Friday, June 03, 2011

WHN LME 'Goes Its Own Way' re: Medicaid Waiver: pbH Non-Disclosive Agreement Hoisted Upon LME's Deemed by UNC Institute of Government to Be 'Illegal'

Its a good day for those supporting open government and efficient public mental health service delivery in western NC. The Western Highlands Network Board and administration has made this happen (with a little help from the concerned CFAC, Consumer and Family Advisory Council appointed to advise the board as per NC Mental Health Reform; the NC Commissioners on the Health and Human Services committee; legal opinion from the UNC Chapel Hill Institute of Government; and, other concerned citizens/ providers such as this one).

Today was the Western Highlands Network (WHN) LME (manages mental health services for 7 counties in Western NC) June Board meeting (1st Friday of every month). The Board, to its credit, after something of a closed session, voted to 'go its own way' re: the NC DHHS mandated Medicaid Waiver. Comments from the WHN LME Board included that, "pbh acts like a public entity when it wants to and a private entity when it wants to." The chairman of the Board indicated that WHN LME Board had made a 'request for public records' of pbH as associated w/ the Medicaid Waiver, which they refused or did not acknowledge. Other associated comments included that pbH has 'state legislators now in control of the mental health reform process' whileas Martin Nesbitt, co-chair of the NC Joint Legislative Oversight Committee (D-Buncombe) has lost some impact even though he is the head of the NC State Legislature Senate (must be some pretty powerful Republican state legislators; yes, they're Republicans).

The Board indicated they wanted to 'cooperate' w/ pbH (Piedmont Behavioral Health LME, in eastern NC, whom have utilized and developed a Medicaid Waiver plan since 2005 at the behest and approval of NC DHHS). The Board indicated that they wanted a face-to-face meeting with the pbH Board or members associated with the Non-Disclosure Agreement which I hope they will make public. The legal opinion, offered in its entirety below, as per the written information handed out to the public today at the WHN LME Board meeting, states, in part:

".....The terms of the agreement appear to prohibit the LME that receives PBH records

from providing public access to the records under the state public records law...."

Therefore, if an LME has signed on w/ this Non-Disclosure Agreement of pbH's, they have cut-off (illegally, it appears) citizens' rights to obtain public records. This was the stated over-riding concern of the WHN LME Board at their May, 2011 meeting, during which they voted down the signing of the pbH Non-Disclosure Agreement (which pbH subsequently revised to take out some of the more onerous requirement, previously referred to as 'The Borg' on Madame Defarge; but the document, though truncated, is essentially the same).

Relatedly, in a letter to Robert Carey, a member of the Consumer and Family Advisory Committee for WHN LME, from NC DHHS's Michael Watson, Deputy Secretary for Health Services, dated 5.23.2011, states (and this was handed out at the Board meeting also):

"......More than 15 LME's have already signed the agreement and are currently working with the materials. LMEs will also develop and utilize their own materials, so long as all waiver and Medicaid contract requirements are met....."

That's a little bit of arm twisting, eh?

Moreover, as per attorney Mark Botts reading of the pbH Non Disclosure Agreement which 15 LME's have signed, he states:

".......Thus the LME that signs the agreement appears to agree that it will not only protect the records from commercial use and distribution but also that it will not comply with the North Carolina Public Records Act....The terms of the agreement appear to prohibit the LME that receives PBH records from providing public access to the records under the state public records law. "

The overall conclusion of the WHN LME Board seemed to be that, as per obtaining an opinion from Mark F. Botts, J.D., Associate Professor of Public Law and Government, School of Government, The University of North Carolina at Chapel Hill, tel 919 962 8204, e mail:, that the pbH Non-Disclosure Agreement, which was quite massively upgraded as per the version that Mr. Botts overviewed, is still problematic and this is particularly troublesome given the fact that 15 LME's have already signed a document deemed to be disharmonious with state law (the state mental health programs are already, reportedly, being investigated by the Feds and surely this will throw more kindling on that fire).

