Williams, Bax & Saltzman, P.C., et al v. Boley International, et al
Filing
Filed opinion of the court by Judge Posner. The motions to seal the settlement agreement in these two appeals are consolidated. The request in Goesel is DENIED; in Massuda it is DISMISSED. [6526611-2] [6516964-2] Richard A. Posner, Circuit Judge. [6540828-1] [6540828] [13-2434, 13-2818]
Case: 13-2434
Document: 31
Filed: 12/26/2013
Pages: 8
In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 13‐2434
ANDREW GOESEL, et al.,
Plaintiffs,
v.
BOLEY INTERNATIONAL (H.K.) LTD., et al.,
Defendants‐Appellees.
APPEAL OF: WILLIAMS, BAX & SALTZMAN, P.C.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 09 C 4595 — Milton I. Shadur, Judge.
____________________
No. 13‐2818
FORTUNEE MASSUDA,
Plaintiff‐Appellant,
v.
PANDA EXPRESS, INC., et al.,
Defendants‐Appellees.
____________________
Appeal from the United States District Court for the
Case: 13-2434
2
Document: 31
Filed: 12/26/2013
Pages: 8
Nos. 13‐2434, 13‐2818
Northern District of Illinois, Eastern Division.
No. 12 C 9683 — Ronald A. Guzmán, Judge.
____________________
SUBMITTED NOVEMBER 4, 2013 — DECIDED DECEMBER 26, 2013
____________________
Before POSNER, Circuit Judge. As motions judge for the
week during which motions to seal the settlement agree‐
ments in these two appeals were filed, I ordered the motions
consolidated and now rule on them.
In Goesel the parties agreed to settle a personal injury
suit, but because the suit was on behalf of a minor they were
required by Local Rule 17.1 of the Northern District of Illi‐
nois to obtain the district judge’s approval of the settlement.
See Elustra v. Mineo, 595 F.3d 699, 709–10 (7th Cir. 2010); cf.
Villalobos v. Cicero School District 99, 841 N.E.2d 87, 93 (Ill.
App. 2005). The judge reduced the portion of the settlement
payable to the plaintiffs’ law firm, thus increasing the
amount of money to be received by the plaintiffs, and ap‐
proved the settlement as revised. The appeal is by the law
firm and challenges the judge’s modification of the settle‐
ment. The parties asked the district judge to seal the settle‐
ment and he obliged. Before me is the law firm’s motion to
maintain under seal documents disclosing the amounts of
the settlement and of the lawyers’ costs and fees. The firm
emphasizes that the parties had agreed to keep the settle‐
ment amount secret.
In Massuda, a suit for breach of fiduciary duty, the district
judge dismissed most of the plaintiff’s claims on the ground
that they were derivative from claims in a previous suit that
the parties had settled. In so ruling the court relied on a re‐
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3
dacted copy of the settlement agreement in the earlier suit,
filed under seal, that inked out almost all the terms of the
settlement other than the names of the parties and the nature
of the suit. The defendants want the redacted settlement
agreement kept under seal in this court as well.
“Documents that affect the disposition of federal litiga‐
tion are presumptively open to public view.” In re Specht, 622
F.3d 697, 701 (7th Cir. 2010); see Nixon v. Warner Communica‐
tions, Inc., 435 U.S. 589, 597 (1978); Baxter International, Inc. v.
Abbott Laboratories, 297 F.3d 544, 545 (7th Cir. 2002); LEAP
Systems, Inc. v. MoneyTrax, Inc., 638 F.3d 216, 220 (3d Cir.
2011). The reason for this right of public access to the judicial
record is to enable interested members of the public, includ‐
ing lawyers, journalists, and government officials, to know
who’s using the courts, to understand judicial decisions, and
to monitor the judiciary’s performance of its duties. Nixon v.
Warner Communications, Inc., supra, 435 U.S. at 597–98; Jessup
v. Luther, 277 F.3d 926, 928 (7th Cir. 2002); Union Oil Co. v.
