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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA Powered By Docstoc
					   No.
   (Alameda County Super. Ct. No. RG 03089302)
   (The Honorable James A. Richman)

           IN THE COURT OF APPEAL OF
            THE STATE OF CALIFORNIA
                  FIRST APPELLATE DISTRICT
                          DIVISION _____

           THE REGENTS OF THE UNIVERSITY OF CALIFORNIA,
                            Petitioner,
                                   v.
              SUPERIOR COURT IN AND FOR THE COUNTY OF
                            ALAMEDA,
                            Respondent.
            COALITION OF UNIVERSITY EMPLOYEES, CHARLES
              SCHWARTZ and SAN JOSE MERCURY NEWS,
                       Real Parties in Interest.

           PETITION FOR WRIT OF MANDATE AND
          SUPPORTING MEMORANDUM OF POINTS
                    AND AUTHORITIES
                    (STAY REQUESTED)
      (TRIAL COURT STAY EXPIRES SEPTEMBER 30, 2003)

JEROME B. FALK, JR. (No. 39087)         JAMES E. HOLST (No. 34654)
STEVEN L. MAYER (No. 62030)             JOHN F. LUNDBERG (No. 42956)
HOWARD RICE NEMEROVSKI CANADY           CHRISTOPHER M. PATTI (No. 118283)
     FALK & RABKIN                      STEVEN G. ROSEN (No. 161833)
A Professional Corporation              MARIA SHANLE (No. 187931)
Three Embarcadero Center, 7th Floor     UNIVERSITY OF CALIFORNIA
San Francisco, California 94111-4024    Office of the General Counsel
Telephone: 415/434-1600                 1111 Franklin Street, 8th Floor
                                        Oakland, California 94607-5200
                                        Telephone: 510/987-9800
                        Attorneys for Petitioner
                   TABLE OF CONTENTS
                                                        Page

INTRODUCTION AND SUMMARY OF ARGUMENT                    1
PETITION FOR WRIT OF MANDATE                            2
       A.   The      University’s  Private   Equity
            Investments Have Resulted In Exceptional
            Returns.                                    2
       B.   The University Discloses Substantial
            Information Regarding The Performance
            Of Its Private Equity Portfolio.            5
       C.   The University Has Declined To Disclose
            The Internal Rates Of Return (IRRs) For
            Each Partnership, Because The IRRs Are
            Trade Secrets And Because Their
            Disclosure Would Result In Significant
            Harm To The University.                     6
       D.   The Superior Court Orders The University
            To Disclose IRRs.                           8
       E.   The Superior Court Reaffirms Its Order
            Despite Undisputed Evidence That It Will
            Prevent The University From Investing In
            The Most Lucrative Private Equity
            Partnerships.                              11
       F.   The Superior Court Also Orders The
            University To Disclose Minutes And Tapes
            Of Closed Session Meetings Of The
            Regents.                                   13
       G.   Review Of The Trial Court’s Order By
            Writ Of Mandate Is Necessary And
            Appropriate.                               15




                              -i-
                    TABLE OF CONTENTS
                                                         Page

MEMORANDUM OF POINTS AND AUTHORITIES                    20
   I.   THE INTERNAL RATES OF RETURN FOR
        PRIVATE EQUITY FUNDS ARE TRADE
        SECRETS EXEMPT FROM DISCLOSURE
        UNDER THE PUBLIC RECORDS ACT.                   20
        A.   The IRRs Are Exempt Under Government
             Code Section 6254(k).                      20
             1.   The IRRs Are Trade Secrets.           20
             2.   In Ordering Disclosure Of The IRRs,
                  The Superior Court Applied The
                  Wrong Legal Standard.                 24
             3.   The IRRs Are Exempt From
                  Disclosure Under Section 6254(k)
                  Because Preservation Of The Trade
                  Secret Privilege Would Not “Conceal
                  Fraud Or Otherwise Work Injustice.”   30
        B.   Even If The Superior Court Should Have
             Applied The Balancing Test Applicable
             Under Government Code Section 6255(a),
             It Erred In Ordering Disclosure.           34
             1.   The Superior Court Failed To Weigh
                  The Now-Incontrovertible Fact That
                  Disclosure Of The IRRs Will
                  Materially Impair The University’s
                  Opportunities To Invest In Top-Tier
                  Private Equity Funds.                 34
             2.   The Superior Court Failed To
                  Consider     And     Weigh      The
                  Commercial Interests And Privacy
                  Rights Of The Trade Secret Holders.   37




                               -ii-
                     TABLE OF CONTENTS
                                                           Page

              3.   The Superior Court Failed To
                   Evaluate, And Balance Against The
                   Interests Of The University And The
                   Trade Secret Holders, The Slight
                   Interest Of The Public In Disclosure
                   Of The IRRs.                           40
   II.   THE MINUTES AND TAPES OF CLOSED
         MEETINGS SOUGHT BY REAL PARTIES
         ARE EXEMPT FROM DISCLOSURE.                      41
         A.   The Meetings Were Properly Closed.          42
         B.   Minutes And Tapes Of Closed Meetings
              Are Exempt From Disclosure Even After
              The Actions Discussed Have Been
              Completed.                                  44
   III. THE COURT SHOULD ISSUE A STAY OF
        THE TRIAL COURT’S RULING PENDING
        DISPOSITION OF THE PETITION.                      45
CONCLUSION                                                47




                                -iii-
                       TABLE OF AUTHORITIES
                                                                        Page


                               Cases

ABBA Rubber Co. v. Seaquist, 235 Cal. App. 3d 1
  (1991)                                                          21
ALRB v. Richard A. Glass Co., 175 Cal. App. 3d 703
  (1985)                                                          20
Blake v. Ecker, 93 Cal. App. 4th 728 (2001)                       35
Bridgestone/Firestone, Inc. v. Superior Court, 7 Cal.
   App. 4th 1384 (1992)                               25, 27, 30, 31
California First Amendment Coalition v. Superior
   Court, 67 Cal. App. 4th 159 (1998)                             38
California State University, Fresno Ass’n, Inc. v.
   Superior Court, 90 Cal. App. 4th 810 (2001)                24, 46
City of Hemet v. Superior Court, 37 Cal. App. 4th 1411
   (1995)                                                  27, 28, 29
City of Richmond v. Superior Court, 32 Cal. App. 4th
   1430 (1995)                                                    28
City of San Jose v. Superior Court, 5 Cal. 4th 47 (1993)          29
City of San Jose v. Superior Court, 74 Cal. App. 4th
   1008 (1999)                                                    25
Connell v. Superior Court, 56 Cal. App. 4th 601 (1997)        31, 46
Corns v. Miller, 181 Cal. App. 3d 195 (1986)                      35
County of Los Angeles v. Superior Court, 82 Cal. App.
  4th 819 (2000)                                                  28
Fortna v. Martin, 158 Cal. App. 2d 634 (1958)                     26
In re Hoddinott, 12 Cal. 4th 992 (1996)                           28
In re Providian Credit Card Cases, 96 Cal. App. 4th
    292 (2002)                                                    23


                                    -iv-
                       TABLE OF AUTHORITIES
                                                                          Page

National Parks & Conservation Ass’n v. Morton, 498
   F.2d 765 (D.C. Cir. 1974)                                        38
Roberts v. City of Palmdale, 5 Cal. 4th 363 (1993)                  28
San Gabriel Tribune v. Superior Court, 143 Cal. App.
   3d 762 (1983)                                                    24
Stadish v. Superior Court, 71 Cal. App. 4th 1130
   (1999)                                                           27
Steiny & Co. v. California Elec. Supply Co., 79 Cal.
   App. 4th 285 (2000)                                              30
Stop Youth Addiction, Inc. v. Lucky Stores, Inc., 17 Cal.
   4th 553 (1998)                                                   28
Union Oil Co. v. FPC, 542 F.2d 1036 (9th Cir. 1976)                 38
Uribe v. Howie, 19 Cal. App. 3d 194 (1971)              10, 20, 25, 26

                              Statutes

CIV. CODE §3426.1                                               20, 21
CODE CIV. PROC. §1858                                               28
EDUC. CODE
  §92032(b)(4)                               2, 14, 41, 42, 43, 44, 46
  §92032(b)(6)                                                      44
  §92032(b)(7)                                                  15, 42
EVID. CODE
  §1060                   1, 10, 16, 20, 25, 26, 28, 29, 30, 31, 33, 46
  §1061(a)(1)                                                        20
  §1061(b)(4)                                                    26, 27




                                     -v-
                   TABLE OF AUTHORITIES
                                                                     Page

GOV’T CODE
  §§6250-6260                                                    8
  §6254                                                         27
  §6254(a)                                                      27
  §6254(c)                                                  27, 28
  §6254(j)                                                      27
  §6254(k)                           1, 20, 25, 26, 27, 28, 29, 30
  §6255                                                     27, 29
  §6255(a)                           1, 10, 24, 25, 26, 34, 37, 46
  §6259                                                         46
  §6259(c)                                               1, 15, 45
  §11126.1                                           2, 41, 44, 45

                     Other Authorities

TRADE SECRETS PRACTICE IN CALIFORNIA (2d ed.
  2002)
  §1.7                                                         21
  §1.10                                                        22




                              -vi-
               INTRODUCTION AND SUMMARY OF
                        ARGUMENT
      This Petition presents for review an order compelling disclo-
sure of trade secrets under the Public Records Act. In the short time
since the order was entered, it has already resulted in the loss of an
investment opportunity potentially worth hundreds of millions of
dollars to the University of California. Immediate review is neces-
sary to prevent further losses to the University’s investment portfo-
lio. Moreover, under Government Code Section 6259(c) the order
can be reviewed only by petition for writ of mandate.
      The trade secrets at issue are the Internal Rates of Return
(“IRRs”) for the private equity partnerships in which the University
has invested a portion of its endowment and pension funds. The
general partners who create and manage these funds treat the IRRs
as confidential, and require investors to sign confidentiality agree-
ments pledging not to disclose such information. The best-perform-
ing, “top-tier” partnerships—which have contributed hundreds of
millions of dollars to the University’s portfolio—can pick and
choose among potential investors and will not permit the University
to invest in their funds if their IRRs will be disclosed.
      Under Evidence Code Section 1060, incorporated by reference
into the Public Records Act (GOV’T CODE §6254(k)), a trade secret
is subject to disclosure only if “allowance of the privilege will . . .
tend to conceal fraud or otherwise work injustice.” Yet the trial
court in this case did not find, and Real Parties did not even attempt
to show, that denying disclosure of the IRRs met this standard.
Instead, the trial court erroneously held that to maintain the trade se-
cret privilege the University had to prove that the public interest in
keeping the IRRs confidential “clearly outweighed” the interest in
disclosure. But this burden applies when a public entity resists dis-
closure of non-exempt, non-privileged documents under Government
Code Section 6255(a)—not when a public entity resists disclosure of
documents that are privileged under the Evidence Code and thus
exempt from disclosure under Government Code Section 6254(k).
The trial court then compounded its error by denying the

                                    -1-
University’s motion for reconsideration after Sequoia Capital—one
of the two best performing venture capital partnerships in the coun-
try—responded to the trial court’s first ruling by expelling the
University from its latest fund and asking the University to sell UC’s
positions in Sequoia’s other funds.
      The trial court also ordered the University to disclose minutes
and tapes relating to four closed session meetings at which the
Regents or its Committee on Investments discussed policy proposals
directly tied to the sale or purchase of investments. These meetings
were properly closed under Education Code Section 92032(b)(4),
which authorizes the Regents to “conduct closed sessions when they
meet to consider or discuss: . . . Matters involving the purchase or
sale of investments for endowment and pension funds.” The
Superior Court held that this statute did not apply to the meetings
because they were not focussed on “particular specific investments.”
But no such requirement appears in Section 92032(b)(4). Similarly,
the trial court held that even if the meetings had been properly closed
when they occurred, the minutes were no longer exempt from disclo-
sure once the transactions under discussion had been consummated.
But the governing statute (GOV’T CODE §11126.1) provides that
minutes of properly closed meetings “shall be kept confidential,”
without imposing an expiration date. Consequently, in this respect,
as with the IRRs, the Superior Court ignored the plain language of
the governing statutes, substituting its view of desirable public pol-
icy for that of the Legislature.

