Pansy v. Borough of Stroudsburg ( 1994 )

Opinions of the United
1994 Decisions States Court of Appeals
for the Third Circuit
5-2-1994
Pansy v. Borough of Stroudsburg, et al.
Precedential or Non-Precedential:
Docket 93-7396
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United States Court of Appeals
for the Third Circuit
No. 93-7396
JOHN A. PANSY,
Plaintiff/Appellee,
v.
BOROUGH OF STROUDSBURG; HAROLD A. BENTZONI;
KATHRYN MIKELS; JOHN W. OSBORNE, II;
WILLIAM REBER; MARY JEAN KNAPIK; MARYANN
WEST KOWALSHYN; RICHARD F. OSSWALD;
CARL R. ROGERS
Defendants/Appellees,
v.
OTTAWAY NEWSPAPERS, INC. t/a POCONO RECORD,
RONALD F. BOUCHARD; PENNSYLVANIA
NEWSPAPER PUBLISHERS ASSOCIATION,
Intervenors/Appellants.
On Appeal from the United States District Court
for the Middle District of Pennsylvania
(D.C. Civ. No. 91-00682)
Argued January 11, 1994
Before: STAPLETON, COWEN and ALITO,
Circuit Judges.
(Filed May 2, 1994)
George W. Westervelt, Jr. (argued)
304 Park Avenue, P.O. Box 549
1
Stroudsburg, PA 18360
Counsel for Appellants
Ottaway Newspapers, Inc.
t/a Pcono Record and
Ronald F. Bouchard
James A. Swetz
Cramer, Swetz & McManus
711 Sarah Street
Stroudsburg, PA 18360
Counsel for Appellee
John A. Pansy
Ralph A. Matergia, Esq. (argued)
Matergia & Dunn
530 Main Street
Stroudsburg, PA 18360
Counsel for Appellees
Borough of Stroudsburg
Harold A. Bentzoni
Kathryn Mikels
John W. Osborne, II
William Reber
Mary Jean Knapik
Maryann West Kowalyshyn
Richard F. Osswald
Carl R. Rogers
OPINION OF THE COURT
COWEN, Circuit Judge.
This appeal raises several questions of first
impression in this court concerning the ability of intervenors to
challenge orders of confidentiality pertaining to settlement
agreements. These questions are extremely important in light of
the widespread and increasing use by district courts of
2
confidentiality orders to facilitate settlements, and the
consequential sacrifice of public access to the information
deemed confidential by such orders.
Ottaway Newspapers, Inc. ("Ottaway"), The Pocono Record
("the Record"), Ronald F. Bouchard and the Pennsylvania Newspaper
Publishers Association (collectively, "the Newspapers") filed
this action in the district court seeking to intervene in an
action that had been settled between John A. Pansy and the
Borough of Stroudsburg ("the Borough"). The Newspapers' purpose
for intervening was to gain access to the Settlement Agreement
which was entered into between Pansy and the Borough. The
Newspapers argued that either the Agreement was a judicial record
to which it had a right of access, or that the Order of
Confidentiality which the court entered concerning the Agreement
should be modified or vacated. The district court ruled that the
Newspapers' motion for intervention was untimely. In the
alternative, the district court held that the Agreement was not a
judicial record, and therefore not accessible under the right of
access doctrine. The district court denied the Newspapers'
Motion to Intervene and Motion to Reconsider, Vacate or Modify
the Order of Confidentiality. This appeal followed.
For the reasons stated below, we will reverse the order
of the district court and direct that the Newspapers be permitted
to intervene. We will remand the case to the district court for
proceedings consistent with this opinion.
3
JURISDICTION AND STANDARD OF REVIEW
The district court entered a final order denying the
Motion to Intervene and the Motion to Amend, Vacate or Modify by
the Newspapers. Accordingly, we have jurisdiction under 28
U.S.C. § 1291. See Bank of Am. Nat'l Trust and Sav. Ass'n v.
Hotel Rittenhouse Assocs., 800 F.2d 339, 341 n.2 (3d Cir. 1986).
The standard of review for each issue raised in this
appeal will be discussed in the analysis of the issue. Where
this appeal raises a legal question, we exercise plenary review.
Prisco v. Talty, 993 F.2d 21, 24 (3d Cir. 1993).
DISCUSSION
A. BACKGROUND
In May, 1991, Pansy filed an action in the district
court pursuant to 42 U.S.C. § 1983 alleging that the Borough
violated his civil rights. Prior to Pansy's filing that action,
he had been Chief of the Borough's Police Department. While
Chief, he was investigated and later arrested by agents of the
Pennsylvania Attorney General's Office. Pansy was charged with
offenses relating to the alleged improper handling of parking
meter money. The Borough subsequently suspended him from the
force and demoted him to patrolman. The demotion and suspension,
in turn, led to Pansy's filing a civil rights action. Ultimately,
Pansy was tried and acquitted of all criminal charges.
Pansy and the Borough agreed to settle the civil rights
action and the Settlement Agreement was presented to and reviewed
by the district court. The Newspapers were not involved with the
4
settlement. On June 5, 1992, the district court entered an order
indicating that it had reviewed the terms of settlement and
directing that the case be considered dismissed with prejudice
upon the expiration of sixty days or consummation of settlement.
The order also stated that "the terms of settlement are
confidential and the parties hereby are ordered and directed to
abide by the order of confidentiality." App. at 54-55. The
Settlement Agreement was never filed with the district court.
On October 22, 1992, the Record sent the Borough a
request for information pursuant to the Pennsylvania Right to
Know Act ("the Act"), Pa. Stat. Ann. tit. 65, §§ 66.1-.4. (1959 &
Supp. 1993). The request sought information and documents
pertaining to the civil rights case, including the Settlement
Agreement.
On November 25, 1992, the Borough sent a response to
the Record which included some information concerning the
monetary cost to the Borough in settling the case. However, the
Borough refused to provide access to the Settlement Agreement
itself, and related documents, ostensibly because the district
court's June 5, 1992 Order of Confidentiality prohibited its
divulgence. The Borough has continued to refuse to provide the
Settlement Agreement to the Newspapers.
On December 23, 1992, the Newspapers filed a petition
in the Court of Common Pleas of Monroe County, Pennsylvania,
challenging the Borough's refusal to produce documents pursuant
to §§ 66.3 and 66.4 of the Right to Know Act. By order of that
5
court, the state court litigation has been stayed pending the
resolution of this case.
On December 23, 1992, the Newspapers also filed the
motions in the district court which are the subject of this
appeal. They filed a Motion to Intervene in the settled civil
rights action between Pansy and the Borough, as well as a Motion
to Reconsider, Vacate, or Modify the district court's June 5,
1992 Order. Specifically, the Newspapers sought the Settlement
Agreement as a judicial record. In the alternative, they sought
to modify or vacate the June 5, 1992 Order of Confidentiality so
they could obtain the Settlement Agreement pursuant to the
Pennsylvania Right to Know Act.
The district court concluded that the Motion to
Intervene was untimely. Alternatively, the district court
addressed the merits of the right of access claim. It found that
even if intervention was proper, the Settlement Agreement was not
a judicial record because it was never filed with the court and,
therefore, the Newspapers had no right to obtain the Settlement
Agreement under the right of access doctrine. The district court
also denied the Motion to Reconsider, Vacate or Modify the Order
of Confidentiality.
B. ANALYSIS
1. Standing
The appellees have not challenged the Newspapers'
standing in this appeal. Nevertheless, we are obliged to
consider whether the Newspapers have standing to intervene in
6
this action to either obtain the sought-after Settlement
Agreement under the right of access doctrine, or to attack the
Order of Confidentiality so that they may seek access to the
document under the Pennsylvania Right to Know Act. The
requirements for an Article III case or controversy were stated
in Valley Forge Christian College v. Americans United for
Separation of Church and State, Inc., 454 U.S. 464, 102 S. Ct.
752 (1982):
Art. III requires the party who invokes the court's
authority to show that he personally has suffered some
actual or threatened injury as a result of the
putatively illegal conduct of the defendant, and that
the injury fairly can be traced to the challenged
action and is likely to be redressed by a favorable
decision.
Id. at 472, 102 S. Ct. at 758 (internal quotations and citations
omitted).
We have routinely found, as have other courts, that
third parties have standing to challenge protective orders and
confidentiality orders0 in an effort to obtain access to
information or judicial proceedings. E.g., Brown v. Advantage
Eng'g, Inc., 960 F.2d 1013, 1016 (11th Cir. 1992); Public Citizen
v. Liggett Group Inc., 858 F.2d 775, 787 & n.12 (1st Cir. 1988),
cert. denied, 488 U.S. 1030, 109 S. Ct. 838 (1989); In re
Alexander Grant & Co. Litig., 820 F.2d 352, 354 (11th Cir. 1987);
0
In this opinion, the term "confidentiality order" will be used
to denote any court order which in any way restricts access to or
disclosure of any form of information or proceeding, including
but not limited to "protective orders", "sealing orders" and
"secrecy orders". "Protective orders" properly denote court
orders over information exchanged during discovery. See Fed. R.
