Lorna J. Wendt v. Gary C. Wendt ( 1996 )

[EDITOR'S NOTE: This case is unpublished as indicated by the issuing court.] MEMORANDUM FILED DECEMBER 6, 1996 The defendant has filed a Motion To Seal The File and Close The Hearing in this contested dissolution of marriage action. The motion was filed pursuant to C.G.S. §§ 46b-11, 46b-49 and Practice Book § 211B. The plaintiff opposed the motion. The court permitted intervention by Dow Jones and Companies, the parent company of the Wall Street Journal who also opposed the motion. The court heard legal arguments, obtained certain agreements from counsel as to factual matters, took judicial notice of other factual matters, made findings of fact, and entered the orders set forth.

There is no reported case in Connecticut discussing the issue of courtroom closure to the news media in a family matter. No reported case has discussed the relationship between PB § 211B established effective October 1, 1995 and the closure of courtroom authority previously established by C.G.S. § 46b-11and § 46b-49. This appears to be a matter of first impression.

FACTS

The defendant is the president and chief executive officer of General Electric Capital Services, Inc. He is also senior vice president of General Electric Corporation. As such, he possesses certain vested and unvested stock options as well as ownership of G.E.'s publicly traded stock. The motion states, "This testimony from a high level insider of G.E. Capital will likely affect the market value of General Electric shares. The interest in protecting the stability of the price of General Electric's shares overrides the public's interest in attending the dissolution proceedings or in viewing the documents related to the dissolution action."

The plaintiff wife objects on three grounds: 1) The testimony will be of matters that are of public record including G.E.'s filings with the Security and Exchange Commission (S.E.C.), 2) There will be no testimony that will denigrate or embarrass Mr. Wendt nor affect his relations with General Electric, 3) There are matters that the public should be aware of including whether unvested stock options are property in Connecticut eligible for marital distribution and whether in Connecticut there is a limit in marital awards to unemployed wives in cases involving a long term marriage to a wealthy corporate executive.

Dow Jones and Companies made four arguments: 1) The closing of the proceedings would violate theFirst Amendment of the United States Constitution, i.e., the rights of free speech and press, 2) Financial disclosures of substantial income and assets in and of themselves are not sufficient to override the public interest, 3) Mr. Wendt's continued employment prospects with G.E. is not such an overriding interest, and 4) Any testimony relating to any possible trading of G.E. stock by Mr. Wendt is already a matter of public record.

DISCUSSION OF LAW

As a general rule, interference with access by the public and press to matters of important information is a violation of theFirst Amendment. "Any arbitrary interference with access to important information is an abridgement of the freedom of speech and of the press protected by the First Amendment." RichmondNewspapers, Inc. v. Virginia, 448 U.S. 555, 583, 100 S. Ct. 2184, CT Page 303665 L. Ed. 2d 973 (1980). A balancing test has been used in the past to limit such interference. Press Enterprises Co. v. SuperiorCourt, 478 U.S 1, 106 S. Ct. 2735, 92 L. Ed. 2d 1 (1986); State v.Franzese, 23 Conn. App. 433, 434 (1990).

Superior court files and the documents contained therein are generally accessible to the public. The reason for this rule has been summarized in a 1990 decision of the United States District Court of Connecticut.

When parties come before the courts as willing claimants seeking redress or as unwilling targets of such claims, they play out a process by which their respective rights and obligations are adjudicated. Their dispute is personal. The adjudicative process, however, is a function of the law which is derived from the community's delegation to the courts and to the legislature of the power to establish and enforce the substance of the law. That process is a matter of public concern as the enforcement of the law has a broader impact than just the decision in the dispute of the particular parties. So also the community has a real concern as to the process by which the law is justly enforced. The public's concern is accommodated by the openness of the court's record. By access to the record, the public best insures that the authority that it has delegated to the courts and the substantive law enacted under authority delegated by the community are exercised and enforced consistent with the charge to the court implicit in the delegation.

City of Hartford v. Chase, 733 F. Sup. 533, 535 (D. Conn. 1990).

The court has applied these standards in rendering its decision on this motion. The court is also of the opinion that C.G.S. §§ 46b-11, 46b-49, Practice Book Section 211B and Practice Book Section 478 are all in conformity with these standards.

