Delaware Court of Chancery Rule 5.1 provides the standard and an intricate series of procedures for the parties to seek “confidential treatment” to prevent pleadings filed with the court from being publicly available. The prior version of the rule referred to this procedures as “filing under seal.” Notably, analogous procedures in federal court employ a much different standard.
A recent pair of Orders from the Delaware Court of Chancery featured the unusual shifting of fees in connection with Rule 5.1, as an exception to the American Rule where each party pays its own fees. See Robert Garfield v. Getaround, Inc., C.A. No. 2023-0445-MTZ, Order (Del. Ch. Oct. 26, 2023). This is the first of two Orders that need to be read together to put them in context. The second Order is noted below.
The Orders understandably do not feature the typically copious background facts provided in opinions, but it includes sufficient information to make the point for purposes of this short blog post.
The noteworthiness of the Orders is that they will remind counsel that under Rule 5.1, when a party disagrees about what portions of a pleading should be designated as confidential, the party harboring the disagreement does not have the right to publicize the information sought to be kept confidential—until the court rules on the issue or unless the procedures provided in Rule 5.1 are followed.
With that background, the relatively short Order deserves to be quoted verbatim:
“It was not for Plaintiff to unilaterally decide that information Defendant has designated and redacted as confidential in its opposition could be publicized in Plaintiff’s reply. Defendant bore the burden of designation under Court of Chancery Rule 5.1(b)(3). Nor was it for Plaintiff to resists Defendant’s call to withdraw Plaintiff’s Reply to publicize information Defendant had designated. Rather, Plaintiff’s recourse was to file a Motion of Challenge to the Opposition and the Reply under Court of Chancery Rule 5.1(f).
The parties shall work with the Register in Chancery to place Plaintiff’s Reply under seal. The parties shall follow Rule 5.1’s procedures to address any remaining disagreements as to whether information in that reply was fairly designated as confidential.”
The first Order was in response to a Motion by the Defendant to place under seal the Reply of the Plaintiff in opposition to the Defendant’s Motion to File Under Seal because that Reply was wrongly filed in a publicly available manner.
In a second Order shifting fees under the bad-faith exception to the American Rule, the Court reasoned that the Plaintiff’s:
“insistence on publicizing information Defendant designated as confidential serves no plain purpose other than agitation. I conclude the publication in the opposition to the motion to seal was in bad faith. Fees are shifted for the Motion to Seal the Opposition.”
Garfield v. Getaround, Inc., C.A. No. 2023-0445-MTZ, Order (Del. Ch. Oct. 27, 2023)