Dodd-Frank Act does not displace right to access judicial records - FINANCIAL-24
By Thomas G. Wolfe, J.D.The Dodd-Frank Act does not displace the common-law right of public access to judicial records, the U.S. Court of Appeals for the District of Columbia Circuit has decided in MetLife, Inc. v. Financial Stability Oversight Council. While the common-law right is not absolute, there is “a strong presumption in its favor,” and there is “nothing in the language of Dodd-Frank to suggest that Congress intended to displace the long-standing balancing test that courts apply when ruling on motions to seal or unseal judicial records,” the court determined. Consequently, the federal trial court should not have categorically prevented disclosure of the redacted—and sealed—briefs and joint appendix in the case without having conducted an analysis under the balancing test.
The D.C. Circuit’s recent decision stems from MetLife, Inc.’s underlying lawsuit challenging the Financial Stability Oversight Council’s designation of the insurer as a nonbank systemically important financial institution (SIFI) under the Dodd-Frank Act. The federal trial court decided to rescind MetLife’s SIFI designation as arbitrary and capricious and eventually unsealed its court opinion. However, the court did not unseal other judicial records in the case.
Dodd-Frank Act. Under the Dodd-Frank Act, when the FSOC considers a SIFI designation, the FSOC may require nonbank financial companies to submit financial data and information. At the same time, the FSOC must “maintain the confidentiality of any data, information, and reports” that a company submits.
Request to unseal records. While Better Markets, Inc., was permitted to intervene in the action, the trial court denied Better Markets’ request to unseal pertinent briefs and the joint appendix in the case. As relayed by the federal appellate court’s opinion, the lower court concluded that “Dodd-Frank’s confidentiality provision … required that relevant portions of the briefs and joint appendix remain sealed because they included data, information, and reports MetLife submitted to the FSOC.”
Agreeing with the positions taken by MetLife and the FSOC, the trial court: (i) questioned whether the applicable briefs and appendix material qualified as “judicial records” subject to the common-law right of public access; and (ii) determined that Dodd-Frank’s confidentiality provision superseded the traditional balancing test on motions to unseal judicial records under United States v. Hubbard, 650 F.2d 293 (D.C. Cir. 1980). However, on appeal, the D.C. Circuit disagreed.
Balancing test. The D.C. Circuit asserted that the common-law right to inspect and copy public records and documents, including judicial records and documents, is “fundamental to a democratic state.” While there is a strong presumption in favor of public access to judicial proceedings, that presumption may be outweighed in certain cases by competing interests, the court explained. Accordingly, as enunciated in Hubbard, when presented with a motion to seal or unseal, a court should weigh the traditional six-factor test to balance the interests:
- the need for public access to the documents at issue;
- the extent of previous public access to the documents;
- the fact that someone has objected to disclosure, and the identity of that person;
- the strength of any property and privacy interests asserted;
- the possibility of prejudice to those opposing disclosure; and
- the purposes for which the documents were introduced during the judicial proceedings.
Are briefs, appendix ‘judicial records’? Next, the court was called to determine whether the briefs and joint appendix could be considered “judicial records” subject to the Hubbard balancing test. The court noted that not all documents filed with a court are judicial records; whether an item is deemed a judicial record depends on “the role it plays in the adjudicatory process.”
On appeal, MetLife contended that the redacted—and sealed—portions of the briefs and appendix “did not play a sufficient role in the adjudicatory process” to qualify as judicial records because the publicly available opinion by the district court “did not quote or cite any of those sealed (redacted) parts.”
Rejecting MetLife’s argument, the court stressed that any portion of a brief or an appendix can affect a court’s decision-making process even if the court never quotes or cites it. By their very nature, the briefs and appendix played a substantial role in the adjudicatory process. MetLife’s argument, if adopted, would undermine the common-law right of access and would bypass a Hubbard analysis. The sealed briefs and appendix constituted judicial records.
Does Dodd-Frank supersede common-law right? Next, the court addressed whether the Dodd-Frank Act superseded the common-law right of access to the sealed judicial records in the case. “Although it is true that the Hubbard inquiry must yield to a statute ‘when Congress has spoken directly to the issue at hand,’ … the Dodd-Frank Act is not such a statute,” the court stated.
In reaching its decision, the court underscored that the applicable Dodd-Frank Act confidentiality provision (§5322(d)(5)(A)) required the FSOC, Office of Financial Research, and other member agencies to keep the materials confidential. However, the provision “imposes no such obligation on—and does not even mention—the courts.” In addition, the provision was not meant to categorically bar disclosure by the courts because nearby provisions (§5322(d)(5)(B) and §5322(d)(5)(C)) take into account privileges that litigants may have and requests for disclosures under the Freedom of Information Act.
Further, the court noted that a party would not necessarily surrender the confidentiality of its information by seeking judicial review because the Hubbard test takes into account the importance of confidentiality and the fact that a party has objected to disclosure. “Non-categorical balancing tests analytically similar to Hubbard’s are the standard for ruling on motions to seal or unseal judicial records in every Circuit,” the court emphasized.
Final disposition. Because the federal trial court did not apply the Hubbard balancing test to the request to unseal the court records at issue in the case, but instead ruled that they were “categorically exempt from disclosure,” the federal appellate court vacated the lower court’s judgment and remanded the case for the court to apply the Hubbard balancing test.
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