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In re Appraisal of Columbia Pipeline Group, Inc.

Court of Chancery of Delaware

August 30, 2018

IN RE APPRAISAL OF COLUMBIA PIPELINE GROUP, INC.

          Submitted: June 22, 2018

          Stephen E. Jenkins, Andrew D. Cordo, Marie M. Degnan, ASHBY & GEDDES, P.A., Wilmington, Delaware; Marcus E. Montejo, Kevin H. Davenport, John G. Day, PRICKETT, JONES & ELLIOTT, P.A., Wilmington, Delaware; Mark Lebovitch, Jeroen van Kwawegen, Christopher J. Orrico, John Vielandi, BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP, New York, New York; Attorneys for Petitioners.

          Martin S. Lessner, James M. Yoch, Jr., Paul J. Loughman, YOUNG CONAWAY STARGATT & TAYLOR, LLP, Wilmington, Delaware; Brian J. Massengill, Linda X. Shi, MAYER BROWN LLP, Chicago, Illinois; Attorneys for Respondent.

          MEMORANDUM OPINION

          LASTER, V.C.

         As contemplated by Court of Chancery Rule 5.1, the petitioners in this appraisal proceeding filed notices challenging the confidential treatment of certain filings (the "Challenged Materials"). In response to the notices, respondent Columbia Pipeline Group, Inc. ("Columbia") moves for continued confidential treatment. Significantly, Columbia does not argue that the Challenged Materials were properly designated as confidential. Instead, Columbia contends that the petitioners are seeking improperly to make information public so it can be used in other litigation. According to Columbia, this effort violates a provision in a confidentiality order entered in this action, which states:

Discovery Material shall be used solely for purposes of this Litigation and shall not be used for any other purpose, including . . . any other litigation or proceeding; provided, however, that the foregoing shall not apply to Discovery Material that is or becomes part of the public record.[1]

         Columbia regards the petitioners' efforts as so facially improper that it believes the court should not even consider whether the Challenged Materials warranted confidential treatment in the first place.

         The Challenged Materials are judicial records. Under the First Amendment of the United States Constitution and as a matter of common law, the public has a presumptive right of access to judicial records.[2] "The public's right of access to judicial records has been characterized as 'fundamental to a democratic state[.]'"[3] The right of access enables the public to "judge the product of the courts in a given case."[4] This, in turn, "helps ensure 'quality, honesty and respect for our legal system.'"[5] Consequently, "all court proceedings are presumptively open to the public."[6] "Denial of access to litigation material must be approached from the premise that [a judicial] restraint [on access] should not be imposed unless strong justification exists for such action."[7]

         Court of Chancery Rule 5.1 "reflects the Court of Chancery's commitment to these principles."[8] It states that, "[e]xcept as otherwise provided" in Rule 5.1, "proceedings in a civil action are a matter of public record."[9] This language "makes clear that most information presented to the Court should be made available to the public."[10]

         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.

         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."[11] The court will not order confidential treatment "merely because disclosure has the potential for collateral economic consequences."[12] Instead, the harm must be "particularized."[13]

         In this case, Columbia does not assert, much less demonstrate, that any of the Challenged Material is confidential within the meaning of Rule 5.1. That is the end of the matter.

         Columbia's contention that the petitioners are violating the use restriction glosses over the fact that the use restriction does not apply to information that is public or which becomes public. A judicial record is a presumptively public filing. Under Rule 5.1, unless the party seeking confidential treatment meets the standard for confidential treatment, the information becomes public. Here, Columbia has failed to meet the standard for confidential treatment, so the use restriction does not apply. Columbia puts the cart before the horse by asking the court to evaluate whether the use restriction has been breached before determining whether it applies.

         The exception to the use restriction for information that is public or which becomes public also addresses Columbia's assertion that it relied on the protections of the confidentiality order. Those protections included an exception for information that becomes public. Use of the information in compliance with that exception does not infringe upon Columbia's reliance interest.[14]

         Rather than confronting the requirements of Rule 5.1 and the confidentiality order, Columbia resorts to a policy-based argument. Columbia perceives injustice in the fact that the petitioners in this appraisal proceeding have been able to obtain broad discovery into the sale process for Columbia, and Columbia perceives further injustice in the possibility that discovery material which becomes public because of its status as a judicial record might be used in other litigation. But Columbia's decision to put its sale process at issue in this proceeding is a choice that Columbia made. "Section 262(h) neither dictates nor even contemplates that the Court of Chancery should consider the transactional market price of the underlying company."[15] No one forced Columbia to rely on the deal price as the principal evidence of fair value. Having chosen to advance that valuation argument, Columbia opened the door to discovery into its sale process.

         There is also no injustice in the public having access to information in judicial filings and potentially using the information to identify and pursue potential wrongdoing. As Justice Brandeis famously observed, "Sunlight is said to be the best of disinfectants; electric light the most efficient policeman."[16] The Delaware Supreme Court has recognized that one benefit of the appraisal remedy is the ability of a petitioner to uncover fraud and other wrongdoing that might not otherwise be identified, because "only shareholders pursuing discovery during an appraisal action are likely to acquire the relevant information needed to pursue a fraud action if such information exists."[17] In part because the high court viewed appraisal actions as serving this important public policy, the justices held that a stockholder who had demanded appraisal and pursued an appraisal proceeding could subsequently file and simultaneously litigate a breach of fiduciary action based on information uncovered during discovery in the appraisal proceeding.[18]

         In my view, these public policy interests counsel against a special exception to Rule 5.1 under which non-confidential information in judicial records in an appraisal proceeding would remain confidential, simply to mitigate the risk of additional litigation for the respondent. Columbia, by contrast, wishes to keep all of its information secret and out of the public view, regardless of whether the information deserves confidential treatment in the first place, and regardless of what the information shows. By taking this approach, Columbia seeks to transform a confidentiality order that this court entered to protect truly ...


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