Opinion
No. 56717
Submitted: September 9, 1999 Filed: February 15, 2000
APPEAL FROM THE CIRCUIT COURT OF COLE COUNTY , THE HONORABLE WILLIAM E. TURNAGE, SR. JUDGE.
Robert B. Hoemeke, St. Louis, MO, for appellant.
James C. Owen, Chesterfield, MO, Michael Blumenthal, Kansas City, MO, for respondent.
Before Joseph M. Ellis, P.J., Robert G. Ulrich and James M. Smart, Jr., JJ.
This case involves issues related to the authority of the court to restrict public access to employment and compensation records of key employees of an insolvency receivership.
Transit Casualty Company is an insolvent insurance company which is currently undergoing liquidation under the supervision of the Cole County Circuit Court. Transit Casualty, which was incorporated in Missouri, operates from its principal place of business in California. The company was placed in receivership pursuant to Chapter 375 of the Missouri Statutes in 1985. The Director of the Missouri Division of Insurance is the receiver. The current special deputy receiver ("SDR") is Burleigh Arnold, appointed by the Director of the Missouri Division of Insurance in 1988. This insolvency proceeding, the parties agree, is perhaps the largest liquidation of a property and casualty insurance firm in the history of the United States. The case involves a vast number of policy holders and other creditors, and Transit has over 900 reinsurance contracts with companies located in thirty different nations.
Since his appointment, Arnold has filed documents with the receivership court pertaining to compensation of employees and various administrative matters. He asked the court to seal various documents. He did this, he said, to protect the interests of Transit's policy holders and creditors. He asked that records related to compensation be kept under seal. The court placed certain records under seal, including the records describing the employment contracts, compensation and bonuses of a number of key employees, including Arnold. The court also placed under seal the proposed plan of liquidation. The documents were made available to the department of insurance, and to the company's creditors, upon request. Individuals requesting copies of such documents must sign an agreement to preserve the confidentiality of the documents as a condition of their release. The sealed documents are not available to members of the general public.
In late 1997, the St. Louis Post Dispatch began examining the receivership records on file with the court. Terry Ganey, the Jefferson City Bureau Chief for the Post Dispatch, filed a request with the receivership court on behalf of his employer, Pulitzer Publishing Company, asking that the court open forty-three documents under seal. The court granted the request as to some of the requested documents and denied it as to others.
On May 4, 1998, Pulitzer filed a motion to intervene in the liquidation proceedings for the purpose of seeking a hearing as to the closure orders for the various items in the court file. The items sought included documents related to the compensation of the special deputy receiver, and documents related to compensation of certain key employees of the receivership. Judge Kinder recused himself from hearing the motion. Ultimately the case was assigned to Senior Judge William E. Turnage. Judge Turnage conducted an evidentiary hearing on November 5 and 6, 1998. Certain employees of the receivership also sought to intervene in the matter related to the public access to the records and were also permitted to participate in the hearing. Each party presented evidence. On December 21, 1998, the court entered its ruling. The court found that the en camera orders were necessary to protect the receivership's policy holders, creditors and their assets. The court regarded the evidence supporting the orders as "credible" and found such evidence to be uncontradicted.
Pulitzer appeals the denial of the motion.
As a preliminary matter, we address Transit's argument that Pulitzer does not have the required interest to appeal. The right of appeal is created by statute; there is no right to an appeal without underlying statutory authority. United Labor Committee, Inc. v. Ashcroft , 572 S.W.2d 446, 447 (Mo.banc 1978). Section 512.020 provides that "[a]ny party to a suit aggrieved by any judgment of any trial court in any civil cause from which an appeal is not prohibited by the constitution, nor clearly limited in special statutory proceedings, may take his appeal to a court having appellate jurisdiction. . . ." "As used in § 512.020, `aggrieved' means `suffering from an infringement or denial of legal rights'." Government Employees Ins. Co., Inc. (GEICO) v. Clenny , 752 S.W.2d 66, 68 (Mo. App. 1988) (quoting Farrell v. DeClue , 382 S.W.2d 462, 466 (Mo. App. 1964)).
The trial court ruled that Pulitzer had standing to intervene for the purpose of seeking records. There is a certain logic to the proposition that, once having been allowed to intervene for a particular purpose, a party is aggrieved by an adverse ruling related to that purpose. Thus, denying that Pulitzer is aggrieved would be tantamount to denying that it had the right to intervene in the first place. However, allowing intervention for such purpose is a reasonable way of providing a forum for the resolution of such issues. The law recognizes the right of the public to copy and inspect public records, including judicial records, although this right is not unfettered. Nixon v. Warner Communications, Inc. , 435 U.S. 589, 597-98 (1978). Pulitzer, as a member of the public, has a legally recognized interest in the records. Therefore, its intervention in the case was not improper and the trial court's denial of Pulitzer's motion to unseal the records places Pulitzer in the position of an aggrieved party.
