May 05, 2017 Practice Points

Protecting the Record: Sealing Confidential Documents

By Ingrid Evert and Jodi Munn Schebel

The practice of defending automotive products liability suits lends itself to the potential for disclosure of proprietary documents and information relating to the design, manufacture, and cost of prototype and production vehicles. Much of this information contains trade secrets that could cause significant competitive harm if it falls into the wrong hands and/or the public domain. Most, if not all, product manufacturers will agree that such information requires protection during litigation, both in the discovery phase and beyond, no matter the type of product they manufacture.

Balancing the long standing public interest in access to the American courts against the confidential nature of the sensitive information disclosed in a trial setting can be difficult and force one or both parties to seek intervention from the courts to keep confidential information attached to or referenced in court filings under seal. Different circuits exercise different standards of review when evaluating whether to allow such information to be filed under seal and it is important for the proponent to be aware of what standard applies and what language to use to effectively protect your client's confidential information. In other words, circuits are split as to how to weigh the public's interest against the needs of a party to keep confidential information under wraps.

In the 2016 Ninth Circuit decision in The Center for Auto Safety v Chrysler Group, LLC, 809 F.3d 1092 (9th Cir. 2016), cert. den., ___ U.S. ___, 196 L. Ed. 2d 26 (2016), the court held that the burden to seal documents from the judicial record turns on whether the filing is "dispositive" versus "non-dispositive." In other words, if the filing is unrelated to the merits of the case (i.e., non-dispositive), the party must only meet a good cause standard for restricting the public's right to access the information. Conversely, if the filing is directly related to the merits of the case or is determinative of the litigant's substantive rights (i.e., dispositive), then a party must meet a higher burden of showing that compelling reasons exist to overcome the presumption of the public's right of access.

Other circuits make similar distinctions. The Fifth, Sixth, Tenth and Eleventh Circuits follow suit with the Ninth Circuit. For example, the Sixth Circuit determined that, during discovery, parties may liberally designate information as being subject to a protective order on a showing of good cause. Shane Group, Inc. v Blue Cross Blue Shield of MI, 825 F.3d 299, 305 (6th Cir 2016) citing Fed. R. Civ. P. 26(c)(1)). But "[a]t the adjudication stage . . . different considerations apply" because the public has a strong interest in information placed in the public record. Id. Thus, according to the Sixth Circuit, the proponent of a sealing request for a merits-based motion must explain why there are compelling reasons for sealing the records and why those reasons outweigh the public's interest in disclosure. Id. at 307. Further, even when compelling justifications exist, the district court's sealing order must be narrowly tailored to serve the proffered justifications. Id. at 306. The district court "must set forth specific findings and conclusions, which justify nondisclosure to the public." Id. See also United States v McVeigh, 119 F.3d 806, 811 (10th Cir 1997) ("There is a presumption that documents which are essential to the judicial process are to be available to the public, but access to them may be restricted when the public's right of access is outweighed by interests which favor nondisclosure." ).

The Eleventh Circuit similarly looks at whether the filing upon which a sealing order is based relates to discovery matters, rather than substantive issues, and recognizes that documents sealed pursuant to discovery motions generally are not subject to the common law right of access, while documents related to substantive, merits-based motions are. Romero v. Drummond Co., 480 F.3d 1234, 1241 (11th Cir 2007).

The Second Circuit and Eighth Circuits follow a variant of the dispositive versus non-dispositive analysis based on the common law in determining whether the public has a right of access to documents filed with the court. Under the common law, the public only has a right to access "judicial documents." A "judicial document" is one that is relevant to the performance of the court's function and useful to the judicial process. To determine if documents filed in a lawsuit must be accessible to the public, the court employs a three part test, considering: 1) whether the document a judicial document; 2) the importance of the information to the merits of the case; and 3) the importance of the competing considerations, including the privacy interests of those who oppose disclosure, when weighed against the presumption of access. Lugosch v. Pyramid Co. of Onondaga, 435 F.3d 110, 119-20 (2d Cir. 2006); Hartford Courant Co. v. Pellegrino, 380 F.3d 83, 91 (2d Cir. 2004). See also IDT Corp. v. eBay, 709 F.3d 1220, 1223 (8th Cir. 2013) (following the common law balancing test to determine whether the public's right of access to "judicial records" outweighs the interests served by maintaining the confidentiality of the sealed information based on the specific facts of the case).

Careful evaluation of the underlying motion to which the sealed documents apply is imperative. Knowing and understanding the standard in your Circuit and how it is applied is critical to ensuring that your confidential documents can be sealed. If you have a filing on the merits and you cannot (or don't try to) meet the required standard to seal your confidential content or exhibits, you may very well end up with a wholly public filing. Putting in the time to research and understand the applicable case law in your Circuit is time well spent to protect the invaluable, confidential, trade secret information your client has entrusted to you, or your firm, to protect.

Ingrid Evert is an associate and Jodi Munn Schebel is an attorney with Bowman and Brooke, LLP, in Detroit, Michigan.


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