Arkansas Best Corp. v. General Elec. Capital Corp.

• Decision Date: 06 June 1994
• Docket Number: No. 93-399,93-399
• Citation: 317 Ark. 238,878 S.W.2d 708
• Court: Arkansas Supreme Court
• Parties: , 62 USLW 2788 ARKANSAS BEST CORPORATION, Appellant, v. GENERAL ELECTRIC CAPITAL CORPORATION, Riverside Furniture Corporation, Riverside Holdings Inc., M.R. Realty Associates, L.P., McKane Robbins & Co., David McKane, Individually, and Peter Robbins, Individually, Appellees.

Page 708

878 S.W.2d 708

317 Ark. 238, 62 USLW 2788

ARKANSAS BEST CORPORATION, Appellant, v. GENERAL ELECTRIC CAPITAL CORPORATION, Riverside Furniture Corporation, Riverside Holdings Inc., M.R. Realty Associates, L.P., McKane Robbins & Co., David McKane Individually, and Peter Robbins, Individually, Appellees.

No. 93-399.

Supreme Court of Arkansas.

June 6, 1994.

Robert L. Jones and Randolph Jackson, Fort Smith, Clifton T. Hutchinson, Bobby M. Rubarts and Holly A. Schymik, Dallas, TX, for appellant.

Ben Core and Robert W. Bishop, Fort Smith, James E. Brandt and Louise Zeitzew, New York City, for appellees.

NEWBERN, Justice.

Arkansas Best Corporation (ABC) appeals from the order of a Chancellor refusing to unseal a settlement agreement and resulting judgment. The agreement was entered by the parties to a lawsuit before the Chancellor and sealed at their request. In the order sealing the agreement, the Chancellor stated conditions upon which the settlement could be unsealed, in which case it would be incorporated as the findings of fact in an agreed judgment signed by the Chancellor. It was error to permit the document to be sealed, thus we reverse and remand.

In 1989, ABC entered an agreement to sell the stock of its subsidiary, Riverside Corporation (Riverside), to M.R. Realty, a company formed by David McKane and Peter Robbins. To finance the purchase, McKane and Robbins obtained a loan from General Electric Capital Corporation (GECC). McKane and Robbins contend that after the purchase they discovered the amount of money needed annually to fund Riverside's employee pension plan had been understated during negotiations for the sale. McKane and Robbins believed the need would be $150,000 to $200,000; however, the requirement was approximately $750,000. In August 1990 McKane and Robbins sued ABC in a United States District Court in New York alleging, among other things, fraud and breach of contract.

In April 1991 GECC filed suit against McKane and Robbins in Sebastian Chancery Court alleging they had breached loan covenants by diverting $2.4 million dollars from Riverside's cash accounts for personal use. On Oct. 1, 1991, the Chancellor entered an agreed judgment. The judgment stated the parties had entered a settlement agreement which the Court had examined in camera. The settlement agreement was in conjunction with an "other judgment" which provided for payment of a specified sum of money. The agreed judgment also stated the settlement agreement contained admitted facts that formed the basis of liability in the agreed judgment and the "other judgment."

The agreed judgment also provided the settlement agreement would be sealed with the court clerk's file and could only be unsealed after a hearing on a motion of a party to the suit, or by filing of bankruptcy by McKane or Robbins individually or by their company. The agreed judgment also contained the following two paragraphs:

(5) In the event that the Settlement Agreement is unsealed under the terms set forth above, the admitted facts contained in the Settlement Agreement will become a part of this Agreed Judgment and the Other Judgment as findings of fact by this Court;

(6) This Agreed Judgment and the Other Judgment are being entered simultaneously and together constitute the final agreed judgment of the parties.

In 1992 ABC moved the United States District Court in New York to compel discovery of the settlement agreement between McKane and Robbins and GECC. ABC says it needs the information because the money McKane and Robbins may have been found liable for diverting to personal use could be shown to be that which should have been put in the pension fund. In June 1992 a United States Magistrate declined to compel discovery but instructed ABC to apply to the Chancellor to unseal the document.

ABC filed its application to unseal in the Sebastian Chancery Court, and a hearing was held. On December 10, 1992, the Chancellor denied ABC's request.

1. Procedure

a. Standing and timeliness

ABC was not a party to the litigation in which it filed the motion to unseal the settlement agreement. As the Alabama Supreme Court held in Holland v. Eads, 614 So.2d 1012 (Ala.1993), a motion to intervene is the proper means of asserting the public's right to open court records. No motion to intervene was made in this case.

The parties have not raised any question about ABC's standing in the matter.