Pulitzer argues in its Point I that the court erred in denying it access to the contracts and other compensation records as to the SDR because "there exists a public right of access in court proceedings and records," and because, it argues, the purported reasons for maintaining the records under seal were "legally insufficient to overcome the strong public policy favoring open court proceedings and records." Pulitzer grounds its Point I in a common law right of access which it refers to as the "right of access doctrine." Pulitzer notes that language in the Missouri Constitution and Statues reflects the existence of such a right of access. Pulitzer points to Article I, § 14 of the Missouri Constitution, which provides that "courts of justice shall be open to every person." Also, Pulitzer invokes § 476.170 RSMo 1994, which provides that "[t]he sitting of every court shall be public and every person may freely attend the same." Pulitzer also notes that Administrative Rule 2 of the Missouri Supreme Court states that "[r]ecords of all courts are presumed to be open to any member of the public. . . ." Missouri Supreme Court Administrative Rule 2.02.
Pulitzer does not specifically invoke the First Amendment as a basis for reversing the trial court's order. Also, Pulitzer does not ground its claim directly in § 375.1172, RSMo 1994, a specific statute adopted within the "insurer's supervision, rehabilitation and liquidation act" governing access to records of insurance companies in receivership.
Pulitzer argues that to the extent a right of access exists under the First Amendment, it applies to Missouri's courts no less than to the federal courts. Pulitzer, however, fails to present authority for the proposition that the First Amendment entitles it to access to the documents in question. Indeed, in Nixon v. Warner , 435 U.S. 589 (1978), the U.S. Supreme Court specifically declined to find a First Amendment right of access to public records. The court held that the right of access to judicial records is subject to the sound discretion of the courts, a discretion to be exercised in the light of all of the pertinent facts and circumstances of the particular case. Id . at 598-99. The federal courts are divided over whether such a right exists. See, e.g., Publicker Industries, Inc. v. Cohen , 733 F.2d 1059 (3rd Cir. 1984); Webster Groves School Dist. v. Pulitzer Pub. Co. , 898 F.2d 1371, 1374 (8th Cir. 1990); In re Reporters Comm. for Freedom of the Press , 773 F.2d 1325, 1339 (D.C. Cir. 1985).
The starting point of our analysis, however, is to determine whether the issue of access to the records in question is directly governed by § 375.1172. We will not entertain a generalized or common law right of access to a particular category of records if the legislature has undertaken specifically to address the matter in question, preempting any general common law right. Moreover, a specific statute will take precedence over other more general or more vague provisions of law.
Section 375.1172 states as follows:
In all proceedings and judicial reviews thereof under Sections 375.1164 to 375.1170, all records of the insurer, other documents, and all department of insurance files and court records and papers, so far as they pertain to or are part of the record of the proceedings, shall be and remain open and public records until the termination of such proceedings; except as is necessary to obtain compliance therewith, unless and until the court, upon motion of the receiver, and after hearing arguments from the parties, shall determine that preservation of the assets and claims of the insurer require confidentiality as to specific records or documents, and shall enter an order of such findings.
In this case, neither party has argued that this statutory section directly governs the issue in question. The receivership argues that it does not apply because the statute was amended in 1992 (by HB No. 1574, Section A) to remove liquidations from within its reach. The receivership notes that the first sentence formerly read, "In all proceedings and judicial reviews thereof under Sections 375.1164 to 375.1246. . . ." Insolvencies are covered in §§ 375.1175 to .1246. The receivership argues that this exclusion was adopted because the legislature desired that liquidations not be included within the proceedings governed by this statute. We note also that the phrase "upon motion of the liquidator" was changed to "upon motion of the receiver" in the amendment.
Pulitzer also argues that the statutory section in question does not directly apply, but instead applies indirectly. Pulitzer argues that the purpose of the 1992 amendment was to allow courts to restrict assets to records of rehabilitations only. Pulitzer argues that all records of liquidations are open to the public by implication. The receivership counters that this argument is absurd because the removal of liquidations from the purview of the statute would have the effect of leaving existing common law rules in effect as to liquidations, and such rules allow closure when appropriate. The receivership argues that if the legislature wanted to allow full access to liquidation records, it would have specified that all records of liquidations are open to the public. We agree with the receivership that Pulitzer's argument in this regard is untenable. We cannot construe the amendment to find an intention by the legislature to make public all records of all liquidations under all circumstances.
