Protective orders, property interests and prior restraints: can the courts prevent media nonparties from publishing court-protected discovery materials?

• Author: Cohen, Giles T.

INTRODUCTION

On October 27, 1994, the Procter & Gamble Company ("P & G") filed suit against Bankers Trust Company, alleging that the defendant had engaged in "fraudulent conduct to induce [P & G] to enter into and to remain in two complex leveraged derivative transactions" leading to losses of more than one hundred million dollars.(1) On January 17, 1995, as part of the usual procedure in a case involving commercial clients, both parties stipulated to a protective order(2) thereby putting confidential company documents under seal and protecting the materials produced during discovery.(3) On September 12, 1995, though the complaint was filed under seal and was legally "hands off" to parties outside of the litigation, Business Week legal affairs editor Linda Himelstein obtained a copy of a 300-page amended complaint filed by P & G in the United States District Court in the Southern District of Ohio.(4)

Himelstein, who had been investigating the lawsuit for an article for Business Week, received a copy of the complaint from a confidential source at Sullivan & Cronwell, Bankers Trust's counsel.(5) On September 13, when Business Week sought to publish a cover story based on the complaint, United States District Court Judge John Feikens faxed a restraining order just hours before the magazine's publication deadline.(6) Business Week immediately sought expedited review from the Court of Appeals for the Sixth Circuit and the United States Supreme Court but was denied by both courts.(7) On October 3, 1995, at the behest of Business Week, Judge Feikens held a hearing that ultimately led to his upholding the restraining order and, simultaneously, unsealing the protective order: this two-step approach maintained the injunction barring publication of the original confidential documents while allowing Business Week and others to make photocopies public.(8) On March 5, 1996, in a case that generated widespread media interest and support,(9) the United States Court of Appeals for the Sixth Circuit reversed Feikens's order on the grounds that it constituted an unconstitutional prior restraint.(10)

The Business Week situation is only the most recent instance of an evolving phenomenon: the tension between the American traditions of open trial proceedings and freedom of the press, and the application of the Federal Rules of Civil Procedure and their revised discovery provisions.(11) Whereas the First Amendment has been found to support public access to trial proceedings,(12) Federal Rule of Civil Procedure 26(c) ("Rule 26(c)") grants broad discretion to the courts in implementing protective orders:(13) Such orders allow the trial courts substantial leeway in restricting public access to pretrial discovery materials, which may implicate various other interests, including privacy interests and commercial interests.(14) In Seattle Times Co. v. Rhinehart,(15) the Supreme Court addressed this tension by emphasizing the private nature of pretrial discovery materials, effectively defeating First Amendment challenges to Rule 26(c) protective orders.(16) While settling the constitutional question of the validity of restricting public access to discovery materials through protective orders, Rhinehart left open the question of whether media nonparties who obtain "protected" discovery materials through mistake or illegitimate means are likewise bound by such an order.(17)

This Comment proposes that a court may, under certain circumstances, utilize its injunctive power to prevent confidential discovery materials under a protective order from being published by a media nonlitigant.(18) Because this position seems to fly in the face of First Amendment considerations, Part I of this Comment will examine the tension between the clear presumption against suppression of speech and prior restraints highlighted in such seminal cases as New York Times Co. v. United States(19) and Nebraska Press Ass'n. v. Stuart,(20) and the protection afforded to confidential discovery materials that are under seal in Seattle Times Co. v. Rhinehart.(21) Part II will examine the theoretical arguments supporting the extension of protective orders to nonparties. These policy arguments, which include the litigants' privacy and property interests and the court's interest in an efficient process, are critical because they counter the strong First Amendment considerations in this area.

Part III demonstrates how these policy arguments shape legal doctrine enabling a court to establish a property right in certain intangible commercial information.(22) The intangible property interest is crucial because by establishing a property interest in information covered by a protective order, a court may justify a restraining order on the grounds of protecting private property, even in the face of a legitimate First Amendment claim. This conflict caused by the attempt to balance private property rights and First Amendment considerations has developed into a highly malleable and confused area of Supreme Court jurisprudence. Part IV proposes a standard for enforcing protective orders against media nonlitigants, a standard determined by the property interest in the information sought to be protected.

