Opinion
No. 00 Civ. 2426
February 26, 2001
MEMORANDUM OPINION AND ORDER
This mater has been referred to me to resolve a discovery dispute involving the New York Stock Exchange (the "Exchange"). The Exchange was formerly a third-party defendant in this matter but the claims against it were dismissed by the Order of the Honorable Jed S. Rakoff, United States District Judge, dated September 29, 2000. On February 13, 2001, I conducted a tape-recorded conference call with counsel for all parties to set a briefing schedule concerning the motion, and, during the course of that conference call, counsel for the Exchange requested that the parties' papers concerning the motion be maintained under seal unless the motion against the Exchange was successful. I asked the parties to make written submissions concerning this preliminary matter, and both the Exchange and the defendants have submitted letter briefs addressing the issue of conditionally sealing the record. For the reasons set forth below, the application to seal the record is denied.
Prior to its being dismissed from this action, the defendants requested certain documents from the Exchange, and, based on the parties' submissions, it appears that the Exchange both objected to the requests and produced some documents in response to the requests. Defendants subsequently received additional documents from the SEC which included documents that the SEC had received from the Exchange. Defendants' claim that the SEC's production of Exchange documents demonstrates that the Exchange improperly withheld documents. Defendants' will, therefore, seek the imposition of sanctions against the Exchange. There is no claim presently made that the documents that are the subject of the underlying motion contain trade secrets or are otherwise entitled to confidential treatment. Rather, the Exchange seeks the sealing order because it believes that the motion will be meritless, is being made for the benefit of the media and will unnecessarily besmirch the reputation of the Exchange.
As a general proposition, judicial proceeding are presumptively open to public scrutiny. As explained by Judge Leisure in Encyclopedia Brown Prods., Ltd. v. Home Box Office, Inc., 26 F. Supp.2d 606, 610-11 (S.D.N.Y. 1998)
Accessibility of judicial documents and proceedings to the public is a centuries-old component of our legal system. United States v. Amodeo, 44 F.3d 141, 145 (2d Cir. 1995) (hereinafter "Amodeo I") Openness of judicial workings is, among other things, crucial to the citizenry's ability to "keep a watchful eye on the workings of public agencies," Nixon v. Warner Communications, Inc., 435 U.S. 589, 598, 98 S.Ct. 1306, 55 L.Ed.2d 570 (1978), especially with respect to the judges of the Article III courts, who are not elected. Thus, while public access to court records and proceedings is not absolute, there has been a long-standing presumption in its favor and against sealing. See id.
The Court of Appeals for the Second Circuit has held that the decision whether to seal court records requires weighing the importance of the presumption of public access, depending upon the type of judicial function at issue, against the interests sought to be protected by sealing. United States v. Amodeo, 71 F.3d 1044, 1047-1051 (2d Cir. 1995) (hereinafter "Amodeo II"). The motives of the party invoking the presumption of public access, and those of the party opposing such access, may be considered insofar as they bear on the veracity of the parties' asserted positions. Cf. id. at 1050. In all events, "a judge must carefully and skeptically review sealing requests to insure that there really is an extraordinary circumstance or compelling need." In re Orion Pictures Corp., 21 F.3d 24, 27 (2d Cir. 1994)
(footnote omitted). In addition to the reasons stated by Judge Leisure, the transparency of judicial proceedings also fosters public confidence in the working of the judiciary. See generally Press-Enterprise Co. v. Superior Court, 464 U.S. 501, 508 (1984) Gannett Co v. DePasquale, 443 U.S. 368, 429 (1979) (Blackmun, J., concurring in part and dissenting in part); Phoenix Newspapers, Inc. v. United States District Court, 156 F.3d 940, 946 (9th Cir. 1998). Thus, although there can be no doubt that a court has the power to seal all or part of its proceedings, it is a power that should be exercised with great caution.