Civ. P. 26(c).
7
United States v. Cianfrani, 573 F.2d 835, 845 (3d Cir. 1978);
City of Hartford v. Chase, 733 F. Supp. 533, 534 (D. Conn. 1990),
rev'd on other grounds, 942 F.2d 130 (2d Cir. 1991). The
Newspapers may have standing notwithstanding the fact that "they
assert rights that may belong to a broad portion of the public at
large. So long as the 'injury in fact' alleged by each
intervenor is 'a distinct and palpable injury to himself,'
standing should not be denied 'even if it is an injury shared by
a large class of other possible litigants.'" Cianfrani, 573 F.2d
at 845 (quoting Warth v. Seldin, 422 U.S. 490, 501, 95 S. Ct.
2197, 2206 (1975)).
Moreover, to establish standing, it is not necessary
for litigants to demonstrate that they will prevail on the merits
of their claim. See Warth, 422 U.S. at 500, 95 S. Ct. at 2206.
Therefore, in determining whether the Newspapers have standing,
we need not determine that the Newspapers will ultimately obtain
access to the sought-after Settlement Agreement. We need only
find that the Order of Confidentiality being challenged presents
an obstacle to the Newspapers' attempt to obtain access. The
Newspapers have met the standing requirements in this case: they
have shown that the putatively invalid Confidentiality Order
which the district court entered interferes with their attempt to
obtain access to the Settlement Agreement, either under the right
of access doctrine or pursuant to the Pennsylvania Right to Know
Act.
2. Intervention
8
The district court denied the Newspapers' Motion for
Intervention. We normally review the district court's denial of
the Newspapers' Motion for Intervention for abuse of discretion.
Harris v. Pernsley, 820 F.2d 592, 597 (3d Cir.), cert. denied,
484 U.S. 947, 108 S. Ct. 336 (1987). However, because the
question raised is whether the district court applied the correct
legal standard for intervention, we exercise plenary review. Cf.
Savarese v. Agriss, 883 F.2d 1194, 1200 (3d Cir. 1989).
The district court denied the Newspapers' Motion for
Intervention for two reasons. First, it determined that the
Motion for Intervention was untimely because the case had already
been settled for at least six months. Second, it found that the
Newspapers did not demonstrate that their interest in the case
had anything in common with a question of law or fact in the main
action and therefore did not meet the requirements of Fed. R.
Civ. P. 24(b)(2).0
The district court applied incorrect legal standards in
denying the Newspapers' Motion for Intervention. As to the
district court's finding that the Newspapers have not shown that
their claim has anything in common with a question of law or fact
in the case, the district court ruled contrary to a forming
consensus in the federal courts. We agree with other courts that
0
Fed. R. Civ. P. 24(b) provides in part:
Permissive Intervention. Upon timely application
anyone may be permitted to intervene in an action: (1)
when a statute of the United States confers a
conditional right to intervene; or (2) when an
applicant's claim or defense and the main action have a
question of law or fact in common.
9
have held that the procedural device of permissive intervention
is appropriately used to enable a litigant who was not an
original party to an action to challenge protective or
confidentiality orders entered in that action. E.g., Beckman
Indus., Inc. v. International Ins. Co., 966 F.2d 470, 473-74 (9th
Cir.), cert. denied, ___ U.S. ___, 113 S. Ct. 197 (1992); United
Nuclear Corp. v. Cranford Ins. Co., 905 F.2d 1424, 1427 (10th
Cir. 1990), cert. denied, 498 U.S. 1073, 111 S. Ct. 799 (1991);
Public Citizen v. Liggett Group, Inc., 858 F.2d 775, 783-87 (1st
Cir. 1988), cert. denied, 488 U.S. 1030, 109 S. Ct. 838 (1989);
Meyer Goldberg, Inc., of Lorain v. Fisher Foods, Inc., 823 F.2d
159, 161-64 (6th Cir. 1987); Martindell v. International Tel. &
Tel. Corp., 594 F.2d 291, 294 (2d Cir. 1979); In re Beef Indus.
Antitrust Litig., 589 F.2d 786, 788-89 (5th Cir. 1979); City of
Hartford v. Chase, 733 F. Supp. 533, 534 (D. Conn. 1990), rev'd
on other grounds, 942 F.2d 130 (2d Cir. 1991); In re Franklin
Nat'l Bank Sec. Litig., 92 F.R.D. 468, 470-71 (E.D.N.Y. 1981),
aff'd sub nom. Federal Deposit Ins. Corp. v. Ernst & Ernst, 677
F.2d 230 (2d Cir. 1982) [hereinafter FDIC]. In Beckman, the
Court of Appeals for the Ninth Circuit stated:
[S]pecificity, e.g., that the [intervenors'] claim
involve . . . the same legal theory [that was raised in
the main action], is not required when intervenors are
not becoming parties to the litigation. There is no
reason to require such a strong nexus of fact or law
when a party seeks to intervene only for the purpose of
modifying a protective order.
10
966 F.2d at 474.0 The reasoning in Beckman is persuasive, and we
adopt it. We therefore reject the district court's conclusion
that the Newspapers have not shown their claim has anything in
common with a question of law or fact in the case, and therefore
cannot intervene. By virtue of the fact that the Newspapers
challenge the validity of the Order of Confidentiality entered in
the main action, they meet the requirement of Fed. R. Civ. P.
24(b)(2) that their claim must have "a question of law or fact in
common" with the main action.0
The district court's second reason for denying the
Newspapers' motion for intervention was that the motion to
intervene was untimely, as it was made approximately six and one-
half months from the date of settlement. In support of its
holding, the district court cited dicta from a footnote in an
opinion by this court, Littlejohn v. Bic Corp., 851 F.2d 673, 677
n.7 (3d Cir. 1988), which stated that "'intervention is ancillary
0
The Beckman court also noted that although permissive
intervention ordinarily requires independent jurisdictional
grounds, an independent jurisdictional basis is not required
because intervenors do not seek to litigate a claim on the
merits. 966 F.2d at 473. Thus, in cases where intervenors seek
to modify an order of the court, the court has jurisdiction based
on the fact that it already has the power to modify the
protective order and no independent jurisdictional basis is
needed. Id.
0
We therefore do not follow dicta in our decision in Littlejohn
v. Bic Corp., 851 F.2d 673 (3d Cir. 1988), which stated: "Third
parties seeking access to the judicial record after the
termination of an action may therefore be required to proceed by
complaint or order to show cause." Id. at 677 n.7. That
statement is dicta because, as the Littlejohn court pointed out,
the intervention issue was not raised on appeal. Id. Of course,
as an alternative to permissive intervention, parties may choose
to proceed by complaint or order to show cause to challenge
confidentiality orders.
11
and subordinate to a main cause and whenever an action is
terminated, for whatever reason, there no longer remains an
action in which there can be an intervention,'" id. (quoting
Black v. Central Motors Lines, Inc., 500 F.2d 407, 408 (4th Cir.
1974)).
We do not follow the dicta quoted above from Littlejohn
because it announces an inappropriate rule and is contrary to the
majority of courts that have decided the issue. These courts
have allowed intervention by parties for the limited purpose of
modifying a confidentiality or protective order even after the
underlying dispute between the parties has been settled. See,
e.g., Beckman, 966 F.2d at 471, 473-75; Brown v. Advantage Eng'g,
Inc., 960 F.2d 1013, 1014-16 (11th Cir. 1992); United Nuclear,
905 F.2d at 1426-29; Public Citizen, 858 F.2d at 783-87; Meyer
Goldberg, 823 F.2d at 161-64; Stallworth v. Monsanto Co., 558
F.2d 257, 260-70 (5th Cir. 1977); In re Franklin Nat'l Bank Sec.
Litig., 92 F.R.D. at 469-71; see Bank of Am. Nat'l Trust and Sav.
Ass'n v. Hotel Rittenhouse Assocs., 800 F.2d 339, 342 n.2 (3d
Cir. 1986).0 Discussion in a recent decision by this court
0
One case has been found which contradicts the general rule that
intervenors will be granted permissive intervention to challenge
confidentiality orders. In United States v. Kentucky Utils. Co.,
927 F.2d 252 (6th Cir. 1991), the Court of Appeals for the Sixth
Circuit expressed skepticism as to whether intervention to
challenge a confidentiality order would be appropriate. The
court stated:
Because the papers [sought] are not in the court
record, but are instead copies of private documents
that came into the possession of the DOJ only for the
limited purposes of discovery and were not safeguarded
by a protective order during discovery, [the potential
intervenor] faces a formidable burden in attempting to
12
reflects the growing consensus among the courts of appeals that
intervention to challenge confidentiality orders may take place
long after a case has been terminated. In Leucadia, Inc. v.
Applied Extrusion Technologies, Inc., 998 F.2d 157 (3d Cir.
