Motions to Unseal in Class Actions: Balancing the Public Interest in Access to Judicial Records Against a Party’s Interest in SecrecyPosted: October 25, 2016
Class actions often involve matters of significant public interest, such as price-fixing or dangerous product defects. At the same time, class actions routinely involve confidential and sensitive business information. Courts are increasingly grappling with the question of when confidential documents that become part of the judicial record should be sealed[i] and when they should be made publicly available. The issue has arisen in a number of recent high profile class actions, including the case against Donald Trump involving Trump University and the case against Target regarding its massive data security breach. This article provides an overview of the legal standard for sealing judicial documents and examples of how it is applied in class actions.
The Right of Public Access
The law has for many years recognized both common law and First Amendment rights of public access to judicial records, in both criminal and civil cases, in order to assist the public in monitoring the functioning of the courts, so as to encourage quality, honesty, and respect for the legal system.[ii]
Under the common law, the public has historically had a right to inspect and copy public records, including judicial records. There is a “strong presumption” in favor of openness as to such records. Whether a document is subject to this right depends on whether it is considered a “judicial” document, which in turn depends on whether it was filed with the court and made a material part of the court’s adjudicatory proceedings.[iii]
The “weight to be given the presumption of access” turns on where a document falls along “a continuum from matters that directly affect an adjudication to matters that” do not. Where documents play an important role in determining litigants’ substantive rights, the weight accorded to the presumption of access is strong. Where documents play only a negligible role in determining the parties’ substantive rights, the weight of the presumption is weak.[iv]
The common law right of public access is not absolute and may be rebutted. The burden of overcoming the presumption of access rests on the party seeking to seal documents. That burden is heavy; only the most compelling reasons justify non-disclosure. Examples of compelling reasons include where a court record could be used to “gratify private spite or promote public scandal, to circulate libelous statements, or as sources of business information that might harm a litigant’s competitive standing.”[v]
The trial court must balance the competing interests of the public and the party seeking to keep records secret. On one side of the balance, the greater the public interest in the litigation, the greater the showing necessary to overcome the presumption of access. In class actions, the standard for denying public access is applied with “particular strictness.” In a class action before the Third Circuit Court of Appeals, the Court stated as follows:
The right of public access is particularly compelling here, because many members of the “public” are also plaintiffs in the class action. Accordingly, all the reasons… for the right of access to public records apply with even greater force here. Protecting the access right in class actions “promotes [class members’] confidence” in the administration of the case. Additionally, the right of access diminishes the possibility that “injustice, incompetence, perjury, [or] fraud” will be perpetrated against those class members who have some stake in the case but are not at the forefront of the litigation. Finally, openness of class actions provides class members with a more complete understanding of the class action process and a better perception of its fairness.[vi]
On the other side of the balance, when articulating “compelling reasons” for non-disclosure, the proponent of sealing should provide detailed justifications for sealing, on a document by document basis:
In order to override the common law right of access, the party seeking the closure of a hearing or the sealing of part of the judicial record bears the burden of showing that the material is the kind of information that courts will protect and that disclosure will work a clearly defined and serious injury to the party seeking closure. In delineating the injury to be prevented, specificity is essential. Broad allegations of harm, bereft of specific examples or articulated reasoning, are insufficient.[vii]
The scope of the First Amendment right of access is more limited than the common law right. Documents are subject to the First Amendment right only if: (1) the class of documents sought has historically been open to the public; and (2) access to the documents plays a significant role in the functioning of the particular process in question.[viii] Perhaps because of the more limited scope of the First Amendment right, most of the attempts to gain access to information instead focus on the common law right.
Parties will sometimes try to bypass the public’s right of access by invoking stipulated protective orders entered under Federal Rule of Civil Procedure 26. But there is a material difference between such protective orders and orders to seal judicial records. The former relate to discovery between the parties, whereas the latter concern material that has been placed in the court record. A party cannot file documents under seal simply because they were originally produced pursuant to a Rule 26 protective order.[ix]
Motions to Unseal in Recent Class Actions
Several courts have recently decided motions to unseal in a series of widely publicized class actions. In Shane, for example, the Sixth Circuit Court of Appeals reversed a district court’s orders sealing materials and approving a settlement in a class action against Blue Cross Blue Shield alleging it engaged in price-fixing to the detriment of millions of Michigan citizens.[x] Prior to the settlement, the parties filed various materials under seal in connection with the plaintiffs’ motion for class certification, including a detailed expert report valuing the class’s claims. The parties thereafter reached a settlement and the district court approved it, but the class certification materials remained under seal, even after various objectors to the settlement sought access.
