Opinion
C.A. No. 16297-NC
Submitted: March 15, 2001
Decided: April 17, 2001
Stephen B. Jenkins, Richard I.G. Jones, Jr.
Rodman Ward, Jr., Thomas J. Allingham II, Karen Valihura, Rosemary S. Goodier
Counsel:
Following the Court's post-trial decision of March 13, 2000, in this case, Cantor Fitzgerald, L.P. ("CFLP") petitioned pursuant to Court of Chancery Rule 5(g) to preserve the confidentiality of certain documents filed under seal in this action. Both parties identify the specific documents at issue in a June 29, 2000, letter to the Court. CFLP seeks to maintain five general categories of documents under seal: (1) CFLP's non-public financial documents; (2) drafts of the applicable partnership agreement, settlement agreement, and private placement memoranda; (3) CFLP's agreements with third parties; (4) CFLP's employment agreements; and (5) CFLP's discovery responses that contain certain confidential or highly confidential information. The documents CFLP seeks to protect are of the type currently subject to a Court-approved Stipulated Protective Order.
See Stipulated Protective Order Regarding Confidential Information ("Protective Order"). Nov. 3, 1998, amended by Order of the Court on Dec. 18, 1998.
The defendants, Iris Cantor, et al., believe that CFLP's position is inconsistent with the Protective Order, Court of Chancery Rule 5(g), and what is known as the Common Law Right of Access. Accordingly, they argue that the Court should deny the application. The defendants do not, however, object to maintaining the confidentiality of the following limited categories of documents and deposition testimony: (1) trade secrets, (2) third-party confidential material, and (3) non-public financial information.
For the reasons discussed below, I deny CFLP's application in part and find that only those documents and testimony relating to (1) trade secrets, (2) thirdparty confidential material, and (3) non-public financial information are entitled to continued protection under the parties' Protective Order adopted pursuant to Rule 5(g).
ANALYSIS
United States' citizens have a fundamental "right to be informed of the operations of government and to an open court system." This right translates into a presumption that the press and public have a right of access to judicial documents and records. This concept is known as the Common Law Right of Access and is adopted or acknowledged in Court of Chancery Rule 5(g).
In the matter of 2 Sealed Search Warrants , Del. Super., 710 A.2d 202, 210 (1997).
See Id .
Court of Chancery Rule 5(g)(l) provides:
Except as otherwise provided in this Rule 5(g), all pleadings and other papers, including deposition transcripts and exhibits, answers to interrogatories and requests for admissions, and affidavits or certificates and exhibits thereto ("documents") filed with the Register in Chancery shall become a part of the public record of the proceedings before this Court.
Because this right is included in Rule 5(g), I will not analyze the common law rule as a separate concept. These are not non-parties seeking access to judicial records. Both CFLP and the defendants are subject to the Protective Order and the Court of Chancery Rules. Thus, the discussion will be limited to the parties' rights and responsibilities under the Protective Order and the Court's Rules.
The parties' rights and responsibilities with regard to sealed documents in this action are defined by both Court of Chancery Rule 5(g) and the Stipulated Protective Order approved by the Court. Accordingly, the provisions of both of these sources of authority set forth the procedural and substantive law governing this petition.
Paragraph 16 of the Protective Order states that "[n]othing in this Stipulated Protective Order shall abrogate Rule 5(g) of the Rules of the Court of Chancery of the State of Delaware."
Rule 5(g)(6) provides a mechanism for challenging the continued restriction on public access to records that have been filed under seal in the Court of Chancery. Under that provision, the party seeking to have the records unsealed "shall give written notice of such party's objection to the person who designated the document for filing under seal." If the other party wishes to keep the record sealed, that party must "serve and file an application within 7 days after receipt of such written notice setting forth the grounds for such continued restriction and requesting a judicial determination whether good cause exists therefore."
Court of Chancery Rule 5(g)(6).
Id.
The Protective Order also addresses this situation. The Protective Order provides:
In the event that any party to this litigation disagrees at any stage of these proceedings with the designation by a producing party of materials designated "Confidential" or "Highly Confidential," the parties shall first try to resolve such dispute in good faith on an informal basis. If the dispute cannot be resolved, the objecting party may seek appropriate relief from the Court, and the party asserting confidentiality shall have the burden of proving same.