               PETITION FOR WRIT OF MANDATE
     Petitioner Regents of the University of California alleges:

     A.   The University’s Private Equity Investments Have
          Resulted In Exceptional Returns.
    1. The University of California owns and manages invest-
ment funds with assets of approximately $50 billion. Pet. Ex. 24 at



                                   -2-
305 ¶3.1 These funds help pay for endowed chairs, research, schol-
arships, and employee pensions. Id. Regents set broad policies gov-
erning the funds, but take no part in selecting specific investments.
Id. The University Treasurer implements Regental policies and
manages the funds. Id.
      2. As part of its diversified investment strategy, the
University invests a small portion of its assets—less than 3%—in
more than ninety private equity partnerships (“PEPs”). Pet. Ex. 24 at
312-13 ¶12, 566; Pet. Ex. 90 at 1880 ¶3. Private equity partnerships
are limited liability partnerships created to make investments in pri-
vate companies. Id. at 312 ¶12. Neither the companies invested in
(commonly referred to as “portfolio companies”) nor the partner-
ships themselves are subject to public disclosure laws applicable to
companies whose debt or equity securities are publicly traded. Id.
      3. PEPs invest in new and emerging companies, often in the
technology sector. Pet. Ex. 24 at 312-13 ¶12. These investments
have greater risk, but also potentially much greater returns, than
investments in publicly traded securities. Id. The General Partners
(or “GPs”) of the private equity partnerships use their expertise and
experience, as well as extensive research into potential “portfolio
companies” and their industries, to make investment decisions for
the partnerships. Id. Limited Partners (or “LPs”) contribute capital
and receive returns on their investments. Id.
      4. PEPs are long-term investments, typically requiring LPs
to invest a specific amount over a 10-year term. Pet. Ex. 24 at 313
¶13. In its first five to six years, the partnership invests money in its
portfolio companies, and returns only begin to appear in the later
years. Id. As a result, the true performance of a PEP cannot be
determined until the partnership closes and makes final distributions
to its LPs. Id. at 313-14 ¶13. Interim “returns,” particularly over

     1
       Copies of the trial court pleadings and transcripts will be found
in the Exhibits to Petition for Writ of Mandate (“Pet. Ex.”) filed simul-
taneously with this Petition. The exhibits are consecutively paginated
and will be cited by both tab number and page number.


                                    -3-
one- or two-year periods, tell nothing about the partnership’s even-
tual performance and may even be misleading. Id. at 313-14 ¶¶13,
14; Pet. Ex. 22 at 293-94 ¶¶6-7.
      5. The University began investing in private equity partner-
ships in 1979. Pet. Ex. 24 at 315 ¶15. As an early investor in
Silicon Valley, the University has formed long-standing
relationships with the premier venture capital groups and has built a
reputation as a reliable and sophisticated partner. Id.
      6. Since the beginning of its private equity investment pro-
gram, the University has received distributions of $2.2 billion dollars
on venture capital investments of $650 million. Pet. Ex. 24 at 316
¶17. Indeed, the University’s private equity investments have out-
performed any other portion of the University’s investment portfolio.
Pet. Ex. 22 at 293 ¶4; Pet. Ex. 24 at 317 ¶19. During the ten years
ending on December 31, 2002, the University’s private equity
investments earned an annual return of 28.8% and its venture capital
portfolio earned an annual return of 42.9%. Pet. Ex. 24 at 315 ¶16.
(During the same ten-year period, the University’s annual return on
public equities was 8.3%. Id. at 578.) Private equity investments
provide money that has helped fund scholarships, research, teaching,
and employee pensions and has for the last decade helped University
employees avoid having to make contributions from their paychecks
to their pension plan. Id. at 316-17 ¶18.
      7. Because of its long-term participation in the private equity
market, UC has access to “top-tier” partnerships—i.e., the best per-
forming and the most sought after partnerships—that is unique
among public funds. Pet. Ex. 24 at 315-16 ¶16. For example,
CalPERS’s annualized return from private equity investments over
the past 10 years has been 10.6%. Id. at 315 ¶16. This compares
unfavorably to UC’s return on private equity over the same period of
28.8% annually and its return on venture capital of 42.9% annually.
Id. Indeed, the ten-year 42.9% return for the University of
California Retirement Plan’s (“UCRP’s”) venture capital portfolio is
15% to 20% greater than the performance of two comparable


                                   -4-
indices: the Cambridge Associates Venture Index, with an annual
return of 27.9%, and the Venture Economics Venture Index, with an
annual return of 22.3%. Id. at 320 ¶23(b). These extraordinary
returns are the direct result of the University’s unique ability to
invest in top-tier private equity funds. Pet. Ex. 24 at 315-16 ¶16.
       8. In part because of its investment in lucrative private
equity partnerships, the University’s investment funds remain quite
healthy despite broad declines in the markets during the past two
years. Pet. Ex. 24 at 310-11 ¶10. In contrast to most other public
pension plans, the assets of the UCRP exceed its liabilities. See id.
at 505 (79% of state retirement systems underfunded as of
December 31, 2002). Indeed, the UCRP ranked sixth out of 123
state retirement systems as of the end of the last calendar year. See
id. at 519.
       9. Access to top-tier private equity partnerships is a “seller’s
market.” Pet. Ex. 24 at 325-26 ¶29. Participation is by invitation
only (id.), and fund managers have total discretion in choosing
between potential partners. Pet. Ex. 25 at 676 ¶3; Pet. Ex. 29 at 706
¶2. The University receives invitations to participate in new funds
because of the relationships it has carefully built over the past two
decades and the reputation for reliability it has been able to establish
through its past participation with these GPs. Pet. Ex. 24 at 325-26
¶29. However, because the demand for participation in these funds
far outstrips the available spaces, GPs who choose not to deal with
the University in the future can easily find new investors to take its
place. Id. at 326 ¶29. That is why the University has vigorously
resisted disclosures that would hamper its ability to obtain the
maximum return on investments for the benefit of its students, fac-
ulty, employees, and retirees.

     B.    The University Discloses Substantial Information
           Regarding The Performance Of Its Private Equity
           Portfolio.
     10. The University makes public, both pro-actively and in
response to requests, huge quantities of information regarding its

                                    -5-
investments. See Pet. Ex. 24 at 311-12 ¶11, 365-583. This
information permits extensive public oversight of the University’s
investment practices.
      11. In particular, the University provides the public substan-
tial information regarding its private equity investments. The
University discloses the overall performance of its private equity
portfolio and the strategy and objectives of its private equity invest-
ments. Pet. Ex. 22 at 295-96 ¶9; Pet. Ex. 24 at 311-12 ¶11, 319-21
¶¶22-24, 394-503, 563-89. It also discloses abundant information
regarding each private equity partnership in which it invests,
including disclosing on a quarterly basis the names of each partner-
ship, the amount invested in each partnership, the number of shares
held in each partnership, and—most significantly—the partnership’s
market value. Id.
      12. The Regents also disclose additional information regard-
ing its investment in PEPs in the context of public meetings. These
meetings have addressed the selection of Cambridge Associates as
the University’s private equity consultant, the establishment and
adjustment of asset allocation percentages for private equity invest-
ments, procedures for approval of private equity investments,
performance objectives for the private equity portfolio, selection of
performance benchmarks, and allocation within the private equity
portfolio to various industry sectors. Pet. Ex. 24 at 320-21 ¶24.

     C.   The University Has Declined To Disclose The Internal
          Rates Of Return (IRRs) For Each Partnership,
          Because The IRRs Are Trade Secrets And Because
          Their Disclosure Would Result In Significant Harm
          To The University.
      13. Despite the disclosure described above, the University has
declined to disclose one limited bit of confidential information—the
“internal rates of return” (IRRs)—for its private equity funds.
      14. Unlike investments in public companies traded on organ-
ized stock exchanges, there is no easily ascertainable market value
for PEP investments. Pet. Ex. 24 at 314 ¶14. Nor is there a uniform


                                   -6-
methodology for determining a PEP’s internal rate of return. Pet.
Ex. 14 at 232 ¶6; Pet. Ex. 15 at 240 ¶6.
      15. IRRs do not measure the actual money distributed by the
PEP to the LPs at the end of the investment cycle. Pet. Ex. 24 at
321. Instead, IRR calculations are based on subjective estimates,
often provided by the partnership GPs, of the current value of the
portfolio companies owned by the partnerships. Pet. Ex. 24 at 321
¶25; Pet. Ex. 22 at 294 ¶7. Accordingly, IRRs for the same funds
produced by different analysts vary widely. Pet. Ex. 24 at 321 ¶25;
Pet. Ex. 22 at 294 ¶7. For example, CalPERS has reported an IRR of
-29.44% for Madison Dearborn Partners IV Partnership, while
CalSTRS has reported an IRR of -43.49% for the same partnership.
Pet. Ex. 24 at 322 ¶25(D). Because the real measure of a fund’s per-
formance is its ultimate return in the form of distributions, IRRs are
of limited value in assessing eventual fund returns. Pet. Ex. 12 at
219-20 ¶3; Pet. Ex. 24 at 322 ¶25(C)-(E). In fact, they tell more
about the valuation methodology of the analyst or partnership than
they do about ultimate fund performance. Pet. Ex. 9 at 196-97 ¶5;
Pet. Ex. 24 at 322 ¶25(E).
      16. The University’s IRR calculations are provided by an
independent private equity consultant, Cambridge Associates. Pet.
Ex. 11 at 211 ¶10; Pet. Ex. 24 at 322-23 ¶26. Cambridge Associates
takes raw data obtained from the GPs under strict confidentiality
agreements and calculates IRRs based on its own proprietary for-
mulas. Pet. Ex. 11 at 211 ¶10; Pet. Ex. 59 at 1944 ¶¶2-4.
Cambridge Associates then sells the IRRs to LPs in the respective
partnerships. Pet. Ex. 11 at 211 ¶10, 213 ¶13. The contract between
Cambridge and the University requires the University to preserve the
confidentiality of the IRRs, unless disclosure is required by law. Pet.
Ex. 11 at 211-12 ¶11; Pet. Ex. 60 at 1947 ¶2, 1950 ¶7. Similar con-
fidentiality provisions govern information given by the private
equity partnerships to the University. See, e.g., Pet. Ex. 14 at 231-32
¶¶4-5; Pet. Ex. 15 at 239-40 ¶5; Pet. Ex. 18 at 269-70 ¶12; Pet.



                                   -7-
Ex. 19 at 273-74 ¶¶3, 5; Pet. Ex. 20 at 283 ¶6; Pet. Ex. 28 at 703
¶15; Pet. Ex. 29 at 707 ¶5.

     D.   The Superior Court Orders The University To
          Disclose IRRs.
      17. On December 24, 2002, the Coalition of University
Employees and Charles Schwartz, a retired faculty member at the
University of California at Berkeley, sent the University a request
for documents under the Public Records Act (“PRA”), Government
Code Sections 6250-6260. Pet. Ex. 2 at 13-16. The request sought
disclosure of numerous categories of documents, including “[a]ll
documents showing the internal rate of return of any private equity
investments which have been made by the University of California”;
minutes and tapes of four meetings of The Regents in 2000 and
2002; and “[a]ll public records . . . concerning the performance of
the investments of the University of California Retirement Plan . . .
since January 1, 2000.” Id. at 13-14.
      18. The University acknowledged receipt of this Public
Records Act request on December 30, 2002 (Pet. Ex. 2 at 18); pro-
vided a more detailed response on January 22, 2003 (id. at 20-21);
and a supplemental response on February 14, 2003 (id. at 23-26).
The January 22, 2003, letter enclosed documents responsive to seven
specific requests and the February 14, 2003, letter enclosed an addi-
tional document. See id. at 20. Additional documents were dis-
closed on June 13, 2003. Pet. Ex. 47 at 1347 ¶4, 1386-1523.2
However, the University did not disclose either the IRRs or minutes
and tapes of meetings of The Regents or its committees held in
closed session.

