A divided South Carolina Supreme Court has overturned a trial judge’s ruling that the Hilton Head Island-Bluffton Chamber of Commerce is a public body under the state’s Freedom of Information Act—much to the dismay of some transparency advocates.

“It certainly was a disappointment,” said Jay Bender, a Columbia media law attorney who filed an amicus brief in the case on behalf of the South Carolina Press Association. The group had argued that the chamber, a private nonprofit organization, was a “public body” under FOIA, because it gets public money from the town of Hilton Head.

The cash in question comes to the chamber through the town by way of the accommodations tax and a grant from the South Carolina Department of Parks, Recreation and Tourism for the purpose of promoting tourism. The chamber, which also operates the Visitor & Convention Bureau, serves as the designated marketing organization for the towns of Hilton Head and Bluffton and for Beaufort County, which allows it to receive public money from the local government.

Hilton Head businessman and government watchdog Skip Hoagland, who is behind the suit, has accused the chamber of corruption and misusing public money by, for example, contracting with out-of-town companies and selling them advertising while ignoring local businesses.

Hoagland’s company, Domains New Media LLC, sued the chamber in an effort to drag its dealings out into public view. Its FOIA request seeks all records pertaining to the receipt or expenditure of public money along with chamber meeting minutes, information about chamber employees, staff manuals, policy statements and documents connected to a proposed welcome center for the chamber.

‘Necessary accountability safeguards’

In 2016, Beaufort County Circuit Judge Michael Nettles ruled in Hoagland’s favor and found that the chamber was a public body for purposes of FOIA. In his order, Nettles noted that while the chamber submits a budget at the beginning of the fiscal year and an accounting report at year’s end, neither provides sufficient detail about how the public funds are spent.

“The accounting provides very little, if any, information on, for instance, the particular vendor chosen for a certain expenditure in furtherance of a stated tourism purpose,” Nettles wrote in his order granting summary judgment to Domains New Media.

“Without the chamber being subject to FOIA,” he added, “the residents of the areas the chamber serves will not be able to learn how defendant manages the expenditure of public funds.”

But four of five Supreme Court justices disagreed with Nettles.

Justice John Kittredge stressed in the majority’s May 23 opinion that the accommodations tax statute “requires the governments to maintain oversight and responsibility of the funds by approving the proposed budget and receiving an account from the” designated marketing organization.

Kittredge added that the General Assembly passed the “more narrow and targeted A-Tax statute” after the passage of FOIA “to provide what it determined were the necessary accountability safeguards with regard to the expenditure of these specific funds while protecting the private nature of the organizations selected to perform this marketing function.”

In his dissent, Justice John Few contended that the so-called “safeguards” in the tax law were actually “contrary to the policy” of disclosing public records under FOIA.  

“By placing the responsibility for the expenditure of public funds in the hands of a private entity such as the Chamber, and then relying on public officials for ‘oversight,’ with no right of access by the public, the accommodations tax statute actually inhibits citizens from being ‘advised of the performance of public officials and of the decisions that are reached in public activity,’ thereby frustrating—not furthering—the ‘vital’ policy of open government,” Few wrote.

Addressing the dissent, Kittredge asserted that applying FOIA to any group that receives public funds contradicts the court’s “discernment of legislative intent” in Weston v. Carolina Research and Development. The decision established the test for determining whether an entity is a public body and held that FOIA does not apply to businesses that receive public money in return for supplying goods and services on an “arm’s-length basis.”

“We are remaining faithful to this Court’s decisional framework in Weston, to which the legislature for more than a quarter century has not responded, much less superseded,” Kittredge wrote.

‘Dark day for transparency’

Domains New Media’s attorney, Taylor Smith of Harrison & Radeker in Columbia, called the majority opinion “a dark day for transparency in South Carolina.” He said his client intended to petition the court for a rehearing and declined to comment further.

Attempts to speak with the chamber’s attorneys at Sowell Gray Robinson Stepp & Laffitte in Columbia were unsuccessful.

They had argued in the chamber’s appellate brief that the definition of a public body under FOIA “should not be applied in a manner that converts private organizations into public bodies simply because they receive public money to provide goods and services to a public body, particularly when the public has access to how the money is spent through the public body.”

The Myrtle Beach Area Chamber of Commerce raised a similar argument in an amicus brief in which its attorneys stressed that the chamber publishes a quarterly list detailing its spending of accommodations tax revenues and “is no foe of public access” to such information.

But Bender, the Columbia-based media law attorney, said the tax expenditure reports are a “sham.” He noted that when a reporter asked to look at the Myrtle Beach chamber’s records, he was led to a cold warehouse stacked with unlabeled boxes where two different speaker systems played country music and Christmas tunes at the same time while a forklift operated nearby.

During oral arguments in the Hilton Head case, Few asked the chamber’s attorneys if the town knew what a line item in the chamber’s proposed budget that read “SEM Marketing $200,000” represented.

“Well, it may. I don’t know,” the attorney replied, according to Few’s dissent.

Bender made a similar point in the SC Press Association amicus brief, noting that the chamber’s budgets included vague explanations of six-figure expenditures, such as “Leisure Media & Promotions.”

“Under this decision,” he said, “no organization receiving accommodations tax money is going to be required to account for its use of the money except in the most vague terms.”

While the majority held that the legislature did not intend for the chamber to be considered a public body under FOIA simply because it receives and spends public money, Kittredge wrote in a footnote that if lawmakers disagree with the decision they can “respond and overrule our precedents.”

The 16-page decision is DomansNewMedia.com, LLC v. Hilton Head Island-Bluffton Chamber of Commerce (Lawyers Weekly No. 010-053-18). An opinion digest is available at sclawyersweeky.com.

Follow Phillip Bantz on Twitter @SCLWBantz



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