
                                DIVISION ONE


             JOHNSON UTILITIES L.L.C., Plaintiff/Appellant,

                                        v.

            TOWN OF QUEEN CREEK, Defendant/Appellee.
    __________________________________________________________

    ARIZONA CORPORATION COMMISSION, Intervenor/Appellee.

                             No. 1 CA-CV 18-0201
                               FILED 2-26-2019


           Appeal from the Superior Court in Maricopa County
                          No. CV 2018-005640
               The Honorable Randall H. Warner, Judge

                                  AFFIRMED


                                   COUNSEL

Fredenberg Beams, Phoenix
By Daniel E. Fredenberg, Christian C. M. Beams
Counsel for Plaintiff/Appellant

Dickinson Wright PLLC, Phoenix
By Scott A. Holcomb, David J. Ouimette, Holly M. Zoe
Counsel for Defendant/Appellee

Arizona Corporation Commission, Phoenix
By Andy M. Kvesic, Maureen A. Scott
Counsel for Intervenor/Appellee
                   JOHNSON v. QUEEN CREEK/ACC
                        Decision of the Court

Ballard Spahr LLP, Phoenix
By David J. Bodney, Chase A. Bales
Counsel for Amicus Curiae Phoenix Newspapers Inc., KPNX-TV Channel 12,
Scripps Media, Inc. and Meredith Corporation



                        MEMORANDUM DECISION

Presiding Judge Jennifer M. Perkins delivered the decision of the Court, in
which Judge Lawrence F. Winthrop and Judge Jon W. Thompson joined.


P E R K I N S, Judge:

¶1             A utility company brought this action seeking declaratory
relief that a nondisclosure agreement it entered into with a town prevented
the town from producing certain documents for a public records request.
We affirm.

           FACTUAL AND PROCEDURAL BACKGROUND

¶2             We conduct our review based on the record made in the trial
court, considering only the evidence presented to the trial court. See Vig v.
Nix Project II P’ship, 221 Ariz. 393, 396, ¶ 10 (App. 2009).

¶3            In September 2017, the Town of Queen Creek (“Town”) began
talks with Johnson Utilities, LLC (“Johnson”) for the purpose of entering
into a “transaction of mutual interest.” Toward this end, Johnson and the
Town agreed to a Mutual Nondisclosure Agreement (“Agreement”) that
allowed the parties to exchange documents, and also defined several classes
of documents as “Confidential Information.”

¶4           Johnson delivered some documents to the Town via a File
Transfer Protocol (“FTP”) server. In December 2017, the Town decided to
stop pursuing the transaction and canceled future meetings. The parties
apparently then stopped communicating on this matter for several months.

¶5             On March 16, 2018, Commissioner Andy Tobin of the Arizona
Corporation Commission (“Commission”) sent a letter to the Town
requesting any communications between the Town and Johnson. The Town
treated this letter as a public records request, see Arizona Revised Statutes
(“A.R.S.”) Title 39, and, pursuant to the Agreement, alerted Johnson of its
intention to disclose documents to the Commission. Johnson responded


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                    JOHNSON v. QUEEN CREEK/ACC
                         Decision of the Court

that it believed some of the documents were protected from disclosure
under the Agreement and demanded that the Town delete the information
from the FTP server.

¶6            On April 6, 2018, Johnson filed the instant suit after the Town
refused to delete the disputed documents. Johnson also requested a
temporary restraining order (“TRO”) against the Town to prevent it from
disclosing any documents to the Commission until resolution of the suit.
The trial court enjoined the Town from disclosing any documents until a
scheduled hearing for a TRO. The Commission made an appearance in the
case before the hearing.

¶7            On April 12, 2018, the parties and trial court agreed to
consolidate the TRO hearing with the merits of the case. The court did not
take testimony but received exhibits and considered the arguments of
counsel. The trial court then issued an order in which it held that the
disputed documents were public records and that it did not have the
authority to direct the Town to withhold the disputed documents. The trial
court also issued a limited TRO against disclosure of the documents to
allow Johnson time to appeal. Johnson filed the instant appeal and we
stayed the expiration of the TRO pending its resolution.

