Opinion ID: 434929
Heading Depth: 2
Heading Rank: 3

Heading: The Balance Between the Presumption of Access and Continental's Interest in Confidentiality

Text: 34 Having concluded that the presumption of access applies to the Report, we must balance the public interest underlying that presumption against Continental's interest in confidentiality. See Crystal Grower's Corp. v. Dobbins, supra. Continental has identified three factors on its side of the balance: attorney-client privilege, work product immunity and effective functioning of special litigation committees. Amicus Curiae, Chicago Clearing House Association, adds to that list the need for bank officials to observe their high standards of accountability and to maintain the soundness and public confidence which is necessary to [banking] institutions. Brief for Amicus Curiae at 13. These interests, according to the amicus, would be threatened if special litigation committee reports were made public. 35 In undertaking a balancing test, we are mindful of the difficulty of weighing the important first amendment interests that cut in favor of disclosure. Therefore, we must be firmly convinced that disclosure is inappropriate if we are to reject demands for access. Under the circumstances before us, doubts must be resolved in favor of the Newspapers. 36 Initially, we think we need not remand for findings by the district court. Judge Grady has not made findings on the appropriate weight to be accorded the various interests in the balance. While better practice would dictate more specific findings, no case has been cited to us which holds that appellate review is precluded by the failure to accompany a disclosure order with findings. In United States v. Criden, 648 F.2d 814 (3d Cir.1981), the court applauded the district court for clearly and succinctly express[ing] the bases for his decision denying release. Id. at 818 (emphasis added). In United States v. Edwards, supra, this court found, in the context of a denial of access to audio recordings in evidence at a criminal trial, that it is vital for a [district] court to state the basis for its ruling, so as to permit appellate review of whether relevant factors were considered and given appropriate weight. Id., 672 F.2d at 1294. In the future, we think it very desirable for district courts to heed Judge Fairchild's call in Edwards for express findings. 17 However, given our view of the balance in this case, a remand is unnecessary. 37 With respect to the weight of the respective interests, in Crystal Grower's Corp. v. Dobbins, supra, the Tenth Circuit identified the factors weighing in favor of public disclosure of court documents. 38 First is the general interest in understanding disputes that are presented in a public forum for resolution. Second is the public's interest in assuring that the courts are fairly run and judges are honest. 39 Id., 616 F.2d at 461. See also Joy v. North, 692 F.2d 880, 893 (2d Cir.1982) (without public disclosure confidence in the administration of justice would be severely weakened), cert. denied, --- U.S. ----, 103 S.Ct. 1498, 75 L.Ed.2d 930 (1983). We add to this side of the balance the public's right of access, guaranteed by the first amendment, to information before the court relating to matters of public interest. 40 As noted, it is difficult to attach specific weights to these interests. Public scrutiny of the judicial process has been held vital to the functioning of the courts. While sealing of one document in one case may not have a measurable effect on confidence in judicial integrity or on the effective operation of the courts, the effect of a consistent practice of sealing documents could prove damaging. Further, when claims for disclosure are based, at least in part, on the first amendment, there is a tradition of openness in this country that cannot be taken lightly. Therefore, we agree with the Second Circuit, that special litigation committee reports used in the adjudication stages of derivative litigation should be available for public inspection unless exceptional circumstances require confidentiality. Joy v. North, 692 F.2d at 893. 41 On Continental's side of the balance we turn first to the public interest expressed in the doctrines of attorney-client privilege and work product immunity; a decision circumventing these doctrines poses a significant threat to the free flow of communications between clients and their attorneys and inhibits the ability of lawyers to adequately prepare their clients' cases. Crystal Growers, 616 F.2d at 461. We may assume for the purposes of this appeal that, because the Report here was prepared by the SLC and its counsel by way of preparation for litigation, it was protected as work product by FED.R.CIV.PRO. RULE 26(b)(3). We may further assume that, because the Report, in large part, consists of communication between the SLC and its counsel, it was protected against disclosure at the time of preparation by the attorney-client privilege. 42 In Joy v. North, supra, the court held that the attorney-client privilege and work product immunity were waived when the special litigation report was used in support of a motion to dismiss a derivative suit. Id. at 894. That holding is in keeping with the general rule that protection from disclosure is available only when the party asserting a privilege has maintained confidentiality. 