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Diercks v. Malin

Court of Appeals of Iowa

December 21, 2016

DR. ALLEN DIERCKS and PATRICIA LANE, Plaintiffs-Appellants,
v.
CRAIG MALIN, Davenport City Administrator, CITY OF DAVENPORT, IOWA, an Iowa Municipal Corporation, and JACKIE E. HOLECEK, Davenport City Deputy Clerk, Defendants-Appellees.

         Appeal from the Iowa District Court for Scott County, Stuart P. Werling, Judge.

         The plaintiffs appeal the district court's denial of their claim based on the defendants' alleged failure to provide documents pursuant to the Iowa Open Records Act. AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

          Michael J. Meloy of Meloy Law Office, Bettendorf, and John T. Flynn of Brubaker, Flynn & Darland, Davenport, for appellants.

          Jason J. O'Rourke of Lane & Waterman, L.L.P., Davenport, for appellees.

          Heard by Vogel, P.J., and Tabor and Mullins, JJ.

          MULLINS, Judge.

         Allen Diercks and Patricia Lane (the plaintiffs) appeal the district court's denial of their claim based on the alleged failure of Davenport City Administrator Craig Malin, the City of Davenport, and Davenport City Deputy Clerk Jackie Holecek (collectively, the City) to provide documents pursuant to Iowa Code chapter 22 (2013) (the Iowa Open Records Act). For the reasons set forth below, we affirm in part, reverse in part, and remand.

         I. Background Facts and Proceedings

         This case arises from the City of Davenport's inquiry into acquiring the Isle of Capri's Rhythm City Casino. On October 15, 2012, Davenport's Mayor, William Gluba, executed an agreement with the casino, which enabled the City to examine the casino's financial and operational information as part of the City's consideration of potentially acquiring the casino. The casino agreement was designated private and confidential by the parties, although the agreement indicated disclosure of the agreement and the materials exchanged pursuant to the agreement may be required under the Iowa Open Records Act.

         Also in October 2012, the Davenport City Council approved a motion directing Gluba to sign a proposed asset purchase term sheet with the casino, "to begin [the] formal process which may lead to [the] City['s] purchase of [the] casino." The term sheet provided the casino would afford the City "reasonable access to records and information" so the City could "conduct a customary purchaser's due diligence investigation."

         In December 2012, Malin signed a contract with Deloitte & Touche LLP, in which the parties agreed Deloitte would perform a due diligence evaluation of the casino. The Deloitte contract restricted the City's ability to disclose information it received from Deloitte, while noting those limitations did not apply where disclosure was required by a subpoena, court order, regulatory authority, or other legal process.

         The City hired attorney John Hintze as a legal consultant and Gary Buettner as a casino-operations expert. Hintze served as the primary contact for Deloitte during its due diligence review. On January 9, 2013, Hintze sent an email to Davenport City Attorney Thomas Warner, Buettner, and a Deloitte partner, Ayesha Rafique, with an attached legal memorandum explaining certain due diligence information might be subject to a public records request.

         On January 21, Rafique executed on behalf of Deloitte a document entitled "Scope of Services, " which was marked "Appendix B" to the Deloitte contract and outlined the services Deloitte would provide the City. This document was sent to Hintze, Buettner, and Malin.

         On February 18, Rafique sent Warner a bill in the amount of $207, 900;[1]Rafique also had sent the bill to Hintze just four days prior. Warner testified he informed Rafique the City would only pay a final bill at the end of the transaction. The bill was subsequently cancelled, and Warner deleted the e-mail containing the February bill.[2]

         In late February or early March, the City ceased its pursuit of potentially purchasing the casino. As a result, Deloitte was instructed to stop working on its due diligence review.[3]

         On March 12, Deloitte sent an invoice for $387, 500 to the City for services performed through March 8. The invoice was not itemized; Warner indicated this was required to protect the confidential nature of the services performed by Deloitte and information provided by the casino. Warner stated, "our outside attorney [(Hintze)] and Gary [Buettner] monitored [Deloitte's] work for us [(the City)]."

         On April 10, Warner provided Gluba and the city council a memorandum marked confidential, which stated an alderman "would like to see a product or report resulting from the due diligence work undertaken by Deloitte." Warner wrote, "The request cannot be readily accommodated due to the nature of the due diligence work and the confidentiality agreements executed by the City between Deloitte and the [casino]." The memorandum further stated, "Deloitte provided financial preacquisition due diligence and advice and recommendations . . . . [which] w[ere] coordinated with the legal work of [Hintze's law firm], and the operational review and recommendations of [Buettner]." Warner concludes "[a]s the Asset Purchase Agreement negotiations were iterative, there is no single concluding product or report to produce."

         On April 11, the plaintiffs served a public records request on the City, [4]pursuant to Iowa Code chapter 22, summarized as follows:

• The engagement letter with Deloitte and attachments,
• All e-mails (and attachments), memorandums, letters, or correspondence between Malin and Deloitte regarding the due diligence services,
• All e-mails (and attachments), memorandums, letters, or correspondence between Davenport finance director, Brandon Wright, and Deloitte regarding the due diligence services,
• All e-mails (and attachments), memorandums, letters, or correspondence between Warner and Deloitte regarding the due diligence services.

         In response, the City produced documents on April 22.[5] It is undisputed this production did not include a copy of the Deloitte Scope of Services document, despite the plaintiffs' request. When responding to the request, the City made no claim of confidentiality, privilege, or exemption.

         The plaintiffs served an additional public records request on April 24 summarized as:

• All invoices and itemized statements detailing the hours spent and the services provided by Deloitte,
• All e-mails between Malin and Deloitte,
• Copies of all reports, letters, analysis, or other information received from Deloitte on the casino deal.

         The City responded with documents on May 3 and again made no claim of confidentiality, privilege, or exemption for undisclosed materials. It is undisputed, however, that the City did not produce the invoice received ...


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