Procter & Gamble Co. v. Bankers Trust Co.

• Decision Date: 08 May 1996
• Docket Number: No. 95-4078,95-4078
• Parties: , 24 Media L. Rep. 1385 The PROCTER & GAMBLE COMPANY, Plaintiff-Appellee, v. BANKERS TRUST COMPANY, BT Securities Corporation, Defendants-Appellees, The McGraw-Hill Companies, Inc., Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 219

78 F.3d 219

64 USLW 2557, 24 Media L. Rep. 1385

The PROCTER & GAMBLE COMPANY, Plaintiff-Appellee, v. BANKERS TRUST COMPANY, BT Securities Corporation, Defendants-Appellees The McGraw-Hill Companies, Inc., Appellant.

No. 95-4078.

United States Court of Appeals Sixth Circuit.

Argued Dec. 6, 1995.

Decided March 5, 1996.

Rehearing and Suggestion for Rehearing En Banc Denied May 8,

1996. ^*

On Appeal from the United States District Court for the Southern District of Ohio.

John D. Luken (argued), Thomas S. Calder (briefed), Dinsmore & Shohl, Cincinnati, OH, Matthew Gluck, Fried, Frank, Harris, Shriver & Jacobson, New York City, Stanley M. Chesley, Waite, Schneider, Bayless & Chesley, Cincinnati, OH, for Plaintiff-Appellee.

Thomas B. Ridgley (argued and briefed), Vorys, Sater, Seymour & Pease, Columbus, OH, Daniel J. Buckley, Vorys, Sater, Seymour & Pease, Cincinnati, OH, Michael E. Wiles, Debevoise & Plimpton, New York City, for Defendants-Appellees.

Richard M. Goehler (briefed), Susan Grogan Faller, Frost & Jacobs, Cincinnati, OH, Laura Handman, New York City, Victor A. Kovner (argued and briefed), Robert D. Balin, Lankenau, Kovner & Kurtz, New York City, for Appellant.

Robert D. Sack (argued), Gibson, Dunn & Crutcher, New York City, Theodore J. Boutrous, Jr. (briefed), Gibson, Dunn & Crutcher, Washington, DC, for amici curiae Dow Jones and Co., Cincinnati Enquirer, Los Angeles Times, Newsday, American Society of Newspaper Editors.

Richard L. Klein (briefed), New York City, for amicus curiae Bloomberg L.P.

William M. Saks (briefed), American Civil Liberties Union of Ohio Foundation, Cleveland, OH, for amici curiae American Civil Liberties Union, American Civil Liberties Union of Ohio Foundation, Inc.

David L. Marburger (briefed), Baker & Hostetler, Cleveland, OH, for amici curiae E.W. Scripps Co., et al.

Before: MERRITT, Chief Judge; BROWN and MARTIN, Circuit Judges.

MERRITT, C.J., delivered the opinion of the court, in which MARTIN, J., joined, with MARTIN, J. (pp. 227-28), also delivering a separate concurring opinion. BROWN, J. (pp. 229-32), delivered a separate dissenting opinion.

MERRITT, Chief Judge.

In a case of widespread interest to the press, the District Court issued an injunction prohibiting Business Week magazine from publishing an article disclosing the contents of documents placed under the seal of secrecy by the parties to a lawsuit. This appeal raises the issue of whether the bedrock First Amendment principle that the press shall not be subjected to prior restraints can be set aside when a federal court perceives a threat to the secrecy of material placed under seal by stipulation of the parties. We are guided by the holding of the First Circuit in In the Matter of Providence Journal Company that even a temporary restraint on pure speech is improper "absent the most compelling circumstances." 820 F.2d 1342, 1351, modified on reh'g by 820 F.2d 1354 (1st Cir.1986), cert. granted and dismissed on other grounds. Such circumstances are not present in the case at bar, and we therefore hold that the District Court erred in granting the orders challenged here.

The District Court maintained its prior restraint on publication for three weeks by successive injunctive orders. It then sought to avoid review under the mootness doctrine by entering a permanent injunction against publishing the original secret documents while simultaneously making photocopies public. The case is not moot because the permanent injunction against publication of the original documents remains in effect and because temporary restraints on speech fall within the well-recognized exception to mootness for wrongs that are "capable of repetition, yet evading review." See Southern Pacific Terminal Co. v. ICC, 219 U.S. 498, 515, 31 S.Ct. 279, 283, 55 L.Ed. 310 (1911).

I. Facts

On October 27, 1994, Procter & Gamble ("P & G") filed a complaint against Bankers Trust ¹ ("Bankers") claiming a loss of over $100 million due to alleged fraud by Bankers in the sale of derivatives to P & G. The case has received widespread coverage, especially in the business press.