                               DISCUSSION

¶8            “Public records and other matters in the custody of any officer
shall be open to inspection by any person at all times during office hours.”
A.R.S. § 39-121. Our courts employ a two-step process to determine whether
a government agency must disclose a disputed document. Griffis v. Pinal
Cty., 215 Ariz. 1, 5, ¶¶ 12–13 (2007). When the party opposing disclosure
raises a “substantial question” about a document’s status, the court must
first determine that the document is a public record and thus subject to the
public records statute. Id. at ¶¶ 13, 15. If so, “the public records law creates
a strong presumption in favor of disclosure.” Id. at ¶ 12. The party opposing
disclosure may overcome this presumption with a showing that the
“countervailing interests of confidentiality, privacy or the best interests of
the state” override the disclosure policy. Carlson v. Pima Cty., 141 Ariz. 487,
491 (1984); Salt River Pima-Maricopa Indian Cmty. v. Rogers, 168 Ariz. 531,
537–38 (1991). Each step presents an issue of law that we review de novo.
Lunney v. State, 244 Ariz. 170, 174, ¶ 6 (App. 2017).

¶9            As to the first step, the “party claiming that the disputed
documents are not public records bears the burden of establishing its
claim.” Griffis, 215 Ariz. at 6, ¶ 16. Public records are those that are



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                    JOHNSON v. QUEEN CREEK/ACC
                         Decision of the Court

“reasonably necessary or appropriate to maintain an accurate knowledge
of [an officer’s or public body’s] official activities” and any activities
“supported by monies from this state or any political subdivision of this
state.” A.R.S. § 39-121.01(B). As relevant here, these include

       documentary materials, regardless of physical form or
       characteristics . . . made or received by any governmental
       agency in pursuance of law or in connection with the
       transaction of public business and preserved . . . by the agency
       or its legitimate successor as evidence of the organization,
       functions, policies, decisions, procedures, operations or other
       activities of the government . . ..

A.R.S. § 41-151.18; see also § 39-121.01(B). Public records also include three
common-law categories: those records made by a public official for the
dissemination of information; those records that agencies and officials keep
as directed by law in the discharge of official duties or as evidence of official
conduct; and any written record of transactions of an agency or officer kept
as a convenient and appropriate method of discharging official duties, even
if not required by law. Salt River, 168 Ariz. at 538–39 (quoting Matthews v.
Pyle, 75 Ariz. 76, 78 (1952)).

¶10            For a court to hold that a document is not a public record, the
party opposing disclosure must show that the document is personal or
private or has no “substantial nexus” with government activities. Salt River,
168 Ariz. at 541 (1991). To determine this, the court must consider the
“nature and purpose” of the document, which requires a “content-driven”
and “fact-specific” inquiry. Griffis, 215 Ariz. at 4–5, ¶¶ 10, 15. In conducting
this inquiry, the trial court should review the disputed documents in camera.
Griffis, 215 Ariz. at 5, ¶ 15; Carlson, 141 Ariz. at 490–91; Matthews, 75 Ariz. at
81; Lunney, 244 Ariz. at 179, ¶ 29.

¶11           As to the second step, the party opposing disclosure bears the
burden “to overcome the legal presumption favoring disclosure.” Cox Ariz.
Publ’ns, Inc. v. Collins, 175 Ariz. 11, 14 (1993). To do so, the party must
“specifically demonstrate how production of the documents would violate
rights of privacy or confidentiality,” or how disclosure would be
detrimental to the state’s best interests. Id. The party may not rely on “global
generalities” of possible harm, but must specifically demonstrate how
disclosure of particular information will adversely affect the party’s rights
regarding one of the three countervailing interests. Judicial Watch, Inc. v.
City of Phoenix, 228 Ariz. 393, 399–400, ¶¶ 29–30 (App. 2011).




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                    JOHNSON v. QUEEN CREEK/ACC
                         Decision of the Court

¶12            Johnson argues the Agreement controls, that it classifies all
the disputed documents as confidential, and accordingly the Town cannot
disclose any documents Johnson provided under the Agreement. A party
cannot enforce a term of a contract requiring an act which is illegal or
contrary to public policy. Green Cross Med., Inc. v. Gally, 242 Ariz. 293, 296,
¶ 10 (App. 2017). Thus, the Agreement is void to the extent that it would
require the Town to take actions contradictory to Arizona’s public records
law. The same is true for the Agreement’s definition of “Confidential
Information”: insofar as it would prevent the Town from disclosing
documents that it should otherwise disclose under the public records law,
the Agreement does not control here. Moorehead v. Arnold, 130 Ariz. 503, 505
(App. 1981) (“The promise of confidentiality standing alone is not sufficient
to preclude disclosure. If the promise of confidentiality were to end our
inquiry, we would be allowing a city official to eliminate the public’s rights
under A.R.S. [§] 39-121.”) (citation omitted); see also Am. Power Prod., Inc. v.
CSK Auto, Inc., 242 Ariz. 364, 370, ¶ 22 (2017) (parties are free to define terms
“[a]s long as the contract is legal and enforceable”).

