November 27, 2018 Practice Points

Delaware Chancery Court Balances Need for Confidential Court Filings Against Public-Access Rights

By Seth R. Tangman

Corporate and commercial litigation in the Delaware Court of Chancery invariably involves the filing of highly sensitive and important business documents with the court. Parties often wish to shield such documents from public disclosure. Chancery Court Rule 5.1 provides a mechanism for the confidential treatment of court filings.

Under Rule 5.1, parties seeking confidential treatment of court filings must first obtain a confidentiality order from the court. Once a confidentiality order is secured, the court allows parties to make filings confidential where there is “good cause” to do so. Good cause exists “only if the public interest in access to court proceedings is outweighed by the harm that public disclosure of sensitive, non-public information would cause.” After a party files a confidential document with the court, it normally must make available to the public a redacted version. The court, however, does not require parties to file public versions of exhibits to confidential filings, as a matter of administrative convenience.

Should another party— or a member of the public—wish to challenge the confidential treatment of a court filing, it must provide notice of its challenge to the party that filed the confidential document. The filing party then bears the burden to demonstrate to the court that good cause exists to apply the confidentiality protections of Rule 5.1. The court then carefully balances the confidentiality interests of the party seeking confidential treatment against the constitutional rights of the public to judicial records by applying the good-cause standard.

The court is mindful of the sensitive and proprietary nature of the information contained in the filings, and regularly finds good cause for confidential treatment of filings. The court, however, will not rubber-stamp the approval of confidential filings, considering the public’s constitutional right of access to court records. Further, just because a document has had unchallenged confidential treatment in discovery in the case does not mean that the court will continue that treatment once the document is filed with the court unless there is good cause. This issue often arises because of the proclivity on the part of counsel to over-designate documents as confidential when producing them in discovery.

In re Appraisal of Columbia Pipeline Group, Inc., Cons. C.A. No. 12736-VCL (Del. Ch. Aug. 30, 2018), is a recent example of the court’s application of confidentiality standards to court filings and exhibits. In that case, the court denied continued confidential treatment of filings and exhibits over objections that the challenging party was engaged in gamesmanship to “improperly [] make information public so it can be used in other litigation.” Curiously, the defending party did not make any argument that the challenged materials were confidential. The court determined that unless there is good cause, as defined under Rule 5.1, to maintain confidential treatment of filings and exhibits, the court will not continue confidential treatment “merely because disclosure has the potential for collateral economic consequences.” The court then noted that—regardless of the challenging party’s allegedly improper motivations—there was no reason to shield the materials from public disclosure.

It is common for Delaware corporate litigation to occur in parallel with litigation in other jurisdictions (e.g., federal securities litigation), as illustrated in Columbia Pipeline. In such instances, attorneys naturally worry that opposing counsel in parallel litigation coordinate confidentiality challenges to unfairly prejudice a litigant in another jurisdiction. Nonetheless, the Columbia Pipeline case shows that, no matter, the court will make public any filing that does not have good cause for confidential treatment. Ultimately, the responding party in Columbia Pipeline failed to show good cause to warrant overriding the public’s constitutional right of access to the court records.

Seth R. Tangman is an associate at Potter Anderson & Corroon LLP in Wilmington, Delaware.

The opinions expressed are those of the author and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.


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