Sixth Circuit Sends Clear Message on Tough Standard for Sealing Judicial Records

Prior to exchanging sensitive discovery in your most recent federal court case, you draw up a comprehensive Stipulated Protective Order with opposing counsel and submit it to the judge. The judge signs it. In the Stipulated Protective Order, the parties designate what is confidential, and the parties are required to move to seal any confidential documents prior to filing. You follow that provision and move to seal the exhibits to your motion for summary judgment that were designated confidential, relying upon the Stipulated Protective Order, but your motion to seal is denied. What gives?

The short answer is that simply designating a document confidential in discovery pursuant to a Stipulated Protective Order or other similar order or agreement is not enough, something the Sixth Circuit has made crystal clear in a series of opinions and orders issued in 2016 and 2017.[1] While the law on the issue of sealed court records is hardly new, these recent decisions serve as notice to federal court practitioners in the Sixth Circuit: sealing court records should not be presumed. To the contrary, it should be difficult to seal documents filed with the federal courts in the Sixth Circuit.

To give federal court practitioners a sense of the issues involved when seeking to seal court records, this article looks at four cases. The first is the Sixth Circuit’s foundational case from 1983, Brown & Williamson Tobacco Corp. v. FTC.[2] The second is probably the most influential of the recent Sixth Circuit opinions on the subject, Shane Group Inc. v. Blue Cross Blue Shield.[3] And the final two are opinions by now Chief Judge Crenshaw from the Middle District of Tennessee that serve as cautionary tales from the district courts. The article will conclude with a quick summary of practice pointers when dealing with sealed court records issues in this new environment the Sixth Circuit has created with its recent rulings.

‘Brown & Williamson’

To more fully understand the Sixth Circuit’s interest in sealed judicial records, it is important to understand the foundational case underlying these decisions. In Brown & Williamson, the court took up the issue of sealed court records on its own motion after the issue was raised by a public interest group.[4] Without discussion, the district court had sealed the entire record in the case, which included documents submitted to the FTC pursuant to a confidentiality agreement by Brown & Williamson and four other cigarette companies in related administrative proceedings.[5] Relying upon both the First Amendment and common law rights of access to judicial records, the Sixth Circuit unsealed all previously sealed documents.[6]

The Brown & Williamson decision relied upon two key Supreme Court decisions: Nixon v. Warner Communications Inc. and Richmond Newspapers Inc. v. Virginia.[7] In Nixon, the Supreme Court recognized a common law right of access to judicial records, whereas Richmond Newspapers held that there is a constitutional right of access to criminal trials.[8] Based upon the fact that “the open courtroom has been a fundamental feature of the American judicial system,” the Brown & Williamson court noted that the principles from Richmond Newspapers that apply in analyzing open court issues also apply to open judicial records “because court records often provide important, sometimes the only, bases or explanations for a court’s decision.”[9]

Against this backdrop, the Sixth Circuit laid the foundation for how decisions should be made when a party seeks to file a document under seal. First, the right of access is not absolute, but there is a “strong presumption in favor of openness.”[10] Second, the standard of review is abuse of discretion, but the trial judges do not operate without standards and are “not insulated from review merely because the judge has discretion in this domain.”[11] The court acknowledged several competing interests that might be sufficient to overcome the presumption: (1) a criminal defendant’s right to a fair trial; (2) trade secrets; (3) national security; and (4) “certain privacy rights of participants or third parties.”[12]

The court also noted what was insufficient to justify sealing judicial records. “Simply showing that the information would harm the company’s reputation is not sufficient to overcome the strong common law presumption in favor of public access to court proceedings and records.”[13] “[T]he natural desire … to shield prejudicial information contained in judicial records from competitors and the public … cannot be accommodated by courts without seriously undermining the tradition of an open judicial system.”[14] The court, in fact, took this a step further, explaining that “common sense tells us that the greater the motivation a corporation has to shield its operations, the greater the public’s need to know. In such cases, a court should not seal records unless public access would reveal legitimate trade secrets, a recognized exception to the right of public access to judicial records.”[15] The court also rejected reliance on a confidentiality agreement as a basis for sealing court records and declined to create a new exception that made documents confidential when confidentiality was “promised during an agency investigation.”[16] It is against this backdrop that the Sixth Circuit has issued its flurry of recent opinions on sealed court records.