1993), we stated that "a district court may properly consider a
motion to intervene permissively for the limited purpose of
modifying a protective order even after the underlying dispute
between the parties has long been settled." Id. at 161 n.5. This
recognition in Leucadia, in combination with the forming
consensus in other courts of appeals, provides strong reasons to
allow a district court to grant permissive intervention in order
to allow litigation of ancillary issues even after a case has
been concluded.
In Public Citizen, the Court of Appeals for the First
Circuit reasoned that where an intervenor is litigating an
demonstrate that her desire for access to materials of
such a private nature rises to the status of an
interest of so significant a magnitude as to entitle
her to participate as a party to the action and
challenge the . . . order.
Id. at 255. It should be noted that the Kentucky Utilities court
cited no authority for the above-quoted passage. It contains no
analysis, nor does it articulate any workable standards,
concerning whether a party may intervene in an action to
challenge a protective or confidentiality order. It merely
asserts the phrase "formidable burden". Moreover, as a matter of
policy the holding in Kentucky Utilities is unacceptable since it
makes it almost impossible for the public to intervene in actions
even involving important public matters to challenge protective
or confidentiality orders. We therefore cannot join the position
taken by the Sixth Circuit in Kentucky Utilities.
13
ancillary issue, the potential for prejudice to the original
parties due to the delay in intervention0 is minimized:
[A] factor to be considered is the prejudice to
existing parties due to [a litigant's] delay in
intervening. This factor encompasses the basic
fairness notion that intervention should not work a
"last minute disruption of painstaking work by the
parties and the court." For purposes of this factor,
therefore, it is necessary to ask why a would-be
intervenor seeks to participate, for if the desired
intervention relates to an ancillary issue and will not
disrupt the resolution of the underlying merits,
untimely intervention is much less likely to prejudice
the parties. Here, of course, [the intervenor's]
motion pertains to a particularly discrete and
ancillary issue, as demonstrated by the fact that the
merits of the case have been already concluded and are
no longer subject to review. Because [the intervenor]
sought to litigate only the issue of the protective
order, and not to reopen the merits, we find that its
delayed intervention caused little prejudice to the
existing parties in this case.
858 F.2d at 786 (citations omitted).
This reasoning is persuasive and we adopt it. We also
note that in cases dealing with access to information, the public
and third parties may often have no way of knowing at the time a
confidentiality order is granted what relevance the settling case
has to their interests. Therefore, to preclude third parties
from challenging a confidentiality order once a case has been
settled would often make it impossible for third parties to have
their day in court to contest the scope or need for
confidentiality. We therefore expressly hold today what we
observed in our opinion in Leucadia: "a district court may
0
Fed. R. Civ. P. 24(b) provides, in part, that in exercising its
discretion in determining whether to allow permissive
intervention, "the court shall consider whether the intervention
will unduly delay or prejudice the adjudication of the rights of
the original parties."
14
properly consider a motion to intervene permissively for the
limited purpose of modifying [or vacating] a [confidentiality]
order even after the underlying dispute between the parties has
long been settled." 998 F.2d at 161 n.5.0
The facts of this case lead us to conclude that
intervention should not be deemed untimely. In United Nuclear,
intervention was permitted approximately three years after the
underlying action was settled and dismissed, 905 F.2d at 1427,
and in Beckman, intervention was allowed approximately two years
after the underlying case was terminated, 966 F.2d at 471, 473.
In the instant case, there was only a six and one-half month
delay between the time of settlement and the motion for
0
In Commonwealth of Pa. v. Rizzo, 530 F.2d 501 (3d Cir.), cert.
denied, 426 U.S. 921, 96 S. Ct. 2628 (1976), we listed three
factors to consider in determining whether a motion to intervene
is timely: (1) how far the proceedings have gone when the movant
seeks to intervene; (2) prejudice which resultant delay might
cause to other parties; and (3) the reason for the delay. Id. at
506. In Delaware Valley Citizens' Council v. Commonwealth of
Pa., 674 F.2d 970 (3d Cir. 1982), we also stated that "a motion
to intervene after entry of a decree should be denied except in
extraordinary circumstances," id. at 974. However, Rizzo and
Delaware Valley involved parties seeking to intervene and
litigate the merits of the underlying suit. The standards
articulated in Rizzo and Delaware Valley are therefore not
helpful in cases such as the instant one, where the intervenors
do not wish to litigate the merits of the underlying suit, but
rather only seek to litigate an ancillary issue, such as a
protective or confidentiality order. For example, the first
Rizzo factor will rarely be helpful in cases where the intervenor
is challenging a confidentiality order over a settlement
agreement, because the order usually takes effect upon the
termination of an action. Thus, to ask how far the proceedings
have gone is pointless. Therefore, although Rizzo, Delaware
Valley and their progeny are good law, they do not control in
cases such as the one which is the subject of this appeal, where
the potential intervenors wish only to litigate a question
ancillary to the underlying suit.
15
intervention.0 This relatively short delay, in itself, leads us
to the conclusion that intervention should be permitted.0
3. The Right of Access Doctrine
Although the district court denied intervention by the
Newspapers, it made an alternative holding. Assuming that
intervention was proper, the district court considered the merits
of the Newspapers' challenge to the Order of Confidentiality and
their attempt to obtain access to the Settlement Agreement. The
district court determined that the Settlement Agreement was not a
"judicial record," and it therefore denied the Newspapers' motion
to obtain access to the Settlement Agreement under the right of
access doctrine.
We have previously recognized a right of access to
judicial proceedings and judicial records, and this right of
access is "beyond dispute." Littlejohn v. Bic Corp., 851 F.2d
673, 677-78 (3d Cir. 1988) (quoting Publicker Indus., Inc. v.
Cohen, 733 F.2d 1059, 1066 (3d Cir. 1984)). "The balancing of
factors for and against access is a decision committed to the
0
We also note that the Record sent the Borough a request for
information pursuant to the Pennsylvania Right to Know Act on
October 22, 1992, just over four months from the date of
settlement. Only after the Borough refused to provide the Record
with the Settlement Agreement did the Record realize that court
action would be necessary. These facts indicate that the Record
was diligent in seeking the Settlement Agreement, and that its
motion for intervention therefore cannot be deemed untimely.
0
We need not address whether in some circumstances a trial court,
in the exercise of its discretion, may rightly conclude that
untimeliness or other factors relating to the particular claimant
justify refusal of intervention where the intervenors seek to
contest an ancillary issue.
16
discretion of the district court, although it is not generally
accorded the narrow review reserved for discretionary decisions
based on first-hand observations." Bank of Am. Nat'l Trust and
Sav. Ass'n v. Hotel Rittenhouse Assocs., 800 F.2d 339, 344 (3d
Cir. 1986) (citations omitted). In this case, however, the
district court reached its conclusion through a legal
determination that the Settlement Agreement was not a "judicial
record" accessible under the right of access doctrine. We will
therefore exercise plenary review over the district court's legal
determination. See 1st Westco Corp. v. School Dist. of Phila., 6
F.3d 108, 112 (3d Cir. 1993).
The Newspapers argue that the Settlement Agreement
which Pansy and the Borough entered into is a "judicial record,"
accessible under the right of access doctrine. If the Settlement
Agreement is a judicial record, then Rittenhouse would be binding
and the Agreement should be released by the district court. In
Rittenhouse, this court held that a settlement agreement deemed a
judicial record is accessible under the right of access doctrine.
800 F.2d at 344-45. We specifically held that the strong
presumption of access outweighed the interest in promoting
settlements, which in the matter before us is the only interest
which the Borough has argued in favor of maintaining the Order of
Confidentiality. Id. Therefore, if the Settlement Agreement is
a judicial record, it should be released by the district court
itself under the right of access doctrine, and there would be no
need for the Newspapers to demonstrate that the Settlement
17
Agreement is a public record under the Pennsylvania Right to Know
Act.
However, our prior decisions preclude a finding that
the Settlement Agreement is a judicial record accessible under
the right of access doctrine. See Internal Operating Procedures
of the United States Court of Appeals for the Third Circuit 9.1
(July 1990) ("It is the tradition of this court that the holding
of a panel in a reported opinion is binding on subsequent
panels."). In Enprotech Corp. v. Renda, 983 F.2d 17 (3d Cir.
1993), we indicated that when a settlement agreement is not filed
with the court, it is not a "judicial record" for purposes of the
right of access doctrine. Id. at 20-21. In Enprotech, we held
that since the "Settlement Agreement ha[d] not been filed with,
placed under seal, interpreted or enforced by the district
court", it was not a judicial record. Id. at 20. The Enprotech
court went on to hold: "Moreover, the Agreement will not become a
part of the public record unless and until the district court may
order the parties to comply with its terms." Id. at 21. The
Enprotech Court so held even though the district court in that
case specifically retained jurisdiction over the settlement
agreement until its expiration so that it could enforce its
terms. Id.
