One of the frequent givens in current civil litigation is a protective order that shields material produced in discovery.  Those orders often require the filing of certain material under seal.  The tension between public interest in open access to records and business interests in confidentiality/trade secrets came to a head in yesterday’s opinion, Shane Group, Inc. v. Blue Cross Blue Shield of Michigan.  That case involved a class settlement of antitrust claims brought against Blue Cross Blue Shield arising out of an alleged “most favored nation” scheme with certain hospitals. Before reviewing the substance of the attack on the class settlement, the Sixth Circuit expounded upon the district court’s order that sealed key aspects of the pleadings.

The Court drew a “stark” distinction between basic discovery exchanged between the parties and materials filed with the court.  In light of the historic openness of judicial proceedings, the Court recognized that a more exacting standard must be met in order to file materials under seal.  In this case, given that the district court sealed key exhibits and filings, the Sixth Circuit found that members of the class that might object to the settlement had access to only “fragmentary information” about the conduct giving rise to the litigation.  In addition, the court faulted the parties’ basis for sealing this information as “brief, perfunctory, and patently inadequate.”  Finding an abuse of discretion, the Court held that “the parties and the district court plainly conflated the standards for entering a protective order under Rule 26 with the vastly more demanding standards for sealing off judicial records from public view.”  Nor was this error harmless, because it deprived class members of the ability to participate meaningfully in the Rule 23 process by denying them the ability to review the basis for the proposed settlement.

Beyond the sealing issue, the Court also criticized certain aspects of the district court’s order approving the settlement.  For instance, the Sixth Circuit noted that the district court did not elaborate the likelihood of success issue, and instructed the court on remand to devote more attention to this matter.  Likewise, the court attacked the billing rates of plaintiffs’ counsel that were approved by the district court, characterizing them as “Bentley rates, not Cadillac rates.”  If the district court were to approve such rates, it would need to provide more of an explanation than it did initially.  Finally, the Sixth Circuit raised concerns about the incentive awards given to class representatives.  Echoing some recent decisions from the Court on this issue, the Sixth Circuit expressed concern about “a bounty” that might not be fair to the overall class.

This case is worth a careful read for a number of reasons.  First, we have all dealt with protective order and sealing issues and this represents the Sixth Circuit’s latest word on the subject.  You can be sure that district courts will be sensitive to sealing issues in light of the tenor of this opinion.  Relatedly, consistent with some other recent class settlement decisions from the Circuit, this again sheds light on the issues that both class and plaintiffs’ counsel must be cognizant of in seeking approval of a class settlement.  The Sixth Circuit will not just rubber stamp approval because the plaintiffs and defendant agree. An adequate record must be made that will enable the Circuit to review and assess the propriety of the settlement.