     2
      Real Parties have made much of the fact that one of the docu-
ments disclosed on June 13 was accompanied by a post-it stating: “Too
complicated David does not want to disclose.” See, e.g., Pet. Ex. 45 at
1289-90; Pet. Ex. 47 at 1347 ¶4. Since the document was disclosed,
the post-it is irrelevant, demonstrating only that the University dis-
closes records, despite the concerns of its officials, if the Public
Records Act requires it to do so.


                                   -8-
      19. On April 1, 2003, Real Parties Coalition of University
Employees, Charles Schwartz and San Jose Mercury News filed a
petition for writ of mandate against Petitioner Regents of the
University of California in Respondent Alameda County Superior
Court. Pet. Ex. 2 at 3. Among other things, the petition sought dis-
closure of “all reports, documents and other public records showing
the performance of private equity investments made by UC, includ-
ing but not limited to documents showing the internal rate of return,”
as well as all documents relating to the meetings in 2000 and 2002
identified in the PRA request. Id. at 9 ¶¶1, 2.
      20. In response to the Petition, the University contended that
the disclosures sought by Real Parties would adversely impair its
ability to invest in top tier private equity partnerships in the future.
Pet. Ex. 7 at 167-68, 177-80. In their reply memorandum, Real
Parties disparaged this concern, arguing that “there is not one shred
of evidence that any venture capital fund has excluded any public
pension fund as a result” of IRR disclosure. Pet. Ex. 45 at 1288.
Moreover, Real Parties repeatedly cited evidence that “Sequoia
Capital, one of the two top-performing funds in history, recently
admitted Michigan into a new round even after Michigan disclosed
IRR information.” Id. at 1291-92; see also id. at 1288, 1294, 1297,
1303.
      21. On July 24, 2003, Respondent Court entered an “Order
Granting Petition for Writ of Mandate” (“July 24 Order”). Pet.
Ex. 61 at 1952-71. Although Real Parties’ petition had sought
release of all documents “showing the performance of private equity
investments made by UC, including but not limited to documents
showing the internal rate of return” (Pet. Ex. 2 at 9 ¶1), their sup-
porting memorandum had addressed only the more limited issues of
whether the IRRs and the minutes and tapes of the meetings identi-
fied in the PRA request were disclosable. Pet. Ex. 61 at 1953 & n.1.
Accordingly, the July 24 Order addressed only those issues. Id. at
1954.



                                    -9-
      22. With respect to the IRRs, the court acknowledged that of
the eighty-eight private equity partnerships in which the University
had invested that had generated an IRR, fifty-five had never had
their IRR disclosed by any public fund. Pet. Ex. 61 at 1959. The
court also acknowledged that, for twenty-four of the thirty-three
remaining funds, the University’s IRR figures are “materially differ-
ent” than those publicly disclosed by other public pension funds. Id.
Accordingly, while the court expressed some skepticism about
whether the IRRs were trade secrets (see id. at 1959; Pet. Ex. 90 at
2252), the court assumed they were for purposes of analysis. Pet.
Ex. 61 at 1959; Pet. Ex. 90 at 2252.
      23. Despite this assumption, the court found that disclosure of
the IRRs was required under the Public Records Act. The court
acknowledged that Evidence Code Section 1060 creates a privilege
for trade secrets to the extent that “allowance of the privilege will
not tend to conceal fraud or otherwise work injustice.” Pet. Ex. 61 at
1959-60 (quoting EVID. CODE §1060). However, it held that under
Uribe v. Howie, 19 Cal. App. 3d 194 (1971), the “work injustice”
language contained in Section 1060 “essentially embod[ies] a bal-
ancing test analogous to that set forth in the ‘catch-all’ exemption of
[Government Code] Section 6255(a).” Pet. Ex. 61 at 1960. The
Court therefore held that disclosure of the IRRs was required unless
the public interest in disclosure outweighed the need to keep the
IRRs confidential. Id.
      24. In applying this balancing test, the court held that “the
public interest in favor of disclosure of government financial infor-
mation is clear.” Pet. Ex. 61 at 1960. However, the court did not
evaluate the need for IRR disclosure in the context of the other
information disclosed by UC concerning its private equity invest-
ments. Instead, the court found that University had not made a
“compelling” showing that revealing the IRRs “will make the desir-
able funds—the so-called ‘top tier partnerships’—less likely to per-
mit [the University] to continue investing in them, to the detriment
of the public.” Id. at 1961-62. In particular, the Court found that


                                  -10-
only one-quarter of the approximately ninety-four funds in which the
University invests had submitted declarations in support of the
University (id. at 1962-63); that some of these declarations objected
only to disclosure of portfolio company information, and not to dis-
closure of IRRs; and “that other public pension plans have produced
IRR information without the dire consequences predicted by [the
University] . . . .” Id. The court found “[p]articularly persuasive”
evidence that “Sequoia, admittedly a top venture fund, [had] recently
accepted an $8 million investment from the University of Michigan,
after that University publicly released IRR information.” Id. at
1963-64 (emphasis in original).

     E.   The Superior Court Reaffirms Its Order Despite
          Undisputed Evidence That It Will Prevent The
          University From Investing In The Most Lucrative
          Private Equity Partnerships.
     25. The ink was barely dry on the July 24 Order before its
factual premises collapsed. On the same day the Order was issued,
Sequoia notified the University of Michigan (“UM”) that it was
removing UM from Sequoia Capital XI; Sequoia also requested UM
to sell its positions in its other Sequoia Capital partnerships. Pet.
Ex. 67 at 2020-21.
     26. In response to Sequoia’s decision, the University filed a
motion for reconsideration of the July 24 Order. Pet. Ex. 63 at 1998-
99; Pet. Ex. 64 at 2002-10. The University contended in this motion
that Sequoia’s decision to terminate its relationship with UM pro-
vided further evidence that IRR disclosure would financially damage
the University and the pension funds that provide benefits to
University employees and retirees. Pet. Ex. 64 at 2003-06. It also
told the court that Sequoia’s decision was particularly serious,
because Sequoia had been one of UC’s best performing private
equity investments, providing the University with $508 million on a




                                 -11-
total investment of approximately $110 million. Pet. Ex. 66 at 2014
¶2.3
      27. Real Parties opposed reconsideration, arguing, inter alia,
that Sequoia had not severed its relationship with UM as a result of
IRR disclosure and that, in any event, “what Sequoia did or did not
do with Michigan does not demonstrate what it might or might not
do in California . . . .” Pet. Ex. 75 at 2072.
      28. The day before the hearing on Petitioner’s motion for
reconsideration, Sequoia did to UC what it had previously done to
UM: it removed the University of California from Sequoia Capital
XI and requested the University to sell its other Sequoia partnership
interests. Pet. Ex. 85 at 2196-201. Sequoia made this decision—
even though it had given UC the largest allocation in that
partnership—as a direct result of the July 24 Order. Id. at 2197 ¶2,
2199. Although this information was brought immediately to the
Superior Court’s attention (id. at 2196-201), and although the
University informed the Court that loss of the opportunity to invest
in Sequoia could not be replaced with similarly productive
investments (id. at 2197 ¶4), the Superior Court denied
reconsideration. Pet. Ex. 86 at 2205-06.

     3
       In addition to relying on Sequoia’s decision to expel UM from its
latest venture fund, the University’s motion for reconsideration also
cited a decision by Three Arch Partners not to permit the University to
invest in a new fund, a decision that was made the day after Real Party
San Jose Mercury News published a news account of the July 24 Order.
Pet. Ex. 64 at 2005; Pet. Ex. 66 at 2015 ¶5. In response, Real Parties
submitted (over Petitioner’s objection) a news article in which a Three
Arch partner was quoted as stating that the decision not to ask the
University to participate in its new fund wasn’t related to the Superior
Court’s decision and that Three Arch did not object to the publication
of IRRs for individual funds. Pet. Ex. 78 at 2129. However, in the
same article, the Three Arch partner stated that disclosure rules would
influence its choice of future investors. Id. The ability of Three Arch
to reject the University as an investor also contradicted the Superior
Court’s assumption, based on nothing more than hearsay newspaper
articles submitted by Real Parties, that in the current supposedly weak
venture capital market, funds would not be able to reject the University
as an investor. See Pet. Ex. 61 at 1964; Pet. Ex. 45 at 1294.


                                  -12-
     F.   The Superior Court Also Orders The University To
          Disclose Minutes And Tapes Of Closed Session
          Meetings Of The Regents.
      29. Prior to mid-2000, the University’s public equity portfolio
had been highly concentrated in a relatively small number of stocks,
sometimes as few as 60, picked by in-house analysts. Pet. Ex. 24 at
306 ¶6. Such concentration is generally recognized to involve sub-
stantial risk. Id.
      30. The Regents changed these public equity investment poli-
cies incrementally, making a series of decisions in 2000 and again in
2002. Pet. Ex. 24 at 305-06 ¶¶5-6.
      31. In January and March 2000, the Regents and/or its
Committee on Investments held two meetings in closed session to
discuss adopting an asset allocation policy. Pet. Ex. 24 at 329 ¶39.
Adopting such a policy necessarily requires the purchase and sale of
investments because the University must sell or purchase positions
in which it holds more or less investments than the asset allocation
policy permits. Id. The meetings in January and March 2000 also
discussed proposals to place a portion of the University’s public
equity investments, which previously had been managed entirely by
the Treasurer’s office, into externally managed index funds. Id.
This proposal also required the University to sell overweight posi-
tions from its portfolio. Id. at 329-30 ¶39.
      32. The Regents and/or its Committee on Investments also
met in closed session on October 29 and November 13, 2002, to dis-
cuss a recommendation by the University Treasurer that the
University eliminate its internally managed equity portfolio
altogether in favor of investing in broad, index-based funds and a
multiple manager/multiple strategy active portfolio. Pet. Ex. 24 at
306-07 ¶6, 328 ¶36. This proposal urged the University to move
away from picking individual stocks toward broad investments in the
market. Id. at 305-07 ¶¶5-6. This recommendation was based on an
analysis which showed that broad index-based investments would
have produced greater returns than the University’s internal equity
managers had produced during the prior decade. Id. at 306 ¶6.

                                 -13-
      33. The meetings in October and November 2002 were held
in closed session for two reasons. First, these discussions necessar-
ily reflected on the performance, and possible layoff, of the
University’s internal managers, and holding the meetings in public
might have invaded their personal privacy and potentially interfered
with their search for new employment. Pet. Ex. 24 at 328-29 ¶37.
Second, movement from a concentrated position in a relatively few
stocks to investment in a 3000-stock index fund required the
University to liquidate large portions of its then-current holdings. Id.
at 328 ¶36. Advance disclosure of its intent to do so would have
allowed short sellers to manipulate the market to the University’s
detriment. Id. Because the asset allocation policy discussed and
adopted by the Regents at the meetings in January and March 2000
similarly caused the University to sell its holdings, this consideration
also applied to those meetings. Id. at 329–30 ¶39.
      34. In its July 24 Order, the Superior Court rejected the
University’s contention that minutes and tapes of the closed sessions
held in January and March 2000, and October and November 2002,
were exempt from disclosure under the Public Records Act. Pet.
Ex. 61 at 1966-69. The court acknowledged that the minutes of
properly closed meetings are exempt from disclosure and that
Education Code Section 92032(b)(4) permits the Regents to hold
closed sessions to consider “[m]atters involving the purchase or sale
of investments for endowment and pension funds.” Id. at 1967.
Nevertheless, it held that this statute permits the Regents to hold
closed sessions only to discuss “the purchase or sale of particular
specific investments” (id.), even though the record is undisputed that
the Regents do not make specific investment decisions. Pet. Ex. 24
at 305 ¶3. And while the Court acknowledged that portions of the
2000 and 2002 meetings might have come within its narrow inter-
pretation of Section 92032(b)(4), it held that that statute does not
justify exempting records relating “to past meetings where action has
already been taken.” Pet. Ex. 61 at 1968. However, the statutory
exemption for minutes of closed session meetings does not contain


                                  -14-
any provision permitting the release of minutes that were once prop-
erly sealed due to the passage of time.
       35. The Superior Court also rejected Petitioner’s contention
that the meetings in October and November 2002 were properly
closed in their entirety under Education Code Section 92032(b)(7),
which permits closed meetings to consider “[m]atters concerning
the . . . employment, performance, compensation, or dismissal of
university officers or employees . . . .” Pet. Ex. 61 at 1969. Never-
theless it ordered Petitioner to: (1) conduct a further review of the
documents “to determine if there are any references to individual
employees or any other matters that Respondent believes would
violate the privacy rights of its employees”; and (2) submit redacted
documents to the court for in camera review. Pet. Ex. 61 at 1969-70.
In accordance with this portion of the order, Petitioner submitted
redacted and unredacted copies of minutes of the meetings in
October and November 2002. Pet. Ex. 87 at 2208-10. The parties
expect that in camera review of these documents will be complete by
September 30, 2003. Pet. Ex. 88 at 2212-14.