In this case, the basis for the sealing request — allegedly false allegations of misconduct in discovery by the Exchange — is weak. For better or for worse, allegations of intentional "stone walling" are commonly made in many discovery disputes, so much so in this Court that the term has become as hackneyed and meaningless as "fishing expedition." Thus, the nature of the charge defendants seek to assert against the Exchange does not involve unique or unusually offensive conduct.
Second, the Exchange is not a uniquely vulnerable entity that will whither in response to defendants' charge of wrongdoing or suffer any harm at all. In the recent past, the Exchange has been publicly charged with antitrust violations, Higgins v. New York Stock Exchange, 942 F.2d 829 (2d Cir. 1991), fraud, Murphy v. McDonnell Co., 553 F.2d 292 (2d Cir. 1977), Hirsch v. duPont, 553 F.2d 750 (2d Cir. 1977); Leytman v. New York Stock Exchange, 95 CV 902, 1995 WL 761843 (E.D.N.Y. Dec. 6, 1995), failure to supervise its members, Rich v. New York Stock Exchange, 522 F.2d 153 (2d Cir. 1975), and gender-based discrimination, Martens v. Smith-Barney, Inc., 190 F.R.D. 134 (S.D.N Y 1999). Nevertheless, there can be no doubt that the Exchange has prospered and remains one of the world's premiere financial markets, if the not the premiere financial market. Thus, there is little reason to believe that the outcome of defendants' proposed motion, whatever it is, will have a substantial adverse impact on the Exchange.
Third, if the Exchange's argument here were sufficient to justify sealing, a vast array of judicial proceedings would have to be sealed. Ignoring for the moment the heinous nature of many of the criminal charges filed in this Court, civil complaints alleging fraud, racketeering, grossly offensive acts of employment discrimination and all manner of commercial dishonesty are routinely filed in this Court, frequently involving particularly vulnerable victims. The wrongdoing defendants seek to allege here is not qualitatively more severe than that alleged in many civil actions. If the possibility of embarrassment from the charges alone justified sealing here, the sealing of civil proceedings would rapidly become the general rule.
Finally, to the extent that the Exchange accuses defendants and their counsel of seeking to wage a media campaign against the Exchange, the Exchange's papers do not address the fact that defendants and their counsel have a right under the First Amendment to discuss the charges and the proceedings against them with anyone who is willing to listen. At this point, there is no way of knowing whether defendants' charges against the Exchange are true or false. Even if false however, however, defendants have at least a limited First Amendment right to make publicly whatever arguments they seek to make concerning the charges that have been publicly filed against them. Philadelphia Newspapers v. Hepps, 475 U.S. 767, 778 (1986) ("To provide "`breathing space,'" . . . for true speech on matters of public concern, the Court has been willing to insulate even demonstrably false speech from liability, and has imposed additional requirements of fault upon a plaintiff in a suit for defamation." (citations omitted; emphasis in original)). Although I fully appreciate that there are situations where the sealing of judicial proceedings is appropriate and instructions to counsel to abstain from discussing the case with the media are entirely warranted, the charge involved here — that a commercial entity has improperly withheld documents in discovery — simply does not raise the safety, fairness or privacy concerns that typically justify the extraordinary remedy of sealing part of the record.
If the Exchange is correct and the motion defendants propose is baseless, the Exchange has adequate remedy under the provisions of Rules 11 and 37(a)(4) of the Federal Rules of Civil Procedure.
Accordingly, for all the foregoing reasons, the Exchange's application to seal conditionally the papers to be filed in connection with defendants' proposed sanctions motion against the Exchange is denied in all respects.
In order to preserve the right of the Exchange to take a meaningful appeal from this Order, both this Order and the letter briefs submitted by the Exchange and defendants shall be filed under seal until March 15, 2001. In the absence of a further Order from the Court, the Clerk is directed to unseal this Order and the letters from counsel for the Exchange dated February 16 and 20, 2001 and the letter from defendants' counsel dated February 21, 2001, at 5:00 p.m. on March 15, 2001.