In the instant case, the Settlement Agreement which is
subject to the Order of Confidentiality was never filed with,
interpreted or enforced by the district court. The district
court has not ordered any of the terms of the Settlement
Agreement to be complied with. Accordingly, Enprotech controls
18
the instant case and leads us to conclude that the Settlement
Agreement is not a judicial record, and the right of access
doctrine cannot be a basis for the Newspapers to obtain access to
the Agreement. In contrast, in Rittenhouse we found that the
settlement agreement was a judicial record because it had been
filed with and enforced by the district court. 800 F.2d at 344-
45.
Another decision by this court indicates that the
Settlement Agreement is not a judicial record accessible under
the right of access doctrine. In Littlejohn v. Bic Corp., 851
F.2d 673 (3d Cir. 1988), we addressed the question of whether
documents which were admitted into evidence and had become
judicial records were accessible under the right of access
doctrine after the underlying litigation had been settled and the
documents had been returned to the party resisting disclosure. We
stated:
We . . . hold that, absent allegations of fraud or
other extraordinary circumstances, trial exhibits that
were restored to their owner after a case has been
completely terminated and which were properly subject
to destruction by the clerk of court are no longer
judicial records within the "supervisory power" of the
district court.
Id. at 683. Under Littlejohn, even where there is no dispute
that documents were at one time judicial records, once such
documents are no longer part of the court file they lose their
status as judicial records.0 Thus, in Littlejohn, as in
0
But see Littlejohn, 851 F.2d at 688 (Scirica, J., dissenting).
In his dissent, Judge Scirica stated:
19
Enprotech, we focused on the technical question of whether a
document is physically on file with the court. If it is not, it
is not a "judicial record." We pointed out in Leucadia that
"[n]umerous other courts have also recognized the principle that
the filing of a document gives rise to a presumptive right of
public access." 998 F.2d at 161-62 (emphasis added). See also
Rittenhouse, 800 F.2d at 345 ("Once a settlement is filed in the
district court, it becomes a judicial record, and subject to the
access accorded such records." (emphasis added)). In the matter
presently before the court, the parties agree that the Settlement
Agreement has never been filed with the court.
The Newspapers nevertheless argue that since the
district court has entered an Order of Confidentiality over the
Settlement Agreement, this in effect has converted the unfiled
Settlement Agreement into a judicial record. This argument
fails. Simply because a court has entered a confidentiality
order over documents does not automatically convert those
documents into "judicial records" accessible under the right of
access doctrine. For example, when a court enters an order of
Any member of the public, whether a student of the law,
an interested observer, or a historian, will be
required to assert his rights within two months or lose
them forever. . . . I do not view a local rule
permitting return or destruction of exhibits as
controlling the determination of right of access.
Rather, the district judge should be permitted to
inquire whether the contested items are still available
from any source. If the items exist, their character
as judicial records renders them presumptively open to
public examination, absent "improper purposes."
Id. (citation omitted).
20
protection over documents exchanged during discovery, and these
documents have not been filed with the court, such documents are
not, by reason of the protective order alone, deemed judicial
records to which the right of access attaches. See Seattle Times
Co. v. Rhinehart, 467 U.S. 20, 30-37, 104 S. Ct. 2199, 2206-10
(1984); Leucadia, 998 F.2d at 163 & n.9; Cipollone v. Liggett
Group, Inc., 785 F.2d 1108, 1119-20 (3d Cir. 1986), cert. denied,
484 U.S. 976, 108 S. Ct. 487 (1987).
The district court in this case stated that "it is
further ordered that the terms of the settlement are confidential
and the parties hereby are ordered and directed to abide by the
order of confidentiality." App. at 54-55. Therefore, the
district court granted an order of confidentiality over the terms
of the Settlement Agreement. It did not order the terms of the
Settlement Agreement to be abided by the parties--nor could it,
since the Settlement Agreement itself was never filed with the
court.
The Order of Confidentiality is independent of any of
the terms included within the Settlement Agreement, just as
protective orders over discovery materials are independent of the
items actually exchanged subject to such protective orders.
Indeed, we have no way of knowing whether the Settlement
Agreement itself includes a provision for confidentiality because
the Settlement Agreement was never filed with the court and is
not a part of the court record. It is therefore not possible for
us to find, as Enprotech requires in order to deem a settlement
agreement a judicial record, that the district court ordered the
21
parties to comply with the terms of the Settlement Agreement. 983
F.2d at 21 ("[T]he [Settlement] Agreement will not become a part
of the public record unless and until the district court may
order the parties to comply with its terms.").
The Newspapers further argue that the Settlement
Agreement is a judicial record because the district court
actually reviewed the Settlement Agreement before granting the
Order of Confidentiality. In its June 5, 1992 order, the
district court stated: "[T]he parties having informed the Court
that the . . . matter is settled and the Court having reviewed
the terms of settlement, this action is hereby discontinued . . .
." App. at 54 (emphasis added). By virtue of the fact that the
district court reviewed the Settlement Agreement before granting
its order, the Newspapers argue this converts the Settlement
Agreement into a judicial record. In support of this position,
the Newspapers cite the decision by the Court of Appeals for the
First Circuit in FTC v. Standard Fin. Management Corp., 830 F.2d
404 (1st Cir. 1987).
In Standard Financial, the court held that "relevant
documents which are submitted to, and accepted by, a court of
competent jurisdiction in the course of adjudicatory proceedings,
become documents to which the presumption of public access
applies." Id. at 409. Even though the disputed documents were
not part of the court file, id. at 405-407, 413, the Standard
Financial court held that they were nevertheless accessible under
the right of access doctrine because "[t]hey were duly submitted
to the court", id. at 410, and "were relevant and material to the
22
matters sub judice", id. The Newspapers argue that since the
Settlement Agreement was duly submitted to the district court,
and the district court based its June 5, 1992 Order partly in
reliance on this submission, Standard Financial controls and the
Settlement Agreement is accessible under the right of access
doctrine.
The Court of Appeals for the First Circuit in Standard
Financial has articulated a persuasive and perhaps desirable
rule. Moreover, it may well be that during the life of a case,
the issue of whether a document is a judicial record should turn
on the use the court has made of it rather than on whether it has
found its way into the clerk's file. However, when the "judicial
record" issue arose in this case, final judgment had been entered
and no possibility of an appeal remained. As a result, we find
this case to be indistinguishable from Littlejohn and we are
bound by the Internal Operating Procedures of this court to
follow that decision. Internal Operating Procedures of the
United States Court of Appeals for the Third Circuit 9.1 (July
1990). In Littlejohn, this court held that exhibits that have
been admitted into evidence and relied upon by the court do not
remain judicial records after the case is closed and they are
returned to the parties. 851 F.2d at 683. We are therefore
clearly not at liberty here to bestow judicial record status on
the Settlement Agreement, which the court briefly perused and
returned to the parties in a now closed case. But see
Littlejohn, 851 F.2d at 688 (Scirica, J., dissenting) (A
"district judge should be permitted to inquire whether the
23
contested items are still available from any source."). The
Settlement Agreement is not a "judicial record," and the district
court correctly concluded that the Newspapers cannot obtain
access to that document under the right of access doctrine.0
4. Challenging the Order of Confidentiality
The Newspapers also made a motion in the district court
to reconsider, vacate or modify the Confidentiality Order, as a
matter independent of the right of access doctrine. The district
court denied the Newspapers' motion. We review the grant or
modification of a confidentiality order for abuse of discretion.
See Republic of Philippines v. Westinghouse Elec. Corp., 949 F.2d
653, 664 (3d Cir. 1991); Smith v. Bic Corp., 869 F.2d 194, 199
(3d Cir. 1989). However, we exercise plenary review over the
district court's interpretation and application of the legal
standard for granting or modifying a confidentiality order. Cf.
Savarese v. Agriss, 883 F.2d 1194 (3d Cir. 1989).
0
The Newspapers make a technical argument as to why the
Settlement Agreement is a judicial record accessible under the
right of access doctrine. Citing Bank of Am. Nat'l Trust and
Savings Ass'n v. Hotel Rittenhouse Assocs., 800 F.2d 339, 344 (3d
Cir. 1986), the Newspapers argue that since in settling the case
the appellees did not meet the specific requirements of Fed. R.
Civ. P. 41(a), governing voluntary dismissal, the Settlement
Agreement must be considered a judicial record. Although in
Rittenhouse we did state in dicta that documents relating to a
voluntary stipulation of dismissal under Fed. R. Civ. P. 41(a)(1)
would likely not be accessible under the right of access
doctrine, 800 F.2d at 344, we did not at all suggest that any
documents not relating to a Rule 41(a)(1) dismissal would
automatically be accessible under the right of access doctrine.
The Newspapers' argument overlooks the fact that the settlement
agreement in Rittenhouse, unlike the one in the case presently
before the court, was filed with the court. 800 F.2d at 344-45.
As the above discussion indicates, whether the relevant document
is in the court file is the critical inquiry.
