WARNING: incomplete opinion
CIRCUIT COURT OF THE CITY OF RICHMOND
George B. Little
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
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.
ÃŸsection 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.
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
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
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
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