Leavell, 220 F.3d 562, 568 (7th Cir. 2000); Citizens First Nat’l
Bank v. Cincinnati Ins. Co., 178 F.3d 943, 945–46 (7th Cir. 1999);
In re Continental Illinois Securities Litigation, 732 F.2d 1302,
1308 (7th Cir. 1984); Poliquin v. Garden Way, Inc., 989 F.2d 527,
533 (1st Cir. 1993). As Holmes put it, “It is desirable that the
trial of causes should take place under the public eye, not
because the controversies of one citizen with another are of
public concern, but because it is of the highest moment that
those who administer justice should always act under the
sense of public responsibility, and that every citizen should
be able to satisfy himself with his own eyes as to the mode in
which a public duty is performed.” Cowley v. Pulsifer, 137
Mass. 392, 394 (1884).
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The presumption can be rebutted. A litigant is allowed,
for example, to conceal trade secrets, and, if there are com‐
pelling reasons of personal privacy, to litigate under a pseu‐
donym. See, e.g., Doe v. City of Chicago, 360 F.3d 667, 669 (7th
Cir. 2004); Doe v. Blue Cross & Blue Shield United, 112 F.3d 869,
872 (7th Cir. 1997); Sealed Plaintiff v. Sealed Defendant #1, 537
F.3d 185, 188 (2d Cir. 2008). And the presumption of public
access “applies only to the materials that formed the basis of
the parties’ dispute and the district court’s resolution”; other
materials that may have crept into the record are not subject
to the presumption. Baxter International, Inc. v. Abbott Labora‐
tories, supra, 297 F.3d at 548.
But what about concealment of terms in settlement
agreements? Settlements are ubiquitous in the legal system,
but most settlement agreements never show up in a judicial
record and so are not subject to the right of public access. Ei‐
ther the agreement is made before a suit is filed (and so the
suit is never filed), or, if after, the parties file a stipulation of
dismissal and in that event they’re not required to make the
agreement a part of the court record. Fed. R. Civ. P.
41(a)(1)(ii); Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375,
381–82 (1994); Jessup v. Luther, supra, 277 F.3d at 928. The par‐
ties in Goesel didn’t have that option, because the local rule
cited above (the validity of which is not challenged) required
the court’s approval for the settlement to be valid.
If though it is part of the judicial record the settlement is
made without any court action (approval, disapproval, or
approval with modifications as in Goesel) there will rarely be
a good reason to require that its terms be made public, be‐
cause making them public would not reveal anything about
judicial activity. See LEAP Systems, Inc. v. MoneyTrax, Inc., su‐
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pra, 638 F.3d at 220 (“settlement agreements reached without
court assistance or intervention will not be treated as ‘judi‐
cial records’ for purposes of the ‘right of access’ doctrine”);
Gambale v. Deutsche Bank AG, 377 F.3d 133, 143 (2d Cir. 2004);
Pansy v. Borough of Stroudsburg, 23 F.3d 772, 781 (3d Cir.
1994). One can imagine exceptions: cases in which the size,
large or small, of the settlement can be shown to be the result
of judicial doctrines that excessively (or so it might be
thought) favor one side in a class of disputes, or of rulings
made earlier in the case that by favoring one side or the oth‐
er influenced the terms of settlement. But for the most part
settlement terms are of potential public interest only when
judicial approval of the terms is required, or they become an
issue in a subsequent lawsuit, or the settlement is sought to
be enforced. E.g., Herrnreiter v. Chicago Housing Authority, 281
F.3d 634, 636–37 (7th Cir. 2002); Jessup v. Luther, supra, 277
F.3d at 929–30; Union Oil Co. v. Leavell, supra, 220 F.3d at 567;
Brown v. Advantage Engineering, Inc., 960 F.2d 1013, 1015–16
(11th Cir. 1992). In all such cases the presumption of a right
of public access to court documents should apply.
The net effects of compelled disclosure of settlement
terms are deeply uncertain. It’s been argued, on behalf of
disclosure, that settlement agreements, which often contain
terms going far beyond just a dollar amount, may conceal
safety hazards and other matters of acute public concern.
Richard A. Zitrin, “The Laudable South Carolina Court
Rules Must Be Broadened,” 55 S. Carolina L. Rev. 883, 887–89
(2004). Usually, however, all that is sought to be concealed is
the size of the settlement. Robert Timothy Reagan et al.,
Sealed Settlement Agreements in Federal District Court 1, 8
(Federal Judicial Center 2004). Yet making that information
public can be defended as encouraging prelitigation settle‐
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ments, since they are not open to public scrutiny, and thus as
economizing on litigation costs. Also and more important,
the more that is known about size (and other terms) of set‐
tlements, the easier it should be for prospective litigants to
predict the likely outcome of their own litigation, and ability
to predict outcome should both foster and simplify settle‐
ment. See Scott A. Moss, “Illuminating Secrecy: A New Eco‐
nomic Analysis of Confidential Settlements,” 105 Mich. L.