Despite these lapses, we have no hesitancy in treating this as a case in which there was a post-judgment motion to intervene for the purpose of unsealing the records. Arkansas R.Civ.P. 24 permits "timely" intervention. No time limit is stated. The timeliness of intervention is within the discretion of the Trial Court, and permitting intervention will not be considered error due to untimeliness unless there has been an abuse of discretion. See Bank of Quitman v. Phillips, 270 Ark. 53, 603 S.W.2d 450 (Ark.App.1980). When there are "unusual and compelling" circumstances, we permit intervention even after a final judgment has been entered. UHS of Arkansas, Inc. v. City of Sherwood, 296 Ark. 97, 752 S.W.2d 36 (1988). Cf. Beckman Industries, Inc. v. International Ins. Co., 966 F.2d 470 (9th Cir.1992), in which the "compelling need" and "extraordinary circumstances" tests were rejected in favor of allowing post-judgment intervention to seek modification of a protective discovery order "to meet the reasonable needs of other parties in other litigation."

The circumstances in this case are indeed "unusual and compelling." ABC sought to discover information about the litigation between McKane and Robbins in a federal court which in turn referred them to the Sebastian Chancery Court. In ordinary or "usual" circumstances, the information would be a matter of public record. That, coupled with the public's interest in open judicial proceedings, which we regard as "compelling," causes us to conclude the attempt to intervene was not untimely.

b. Final order

Again, neither party has challenged the finality of the order being considered, but when we have doubts we raise the issue as it is jurisdictional. Widmer v. Touhey, 297 Ark. 85, 759 S.W.2d 562 (1988); Roy v. International Multifoods Corp., 268 Ark. 958, 597 S.W.2d 129 (1980). If the ruling on the motion to unseal the settlement agreement were merely a motion in the course of litigation not yet final, we would dismiss the appeal. Here, however, the litigation is final. A judgment has been entered. Although the ruling on the motion we treat as one to intervene came after the final judgment, it is a part of the litigation which resulted in that final determination and is a part of the judgment, thus we consider it final and appealable pursuant to Ark.R.App.P. 2(a)1.

c. Discovery

This problem began with a discovery request in the federal court in New York, but the issue before us is not a discovery issue. The federal magistrate declined to order McKane and Robbins to produce the sealed settlement agreement but deferred to the Chancellor. The parties' briefs frequently refer to Ark.R.Civ.P. 26(c) which deals with protective orders restricting discovery requests. The rule does not address the issue presented. The settlement agreement was sealed pursuant to a judgment. The order sealing the settlement agreement does not refer to Rule 26(c), nor was the agreement subject to a discovery request at the time it was sealed. Instead, the Chancellor's action requires us to determine under what authority, if any, a trial court may seal a settlement agreement which is apparently part of, or the basis of, an "other judgment" which also lies hidden from the public view.

d. Burden of persuasion

GECC and McKane and Robbins suggest that ABC bears a greater burden in convincing a court that the record should be unsealed than they were required to sustain in convincing the Chancellor to seal the records. We disagree. Although the decision we review is that of declining to unseal the records, the issue is whether the records should have been sealed in the first place. It was treated thus in Holland v. Eads, supra, and in Zukerman v. Piper Pools, 256 N.J.Super. 622, 607 A.2d 1027 (1992). The latter case was one in which an unsealing order was sought, and the New Jersey Superior Court, Appellate Division, considered only the question whether the record should have been sealed. Considering the motion to unseal the Court said, and we agree, "One who seeks to overcome the expectation of access bears the burden of establishing the requisite important state interest." 607 A.2d at 1029.

2. The right of access

In Nixon v. Warner Communications, Inc., 435 U.S. 589, 98 S.Ct. 1306, 55 L.Ed.2d 570 (1978), the Supreme Court addressed the common law right of access to court proceedings and records. While it is not an absolute right, the Court stated, "It is clear the courts of this country recognize a general right to inspect and copy public records and documents, including judicial records and documents." 435 U.S. at 597, 98 S.Ct. at 1312. The Court conceded, however, "It is difficult to distill from the relatively few judicial decisions a comprehensive definition of what is referred to as the common-law right of access or to identify all factors to be weighed in determining whether access is appropriate." Id., at 599, 98 S.Ct. at 1312.

In Arkansas Dep't of Human Services v. Hardy, 316 Ark. 119, 871 S.W.2d 352 (1994), we addressed the public's right of access to a court's final order. The Department of Human Services brought a paternity suit. After a hearing, the Chancellor filed a final order containing his ruling and then filed a second order stating the first order was sealed. We found the Chancellor erred in sealing the order, stating:

The foregoing issue came about because the chancellor sealed the final order, and, contrary to the arguments of both parties, we know of no authority for the sealing of a final order. One of the basic principles of a...