Because § 375.1172 does not govern the precise issue before us, we conclude the issues herein are governed by a common law right of access to judicial records and the presumption of openness reflected in Administrative Rule 2.02. The United States Supreme Court recognized a common law right of access in Nixon , 435 U.S. at 597. Such right is not absolute, however. Id . at 598. The court in Nixon noted that "[t]he few cases that have recognized such a right do agree that the decision as to access is one best left to the sound discretion of the trial court, a discretion to be exercised in light of the relevant facts and circumstances of the particular case." Id . at 599.
Therefore, in the case at hand, we review for abuse of discretion and evaluate the presumption of openness in view of the pertinent facts and circumstances. We note that Transit Casualty is a private company in liquidation, not a publicly owned entity. The ultimate loss resulting from the insolvency will fall upon the creditors of the company and its shareholders, not on the general public. One reason for court supervision of the liquidation is to make possible an orderly liquidation which will limit the amount of damage suffered by policy holders and other creditors. Another reason for court supervision of the liquidation is to empower the collection of receivables due the insolvent corporation. Collection of receivables can be complicated when debtors of the insolvent company know that the company in question is insolvent. Reinsurers, for instance, have no expectation of selling any more reinsurance contracts to Transit Casualty, and accordingly have reduced incentive to settle claims generously.
While the State of Missouri participates by way of court supervision, this participation is similar in essence to that which occurs in other litigation matters. The funds to be distributed are funds recovered by the receiver from various creditors of the receivership. The availability of records to creditors and shareholders helps to provide an additional accountability mechanism beyond the accountability mechanism provided by court oversight. Creditors have the right to form committees and to petition the court as to matters related to the liquidation. The creditors and shareholders all currently have a right of access to the information in question. Pulitzer presents no evidence of any allegation here by any creditor or shareholder that the receiver or any of his employees are involved in any abuses or improper activities.
Common sense suggests that it is necessary to provide significant compensation to the receiver and to the key employees to insure both competence and diligence. In this case, Transit claims hundreds of millions of dollars in potential recoveries from reinsurance. A system of bonuses or contingency compensation may be appropriate where the best hope of the creditors is that the receivership will be extremely aggressive in recovering receivables for the liquidation estate. Enhanced compensation may also be necessary to induce key employees of the company to remain on board, so that the receivership can retain the benefit of the experience and efficiency of these officers to the conclusion of the liquidation.
Therefore, even if compensation figures are substantial, and this court can only speculate that they are, such is not necessarily suggestive of abuse. The creditors are most likely best suited to be able to judge the appropriateness of the level of compensation because they are the ones ultimately paying for it.
The employees have a legally protected interest in the confidentiality of information related to their salaries and earnings. See State ex rel. Crowden v. Dandurand , 970 S.W.2d 340, 343 (Mo.banc 1998) (court recognized litigant's right of privacy in his employment records, but found waiver of right of privacy because he asserted lost earnings claim in the litigation). We see no indication here that any employees of the receivership have waived their right of confidentiality in the records.
The trial court was correct in its finding that the testimony concerning the confidentiality interests at stake was not contradicted. Pulitzer did not present evidence contradicting the testimony of Arnold and the employees, but instead relied generally upon the presumption of openness and the public interest in allowing public access to the records.
Certainly we agree that there is a presumption in favor of the openness of the court's records concerning this liquidation. Also, we do not deny that there could be other arguments made in particular cases as to why the interests of the public is having access to the information outweigh any confidentiality interests. However, we do not agree that there has been a showing in this case that the trial court abused its discretion by recognizing that the legitimate confidentiality interests at stake justified maintaining closure as to the documents in question.
Pulitzer also challenges the trial court's orders prohibiting the Director of Insurance from compelling Transit to disclose Arnold's compensation in a public report, in restraining the Director from releasing such information and in denying Pulitzer's motion to rescind such orders. Pulitzer insists that the court has effectively enjoined the Director from conducting the affairs of the receivership. Pulitzer argues that it has standing to challenge this action under the Missouri Sunshine Law.
The "Sunshine Law" (Chapter 610, RSMo) reflects Missouri's commitment to open government and is construed liberally in favor of open government. See North Kansas City Hosp. Bd. of Trustees v. St. Luke's Northland Hosp. , 984 S.W.2d 113, 119 (Mo. App. 1998).
Pulitzer's "Sunshine Law" argument was not raised below and is not preserved for appeal. "Issues raised for the first time on appeal are not preserved for review." Seitz v. Lemay Bank Trust Co. , 959 S.W.2d 458, 462 (Mo.banc 1998).
The judgment of the trial court is affirmed.