     G.    Review Of The Trial Court’s Order By Writ Of
           Mandate Is Necessary And Appropriate.
      36. Under Government Code Section 6259(c), the July 24
Order is not appealable as a final judgment but may only be
reviewed by petition for writ of mandate. The Superior Court has
given Petitioner until September 5, 2003, to file this Petition. Pet.
Ex. 72 at 2045-46.
      37. The trial court’s July 24 Order threatens Petitioner with
irreparable injury. Compelled disclosure of the IRRs has already
cost the University of California at least one potentially lucrative
investment opportunity in a top-tier private equity partnership and
may result in the loss of other such opportunities in the future. If the
past performance of these investments is any guide to the future, the
potential losses to the University could well be in the hundreds of
millions of dollars.


                                  -15-
      38. Disclosure of investment policy and allocation matters
discussed by the Regents in closed session could impair the
University’s ability to realize profits and avoid losses on
investments.
      39. In first issuing the July 24 Order and then denying recon-
sideration, the Superior Court abused its discretion, for the reasons
discussed in the Memorandum that follows, which Petitioner incor-
porates herein by reference.
      40. In addition to seeking a writ of mandate, Petitioner seeks
a stay of Respondent’s July 24 Order pending disposition of this
Petition. Granting a stay will prevent the appeal from becoming
moot and protect the Regents from suffering irreparable injury in the
form of lost investment opportunities caused by the Superior Court’s
ruling.
      41. Petitioner is also entitled to a stay because it has shown
probable success on the merits. As discussed in more detail in the
Memorandum that follows, the Superior Court’s July 24 Order is
fatally flawed in numerous respects: (1) it ignored the statutory test
set forth in Evidence Code Section 1060 for determining whether
trade secrets should be disclosed; (2) it failed to recognize that dis-
closure of the IRRs will result in the loss of investment opportunities
potentially worth hundreds of millions of dollars; (3) it failed to give
any weight at all to the trade secret interests of Cambridge
Associates, which compiles the IRRs for the University, and the
similar interests of the PEPs in which the University invests; (4) it
failed to explain how disclosure of the IRRs would further the public
interest in light of all the other information disclosed by the
University concerning its private equity investments; and (5) it
added requirements to the statute authorizing the Regents to hold
closed sessions concerning investment-related matters that are not
found in the statutory text.
      42. Because a temporary stay entered by the trial court
expires on September 30, 2003, the Court should act on Petitioner’s
stay request by that date.


                                  -16-
      43. All exhibits accompanying this Petition are true copies of
original documents on file with Respondent Court, except
Exhibits 89 and 90, which are true copies of the original reporter’s
transcript of the June 24, 2003, hearing on Real Parties’ motion for a
writ of mandate and the August 28, 2003, hearing on Petitioner’s
motion for reconsideration, respectively. The exhibits are incorpo-
rated herein by reference as though fully set forth in this Petition.
      WHEREFORE, Petitioner prays:
      1. That this Court issue its alternative writ of mandate and/or
order to show cause ordering Respondent to set aside its July 24
Order and its order denying Petitioner’s motion for reconsideration
and enter a new order denying Real Parties’ motion for a writ of
mandate; or in the alternative, to show cause why a peremptory writ
as set forth above should not issue;
      2. That, upon return of the alternative writ and/or the hearing
on the order to show cause, or alternatively in the first instance, a
peremptory writ issue ordering Respondent to set aside its July 24
Order and its order denying Petitioner’s motion for reconsideration
and enter a new order denying Real Parties’ motion for a writ of
mandate;
      3. That this Court stay the July 24 Order pending disposition
of this Petition;
      4. That this Court set this matter for hearing at the earliest
time consistent with its calendar;
      5. That Petitioner be awarded its cost of suit; and




                                  -17-
    6. That Petitioner be awarded such other and further relief as
may be just and proper.


DATED: September ___, 2003.
                          Respectfully,

JEROME B. FALK, JR.                       JAMES E. HOLST
STEVEN L. MAYER                           JOHN F. LUNDBERG
HOWARD RICE NEMEROVSKI CANADY             CHRISTOPHER M. PATTI
    FALK & RABKIN                         STEVEN G. ROSEN
A Professional Corporation                MARIA SHANLE
                                          UNIVERSITY OF CALIFORNIA
                                          OFFICE OF THE GENERAL
                                              COUNSEL

             By:______________________________
                      STEVEN L. MAYER
                     Attorneys for Petitioner




                                -18-
                           VERIFICATION
     I, David Russ, declare:
     I am the Treasurer and Vice-President for Investments of the
University of California. I have read the foregoing Petition for Writ
of Mandate and know its contents. The facts alleged in the Petition
are within my own knowledge and I know these facts to be true.
     I declare under penalty of perjury under the laws of the State of
California that the foregoing is true and correct and that this verifi-
cation was executed on September 5, 2003, at Oakland, California.



                                          DAVID RUSS




                                  -19-
          MEMORANDUM OF POINTS AND AUTHORITIES
                                  I.

            THE INTERNAL RATES OF RETURN FOR
              PRIVATE EQUITY FUNDS ARE TRADE
             SECRETS EXEMPT FROM DISCLOSURE
              UNDER THE PUBLIC RECORDS ACT.
     A.    The IRRs Are Exempt Under Government Code
           Section 6254(k).
           1. The IRRs Are Trade Secrets.
       Section 6254(k) of the Public Records Act exempts from dis-
closure “[r]ecords, the disclosure of which is exempted . . . pursuant
to . . . state law, including, but not limited to, provisions of the
Evidence Code relating to privilege.” Section 1060 of the Evidence
Code exempts “trade secrets” unless nondisclosure would “conceal
fraud or otherwise work injustice.” Whether information is a trade
secret is a question of law which this Court determines independ-
ently. ALRB v. Richard A. Glass Co., 175 Cal. App. 3d 703, 713-15
(1985); Uribe v. Howie, 19 Cal. App. 3d 194, 207 (1971).
       IRRs are calculated for the University by Cambridge
Associates based on data provided by the various private equity
partnerships in which the University has invested. IRRs do not
measure the actual money distributed by the PEP to the LPs at the
end of the investment cycle; instead, they are highly subjective esti-
mates of interim partnership performance, based on the judgment of
the general partner or outside consultants. Pet. Ex. 22 at 294 ¶7; Pet.
Ex. 24 at 321 ¶25(A).
       Section 1061(a)(1) of the Evidence Code and Section 3426.1 of
the Civil Code define a “trade secret” as follows:
          (d) “Trade secret” means information, including a
     formula, pattern, compilation, program, device, method,
     technique, or process, that:
          (1) Derives independent economic value, actual or
     potential, from not being generally known to the public or
     to other persons who can obtain economic value from its
     disclosure or use; and



                                  -20-
          (2) Is the subject of efforts that are reasonable
     under the circumstances to maintain its secrecy. (CIV.
     CODE §3426.1)
See ABBA Rubber Co. v. Seaquist, 235 Cal. App. 3d 1, 18 (1991).
     The information sought here meets this definition. The IRRs
are—and reflect—the trade secrets of the various private equity
partnerships and their fund managers, the underlying portfolio com-
panies, and Cambridge Associates.4
     First, a trade secret must have independent economic value
from being kept confidential. However, “as long as the incremental
value of the secret is not trivial, it need not be great.” TRADE
SECRETS PRACTICE IN CALIFORNIA §1.7, at 9 (2d ed. 2002).
     The IRRs plainly satisfy this element of the trade secret test.
Their economic value is shown by the fact that Cambridge
Associates sells that data to the University and other investors. Pet.
Ex. 11 at 211-13 ¶¶10-13. Release of the IRR data to the public
would impair or destroy Cambridge Associates’ ability to sell that
information to its clients. Id. at 213 ¶13. The IRRs also have eco-
nomic value because they reflect Cambridge Associates’ proprietary
database and valuation techniques. Id. at 211 ¶10; Pet. Ex. 59 at
1944 ¶3.



     4
       The Superior Court’s order mentions only the trade secret pro-
tection the University claims for Cambridge Associates. Pet. Ex. 61 at
1957-58. But the IRRs also incorporate trade secrets of the private
equity partnerships and—somewhat more indirectly—the portfolio
companies whose confidential performance data is reflected in each
partnership’s IRR. For example, IRRs reflect the partnerships’ subjec-
tive assessments of each partnership’s portfolio companies and their
competitors. Pet. Ex. 13 at 225 ¶6; Pet. Ex. 15 at 240-41 ¶6; Pet.
Ex. 16 at 252 ¶11; Pet. Ex. 18 at 269 ¶11; Pet. Ex. 22 at 294 ¶7; Pet.
Ex. 24 at 322 ¶25(D)-(E). Moreover, if a fund’s portfolio contains
relatively few investments when the IRR is calculated, the IRR can be
“reverse engineered” to discover individual portfolio company valua-
tions. Pet. Ex. 19 at 279 ¶9; Pet. Ex. 27 at 694-95 ¶8. Yet even Real
Parties have tacitly conceded that portfolio company data are confiden-
tial, by their failure to seriously challenge the University’s decision not
to release such information. See Pet. Ex. 61 at 1953.


                                    -21-
      Moreover, the IRRs possess economic value even apart from
how they are calculated. See, e.g., Pet. Ex. 13 at 225 ¶6; Pet. Ex. 14
at 233 ¶9; Pet. Ex. 15 at 241 ¶8. The private equity partnerships
keep performance information confidential to prevent competitors
from using it to harm the partnerships’ ability both to attract inves-
tors and to invest in portfolio companies. See, e.g., Pet. Ex. 14 at
233-34 ¶¶9-10, Pet. Ex. 16 at 251-53 ¶¶9-11; Pet. Ex. 18 at 268-69
¶¶9-11.
      The IRRs also satisfy the second prong of the trade secret test
because reasonable efforts have been made to maintain their confi-
dentiality. The private equity partnerships in which the University
invests are not public companies, and thus are not required to dis-
close their financial information to the public and to the securities
regulators. Pet. Ex. 24 at 312 ¶12. Moreover, the private equity
partnerships give Cambridge Associates the data used to calculate
IRRs under strict agreements for the preservation of its confidential-
ity. Pet. Ex. 11 at 213 ¶14, 217; Pet. Ex. 59 at 1944 ¶3. The con-
tract between Cambridge and the University similarly requires the
University to preserve the confidentiality of the IRRs. Pet. Ex. 11 at
211-12 ¶¶11-12; Pet. Ex. 60 at 1947 ¶2, 1950 ¶7. The agreements
between the University and the private equity partnerships in which
it invests contain similar confidentiality provisions. See, e.g., Pet.
Ex. 14 at 231-32 ¶¶4-5; Pet. Ex. 15 at 239-40 ¶5; Pet. Ex. 18 at 269-
70 ¶12; Pet. Ex. 19 at 273 ¶3; Pet. Ex. 20 at 283 ¶6; Pet. Ex. 28 at
703 ¶15; Pet. Ex. 29 at 707 ¶5.
      These agreements reflect industry practice, pursuant to which
the PEPs take numerous measures to keep their performance data
confidential. Pet. Ex. 9 at 200 ¶16; Pet. Ex. 13 at 229 ¶16; Pet.
Ex. 14 at 234 ¶10. This is more than enough to satisfy this prong of
the trade secret test. See TRADE SECRETS PRACTICE IN CALIFORNIA,
supra, §1.10, at 15 (“Among the most persuasive measures are those
that restrict access to the trade secret . . . [or] impose an obligation of
confidentiality on persons having access to the information (e.g.,
requiring nondisclosure agreements)”).


