Alexander Grant & Co. Litigation, In re

• Decision Date: 24 June 1987
• Docket Number: SUN-SENTINEL,No. 86-5223,ESM-1,86-5223
• Citation: 820 F.2d 352
• Parties: , 14 Media L. Rep. 1370 In re ALEXANDER GRANT & CO. LITIGATION, (). Appeal of NEWS ANDCO. and John Edwards.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 352

820 F.2d 352

8 Fed.R.Serv.3d 251, 14 Media L. Rep. 1370

In re ALEXANDER GRANT & CO. LITIGATION, (ESM-1) Appeal of NEWS AND SUN-SENTINEL CO. and John Edwards.

No. 86-5223.

United States Court of Appeals Eleventh Circuit.

June 24, 1987.

Ricki Tannen, Ferrero, Middlebrooks, Strickland, and Fischer, P.A., Ray Ferrero, Jr., Wilton L. Strickland, Ft. Lauderdale, Fla., for News and Sun-Sentinel Co.

Jeffrey M. Weissman, Sparber, Shevin, Shapo, Heilbronner & Book, P.A., Miami, Fla., for Marvin L. Warner.

Richard E. Brodsky, Paul, Landy, Beiley & Harper, P.A., Miami, Fla., for Alexander Grant Co.

Appeal from the United States District Court For the Southern District of Florida.

Before FAY and CLARK, Circuit Judges, and HENDERSON, Senior Circuit Judge.

PER CURIAM:

This appeal challenges a protective order denying non-parties access to discovery materials compiled in a series of complex securities actions consolidated for discovery proceedings. The protective order was issued at the request of the parties. The District Court for the Southern District of Florida declined to modify the order. The non-parties, as intervenors, argue on appeal that the district court abused its discretion. For the reasons that follow, we affirm.

I. BACKGROUND

E.S.M. Government Securities, Inc. (hereinafter E.S.M.) is a Florida corporation formerly engaged in the securities brokerage business in Fort Lauderdale, Florida. E.S.M. was a parent and holding company for several subsidiaries and specialized in term repurchase and reverse repurchase transactions involving government entities. ¹ In the late seventies, E.S.M. retained the Alexander Grant & Company (hereinafter "Grant"), a public accounting partnership organized under the laws of Illinois, as an independent Certified Public Accountant to perform audits and prepare financial statements. At the time, Grant operated an office in Fort Lauderdale, Florida.

On March 4, 1985, the Securities and Exchange Commission filed a complaint for injunctive relief against E.S.M. alleging violations of the Securities Exchange Act of 1934. E.S.M. and its affiliates consented to the complaint and the district court entered a permanent injunction on March 6, 1985. After an involuntary Chapter 7 petition was filed on March 26, 1985, E.S.M. was adjudicated bankrupt.

Thereafter, approximately twenty actions were brought against Grant. The complaints, filed by a private individual, several financial institutions, and government entities, sought recovery for damages allegedly sustained by detrimental reliance on inaccurate financial statements prepared by Grant. The theories advanced by the plaintiffs included common-law fraud, ordinary, professional and gross negligence, and violations of (1) 10(b) of the Securities Act of 1934, 15 U.S.C. Sec. 78j(b) (1982); (2) Securities and Exchange Commission Rule 10b-5, 17 C.F.R. Sec. 240.10b-5 (1986); (3) the Racketeer Influenced and Corrupt Organization Act, 18 U.S.C. Sec. 1961 et seq. (1982); (4) the Florida Securities Act, Fla.Stat.Ann. Sec. 517.301 (West Supp.1986); and (5) the Florida Racketeer Influenced and Corrupt Organization Act, Fla.Stat.Ann. Secs. 895.02 and 895.03 (West Supp.1986).

Recognizing that multiple actions brought against Grant were based on similar facts and involved common questions of law, the district court pursuant to Fed.R.Civ.P. 42(a) consolidated the actions for discovery proceedings before one district judge on July 30, 1985. At the request of the parties, the district court also entered an accompanying protective order ² pursuant to Fed.R.Civ.P. 26(c) authorizing any party producing discovery material containing tax returns, trade secrets, or other sensitive material to designate any or all of it as "confidential." ³ Under the terms of the order, any material so designated was only available to the parties for use in litigation, and was inaccessible to any non-parties. A party challenging a "confidential" designation could seek judicial review by making an objection. Once a notice of an objection was received, the party seeking to protect the sensitive material had ten days to apply to the district court for a ruling on the merits.

The consolidation of the actions for discovery purposes and the issuance of the protective order resulted in the accumulation of approximately 40,000 documents in a discovery depository maintained by the parties. On January 13, 1986, the News and Sun-Sentinel Company, the publisher of the Fort Lauderdale News and Sun-Sentinel, and John Edwards, a journalist employed by the newspaper publisher (hereinafter appellants), filed a motion to intervene for the limited purpose of requesting reconsideration of the protective order. The motion to intervene was granted pursuant to Fed.R.Civ.P. 24(b) and a hearing was conducted on February 18, 1986. In an order dated March 3, 1986, the district court reconsidered and reaffirmed the protective order without modification. In re Alexander Grant & Co. Litigation, 629 F.Supp. 593 (S.D.Fla.1986). Appellants filed a notice of appeal on March 26, 1986.