‘Shane Group’

Probably the most influential of the six opinions and orders issues by the Sixth Circuit in 2016 and 2017 is Shane Group Inc. v. Blue Cross Blue Shield of Michigan.[17] The Shane Group case was a class action based upon a massive price-fixing scheme by the largest health insurer in Michigan, which impacted millions of Michiganders.[18] Most of the substantive filings, including exhibits that served as the basis for the proposed settlement in the case, were sealed.[19] The justification provided for this broad action was exceedingly thin. For example, when the plaintiffs sought to seal their Motion for Class Certification, including 90 attachments, the argument, in its entirety was: “[t]he Class Certification Brief includes quotations, information, and references to multiple depositions and documents designated as confidential by Blue Cross or the third party entity that produced the document or deposition.”[20] The order granting that motion to seal parroted this argument.[21]

At the outset, the court sought to distinguish discovery secrecy from secrecy in the court file, explaining that “there is a stark difference between so-called ‘protective orders’ entered pursuant to the discovery provisions of Federal Rule of Civil Procedure 26, on the one hand, and orders to seal court records on the other.”[22] “Secrecy is fine at the discovery stage, before the material enters the judicial record.”[23] “At the adjudication stage, however, very different considerations apply.”[24] Once a document is filed, several public interests are implicated.[25] At the heart of these public interests is the public’s desire “to assess for itself the merits of judicial decisions,” which are based upon the evidence and records in the court file.[26]

The Shane Group court then explained the high hurdle that must be cleared to justify sealing court records. First, there is a strong presumption in favor of transparency. The party seeking a seal bears the burden of overcoming this presumption.[27] And the greater the public interest in a case, “the greater the showing necessary to overcome the presumption of access.”[28] Akin to strict scrutiny, the party seeking a seal must demonstrate a compelling reason for the seal, and the seal “must be narrowly tailored to serve that reason.”[29] Finally, the party seeking closure also has “the burden of showing that ‘disclosure will work a clearly defined and serious injury.’”[30]

While this is the general test to be applied, the court further explained how a motion to seal and a court’s analysis of the same should address the issue. “The proponent of sealing therefore must ‘analyze in detail, document by document, the propriety of secrecy, providing reasons and legal citations.”[31] The court’s order must be similarly detailed, even when a motion to seal is agreed to by the parties or unopposed.[32] Failure by the court to set forth specific findings of fact and law are grounds, by itself, for vacating the seal.[33] Importantly, the court also explained that, while the standard is abuse of discretion, “’[i]n light of the important rights involved, the district court’s decision is not accorded’ the deference that standard normally brings.”[34]

It is hardly surprising, then, based upon these stringent standards, that the orders to seal in Shane Group were insufficient. The court described the parties’ attempts to justify the sealing as “brief, perfunctory, and patently inadequate.”[35] In fact, the court explained that these justifications were “’[s]o perfunctory … that [the motion to seal the plaintiffs’ class certification brief] could have been summarily rejected.’”[36] One of the parties did not even seek permission of the district court to seal documents; they just filed them under seal.[37] The district court’s orders were similarly perfunctory. The appellate court attributed the problem to confusion regarding what standard applied, with the parties and district court applying the standard under Rule 26 for discovery orders rather than the “vastly more demanding standards for sealing off judicial records from public view.”[38] The court held that “every document that was sealed in the district court was sealed improperly.”[39]