                                    -22-
       The Superior Court expressed skepticism that the IRRs are
trade secrets, although it ultimately refrained from deciding that
question and assumed that they were. See Pet. Ex. 61 at 1959;
Ex. 90 at 2252. It observed that “[p]ublic disclosure . . . is fatal to
the existence of a trade secret.” Pet. Ex. 61 at 1959 (quoting In re
Providian Credit Card Cases, 96 Cal. App. 4th 292, 304 (2002)). It
also noted that the IRRs for some of the private equity partnerships
in which the University has invested have recently been disclosed—
not by the funds themselves, which vigorously have resisted disclo-
sure—but by other public entity investors in California or in other
states. Id. at 1958-59.
       The undisputed evidence shows that the University invests in
eighty-eight funds that have generated IRRs. But in only nine cases
has the IRR data possessed by the University been disclosed to the
public. Pet. Ex. 56 at 1880 ¶¶3-7.5 Thus, for nearly 90% of the pri-
vate equity funds whose IRRs are known to the University, the IRR
data Petitioners seek from the University has never been released to
the public and remains a closely guarded trade secret. Even if,
arguendo, the release by some public investors—over the objection
of the funds—terminated the trade secret rights of nine funds, the
still-confidential data of the remaining seventy-nine funds is a trade
secret.6

     5
        There has been disclosure by other public investors of IRR data
for twenty-four funds, but that data is materially different from the IRR
data possessed by the University. Pet. Ex. 56 at 1880 ¶6. And even as
to the nine funds whose IRRs have been disclosed, the University
should not be compelled to release data that it has contractually prom-
ised it would not release. See note 9, infra.
      6
        The July 24 Order also stated—relying on a statement made by
Real Parties—that “of the approximately 94 funds in which Respondent
invests, less than one quarter have submitted declarations in support of
Respondent’s opposition.” Pet. Ex. 61 at 1962-63. That is not accu-
rate. Many of the private equity funds in which the University has
invested have been managed by the same fund manager/general
partner. Some of the funds are no longer active and have been closed
down. Of the funds that are currently active, 80% of the fund managers
have submitted declarations in support of the University. See Pet.
                                                          (continued . . . )

                                    -23-
           2.   In Ordering Disclosure Of The IRRs, The
                Superior Court Applied The Wrong Legal
                Standard.
      As noted above, trade secrets are by statute exempt from Public
Records Act disclosure unless nondisclosure would “conceal fraud”
or “work injustice.” Obviously, disclosure of the IRRs would do
neither. Indeed, Real Parties never contended otherwise.
      That should have been the end of it. Unfortunately, the
Superior Court decided that the “conceal fraud or otherwise work
injustice” standard should be replaced by an ad hoc “balancing of
interests” test, under which the court balances “the public interest in
disclosure of the IRRs” against “the claimed need to keep them
secret.” Pet. Ex. 61 at 1959-60.
      The trial court drew this test from the “catch-all” exception of
Government Code Section 6255(a), which allows a governmental
body to withhold disclosure of unprivileged, non-exempt material
where “the public interest served by not disclosing the record clearly
outweighs the public interest served by disclosure of the record.”7
When an agency invokes the Section 6255(a) “catch-all” exception,
it has the burden of proof. San Gabriel Tribune v. Superior Court,
143 Cal. App. 3d 762, 780 (1983). Unsurprisingly, because the
“catch-all” exemption is invoked to prevent disclosure of unprivi-
leged, non-exempt information, that burden is not trivial: the agency
has the “burden of demonstrating a ‘“clear overbalance” on the side
of confidentiality.’” California State University, Fresno Ass’n, Inc.



     ( . . . continued)
Ex. 80 at 2165 ¶2.
     7
       Section 6255(a) provides:
             The agency shall justify withholding any record by
     demonstrating that the record in question is exempt under
     express provisions of this chapter or that on the facts of the
     particular case the public interest served by not disclosing
     the record clearly outweighs the public interest served by
     disclosure of the record. (GOV’T CODE §6255(a) (emphasis
     added))


                                   -24-
v. Superior Court, 90 Cal. App. 4th 810, 835 (2001) (quoting City of
San Jose v. Superior Court, 74 Cal. App. 4th 1008, 1018 (1999)).
       But the University’s assertion of the trade secret exemption
does not implicate Section 6255(a) at all, but rather involves the
express exemption conferred by Evidence Code Section 1060, made
applicable to the Public Records Act by Government Code Section
6254(k). Accordingly, the Superior Court should have applied the
statutory standard unambiguously established by Section 1060:
whether preservation of the IRRs’ trade secret confidentiality would
“conceal fraud or otherwise work injustice.” To be sure, the
Superior Court acknowledged that when information sought is
shown to be a trade secret, “the burden shifts to the party seeking
disclosure to demonstrate that the trade secret should be disclosed,
i.e., that not to disclose it would otherwise ‘work injustice.’” Pet.
Ex. 61 at 1960-61 n.8 (citing Bridgestone/Firestone, Inc. v. Superior
Court, 7 Cal. App. 4th 1384, 1393 (1992)). Yet it did not impose
that burden or apply that standard. Instead, the court incorrectly
cited Uribe v. Howie, 19 Cal. App. 3d 194 (1971), for the proposi-
tion that “the ‘work injustice’ language . . . essentially embod[ies] a
balancing test analogous to that set forth in the ‘catch-all’ exemption
of Section 6255(a)” (Pet. Ex. 61 at 1960), and proceeded to apply the
ad hoc balancing test under which the University was required to
show that “the public interest in disclosure of the IRRs [does not]
clearly outweigh[] the claimed need to keep them secret.” Id.
       This was an error of law. The meaning of Section 1060—and
the very precise standard it imposes for overcoming the protection
ordinarily afforded to trade secrets—is perfectly clear. It is a very
different standard than the one prescribed under Section 6255(a)
when an agency seeks to withhold disclosure of unprivileged, non-
exempt information.
       Uribe is not to the contrary. That case involved a demand for
disclosure of pesticide spray reports filed with a county agricultural
commissioner that contained information regarding the chemical
compound of pesticides used, the quantity of the compound, and the


                                  -25-
field that was sprayed. 19 Cal. App. 3d at 208. The Court of Appeal
held that this information was not a trade secret. Id. at 208-10 (cit-
ing Fortna v. Martin, 158 Cal. App. 2d 634, 639-40 (1958) (materi-
als used and services performed in termite control work not trade
secrets)). It then went on to observe that even if the information
sought was a trade secret, “the public interest is far better served by
disclosure than by the converse.” Id. at 210. The Court did not dis-
cuss the “conceal fraud or otherwise work injustice” standard that
would have applied if the information sought had been a trade secret.
It did not compare that standard to the ad hoc balancing standard of
Section 6255. The Superior Court’s assertion that Uribe “construed
the ‘work injustice’ language” to be “analogous to that set forth in
the ‘catch-all’ exemption of Section 6255(a)” is, with respect, just
plain wrong: the Uribe Court never interpreted the “work injustice”
standard at all, and never compared it to—let alone analogized it
to—the ad hoc balancing standard of Section 6255(a).
      The two standards are very different. The Section 6255(a) ad
hoc balancing standard is just that—a balancing of interests. It
compares the agency’s interest in non-disclosure of unprivileged,
non-exempt information with the public interest in disclosure; and
the requirement that the agency show that the interest in non-disclo-
sure “clearly outweighs the public interest in disclosure” puts an
extra weight on the disclosure side of the scale.
      By contrast, Section 6254(k) and Evidence Code Section 1060
do not call for balancing at all. Section 6254(k) unconditionally
protects privileged information. As for Section 1060, doubtless
because it only applies to information that has been found to be a
trade secret (so that the interest in non-disclosure is a given), Section
1060 merely asks the court to determine whether protection of trade
secret confidentiality would “conceal fraud or otherwise work injus-
tice.”8


     8
      Similarly, Evidence Code Section 1061(b)(4), which applies the
trade secret privilege in the context of criminal proceedings, strongly
                                                       (continued . . . )

                                   -26-
    Courts have rejected similar efforts to impose ad hoc balancing
on Section 6254 exemptions from disclosure. In City of Hemet v.
Superior Court, 37 Cal. App. 4th 1411, 1429 (1995), the court said:
           At oral argument, real party argued that the exemp-
     tions set out in section 6254 allow for a weighing of inter-
     ests by the trial court. This is true only for some of the
     exemptions, such as that contained in subdivision (c),
     which makes the exemption for personnel files subject to
     the qualification that disclosure must “constitute an
     unwarranted invasion of personal privacy.” But many of
     the exemptions are absolute on their face. For example,
     library circulation records are exempt under subdivision
     (j), and the subdivision provides no circumstances under
     which disclosure may be ordered. Qualifications or con-
     ditions placed on some exemptions do not affect exemp-
     tions which are not so limited.
     City of Hemet is soundly reasoned. In sharp contrast to the ad
hoc balancing standard of Section 6255, the Section 6254(k) exemp-
tion for information protected by any privilege established in the
Evidence Code is expressed in unconditional terms. This cannot
have been legislative inadvertence, for other subsections of Section
6254 condition the exemption on some kind of balancing. See
GOV’T CODE §6254(a) (exempting preliminary notes and
memorandum where “the public interest in withholding those rec-


      ( . . . continued)
implies that issuance of an order protecting the trade secret is manda-
tory unless disclosure is necessary to prevent “fraud” or “injustice”:
      If the court finds that a trade secret may be disclosed during
      any criminal proceeding unless a protective order is issued
      and that the issuance of a protective order would not conceal
      a fraud or work an injustice, the court shall issue a protec-
      tive order limiting the use and dissemination of the trade
      secret, including, but not limited to, articles disclosing that
      secret. (Emphasis added)
      While one Court of Appeal opinion implies that a trial court in a
civil case may conduct a balancing test before it issues a protective
order under this statute (Stadish v. Superior Court, 71 Cal. App. 4th
1130, 1144-45 (1999)), the decision did not consider the quoted lan-
guage. Nor did Stadish even mention the Bridgestone/Firestone test for
determining whether trade secrets are discoverable in the first instance.


                                   -27-
ords clearly outweighs the public interest in disclosure”); id.
§6254(c) (personnel and medical files exempt where “disclosure
would constitute an unwarranted invasion of personal privacy”)
(emphasis added). Despite this, the Superior Court’s order has the
effect of inserting the qualification “provided that the public interest
in withholding those records clearly outweighs the public interest in
disclosure” into Section 6254(k)—at least for trade secrets—when
those words were not used in Section 6254(k)—or, for that matter, in
Evidence Code Section 1060. This violates the canon of statutory
interpretation that where the Legislature could readily have included
restrictive language in a statute but did not do so, courts should not
supply it. See, e.g., CODE CIV. PROC. §1858 (courts interpreting
statutes are “simply to ascertain and declare what is in terms or in
substance contained therein, not to insert what has been omitted, or
to omit what has been inserted”); Stop Youth Addiction, Inc. v. Lucky
Stores, Inc., 17 Cal. 4th 553, 573 (1998); In re Hoddinott, 12 Cal.
4th 992, 1002 (1996). This rule is especially applicable here,
because as the Supreme Court has frequently cautioned, privileges
are solely a creature of statute, and courts may not “imply unwritten
exceptions to existing statutory privileges.” Roberts v. City of
Palmdale, 5 Cal. 4th 363, 373 (1993).
      The importation of an ad hoc balancing test into Section
6254(k) is unprecedented. Courts regularly apply that section,
thereby protecting information that is privileged under some other
statute. See, e.g., Roberts v. City of Palmdale, 5 Cal. 4th at 372-73
(document protected by attorney-client privilege protected from dis-
closure under Section 6254(k); no balancing); County of Los Angeles
v. Superior Court, 82 Cal. App. 4th 819, 833 (2000) (attorney-work
product protected from disclosure; no balancing); City of Hemet, 37
Cal. App. 4th at 1428-31 (police record exempt from disclosure
under Penal Code provision protected from disclosure under Section
6254(k); no balancing); City of Richmond v. Superior Court, 32 Cal.
App. 4th 1430, 1440-41 (1995) (peace officer personnel records; no
balancing).


