WARNING: incomplete opinion

CIRCUIT COURT OF THE CITY OF RICHMOND

George B. Little

v.

Virginia Retirement System, et al.

Case No. HB-1298

August 5, 1992

By Judge Robert H. Harris, Sr.

The Petitioner brought this suit alleging that the Respondents, the Virginia Retirement System ("VRS"); Systems Holding, Inc. ("SHI"); RF&P Corp. ("RF&P"); Mark Finn, both individually, and in his capacities as a trustee of VRS, a director of SHI, and Chairman of the Board of RF&P; and Jacqueline Epps, both individually, and in her capacities as Chairperson of the Board of VRS, and as a director of SHI and RF&P, violated certain provisions of the Virginia Freedom of Information Act ("VFOIA"). This is the second suit the Petitioner has brought against one of the defendants, VRS, alleging violations of the VFOIA. Following the presentation of the Petitioner's case in chief, the Court granted a motion to strike the evidence against Mark Finn, [FN 1] but all other Respondents remain involved in this suit.

The relationships among VRS, SHI and RF&P are critical to the decisions here. The Constitution of Virginia requires the General Assembly to "maintain a state employees retirement system to be administered in the best interest of the beneficiaries thereof." Va. Const. art. X, section 11. Accordingly, the General Assembly established the Virginia Retirement System. See Va. Code Ann. ßsection 51.1-100-51.1-168 (Michie 1991). The Board of Trustees of VRS is appointed by the Governor, see id. section 51.1-109, and is established as the trustee of VRS funds. See id. section 51.1-114. In that fiduciary position, the Board is authorized to invest in "every kind of property and every kind of investment" while using the "judgment of care . . . which men of prudence, discretion, and intelligence exercise in the management of their own affairs." Id. section 51.1-116.

As a portion of its investments, VRS held shares of stock in RF&P. By statute, the VRS Board of Trustees was entitled to appoint a number of directors to the Board of RF&P, proportionate to the percentage of RF&P stock held by VRS. See id. section 51.1-151. In March of 1990, VRS held approximately twenty percent of the total RF&P stock, and therefore, was entitled to appoint two directors to the RF&P Board. The VRS Board appointed two of its own members, Jacqueline Epps and Mark Finn, to fill those seats.

In June of 1991, as part of its plan to acquire ownership of all RF&P stock, VRS established Systems Holding, Inc. as a wholly owned subsidiary of VRS for the sole purpose of holding the RF&P stock acquired. Currently, the RF&P stock represents the sole asset of SHI. As the creator of, and sole stockholder in SHI, VRS appointed the entire Board of Directors of SHI. Until November of 1991, that Board consisted of two people, Jacqueline Epps and Mark Finn. Once VRS acquired one hundred percent ownership of the RF&P stock, it was statutorily authorized to appoint the full membership of the RF&P Board of Directors. Accordingly, the "non-public" members of the RF&P Board resigned and the VRS Board authorized its subsidiary, SHI, which formally held those shares, to appoint the new RF&P Board members. To that end, Ms. Epps and Mr. Finn, acting both as Board members of SHI and as the only remaining Board members of RF&P, appointed the full RF&P Board. Because of the links between VRS, SHI and RF&P, the Petitioner alleges not only continued violations of the Virginia Freedom of Information Act by VRS, but also argues that SHI and RF&P are subject to the VFOIA, and that they, too, have violated the Act.

Prior to the hearing on March 29-30, 1992, the Court confronted two preliminary questions: first, whether SHI, a wholly owned subsidiary corporation of VRS, was subject to the VFOIA; second, whether RF&P, a corporation one hundred percent of whose stock is now owned by VRS through its subsidiary SHI, is also covered by the VFOIA. Only one of those issues remains genuinely in dispute. At the outset of the March hearing, SHI conceded that it is subject to the VFOIA and agreed that SHI would continue to obey the Act, as it had done voluntarily since December, 1991. While an analysis of the circumstances making SHI subject to the VFOIA will prove helpful in evaluating the Act's applicability to RF&P, the Court need not dwell on SHI's status.

Thus the issues which the Court must address, and the order in which it will address them are as follows:

I. Is the RF&P Corporation a "public body" subject to the Virginia Freedom of Information Act?

II. Has the Virginia Retirement System denied the Petitioner any of his rights under the Virginia Freedom of Information Act, and if so, is the injunctive relief sought by the Petitioner appropriate?

