In my last blog post I mentioned that developers of data centers were beginning to deploy non-disclosure agreements (NDAs) in their conversations with municipal officials. This strategy appears to be intended to prevent public pushback to such developments from gaining momentum prior to critical votes by municipal officials regarding these projects.[1] These non-disclosure agreements can prevent officials from discussing critical details around these developments with the public including the scale of such projects and the identity of the company seeking to build these data centers.
Even so, these agreements should be scrutinized for several reasons. First, Michigan disfavors contracts entered by public officials that interfere with the “unbiased discharge of [their] duty to the public in the exercise of his office, or if it places him in a position inconsistent with his duty to the public, or even if it has the tendency to induce him to violate such duty.” Sellars v. Lamb, 303 Mich. 604 (1942). Therefore, to the extent that NDAs can be argued to create a “tendency” to place public officials in positions which are inconsistent with their public duties, NDAs with developers may possibly be challenged as against public policy.
Additionally, information regarding data center developments may still be subject to disclosure requirements under the Michigan Freedom of Information Act (FOIA). When information is statutorily required to be provided to the public “a public institution cannot avoid a duty to disclose information by contracting to maintain the confidentiality of that information.” Huron Restoration, Inc. v. Bd. of Control of E. Michigan Univ., No. 203719, 1999 WL 33455136, at *1 (Mich. Ct. App. Jan. 22, 1999); see also Bradley v Saranac Community Schools Bd of Ed, 455 Mich. 285, 303; 565 NW2d 650 (1997). Essentially, the purposes of NDAs between municipal governments and developers conflicts with the principles underlying Michigan’s FOIA statute.
Under the FOIA, information provided to municipalities must be disclosed to the public upon request unless it falls within several exceptions outlined under the FOIA. Developers and municipalities may act to block otherwise valid FOIA requests would be the “trade secrets” exemption. MCLA § 15.243 (f). Even so, this exception requires very specific criteria to be enforceable such as the recording of information by a municipality that it has received information covered by this exception within a reasonable time after receipt of such information. If this recording does not occur, then the trade secret exception does not apply, and information related to data centers provided by developers to municipalities will be discoverable through a FOIA request. Coblentz v. City of Novi, 475 Mich. 558, 719 N.W.2d 73 (2006).
If you are concerned about a data center development occurring near you, give us a call. We would be happy to discuss your options and whether it is possible to acquire more information regarding such developments through Michigan’s FOIA.
[1] https://www.nbcnews.com/tech/tech-news/data-center-ai-google-amazon-nda-non-disclosure-agreement-colossus-rcna236423