PB § 211B was promulgated by the judges of the superior court effective October 1, 1995. Prior to that date, the constitutional federal balancing test was used without any procedural or authoritative court rule. PB § 211B contains CT Page 3037 such procedure as well as guidance using a balancing test. "The court shall not order that the public, which may include the news media, be excluded from any portion of a proceeding and shall not order that any files, affidavits, documents, or other materials on file with the court or filed in connection with a court proceeding be sealed or their disclosure limited." PB § 211B(a). That section contains an opening caveat "except as otherwise provided by law." A parallel Practice Book rule was approved effective October 1, 1995 dealing with criminal matters.PB § 895. Both of those rules state that orders under certain statutes are excepted. PB § 211B(c), PB § 895(c). Included within these are orders made pursuant to C.G.S. §§46b-11 and 46b-49. These two statutes are the authorities relied upon by the defendant in prosecuting this motion.

The court has used the procedure but not the authority of Practice Book 211B in entering the orders set forth in this decision.

Upon motion of any party, or upon its own motion, the court may order that the public be excluded from any portion of a proceeding and may order that files, affidavits, documents or other materials on file with the court or filed in connection with a court proceeding be sealed or their disclosure limited if the court concludes that such order is necessary to preserve an interest which is determined to override the public's interest in attending such proceeding or in viewing such materials. Any such order shall be no broader than necessary to protect such overriding interest.

Practice Book Section 211B(b).

In connection with any order issued pursuant to paragraph (b) of this rule, the court shall, on the record in open court, articulate the overriding interest being protected and shall specify its finding underlying such order. The time and date of any such order shall be entered by the court clerk in the court file together with such order. With the exception of orders concerning any session of court conducted pursuant to Gen. Stat. §§ 46b-11, 46b-49, and 46b-122 or any other provision of the general statutes under which the court is authorized to close proceedings, CT Page 3038 no order excluding the public from any portion of a proceeding shall be effective until seventy-two hours after it has been issued.

Practice Book Section 211B(c).

Under C.G.S. § 46b-11 family relations matters may be heard in a courtroom from which the public and press have been excluded "if the judge hearing the case determines that the welfare of any children involved or the nature of the case so requires." This statute pre-existed PB § 211B and appears to have been promulgated by the legislature in 1959. 1959 P.A. 531. The statute has been used to limit testimony related to minor children. Gennarini v. Gennarini, 2 Conn. App. 132, 139 (1984);Pascal v. Pascal, 2 Conn. App. 472, 485 (1984); State v. McCloud,36 Conn. Super. Ct. 352, 356 (1980). There are no other reported cases dealing with § 46b-11 and § 46b-49, either as a superior court unreported decision or by appellate court decision in Connecticut.

C.G.S. § 46b-49 appears to have been promulgated by the Connecticut legislature in 1973. P.A. 73-373. "When it considers it necessary in the interests of justice and the persons involved, the court shall, upon the motion of either party or of counsel for any minor children, direct the hearing of any matter under this chapter . . . to be private. The court may exclude all persons except the officers of the court, a court reporter, the parties, their witnesses and their counsel." It appears that neither C.G.S. § 46b-49 nor C.G.S. § 46b-11 contains any procedural method of conducting any constitutional balancing.

Practice Book § 211B references both C.G.S. § 46b-11 and § 46b-49. On October 1, 1995, the Practice Book was also amended to provide for closed hearings in family relations matters. PB § 478.

Subject to the provisions of Sec. 211B, any family relations matter may be heard in chambers or in a courtroom from which the public and press have been excluded, and the records and other papers in any family relations matter may be ordered by the court to be kept confidential and not to be open to inspection except under order of the court or a judge thereof.

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It appears that this rule was passed to avoid a conflict between statutes and the rules of procedure. State v. Clemente,166 Conn. 501, 516 (1974). Prior to the adoption on October 1, 1995 of PB § 478, the standards for courtroom closure were "the welfare of any children involved or the nature of the case so requires."C.G.S. § 46b-11 (formerly Sec. 51-335).