                                  -28-
      City of Hemet upheld a city’s claim for exemption under
Section 6254(k). It said that statutes creating a privilege that are
then imported into the Public Records Act by Section 6254(k)
     establish specific criteria for disclosure of information
     which impose considerably more arduous requirements
     for the seeker, and are more zealous to protect the subject,
     than those contained in CPRA. The latter is, after all,
     founded upon a policy favoring disclosure, while the
     Evidence Code procedure begins from a presumption of
     confidentiality. (37 Cal. App. 4th at 1425)
      Equating the Section 1060 test for overcoming trade secret
protection with the catch-all ad hoc balancing test of Section 6255
would mean that under the Public Records Act, highly sensitive
trade secret information would have no greater protection from com-
pelled disclosure—that is, be entitled to no greater preservation of
confidentiality—than ordinary, non-exempt and unprivileged infor-
mation. That would be more than odd: treating privileged/exempt
information in precisely the same way as non-exempt/unprivileged
information would make no sense whatever. Indeed, if the
Legislature had intended that the catch-all standard govern whether
privileged information must be produced under the Public Records
Act, it would have had no need to enact Section 6254(k), which
exempts any information that is subject to a privilege recognized by
the Evidence Code. But, of course, an interpretation that renders
surplusage an entire subsection of the Public Records Act would
violate the fundamental canon of statutory interpretation that courts
should “reject interpretations that render particular terms of a statute
mere surplusage, [and] instead [should] giv[e] every word some sig-
nificance.” City of San Jose v. Superior Court, 5 Cal. 4th 47, 55
(1993).
      The Superior Court’s July 24 Order reflects its misperception
of the applicable standard. Believing that it was compelled to bal-
ance the University’s invocation of the trade secret rights of
Cambridge Associates, the private equity funds, and their portfolio
companies against the public’s interest in disclosure, the court gave
considerable attention to the issue of whether disclosure would close

                                  -29-
the door to future University investment in “top tier” funds. See Pet.
Ex. 61 at 1961-65. But the test applicable under Section 1060 is not
concerned with the University’s interest in non-disclosure or, for that
matter, the trade secret holders’ interest in non-disclosure. As shown
above, the latter’s interest in preserving the confidentiality of their
trade secrets is presumed as a matter of law once it has been estab-
lished that the information is indeed a trade secret. The appropriate
question which the Superior Court should have asked is whether
non-disclosure would “conceal fraud or otherwise promote injus-
tice.” That question does not focus on the trade secret holder at all,
but upon the interests of the party seeking the information. The
Superior Court got the wrong answer because it asked the wrong
question.

           3.   The IRRs Are Exempt From Disclosure Under
                Section 6254(k) Because Preservation Of The
                Trade Secret Privilege Would Not “Conceal
                Fraud Or Otherwise Work Injustice.”
      As noted above, Real Parties made no attempt to argue that
non-disclosure of the IRRs would “conceal fraud or otherwise work
injustice.” That is not surprising, for any such argument would be
preposterous.
      Most trade secret cases arise in the context of litigation, in
which a litigant seeks discovery of another litigant’s (or a third
party’s) trade secret information. The “work injustice” standard has
been held to require a genuine showing of necessity such that, with-
out disclosure, a party’s ability to prove its case or present a defense
would be compromised. See Bridgestone/Firestone, 7 Cal. App. 4th
at 1391-93; see also Steiny & Co. v. California Elec. Supply Co., 79
Cal. App. 4th 285, 292 (2000). The moving party must “make a
prima facie, particularized showing that the information sought is
relevant and necessary to the proof of, or defense against, a material
element of one or more causes of action presented in the case, and
that it is reasonable to conclude that the information sought is essen-
tial to a fair resolution of the lawsuit.” Bridgestone/Firestone, 7


                                  -30-
Cal. App. 4th at 1393 (emphases added). “Allowance of the trade
secret privilege may not be deemed to ‘work injustice’ within the
meaning of Evidence Code section 1060 simply because it would
protect information generally relevant to the subject matter of an
action or [be] helpful to preparation of a case.” Id. at 1391.
      No reported case translates this standard to the Public Records
Act context, so this case provides the Court with an opportunity to
do so. At the very least, the standard for public disclosure of a third-
party’s trade secrets that happen to be in the possession of a govern-
ment agency can be no less protective of the confidentiality of that
valuable commercial information than the standard applicable when
one litigant seeks another litigant’s trade secret information on the
ground that it is relevant to pending litigation. After all, a litigant
has an interest in discovery because it is embroiled in litigation;
nonetheless, the litigant is only entitled to discovery of information
that is relevant to the subject matter of the case or that has a reason-
able likelihood of leading to relevant information. By contrast, the
Public Records Act imposes no requirement of standing or relevance
on those seeking disclosure of non-exempt, unprivileged public rec-
ords. See Connell v. Superior Court, 56 Cal. App. 4th 601, 616-17
(1997) (plaintiff’s motive in seeking disclosure under PRA is irrele-
vant). Consequently, at the very least, the citizen seeking disclosure
from a government agency of a third-party’s trade secret information
in a non-litigation context must establish that the information sought
is necessary to prevent injustice that is comparable to depriving a
litigant of evidence essential to its case—i.e., that disclosure of the
trade secret is necessary to prevent the government from concealing
fraudulent or unlawful conduct or actions.
      But no matter what definition of “injustice” is applied, the
question in this case is not even close, for Real Parties have made no
showing of any genuine need for the confidential IRR information
they seek to make public. The private equity partnerships (and
related private investments) represent approximately 2.7% of the
University’s total investment portfolio. Pet. Ex. 24 at 312-13 ¶12,


                                  -31-
566. The University publicly discloses the internal rate of return
earned on this sector of the portfolio, as it does for each of the other
sectors. Pet. Ex. 22 at 295-96 ¶9; Pet. Ex. 24 at 319-20 ¶¶22-23. It
also discloses on a quarterly basis the name of each private equity
fund in which the University has invested, the amount invested and
number of shares held in each fund, and the current market value of
each fund. Pet. Ex. 22 at 295-96 ¶9; Pet. Ex. 24 at 311-12 ¶11, 319-
21 ¶¶22-24, 394-503, 563-89. Real Parties have made no attempt to
explain how disclosure of the IRR for each fund—which on average
represents only about .03% of the University’s overall portfolio—
would be of material assistance to the public, let alone how declining
to make that information available would “conceal fraud or
otherwise work injustice.”
     Real Parties argued below that they sought the “information ‘in
order that [they] may apprise the public of the propriety’ of UC’s
investments.” Pet. Ex. 3 at 51. Deploying more facility with ad
hominem rhetoric than reason, they argued that:
     [t]he public has a right to know not just how UC’s overall
     $34 billion pension fund has done, but whether certain
     stocks or venture funds have soared in value while oth-
     ers—the Enrons, WorldComs, and Tycos of the world—
     have sunk like a stone, causing severe damage to the UC
     Retirement Plan. Only through that kind of transparency
     can the public hold UC accountable and ensure that UC
     doesn’t invest money in companies whose rapacious and
     corrupt CEOs (the Kenneth Lays, Bernard Ebberses, and
     Dennis Kozlowskis of the world) have plundered the
     public fisc. (Id. at 54)
      This is just plain silly. Enron, WorldCom and Tyco were all
publicly traded stocks. Extensive data on publicly traded companies
is readily available. So is the fact that the University invested in
these companies. See Pet. Ex. 24 at 328 ¶36 (University posts all of
its positions quarterly on the Treasurer’s web-site). Indeed, notwith-
standing Real Parties’ heavy-handed effort to tar this case with mud
from unrelated corporate scandals, they do not complain about the
information the University discloses concerning its publicly traded
investment portfolio. And given the extensive information disclosed

                                  -32-
by the University concerning its private equity investments (see p.6,
supra), Real Parties cannot show that disclosure of the IRRs would
assure the public that the University has not invested in a private
equity partnership managed by a “rapacious and corrupt” manager.
     Real Parties also argued below that
     [t]he need for UC to reveal how individual venture funds
     perform is especially acute given the political connection
     various UC regents have. Many UC regents are major
     contributors to the Governors who appoint them. The
     public has a right, and a need, to know whether venture
     capital investments are based on performance or on con-
     nections. (Pet. Ex. 3 at 54 (citation omitted))
      Again, Real Parties’ rhetoric has gotten away from them. The
Regents have no role, individually or collectively, in the selection of
individual investments. Pet. Ex. 24 at 310 ¶9, 324 ¶27(B). The
Office of the Treasurer directs the investment program, and avoids
any investment opportunities that have direct or indirect ties to any
Regent. Pet. Ex. 24 at 324 ¶27(B)-(C). Moreover, Cambridge
Associates must issue an independent recommendation for each pro-
posed private equity investment. Id. at 324 ¶27(C). Finally, since
the identity of each private equity partnership in which the
University invests is public, the public is able to judge whether the
University is investing in any fund with a connection to a Regent.
Id. at 324 ¶27(D). For all these reasons, the University’s decision
not to reveal the highly sensitive trade secret data Real Parties seek
would not “conceal fraud or otherwise work injustice.”9

     9
       The analysis for the IRR data for the nine funds whose IRR data
has been disclosed by one or more public entities (see p.23, supra) is
somewhat different.
      Even if, arguendo, production by a third-party destroys the trade
secret rights of those funds and their managers, the University should
not be required to replicate those disclosures in violation of its con-
tractual obligation to hold that information in confidence. If the infor-
mation for those nine funds is no longer protected by Section 1060, it
nevertheless need not be produced if the interest of the University in
honoring its contractual commitment clearly outweighs the public’s
interest in disclosure. Here, the public’s interest in disclosure is nil.


                                   -33-
     B.    Even If The Superior Court Should Have Applied The
           Balancing Test Applicable Under Government Code
           Section 6255(a), It Erred In Ordering Disclosure.
      For the reasons discussed in the previous sections, the Superior
Court applied the wrong standard and therefore reached the wrong
conclusion. But even if the Court concludes that the IRRs are not
trade secrets or otherwise disagrees with our analysis of the appro-
priate standard for disclosing such privileged information, and the
Court applies the Section 6255(a) balancing test, the order below
must be reversed because the Superior Court misapplied that bal-
ancing test in three fundamental respects.