III. Has Systems Holding, Inc. denied the Petitioner any of his rights under the Virginia Freedom of Information Act, and if so, is the injunctive relief sought by the Petitioner appropriate?

IV. Has RF&P Corp. denied the Petitioner any of his rights under the Virginia Freedom of Information Act, and if so, is the injunctive relief sought by the Petitioner appropriate?

V. Has Jacqueline Epps, in her individual capacity, willfully violated the Virginia Freedom of Information Act?

VI. Are any of the parties in this suit entitled to an award of attorneys' fees?

(I)

Is the RF&P Corporation a "public body" subject to the Virginia Freedom of Information Act?

The Court begins with this question in order to determine what entities are subject to the VFOIA, what violations occurred, if any, and what remedies are appropriate if violations did occur. Because the Court finds that the peculiar relationship between the VRS Board of Trustees and the RF&P Board of Directors makes the latter subject to the VFOIA, the Court need not decide the more difficult questions of whether circumstances exist in which a private corporation can become merely an arm of the state and whether such a relationship alone would make the private corporation subject to the Act.

The essence of the Petitioner's claim is that once the Virginia Retirement System acquired one hundred percent of the stock of RF&P, the latter, formerly private, effectively became a state entity covered by the Virginia Freedom of Information Act. The Petitioner grounds this argument in the public policy principles which gave birth to the VFOIA:

It is the purpose of the General Assembly by providing this chapter to ensure to the people of this Commonwealth ready access to records in the custody of public officials and free entry to meetings of public bodies wherein the business of the people is being conducted. This chapter recognizes that the affairs of government are not intended to be conducted in an atmosphere of secrecy since at all times the public is to be the beneficiary of any action taken at any level of government.

Id. section 2.1-340.1 (1987) (currently denoted as subsection (A) without recitation of the policy language in 1992 Supp.).

In furtherance of this stated policy, the VFOIA is to "be liberally construed to promote an increased awareness by all persons of governmental activities and afford every opportunity to citizens to witness the operations of government. Any exception or exemption from applicability shall be narrowly construed in order that no thing which should be public may be hidden from any person." Id. section 2.1-340.2(B) (1987 & Supp. 1992) (emphasis added).

The Petitioner has, during the course of these proceedings, frequently reminded the Court of this liberal construction mandate. To that end, the Petitioner presented evidence of the significant value of the VRS investment in RF&P (over $500,000,000), of its importance to the public in general, and VRS participants in particular, and of the public benefit of ready access to information about how that investment is being managed. The liberal construction language, however, does not empower this Court to act in a legislative capacity by determining what should be public. The Court's role is limited to interpreting, with a certain mandated liberality, what the General Assembly intended to be public. Even with the mandate to construe the statute liberally, this Court does not have unrestrained latitude to go beyond the language of the statute. In Roanoke City School Bd. v. Times-World Corp., 226 Va. 185, 307 S.E.2d 256 (1983), for example, the court addressed whether, under the version of the VFOIA in effect at that time, the definition of "meetings" was broad enough to include telephone conference calls. The court declared, "[T]here is no common-law right of the public or press to attend the meetings of governmental bodies. . . . [I]n the absence of a statutory prohibition, there can be no legal or constitutional objection to a governmental body transacting certain business by means of a telephone conference call." Id. at 191, 307 S.E.2d at 258.

In that vein, RF&P argues that any application of the Freedom of Information Act to RF&P would extend that Act beyond the intent of the legislature. In support of this argument, RF&P has referred the Court to House Bill No. 643, introduced in the 1992 session of the General Assembly, which would have expressly extended the definition of "public body" to include corporations in which at least ninety percent of the stock is owned by the Commonwealth. The bill was referred back to the Committee on General Laws, where no further action was taken before the 1992 session ended. RF&P argues that non-passage of that bill by the legislature reveals a lack of intent on its part to cover such corporations as RF&P, especially since the General Assembly had, in recent sessions, passed laws which allowed for the establishment of such a single purpose investment corporation as SHI, see Va. Code. Ann. section 51.1-116 , and allowed the Commonwealth to transfer its shares of RF&P stock to the VRS. See id. section 2.1-187 (currently re-enacted without reference to RF&P stock, in 1992 Supp.). However, legislative intent is an elusive creature in Virginia, particularly where such intent is grounded in legislative non-action. Although RF&P contends otherwise, strong inferences cannot be drawn from the legislative activity involved here. This contrasts with the situation in Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579 (1951), in which the U