¶13             Johnson has not raised a substantial question of whether the
documents at issue are public records. Although the disputed documents
are not part of the record before us, the burden was on Johnson to establish
its claim that they are not public records. Griffis, 215 Ariz. at 6, ¶ 16. Johnson
and the Town—each of whom have access to all the disputed documents—
agree that Johnson provided the documents to the Town in furtherance of
their negotiations for the Town to buy utility operations from Johnson. This
means the parties agree that the disputed documents are documentary
materials received by a government agency in connection with the
transaction of public business and preserved by the agency as evidence of
governmental activities. The documents thus fall squarely within the
statutory definition of public records. A.R.S. §§ 41-151.18, 39-121.01(B).

¶14            The trial court stated in its judgment that the countervailing
interests “exception allows a public body to restrict access in certain
circumstances but does not authorize the court to direct the public body to
do so.” This is incorrect. Arizona case law allows the agency or officer to
determine whether an exception applies “in the first instance . . . but under
no circumstances should [that] determination be final. It rests within the
jurisdiction of the courts of the state to determine these questions.”
Matthews, 75 Ariz. at 81; see also Griffis, 215 Ariz. at 5, ¶ 15 (“In camera
review of disputed documents also reinforces [the Arizona Supreme]
Court’s previous holding that the courts, rather than government officials,
are the final arbiter of what qualifies as a public record.”).



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                    JOHNSON v. QUEEN CREEK/ACC
                         Decision of the Court

¶15            Johnson failed to demonstrate specifically how the release of
these records will adversely affect its rights of privacy or confidentiality, or
the state’s best interests. As evidence of confidentiality, Johnson directs our
attention to the Agreement and the fact that it transferred files via an FTP
server. As stated above, the Agreement does not control here; that the files
are on an FTP server is legally irrelevant. A.R.S. § 41-151.18 (“regardless of
physical form or characteristics”). The parties have also made oblique
references to the “Carollo Report” that apparently identifies where the
current utility infrastructure does not meet the Town’s standards. Johnson
has not specifically identified what, if anything, in that report would
negatively affect its privacy or confidentiality and has instead offered only
global generalities of possible harm. See Judicial Watch, 228 Ariz. at 399–400,
¶ 29.

¶16            The parties allayed our remaining privacy and confidentiality
concerns at oral argument. In its opening brief, Johnson stated that the
public records “include confidential customer information, among other
things.” The Town, however, represented to this Court that the records do
not include customer names or other private customer information but
rather more generalized, aggregated information. The Town also informed
this Court that it redacts any confidential, personally-identifying
information through its normal public records processing. The
Commission, as the requestor, likewise informed us that it would not seek
such information and did not believe such information was within the
scope of its request. To the extent the records contain any personally-
identifying information, we are satisfied the Town will redact it in
accordance with Arizona public records law before disclosing the records.
See A.R.S. § 39-121.01(D)(2) (privilege log); Hodai v. City of Tucson, 239 Ariz.
34, 43, ¶ 27 (App. 2016) (redaction is one part of the administrative burden
of producing public records).

¶17          All three parties have requested their attorney fees and costs
on appeal. The Agreement allows for the award of attorney fees to the
prevailing party of any action brought to enforce or interpret the
Agreement. Johnson brought this action to enforce the Agreement. We
award reasonable attorney fees and costs on appeal to the Town and the
Commission in an amount to be determined upon their compliance with
Arizona Rule of Civil Appellate Procedure 21. See Maricopa Cty. v. Maricopa
Cty. Mun. Water Conservation Dist. No. 1, 171 Ariz. 325, 332 (App. 1991).




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                   JOHNSON v. QUEEN CREEK/ACC
                        Decision of the Court

                              CONCLUSION

¶18           We affirm the trial court’s judgment. The temporary
restraining order as set forth in the trial court’s April 13, 2018 judgment
shall remain in effect until this Court issues the mandate.




                          AMY M. WOOD • Clerk of the Court
                          FILED: AA




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