           1.   The Superior Court Failed To Weigh The Now-
                Incontrovertible Fact That Disclosure Of The
                IRRs Will Materially Impair The University’s
                Opportunities To Invest In Top-Tier Private
                Equity Funds.
      As the Superior Court noted in its July 24 Order, the University
opposed disclosure of the IRRs in large part because revealing that
data “will make the desirable funds—the so-called ‘top tier partner-
ships’—less likely to permit [the University] to continue investing in
them, to the detriment of the public.” Pet. Ex. 61 at 1961-62. As the
University’s Treasurer stated, “requiring the University to disclose
the information sought by [Real Parties] will have a devastating
effect on the University’s ability to participate in many top-tier pri-
vate equity partnerships in the future,” with “a potential loss of
literally hundreds of millions, if not billions of dollars to the benefi-
ciaries of the University’s investment funds.” Pet. Ex. 24 at 327 ¶33.
The University supported this declaration with numerous declara-
tions from PEP managers emphasizing the likelihood that IRR dis-
closure would have significant adverse consequences for the
University. See, e.g., Pet. Ex. 14 at 237 ¶20 (UC would not have
been invited to participate in fund if fund had known UC would be
forced to disclose fund performance information); Pet. Ex. 29 at 710
¶14 (UC would not have been admitted as investor if fund had



                                   -34-
known UC would be forced to disclose fund’s confidential and pro-
prietary information).
      While the trial court found that the University’s showing was
“not compelling” (Pet. Ex. 61 at 1962), the court obviously could not
have known the effect its order would have on the University and its
investments. Evidence of that effect was submitted to the court with
Petitioner’s motion for reconsideration. Yet the trial court denied
the motion, even though its July 24 Order had already caused the
University to be dropped from the latest partnership established by
Sequoia Capital—whose prior funds have given the University
almost $400 million in returns. Consequently, the trial court abused
its discretion both in issuing the July 24 Order and in failing to
reconsider it once its consequences became clear.10
      In belittling the University’s concern that disclosure of the
IRRs would impair its ability to participate in “top-tier” private
equity partnerships, the trial court found “[p]articularly persuasive”
evidence that “Sequoia, admittedly a top venture fund . . . recently
accepted an $8 million investment from the University of Michigan,
after that University publicly released IRR information.” Pet. Ex. 61
at 1963-64 (emphasis in original). But this “particularly persuasive”
evidence now supports the University, not Real Parties. On the same
day the trial court issued its opinion, Sequoia notified the University
of Michigan (“UM”) that it was removing UM from Sequoia
Capital XI; the letter also requested UM to sell its positions in the
other Sequoia Capital partnerships. Pet. Ex. 67 at 2020-21. Then,


     10
       In opposing reconsideration, Real Parties argued that the evi-
dence the University submitted to the Superior Court should somehow
have been submitted before the June 24 hearing. Pet. Ex. 75 at 2072.
But they never explained how evidence of decisions made by Sequoia
on July 24 (termination of Michigan) and August 27 (termination of
UC) could have been produced in June. Given this new evidence,
reconsideration was required, even if the trial court’s view of the merits
was unchanged. Corns v. Miller, 181 Cal. App. 3d 195, 202 (1986); cf.
Blake v. Ecker, 93 Cal. App. 4th 728, 739 (2001) (reconsideration
required where there has been a change in the law).


                                   -35-
after Real Parties argued that Sequoia’s decision was irrelevant to
this case because “what Sequoia did or did not do with Michigan
does not demonstrate what it might or might not do in California”
(Pet. Ex. 75 at 2072), Sequoia did to UC what it had previously done
to UM: it removed the University of California from Sequoia
Capital XI and requested UC to sell its holdings in its remaining
Sequoia PEPs. Pet. Ex. 85 at 2197-98.11
      When the Superior Court denied Petitioner’s motion for recon-
sideration, the Court stated that because the University had invested
in 94 funds, if “one of them pulled the plug . . . that leaves 93 more.”
Pet. Ex. 90 at 2256. But even Real Parties have admitted that
Sequoia “is one of the two best performing venture capital firms in
history.” Pet. Ex. 53 at 1798 ¶3. Indeed, the University has obtained
a 460% return on its investment in Sequoia, receiving $508 million
(which represents both distributions and the present value of the
University’s remaining investments) on a total investment of
approximately $110 million. Pet. Ex. 66 at 2014 ¶2.12
      For this reason, loss of the University’s opportunity to invest in
Sequoia cannot be replaced by similarly productive investments.
Pet. Ex. 85 at 2197 ¶4. Such opportunities are simply not available.
Id. Accordingly, the loss of this single investment opportunity could
cost the University’s pension and endowment funds hundreds of
millions of dollars in future returns. Id. at 2197-98 ¶4.




     11
          Before Sequoia terminated its relationship with UC, Real Parties
argued that Sequoia’s decision to terminate its relationship with the
University of Michigan was not due to the latter’s disclosure of IRRs.
Pet. Ex. 75 at 2067 n.1. Here, again, Real Parties’ arguments have been
overtaken by events. Sequoia directly linked its decision to end its
relationship with UC to the Superior Court’s ruling. Pet. Ex. 85 at
2197 ¶2.
       12
          Moreover, the Superior Court’s comment ignored the fact that
each general partner manages multiple funds. Pet. Ex. 80 at 2165 ¶2.
Sequoia alone manages nine funds in which the University is an inves-
tor, in addition to Sequoia Capital XI. See Pet. Ex. 24 at 587-88.


                                   -36-
      Moreover, there is every reason to believe that other fund man-
agers—especially the top performing ones—may follow Sequoia’s
lead. For example, while Real Parties’ counsel said that Kleiner
Perkins—one of the other top performing venture capital funds—did
not object to IRR disclosure (Pet. Ex. 90 at 2264), Kleiner Perkins
submitted a declaration below stating that it would not choose
investors that it knows will break its confidentiality agreements. Pet.
Ex. 29 at 710 ¶14. Since fund managers have total discretion over
who to invite as investors (Pet. Ex. 25 at 676 ¶3; Pet. Ex. 29 at 706
¶2), and competition for top-tier funds is intense, fund managers can
easily replace UC with investors who do not pose a risk that
confidential fund information will be disclosed. Pet. Ex. 11 at 214
¶16.
      In requiring IRR disclosure, the Superior Court emphasized
that “other public pension plans have produced IRR information
without the dire consequences predicted by [the University].” Pet.
Ex. 61 at 1963. Even if that was true at the time of the trial court’s
July 24 Order, it is no longer true. Hence, any balancing of interests
required under either the trade secret statutes or Government Code
Section 6255(a) must take into account the certain damage that IRR
disclosure will cause to the University’s ability to obtain the best
possible returns for its faculty, students, employees, and retirees.

          2.    The Superior Court Failed To Consider And
                Weigh The Commercial Interests And Privacy
                Rights Of The Trade Secret Holders.
     The Superior Court’s one-sided balancing was not deficient
only because it failed to accord proper weight to the damaging con-
sequences of IRR disclosure. The court also erred in failing to
weigh the trade secret interests at stake, even though it assumed that
the IRRs were trade secrets for purposes of its analysis. See Pet.
Ex. 61 at 1959; Pet. Ex. 90 at 2252.
     The July 24 Order requires the disclosure of financial perform-
ance information that—like the net income of a private firm, the
compensation of an employee, or the capital gains earned by an

                                  -37-
investor—is traditionally viewed as personal and highly confidential
unless one voluntarily chooses to disclose it. All of the private
equity fund managers and sponsors in which the University invests
view the financial performance data of their funds as highly confi-
dential; indeed, they provide interim performance data to investors
only on the understanding that it will be kept confidential. Pet.
Ex. 13 at 225 ¶7; Pet. Ex. 14 at 231-32 ¶¶4-5; Pet. Ex. 15 at 239-40
¶5; Pet. Ex. 18 at 269-70 ¶12; Pet. Ex. 19 at 273-74 ¶¶3, 5; Pet.
Ex. 20 at 283 ¶6; Pet. Ex. 28 at 703 ¶15; Pet. Ex. 29 at 707 ¶5. IRR
disclosure by the University would breach the partnerships’—i.e.,
the trade secret holders’—right to confidentiality and privacy for
this financial performance information.
      Because no California precedent holds that ad hoc balancing is
the appropriate standard when someone seeks disclosure under the
Public Records Act of a third-party’s trade secrets, no California
case precludes or even advises against consideration of the trade
secret holder’s interests in preserving the trade secret. However,
analogous federal authority under the Freedom of Information Act
makes clear that the interests of third-party trade secret holders must
be considered. See, e.g., Union Oil Co. v. FPC, 542 F.2d 1036,
1044-45 (9th Cir. 1976); National Parks & Conservation Ass’n v.
Morton, 498 F.2d 765, 770 (D.C. Cir. 1974) (trade secret exemption
“may be applicable even though the Government itself has no inter-
est in keeping the information secret. The exemption may be
invoked for the benefit of the person who has provided commercial
or financial information if it can be shown that public disclosure is
likely to cause substantial harm to his competitive position”). In the
absence of relevant statutory differences between the Freedom of
Information Act and the Public Records Act, and there are none in
this context, these decisions are persuasive authority. California
First Amendment Coalition v. Superior Court, 67 Cal. App. 4th 159,
169 n.8 (1998) (“Because the Public Records Act is modeled after
the federal FOIA and serves the same purpose, federal decisions
under the FOIA are often relied on to construe California’s act”).


                                  -38-
      Nevertheless, the trial court’s order fails even to discuss, let
alone weigh, the confidentiality/privacy rights of the trade secret
holders. (Indeed, as previously noted, the trial court mentioned only
the trade secret rights of Cambridge Associates, and omitted refer-
ence to the trade secret rights of the private equity funds. See note 4,
supra.) It erroneously assumed, without analysis, that the only inter-
est to be weighed in favor of non-disclosure was that of the
University’s interest in protecting its investments. That is a weighty
interest to be sure, but it is not the only interest that supports the
University’s position.
      The Superior Court may have been led to ignore the trade
secret interests at stake by its reliance on the supposed “fact” that “of
the approximately 94 funds in which Respondent invests, less than
one quarter have submitted declarations in support of Respondent’s
opposition.” Pet. Ex. 61 at 1963. Here, again, the court erred.
Many of the private equity funds in which the University has
invested have been managed by the same fund manager/general
partner. Pet. Ex. 80 at 2165 ¶2. Some of the funds are no longer
active and have been closed down. Id. Of the funds that are cur-
rently active, approximately 80%—not one quarter—of the fund
managers submitted declarations below in support of the University.
Id. And although not all of these declarations singled out IRRs
(which is not surprising given the apparent breadth of the informa-
tion sought in Real Parties’ pleading (see p.9, supra)), even Real
Parties concede that the managers of twenty-nine funds specifically
opposed release of that information. See, e.g., Pet. Ex. 48 at 1525
¶4.
      Moreover, the trial court also ignored the trade secret interests
of Cambridge Associates. Cambridge Associates sells the IRRs it
calculates to the University; and its market for that data would
unquestionably be impaired, if not eliminated, if the IRRs were made
public. Pet. Ex. 11 at 213 ¶13. Yet the Superior Court did not con-
sider these interests, either, in finding that the balance of interests
favored IRR disclosure.


                                   -39-
           3.   The Superior Court Failed To Evaluate, And
                Balance Against The Interests Of The University
                And The Trade Secret Holders, The Slight
                Interest Of The Public In Disclosure Of The
                IRRs.
       Once the Superior Court had correctly analyzed both the
University’s and the trade secret holders’ interests in keeping the
IRRs confidential, it should have weighed those interests against the
interests served by disclosure. But the court failed to do this, too.
Instead of analyzing and weighing the public’s interest in disclosure
of the particular information sought by Real Parties, it asserted in
conclusory fashion that “[t]he public interest in favor of disclosure of
government financial information is clear.” Pet. Ex. 61 at 1960
(emphasis added).
       Such generalities obscure, rather than aid, analysis. As
explained above, the University presently makes available substan-
tial information about the private equity portfolio: the names of each
fund in which the University has invested; the amount of each
investment; the number of shares held, the current estimated value of
each investment; and the overall IRR for the private equity sector.
See p.6, supra. Therefore, the Superior Court should have evaluated
whether, and to what extent, disclosure of the individual IRRs would
provide any significant incremental improvement in the ability of the
public to evaluate the University’s stewardship of its investment
portfolio.
       Had it asked that question, it would have been compelled to
conclude that the public interest in disclosure of this additional
information was very slight. Each individual PEP makes up only a
minuscule percentage of the overall UC portfolio—on average,
about .03%. See p.3, supra. Moreover, interim IRRs do not provide
meaningful data about fund performance, both because they are
based on subjective (and proprietary) valuations, and because a
fund’s performance cannot be accurately measured until all distribu-
tions have been made. Pet. Ex. 13 at 225 ¶6; Pet. Ex. 15 at 240-41
¶6; Pet. Ex. 16 at 252-53 ¶11; Pet. Ex. 18 at 269 ¶11; Pet. Ex. 22 at
294 ¶7; Pet. Ex. 24 at 313-14 ¶¶13, 14, 321 ¶25; Pet. Ex. 25 at 679

                                  -40-
¶9. Given all the other information disclosed by the University
about its private equity investments, and the damage that disclosure
of the IRRs would cause to the University’s ability to invest in
lucrative top-tier partnerships, the Superior Court erred in holding
that the negligible incremental interest in disclosing IRRs outweighs
the certain damage that IRR disclosure has already had and will
continue to have on the University’s ability to invest its portfolio
wisely.