The Sixth Circuit reversed the sealing order and vacated the order approving the settlement, reasoning that the sealed materials were critical to the class’s ability to evaluate the settlement, and that the parties’ asserted bases for sealing were “brief, perfunctory, and patently inadequate.” The Sixth Circuit faulted the parties and the district court for conflating “the standards for entering a protective order with the vastly more demanding standards for sealing off judicial records from public view.” The Sixth Circuit also rejected Blue Cross’ concern about disclosing “competitively-sensitive financial and negotiating information” because “information about a practice since outlawed by the Michigan Legislature is not entitled to protection as a legitimate trade secret.”
Similarly, in Center for Auto Safety, a class action against Chrysler alleging defects in certain of its vehicles, the Ninth Circuit Court of Appeals vacated a district court order refusing to unseal documents.[xi] The plaintiffs had moved for a preliminary injunction to require Chrysler to notify the proposed class of the alleged risks its vehicles posed, and the parties had filed confidential discovery documents concerning that motion under seal. The Center for Auto Safety moved to intervene and to unseal the documents, which the district court denied, relying upon language from prior Ninth Circuit rulings that had suggested that while “compelling reasons” were required to seal materials in connection with “dispositive motions,” a less stringent “good cause” standard applied for “non-dispositive” motions such as one seeking a preliminary injunction.
The Ninth Circuit rejected “the apparent simplicity of the district court’s binary approach,” explaining that the proper inquiry was whether the underlying motion was more than tangentially related to the merits of the case, “in which case the “compelling reasons” standard applied. A motion for preliminary injunction, “which frequently requires the court to address the merits of the case” and “which often includes the presentation of substantial evidence” will often “reflect the need for public access.” Because the district court had applied the wrong standard, the Ninth Circuit vacated its order and remanded the case so that the district court could apply the appropriate, “compelling reasons” standard.
Along the same lines, in the class action against Donald Trump involving Trump University, the Southern District of California granted a motion by the Washington Post to intervene and unseal various exhibits the parties had filed in connection with the plaintiff’s motion for class certification, including materials that allegedly evidenced a deceptive advertising campaign by Trump that had defrauded thousands of consumers.[xii] The court applied the “compelling reasons” standard, determining that a motion for class certification is “more than tangentially related to the merits,” and then balanced the competing interests of the public and Trump.
The court rejected Trump’s argument that certain documents contained trade secrets, because some of those documents had already been posted online by Politico. With respect to the other documents, the court rejected Trump’s “blanket assertion as to why the disputed materials constitute[d] trade secrets.” Trump had argued that this information retained commercial value even though Trump University had stopped enrolling new students in 2010 because Trump University might someday enroll students again. The court rejected that argument as “wholly speculative.” It held that the Post had “made a strong argument that the public interest in understanding the judicial process is heightened” given that Trump had become “the front-runner for the Republican nomination in the 2016 presidential race” and had himself “placed the integrity of these court proceedings at issue.”
Similarly, in a class action against Target arising out of a breach of the company’s data, a federal district court in Minnesota granted the plaintiffs’ motion to unseal their memorandum of law in support of their motion for class certification.[xiii] The court rejected Target’s argument that disclosure would risk another data breach, ruling that Target had failed to demonstrate how statements about Target’s alleged negligent conduct prior to and during the data breach in 2013 constituted a disclosure of confidential material about its information security procedures in 2015. The court also held that Target’s concern that disclosure would result in adverse publicity did not warrant sealing the memorandum in question.
Although courts frequently unseal judicial documents, they do not always do so. For example, in a class action against General Motors arising out of alleged defects in the ignition switches on its vehicles, the Southern District of New York sealed a number of documents concerning a discovery motion because it had not considered them in its ruling.[xiv] Furthermore, in a securities class action against State Street Corporation and affiliated entities, the United States district court in Massachusetts denied a motion to unseal documents filed in connection with summary judgment motions where the defendants submitted two declarations establishing “the sensitive and confidential nature of the information and… a particularized showing of the presence of commercial harm.”[xv] Similarly, in a class action against Google alleging that it had it violated consumers’ privacy rights in connection with its operation of Gmail, the Northern District of California largely denied a motion to unseal materials filed in connection with the plaintiffs’ motion for class certification.[xvi] After conducting a detailed document by document analysis, the court permitted Google to seal most of the materials because they related to specific descriptions of either (1) how Gmail operates, the disclosure of which could cause competitive harm to Google; or (2) how users’ interactions with the Gmail system affect how messages are transmitted, the disclosure of which could lead to a breach in security of that system.