Protective Order at ¶ 5.
Both parties have raised procedural objections. CFLP argues that the defendants' challenge to the designation of documents lacks the requisite specificity because they have challenged whole categories of documents and not specific documents as required by Rule 5(g)(6). I am not convinced that in this case, with thousands of pages of documents in the record, the defendants' challenge to categories of documents is insufficient. To find otherwise, would elevate form over substance.
The defendants argue that CFLP's petition is procedurally improper because it was filed more than seven days after the defendants' letter of April 13, 2000, which they contend was the "notice" required by Rule 5(g). By Court Order dated February 25, 2000, the parties were to finalize their designations of their documents and file redacted versions of the items in the record by April 17, 2000. Because that is the day the parties designations were set, I find that the seven day period for filing runs from that day. Thus, CFLP's filing on April 27, 2000, was timely. For these reasons, I find that this petition is procedurally proper.
There is some question about which party must make the filing. Under Rule 5(g)(6) it is clearly CFLP, the party seeking to keep the confidentiality of the records. The Protective Orders however, states that the objecting party (here the defendants) " may seek appropriate relief from the Court." I find that the mandatory language of the Rule trumps the precatory language of the Protective Order. Thus, it was CFLP's obligation to petition the Court, and it has done so.
Under both the Rules and the Protective order, the burden is on CFLP, as the party seeking to maintain the restrictions, to prove they should remain under seal. While the Protective Order is silent as to a standard of review, the Rules require application "setting forth the grounds for such continued restriction and requesting a judicial determination whether good cause exists therefore." Thus, this Court will grant CFLP's petition if it has shown "good cause" exists for keeping the records at issue sealed.
Court of Chancery Rule 5(g)(6) (emphasis added).
In determining "good cause," I must balance the general principal that items filed in this Court become a part of the public record with the need to protect the sensitive information of parties' to litigation. Here, I find that CFLP's petition and argument in support of that petition do not set forth sufficient particularized allegations of harm that would flow from unsealing some of the categories of documents at issue. In general, it is quite apparent that trade secrets, third-party confidential materials, and non-public financial information are matters deserving of protection. Despite the broad categories established by CFLP, to the extent that an individual item in the record falls within the three categories listed in the preceding sentence, I find that CFLP has shown "good cause" for maintaining the restrictions of the Protective Order.
One category of documents that needs to be addressed specifically encompasses draft versions of the Partnership Agreement, the Settlement Agreement, and Private Placement Memoranda. CFLP has agreed to release unredacted versions of the 1992 and 1996 Partnership Agreements. It has also agreed to release a redacted version of the Settlement Agreement. Because the draft versions of these documents implicate the private give and take among parties (usually through the advice of counsel) I find that there exists good cause for keeping the draft versions sealed under the Stipulated Protective Order. I note that the defendants, as parties to the action, have access to these sealed items and can freely use them in the continuing litigation. They are not prejudiced by any inability to use the information outside the litigation.
CONCLUSION
I find that CFLP has shown "good cause" for maintaining the restrictions of the Stipulated Protective Order for the following categories of documents: (1) trade secrets, (2) third-party confidential material, and (3) non-public financial information. Thus, to the extent that individual documents on the list of disputed items fall within those categories, they remain sealed under the Protective Order. I also find that good cause has been shown to warrant affirming that the Protective Order continues to encompass the draft versions of the Partnership Agreement, the Settlement Agreement, and the Private Placement Memoranda.
I realize that this decision sets the stage for additional litigation concerning which individual documents fit within the three categories listed above. I trust, however, that both sides will remain true to their obligation under the Protective Order to approach this process in "good faith" and only involve the Court where absolutely necessary. With this admonishment in mind, should it be necessary, I direct the parties to submit to this Court, within 30 days of this decision, a list of individual record items from the list of June 29, 2000, if any, that remain in dispute after this ruling. In the alternative, the parties should submit an order definitively identifying the result of their "good faith" resolution of this dispute.
IT IS SO ORDERED.