In January of 1995, Bankers and P & G agreed to a broad stipulated protective order as part of the discovery process. The order provided that parties and non-parties to the litigation--without court approval for "good cause" as required by Rule 26(e) of the Civil Rules--could, in their discretion, designate discovery material as "confidential" and could have such material filed under seal if the parties agreed that it reflected "trade secrets or other confidential research, development or commercial information...." J.A. at 14. The parties and not the court would determine whether particular documents met the requirements of Rule 26. The protective order further provided that the parties could modify its terms without approval of the court. J.A. at 21. The presiding judge, the late Judge Carl Rubin during his terminal illness, signed the stipulated order allowing the parties to conduct the discovery process in secret. Judge John Feikens, the former Chief Judge of the Eastern District of Michigan, was assigned the case after Judge Rubin's death, and he therefore inherited this unusual protective order and the voluminous set of documents already filed under the seal of secrecy.

Without notice to Business Week or a request for a hearing, on Wednesday, September 13, 1995, Bankers and P & G alerted Judge Feikens that Business Week, a magazine owned by McGraw-Hill, had obtained documents from the Bankers/P & G litigation that the parties wanted to remain secret. The documents in question were materials supporting a motion by P & G for leave to amend its complaint. Although the motion itself was not sealed, the accompanying documents, which contained a supporting memorandum of law, a proposed Second Amended Complaint containing RICO allegations, and a RICO case statement, were filed in secret pursuant to the protective order. Neither Bankers nor P & G could say at that time how Business Week had obtained the documents.

Shortly before six o'clock, again without notice or a hearing, Judge Feikens--at the urgent request of both parties--transmitted by facsimile an order to McGraw-Hill enjoining and prohibiting them from publishing the documents without consent of the court. It stated that the parties would "suffer irreparable harm" if the documents were disclosed, but it did not state a reason. The order was open-ended in duration and did not set a date for a hearing. Business Week obeyed the order, pulling its story before its nine p.m. publication deadline.

The following day, September 14, McGraw-Hill filed for a stay of the District Court order and an expedited appeal with the Sixth Circuit. A Sixth Circuit panel heard oral argument and on Tuesday, September 19, dismissed the appeal on the grounds that the order could "best be characterized as a temporary restraining order" and was therefore not a final order and not appealable. The panel did not treat the order as a request for mandamus or exercise its discretion by mandamus to set aside the prior restraint. Later that day, McGraw-Hill sought an emergency stay from Justice Stevens of the United States Supreme Court.

On September 21, Justice Stevens denied the stay, stating that the wiser course would be to return to the District Court for a fact-finding hearing on the matter. That same day, the District Court commenced what would be a two-day hearing to determine how the documents had been obtained and whether the injunction should remain in place. On September 22, ten days after the original injunctive order, the District Court entered another order extending the September 13th order for another ten days and conducted more hearings.

The hearings revealed that the documents had found their way to Business Week through an unusual chain of people and events. Business Week's editor on the story, Zachary Schiller, testified on the basis of his reporter's notes to a tantalizing, off-the-record phone call from an employee in the public relations department of P & G who suggested that some documents that would be of interest to Business Week were about to be filed at the courthouse. (It seems that the tactics of P & G's public relations office were a little different from those of its lawyers.) Schiller notified several Business Week journalists that he was seeking information about the mysterious filing.

While Schiller was away from his office, a New York-based journalist for Business Week contacted an acquaintance who was a partner at the New York law firm representing Bankers Trust. Neither the partner (who was not working on the P & G case) nor the journalist (who had not previously been covering the story), appeared to know that the material was under seal. The journalist simply asked for the documents, and the partner obtained copies and gave them to her. The circle of irony became complete. Banker's New York lawyers unwittingly also followed tactics different from those of its litigators. It appears that Business Week found out about the sealed material because of a P & G leak and got the documents through a leak from Banker's Trust.

With this information before it, the District Court entered two orders on October 3rd, three weeks after its initial order restraining publication. In one order, the District Court concluded that Business Week "knowingly violated the protective order" by obtaining the documents and was therefore prohibited and permanently enjoined from using "the confidential materials that it obtained unlawfully." J.A. at 49. ("I conclude as a matter of law that Business Week cannot be permitted to use the confidential materials it obtained to publish its story." J.A. at 47.) This injunction remains in effect. In the other order, the District Court determined that, because the parties could not provide a "substantial government interest" in keeping the documents confidential, "the sealed...