Bloomberg: Google’s San Jose Campus Triggers Lawsuit Over Deal’s Secrecy

By Josh Eidelson
November 13, 2018

San Jose, Calif., was sued by two nonprofit groups over a planned campus for tech giant Google, and what they contend are illegal nondisclosure agreements signed by city officials to help seal a $67 million land deal.

The NDAs were signed by San Jose Mayor Sam Liccardo and at least 17 municipal officials, including city council members, according to a petition filed Tuesday in California Superior Court in Santa Clara. The litigation comes amid a larger effort by advocacy groups to use public deals to wrest concessions from huge Silicon Valley companies for the benefit of subcontractors and service employees.

City officials signed agreements “designed to transform public records, on such crucial issues as transit and environmental compliance, into private ones that the public does not see,” according to the filing. The “city and Google went to extraordinary lengths to keep the public in the dark.”

The agreements are invalid under San Jose’s municipal code, which restricts officials from entering into contracts without council approval, and violate state law barring agencies from letting outside parties control disclosures to the public, the plaintiffs said.

Google, based in nearby Mountain View, and San Jose have been negotiating over the sale of nine parcels of city-owned land as part of a larger, 6 to 8 million square foot development that could host 15,000 to 20,000 employees. Described as a Google “village,” it will be built around mass-transit and parkland in San Jose’s Diridon Station area.

“This project is huge and is going to really change this city forever,” said Maria Noel Fernandez, deputy director of Working Partnerships USA, a local union-backed nonprofit and one of the two plaintiffs in the case. She’s also a member of the advisory group convened by the city for input on the project. “We don’t know what the city is hiding,” Fernandez said.

“City leaders have a real incentive to deal with Google, and Google knows that,” said David Snyder, executive director of plaintiff First Amendment Coalition, a government-transparency nonprofit. “They can dictate the terms of the agreement.” Snyder said that, despite partial document production by the city, his group has been “largely stonewalled” in its requests for information about the deal and negotiations with Google.

The San Jose City Council has scheduled a vote for Dec. 4 on whether to let the project proceed. The plaintiffs are seeking a court order to release documents tied to the deal, including communications between the parties, as well as a declaration that the NDAs are invalid.

A lawyer for San Jose told Bloomberg the city believes the NDAs are valid, and that the city manager exercised his legal authority by allowing officials to sign them. “To the extent we’ve withheld documents, it’s deliberative, and directly related to the negotiations, and it’s not a question of withholding,” San Jose City Attorney Rick Doyle said. “It’s a question of timing of when we’re releasing them.”

Google, which isn’t named as a defendant, didn’t respond to requests for comment.

Working Partnerships has spearheaded a push by labor and community groups in Silicon Valley to secure commitments from cities such as San Jose and companies like Google. The group wants protections for affordable housing and quality jobs for local residents that come with a right to unionize. In recent years, unions have successfully organized thousands of subcontracted staff, such as shuttle drivers and security guards, who serve Bay Area technology firms. They’ve accomplished this, in part, by pressing companies such as Facebook Inc. not to oppose unionization among their vendors’ employees.

In the case of San Jose, the plaintiffs wrote that their “petition seeks to bring sunlight into the process to enable the public to better evaluate the project’s impacts on traffic, affordable housing, displacement and gentrification by obtaining public records shedding light upon what the City and Google did.”

A copy of one of the Google-San Jose NDAs, included with the court petition, stated that a party can disclose confidential information “when compelled to do so by law” but needs to first provide “reasonable prior notice” to the other party—unless ordered by a court not to do so. Doyle, the attorney for San Jose, told the San Jose Mercury News in February that Google sought the NDAs to cover “a very sensitive negotiation” between the parties.

U.S. companies “make widespread use of NDAs in all aspects of their business,” University of Pennsylvania management professor Peter Cappelli said in an email. This is especially the case in the technology sector.

“Virtually all companies use these,” he said, hoping to safeguard their business secrets and avoid tipping competitors off to their plans. Some companies ask for NDAs before visitors even come onto their property, as well as from contractors or departing employees. The main policy concern raised by nondisclosure agreements, said Cappelli, arises when they prevent exposure of “behavior that some would consider unethical, or at least unflattering to leaders who otherwise cannot be held accountable.”

(Updates with San Jose lawyer’s response in the ninth paragraph.)