Oklahoma Firefighters Pension Retirement System v. Michael L. Corbat

COURT OF CHANCERY
OF THE
SAM GLASSCOCK III STATE OF DELAWARE COURT OF CHANCERY COURTHOUSE
VICE CHANCELLOR 34 THE CIRCLE
GEORGETOWN, DELAWARE 19947
Date Submitted: August 1, 2017
Date Decided: November 15, 2017
Stuart M. Grant, Esquire Stephen P. Lamb, Esquire
Nathan A. Cook, Esquire Meghan M. Dougherty, Esquire
Rebecca A. Musarra, Esquire Paul, Weiss, Rifkind, Wharton
Grant & Eisenhofer P.A. & Garrison LLP
123 Justison Street 500 Delaware Avenue, Suite 200
Wilmington, DE 19801 Wilmington, DE 19899
Donald J. Wolfe, Jr., Esquire
T. Brad Davey, Esquire
Tyler J. Leavengood, Esquire
Jay G. Stirling, Esquire
Potter Anderson & Corroon LLP
1313 North Market Street, 6th Floor
Wilmington, DE 19899
Re: Oklahoma Firefighters Pension Retirement System, et al., v.
Michael L. Corbat, et al., Civil Action No. 12151-VCG
Dear Counsel:
Before me is the Defendants’ motion to maintain the confidential treatment of
redactions to the public versions of the Amended Supplemental Complaint and
briefing on the Defendants’ Motion to Dismiss. Also before me is the request by a
reporter for the Wall Street Journal to lift the confidentiality of these filings pursuant
to Court of Chancery Rule 5.1.1 The matter involves stockholders purportedly suing
derivatively on behalf of Citigroup Inc. (“Citigroup”).2 The Complaint and the
briefing on the Motion to Dismiss refer to documents received by the Plaintiffs
pursuant to a request under 8 Del. C. § 220.3 Those documents themselves were
subject to a confidentiality agreement when produced. 4
Rule 5.1 starts with the premise that the public has a right to monitor
proceedings in this Court and that all filings are presumed to be public. 5 Rule 5.1(b)
provides that confidential treatment may be maintained where “good cause” exists,
“good cause” being determined by the Court after weighing the harm that would be
caused by public disclosure against the public interest in access to court filings.6 The
1
A request by the Wall Street Journal to lift the confidentiality of certain portions of documents
referenced in the Complaint has been addressed by the Defendants, and is, to my understanding,
no longer in contention.
2
Compl. ¶ 399.
3
See id. ¶ 7 (noting that the Plaintiffs “pursued their rights under Section 220 of the General
Corporation Law” “to investigate [Citigroup’s] nearly decade-long failure and apparent refusal to
implement effective controls in diverse lines of its business”).
4
Defs.’ Mot. for Continued Confidential Treatment ¶ 1.
5
See Horres v. Chick-fil-A, Inc., 2013 WL 1223605, at *2 (Del. Ch. Mar. 27, 2013) (noting that
“Rule 5.1 reflects the Court of Chancery’s commitment to . . . principles” of public access to court
records).
6
Ct. Ch. R. 5.1(b)(2) (“For purposes of this Rule, ‘good cause’ for Confidential Treatment shall
exist only if the public interest in access to Court proceedings is outweighed by the harm that
public disclosure of sensitive, non-public information would cause. Examples of categories of
information that may qualify as Confidential Information include trade secrets; sensitive
proprietary information; sensitive financial, business, or personnel information; sensitive personal
information such as medical records; and personally identifying information such as social security
numbers, financial account numbers, and the names of minor children.”); see also ADT Holdings,
Inc. v. Harris, 2017 WL 4317245, at *1 (Del. Ch. Sept. 28, 2017) (“In determining whether good
cause has been established, the court must ‘balanc[e] . . . the public interest against the harm that
public disclosure might entail with respect to sensitive nonpublic information.’” (alterations in
original) (quoting Reid v. Siniscalchi, 2014 WL 6486589, at *1 (Del. Ch. Nov. 20, 2014))).
