Complaint in Settled Case Subject to Presumption of Public Access: Second Circuit | Practical Law

Complaint in Settled Case Subject to Presumption of Public Access: Second Circuit | Practical Law

In Bernstein vs. Bernstein, Litowitz, Berger & Grossmann LLP,the US Court of Appeals for the Second Circuit held that a complaint in a settled case was a judicial document subject to a presumption of public access under the First Amendment and common law. Because the complaint alleged the involvement of a public entity in a kickback scheme, the privacy interest in keeping the complaint sealed was insufficient to rebut the presumption of public access.

Complaint in Settled Case Subject to Presumption of Public Access: Second Circuit

Practical Law Legal Update w-001-4761 (Approx. 4 pages)

Complaint in Settled Case Subject to Presumption of Public Access: Second Circuit

by Practical Law Litigation
Published on 01 Mar 2016 • USA (National/Federal)
In Bernstein vs. Bernstein, Litowitz, Berger & Grossmann LLP, the US Court of Appeals for the Second Circuit held that a complaint in a settled case was a judicial document subject to a presumption of public access under the First Amendment and common law. Because the complaint alleged the involvement of a public entity in a kickback scheme, the privacy interest in keeping the complaint sealed was insufficient to rebut the presumption of public access.
On February 24, 2016, in Bernstein vs. Bernstein, Litowitz, Berger & Grossmann LLP, the US Court of Appeals for the Second Circuit held that a complaint in a settled case was a judicial document subject to a presumption of public access under the First Amendment and common law. Because the complaint alleged the involvement of a public entity in a kickback scheme, the privacy interest in keeping the complaint sealed was insufficient to rebut the presumption of public access. ( (2nd Cir. Feb. 24, 2016).)
Attorney Bruce Bernstein, formerly of counsel with Bernstein, Litowitz, Berger & Grossmann LLP (BLB&G), claimed that BLB&G forced him to resign in October 2012 after he blew the whistle on unethical conduct by the firm. Bernstein alleged that BLB&G routinely assigned its litigation to unqualified local counsel as part of a political kickback scheme with the Mississippi Attorney General's Office. The alleged misconduct arose during BLB&G's representation of lead plaintiff Mississippi Public Employees' Retirement System (MPERS) in In re Saytam Computer Services, Ltd. Sec. Litig., a securities class action (609 F. Supp. 2d 1375 (J.P.M.L. 2009)).
Prior to filing the complaint, Bernstein filed a motion with the US District Court for the Southern District of New York, requesting the entry of an order sealing all materials filed in the case. The district court ordered that the action could be filed under seal expiring automatically within 14 days of service of process on the defendants unless extended by the court.
On August 22, 2014, Bernstein filed a complaint under seal against BLB&G, alleging breach of contract and RICO violations. The parties settled one day before the automatic unsealing of the complaint. The settlement agreement included a provision that voided the settlement if the action was unsealed. Bernstein then filed a notice of dismissal in accordance with the settlement, and the parties jointly moved the court to close the file without unsealing it.
The district court held that the complaint was a judicial document subject to a presumption of public access under the First Amendment and common law. Finding that the weak private interests at stake did not rebut the presumption of public access, the district court denied the parties' request to continue the sealing order. BLB&G appealed this ruling, and Bernstein supported BLB&G's position that the case should remain sealed to avoid the risk of unwinding the settlement.
The Second Circuit affirmed the lower court's decision, holding that pleadings, even in settled cases, are judicial records subject to a presumption of public access under the First Amendment and common law, requiring the court to make specific, rigorous findings before sealing. Under the circumstances of this case, where a complaint alleged that partners in a law firm engaged in a kickback scheme with a public entity, while serving as counsel for a state employees' pension fund that was a lead plaintiff in a major securities class action, the presumption of public access was strong. The court found that:
  • Experience and logic support the public's right of access to a complaint under the First Amendment, especially in a case that is ultimately settled, because:
    • complaints have historically been publicly available by default, even when they contain sensitive information; and
    • public access allows the public to understand the activity of the federal courts, enhances the court's accountability and legitimacy, and informs the public of matters of public concern.
  • Each of the factors under Lugosch v. Pyramid Co. of Onondaga for determining the weight of the common law presumption of access to judicial records supports public availability (435 F.3d 110, 119 (2nd Cir. 2006)), because:
    • the complaint is highly relevant to the exercise of Article III judicial power; and
    • public interest in disclosure, especially for those who contribute and receive payments from MPERS, and to federal courts in the future, outweighs any private interest in secrecy.
  • The district court properly rejected BLB&G's argument that the protection of confidential client information under the New York Rules of Professional Conduct is essential to preserve a higher value superseding the First Amendment right of access, because the complaint here did not contain confidential client information.