Motions to unseal judicial records are frequently brought in class actions. Those moving to unseal are most likely to succeed where the case presents a matter of significant public interest and the documents are closely related to the merits. Those opposing such motions are most likely to succeed where the documents are not important to the court’s adjudication of the merits or where the documents are confidential and their disclosure would cause a substantial injury to a party. Parties looking to keep records sealed must make a compelling, specific argument for sealing – for each document they wish to keep out of the public eye.
[i] While this article and the federal courts use the term “sealed” to refer to a situation in which the parties and the Court may view documents, but the public may not, it should also be noted that Massachusetts state courts use the term “impoundment” to refer to that situation, and use the word “sealed” to refer to a situation in which only the Court, and not the parties or public, may view documents. See, e.g., Pixley v. Commonwealth, 453 Mass. 827, 836 n.12 (2009).
[ii] See, e.g., Press-Enterprise Co. v. Superior Court of California, 464 U.S. 501, 506-10 (1984); Ctr. For Auto Safety v. Chrysler Group, LLC, 809 F.3d 1092, 1096 (9th Cir. 2016); In re Cendant Corp., 260 F.3d 183, 198 n. 13 (3d Cir. 2001); In re Policy Mgmt. Sys. Corp., No. 94-2254, 1995 U.S. App. LEXIS 25900 at *7 (4th Cir. Sept. 13, 1995); In re Continental Illinois Sec. Litigation, 732 F.2d 1302, 1308-09 (7th Cir. 1984).
[iii] See, e.g., Nixon v. Warner Communications Inc., 435 U.S. 589, 597 (1978); Shane Grp., Inc. v. Blue Cross Blue Shield, No. 15-1544, 2016 U.S. App. LEXIS 10264 at *6-7 (6th Cir. June 7, 2016); Ctr. For Auto Safety, 809 F.3d at 1096; Cendant, 260 F. 3d at 192; In re Policy Mgmt., 1995 U.S. App. LEXIS 25900 at *7.
[iv] United States v. Amodeo, 71 F.3d 1044, 1049-50 (2d Cir. 1995).
[v] Ctr. For Auto Safety, 809 F.3d at 1097 (internal citations and quotations omitted); Shane, 2016 U.S. App. LEXIS 10264 at *6-7; Cendant, 260 F. 3d at 194.
[vi] Cendant, 260 F.3d at 193 (internal citations removed). See also Shane, 2016 U.S. App. LEXIS 10264 at *7; Ctr. For Auto Safety, 809 F.3d at 1096-97.
[vii] Cendant, 260 F. 3d at 194. See also Shane, 2016 U.S. App. LEXIS 10264 at *7; In re Midland Nat’l Life Ins. Co Annuity Sales Practices Litig. v. Allianz Life Ins. Co. of N. Am., 686 F.3d 1115, 1119 (9th Cir. 2012).
[viii] See, e.g., Press-Enter. Co. 104 S. Ct. at 823-24; Cendant, 260 F.3d at 198 n. 13; Policy Mgmt., 1995 U.S. App. LEXIS 25900 at *7; Glass Dimensions, Inc. v. State St. Corp., No. 10-10588-FDS, 2013 U.S. Dist. LEXIS 170190 at *6 (D. Mass. Dec. 3, 2013).
[ix] Shane, 2016 U.S. App. LEXIS 10264 at *6; Baxter Int’l v. Abbot Labs, 297 F.3d 544, 545-47 (7th Cir. 2002).
[x] Shane, 2016 U.S. App. LEXIS 10264.
[xi] Ctr. For Auto Safety, 809 F.3d at 1094-96, 1099-1103.
[xii] Cohen v. Trump, No. 13-cv-2519-GPC-WVG, Order (S.D. Cal. May 27, 2016).
[xiii] In re: Target Corporation Customer Data Breach Litig., Case No. 14-md-2522, Order (D. Minn. Aug. 13, 2015).
