9th Circuit panel stands up for open courts in Chrysler unseal opinion

January 13, 2016

(Reuters) – In my business, every document filed under seal is a provocation. Obviously, protective orders are sometimes the only way businesses can shield trade secrets and people can preserve their privacy, but as the U.S. Supreme Court said in the 1978 decision Nixon v. Warner Communications, the public’s right of access to court records is deeply rooted in common law. Confidentiality should a rare exception, not a reflexive default.

The 9th U.S. Circuit Court of Appeals stood up for that principle Tuesday. In a decision by Judge John Owens, a split three-judge panel held that Chrysler must show a compelling interest – and not just good cause – for sealing corporate documents that accompanied briefing on a preliminary injunction motion in a products liability class action. Owens and U.S. District Judge William Sessions of Vermont, sitting by designation, said the test for lifting protective orders on documents used as exhibits should be whether the material is related to the merits of the case. If it is, they held, the public has a presumptive right to see it.

In a cautionary dissent, Judge Sandra Ikuta warned that the majority opinion created a new rule that flouts 9th Circuit precedent in the 2002 case Phillips v. General Motors and undermines the Federal Rules of Civil Procedure. “The majority’s only rationale for disregarding our precedent is policy,” she wrote. “The majority prefers to strike a different balance between the common law right of public access and the protections provided by (the evidentiary rules).”

Since this post is all about transparency, I’ll disclose here that I agree with the majority on public access, which you’ve probably guessed already. Judge Ikuta may be right that the decision steps beyond 9th Circuit precedent, but the majority’s reasoning makes good sense to me.

The underlying 2013 class action accused Chrysler (now FCA US) of outfitting hundreds of thousands and possibly millions of SUVs, trucks and vans with a defective power system that caused unexpected stalls. The magistrate judge overseeing discovery entered a broad protective order on documents from both sides.

Several months into the case, plaintiffs’ lawyers at Girard Gibbs and Schneider Wallace Cottrell Konecky Wotkyns moved for a preliminary injunction to compel Chrysler to inform car owners of the supposed defect. The plaintiffs’ brief cited Chrysler documents shielded by the protective order, as did Chrysler’s opposition.

Just before U.S. District Judge Dean Pregerson of Los Angeles denied the preliminary injunction motion in October 2014, the Center for Auto Safety moved to intervene in the case to unseal the Chrysler documents. (The Center had petitioned for a recall of vehicles with the problematic power system.) Plaintiffs’ lawyers said it was fine with them for the seal to be lifted but Chrysler opposed the Center.

In December 2014, Judge Pregerson denied the motion to make the documents public. In the 9th Circuit, he said, the presumption of public access applies when discovery materials accompany a dispositive motion, such as a motion for summary judgment. In those instances, parties opposed to unsealing must show a compelling reason for the material to remain confidential. But when sealed documents are exhibits in nondispositive motions, such as discovery disputes, confidentiality proponents only have to show good cause why the documents should stay under seal.

The judge said a preliminary injunction motion does not lead to a final determination so the good cause standard applied. He concluded Chrysler’s competitive interest in keeping technical documents under seal (among other reasons) was a good cause to leave the protective order alone.

The Center, represented by the public interest group Public Justice, appealed, arguing that the documents became part of the presumptively public record when they were attached to a preliminary injunction motion so Judge Pregerson used the wrong standard to hold the documents confidential. Chrysler, represented at the 9th Circuit by Gibson Dunn & Crutcher, countered that 9th Circuit precedent clearly distinguishes between dispositive and nondispositive motions in directing trial judges which standard to apply. According to Chrysler, a preliminary injunction motion is a “textbook example of a non-dispositive motion.”

The 9th Circuit majority said it doesn’t make sense to impose a “mechanistic rule” to decide whether the presumption of public access applies. The opinion acknowledged that the 9th Circuit has said sealed documents accompanying tangential motions, such as motions to compel discovery, can remain under seal with a showing of good cause. But according to the majority, when the circuit court used the phrases “dispositive” and “non-dispositive,” it was not being literal but was distinguishing between motions that go to the merits and those that address side issues.

“Although the apparent simplicity of the district court’s binary approach is appealing, we do not read our case law to support such a limited reading of public access,” the majority said, pointing out that other federal circuits also use a flexible model to determine when the good cause standard applies. “Public access to filed motions and their attachments does not merely depend on whether the motion is technically ‘dispositive.’ Rather, public access will turn on whether the motion is more than tangentially related to the merits of a case. Our reading of the public access cases is consistent with our own case law, and more importantly, comports with the old tradition of ensuring public access which ‘antedates the Constitution and … is now beyond dispute.'”

Pretty stirring words to my ears, but Judge Ikuta said the panel’s expansive definition of “dispositive” goes beyond what the 9th Circuit has previously held. She also said it’s not fair to Chrysler to change the rules because the carmaker expected confidentiality when it turned the documents over to plaintiffs in the case. Her dissent warned that the majority opinion will erode the cooperation that allows complex litigation to churn along: “It is clear that no future litigant can rely on a protective order and will have to chart its course through discovery cautiously and belligerently, to the detriment of the legal system,” she wrote.

Jennifer Bennett of Public Justice, who argued at the 9th Circuit for the Center for Auto Safety, told me that the majority opinion aligns with the spirit of 9th Circuit precedent, which is concerned with the difference between tangential and core motions. “The court looked beyond the literal word and said, ‘We want the public to have access to documents that are actually relevant to the case,” she said.

Trial courts in the 9th Circuit, she said, had previously been divided over the standard, she said, so the opinion is a big win for “transparency, accountability and public safety.” By upholding the presumption of a public right of access even to documents introduced in the middle of a case, she said, the 9th Circuit has made it more difficult for corporations to seal entire case records through settlements.

Thomas Dupree of Gibson Dunn, who argued for Chrysler at the 9th Circuit, referred me to a company spokesman who said in an email statement that FCA is “reviewing the decision and considering its legal options.”

The underlying class action, meanwhile settled last June with an agreement that Chrysler would send recall notices to hundreds of thousands of car owners and pay to fix the vehicles. The exact cost to the company? That’s under seal.

Correction: Jennifer Bennett works for Public Justice, not Public Citizen.

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