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ADT Holdings, Inc. v. Harris

Court of Chancery of Delaware

September 28, 2017

ADT HOLDINGS, INC., in its individual capacity and as attorney-in-fact for ZONOFF, INC, and ADT LLC, Plaintiffs,

          Date Submitted: September 19, 2017

          Steven L. Caponi, K&L GATES LLP, Wilmington, Delaware; Attorney for Plaintiffs.

          Megan Ward Cascio, Lauren Neal Bennett, MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, Delaware; Mark C. Scarsi, Ashlee N. Lin, Katherine R. Pierucci, J. Samuel Payne, MILBANK, TWEED, HADLEY & McCLOY LLP, Los Angeles, California; Attorneys for Defendants.

          Jeremy D. Anderson, FISH & RICHARDSON P.C., Wilmington, Delaware; Attorney for Nonparty Legrand Home Systems, Inc.


          LASTER, V.C.

         On the eve of trial, nonparty Legrand Home Systems, Inc. ("Legrand") moved to seal certain trial exhibits so that they would not become part of the public trial record. Legrand also sought to close the courtroom for any testimony or attorney argument regarding the exhibits. Legrand claimed this relief was necessary because the exhibits contained sensitive, confidential information and that Legrand would suffer irreparable harm if the information was made public. The parties to the case did not oppose Legrand's motion. The court, however, bears an independent obligation to balance the harm Legrand claims it will suffer against the public right of access, which is at its height during a trial. Legrand's motion is denied.

         "The public's right of access to judicial records has been characterized as fundamental to a democratic state."[1] The right of access enables the public to "judge the product of the courts in a given case."[2] This, in turn, "helps ensure 'quality, honesty and respect for our legal system.'"[3] Consequently, "all court proceedings are presumptively open to the public."[4]

         Court of Chancery Rule 5.1 "reflects the Court of Chancery's commitment to these principles."[5] It states that, "[e]xcept as otherwise provided" in Rule 5.1, "proceedings in a civil action are a matter of public record."[6] This language "makes clear that most information presented to the Court should be made available to the public."[7]

         Rule 5.1(b)(3) provides that a "party or person seeking to obtain or maintain Confidential Treatment always bears the burden of establishing good cause for Confidential Treatment." Rule 5.1(b)(2) defines "good cause" as follows:

For purposes of this Rule, "good cause" for Confidential Treatment shall exist only if the public interest in access to Court proceedings is outweighed by the harm that public disclosure of sensitive, non-public information would cause. Examples of categories of information that may qualify as Confidential Information include trade secrets; sensitive proprietary information; sensitive financial, business, or personnel information; sensitive personal information such as medical records; and personally identifying information such as social security numbers, financial account numbers, and the names of minor children.[8]

         In determining whether good cause has been established, the court must "balanc[e] ... the public interest against the harm that public disclosure might entail with respect to sensitive nonpublic information."[9] The court will not order confidential treatment "merely because disclosure has the potential for collateral economic consequences."[10] Instead, the harm must be "particularized."[11]

         The fact that Legrand's motion is unopposed does not change these standards. Although the parties to the case have not opposed it, the motion seeks to overcome the public interest in open trials. The real opposition is from the public. Indeed, when considering such a motion, the court "serves not only the litigants before it; it has a public function as well."[12] It is therefore necessary for the court to examine Legrand's motion to determine whether it has carried its burden, notwithstanding the lack of a formal opposition to the motion.

         Legrand also argued that, as a nonparty, it should benefit from a lighter burden when seeking to obtain confidential treatment. It is true that, when refusing to grant a party's motion to seal exhibits, the court has reasoned, in part, that "[t]hose who decide the litigate in a public forum (rather than pursue a private dispute-resolution procedure) must do so in a manner consistent with the right of the public to follow and monitor the proceedings and result of their dispute."[13] But that principle does not alter the necessary showing to overcome the public's right of access. An everyday reality of doing business is the possibility that a business partner may end up in litigation in a public court. For information to be sealed from public view, the person seeking confidential treatment must make the showing required by Rule 5.1(b)(3), which applies equally to any "party or person" who wishes to keep a matter secret.[14]

         Legrand's motion is cursory and conclusory. Legrand claims that the exhibits contain "confidential, proprietary, and commercially-sensitive business information."[15] ...

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