II. DISCUSSION

As a preliminary matter, we note that appellants have standing to intervene in this action and challenge the propriety of the district court's protective order. See In re Tribune Co., 784 F.2d 1518 (11th Cir.1986); Newman v. Graddick, 696 F.2d 796, 800 (11th Cir.1983). An order denying access to court proceedings and records is immediately reviewable. In re Tribune Co., 784 F.2d at 1521. Appellants argue that the district court abused its discretion by issuing and reaffirming the protective order limiting access to discovery material designated confidential. After reviewing the record and the applicable law, we disagree and affirm.

A. Access to Discovered Information

First, appellants have no common-law right to examine the discovery materials at issue. There is no question that the press and the public jointly possess a common-law right to inspect and copy judicial records and public documents. Nixon v. Warner Communications, Inc., 435 U.S. 589, 597, 98 S.Ct. 1306, 1311, 55 L.Ed.2d 570 (1978); United States v. Rosenthal, 763 F.2d 1291, 1293 (11th Cir.1985); Wilson v. American Motors Corp., 759 F.2d 1568, 1570 (11th Cir.1985). Nevertheless, this court has observed that private "documents collected during discovery are not 'judicial records' " United States v. Anderson, 799 F.2d 1438, 1441 (11th Cir.1986). Thus, while appellants may enjoy the right of access to "pleadings, docket entries, orders, affidavits or depositions duly filed," Wilson, 759 F.2d at 1569 (emphasis added), appellants' common-law right of access does not extend to information collected through discovery which is not a matter of public record. See Seattle Times Co. v. Rhinehart, 467 U.S. 20, 33, 104 S.Ct. 2199, 2207, 81 L.Ed.2d 17 (1984); Anderson, 799 F.2d at 1441; United States v. Gurney, 558 F.2d 1202, 1209 (5th Cir.1977), cert. denied sub nom., Miami Herald Publishing Co. v. Krentzman, 435 U.S. 968, 98 S.Ct. 1606, 56 L.Ed.2d 59 (1978). ⁴

Second, appellants possess no First Amendment rights to the protected information which override the provisions of Fed.R.Civ.P. 26(c). The discovery process, as a "matter of legislative grace," is a statutorily created forum not traditionally open to the public. Seattle Times Co., 467 U.S. at 32, 104 S.Ct. at 2207. Although information exchanged in pretrial discovery would often generate considerable public interest if publicly disseminated, private litigants have protectable privacy interests in confidential information disclosed through discovery. See Seattle Times Co., 467 U.S. at 35, 104 S.Ct. at 2208.

In order to preserve the confidentiality of sensitive materials, a district court may regulate access to the information by issuing a protective order pursuant to Rule 26(c). ⁵ See Seattle Times Co., 467 U.S. at 36, 104 S.Ct. at 2209; In re Consumers Power Co. Securities Litigation, 109 F.R.D. 45, 54-55 (E.D.Mich.1985); In re Korean Air Lines Disaster of September 1, 1983, 597 F.Supp. 621, 622 (D.D.C.1984). Such an order, if issued upon good cause and limited to pretrial civil discovery, is not subjected to heightened scrutiny. Seattle Times Co., 467 U.S. at 37, 104 S.Ct. at 2209; see Cipollone v. Liggett Group, Inc., 785 F.2d 1108, 1119 (3d Cir.1986); Tavoulareas v. Washington Post Co., 737 F.2d 1170, 1172 (D.C.Cir.1984); Korean Air Lines Disaster, 597 F.Supp. at 623. After evaluating and balancing the competing public and private interests, the Supreme Court has concluded that valid protective orders are not violative of the First Amendment because Rule 26(c) minimizes abuse of the discovery process--a substantial government interest unrelated to the suppression of expression. Seattle Times Co., 467 U.S. at 34, 104 S.Ct. at 2208; see Cipollone, 785 F.2d at 1119; Tavoulareas, 737 F.2d at 1172.

B. Good Cause

A district court must articulate its reasons for granting a protective order sufficient for appellate review. See United States v. Kooistra, 796 F.2d 1390, 1391 (11th Cir.1986). Here, "the fear of adverse publicity, intimidation or other outside forces that could interfere with the free flow of information, most of which would not be admissible during the actual litigation stage of [the] cases" served as the articulated justifications for the order. As indicated, the sole criterion for determining the validity of a protective order is the statutory requirement of "good cause." Seattle Times Co., 467 U.S. at 37, 104 S.Ct. at 2209; Cipollone, 785 F.2d at 1119; Tavoulareas, 737 F.2d at 1172; see Fed.R.Civ.P. 26(c). "Good cause" is a well established legal phrase. Although difficult to define in absolute terms, it generally signifies a sound basis or legitimate need to take judicial action. In a different context, this court has identified four factors for ascertaining the existence of good cause which include: " the severity and the likelihood of the perceived harm; the...