Rev. 867, 898–903 (2007); Ben Depoorter, “Law in the Shadow
of Bargaining: The Feedback Effect of Civil Settlements,” 95
Cornell L. Rev. 957, 974 (2010). Disclosure of sizes of settle‐
ments should also reduce the probability of lopsided settle‐
ments—ones that the parties would have recognized were
too large or too small had they had information about set‐
tlements in similar cases.
So there is an upside to disclosing settlement terms, but
also a downside. If parties know that the size of their settle‐
ment will become public, their settlement negotiations are
likely to become more complicated. See id. at 980–83; Note,
“Quality, Not Quantity: An Analysis of Confidential Settle‐
ments and Litigants’ Economic Incentives,” 154 U. Pa. L. Rev.
433, 456 (2005). The defendant will fear that if the amount is
large, making it public will invite more suits against him,
while the plaintiff’s lawyer will fear that if the amount is
small he will find settlement negotiations in his next case
more difficult—the defendant in that case will have a greater
incentive to resist, hoping to negotiate as good a bargain as
he has observed in the settlement agreement that has be‐
come public. The plaintiff’s lawyer who has agreed to a
modest settlement that the court has made public also may
fear that future clients, unimpressed by the amount he got in
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settlement for a previous client, will desert him for tougher‐
seeming negotiators.
Yet in the end this to and fro of competing considerations
may be of little importance. Depoorter in the article cited
above argues that most lawyers who negotiate settlements
are experienced and know from their own cases (and by
word‐of‐mouth from other lawyers) what the attainable
terms of settlement are likely to be in the class of cases that
they handle. So maybe there is little at stake in the decision
whether to allow or forbid parties to conceal the size of a set‐
tlement.
Against a background of such uncertainty, it’s difficult to
imagine what arguments or evidence parties wanting to con‐
ceal the amount or other terms of their settlement (apart
from terms that would reveal trade secrets or seriously com‐
promise personal or institutional privacy or national securi‐
ty) could present to rebut the presumption of public access
to judicial records. The parties before me haven’t even tried.
In neither case have they offered any reason for secrecy ex‐
cept that they have a confidentiality agreement. Obviously
that’s insufficient, and I could stop there: because there is po‐
tential public value to disclosing settlement terms, including
amount, parties have to give the judge a reason for not dis‐
closing them—and the fact that they don’t want to disclose is
not a reason. See Arthur R. Miller, “Confidentiality, Protec‐
tive Orders, and Public Access to the Courts,” 105 Harv. L.
Rev. 427, 492–93 (1991). But I’ll trudge on.
In Goesel an outsider to the litigation could not evaluate
the dispute over the district judge’s modification of the set‐
tlement without knowing the amount of the settlement (in‐
cluding fees and costs) before and after the modification.
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Nos. 13‐2434, 13‐2818
That is information important to future negotiations over at‐
torneys’ fees in cases in which the plaintiff is a minor; and no
good reason—in fact no reason at all—has been given for
thinking that concealment of the information would serve
some social purpose.
As for the other case, Massuda, there is no indication that
the amount of the settlement figured in the district court’s
decision. Nor is an unredacted copy of the settlement
agreement, which would reveal that amount, even in the ju‐
dicial record in either the district court or this court; as far as
I can tell the district judge never saw it. The only issue is
whether the redacted agreement, which is in the judicial rec‐
ord, should be under seal, as the defendants request. I can’t
understand why they want that, since almost everything of
any possible interest has been redacted, including the size of
the settlement. I asked them for an explanation, and their
unhelpful response was that they requested the seal “in an
abundance of caution” but “do not object to the Seventh Cir‐
cuit unsealing the redacted document if it decides to do so.”
Oddest of all, they had included a copy of the redacted set‐
tlement agreement in the appendix to their brief on appeal—
a public document—thus mooting their request for conceal‐
ment.
The request in Goesel is therefore denied; in Massuda it is
dismissed.
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