2
Defendants suggest that such a weighing here should result in confidentiality being
maintained. The Defendants point out that this matter involves oversight by the
Directors of the affairs of Citigroup and the compliance of those affairs with law.
The Motion to Dismiss turns on whether the provision of such oversight by the
Directors demonstrates lack of good faith. The Defendants argue that the redacted
portions of the Complaint and the briefing are not necessary for the public to
understand the nature and ultimate resolution of their claims, and thus that the public
interest in disclosure is entitled to little or no weight. I disagree. The public,
particularly the Delaware public, has a strong interest in the workings of a Delaware
entity and its compliance with substantive law. 7 The question for me is whether
confidentiality is nonetheless in the interest of justice, because the harm of disclosure
outweighs that public interest. At oral argument, counsel for the Defendants
suggested that it did so and that the interest represented would never become stale—
that portions of the Complaint and the briefing now sealed should remain so sealed,
forever.8
Specifically, redactions in the documents at issue involve communications
between Citigroup’s management and its Board of Directors concerning its
7
Cf. VTB Bank v. Navitron Projects Corp., 2014 WL 1691250, at *11 (Del. Ch. Apr. 28, 2014)
(“Delaware’s public interest in having this Court oversee and rectify the conduct of Delaware
entities may be so compelling in a particular case that it may militate against dismissal on forum
non conveniens grounds even where . . . the defendant may otherwise suffer overwhelming
hardship if required to litigate in Delaware.”).
8
July 20, 2017 Oral Arg. Tr. 68:1–24.
3
compliance with law and with regulatory consent orders entered in 2012 and early
2013. Some of the information thus removed from public consideration is at least
seven years old. The Defendants contend that making redactions to the documents
public would reveal “Citigroup’s present and continuing BSA/AML internal
controls and compliance protocols, which have the goal of safeguarding the U.S.
financial system from illicit financial activity.”9 And they suggest that
“[p]ublication of the details regarding Citigroup’s efforts to combat such activity—
and the potential shortcomings in that effort—is at odds with that goal.”10 Finally,
they argue that publication may also harm the Citigroup Board’s ability to receive
unbiased advice from management and employees. To the extent this is true, the
interests are not insignificant. However, it seems to me unlikely that the references
in the pleadings to internal procedures and reports which are now several years old
can have the adverse public and private impacts described. They may perhaps be
embarrassing to the Citigroup Board or management, but any cognizable detriment
represented by reference to such stale documents is unlikely to outweigh the public
interest in these proceedings. 11
9
Defs.’ Mot. for Continued Confidential Treatment ¶ 10.
10
Id.
11
See Sequoia Presidential Yacht Grp. LLC v. FE Partners LLC, 2013 WL 3724946, at *2 (Del.
Ch. July 15, 2013) (“[T]hat the information for which a party seeks confidential treatment may be
embarrassing . . . does not alone warrant confidential treatment.”).
4
Having so found, I must deny the Defendants’ motion, at least in part.
Prudence dictates, however, that I direct the Defendants’ Delaware counsel to review
the redacted portions of the Complaint and the briefing (excluding the exhibits
thereto), and to designate for continued confidentiality only those that involve
current procedures, revelation of which poses a substantial risk to “the goal of
safeguarding the U.S. financial system from illicit financial activity,”12 if any such
risk exists, or risks outing of current proprietary information. The period for such a
review will be twenty (20) business days from the date of this Letter Opinion. At
the end of that time, the Defendants should work with the Plaintiffs to file public
copies removing all other redactions. I will then review any continuing redactions
for which the Defendants allege further confidential treatment is required. To the
extent that the foregoing requires an order to take effect, IT IS SO ORDERED.
Sincerely,
/s/ Sam Glasscock III
Sam Glasscock III
12
Defs.’ Mot. for Continued Confidential Treatment ¶ 10.
5