Despite failing to do so below, the defendant sought to justify the sealing, after the fact, in the appellate court. Procedurally, the defendant argued that the attempt to unseal below was waived because it was untimely.[40] The court rejected this and explained that opposition to sealing court records is not waivable.[41] The main substantive argument was that the sealed records contained confidential patient-health information and competitively sensitive financial and negotiating information, including of third parties.[42] The court rejected both arguments. First, the sealed materials included barely any patient-health information.[43] Second, the argument regarding financial information was comprised of “platitudes” and did not amount to a “clearly defined and serious injury.”[44] And the information contained in the records were not trade secrets, one of the very few categories of records that can overcome the presumption of access.[45] The most compelling argument made was that unsealing the records would affect the privacy interests of “innocent third parties.”[46] While the court was skeptical of even these justifications, it left open the door for both the parties and third parties to make their arguments below to seal some or all of the court records again, as long as the stringent standards set forth in the case were satisfied.

Two Cautionary Tales from the Middle District of Tennessee

While the full impact of the Sixth Circuit’s recent, intense interest in sealed courts records will not be known for many years, it is worth looking at two cautionary tales from Chief Judge Crenshaw in the Middle District of Tennessee to highlight the potential pitfalls facing attorneys and litigants when seeking to seal court records.

In Alyn v. Southern Land Company, Southern Land filed motions to seal documents it was filing in support of its motion for summary judgment.[47] The justification for Southern Land’s motions to seal was “the parties’ Stipulated Protective Order.”[48] After a show cause order was issued asking the parties to justify the sealing despite the recent decisions of the Sixth Circuit, including Shane Group, both parties stood by their position that the Stipulated Protective Order was a sufficient basis to justify sealing the records.[49] Chief Judge Crenshaw denied these requests to seal, relying upon the Sixth Circuit’s decision in Shane Group, among others.[50] The district court explained that “the Court of Appeals has made very clear that an agreed protective order does not automatically create a sufficient legal basis for a district court to place documents under seal.”[51]

Alyn, whose documents were the ones at risk of being made public, then filed an emergency motion for reconsideration in which she now sought to justify sealing the records on something more than the Stipulated Protective Order.[52] First, Alyn claimed that her tax returns were “financial trade secrets” under Tennessee law.[53] This argument was rejected, but the Court did give the parties time to redact information required to be redacted by Local Rules, including social security numbers and dates of birth.[54]

Alyn then sought an emergency motion for stay pending appeal.[55] Like her other attempts to have the documents sealed, the Court denied the motion, concluding that “Alyn is not likely to prevail on the merits of this appeal, because three weeks and several attempts after the Court’s Show Cause Order, Alyn still has failed to provide compelling legal reasons to seal the documents filed by Southern Land in support of its summary judgment motions.”[56] Similarly, the Court found that there would be no irreparable harm if the stay was not granted and that the harm to others and the public interest supported denying the motion to stay.[57] While this case demonstrates the patience that courts may have in allowing parties to explain why documents should be sealed, it also reinforces that fact that Stipulated Protective Orders are patently insufficient and that, whatever the arguments in favor of sealing are, they are likely to be closely scrutinized by the courts.

There is another decision by Chief Judge Crenshaw that is also worth discussing, albeit in less detail. Chief Judge Crenshaw inherited the Snodgrass-King Pediatric Dental Assocs. PC v. Dentaquest USA Insurance case from another judge. Despite documents having been previously sealed in the case, Chief Judge Crenshaw, sua sponte, issued a Show Cause Order “asking the parties to identify, document by document, which documents should remain under seal.”[58] In rejecting DentaQuest’s arguments in response to the Show Cause Order, the court repeatedly noted that requests to seal will be rejected if proponents do not “analyze[] in detail, document by document, the propriety of secrecy, providing reasons and legal citations.”[59]

Practice Pointers

While these four cases highlight many of the issues that can arise, I want to conclude with some general practice pointers about sealed court records.

