998 F.2d 157 (3rd Cir. 1993), 92-7462, Leucadia, Inc. v. Applied Extrusion Technologies, Inc.

Docket Nº:92-7462.
Citation:998 F.2d 157
Party Name:LEUCADIA, INC. v. APPLIED EXTRUSION TECHNOLOGIES, INC., Richard I. Burstein, Proposed Intervenor, Appellant.
Case Date:June 25, 1993
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

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998 F.2d 157 (3rd Cir. 1993)




Proposed Intervenor, Appellant.

No. 92-7462.

United States Court of Appeals, Third Circuit

June 25, 1993

Argued March 29, 1993.

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Susan Schneider Thomas (Argued), Zlotnick & Thomas, Bala Cynwyd, PA, Jeffrey S. Goddess, Rosenthal Monhait Gross & Goddess, P.A., Wilmington, DE, for appellant.

Kevin G. Abrams (Argued), David L. Finger, Richards, Layton & Finger, Wilmington, DE (John D. Donavan, Jr., Ropes & Gray, Boston, MA, of counsel), for appellee.

Before: SLOVITER, Chief Judge, COWEN and NYGAARD, Circuit Judges


SLOVITER, Chief Judge.

This case requires us to consider once again the contours of the common law right of public access to judicial records, a right that is well established in this circuit. See, e.g., Republic of the Philippines v. Westinghouse Elec. Corp., 949 F.2d 653 (3d Cir.1991); Littlejohn v. BIC Corp., 851 F.2d 673 (3d Cir.1988); Bank of America Nat'l Trust & Savings Ass'n. v. Hotel Rittenhouse Assocs., 800 F.2d 339 (3d Cir.1986). In the district court, Richard I. Burstein moved to intervene permissively in a settled lawsuit for the limited purpose of modifying a court-imposed protective order to gain access to material that had been filed with the court under seal pursuant to that order. The district court refused to allow Burstein to intervene for this limited purpose. Burstein appeals.



Leucadia, Inc., a leading producer of extruded strong net products, filed an action in the United States District Court for the District of Delaware in November 1990 against Applied Extrusion Technologies, Inc. (AET), its business competitor, alleging misappropriation of trade secrets relating to AET's production of the nets (the Leucadia action). The gravamen of Leucadia's complaint for injunctive relief and damages focused on AET's hiring of several former Leucadia employees who had access to confidential technical information and customer lists.

The parties filed a joint motion for a protective order covering documents and materials produced during pretrial discovery, relying on the sensitive commercial issues raised in the complaint. On December 11, 1990 the district court entered the requested order, which specified that all "confidential information" produced by the parties would be filed with the district court under seal and would be used solely in the pending dispute between Leucadia and AET. 1 The order further

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provided that either party could designate any document or part thereof as confidential provided that the party in good faith believed that the information so designated constituted "financial [information], trade secrets or confidential or proprietary information or know-how of such party." App. at 11. The district court was not required to review a party's confidentiality designation unless the opposing party objected, in which case the designating party would have the burden of proving that the information was appropriately subject to the confidentiality and sealing provisions of the order. 2

With the entry of the protective order, Leucadia and AET commenced pretrial discovery. In the course of pretrial proceedings, the parties filed under seal certain motions to which were attached discovery documents or unsealed motions together with sealed exhibits. 3 In the district court's published opinion denying AET's motion to dismiss the complaint and for a more definite statement, directing Leucadia to file an amended complaint, and temporarily postponing Leucadia's discovery to permit AET to ascertain from Leucadia the trade secrets which AET allegedly misappropriated, the court made references to some of the sealed material without disclosing their contents. See Leucadia, Inc. v. Applied Extrusion Technologies, Inc., 755 F.Supp. 635 (D.Del.1991).

After the parties conducted additional discovery, AET filed a counterclaim and Leucadia moved for a preliminary injunction. Before a hearing on Leucadia's motion could be held, however, the parties reached a settlement of their dispute which they filed under seal. On August 23, 1991, the district court dismissed the case with prejudice pursuant to the terms of the settlement, but noted that it "retain[ed] jurisdiction over the parties for

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the limited purpose of enforcing ... the settlement agreement...." App. at 68.

