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Federal Bar Update: Confidentiality not always enforceable

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Federal Bar UpdateAmendments

In Dugdale Communications v. Alcatel-Lucent USA, No. 1:09-CV-960 (S.D. Ind. Feb. 11, 2011), the court addressed defendant’s motion to amend its answer. Magistrate Judge Tim Baker denied the motion, starting the court’s opinion by writing, “Leave to amend pleadings is freely granted when justice requires. But when, as in this case, a party waits until significant deadlines have passed to seek leave to make amendments that could have been made earlier, and which would unduly prejudice the opposing party, justice requires denial of leave to amend.”

As with most discretionary amendment issues, the opinion turns on its unique facts, but one of the desired amendments – to add a statute of frauds defense – was denied due to undue delay. The court explained, “While Dugdale’s discovery responses may not have been entirely consistent, Alcatel waited to depose Witham until the day before the discovery deadline. As a result of this and other circumstances, Alcatel cannot in fairness claim that it now should be allowed to add a claim based on something it should (or easily could) have known long ago. The court has already enlarged CMP deadlines twice and recently declined to further delay progress in this case. Accordingly, the court denies Alcatel’s motion for leave to add a statute of frauds defense.”

Enforcing confidential settlement agreements

As federal practitioners know, the 7th Circuit is particularly strict about protecting public access to federal court filings. Trial judges within the 7th Circuit are thus equally strict in ensuring that sealed record requests meet the 7th Circuit standards. So can a confidential settlement agreement be enforced in federal court while preserving confidentiality?

This issue was addressed by the court in Gant v. Carrier Corp., No. 1:09-CV-1193 (S.D. Ind. Jan. 25, 2011). The defendant sought to enforce a confidential settlement agreement. The court set the matter for a court conference to try to informally resolve the matter, kept the agreement under seal until that conference, but expressed that it “has serious reservations about the propriety of maintaining the purported settlement agreement and related documents under seal given that the Court is now being asked to enforce this purported agreement.”

The court explained, “In Cincinnati Insurance, the Seventh Circuit noted that ‘[t]he parties to a lawsuit are not the only people who have a legitimate interest in the record compiled in a legal proceeding.’ Id. at 944. The public’s interest in a transparent and predictable legal system extends to the Court’s enforcement of settlement agreements. Many cases never reach the courtroom and others end without even a written opinion. As the Seventh Circuit stated in Jessup v. Luther, 277 F.3d 926, 929 (7th Cir. 2002), ‘[t]he public has an interest in knowing what terms of a settlement a federal judge would approve and perhaps therefore nudge the parties to agree to.’ The Seventh Circuit has further stated that ‘[p]eople who want secrecy should opt for arbitration. When they call on the courts, they must accept the openness that goes with subsidized dispute resolution by public (and publicly accountable) officials.’ Union Oil Co. of Cal. v. Leavell, 220 F.3d 562, 568 (7th Cir. 2000).”

The court continued, “In the case at bar, Carrier has provided no reasons why its desire for sealing overcomes the public’s legitimate interest in the record compiled by this legal proceeding. The purported settlement agreement contains a confidentiality clause, which presumably is at the heart of this sealing request. But the parties’ (or one party’s) desire for confidentiality does not override the public’s interest in open proceedings when disputes require the Court’s intervention. Certainly Carrier’s motion contains no authority supporting such an outcome.”

Thus, parties seeking to enforce confidential settlement agreements should be on notice that confidentiality cannot be assured in federal court. If confidentiality is vital, consideration should be given to possibly including enforcement mechanisms through arbitration or a simple state-law, state-court breach of contract action.

Mark your calendars

The annual Federal Civil Practice Seminar will be held Friday, Dec. 16, in Indianapolis.•

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John Maley, jmaley@btlaw.com, is a partner with Barnes & Thornburg, LLP, practicing federal and state litigation, employment matters, and appeals. The opinions expressed in this column are the author’s.

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  1. Paul Ogden doing a fine job of remembering his peer Gary Welsh with the post below and a call for an Indy gettogether to celebrate Gary .... http://www.ogdenonpolitics.com/2016/05/indiana-loses-citizen-journalist-giant.html Castaways of Indiana, unite!

  2. It's unfortunate that someone has attempted to hijack the comments to promote his own business. This is not an article discussing the means of preserving the record; no matter how it's accomplished, ethics and impartiality are paramount concerns. When a party to litigation contracts directly with a reporting firm, it creates, at the very least, the appearance of a conflict of interest. Court reporters, attorneys and judges are officers of the court and must abide by court rules as well as state and federal laws. Parties to litigation have no such ethical responsibilities. Would we accept insurance companies contracting with judges? This practice effectively shifts costs to the party who can least afford it while reducing costs for the party with the most resources. The success of our justice system depends on equal access for all, not just for those who have the deepest pockets.

  3. As a licensed court reporter in California, I have to say that I'm sure that at some point we will be replaced by speech recognition. However, from what I've seen of it so far, it's a lot farther away than three years. It doesn't sound like Mr. Hubbard has ever sat in a courtroom or a deposition room where testimony is being given. Not all procedures are the same, and often they become quite heated with the ends of question and beginning of answers overlapping. The human mind can discern the words to a certain extent in those cases, but I doubt very much that a computer can yet. There is also the issue of very heavy accents and mumbling. People speak very fast nowadays, and in order to do that, they generally slur everything together, they drop or swallow words like "the" and "and." Voice recognition might be able to produce some form of a transcript, but I'd be very surprised if it produces an accurate or verbatim transcript, as is required in the legal world.

  4. Really enjoyed the profile. Congratulations to Craig on living the dream, and kudos to the pros who got involved to help him realize the vision.

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