Wilmington Savings Fund Society, FSB v. Houston Casualty Company et al

Filing 138

AMENDED MEMORANDUM re 137 Order-Memorandum. Signed by Judge Mark A. Kearney on 8/8/2018. (crb)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
WILMINGTON SAVINGS FUND
SOCIETY, FSB

CIVIL ACTION

NO. 17-1867

v.
HOUSTON CASUAL TY COMPANY, et
al

August 8, 2018

KEARNEY, J.

AMENDED MEMORANDUM 1
Businesses know there is no such thing as a free lunch.

Yet when they ask public

servants to resolve their complex disputes, the businesses often cite and attach internal
documents which may not be necessary to meet their pleading burden and ask us to preclude the
public access which is fundamental to federal courts. We appreciate the types of extraordinary
private information or confidential and trade secret information which may preclude public
access - particularly as to future plans which could impact the businesses' confidential business
model. But the federal courts are not private arbitrations and the price to pay for the public trust
in resolutions reached under Article III includes the public viewing of controversies.
Pleading is not evidence. A cross-claim is not a summary judgment memorandum. This
internal non-privileged information partially representing private discussions between opposing
parties may be sensitive. We have no basis it rises to the level necessary to preclude public
access. To the extent their lawyers believe they need this level of detail to move forward under
Fed.R.Civ.P. 8, the businesses cannot have it both ways in a federal court.
Defendant Houston Casualty Company now seeks leave to file an indemnity cross-claim
through a motion under seal. The proposed Motion and attached documents reference a series of

agreements, arbitration information and settlement negotiations plead in
This information may be material to their claim for indemnity for trial.

th~

proposed Motion.

But it asks us today to

seal or redact significant portions of its proposed Motion for leave which describes the terms of
agreements for our interpretation.

Houston Casualty's stated cause is based on the parties
Even assuming this information is not stale, we

treating the 2010 negotiations as confidential.

need more than a conclusory claim to preclude public access.
The common law right of access to judicial proceedings and judicial records" is a right
which our court of appeals holds is '"beyond dispute."' 2

The burden of justifying the

confidentiality of each document sought to be covered by a protective order remains on the party
seeking the order. 3 Right of access to judicial records is not absolute. 4
We have "supervisory power over [our] own records and files" and may deny access
"where court files [may] become a vehicle for improper purposes." 5 Our court of appeals
permits us to seal documents where justice requires. 6 Right of access "promotes public
confidence in the judicial system by enhancing testimonial trustworthiness and the quality of
justice dispensed by the court." 7 A "'strong presumption' in favor of accessibility attaches to
almost all documents created in the course of civil proceedings." 8 Beyond evidence, the
common law right of access includes all judicial records and documents, "transcripts, evidence,
pleadings, and other materials submitted by litigants ... " 9
We do not preclude public access absent particularized good cause. "Good cause is
established on a showing that disclosure will work a clearly defined and serious injury to the
party seeking closure. The injury must be shown with specificity." 10 "Broad allegations of harm,
unsubstantiated by specific examples or articulated reasoning," do not support a good cause
showing. 11 We must make "specific, rigorous findings before sealing" court filings. 12

2

Houston Casualty offers a conclusory reason to seal both its motion and exhibits 2-11:
"[b]ased on the non-public and confidential nature of these documents." It seeks to redact
portions of its proposed Motion for leave "relating to the [June 24, 2010 Stock Purchase
Agreement] which - if disclosed to the public - would reveal confidential, sensitive information
about the parties." 13 This conclusion relating to 2010 information is the entirety of the clearly
defined and serious injury.

We have no specificity. Houston Casualty does not come close to

the standard we must show to preclude the public from obtaining access.
Possibly

recognizing

Houston

Casualty

could

not

14

adequately

describe

their

confidentiality concerns, BB&T Corporation and the Plaintiff filed separate memoranda offering
more specific grounds to seal exhibits 2, 3, 5, 10 and 11. 15 Exhibit 2 is a stock purchase
agreement which they claim has little impact on whether we should allow Houston Casualty to
amend its answer. Their argument as to this stock purchase agreement otherwise fails to show
particularized harm from disclosure.

Exhibit 3 is part of the 2010 stock purchase agreement

which Plaintiff argues is "obviously sensitive business information not directly relevant to the
claims ... " This is not enough specificity. It is not obvious to us. Further, if the document does
not affect our present decision to grant leave to amend (especially if the parties consent),
Houston Casualty may not wish to attach it to the proposed motion. BB&T Corporation offers
no better explanation for sealing this exhibit 3. Exhibit 4 is a Notice of Arbitration and Amended
Statement of Claim.

BB&T Corporation and Plaintiff argue we should seal this document

because we would otherwise discourage arbitrations. The parties' wishes in a private arbitration
- including their reasons for wanting to arbitrate one dispute and not this one - are not outcome
determinative of our obligation to ensure public access. Neither party shows us a particularized
harm to the parties from allowing public access to an arbitration demand between Universitas

3

Education LLC and Plaintiff.