In December 1991, Burstein, a stockholder of AET, filed a class action suit against the corporation and its directors in the United States District Court for the District of Delaware (the Burstein action). Burstein's complaint alleged that the defendants violated federal securities laws by making false and misleading statements regarding the corporation's business prospects, including the failure to disclose adequately the consequences of the Leucadia litigation and settlement, in a prospectus issued as part of a public offering of AET securities in 1991.

On May 21, 1992, nine months after the Leucadia litigation was dismissed with prejudice, Burstein filed a motion for permissive intervention to unseal the documents filed pursuant to the protective order in the Leucadia action. Burstein sought to "(a) obtain and examine all documents and papers filed with the Court under seal; (b) take discovery, including subpoenas for documents and materials in the possession of others who are currently bound by the protective order; and (c) use the items examined or obtained ... in the course of the collateral securities action." App. at 73.

The district court held a hearing on Burstein's motion on June 26, 1992 at which AET opposed the intervention. Leucadia initially expressed a willingness to permit Burstein to inspect the documents, provided that the district court could ensure their confidentiality and limit their use to the collateral securities litigation. Burstein agreed to be bound by these conditions and by the terms of the protective order. Burstein conceded that an order entered several days earlier in the Burstein action staying all merits-related discovery pending a ruling on AET's motion to transfer 4 precluded him from using the formal tools of discovery to obtain information concerning the securities litigation from any party to that dispute. Thus, at the hearing, Burstein limited his intervention request to examining and copying the documents filed under seal.

The district court denied Burstein's motion. The court did not discuss the contents of the documents, noting only that it had approved "a comprehensive protective order relating to information obtained in discovery ... because of the ultra sensitive nature of both parties' trade secrets." App. at 124-25. The court also stated that the stay order in the Burstein action was the "law of the case in the securities action and this ruling should not be ignored by another judge of the same court." App. at 125-26. Finally, the court addressed Leucadia's confidentiality concerns:

[T]his Court does not know how to deliver these assurances [regarding confidentiality]. The Court surely is in no position to examine the documents in camera and sort out documents in the manner Leucadia suggests. The simplest way would be to open the file to the public of all documents now under seal but neither party desires this. Thus Burstein has not shown sufficient reason to discover the documents under seal in this action and the motion to intervene [is] accordingly denied.

App. at 126.

The district court denied Burstein's motion for reargument and Burstein filed a timely notice of appeal. We have jurisdiction under 28 U.S.C. § 1291. See Westinghouse, 949 F.2d at 658 n. 4 ("[O]rders ... denying a motion to unseal are collateral orders within the meaning of 28 U.S.C. § 1291."); Beckman Indus., Inc. v. International Ins. Co., 966 F.2d 470, 472 (9th Cir.) (order denying motion to intervene for limited purpose of modifying protective order "appealable either as a final order ... or as a collateral order"),

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cert. denied, --- U.S. ----, 113 S.Ct. 197, 121 L.Ed.2d 140 (1992). 5




The Common Law Right of Access

In numerous cases since our decision in United States v. Criden, 648 F.2d 814 (3d Cir.1981), this court has acknowledged the existence of a pervasive common law right "to inspect and copy public records and documents, including judicial records and documents." Id. at 819 (quoting Nixon v. Warner Communications, Inc., 435 U.S. 589, 597, 98 S.Ct. 1306, 1311, 55 L.Ed.2d 570 (1978)). The existence of this right, which antedates the Constitution and which is applicable in both criminal and civil cases, is now "beyond dispute." Littlejohn, 851 F.2d at 677-78 (quoting Publicker Indus., Inc. v. Cohen, 733 F.2d 1059, 1066-67 (3d Cir.1984)). 6

As we recently explained, the presumption that the public has a right to inspect and copy judicial records serves numerous salutary functions:

The public's exercise of its common law access right in civil cases promotes public confidence in the judicial system.... As with other branches of government, the bright light cast upon the judicial process by public observation diminishes the possibilities for injustice, incompetence, perjury, and fraud. Furthermore, the very openness of the process should provide the public with a more complete understanding of the judicial system and a better perception of its fairness.

Westinghouse, 949 F.2d at 660 (quoting Littlejohn, 851 F.2d at 678). In addition, "[a]ccess to civil proceedings and records promotes 'public respect for the judicial process' and helps to assure that judges perform their duties in an honest and informed manner." Id. (citation omitted) (quoting Globe Newspaper Co. v...

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