24
Even if the Settlement Agreement is not a judicial
record, the Newspapers seek to modify or vacate the Order of
Confidentiality controlling the Settlement Agreement. Their
reason for doing so is that if the Newspapers are successful in
vacating the Order of Confidentiality, they will then be able to
seek access to the Settlement Agreement under the Pennsylvania
Right to Know Act, Pa. Stat. Ann. tit. 65, §§ 66.1-.4. (1959 &
Supp. 1993), without interference by the federal court Order of
Confidentiality.
It is important to note the practical difference
between the Newspapers' failed attempt to obtain the Settlement
Agreement under the right of access doctrine on the one hand, and
on the other hand the Newspapers' attempt only to modify or
vacate the Order of Confidentiality. If the Newspapers had been
successful in demonstrating that the Settlement Agreement was a
judicial record for purposes of the right of access doctrine, the
Settlement Agreement would have been made available by the
district court itself, as a judicial record. In contrast, if the
Newspapers are successful in vacating the Order of
Confidentiality, as a matter independent of the right of access
doctrine, the district court will not then automatically grant
access to the Settlement Agreement. Rather, the Order of
Confidentiality would merely be vacated, and the Newspapers would
then be free to seek access to the Settlement Agreement through
other legal channels, without interference by the Order of
Confidentiality. In fact, the Newspapers have already commenced
a suit in Pennsylvania state court, seeking the Settlement
25
Agreement as a "public record" under the Pennsylvania Right to
Know Act. The state court stayed that action pending the outcome
of this federal action.
If the Order of Confidentiality is vacated, then it
appears that the Settlement Agreement will be made available by
order of the state court pursuant to the Pennsylvania Right to
Know Act.0 If the Order of Confidentiality is not vacated, then
the state court would be unable to order the document accessible.
This is because even though the Settlement Agreement would likely
be available under the Pennsylvania Right to Know Act, the state
court would be obligated to respect the already-existing federal
court Order of Confidentiality.0 From these observations, it is
0
In Morning Call, Inc. v. Lower Saucon Township, 627 A.2d 297
(Pa. Commw. Ct. 1993), the Commonwealth Court of Pennsylvania
held that a settlement agreement entered into between a township
and a private party was a "public record" subject to disclosure
under the Pennsylvania Right to Know Act. Id. at 299-301. The
court so held even though the parties to the settlement agreement
had included a non-disclosure clause within the settlement
agreement. Id. at 298.
0
The Pennsylvania Right to Know Act provides that information
restricted by order of a court is not a "public record" for the
purposes of the Act. Pa. Stat. Ann. tit. 65, § 66.1(2) (Supp.
1993).
Although neither the Full Faith and Credit Statute, 28
U.S.C. § 1738, nor the Full Faith and Credit Clause of the United
States Constitution, U.S. Const. art. IV, § 1, mentions what
obligations exist for state courts confronting federal court
judgments, it is well recognized that state courts must give full
faith and credit to federal court judgments. E.g., Stoll v.
Gottlieb, 305 U.S. 165, 170-71, 59 S. Ct. 134, 136-37 (1938);
Crescent City Live-Stock Landing & Slaughter-House Co. v.
Butchers' Union Slaughter-House & Live-Stock Landing Co., 120
U.S. 141, 146-47, 156-59, 7 S. Ct. 472, 474-75, 480-81 (1887).
The state court's obligation to respect a prior federal court
order which conflicts with state law also follows from the
principle that states cannot curtail the jurisdiction of the
federal courts. Janice Toran, Secrecy Orders and Government
26
clear that the Newspapers have an interest in vacating the Order
of Confidentiality even though we have rejected their attempt to
obtain the Settlement Agreement under the right of access
doctrine.
It is well-established that a district court retains
the power to modify or lift confidentiality orders that it has
entered. See, e.g., United Nuclear Corp. v. Cranford Ins. Co.,
905 F.2d 1424, 1427 (10th Cir. 1990), cert. denied, 498 U.S.
1073, 111 S. Ct. 799 (1991); In re "Agent Orange" Prod. Liab.
Litig., 821 F.2d 139, 145 (2d Cir.), cert. denied , 484 U.S. 953,
108 S. Ct. 344 (1987); Palmieri v. New York, 779 F.2d 861, 864-65
(2d Cir. 1985); In re Franklin Nat'l Bank Sec. Litig., 92 F.R.D.
468, 471 (E.D.N.Y 1981), aff'd sub nom. FDIC, 677 F.2d 230 (2d
Cir. 1982). The issue of whether an order of confidentiality
should be modified is separable from the question concerning
whether a settlement agreement subject to that order is a
judicial record for purposes of the right of access doctrine.
Cf., e.g., Beckman Indus., Inc. v. International Ins. Co., 966
F.2d 470, 471-76 (9th Cir. 1992); City of Hartford v. Chase, 942
F.2d 130, 134-37 (2d Cir. 1991) (allowing intervening third
parties to challenge confidentiality order over documents not
part of court file); Cipollone v. Liggett Group, Inc., 785 F.2d
1108, 1110-23 (3d Cir. 1986), cert. denied, 484 U.S. 976, 108 S.
Ct. 487 (1987). Therefore, although we have already determined
that the Settlement Agreement is not available under the right of
Litigants: "A Northwest Passage Around the Freedom of Information
Act"?, 27 Ga. L. Rev. 121, 170-71 (1992).
27
access doctrine, we will consider whether the district court
should have nevertheless modified or vacated the Order the
Confidentiality which it ordered over the Settlement Agreement.
In favor of its position that the Order of
Confidentiality should be vacated, the Newspapers argue that the
district court lacked the power to enter an order of
confidentiality over a document which is not in the court file
nor incorporated into an order of the court. We reject this
argument. Courts have inherent power to grant orders of
confidentiality over materials not in the court file. In Seattle
Times Co. v. Rhinehart, 467 U.S. 20, 104 S. Ct. 2199 (1984), the
Supreme Court confirmed that courts have the power to grant
confidentiality orders over material not on file with the court,
id. at 33 n.19, 104 S. Ct. at 2207 n.19, holding that "we have no
question as to the court's jurisdiction to [enter protective
orders] under the inherent 'equitable powers of courts of law
over their own process, to prevent abuses, oppression, and
injustices,'" id. at 35, 104 S. Ct. at 2209 (quoting
International Prods. Corp. v. Koons, 325 F.2d 403, 407-08 (2d
Cir. 1963)). See also, e.g., FDIC, 677 F.2d at 232 ("It is
beyond question that a court may issue orders prohibiting
disclosure of documents or information.").
The Newspapers also challenge the validity of the Order
of Confidentiality because the Order was not entered pursuant to
a rule of civil procedure or any other court rule. The Order was
entered over the Settlement Agreement, while the Federal Rules of
Civil Procedure only address protective orders over materials
28
exchanged during discovery, Fed. R. Civ. P. 26(c). However, in
Seattle Times, the Supreme Court made clear that courts have
inherent equitable power to grant confidentiality orders, whether
or not such orders are specifically authorized by procedural
rules. 467 U.S. at 35, 104 S. Ct. at 2209.
Nevertheless, simply because courts have the power to
grant orders of confidentiality does not mean that such orders
may be granted arbitrarily. Disturbingly, some courts routinely
sign orders which contain confidentiality clauses without
considering the propriety of such orders, or the countervailing
public interests which are sacrificed by the orders.0 Because
0
In City of Hartford v. Chase, 942 F.2d 130 (2d Cir. 1991), Judge
Pratt, in a concurring opinion, made the following insightful
observations:
A . . . troubling tendency accompanies the increasing
frequency and scope of confidentiality agreements that
are ordered by the court. These agreements are reached
by private parties and often involve materials and
information that is never even presented to the court.
With the signature of a federal judge, however, they
are converted into a powerful means of maintaining and
enforcing secrecy. Once signed, a confidentiality
order, which has converted a private agreement into an
order of the court, requires the court to use its
contempt power to enforce the private agreement. . . .
[B]ecause they often involve information not in the
control of the court, and may . . . implicate public
concerns, confidentiality orders, when not subject to
proper supervision, have a great potential for abuse.
For this reason, judges should review such agreements
carefully and skeptically before signing them.
Id. at 137-38 (Pratt, J., concurring). See also Toran, supra
note 13, at 124-26; Brian T. FitzGerald, Note, Sealed v. Sealed:
A Public Court System Going Secretly Private, 6 J.L. & Pol. 381,
382 (1990) ("Unfortunately, the incidence of secrecy in the
judicial process appears to be on the rise, particularly in the
complex litigation area. Equally disturbing is the trend for
29
defendants request orders of confidentiality as a condition of
settlement, courts are willing to grant these requests in an
effort to facilitate settlement without sufficiently inquiring
into the potential public interest in obtaining information
concerning the settlement agreement. The public's interest is
particularly legitimate and important where, as in this case, at
least one of the parties to the action is a public entity or
official.