Exhibit 10 is a draft complaint and Exhibit 11 is a tolling

agreement. They refer to negotiations between the parties relating to pending litigation. The
parties do not show us reasons for sealing these discussions.
While BB&T Corporation and Plaintiff present more a fulsome argument, they still do
not show a clearly defined and serious injury other than the risk of their business dealings being
known to the public who pays for the tribunal they invoke. We cannot meet our independent
burden of precluding public access to these documents. BB&T also argues we should grant the
motion because all parties agree to the seal. It misses the point - our obligation is to the process
and not to the parties' agreements. Parties cannot seal public records by agreement. The parties
present no particularized good cause for sealing the identified redacted information other than
claiming confidentiality simply because of a private agreement.

Their agreement does not

govern our obligation to ensure public access. 16 Unlike discovery exchanges, the parties now ask
a public servant to review a public filing and grant relief. 17
Plaintiff also claims all or parts of proposed exhibits 5-9 should be redacted or sealed as
they are letters referring to and quoting the 2010 Stock Purchase Agreement. If offers no other
cause. Conclusory claims are insufficient. We also found no stated particularized harm in public
access to the 2010 Stock Purchase Agreement.
We need a clearly defined and serious injury with articulated reasoning to preclude public
access. The parties have not met this standard of specificity first described in Pansy. 18 In
applying the factors offered by our court of appeals, there is no basis to find embarrassment or
harm to competitive standing in the marketplace. 19 This is not a case involving future business
plans. If the parties consent or we order an amended answer, the issue may be interpreting past
conduct under a long established contractual obligation. This is not a case involving privacy

4

interests. The case does not appear to involve public concerns.

We are not reviewing the

sharing of information among the parties to ensure fairness - in which case we authorized the
parties enter into a private confidentiality agreement for discovery materials to ensure fulsome
production.

We are not aware of trade secrets.

We are also not reviewing a settlement

agreement conditioned on confidentiality. 20
On balance, Houston Casualty, BB&T Corporation and Plaintiff have not met their
burden to seal allegations or documents partially comprising a motion for leave to file an
amended answer with cross-claim.

The parties also have alternatives: they could consent to

amendment and avoid the extensive allegations or, upon closer review of their Rule 8 pleading
obligations, may omit some of the material which is not necessary for our analysis.
We do not see - at least today - particularized grounds to block public access because the
parties are entities. 21 If they wish a public servant's consideration of materials which are not
trade secrets but may be "sensitive" to their business, i.e., may affect their balance sheet based on
past conduct, they should expect public review in a federal courthouse just like every other
litigant.
As the parties have not met their burden, we must deny their motion to seal the proffered
materials should they elect to include them in a filing. We do not lift the redaction on the present
motion to seal.

1

We amend today's Order-Memorandum (ECF Doc. No. 137) only to correct inadvertent
typographical errors in the Memorandum not affecting our reasoning.
2

LEAP Sys., Inc. v. MoneyTrax, Inc., 638 F.3d 216, 220 (3d Cir. 2011) (quoting Littlejohn v. Bic
Corp., 851F.2d673, 677-78 (3d Cir.1988)).

3

Id. at 1122.

5

4

Id. at 221 (citing Nixon v. Warner Commc'ns, 435 U.S. 589, 598 (1978)).

s Id.

7 Id.
8

Id. (internal quotations omitted).

9

United States v. Martin, 746 F .2d 964, 968 (3d Cir.1984).

10

Publicker Indus., Inc. v. Cohen, 733 F.2d 1059, 1071 (3d Cir.1984).

11

Cipollone v. Liggett Grp., Inc., 785 F.2d 1108, 1121 (3d Cir.1986), cert. denied, 484 U.S. 976
(1987).
12

13

Bernstein v. Bernstein Litowitz Berger & Grossman LLP, 814 F.3d 132, 141 (2d Cir. 2016).
ECF Doc. No. 128, ~~ 5, 7.

14

We appreciate a party may not always know why an opposing party asserts confidentiality. We
expect experienced federal trial counsel will cooperate to determine the particularized harm
claimed by opposing parties to aid motions to seal other parties' documents.
15

They do not offer grounds to seal language in Houston Casualty's proposed Motion for leave.
See Bradford & Bigelow, Inc. v. Richardson, 109 F. Supp. 3d 445, 447 (D.Mass. 2015) ("It
stems from the parties' misconception that they, rather than the court, get to decide when
documents are sealed.").
16

17

We recognize parties may agree to hold discovery confidential and we will enforce a breach of
the confidentiality agreement so long as it does not affect our independent obligation to ensure
public access in most instances. North Jersey Media Grp., Inc. v. United States, 836 F.3d 421
(3d Cir. 2016).
18
Pansy v. Borough ofStroudsburg, 23 F.3d 772 (3d Cir. 1994).
19

Glenmede Trust Co. v. Thompson, 56 F.3d 476 (3d Cir. 1995).

°Fair Laboratory Practices Assocs. v. Riedel,

2

666 F. App'x 209 (3d Cir. 2016).

21

We rarely review an individual's claims for confidentiality in financial disputes other than
private identifiers. For example, we have not seen a seal order for an unsuccessful home
purchase or negotiations with an adjuster seeking insurance coverage.

6