This post was prepared by Brian E. O’Neill, Esq. of Eckert Seamans.
The Court of Chancery recently denied a motion to maintain the confidentiality of redactions in the public version of the complaint and briefs related to the defendants’ motion to dismiss. In Oklahoma Firefighters Pension Retirement System v. Corbat, C.A. No. 12151-VCG (Del. Ch. Nov. 15, 2017), Vice Chancellor Glasscock analyzed Rule 5.1’s factors to balance the harm caused by disclosure with the public’s right to monitor court proceedings.
Background: The defendants, Citigroup, Inc. and some of its directors and executives, argued that the unsealing of the redacted portions of the complaint and briefings was not mandated because the public had little interest in the sealed contents. The defendants also argued that the unsealed information would disclose internal compliance efforts, which could pose harm to the financial security of the U.S., and that the unsealing would deter management and employees from providing candid advice to the board of directors.
Analysis: The Court found that unsealing of the information was warranted under the Rule 5.1 analysis. The Court noted that “[t]he public, particularly the Delaware public, has a strong interest in the workings of a Delaware entity and its compliance with substantive law.” Vice Chancellor Glasscock then noted that in light of the public’s interest in the unsealing of the information, the Court must determine “whether confidentiality is nonetheless in the interest of justice, because the harm of disclosure outweighs that public interest.”
The Court found confidentiality was no longer required, noting that some of the redacted communications were seven years old, and therefore stale. The Court found that the redacted information appeared to be embarrassing to management, but ruled that embarrassment is an insufficient basis to support renewed confidentiality under Rule 5.1.
Holding: In denying defendants’ motion for preserving confidentiality of the filings, the Court ordered their Delaware counsel to review the redactions within twenty days and to “designate for continued confidentiality only those that involve current procedures, revelation of which poses a substantial risk to the goal of safeguarding the U.S. financial system from illicit activity.” The Court also ruled that it would review any remaining redactions after the twenty day review period to determine whether continued confidentiality was justified.
Takeaway: Chancery will closely scrutinize requests to maintain confidentiality of court filings in order to determine if the high threshold set by Rule 5.1 has been met.