Reed Smith Client Alerts

The Delaware Court of Chancery recently issued a decision, in Manhattan Telecommunications Corp. v. Granite Telecommunications, LLC, C.A. No. 2020-0468-JRS, letter op. (Del. Ch. Nov. 19, 2020), that required a plaintiff to file public versions of court filings containing alleged defamatory statements over the plaintiff’s objection that the defamatory statements warranted confidential treatment and should not be disclosed publicly. The court’s decision is consistent with other Delaware decisions that hold, absent good cause, court filings and records of court proceedings are presumptively public and confidential treatment should only be afforded to court filings and records where the party seeking confidential treatment 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.”

Plaintiff Manhattan Telecommunications Corp. (Manhattan) brought suit in the Delaware Court of Chancery against defendant Granite Telecommunications (Granite) and asserted defamation and tortious interference claims. Manhattan alleged Granite contacted customers to suggest doubt about Manhattan's financial condition and ability to continue providing services due to economic effects of the coronavirus pandemic, which harmed Manhattan's reputation and caused declines in Manhattan’s business.

Manhattan's complaint, filed under seal, contained general descriptions and reproduced specific statements made by Granite that Manhattan claimed were defamatory, and stated the reasons why Manhattan believes the statements caused harm. When Manhattan filed a public version of the complaint, as required under Court of Chancery Rule 5.1, the defamatory statements were redacted. Manhattan also filed a motion to expedite under seal and redacted similar information from the public version of the motion.

UCLA Law Professor Eugene Volokh filed a notice with the Court of Chancery that challenged the confidential treatment of Manhattan’s complaint, exhibits, and its motion to expedite. Manhattan opposed Professor Volokh’s challenge and moved for continued confidential treatment of its filings. In support of continued confidential treatment, Manhattan argued the presumption of public access is overcome because public access to defamatory statements would cause irreparable harm. Manhattan relied on the Court of Chancery’s prior decision in CapStack Nashville 3, LLC v. MACC Venture Partners, LLC, C.A. No. 2018-0552-SG (Del. Ch. Aug. 16, 2018) in support of continued confidential treatment. Manhattan also argued that Professor Volokh’s interest in the information is not sufficiently compelling to outweigh potential harm to Manhattan and that the court's previous grant of Manhattan’s motion for confidential treatment supported continued confidential treatment. In opposing Manhattan’s motion, Professor Volokh noted that he frequently writes on First Amendment issues, including those involving libel law attempts to obtain potentially overbroad injunctions in libel cases, and that Manhattan’s filing of an unredacted motion to remand a related action in the District of Delaware undermines Manhattan’s purported need of confidentiality.

The Court of Chancery denied Manhattan’s motion for continued confidential treatment, holding (i) Manhattan failed to demonstrate any particularized harm that outweighed public interest in the redacted information, (ii) absence of the redacted information diminished the public’s ability to understand the nature of the action, and (iii) Manhattan’s reliance on CapStack and rulings on prior unopposed motions was misplaced. The court discussed legal standards applicable when considering a motion for continued confidential treatment of court filings in response to an objection to confidential treatment under court of Chancery Rule 5.1, noting that court filings are presumptively public and a party seeking confidential treatment bears the burden of showing harm from disclosure that outweighs the public right of access:

[Court of Chancery Rule 5.1], in essence, codifies the “powerful presumption of public access” to court proceedings and records. The rule also recognizes, however, that the presumption of public access is not absolute, and that, in certain circumstances, litigants are entitled to confidentiality. The touchstone for the exception to access is “good cause.” Good cause exists if the party seeking confidential treatment 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.”