1. PROTECTIVE ORDERS, NONPARTIES AND THE FIRST AMENDMENT CHALLENGE: SETTING THE LEGAL BACKDROP

   The language of the First Amendment is clear: "Congress shall make no law . . . abridging the freedom of speech, or of the press."(23) A pervasive tension exists, however, between the applicability of the First Amendment to judicial proceedings and the authority of the courts to remove documents from public access.(24) Whereas the United States has a longstanding tradition of allowing the public to view judicial proceedings and daily court activities,(25) this right of access is not absolute.(26) The justice system recognizes several circumstances--such as attorney-client privilege,(27) settlement negotiations,(28) grand jury proceedings(29) and discovery(30)--where confidentiality is not only allowed, but is necessary.(31) Moreover, trial judges are given broad discretion to determine whether to allow any public access to materials for litigation and settlement negotiations.(32) The tension between presumed "openness" and court-enforced confidentiality is even more pronounced when one of the parties affected is the press.(33) When a protective order is imposed on discovery materials and publication or dissemination of the material is prohibited, this order is analogous to a prior restraint(34) on the litigant's speech.(35) As the Supreme Court has previously recognized, prior restraints are "one of the most extraordinary remedies known to our jurisprudence"(36) and are particularly disfavored.(37) In view of this longstanding judicial hostility to prior restraints and the highly correlative nature of prior restraints and protective orders, the situation in which a member of the media has acquired court-protected discovery materials pertaining to litigation of which it is not a party requires an examination of the legal doctrine covering protective orders and prior restraints on the media.

   1. Pretrial Discovery Materials Are Not Presumptively Public--Seattle Times Co. v. Rhinehart

      Prior to Seattle Times Co. v. Rhinehart,(38) many courts and commentators debated whether the First Amendment limited the right to enforce a protective order against the parties themselves.(39) Protective orders were analogized to "prior restraints" on free speech of the litigants, and the orders were therefore arguably subject to strict scrutiny.(40) In 1984, the Supreme Court firmly addressed the issue of a litigant's First Amendment rights with regard to a protective order in Rhinehart.

      In Rhinehart, a religious organization and its spiritual leader brought a defamation action in a Washington state court against two newspapers that had written stories about them.(41) In response to the defendants' discovery request seeking lists of the organization's members and contributors, the plaintiffs sought a protective order to limit the use of the lists outside the trial.(42) Based in part on the defendants' stated intent to continue publishing articles about the plaintiffs using information gained in discovery, the trial court issued a protective order that "prohibited [the newspapers] from publishing, disseminating, or using the information in any way except where necessary to prepare for and try the case."(43) Because the newspapers had access to the discovery materials for trial use, but were forbidden from publishing or disseminating the material, the order implicated a First Amendment prior restraint.

      The Supreme Court emphatically endorsed the constitutionality of protective orders, stating that pretrial discovery was "not [a] public component[] of a civil trial"(44) and reasoning that such an order "did not involve a restriction on the use of a traditionally public source of information."(45) Moreover, the Court noted that it had previously decided that a litigant has no First Amendment right of access to information made available only for purposes of trying a suit.(46) Thus, the Court reasoned that "continued court control over the discovered information does not raise the same specter of government censorship that such control might suggest in other situations."(47)

      In upholding the Washington trial court's ability to impose and enforce a protective order,(48) the Court emphasized the interest of the trial court in maintaining control over the litigation process.(49) The Court noted that discovery has a "significant potential for abuse," which may encompass not only delay and extra expense but also the acquisition of sensitive information that "could be damaging to reputation and privacy" if released.(50) Liberal discovery is not provided to litigants to achieve this end but "for the sole purpose of assisting in the preparation and trial, or the settlement, of litigated disputes."(51) The opinion...