[xiv] In re General Motors Ignition Switch Litig., 14-md-2543, Orders (S.D.N.Y. July 2 and Dec. 2, 2015).
[xv] Glass Dimensions, 2013 U.S. Dist. LEXIS 170190.
[xvi] In re Google Inc. Gmail Litig., No. 13-md-2430, Order (N.D. Cal. August 6, 2014).
Ian McLoughlin is a partner at Shapiro, Haber and Urmy. He represents plaintiffs in class actions against businesses accused of violating antitrust, consumer protection, securities, and wage and hour laws. He also represents whistle-blowers bringing claims pursuant to the SEC’s whistleblower program and the False Claims Act.
We live in a specialized world, one in which access to information is so overwhelming that there literally is “an app for that” to satisfy even the most specific and narrow of needs.
Yet, until recently, the legal profession’s response to the increasingly tailored needs of our clients has been to give them all the tried and true traditions of the law. Got a dispute? Let’s file a lawsuit with the courts and travel down the litigation road. Got a complex, sophisticated business dispute? Let’s go to arbitration with an arbitrator who is experienced in business disputes. Don’t want to risk a jury deciding your case and spend thousands of more dollars on a trial? Let’s go to mediation. Because…this is how we do it. This is how we’ve been doing it for decades.
The information revolution has moved too quickly and our clients have become too savvy to be content with the legal profession’s limited amount of choices or one size fits all approach. There is a time and a place for litigation, for arbitration, and for late in the dispute process mediation. But most of the time, our clients need an approach to resolving their disputes that is tailored to their needs, specific circumstances, and unique situations. Today’s lawyers and neutrals can best serve our clients by being responsive to the specificity of their needs and interests. That includes not only resolving a dispute but also how we go about resolving it.
New England Patriots coach Bill Belichick often talks about playing “situational football.” In other words, the game plan is designed differently for each game and depends on the situation each opposing team presents. The Patriots will never use the same game plan against the Broncos as they used for the Jets just because it worked. The Patriots win because they understand that a great result begins with a carefully designed and tailored approach.
Every dispute is different. Every client has a different bandwidth of factors which need to be considered. These may include how quickly the client needs to resolve the matter; how much can be spent on it; how important are the relationships of those involved; how much control does the client want to have over the process and the result; how risk averse is he/she; how important is confidentiality; what kind of expertise is needed; what are the important interests that are behind a stated position; and how productively can the parties work together in a non-adversarial setting, with or without a human go-between.
If the field of dispute resolution (DR) is going to be relevant, it has to be agile and responsive to the situation that is presented to us. No longer can litigation be the default and a couple of other processes be “alternatives.” In fact, no one process can be the default position and be presented to clients as the Cadillac of dispute resolution processes. It is time for the “A” (alternative) to be dropped from “ADR” (alternative dispute resolution), something that the Massachusetts Bar Association has just formally recognized in changing its former ADR Committee to its new DR Section. No process is an alternative; rather, every process is an alternative, and there are alternatives within the alternatives.
Within these DR processes, there is an explosion of variations and new roles emerging. For example, distinctions are often made between “facilitative” style mediation and “evaluative” mediation. In the latter, the mediator is called upon to help the parties assess how strong or weak their respective positions are, and to provide insight on the potential damages. A new trend emerging, called Planned Early Negotiation (PEN), draws a distinction between mediation which is done instead of litigation, or very early on in the litigation process, and that which is done later, often on the eve of trial. When done early, there may be some kind of information exchange so that the parties, lawyers and the mediator have enough factual information for well-informed and productive negotiations. Conciliation is another DR process with a much shorter time frame – often an hour or two –- and has often been referred to as “mediation on steroids.” Conciliation largely focuses on the advantages of reaching a negotiated agreement as compared with the pitfalls of the alternative of going to trial.
New approaches have been developing even in the well-established field of arbitration. Arbitration has increasingly become a more complicated process and often includes many elements of litigation. As a result, many parties are opting for more streamlined models of arbitration with limits on discovery and motion practice Some even use a more simplified version like “baseball arbitration,” in which the parties submit their respective written proposals for a settlement to the arbitrator, who then chooses the one he/she believes to be more appropriate and reasonable. And within baseball arbitration, there is both the version just described, known as “daytime” baseball arbitration, and “nighttime” baseball arbitration, in which the parties submitted proposals are not disclosed to the arbitrator until after the arbitrator renders a decision. The proposal that is closest to the arbitrator’s decision is then chosen to be the final resolution. In other cases, arbitrators may visit the site that is at the heart of a dispute and may limit or expand the degree of information exchange, the scope of submissions and the nature of a hearing.