The standard that must be satisfied to justify sealing a court record is akin to strict scrutiny: there must be a compelling need for the closure and any closure must be narrowly tailored.[60] Also similar to strict scrutiny, there is a heavy presumption in favor of access, and the presumption is greater when the case is one of great public interest.[61] “Good cause” sufficient to justify a discovery order is not enough, and stipulated protective orders have no real impact on the analysis.[62] Those seeking closure cannot rely on mere platitudes to justify closure, but instead must argument “on a document-by-document, line-by-line basis” that the records should be sealed.[63] Arguments for closure must also include specific factual and legal arguments[64] and must show that “disclosure will work a clearly defined and serious injury.”[65]

Similarly, courts “must set forth specific findings and conclusions ‘which justify nondisclosure to the public’” regardless of whether the parties agree to the sealing.[66] The courts (including the district court and the circuit court) can and have raised the issue sua sponte.[67] Non-parties can intervene and should be heard by the courts on the issue.[68] The right of access is not waivable.[69]

The Sixth Circuit has discussed the types of interests that may be compelling enough to justify a narrowly tailored seal: national security, trade secrets, fair trial rights of criminal defendants, privacy rights of participants and third parties,[70] privileged information, and “information required by statute to be maintained in confidence.”[71] The Sixth Circuit has shown particular concern for the privacy rights of innocent third parties[72] and reduced concern for plaintiffs who chose to bring suits.[73] Courts should balance the asserted interest against the public interests in openness.[74]

An order sealing a court record (and an order lifting or modifying a seal) is likely reviewable under the collateral order doctrine.[75] The standard of review ostensibly is abuse of discretion, but because of the importance of the right of access, “‘the district court’s decision is not accorded’ the deference that standard normally brings.”[76]

Whether you are opposing or advocating for the sealing of court records, stop and consider the issues raised here. If you do, you are more likely to be successful in the trial court and able to sustain that success on appeal.

