F.T.C. v. Standard Financial Management Corp.
| Decision Date | 06 October 1987 |
| Docket Number | Nos. 87-1340,87-1357,s. 87-1340 |
| Parties | , 56 USLW 2211, 1987-2 Trade Cases 67,722, 14 Media L. Rep. 1750 FEDERAL TRADE COMMISSION, Plaintiff, Appellee, v. STANDARD FINANCIAL MANAGEMENT CORP., et al., Defendants, Appellees. Dana J. Willis, Defendant, Appellant. FEDERAL TRADE COMMISSION, Plaintiff, Appellee, v. STANDARD FINANCIAL MANAGEMENT CORP., et al., Defendants, Appellees. Paul F. Taglione, Defendant, Appellant. |
| Court | U.S. Court of Appeals — First Circuit |
Barry J. Cutler with whom Peter M. Kazon, O'Connor & Hannan, Washington, D.C., Alan M. Spiro and Friedman & Atherton, Boston, Mass., were on brief, for defendant, appellant Dana J. Willis.
Defendant, appellant Paul F. Taglione submitted on the brief of defendant, appellant Willis.
David C. Shonka with whom Phoebe D. Morse, Director, Raymond L. Betts, Boston, Mass., Robert D. Paul, Gen. Counsel, and Ernest J. Isenstadt, Asst. Gen. Counsel, Washington, D.C., were on brief, for plaintiff, appellee F.T.C.
Joseph D. Steinfield with whom Jeanne M. Kempthorne and Hill & Barlow, Boston, Mass., were on brief, for intervenor Globe Newspaper Co.
Brenda M. Cotter with whom Brown, Rudnick, Freed & Gesmer, Boston, Mass., was on brief, for defendant, appellee Standard Financial Management Corp.
Before COFFIN, DAVIS * and SELYA, Circuit Judges.
The United States District Court for the District of Massachusetts ordered the unsealing of sworn personal financial statements submitted to the Federal Trade Commission (FTC) by Dana J. Willis and Paul F. Taglione, appellants herein. Willis and Taglione strive to convince us that the district court's release order far outstripped the bounds of its authority and/or discretion. We believe it did not and, therefore, affirm.
On February 11, 1987, the FTC filed a complaint against Willis, Taglione, and their closely-held corporation, Standard Financial Management Corporation (SFMC). The complaint alleged that through SFMC, which transacted business under the name and style of "New England Rare Coin Galleries", the appellants had engaged in deceptive practices in marketing and selling investment-quality rare coins. These machinations, it was said, were in contravention of the FTC Act, 15 U.S.C. Sec. 45(a)(1), and resulted in losses to consumers in the $15,000,000 range.
The suit was no bolt from the blue. It followed protracted negotiations among the parties. The FTC and the appellants had fashioned a tentative settlement (embodied in a proposed consent decree) which provided, inter alia, for injunctive relief and the appointment of special counsel to oversee the liquidation of SFMC. Though the decree suggested consumer restitution, it made relatively modest arrangements to supply the wherewithal for such remediation: payment by an insurer 1 of $1,500,000 into a redress fund, to be augmented by the net liquidation value of the remaining assets of the corporation. The anticipated settlement imposed some rather mild compliance and reporting conditions upon the appellants, but neither envisioned nor required them to contribute personal funds. And, there was every reason to believe that the redress fund would be topped off millions of dollars short of what would be needed to make affected consumers whole.
In agreeing to this settlement, the FTC relied in part upon the sworn personal financial statements submitted to it by Willis and Taglione, respectively. See, e.g., Part IV.P of the Revised Stipulated Final Order and Judgment ("In agreeing to the amount of redress ..., the Commission has relied upon the information shown in [the financial] statements...."). It is these very statements which lie at the core of the current controversy.
The parties jointly presented the consent decree to the district court on the day after the complaint was filed. At the urging of all concerned and because of exigent circumstances, see supra n. 1, the district judge reviewed the draft order immediately. He held a lengthy hearing lasting into the early evening of February 12 and provisionally approved the decree on the morning of February 13, subject to several modifications which he instructed the parties to draft. The judge indicated then and there that he was concerned about the accuracy of the principals' financial statements and ordered Willis and Taglione to appear before him on February 24 so that he might, among other things, inquire into the statements. Because of the press of time, it was not thought necessary to await the rewritten version of the decree. The special counsel took control of SFMC, and forthwith filed a Chapter 11 petition for corporate reorganization in the bankruptcy court.