18 See Permian Corp. v. United States, 665 F.2d 1214, 1222 (D.C.Cir.1981); United States v. A.T. & T., 642 F.2d 1285, 1299 (D.C.Cir.1980); Maryville Academy v. Loeb Rhoades & Co., 559 F.Supp. 7, 9 (N.D.Ill.1982). In the case before us, however, we need not go so far as to hold that the privileges are waived. 19 Continental did attempt to limit disclosure of the Report and may have been under the impression that the May 12 order protected the claim of privilege even after the Report had been introduced into evidence. However, we attach less weight to the public interest in the attorney-client privilege and work product immunity in the case before us than in a case where absolute confidentiality had been maintained. There is little interest in the confidentiality of documents which have been publicly discussed by their custodian. Such public discussion is a fair characterization of what occurred at the June 30 hearing. Therefore, while we agree with Continental that the public interest in preservation of the attorney-client privilege and work product immunity is a significant factor to be weighed against disclosure, we find that this interest carries less weight here than it would in a case in which strict confidentiality had been maintained. 20 43 Continental also argues that confidentiality is required because otherwise the Report will be used against it in other litigation. The discoverability of the Report in these other cases is, according to Continental, presently unresolved. We have some reason to doubt that the question whether third parties may use the report in litigation against Continental is, in strict contemplation, legally relevant to the decision whether the Report should be disclosed. Whether the material is damaging is a consideration apart from attorney-client privilege or work product immunity. And there is no general privilege, analogous to the fifth amendment's protection against self-incrimination, that protects against disclosure of information that may lead to civil liability. As a common sense matter, however, we might have greater reluctance to require disclosure if the Report were clearly and significantly damaging to Continental. Having read the Report, however, we do not believe that this is the case. 21 44 We are also unpersuaded by Continental's contention that we should protect the functioning of special litigation committees in furthering the ability of corporations to determine their own best interests with respect to derivative suits. Amicus Chicago Clearing House Association makes a similar argument with regard to its member banks' ability to conduct necessary internal investigations. Both argue that the ability to conduct investigations will be lost if the people questioned are aware that their answers may be made public. Again, beyond the attorney-client privilege and work product immunity, we have not been directed to any authority which recognizes this generalized right of confidentiality as a factor to be weighed against disclosure. 22 In Diversified Industries, Inc. v. Meredith, 572 F.2d 596 (8th Cir.1978) (en banc), the court held that disclosure of material similar to the Report pursuant to an SEC subpoena constituted only a limited waiver of the attorney-client privilege. Id. at 611. The court noted that a contrary conclusion would make it more difficult for a corporation to conduct an independent investigation of the merits of litigation. Id. The court did not hold, however, that this interest in independent investigations gives rise to a general right to confidentiality, independent of the attorney-client privilege. We also decline to create such a privilege for internal corporate affairs. We note, however, that in this case Continental might have guarded the confidentiality of the Report more carefully. 45 We agree that the device of a special litigation committee to conduct an investigation and make a report may be useful in handling derivative litigation. We recognize that confidentiality may advance this process. But when the report is used in an adjudicative procedure to advance the corporate interest, there is a strong presumption that confidentiality must be surrendered. 46 We also do not understand why public confidence in the banking industry would be undermined by disclosure of the Report. Certainly, an open airing of the issues surrounding the litigation would be more conducive to public confidence than a secret report which led to dismissal of various claims. See Joy v. North, 692 F.2d at 893. In any event, the public confidence factor is one that is too elusive to be given much weight in the context of this appeal. 47 Our assessment of all the relevant factors leads us to the conclusion that the district court did not abuse its discretion in ordering disclosure of the Report. This may impose some burdens on corporations in attempting to evaluate the merits of derivative suits and in assuring that the corporations' best interests are served by such derivative litigation. We are confident, however, that procedures can be developed whereby these interests can be accommodated. We are not adopting a per se rule of disclosure of special litigation committee reports whenever a motion to terminate is brought. Further, we do not mean to foreclose a district court from maintaining confidentiality in an appropriate case. We do conclude, however, in the context of this case, that the presumption of public access to court documents has not been rebutted. 48 Therefore, the order of the district court is affirmed. 49