Financial Poise
Woman whispers to man, symbolizing an accredited investor keeping confidential business information

The Civil Courts: When Your ‘Confidential Business Information’ Isn’t So Secret

Kentucky Civil Court Case Offers Lessons on Confidential Business Information Made Public

Today, we take a stab at answering the question, When is the civil court system not open to the public,
protecting your confidential business information?

The short answer is, “Whenever the judge says it’s not.” Litigation concerning proprietary business information, trade secrets and the like is often conducted behind closed doors and under seal, provided that one of the parties asks for a court order and the judge agrees. Such “protective orders” ensuring confidential business information be protected have become part of the ordinary course of business litigation. In some places, if both sides agree, every document produced in discovery and every deposition can be marked “confidential” and shielded from public view. The subject matter of the litigation is, in many instances, only tangentially related to the level of confidentiality sought by the litigants.

Exhibit A: Purdue Pharma’s High-Profile Civil Court Case

In certain high-profile cases, however, the protection of confidential business information cannot be assumed, even if both sides would prefer it, or if both sides acquiesce. Consider what happened to pharmaceutical company Purdue Pharma defending fraud and conspiracy claims relating to its drug OxyContin.

Purdue Pharma was sued in Pike County, Kentucky, a community with more than a passing familiarity with OxyContin abuse. A pre-trial discovery took place to exchange information that would be presented in trial. The discovery included a deposition of a former company president. After discovery, Purdue Pharma settled the case for $24 million. Discovery had been taken confidentially, with both sides’ agreement. But following the settlement, a news organization intervened in the case and made a motion to have the parties’ discovery materials unsealed. The judge granted the motion.

The news organization made two arguments: First, that it had a First Amendment right to see the parties’ discovery materials. Second, that it had a common law right to access. The Kentucky court rejected the first basis but found for the news organization on the second, concluding that “the Court sees no higher value than the public (via the media) having access to these discovery materials, so that the public can see that facts for themselves.” Purdue Pharma said that it would appeal the judge’s ruling.

On December 14, 2018, the Kentucky Court of Appeals affirmed the lower court’s ruling in favor of public disclosure. That Court first made clear that its ruling was based on Kentucky common law, not common law generically. The Court then began its analysis of Kentucky common law with Kentucky’s deep anti-monarchical roots, noting that Kentuckians’ “pioneer spirit was evident in their jurisprudence.”

Out of these roots comes a “presumption of broad public access” to the courts and court records, based not on English common law, or even American common law, but on the common law of Kentucky, as developed in that state over its existence. That law, explained the Kentucky Supreme Court, created a “freer, more open, democracy-based American approach to court-records access [that is] well reflected in Kentucky’s jurisprudence.” From these premises, the conclusion was obvious: the lower court ruling was unanimously affirmed.

On August 21, 2019, the Kentucky Supreme Court denied review of the Court of Appeals’ decision, allowing it to stand.

Reality Check: Lessons on Protecting Confidential Business Information

There are lessons to take away. The first lesson is a reminder that the courts belong to the public. If there’s a high-profile case, it may not matter that you were able to convince the other side to enter a protective order, or that the judge barely looked at the order before entering it. If your dispute raises public interest, and the media comes sniffing around, there’s a real risk that information that had been sealed can become unsealed and made public.

The second lesson is that preserving confidential business information is an interest like any other. Confidentiality should be considered explicitly at the outset of litigation, a confidentiality strategy should be devised, and a plan should be put into place.

Part of your strategy should be discussing what is and isn’t confidential and material to the litigation. First, counsel should discuss confidentiality before filing a motion and redact all confidential business information that is not material to the litigation. Though a document can be cited without incorporation of the confidential information, information that cannot be redacted requires the party to file a motion to put the document under seal. Regardless of whether the confidential information is material to the litigation, such as personal identifiers or proprietary information in general, the court will require one redacted and one un-redacted version of the document (or a public placeholder for attachments). The redacted version will be made public while the un-redacted version will be solely for the Court.

If you fear publicity more than the other side, or vice-versa, don’t get caught by surprise. Don’t get caught making decisions on the fly during discovery. And, if you absolutely, positively want to avoid publicity, either resolve your dispute short of litigation, or get your dispute out of the courts and into private arbitration.

[Editor’s Note: To learn more about this and related topics, you may want to attend the following webinars: Leveraging & Protecting Trade Secrets in the 21st Century and IP – What Every Lawyer and Every Client Must Understand. This is an updated version of an article originally published on June 7, 2016.]

Like what you just read?

Then sign up to receive our weekly Financial Poise newsletter, our take on the most relevant and topical business, financial and legal issues affecting investors and small business owners.

Always Plain English. Always Objective. Always FREE.

About Adam Hirsch

Adam represents a wide variety of clients, ranging from individuals to small business owners to large corporations. He has a particular focus on business and investment disputes, and has experience litigating such disputes in numerous state and federal courts. He has also represented business clients in arbitration and mediation proceedings. Adam also represents employees in…

Read Full Bio »   •   View all articles by Adam »

>