In this case, the district court made no findings for
the record when it initially granted the Order of
Confidentiality, and apparently did not balance the competing
public and privacy interests before entering the Order. In
denying the Newspapers' Motion to Reconsider, Vacate or Modify
the Order, the district court did not explain why the need for
confidentiality outweighed the Newspapers' interest in obtaining
access to the Settlement Agreement pursuant to the Pennsylvania
Right to Know Act.0 We must determine whether the district court
appropriately exercised its discretion in granting and
maintaining the Order of Confidentiality.
In the context of discovery, it is well-established
that a party wishing to obtain an order of protection over
discovery material must demonstrate that "good cause" exists for
the order of protection. Fed. R. Civ. P. 26(c); Smith v. Bic
Corp., 869 F.2d 194, 199 (3d Cir. 1989). In this case, the Order
parties to condition any pre-trial settlement on the court's
granting a total sealing order covering all materials in the
court's possession." (footnotes omitted)).
0
See supra note 12.
30
of Confidentiality was not entered over discovery materials, but
rather over a settlement agreement. Protective orders over
discovery materials and orders of confidentiality over matters
relating to other stages of litigation have comparable features
and raise similar public policy concerns. All such orders are
intended to offer litigants a measure of privacy, while balancing
against this privacy interest the public's right to obtain
information concerning judicial proceedings. Also, protective
orders over discovery and confidentiality orders over matters
concerning other stages of litigation are often used by courts as
a means to aid the progression of litigation and facilitate
settlements. Protective orders and orders of confidentiality are
functionally similar, and require similar balancing between
public and private concerns. We therefore exercise our inherent
supervisory power0 to conclude that whether an order of
confidentiality is granted at the discovery stage or any other
0
"While we adhere firmly to the view that our supervisory power
should not be invoked lightly, we believe that circumstances
warrant its application here." Sowell v. Butcher & Singer, Inc.,
926 F.2d 289, 295 (3d Cir. 1991) (requiring district courts
entering a directed verdict to set forth an explanation for the
court's order). The Federal Rules of Civil Procedure do not
discuss confidentiality orders outside the context of discovery.
See Fed. R. Civ. P. 26(c) (protective orders). "In the absence
of procedural rules specifically covering a situation, the court
may, pursuant to its inherent power . . . fashion a rule not
inconsistent with the Federal Rules." Franquez v. United States,
604 F.2d 1239, 1244-45 (9th Cir. 1979) (footnote omitted). If,
as we have recognized above, a district court has inherent power
to enter orders of confidentiality outside the context of
discovery despite the fact that such orders are not made pursuant
to any federal rule, it is appropriate for an appellate court to
exercise its supervisory power to ensure that such orders are not
granted arbitrarily.
31
stage of litigation, including settlement, good cause must be
demonstrated to justify such orders. Cf. City of Hartford v.
Chase, 942 F.2d 130, 136 (2d Cir. 1991) ("We do not . . . give
parties carte blanche either to seal documents related to a
settlement agreement or to withhold documents they deem so
'related.' Rather, the trial court--not the parties themselves--
should scrutinize every such agreement involving the sealing of
court papers and [determine] what, if any, of them are to be
sealed, and it is only after very careful, particularized review
by the court that a Confidentiality Order may be executed.").
"Good cause is established on a showing that disclosure
will work a clearly defined and serious injury to the party
seeking closure. The injury must be shown with specificity."
Publicker Indus., Inc. v. Cohen, 733 F.2d 1059, 1071 (3d Cir.
1984). "Broad allegations of harm, unsubstantiated by specific
examples or articulated reasoning," do not support a good cause
showing. Cipollone v. Liggett Group, Inc., 785 F.2d 1108, 1121
(3d Cir. 1986), cert. denied, 484 U.S. 976, 108 S. Ct. 487
(1987). The burden of justifying the confidentiality of each and
every document sought to be covered by a protective order remains
on the party seeking the order. Id. at 1122.0
0
However, because of the benefits of umbrella protective orders
in cases involving large-scale discovery, the court may construct
a broad umbrella protective order upon a threshold showing by the
movant of good cause. Cipollone v. Liggett Group, Inc., 785 F.2d
1108, 1122 (3d Cir. 1986), cert. denied, 484 U.S. 976, 108 S. Ct.
487 (1987). After delivery of the documents, the opposing party
would have the opportunity to indicate precisely which documents
it believed not to be confidential, and the party seeking to
maintain the seal would have the burden of proof with respect to
those documents. Id.
32
In considering whether good cause exists for a
protective order, the federal courts have generally adopted a
balancing process. Arthur R. Miller, Confidentiality, Protective
Orders, and Public Access to the Courts, 105 Harv. L. Rev. 427,
432-33 (1991). The balancing conducted in the discovery context
should be applied by courts when considering whether to grant
confidentiality orders at any stage of litigation, including
settlement:
[T]he court . . . must balance the requesting party's
need for information against the injury that might
result if uncontrolled disclosure is compelled. When
the risk of harm to the owner of [a] trade secret or
confidential information outweighs the need for
discovery, disclosure [through discovery] cannot be
compelled, but this is an infrequent result.
Once the court determines that the discovery
policies require that the materials be disclosed, the
issue becomes whether they should "be disclosed only in
a designated way," as authorized by the last clause of
Rule 26(c)(7) . . . . Whether this disclosure will be
limited depends on a judicial balancing of the harm to
the party seeking protection (or third persons) and the
importance of disclosure to the public. Courts also
have a great deal of flexibility in crafting the
contents of protective orders to minimize the negative
consequences of disclosure and serve the public
interest simultaneously.
Id. at 433-35 (footnotes omitted). "The most common kind of
order allowing discovery on conditions is an order limiting the
persons who are to have access to the information disclosed and
the use to which these persons may put the information." 8
Charles Alan Wright & Arthur R. Miller, Federal Practice and
Procedure § 2043, at 305 (1970).
One interest which should be recognized in the
balancing process is an interest in privacy. See Seattle Times
33
Co. v. Rhinehart, 467 U.S. 20, 34-36, 104 S. Ct. 2199, 2208-09
(1984). It is appropriate for courts to order confidentiality to
prevent the infliction of unnecessary or serious pain on parties
who the court reasonably finds are entitled to such protection.
In this vein, a factor to consider is whether the information is
being sought for a legitimate purpose or for an improper purpose.
However, privacy interests are diminished when the party seeking
protection is a public person subject to legitimate public
scrutiny. Cf. United States v. Smith, 776 F.2d 1104, 1114 (3d
Cir. 1985) ("[T]he public has a substantial interest in the
integrity or lack of integrity of those who serve them in public
office.").0
While preventing embarrassment may be a factor
satisfying the "good cause" standard,
an applicant for a protective order whose chief concern
is embarrassment must demonstrate that the
embarrassment will be particularly serious. As
embarrassment is usually thought of as a nonmonetizable
harm to individuals, it may be especially difficult for
a business enterprise, whose primary measure of well-
being is presumably monetizable, to argue for a
protective order on this ground.
Cipollone, 785 F.2d at 1121. Circumstances weighing against
confidentiality exist when confidentiality is being sought over
information important to public health and safety, e.g., Miller,
105 Harv. L. Rev. at 478, and when the sharing of information
0
See also Vassiliades v. Israely, 714 F. Supp. 604, 606 (D. Conn.
1989) ("Every lawsuit has the potential for creating some adverse
or otherwise unwanted publicity for the parties involved. It is
simply one of the costs attendant to the filing of an action.").
34
among litigants would promote fairness and efficiency, e.g., id.
at 490.
A factor which a court should consider in conducting
the good cause balancing test is whether a party benefitting from
the order of confidentiality is a public entity or official.
Similarly, the district court should consider whether the case
involves issues important to the public. If a settlement
agreement involves issues or parties of a public nature, and
involves matters of legitimate public concern, that should be a
factor weighing against entering or maintaining an order of
confidentiality. See, e.g., FTC. v. Standard Fin. Management
Corp., 830 F.2d 404, 412 (1st Cir. 1987) (threshold for sealing
is elevated because the case involves a government agency and
matters of public concern).0 On the other hand, if a case
0
See also Johnson v. Greater Southeast Community Hosp. Corp., 951
F.2d 1268, 1277-78 (D.C. Cir. 1991); Arkwright Mutual Ins. Co. v.
Garrett & West, Inc., 782 F. Supp. 376, 381 (N.D. Ill. 1991)
("The courts are public institutions and their proceedings should
be public unless a compelling argument for secrecy can be made.
The matters with which this case is concerned are of significant
and legitimate public concern. . . . The public has a right to
know of this resolution."); City of Hartford v. Chase, 733 F.
Supp. 533, 536 n.5 (D. Conn. 1990) ("Where the parties are
private, the right to rely on confidentiality in their dealings
is more compelling than where a government agency is involved, as
the public has a countering interest in, and thus the claim of
access to the conduct of public business by a governmental
agency."), rev'd, 942 F.2d 130 (2d Cir. 1991); United States v.