Here is Botts letter, in its entirety except for the underlining associated with discriminating the sections, which was in a set of documents given to the public at the WHN LME Board meeting today (see previous Madame Defarge posts within the past month to see the old pbH Non-Disclosure Agreement; after I posted it online on 6.3.2011, I noted, on the Monday following the Friday of the board meeting, that there were some mispellings. I was eager to get the document online, admittedly, given the importance of it and I had hand-typed, rather than scanned, the document, into this blog and so I have tried to correct all of those as per the original document):

(e mail sent to WHN CEO Arthur Carder, 6.1.2011):


In response to your rquest that I examine some of the legal issues surrounding the use of the PBH "Non-Disclosure Agreement," I discussed the matter with my colleague, Frayda Bluestein, who has expertise in state public records law. Our review of the agreement raised two specific legal questions that the parties should consider before executing the agreement. One is how the state public records law might apply to restrict your LME's subsequent compliance with a public records request for documentary information you receive under the non-disclosure agreement. Another involves a state constitutional limitation, which I address in the next paragraph.

The constitutional limitation: Paragraph 6 of the agrement, the indemnity clause, says that the LME promises to indemnify PBH for any losses, liability, damages, and claims caused not only by any act of omission of the LME, but also for the acts and omissions of the LME's contractors. In other words, the LME promises to indemnify PBH for the negligence or liability of others. The Constitution of North Carolina, Art. V, Sec. 4, subsection 3, states that no unit of local government shall give or lend its credit in aid of any person, association, or corporation, except for public purposes and unless approved by a majority of the qualified voters. Because a loan of credit is defined to include the guaranteeing of debts of an individual, association, or private corporation, and because the indemnity clause (par 6 of the non-disclosure agrement) says that the LME promises to indemnity PBH for losses for which a contractor is liable (the contractor's debts), paragraph 6 is a "loan of credit" that triggers a constitutional requirement that cannot be agreed to unless approved by the voters. Therefore, paragraph 6 of the agreement is invalid if this vote is not taken and, generally, local government attorneys would not agree to such a provision.

The public records law question: I note that the non-disclosure agreement applies to "proprietary information," which the agreement defines to include "know-how" and "ideas," as well as "documents." To the extent that the information to be shared is documentary in nature (paper, film, audio recordings, photographs, magnetic tapes, electrtonically stores records, etc.), it is "public record" as defined in G.S. 132-1 and subject to disclosure under the public records law unless some or all of the records are exempt from the law's provision granting the public a right of access. On the rother hand, unrecorded information or knowledge in the minds of public employees (e.g., how to use or think about the records ) is not a public record. therefore, my discussion here of the public records law does not apply to the know-how or ideas that reside in PBH employees' minds and that are intended to be shared pursuant to the non-disclosure agreement. By extension, my concern that the public records law raises obligations that compete with those created by the non-disclosure agreement does apply to know-how and ideas, nor do I examine the validity, appropriateness, or applicability of the non-disclosure agreement to know-how or ideas.

My understanding is that the information PBH intends to share with other LME's includes written (in paper or electronic form) policies and procedures, manuals, forms, contracts, privileging and credentialing tools, provider standards, provider appeal processes and forms, consumer appeal process and forms, etc. The North Carolina Public Records Act permits public access to all public records in an agency's possession unles the agency or the record is specifically exempts from the statute. (I will presume, here, that no one takes the view that PBH is not a governmental agency subject tot he public records statute. If I am wrong on this point, and need to address this qustion, please let me know). I have identified no provision of state law that explicitly exempts the PBH records at issue here from public access under the public records law. The public records act exemption for trade secrets does not apply, as that exemption applies to a trade secret that is the property of a private person.

Neverthtless, under federal law, a North Carolina local government may obtain copyright protection for appropriate materials that are public records. David Lawrence, in his book Public Records Law for North Carolina Public Governments (2nd ed., 2009), at page 55, writes, "a member of the public retains the right, under the public records law, to inspect and make a copy of copyrighted material when the government owns the copyright, but the government may assert its rights as copyright owner and restrict the uses that may be made of a copy of the copyrighted material." It is unclear from a reading of the non-disclosure agrement whether PBH is asserting a copyright interest in the records to be shared and relying on that legal interest as the basis for the agreement. To the extent that PBH holds a copyright on material subject to the non-disclosure agrement, it may be lawful for PBH to refuse to produce the material unless the reeipient signs an agreement restricting the commercial use of the records without PBH consent (See, Seago v Horry County, 663 S.E. 2d 38 (S.C. 2008), holding that state public records law and federal copyright law could be read harmoniously by requiring the county to provide public access to its digital maps but allowing it to restrict the subsequent commercial distribution of the maps by requiring citizns to sign a licensing agreement prior to the county releasing the requested copyrighted material.)

