Libel Case Can't Be Litigated with Alleged Libel Sealed

In Manhattan Telecommunications Corp. [MetTel] v. Granite Telecommunications, LLC, MetTel sued its competitor Granite for allegedly libeling MetTel in statements to customers; but the allegedly libelous statements were redacted from the publicly available Complaint.

Not allowed, says Delaware Court of Chancery Vice Chancellor Joseph R. Slights III, dealing with my notice opposing such sealing. (Many thanks to my local counsel Garrett Rice of Ross Aronstam & Moritz LLP for all his invaluable help, and to UCLA law student Jenna Battaglia, who worked on the case with me.) Here is an excerpt from the Vice Chancellor’s opinion; for similar federal cases, see Parson v. Farley (which I had also filed) and Holmes v. Grambling:

Court of Chancery Rule 5.1 … codifies the “powerful presumption of public access” to court proceedings and records…. [Confidential treatment is allowed only if a party] can demonstrate that “the public interest in access to Court proceedings is outweighed by the harm that public disclosure of sensitive, non-public information would cause.”

By design, the burden of demonstrating [this] is exacting, recognizing that “[t]hose who decide to litigate in a public forum … must do so in a manner consistent with the right of the public to follow and monitor the proceedings and the result of [the] dispute.” In this regard, our courts appreciate that public access to the courts and their business is “fundamental to a democratic state and necessary in the long run so that the public can judge the product of the courts in a given case.” And the public cannot “judge the product of the courts in a given case” if the information being withheld is necessary for understanding “the nature of the dispute” or the court’s bases for a decision….

[A.] MetTel’s Interest in Confidentiality

The harm MetTel alleges will be inflicted upon it in the absence of confidentiality protections is too broad to meet the requirements of Rule 5.1….  [T]o show an interest in confidentiality that outweighs the public’s right of access, MetTel must do more than make “[g]eneric statements of harm.” The showing must be particularized; in other words, MetTel “must point to specific information like ‘trade secrets or competitively sensitive pricing information’” that is not in the public mix and, if disclosed, will cause clearly identified harm.

MetTel claims to meet this burden by alleging “harm beyond its reputation, including but not limited to direct harm to its business relationships with current and potential customers”[:] … “[o]nce that seed [of the defamatory statement] has been planted, the client will undertake a critical look at a provider with which it had been perfectly happy” and “may terminate the contract based on a pretext”; “there is a real risk that MetTel will be asked to bid on fewer and fewer contracts going forward”; and “[o]nce confidence [in] a provider’s financial stability is called into question, customers … can simply choose the non-confrontational option of selecting a different vendor.” …

[But] it is difficult to imagine a defamation case, at least in a commercial setting, where these same concerns would not always be present…. [And] it is evident from a comparison to the examples in Rule 5.1 that potentially defamatory statements, per se, are not the kind of information the drafters of Rule 5.1 intended to protect. The five examples in Rule 5.1 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.” Each of these enumerated categories is discrete and reflects information that is not, or at least should not be, of interest to the general public in the quest to understand the dispute before the court or the bases for the court’s decisions.

While I do not dispute there is some risk of economic harm to MetTel if the redacted information is made public, allowing such information to remain redacted “merely because its disclosure could cause the parties economic harm” would turn the presumption of public access on its head and frustrate the purpose of Rule 5.1.

[B.] The Public’s Interest in Understanding the Bases of the Dispute

The public maintains a strong interest in access to the content of the alleged defamatory statements. If the information currently redacted remains so, the public will have no means to understand the dispute MetTel has asked the Court to adjudicate. This conflicts with the public’s right to “monitor the proceedings and result[s]“—a right, again, that “has been characterized as fundamental to a democratic state.” In other words, when “the supposedly-confidential information represents the nature of the dispute itself—the interest of the public in accessing this information outweighs the economic harm to the parties that disclosure may cause.” That is the case here.

While MetTel and Professor Volokh debate the legitimacy of Professor Volokh’s planned use for this information, nothing in our law obligates Professor Volokh to prove why he seeks access to information filed in a Delaware court, much less that his purpose is somehow “proper.” Instead, MetTel is obligated to prove that good cause exists to deny Professor Volokh access to the information he seeks as a member of the public. That information—the gravamen of the case—cannot be discerned from the redacted Complaint, which, at best, notifies the public that Granite made some unknown defamatory statements that MetTel now asserts are defamatory for some unknown reason(s). [Footnote:]

This is hardly adequate to enable the public “to follow and monitor the proceedings and the result of [the] dispute.”

Not only would it be impossible for a member of the public to understand what is going on in this case based on the pleadings, “it is difficult to envision a judicial opinion in this matter that could maintain the confidentiality of all the designated material and yet be comprehensible to the reading public.” In its Complaint, MetTel asks this Court to determine whether Granite committed defamation, tortious interference with prospective economic advantage, tortious interference with contractual relations, trade libel and deceptive trade practices. When this Court is called upon to determine the merits of these claims in trial or motion practice, the Court will not be able to render and deliver a comprehensible decision without reference to the currently redacted information.

[C.] MetTel’s Reliance on CapStack is Misplaced

Finally, MetTel claims that [under] this court’s decision in CapStack [a prior Court of Chancery case involving a request for an anti-libel injunction] …, MetTel “cannot, on the one hand, argue that the defamatory and tortious statements by Granite are causing irreparable harm, while, at the same time, repeat those defamatory and tortious statements in the public record.” …

[I]t is true that CapStack held that the plaintiffs had “failed to establish that irreparable harm will likely result,” relying in part on the fact that the information was already public through the pleadings[.] … [But u]nder MetTel’s reading of CapStack, the factual gravamen of a defamation complaint could never be disclosed to the public in a court document if that information was not previously disclosed, regardless of whether access to the particular statements would cause particularized harm, because disclosure would potentially foreclose a showing of irreparable harm.

That reading would eviscerate the presumption of public access, ignore our Rule 5.1 jurisprudence requiring a showing of good cause to rebut the presumption, and conflict with the general rule that the mere fact information is “previously undisclosed” is not enough to justify confidential treatment….

Looks quite right to me. Note that the underlying document has not yet been unsealed, because MetTel still has time to appeal.