Firms in new Company Doe case v. CFPB ask judge to keep identities secret

January 19, 2016

(Reuters) – Remember the 4th U.S. Circuit Court of Appeals’ stirring “Company Doe” opinion in April 2014? A business later revealed to be the California baby products maker ErgoBaby had sued anonymously to block the Consumer Product Safety Commission from reporting what ErgoBaby considered an inaccurate and potentially damaging incident report on the CPSC’s public database. The 4th Circuit said it understood why ErgoBaby didn’t want its name revealed in a case that was, after all, brought to protect the company’s public image. But the appellate panel ruled the First Amendment right of access to court records “does not yield” to a corporation’s fears about its reputation.

There’s a new Company Doe controversy in the federal courts: Five credit counseling companies targeted in a Consumer Financial Protection Bureau investigation want to keep their names out of a since-dismissed case challenging the CFPB’s plan to question a lawyer that had represented the corporations. Last September, U.S. District Judge Randolph Moss of Washington, D.C., said the companies could remain anonymous. The CFPB asked the judge in December to reconsider his ruling. On Monday, the anonymous companies urged him not to.

The dispute began last summer when the companies petitioned the CFPB for permission to attend an investigational hearing at which the agency intended to take testimony from a lawyer who had advised them on business operations. The lawyer was also under investigation, and the companies argued they needed to attend the hearing to be sure that he didn’t disclose privileged information to help his own case. After the CFPB denied the companies’ request, they went to court to ask for a temporary restraining order.

They also asked for the record of their suit to be sealed, arguing that the CFPB investigation wasn’t public and they deserved to protect themselves from the “serious harm” that would result from the disclosure they were under government scrutiny. The companies cited the District of Columbia U.S. Circuit Court of Appeals’ opinion in U.S. v. Hubbard, which lays out a six-part test for when cases should be sealed. According to the companies, their “extraordinary strong privacy interest,” which is one prong of the test, far outweighed the public right of access to court records, which is another prong, because CFPB investigations are not public and their suit didn’t involve the merits of the inquiry.

The CFPB pointed out that the companies didn’t ask for confidentiality when they petitioned the agency to attend the lawyer’s hearing. The agency also said the D.C. Circuit’s 2001 decision in In re Sealed Case – which sealed the record of a witness’s challenge to a subpoena in a Federal Election Commission investigation – didn’t apply in this case because CFPB inquiries, unlike FEC cases, are not confidential as a matter of statute.

By the time Judge Moss ruled on the companies’ request to seal the record, that was the only remaining issue in the case. (The companies dismissed their TRO motion for reasons not publicly disclosed.) The judge struck a compromise. He agreed with the CFPB that the public has strong access rights in cases involving government agencies and that there is no statutory right of confidentiality in CFPB investigations. But he also found the companies had a significant privacy interest. Balancing these prongs of the D.C. Circuit’s Hubbard test, Judge Moss refused to seal the entire record of the companies’ case but said their actual identities could remain secret. He recaptioned the suit as John Doe Company 1 v. CFPB and told both sides to redact identifying information from their briefs.

The CFPB asked the judge to reconsider his ruling when it received a Freedom of Information Act request for the companies’ original petition to attend the hearing. (The companies, as the agency had noted in its sealed opposition brief, hadn’t asked for confidentiality when they brought the petition.) In the reconsideration brief, the government contended that Judge Moss used the wrong test. The question before him had been sealing the record, not whether to allow the companies to litigate anonymously – which the companies suggested only in one sentence in their reply brief. As a result, the CFPB said, it never had a chance before the September ruling to urge the judge to consider the test his trial court colleagues have used to decide whether plaintiffs may shield their identities.

Under that test, the CFPB argued, the companies’ names should be disclosed. “Plaintiffs have not demonstrated that their need for anonymity is either ‘critical’ or ‘unusual’ thereby warranting this court’s grant of the ‘rare dispensation’ of allowing them to proceed pseudonymously,” the CFPB brief said, quoting liberally from the 4th Circuit’s Company Doe decision.

The companies, represented by Venable and Montgomery McCracken Walker & Rhoads, said Monday that Judge Moss already performed the balancing test at the heart of all requests to restrict public access so there’s no need for him to revisit his previous ruling. (The brief also said the CFPB waited too long to ask.)

As I’ve said many times, I’m generally opposed to sealing orders and anonymous litigation, and this case isn’t an exception. If corporations avail themselves of the court system, they should expect their litigation to be public, especially when they are challenging the government over a matter of public safety or consumer protection.

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