                                   II.

            THE MINUTES AND TAPES OF CLOSED
          MEETINGS SOUGHT BY REAL PARTIES ARE
                EXEMPT FROM DISCLOSURE.
      Real Parties sought minutes and tapes of the closed meetings
that the Regents and/or its Committee on Investments held in
January and March 2000, and in October and November 2002. The
University contended that these meetings were properly closed and
therefore that under Section 11126.1 of the Government Code—
which provides that “[t]he minute book [of a closed session meeting
of a state body] . . . is not a public record subject to inspect pursuant
to the California Public Records Act”—those minutes need not be
produced. Pet. Ex. 7 at 184-87. Similarly, if a meeting is properly
closed, a tape of that meeting must also be exempt from disclosure.
      The primary ground for closure of the meetings was Education
Code Section 92032(b)(4), which provides: “The Regents of the
University of California may conduct closed sessions when they
meet to consider or discuss: . . . (4) Matters involving the purchase
or sale of investments for endowment and pension funds.” The
Superior Court held that this section did not apply to the meetings
because they were not focussed on “particular specific investments”
(Pet. Ex. 61 at 1967) and that, even if they were, the minutes would
no longer be exempt from disclosure once the purchase or sale of




                                   -41-
investments under discussion had been consummated.              Id.   The
Superior Court erred in both respects.13

     A.    The Meetings Were Properly Closed.
      The meetings in 2000 discussed the proposed adoption of an
Asset Allocation Plan. Pet. Ex. 24 at 329 ¶39. That Plan required
the University to sell off positions in which its investment was
greater than permitted by the new Plan, and to purchase securities in
sectors where such holdings would be authorized. Id. The meetings
also discussed proposals to take a portion of the University’s public
equity investments then managed by in-house staff and replace them
with an externally managed index fund. Pet. Ex. 24 at 309 ¶7, 329
¶39. In both respects, the meetings “involv[ed] the purchase or sale
of investments” under Section 92032(b)(4).
      Similarly, the meetings in 2002 concerned a recommendation
by the Treasurer to eliminate the University’s internally managed
equity portfolio altogether and to replace it with investments in
broad, index-based funds. Pet. Ex. 24 at 328 ¶36. Thus, the
Treasurer recommended moving from a concentrated position in
only 156 equity stocks to positions in about 3000 stocks via index
funds. Implementing this proposal involved the sale of $15.1 billion
in assets, with the sales producing a $618 million gain. Id. at 329

     13
        With respect to the meetings that occurred in October and
November 2002, the University also invoked Education Code Section
92032(b)(7), which allows closure of a Regents’ meeting discussing
“[m]atters concerning the appointment, employment, performance,
compensation, or dismissal of university . . . employees . . . .” See Pet.
Ex. 7 at 187. The Superior Court held that this exemption did not jus-
tify closing the entire meeting, but ordered the University to re-review
the documents to redact references to individual employees or other
matters it believed would violate employees’ privacy interests and
submit the redacted documents for in camera review. Pet. Ex. 61 at
1969-70. The University does not seek immediate review of this aspect
of the ruling below because: (1) for the reasons stated in the text fol-
lowing, the entirety of both meetings was properly closed pursuant to
Section 92032(b)(4); and (2) the in camera review process is not yet
complete.


                                   -42-
¶38. Plainly, these meetings, too, “involv[ed] the purchase or sale of
investments.”
      The Superior Court accepted Real Parties’ argument that
Section 92032(b)(4) should not be read literally, and that a meeting
could only be closed if it addressed the purchase or sale of “particu-
lar specific investments, rather than investment strategy in general.”
Pet. Ex. 61 at 1967 (emphasis added). For several fundamental rea-
sons, this ruling was in error.
      In the first place, the court interpreted the statute as if its
exemption was only for meetings “involving the purchase or sale of
a particular specific investment[].” The italicized words are, of
course, nowhere to be found in the statute that the Legislature
enacted. The Superior Court’s reading adds three limiting words to
the statute—and changes “investments” to “investment.” Here,
again, the court has violated the canon of statutory interpretation that
where the Legislature could readily have included restrictive lan-
guage in a statute but did not do so, courts should not supply it. See
p.28, supra.
      Moreover, the court’s interpretation would effectively render
the statutory exemption a nullity. If it only applied to Regents
meetings held for the purpose of determining whether to buy or sell a
particular investment, the statute would be a dead letter because the
Regents never decide whether to sell or purchase a particular stock.
Pet. Ex. 24 at 305 ¶3. The trial court’s interpretation therefore vio-
lates a second fundamental canon of statutory interpretation: that
parts of statutes, and (a fortiori) entire sections should be interpreted
to give them some genuine meaning and effect. See p.29, supra.
      Finally, the Superior Court’s distinction between a meeting to
discuss the sale of a “particular specific” investment and one to dis-
cuss selling a portion of the portfolio (as in 2000) or the remainder
of the portfolio (as in 2002) is illogical. The Superior Court con-
ceded that the University would have reason to discuss a proposal to
sell 100,000 shares of a particular stock in closed session. Pet. Ex.
61 at 1968. But in October and November of 2002 the University


                                   -43-
discussed a proposal to sell 156 “particular specific” stocks—i.e., its
entire equity portfolio. Pet. Ex. 24 at 328-29 ¶¶36, 38. There is no
reason in law or logic why the first meeting should be confidential
and the second not. Indeed, a proposal to sell part or all of the equity
portfolio—the content of which is public information (see p.32,
supra)—is a proposal to sell each “particular specific” stock held at
the time of the closed session meetings. Thus, even if the Superior
Court had correctly interpreted the statute (which it did not), the
meetings were properly closed.
      The Superior Court believed that its narrow reading of Section
92032(b)(4) was justified by its legislative history. Pet. Ex. 61 at
1968. Not so. The legislative history referred to dealt with a differ-
ent exemption, now found in Section 92032(b)(6). See Pet. Ex. 45 at
1304-05. That exemption applies to discussion of “the acquisition or
disposition of property, if discussion of these matters in open session
could adversely affect the regents’ ability to acquire or dispose of
the property on the terms and conditions they deem to be in the best
public interest.” EDUC. CODE §92032(b)(6) (emphasis added). The
history of that provision sheds no light on the (b)(4) exemption,
which applies to all discussions “involving the purchase or sale of
investments”—plural—with no requirement that disclosure would
“adversely affect the regents’ ability to acquire or dispose” of those
investments.

     B.    Minutes And Tapes Of Closed Meetings Are Exempt
           From Disclosure Even After The Actions Discussed
           Have Been Completed.
      The Superior Court also expressed the view that even if the
meetings had been properly closed at the time, “such would not jus-
tify withholding records related to past meetings where action has
already been taken.” Pet. Ex. 61 at 1968. The court cited no author-
ity for this proposition; and there is none.
      To the contrary, minutes of a closed meeting are permanently
exempt from Public Records Act disclosure. Government Code
Section 11126.1 provides:

                                  -44-
           The state body shall designate a clerk or other officer
     or employee of the state body, who shall then attend each
     closed session of the state body and keep and enter in a
     minute book a record of topics discussed and decisions
     made at the meeting. The minute book made pursuant to
     this section is not a public record subject to inspection
     pursuant to the California Public Records Act . . . and
     shall be kept confidential. (Emphasis added)

                                   III.

          THE COURT SHOULD ISSUE A STAY OF THE
              TRIAL COURT’S RULING PENDING
               DISPOSITION OF THE PETITION.
      In addition to seeking a writ of mandate reversing the July 24
Order, Petitioner seeks to stay the portions of that ruling which com-
pel it to disclose documents pending disposition of the Petition.14 A
stay is necessary to prevent the Petition from becoming moot and to
protect the University against further loss of investment opportuni-
ties while the Petition is pending. Because the temporary stay
entered by the trial court expires on September 30, 2003 (Pet. Ex. 88
at 2212-13), this Court should act on Petitioner’s stay request by that
date.
      Government Code Section 6259(c) provides, in relevant part,
that a stay of an order compelling disclosure under the PRA “shall
not be granted unless the petitioning party demonstrates it will oth-
erwise sustain irreparable damage and probable success on the mer-
its.” Petitioner satisfies both of these criteria.
      As discussed above, the Superior Court’s July 24 Order has
already cost the University one investment opportunity potentially
worth hundreds of millions of dollars, an opportunity that cannot be


     14
       Petitioner does not seek a stay of the July 24 Order insofar as
the Order requires it to review minutes and tapes of the closed sessions
and submit them to the Superior Court for in camera review. However,
the parties have agreed that disclosure of these documents pendente lite
shall be governed by the disposition of this stay request. Pet. Ex. 88 at
2212-14.


                                   -45-
replaced. Pet. Ex. 86 at 2201 ¶4. Given the widespread opposition
in the venture capital community to disclosure of the IRRs (see
pp.22, 39, supra), these lost opportunities will multiply once the
University’s IRRs are actually disclosed pursuant to the trial court’s
order. Similarly, disclosure of the minutes and tapes of the Regents’
closed sessions dealing with investments will impair the Regents’
ability to discuss investment policies in the future without adversely
impacting the University’s portfolio. See pp.43-44. supra. A stay is
thus necessary to prevent irreparable injury to the University.
      Petitioner can also show a likelihood of success on the merits.
As discussed above, the trial court’s decision to compel disclosure of
the IRRs ignored the statutory test governing disclosure of trade
secrets set forth in Evidence Code Section 1060 and failed to prop-
erly balance the competing interests at stake under Government
Code Section 6255(a). Similarly, the trial court’s decision to compel
disclosure of the minutes and tapes of the closed sessions miscon-
strues Education Code Section 92032(b)(4), which unambiguously
permits the Regents to discuss in closed session “[m]atters involving
the purchase or sale of investments for endowment and pension
funds.”
      Although Government Code Section 6259 requires a petition-
ing party to show probable success on the merits, the statute does not
require a finding that the University will inevitably prevail. To the
contrary, the appellate courts have often granted stays in PRA cases
even through the ultimate decision was in favor of disclosure. See,
e.g., California State University, Fresno Ass’n, Inc. v. Superior
Court, 90 Cal. App. 4th 810, 821 (2001) (order that required univer-
sity to disclose documents stayed pending appeal even though
appellate court ultimately held that PRA required university to
disclose documents); Connell v. Superior Court, 56 Cal. App. 3d
601, 605 (1997) (stay granted even though appellate court ultimately
upheld trial court’s order granting disclosure, modifying order only
to conform to requester’s original PRA request). Indeed, we know
of no published decision where a party required to disclose docu-


                                  -46-
ments under the PRA has been denied a stay pending disposition of a
petition for writ of mandate.
      While denial of a stay will moot this proceeding and impair the
University’s ability to invest its pension and endowment funds, it
will not damage Real Parties. As noted above, the public interest in
disclosure of the IRRs is slight. See pp.40-41, supra. Nor is there an
urgent need for additional information regarding the closed sessions
meetings identified by Real Parties, because it is undisputed that the
University has already disclosed abundant information about the
decisions made at these meetings. See Pet. Ex. 24 at 329 ¶38. Con-
sequently, the grant of a stay will not disserve the public interest
while its denial will cause irreparable injury to the University.

                                    CONCLUSION
    The Petition should be granted. The Superior Court’s July 24
Order should be stayed pending disposition of the Petition.


DATED: September ___, 2003.
                                    Respectfully,

JEROME B. FALK, JR.                                 JAMES E. HOLST
STEVEN L. MAYER                                     JOHN F. LUNDBERG
HOWARD RICE NEMEROVSKI CANADY                       CHRISTOPHER M. PATTI
    FALK & RABKIN                                   STEVEN G. ROSEN
A Professional Corporation                          MARIA SHANLE
                                                    UNIVERSITY OF CALIFORNIA
                                                    OFFICE OF THE GENERAL
                                                        COUNSEL

                   By:______________________________
                            STEVEN L. MAYER
                          Attorneys for Petitioner




WD 090503/F-432837/PB8/1095857/v6




                                         -47-

				
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