Kentucky Utils. Co., 124 F.R.D. 146, 150 (E.D. Ky. 1989) ("[The
parties] attempt to assume the posture of private parties who
have settled a case and have a right of privacy in documents
maintained outside the court record. . . . Here, however, the
parties are not private parties. One of the parties is the
federal government."), rev'd, 927 F.2d 252 (6th Cir. 1991); In re
"Agent Orange" Prod. Liab. Litig., 99 F.R.D. 645, 648-50
(E.D.N.Y. 1983).
35
involves private litigants, and concerns matters of little
legitimate public interest, that should be a factor weighing in
favor of granting or maintaining an order of confidentiality.
In this balancing process, the issue arises of how much
weight should be assigned the interest in encouraging
settlements. District courts should not rely on the general
interest in encouraging settlement, and should require a
particularized showing of the need for confidentiality in
reaching a settlement. Cf. Bank of Am. Nat'l Trust and Sav.
Ass'n v. Hotel Rittenhouse Assocs., 800 F.2d 339, 346 (3d Cir.
1986) (requiring particularized showing of need for secrecy to
further settlement in a right of access doctrine case). Even
when a particularized need for confidentiality is put forth by
the parties, the interest in furthering settlement should only be
one factor in the district court's determination. This is
because, as one court put it,
settlements will be entered into in most cases whether
or not confidentiality can be maintained. The parties
might prefer to have confidentiality, but this does not
mean that they would not settle otherwise. For one
thing, if the case goes to trial, even more is likely
to be disclosed than if the public has access to
pretrial matters.
United States v. Kentucky Utils. Co., 124 F.R.D. 146, 153 (E.D.
Ky. 1989), rev'd, 927 F.2d 252 (6th Cir. 1991).0
0
Accord Anne-Therese Bechamps, Note, Sealed Out-of-Court
Settlements: When Does the Public Have a Right to Know?, 66 Notre
Dame L. Rev. 117, 130 (1990) ("The incentives for settling, such
as saving time and expense and avoiding the publicity of a trial,
are still valid whether or not the parties are allowed to seal
the case files."). Cf. Wilson v. American Motors Corp., 759 F.2d
1568 (11th Cir. 1985). In Wilson, the court acknowledged that
36
Moreover, if parties cannot demonstrate good cause for
a court order of confidentiality over the terms of settlement,
they have the option of agreeing privately to keep information
concerning settlement confidential, and may enforce such an
agreement in a separate contract action.0 See, e.g., Marine
Midland Realty Credit Corp. v. LLMD of Michigan, Inc., 821 F.
Supp. 370, 371-74 (E.D. Pa. 1993). Although it is more arduous
to commence a new action to enforce a settlement agreement than
to rely on the court's contempt power to enforce a court order of
confidentiality, it must be remembered that balanced against the
interest of settlement is the interest of the public to have
access to information concerning judicial proceedings. Thus, to
the extent that fewer orders of confidentiality are granted, and
to the extent that parties may have to more often enforce orders
of confidentiality in private contract suits, we believe that
this may in fact be preferable to the current trend of increasing
judicial secrecy.
The factors discussed above are unavoidably vague and
are of course not exhaustive. Although the balancing test
discussed above may be criticized as being ambiguous and likely
to lead to unpredictable results, we believe that such a
courts should encourage settlements. Id. at 1571 n.4.
Nevertheless, the court said that encouraging monetary settlement
between the parties was not even entitled to consideration in
deciding whether to seal the record. Id.
0
In some circumstances, a private agreement to keep terms of a
settlement confidential may be unenforceable because it violates
public policy. E.g., Anchorage Sch. Dist. v. Anchorage Daily
News, 779 P.2d 1191, 1193 (Alaska 1989) (confidentiality
provision unenforceable because it violated public records
disclosure statutes).
37
balancing test is necessary to provide the district courts the
flexibility needed to justly and properly consider the factors of
each case.
Discretion should be left with the court to
evaluate the competing considerations in light of the
facts of individual cases. By focusing on the
particular circumstances in the cases before them,
courts are in the best position to prevent both the
overly broad use of [confidentiality] orders and the
unnecessary denial of confidentiality for information
that deserves it . . . .
Miller, 105 Harv. L. Rev. at 492.
To facilitate effective appellate review of a district
court decision of whether to grant or modify an order of
protection or confidentiality, a district court should articulate
on the record findings supporting its judgment.0 In appropriate
cases, the district court may seal that portion of the record
which contains its findings, for in some circumstances the
court's articulation of its findings might destroy the very
confidentiality being sought.
In determining whether to modify an already-existing
confidentiality order, the parties' reliance on the order is a
relevant factor. E.g., Anne-Therese Bechamps, Note, Sealed Out
of Court Settlements: When Does the Public Have a Right to Know?,
66 Notre Dame L. Rev. 117, 130 (1990); see also, e.g., City of
0
We have, when appropriate, exercised our inherent supervisory
power to require the district courts to provide an explanation
for certain types of orders to assist our statutory function of
appellate review. E.g., Sowell v. Butcher & Singer, Inc., 926
F.2d 289, 295 (3d Cir. 1991) (orders granting directed verdicts);
Vadino v. A. Valey Eng'rs, 903 F.2d 253, 258-59 (3d Cir. 1990)
(orders granting summary judgment).
38
Hartford v. Chase, 942 F.2d 130, 136 (2d Cir. 1991).0 However,
there is a split in authority on the weight to be accorded the
reliance interest.
The Court of Appeals for the Second Circuit has
announced a stringent standard for modification, holding that a
confidentiality order can only be modified if an extraordinary
circumstance or compelling need warrants the requested
modification. City of Hartford, 942 F.2d at 135-36; Palmieri v.
New York, 779 F.2d 861, 864-66 (2d Cir. 1985); Federal Deposit
Ins. Corp. v. Ernst & Ernst, 677 F.2d 230, 232 (2d Cir. 1982).0
Other courts of appeals have rejected this stringent
standard, have held that a more lenient test for modification
applies, but have failed to articulate precisely what that
standard is. E.g., Beckman Indus., Inc. v. International Ins.
Co., 966 F.2d 470, 475-76 (9th Cir.), cert. denied, ___ U.S.
___, 113 S. Ct 197 (1992); United Nuclear Corp. v. Cranford Ins.
Co., 905 F.2d 1424, 1428 (10th Cir. 1990), cert. denied, 498 U.S.
1073, 111 S. Ct. 799 (1991); Public Citizen v. Liggett Group,
Inc., 858 F.2d 775, 791 (1st Cir. 1988), cert. denied, 488 U.S.
1030, 109 S. Ct. 838 (1989); see Meyer Goldberg, Inc. of Lorain
v. Fisher Foods, Inc., 823 F.2d 159, 163-64 (6th Cir. 1987).
0
The fact that the parties' reliance becomes relevant later on
illustrates how important it is for courts to initially conduct a
proper balancing analysis to determine whether a confidentiality
order should be granted.
0
The Court of Appeals for the Sixth Circuit has apparently
adopted the Second Circuit's standard. See United States v.
Kentucky Utils. Co., 927 F.2d 252, 255 (6th Cir. 1991). But see
Meyer Goldberg, Inc. of Lorain v. Fisher Foods, Inc., 823 F.2d
159, 163-64 (6th Cir. 1987).
39
We agree with these courts that the standard of the
Court of Appeals for the Second Circuit for modification is too
stringent. The appropriate approach in considering motions to
modify confidentiality orders is to use the same balancing test
that is used in determining whether to grant such orders in the
first instance,0 with one difference: one of the factors the
court should consider in determining whether to modify the order
is the reliance by the original parties on the confidentiality
order. The parties' reliance on an order, however, should not be
outcome determinative, and should only be one factor that a court
considers when determining whether to modify an order of
confidentiality. "[E]ven though the parties to [a] settlement
agreement have acted in reliance upon that order, they [do] so
with knowledge that under some circumstances such orders may be
modified by the court." City of Hartford, 942 F.2d at 138
(Pratt, J., concurring).
The extent to which a party can rely on a protective
order should depend on the extent to which the order
induced the party to allow discovery or to settle the
case. For instance, reliance would be greater where a
trade secret was involved, or where witnesses had
testified pursuant to a protective order without
invoking their Fifth Amendment privilege. . . .
. . . Reliance will be less with a blanket order,
because it is by nature overinclusive.
0
Cf. Leucadia, Inc. v. Applied Extrusion Technologies, Inc., 998
F.2d 157, 166 (3d Cir. 1993) ("Although our decision [in a
previous case] concerned the challenge by a party to the
confidentiality designation made by its opponent, our reasoning
applies with equal force when a non-party moves to intervene in a
pending or settled lawsuit for the limited purpose of modifying a
protective order and inspecting documents filed under seal.").
