For those who need to understand the prerequisites for, and limitations of, maintaining court filings as confidential, the recent Delaware Court of Chancery opinion must be read in the matter styled: In re Appraisal of Columbia Pipeline Group, Inc., Cons. C.A. No. 12736-VCL (Del. Ch. Aug. 30, 2018).
This decision describes when documents filed with the court, even if labeled “confidential” must be disclosed to the public, and pithily explains why relatively few documents filed with the court qualify for continuing confidential treatment, which in the past have been described as “filings under seal.”
The court explained that under Chancery Court Rule 5.1, and its underlying public policy reasons described with citations to many authorities, as well as constitutional principles that animate that public policy, the presumption remains that all judicial records are available to the public. Other reasons also prevented the company in this case from prevailing in its efforts to keep court records under seal, because the Company did not meet its burden of proof.
This gem of a decision includes bountiful citations to constitutional principles that form the basis for the presumption that all court proceedings are open to the public and that filings with the court are a matter of public record. See footnotes 1-10 and accompanying text.
The court’s opinion is based largely on Court of Chancery Rule 5.1(b)(2), which defines the “good cause” requirement that must be satisfied for public filings with the court to be kept confidential, as follows: good cause shall exist only if the public interest in access to court proceedings is outweighed by the harm the public disclosure of sensitive, non-public information would cause. Such information includes trade secrets and sensitive financial, business or personnel information, but does not include information that may be awkward to disclose “merely because disclosure has the potential for collateral economic consequences.” See footnotes 11-13.
Under Rule 5.1, unless the party seeking confidential treatment meets the standard for confidential treatment, the information becomes public. Columbia failed to meet those prerequisites in this case.The court did observe that there is an exception to the use restriction for information that is already public or which becomes public.
The court reasoned that there is no injustice in the public having access to information in judicial filings and potentially using that information to identify and pursue potential wrongdoing. The court quoted from Justice Brandeis who famously observed that: “Sunlight is said to be the best of disinfectants; electric light the most efficient policeman.” See footnote 16.
As a final procedural note, the court explained that Rule 5.1 does not contemplate a reply, after a motion and a response to that motion to challenge or maintain confidentiality, and therefore, the court struck the reply that was filed, although for the sake of completeness it did address the points made in that reply.
In conclusion, the court reasoned that public policy interests work against a special exception to Rule 5.1 under which non-confidential information and judicial records in an appraisal proceeding would remain confidential, simply to mitigate the risk of additional litigation for the respondent.