Collaborative law, a structured negotiation process, grew out of the need to remove or minimize the adversarial elements of litigation. Collaborative law is a PEN process designed to intentionally pursue resolution by agreement through the collaboration of lawyers, clients and experts. It is similar to the more established role of settlement counsel. Lawyers that are hired as settlement counsel have the singular and limited purpose of negotiating with the other side on behalf of the client, as distinct from litigation counsel. A dispute would then proceed on two tracks; settlement counsel would be focused on pursuing settlement negotiations only, while litigation counsel would be handling the litigation aspects of the dispute.
Similar to the role of settlement counsel, the focused legal representation of clients by collaborative lawyers is limited to the collaborative process, where achieving the desired resolution is the lawyer’s only role. Collaborative law requires the open and voluntary exchange of all relevant information as a basic tenet. As such, “discovery” is both streamlined and profound. Collaborative lawyers and their clients may utilize neutral facilitators, case evaluators, or other neutral experts to provide parties with the expertise needed on the relevant factual and legal issues when there is a colorable claim and a valid defense. By its very nature, collaborative law is responsive to the circumstances of the dispute, allowing for flexibility and creativity in crafting solutions. That very nature allows collaborative lawyers to use variations while remaining consistent with the process’s basic protocols and principles.
Hybrids like “med-arb” or collaborative law with a baseball arbitration style closure option are also emerging, each with a different adaptation of process. What is clear is that there is no longer just one model of any of these processes. They will be called upon to be responsive to the situation each dispute presents.
These changes will require lawyers and neutrals to make more detailed assessments of each situation and the parties involved. Based on that assessment, we can then make a recommendation as to choosing and sometimes designing the right approach. This can present somewhat of a dilemma. Many lawyers and neutrals have a preferred DR process, one that we are more comfortable with, have the most experience in or in which we have been trained. Just like a surgeon excels at surgery and that is what the surgeon wants to do, litigators want to litigate; arbitrators want to arbitrate; mediators want to mediate; collaborative lawyers want to use collaborative law; and so on. So when the client comes into our office, there’s a natural bias, as well as a financial incentive, toward wanting to lead the client to what we do.
But if we are true to doing a thorough assessment of the client, his/her situation and all the factors of the dispute that is presented to us, and are going to make a good recommendation about the approach for this unique situation, we may have to refer the person to some other process and someone else that is the right fit for that client.
In the same way that a lawyer specializing in one area of practice would not try to represent the client in an area outside of his/her practice, a lawyer whose focus is settlement counsel or collaborative counsel is probably not the right lawyer for litigation, and vice versa. As there are specialties in areas of practice, today there are specialties in types of process. The training and expertise for a litigator is different than that of a settlement counselor, just as the process of collaborative law is different from arbitration. In her groundbreaking book, The New Lawyer: How Settlement is Transforming the Practice of Law, Law Professor Julie Macfarlane eloquently dissects the differences between adversarial advocacy and the newly emerging “conflict resolution advocacy.”
There is a role and a place for every kind of process on the DR spectrum, from litigation and arbitration on one end to preventive contract drafting and proactive ombudsman work on the other end. As the needs and demands of our clients get more specific and more sophisticated, those of us who represent our clients either as litigation, settlement or collaborative counsel, as well as those of us who serve as DR neutrals, must be responsive. The times call on us to be flexible and agile, to be ready and able to design approaches according to the needs and the situations presented to us. As legal counsel and neutrals, it is up to us to guide parties in the right direction in order to help them achieve their best outcomes.
Michael A. Zeytoonian, the founding member of Dispute Resolution Counsel, LLC is a lawyer and mediator whose practice areas include employment, business, consumer protection, special education law and homeowner-contractor disputes. Michael writes, lectures frequently on collaborative law, mediation and dispute resolution (DR) and has trained lawyers and presented on Collaborative Law throughout the United States, Canada, Ireland and The Netherlands. He is co-author of Collaborative Law: Practice and Procedures (MCLE, Boston 2014).