40
Beckman, 966 F.2d at 475-76 (citation omitted).0
"[R]eliance on [confidentiality] orders [will] not
insulate those orders from subsequent modification or vacating if
the orders were improvidently granted ab initio. . . . [N]o
amount of official encouragement and reliance thereon could
substantiate an unquestioning adherence to an order improvidently
granted." Palmieri, 779 F.2d at 865. "Improvidence in the
granting of a protective order is [a] justification for lifting
or modifying the order." In re "Agent Orange" Prod. Liab.
Litig., 821 F.2d 139, 148 (2d Cir.), cert. denied, 484 U.S. 953,
108 S. Ct. 344 (1987). It would be improper and unfair to afford
an order presumptive correctness if it is apparent that the court
did not engage in the proper balancing to initially determine
whether the order should have been granted.0
The party seeking to modify the order of
confidentiality must come forward with a reason to modify the
order. Once that is done, the court should then balance the
interests, including the reliance by the original parties to the
order, to determine whether good cause still exists for the
order.
If access to protected [material] can be granted
without harm to legitimate secrecy interests, or if no
such interests exist, continued judicial protection
0
Accord Public Citizen, 858 F.2d at 790 ("Although . . . blanket
protective orders may be useful in expediting the flow of
pretrial discovery materials, they are by nature overinclusive
and are, therefore, peculiarly subject to later modification.").
0
But see Mokhiber v. Davis, 537 A.2d 1100, 1116 n.15 (D.C. 1988)
("[I]t is quite proper for the trial court to place upon the
attacking party the burden of showing that no such 'good cause'
in fact existed; that is, the presumption in favor of the
correctness of trial court actions is operative.").
41
cannot be justified. In that case, access should be
granted even if the need for the protected materials is
minimal. When that is not the case, the court should
require the party seeking modification to show why the
secrecy interests deserve less protection than they did
when the order was granted. Even then, however, the
movant should not be saddled with a burden more onerous
than explaining why his need for the materials
outweighs existing privacy concerns.
Note, Nonparty Access to Discovery Materials in the Federal
Courts, 94 Harv. L. Rev. 1085, 1092 (1981), cited with approval
in Meyer Goldberg, Inc. of Lorain v. Fisher Foods, Inc., 823 F.2d
159, 163 (6th Cir. 1987).
This case presents another factor which must be
considered in the good cause balancing test. The Settlement
Agreement to which the Newspapers are seeking access would, but
for the Confidentiality Order, likely be accessible under the
Pennsylvania Right to Know Act, Pa. Stat. Ann. tit. 65, §§ 66.1-
.4 (1959 & Supp. 1993).0 This case thus illustrates how
confidentiality orders can frustrate, if not render useless,
federal and state freedom of information laws.0 When a court
orders confidentiality in a suit involving a governmental entity,
0
See supra notes 12-13.
0
The federal Freedom of Information Act ("FOIA") is codified at 5
U.S.C. § 552. All fifty states have some form of freedom of
information legislation. Toran, supra note 13, at 129 n.38
(1992).
Federal courts are explicitly exempt from the Freedom of
Information Act's coverage. 5 U.S.C. § 551(1)(B). In GTE
Sylvania, Inc. v. Consumers Union of the United States, Inc., 445
U.S. 375, 100 S. Ct. 1194 (1980), the Supreme Court held that a
federal agency which had been previously ordered by a court not
to disclose information was not required to release such
information under the FOIA. Id. at 386-87, 100 S. Ct. at 1201-
02. It is precisely because courts have the power to trump
freedom of information laws that they should exercise this power
judiciously and sparingly.
42
as the district court in this case did, there arises a
troublesome conflict between the governmental entity's interest
as a litigant and its public disclosure obligations. The
difficult problems created by such a conflict have finally
received scholarly attention. See generally Janice Toran,
Secrecy Orders and Government Litigants: "A Northwest Passage
Around the Freedom of Information Act"?, 27 Ga. L. Rev. 121
(1992). In this case, the Newspapers have had to endure
considerable time and expense to obtain access to information
which, but for the Order of Confidentiality, is likely available
under the applicable freedom of information law.0 Because the
Newspapers have been forced to challenge the Order of
Confidentiality, many months have passed since they made their
initial request for the desired documents. This case thus
illustrates the need for increased judicial awareness of the
public interest in access to information under relevant freedom
of information laws. Accordingly,
where [a governmental entity] is a party to litigation,
no protective, sealing or other confidentiality order
shall be entered without consideration of its effect on
disclosure of [government] records to the public under
[state and federal freedom of information laws]. An
order binding [governmental entities] shall be narrowly
drawn to avoid interference with the rights of the
public to obtain disclosure of [government] records and
shall provide an explanation of the extent to which the
order is intended to alter those rights.
Id. at 182.
To provide some measure of uniformity and
predictability of outcome in this important area, we hold that
0
See supra note 12.
43
where it is likely that information is accessible under a
relevant freedom of information law, a strong presumption exists
against granting or maintaining an order of confidentiality whose
scope would prevent disclosure of that information pursuant to
the relevant freedom of information law. In the good cause
balancing test, this strong presumption tilts the scales heavily
against entering or maintaining an order of confidentiality. To
avoid complicated inquiries as to whether certain information
would in fact be available under a freedom of information law,
courts may choose to grant conditional orders. For example, a
court could order that the order of confidentiality will become
inoperative if the information it orders confidential is later
determined to be available under a freedom of information law. Or
a court could grant an order of confidentiality while specifying
that the scope of the confidentiality order does not extend so as
to prevent disclosure pursuant to any freedom of information law.
Courts have discretion to fashion such orders according to the
needs and circumstances of each case.
We acknowledge the important role that court-aided
settlement plays in our overburdened court system, and we realize
that a strong presumption against confidentiality orders when
freedom of information laws are implicated may interfere with the
ability of courts to successfully encourage the settlement of
cases. However, we believe that a strong presumption against
entering or maintaining confidentiality orders strikes the
appropriate balance by recognizing the enduring beliefs
underlying freedom of information laws: that an informed public
44
is desirable, that access to information prevents governmental
abuse and helps secure freedom, and that, ultimately, government
must answer to its citizens. Neither the interests of parties in
settling cases, nor the interests of the federal courts in
cleaning their dockets, can be said to outweigh the important
values manifested by freedom of information laws.
In the case before us, the district court made no
findings for the record supporting its initial grant of the Order
of Confidentiality. The district court apparently did not
conduct any balancing test at all before signing the Order. The
Order of Confidentiality was thus improvidently granted, and the
reliance interest of the parties in the confidentiality of the
Settlement Agreement must be considered weak in this case.
Moreover, in denying the Newspapers' Motion to Reconsider, Vacate
or Modify the Order of Confidentiality, the district court again
did not articulate any findings demonstrating good cause for the
Order. The district court noted in passing that some information
concerning the cost of the settlement to the Borough has been
made public. But it never explained why the Newspapers' interest
in obtaining access to the Settlement Agreement itself under the
Pennsylvania Right to Know Act was outweighed by the need for
confidentiality. The entry of the Order of Confidentiality
therefore did not reflect the proper exercise of discretion by
the district court.0
0
Because the Order of Confidentiality was ordered over a
settlement agreement that was never filed with the court, and the
order of confidentiality did not close a judicial proceeding to
the public or seal judicial records, we do not apply the
45
Because we have provided guidance in a previously
unchartered area, we will remand the case to the district court
and provide it an opportunity to determine whether there are
circumstances justifying an order of confidentiality over the
Settlement Agreement. This case involves a governmental body, a
public official, and a Settlement Agreement which is likely
available under the Pennsylvania Right to Know Act. Given these
facts, it would be unusual if on remand the district court were
to find that circumstances exist which justify the Order of
Confidentiality being maintained over the Settlement Agreement,
but we do not foreclose that determination.0
We will reverse the district court's order denying
intervention, dated May 13, 1993. We will remand the case to the
district court with a direction that the Newspapers be permitted
standards we have articulated in our line of cases dealing with
access to judicial proceedings and documents. E.g., Miller v.
Indiana Hosp., 16 F.3d 549, 551 (3d Cir. 1994); Publicker Indus.,
Inc. v. Cohen, 733 F.2d 1059, 1071-75 (3d Cir. 1984); United
States v. Criden, 675 F.2d 550, 554-62 (3d Cir. 1982).
Also, the Newspapers have not challenged the Order of
Confidentiality as a prior restraint or "gag order", and we
therefore do not conduct any prior restraint analysis under the
First Amendment. We note that in this case, a prior restraint
claim by the Newspapers would lack merit because none of the
parties subject to the Order of Confidentiality has indicated
that it would willingly provide the Settlement Agreement to the
Newspapers if the Order of Confidentiality were vacated. Cf.
Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer
Council, Inc., 425 U.S. 748, 756-57, 96 S. Ct. 1817, 1822-23
(1976).
0
However, any interest in confidentiality either must arise under
federal law or must be an interest which the Pennsylvania state
courts would determine is sufficient to prevent disclosure under
the Right to Know Act.
46
to intervene, and for further proceedings consistent with this
opinion.
47