Notes

1. Danley v. Encore Capital Grp. Inc., No. 16-1670, 2017 U.S. App. LEXIS 3388 (6th Cir. Feb. 22, 2017) (unpublished); Rudd Equip. Co. v. John Deere Constr. & Forestry Co., 834 F.3d 589 (6th Cir. 2016); Beauchamp v. Fed. Home Loan Mortg. Corp., 658 Fed. App’x 202 (6th Cir. 2016) (unpublished); Shane Grp. Inc. v. Blue Cross Blue Shield of Mich., 825 F.3d 299 (6th Cir. 2016); In re Ramey, No. 15-4199, 2016 U.S. App. LEXIS 17546 (6th Cir. May 9, 2016) (unpublished); United States v. Dejournett, 817 F.3d 479 (6th Cir. 2016).
2. 710 F.2d 1165 (6th Cir. 1983).
3. 825 F.3d 299 (6th Cir. 2016).
4. 710 F.2d at 1176.
5. Id. at 1176-77.
6. Id. at 1181.
7. Richmond Newspapers Inc. v. Virginia, 448 U.S. 555 (1980); Nixon v. Warner Communications Inc., 435 U.S. 589 (1978).
8. 710 F.2d at 1177-78.
9. Id. at 1177.
10. Id. at 1179.
11. Id. at 1177.
12. Id. at 1179.
13. Id.
14. Id. at 1180.
15. Id.
16. Id.
17. 825 F.3d 299 (6th Cir. 2016).
18. Id. at 302.
19. Id.
20. Id. at 306.
21. Id.
22. Id. at 305.
23. Id. (quoting Baxter Int’l Inc. v. Abbott Labs., 297 F.3d 544, 545 (7th Cir. 2002)).
24. Id. (quoting Joy v. North, 692 F2d 880, 893 (2d Cir. 1982)).
25. Id.
26. Id.
27. Id.
28. Id. (citing Brown & Williamson, 710 F.2d at 1179).
29. Id. (quoting Press-Enter. Co. v. Superior Court of Cali., Riverside Cnty., 464 U.S. 501, 509-11 (1984)).
30. Id. at 307 (quoting In re Cendant Corp., 260 F.3d 183, 194 (3d Cir. 2001)).
31. Id. at 305-06 (quoting Baxter, 297 F.3d at 548).
32. Id. at 306.
33. Id. (citations omitted).
34. Id.
35. Id. (quoting Knoxville News-Sentinel, 723 F.2d at 476).
36. Id (quoting Baxter, 297 F.3d at 546).
37. Id. at 307.
38. Id.
39. Id.
40. Id.
41. Id.
42. Id. at 307-08.
43. Id. at 307.
44. Id. at 307-08.
45. Id. at 308.
46. Id. (quoting United States v. Amodeo, 71 F3d 1044, 1050 (2d Cir. 1995)).
47. No. 3:15-cv-596, 2016 U.S. Dist. LEXIS 128935, at *1 (M.D. Tenn. Sept. 20, 2016).
48. Id.
49. Id. at *1-2.
50. Id. at *2.
51. Id. (citing Shane Grp. Inc., 825 F.3d at 305; Beauchamp v. Fed. Home Loan Mortgage Corp., 658 F. App’x. 202 (6th Cir. July 11, 2016)). The Beauchamp decision is sometimes referred to by the other plaintiff’s name, Klingenberg.
52. Id. at *3.
53. Id.
54. Id. at *3-4.
55. Id. at *1.
56. Id. at *4.
57. Id. at *7-8.
58. Snodgrass-King Pediatric Dental Assocs. PC. v. Dentaquest USA Ins. Co., No. 3:14-cv-0654, 2016 U.S. Dist. LEXIS 149693, at *1 (M.D. Tenn. Oct. 28, 2016).
59. Id. at *3-4 (quoting Beauchamp, 658 F. App’x. at 207).
60. The narrow tailoring required is the least restrictive means version of narrow tailoring. See Shane Grp., 825 F.3d at 306 (describing findings by the court necessary to support a seal as including “why the seal itself is no broader than necessary”).
61. Id. at 305.
62. Id. at 305, 307.
63. Id. at 308.
64. Id. at 305-06.
65. Id. at 307 (quoting Cendant, 260 F.3d at 194).
66. Id. at 306 (quoting Brown & Williamson, 710 F.2d at 1176).
67. E.g., Beauchamp, 658 F. App’x. at 207; Brown & Williamson, 710 F.2d at 1176; Snodgrass-King Pediatric Dental Assocs., 2016 U.S. Dist. LEXIS at *1.
68. In re Knoxville News-Sentinel Co., 723 F.2d 470, 474-75 (6th Cir. 1983).
69. Shane Grp., 825 F.3d at 307.
70. Brown & Williamson, 710 F.2d at 1179 (citations omitted).
71. Shane Grp., 825 F.3d at 308 (quoting Baxter, 297 F.3d at 546).
72. Id at 308.
73. Rudd Equip., 834 F.3d at 594.
74. Id.
75. Rudd Equip., 834 F.3d at 592-93 (holding that “orders sealing a court’s records and denying public access to court documents can satisfy the collateral order doctrine” and that the same applies to an order unsealing documents) (citing Application of Nat’l Broad. Co., 828 F.2d 340, 343 (6th Cir. 1987)).
76. Shane Grp., 825 F.3d at 306 (quoting Knoxville News-Sentinel, 723 F.2d at 476).

PAUL R. MCADOO is a partner in the Nashville firm of Aaron & Sanders PLLC. His practice focuses on media law and First Amendment issues, business litigation, trademarks and copyrights. He is a graduate of Florida State University and the University of Florida law school. McAdoo has previously published with the William Mitchell Law Review, the Media Law Resource Center, and the American Bar Association. He is currently serving as vice-chair of the Tennessee Bar Association’s Communication Section’s Executive Committee.