August 30, 2016 Articles

Getting It Right: Confidentiality and Sealing Standards

The confidentiality of discovery materials is fundamentally different from the sealing of materials filed with courts or the sealing of judicial proceedings.

By Ronald Hedges – August 30, 2016

Recent decisions by U.S. courts highlight the tension—and possible confusion—between the standard for a confidentiality order that governs the dissemination of materials in discovery and the standard for filing materials under seal with a court. The distinction between the standards is fundamental, and the consequences of “getting it wrong” might be devastating for both attorney and client.

Gubala: Sealing Without Findings
One decision is Gubala v. Time Warner Cable, Inc., No. 15-cv-1078 (E.D. Wis. June 17, 2016). In Gubala, the court dismissed a putative class action brought for alleged violation of the Cable Communications Policy Act. Before the dismissal, the plaintiff moved to compel the defendant to respond to certain discovery requests and also moved for leave to file under seal documents that the defendant had designated as confidential. The court denied the motion to compel as moot but granted the sealing motion “to avoid unwarranted disclosure of the defendant’s private internal policy information.” However, it did so without any findings as to the nature of the information or the necessity for sealing.

TQ Delta: Confidentiality, Sealing, and Good Cause
Another problematic decision is TQ Delta LLC v. Pace PLC, No. 13-cv-1835 (D. Del. Apr. 28, 2016). In TQ Delta, a nonparty moved to redact a transcript of a hearing. Citing Pansy v. Borough of Stroudsburg, 23 F.3d 772 (3d Cir. 1994), and a subsequent decision applying it, the court denied the motion, finding that the motion was not “supported by anything other than argument” and that the proposed redactions were “significantly broader than would be necessary even were there some redaction-worthy disclosures in the transcript.” The court stated thus:

Once information is disclosed in a judicial proceeding, it is in the public interest to be able to understand the proceedings before a judge, and redaction of the transcript hinders that public interest. Nevertheless, there are things that might be appropriately sealed in a public proceeding, such as the pricing terms in license agreements, some other non-public financial information, trade secrets, and other proprietary technology. Information in a transcript may hint at some of these things without actually threatening any “clearly defined and serious injury.” Things that typically weigh against the necessity of sealing include that the information is old, or general, or already in the public record, and was relevant to the judicial proceeding.

This certainly sounds reasonable. Unfortunately, the court appears to have applied the wrong standard when it held that the nonparty had failed to show “good cause” for the redactions under factors set forth in Pansy, a case dealing with standards applied to the issuance of a confidentiality order under Federal Rule of Civil Procedure26(c). The sealing of proceedings is much more stringent and requires a showing of a compelling interest.

Moreover, TQ Delta suffers from a more fundamental defect: the motion to redact addressed information that was already in the record of a judicial proceeding and had been presented in open court. Exactly what would allow the record of a public proceeding, to which the First Amendment right of access presumably applied under the experience and logic test articulated by the Supreme Court in Press-Enterprise Co. v. Superior Court (Press-Enterprise II), 478 U.S. 1 (1986), to be sealed after the fact? By that time, the proverbial cat was out of the bag!

Shane Group: Conflated Standards
In Shane Group, Inc. v. Blue Cross Blue Shield of Michigan, Nos. 15/1544/1551/1552 (6th Cir. June 7, 2016), the court of appeals emphasized the distinction between Rule 26(c)(1) protective orders, which allow a judge to limit access to discovery materials and require a finding of “good cause,” and orders that limit access to substantive filings and require a showing of compelling reasons as well as narrow tailoring to seal only what is necessary. Although “blanket” protective orders are valid, sealing orders require detailed analysis. As the Sixth Circuit observed, “[t]he line between these two stages, discovery and adjudicative, is crossed when the parties place material in the court record.” According to the Sixth Circuit, the district judge “conflated the standards” and erroneously entered the seal based on the existence of good cause: “One can only conclude that everyone in the district court was mistaken as to which standard to apply. But one point is unmistakable: on the showings set forth on this record, every document that was sealed by the district court was sealed improperly.”

Shane Group not only distinguishes between confidentiality and sealing orders butalso underscores the above-mentioned flaws in the TQ Delta and Gubala opinions, which conflated the governing standards and failed to make the required findings to justify sealing, respectively.

Consequences of Confusion
Why should attorneys care about any of this? First, the failure to appreciate the distinction between the standard for confidentiality of discovery materials and the standard for filing under seal—and to meet the governing standard—might result in materials and testimony becoming public regardless of the intent of both attorney and client. Second, attorneys should recognize the need to strive for clarity from judges and take steps to ensure that judges themselves apply the proper standard. Failure to do so could result in a remand for detailed findings of fact and conclusions at law, resulting in excessive cost and delay or, at the worst, a judicial determination that materials that might have been protected are subject to access by the public, including competitors.

Clearly, distinctions matter. This article is an overview of governing principles both constitutional and procedural; and, as with many legal issues, particular facts may require more nuanced conclusions. But certainly on a fundamental level, attorneys should recognize that the confidentiality of discovery materials is fundamentally different from the sealing of materials filed with courts or the sealing of judicial proceedings.

Keywords: litigation, pretrial practice, discovery, sealing standard, confidentiality standard, governing standard, good cause

Ronald Hedges is with Ronald J. Hedges LLC in Hackensack, New Jersey.