What Should Be Off-Limits to Public in Corporate Lawsuits? : Courts: Debate intensifies with BusinessWeek’s attempt to report on Bankers Trust- Procter & Gamble dispute.
Until recently, the legal wrangling between Bankers Trust Co. and Procter & Gamble Co. was probably not a candidate for Court TV. Without sex, drugs, homemade bombs or bloody gloves, this civil lawsuit seemed destined to be little more than a blip on the public record.
Then a federal judge in Cincinnati declared that the record wasn’t public. And he ordered BusinessWeek magazine not to publish an investigative story about the case. In the past couple of weeks, the dispute has drawn the attention of media lawyers, First Amendment experts and news organizations around the country.
And while the corporations involved are talking about their right to keep company secrets, many journalists and others see a clear case of government censorship.
There is nothing abnormal about sealing documents, said Jane Kirtley, executive director of the Reporters Committee for Freedom of the Press in Washington.
“But gagging a reporter from publishing them is highly unusual,” she said. “I can’t think of a case like this.”
The dispute has become the focus of an increasingly tense debate over what should be off-limits to the public in a lawsuit involving corporations.
Corporate attorneys argue that they must protect their companies’ “trade secrets,” particularly during the early stages of what could be a frivolous lawsuit.
But media experts and First Amendment lawyers are wondering whether some of the nation’s bigger businesses have found a way to use the public court system for private ends.
“What we are seeing is the promiscuous use of protective orders,” said Rodney Smolla, law professor and First Amendment expert at William and Mary Law School in Virginia.
The story of the missing story, according to BusinessWeek Editor in Chief Stephen Shepard, began a few hours before he planned to go to press on Sept. 13 with an article about the case. As the lawyer for the magazine checked the story at about 6 that evening, his fax machine began whining nearby. The message was from U.S. District Judge John Feikens in Cincinnati: The documents being used for BusinessWeek’s story were “under seal,” and he ordered editors to kill the story.
After the fax came, the reaction among BusinessWeek editors was that they had not received the documents from the court and that they did not know when they obtained them that they were under seal. But the magazine’s attorney said the judge would hold him personally responsible should the publication disobey the court’s order. After failing to reach Feikens (who said later that he was available that evening) and being rebuffed by an appeals judge, BusinessWeek killed the story.
“This was the first time in our 66-year history that we have ever been forced by the government to pull a story,” the magazine editors wrote in the most recent issue. “ . . . The basic legal issue is prior restraint--a lawyer’s way of saying ‘government censorship.’ ”
Procter & Gamble had accused Bankers Trust of not properly informing it about the risks of their derivative offerings. Procter & Gamble charged that it lost $102 million from derivatives bought from the New York-based bank, and it asked the court for $195 million in damages.
“There are some legitimate reasons for secrecy,” said Richard J. Ovelmen, an expert on media law in Miami. “But in my experience, the more a party wants to keep something secret, usually the more reason there is for the public to have access to it.”
Ovelmen, like other First Amendment attorneys watching this case, said courts have been overwhelmed with corporate lawsuits in recent years, including not only cases like this one between companies, but also liability suits claiming loss caused by faulty or dangerous products.
To speed things up, many judges have allowed the two parties to determine themselves whether their legal differences should be made public, he said. Settlements in these cases often include an agreement to keep the files sealed, thus permanently barring the media, public or future claimants from learning the details of the lawsuits.
“The litigants are more and more powerful and are able to spend money keeping documents under wraps. The trend is toward keeping the documents out of the public eye,” Ovelmen said. “The press just doesn’t have the money anymore to stop this thing.”
BusinessWeek, however, continued to pursue its efforts to publish its story on the case. Lawyers for McGraw-Hill Inc., which owns the magazine, quickly turned to a federal appeals court for help in releasing the story. When they lost at that level, the New York-based company took its case to the U.S. Supreme Court, where their arguments were rebuffed again.
Supreme Court Justice John Paul Stevens decided last week that “the wiser course” would be to bounce the matter back to Feikens, who has extended his temporary restraining order on the article until Oct. 3.
A spokesman for Bankers Trust said the company would have no comment on the case but that it planned to send a letter to the editor of BusinessWeek for publication next week.
In court documents, the bank argues that the sealing of the record in January enabled the two companies to submit thousands of “sensitive documents” for review in the case with the understanding that the court would keep them from becoming part of the public record. Its attorneys argued that if BusinessWeek uses the material, it will reflect badly on the court’s ability to control its own proceedings.
Procter & Gamble officials also said they support efforts to enforce the restraining order against BusinessWeek even though the documents at issue are from Bankers Trust.
In a court hearing in Cincinnati on Thursday, the reporter who obtained the documents from the case, Linda Himelstein, was asked repeatedly by Bankers Trust attorneys to reveal where she got the documents. She testified that she obtained them from a confidential source who was not an employee of the court, but she would not name the source.