Matters did not come to a standstill pending the resumption of hearings in the district court. To the contrary, the special counsel, under the aegis of the bankruptcy court, began to oversee the tangled affairs of SFMC, and otherwise proceeded to perform under the decree. In the meantime, the financial statements were produced by the appellants in contemplation of the upcoming district court session, and were temporarily sealed. Time and events marched on.
The hearing which was convened on February 24 took place over the course of two days. The district judge questioned the appellants under oath. He ordered the financial statements unsealed and spread upon the court record. Finally, he endorsed and entered the revised consent decree. Willis and Taglione, dismayed by the prospect of revelation of the statements moved for reconsideration. The district court put the release order temporarily on hold. Thereafter, a local publisher, the Boston Globe Newspaper Company, moved to intervene, seeking access to the documents. 2 Without objection, the court granted the Globe's petition for intervention. The judge then undertook a reexamination of the disclosure order, and decided to stand by it. We stayed release of the financial statements in order effectively to preserve appellants' rights pending consideration in this court.
The appellants sponsor two fundamental contentions. They assert, first, that their financial summaries were not a segment of the court record upon which the judge relied in entering the consent decree, and therefore, the common law presumption of public access never attached to them. Willis and Taglione also asseverate that, even if the documents became court records to which the presumption applied, the statements should remain under wraps because of the idiocratic circumstances which obtain here. We deal at the outset with a jurisdictional question which has arisen, and then treat separately with each of the reasons which the appellants espouse as necessitating continued impoundment of the documents.
Before turning to the merits, we take a moment to dispel any notion that we are bereft of jurisdiction to entertain the appellants' plaints. To our way of thinking, the release order is a "final"--if collateral--one within the meaning of our jurisprudence. See, e.g., Boreri v. Fiat S.P.A., 763 F.2d 17, 21-26 (1st Cir.1985); In re Continental Investment Corp., 637 F.2d 1, 4 (1st Cir.1980); United States v. Sorren, 605 F.2d 1211, 1213 (1st Cir.1979). We briefly summarize our reasoning.
The issue (whether or not the release order is warranted) is easily separable from the ongoing liquidation proceedings. The order is complete in and of itself, and there is no "plain prospect that the trial court may itself alter the challenged ruling...." United States v. Gurney, 558 F.2d 1202, 1207 (5th Cir.1977) (quoting C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure: Jurisdiction, Sec. 3911 at 470 (1976)), cert. denied, 435 U.S. 968, 98 S.Ct. 1606, 56 L.Ed.2d 59 (1978). So, unsealing is "finished"--rather than "unfinished"--business. Immediate review will enhance, rather than disrupt, whatever proceedings may be necessary below. The privacy right to which the appellants lay claim must be vindicated now, or it will be forever lost; as we lately remarked in an analogous context, to refuse to hear the appeal "would be to force [a party] to let the cat out of the bag, without any effective way of recapturing it if the district court's directive was ultimately found to be erroneous." Irons v. FBI, 811 F.2d 681, 683 (1st Cir.1987). Lastly, Willis and Taglione pose a somewhat novel question--a question which possesses some overarching significance and controls the point at issue.
We find that the essential ingredients--"separability, finality, urgency, and importance," Continental Investment Corp., 637 F.2d at 5--are present in sufficient measure to render the appeal eligible for review under the collateral order rule. See generally Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 169-72, 94 S.Ct. 2140, 2148-50, 40 L.Ed.2d 732 (1974); Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 545-47, 69 S.Ct. 1221, 1225-26, 93 L.Ed. 1528 (1949); In re San Juan Star Co., 662 F.2d 108, 112-13 (1st Cir.1981). Accordingly, we advance to the merits of the appellants' objections.
The district court based its release order on the common law presumption that the public ought to have access to judicial records. 3 In Nixon v. Warner Communications, Inc., 435 U.S. 589, 98 S.Ct. 1306, 55 L.Ed.2d 570 (1978), the Supreme Court acknowledged that "the courts of this country recognize a general right to inspect and copy public records and documents, including judicial records and documents." Id. at 597, 98 S.Ct. at 1312 (footnotes omitted). The privilege extends, in the first instance, to "materials on which a court relies in determining the litigants' substantive rights." Anderson v. Cryovac, Inc., 805 F.2d 1, 13 (1st Cir.1986). 4 Those documents which play no role in the adjudication process, however, such as those used only in discovery, lie beyond reach. Id. The appellants,...
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