The only reported case that does not involve the consideration of minor children is Saundry v. Saundry,17 CONN. L. RPTR. 373, 2 Conn. Ops. 883, August 12, 1996 (Silbert, J.). In discussing PB § 211B, C.G.S. §§ 46b-11 and 46b-49, Judge Silbert concluded: "Read together, all these provisions give the court authority to close proceedings and to seal files where there is a particular interest to be protected and that interest overrides the public's interest in attending such proceeding or in viewing such materials." Applying those standards, the court refused to close the hearing, notwithstanding the plaintiffs concern about disclosure of her financial situation as a solo law practitioner. Judge Silbert also refused to seal the file concerning issues regarding the defendant's employment as an intelligence captain with the State Department of Corrections. Finally, the court refused to close the file because of fear that disclosure of certain particular information could affect the parties' children. Judge Silbert found that at this stage of the proceeding a generalized concern over children's safety does not "outweigh our system's basic bias in favor of public courts and open records and proceedings." The parties were "invited to reapply for a particularized order in connection with any future aspect of these proceedings the disclosure of which they fear might compromise their children's safety."

CONCLUSION

Although the defendant is a high executive with a Fortune 500 company, disclosure of his income and assets do not override the public's right of access. The defendant's prospect for continued employment and the status of his employment with General Electric similarly does not override the public's right to access. The court has already found that the constitutional guidelines as set forth in Richmond Newspapers and Press Enterprises have been complied with by the enactment of PB § 211B, PB § 478, C.G.S. § 46b-11 and C.G.S. § 46b-49.

The court finds that Gary C. Wendt is an "insider." He is a high ranking corporate officer of G.E. Capital Services, Inc. and CT Page 3040 General Electric Corporation. The exercise of stock options and sale and purchase of stock by insiders is valuable information to traders of stock. Possession and use of insider information before that information is made public is a violation of S.E.C. rules and can lead to criminal prosecution General Electric is the oldest member of the Dow Jones Industrial Average and that stock is followed by millions daily on a worldwide basis. The Dow Jones Industrial Average is followed equally by millions on a regular basis to select investments. Any change, even minuscule, to the Dow Jones Industrial Average, can affect livelihood of virtually every person worldwide. G.E. Capital Services, Inc. is the financial arm of its parent company, General Electric. In 1995, 40% of the profits of General Electric were generated by General Electric Capital Services, Inc. The defendant has been the president and CEO of General Electric Capital Services Corporation since 1986. The defendant holds numerous stock options both vested and unvested in General Electric. One of the issues in this case is how this court is going to deal with unvested stock options. Testimony regarding Mr. Wendt can easily be anticipated concerning his intentions to exercise unvested stock options as well as his opinion as to valuation, contingencies and other terms and conditions of those stock options.

The court finds that the following is an overriding interest: Any information obtained in this case before that information is filed publically by General Electric or its subsidiaries and concerning the defendant Gary C. Wendt as an "insider" may affect another person or entity's decision to trade General Electric stock, invest in corporations within the same industry or utilize the Dow Jones Industrial Average. This overriding interest was articulated in open court on December 4, 1996 when this order was rendered from the bench.

ORDER

1. The motion to seal file and close hearings dated December 3, 1996 is granted, and the public and all news media are excluded from the courtroom in all hearings in this case.

2. All files, transcripts, documents, exhibits, pleadings, motions and depositions, whether sealed, in evidence or otherwise, now or hereafter to be considered by the court are all sealed.

3. This written decision will be public. The arguments made CT Page 3041 in open court on the morning on December 4, 1996 and the transcript thereof will remain public. All other transcripts are sealed.

4. This court is mindful that there may be other issues of public importance that may arise during this case, i.e. (1) the treatment of unvested stock options; (2) the treatment of unvested retirement plans; (3) less than equal distribution of assets in a long term marriage to a wife of a wealthy corporate executive. The parties are invited to reapply for a particulized order in connection with these issues at a later time.

5. This order is based upon the authority of G.S.S. §§46b-11 and 46b-49 and the procedures established by Practice Book § 211B and Practice Book § 478. This order was not based upon the authority of PB § 211B and PB § 478.

6. The order is therefore effective immediately at 12:45 p.m. December 4, 1996.

7. The trial will continue without interruption. There will be no 72 hour stay of the effective date of this decision. PB§ 211B(d), C.G.S. § 51-164x. 1957

TIERNEY, J.

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