The issue at hand seems analogous to the Seago case. However, the terms of the PBH non disclosure agreement appear to create obligations on the part of the LME's receiving PBH information that go beyond PBH's interest in restricting the subsequent commercial distribution of public records subject to the copyright law. To put it another way, the PBH non-disclosure agreement does not appear to strike the harmonious balance between public records law and copyright law that is described in the Seago case. The PBH non-disclosure agreement, at paragraph 3,b., not only restricts the subsquent commercial use or distribution of records received by LME's but has the recipient LMEs promise that they will not, without the prior written consent of PBH, "copy, use or disclose" any information that "has value in PBH's business," remove the information from the premises of the LME, or "deliver" any information "to any person or entity outside the LME." (LME contractors are excepted from this promise). The terms of the agreement appear to prohibit the LME that receives PBH records from providing public access to the records under the state public records law. Thus, the LME that signs the agreement appears to agree that is will not only protect the records from commercial use and distribution, but also that is will not comply with the North Carolina Public Records Act.

The Seago case is a South Carolina case that North Carolina courts are not bound by, and there is no North Carolina case on point. I don't know how a North Carolina court might strike the balance between a copyright holder's interests and the public's interes in access to government documents. It is theroretically possible that a North Carolina court might permit public access and inspection, but not copying of copyrighted records. But, if we assume that State's courts would reach the same or a similar result as Seago, then we can say that the public retains the right, under state public records law, to inspect and make a copy of copyrighted material when government owns the copyright. Because that public right would apply to requests made to the LME that receives PBH material, it is unclear from the agreement how the recipient LME would be able to comply with both the agreement and state law when subsequently faced with a public records requrest for PBH records (One way to strike the balance might be to require the LME, prior to complying with a public records request, to have the citizen or other seeker of records sign an agreement prohibiting commercial distribution and use.)

The foregoing issues are not trivial. I am concerned that the non-disclosure agreement generally lacks the specificity necessary for the parties to clearly understand the scope of information to which it applies and the nature of obligations it imposes. Because the obligations imposed by the agreement on any LME signing it are broad and significant (e.g., permitting PBH attorneys to act on the LME's behalf at the LME's expense, the LME agreeing to pay PBH for damages arising out of contractors' breach of the agreement, no disclosure permitted of information subject to the agrement to any person or entity other than LME contractors), because the agreement states that it applies to any and all information and records disclosed by PBH to the LME, and because the agreement, though possibly appropriate for private parties, does not acknowledge or reference the existence of laws applicable to governmental entities that may raise competing obligations, it is reasonable and appropriate for your governing board to carefully consider the agreement before signing it, seek advice from your agency attorney, and request modifications from PBH as necessary.

PBH appears to have valuable and legitimate interests to protect, and a contract or licensing agreement may be the appropriate means for obtaining that protection. It strikes me that an agreement could be written that protects PBH intersts, but also permits the LME's that receive the information to comply with laws applicable to local governments. Towards that end, I would rewrite paragraphs 6 and 3, b., to address the issues raised above, and perhaps add a paragraph that says that the obligations of the agreement are binding and enforceable only to the extent that they are consistent with any other state and federal law applicable to North Carolina local governments (I note that Paragarph 9 refers to resolving conflicts in accordance with NC law, but leaving "as is" provisions that we know conflict with NC law---which creates confusion and leaves the parties uncertain as to their obligations---and later, face the prospect of the parties having to litigate the meaning of NC law, does not seem prudent if agreement and clarity can be achieved now.) I also note that the agreement permits the LME to use PBH records "exclusively to prepare the LME to operate the waivers and for no other purpose." Due to this language, it is possible to argue that the LME can use the records only to prepare for operation, and that once the LME begins to operate the waiver any continued use of the PBH materials would be a violation of the agreement. While this may not be the intention of the parties, the agreement would be better if it were clear and unambiguous on this point.

The foregoing analysis and conclusions are based on my own research, and consultation with others who have expertise in local government law. I am not an expert in federal copyright law or intellectual property rights. Attorneys with expertise in those fields may have something to say that requires additions or modifications to my own analysis and conclusions. At a minimum, I hope this information helps you identify some specific issues raised by the non-disclosure agrement that are amenable to resolution through further discussion with PBH.

Mark Botts "

I'm gonna go eat some NC barbecue in honor of the good intentions of the WHN LME Board. (however, it undoubtedly is from pigs that came from the eastern part of the state)


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