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Parties litigating in courts across the country routinely file some documents under seal as a matter of course. Sealing filed documents often is a practical necessity – parties need not disclose certain confidential information in the public domain, and parsing through filings and conferring with opposing counsel and third parties to determine what is truly confidential can be contentious, expensive, time-consuming and ultimately burdensome for the courts. While these are valid reasons for filing sealed documents, a recent Sixth Circuit decision, although rising from unusual facts, should give parties pause before filing large numbers of documents under seal.

<em>Shane Group, Inc. v. Blue Cross Blue Shield of Michigan</em>, No. 15-1544, 2016 U.S. App. LEXIS 10264 (6th Cir. June 7, 2016), is a class action alleging that Blue Cross Blue Shield of Michigan (“BCBS MI”) used its market power to require hospitals in Michigan to enter most favored nation agreements that resulted in higher rates for “Blue Cross’s customers and everyone else – while preserving or expanding Blue Cross’s market share.” The class actions commenced following a similar lawsuit by the U.S. Department of Justice (“DOJ”). Information generated during the DOJ litigation, which had been designated “confidential,” was provided to the private litigants. Given the information had been designated confidential, BCBS MI, while defending itself against this class action, submitted voluminous filings under seal. Likewise, the plaintiffs filed the operative complaint (which cited previously designated confidential information) plus many other documents under seal. After the parties reached a class settlement, objecting class members claimed they were unable to scrutinize the settlement due to the broad extent of the sealed court filings. Regardless, the district court approved the settlement.

The Sixth Circuit vacated approval of the settlement, in part because of the extensive sealing of filings that should have been available to the public. The appellate court pointed out that despite the “stark difference” between the standard for Federal Rule of Civil Procedure 26 protective orders for documents exchanged in discovery and the standard for sealing documents filed with courts, parties routinely blur the lines between the two. In so doing, parties may overlook that the “public has a strong interest in obtaining the information contained in the court record.” The court went on to explain that in an antitrust case involving insurance rates paid by Michigan residents, the public has an interest in understanding the conduct that gave rise to a case, and thus, documents should only be sealed if “a party can show a compelling reason” to do so, and the district court “set[s] forth specific findings and conclusions which justify nondisclosure to the public.”

The Sixth Circuit was harsh in its criticism of the extensive sealing of court filings: “[O]ne can only conclude that everyone in the district court was mistaken as to which standard to apply. But one point is unmistakable: on the showings set forth in this record, every document that was sealed in this district court was sealed improperly.” The court sent the case back to the district court ordering them to “begin the Rule 23(e) process anew.” This opinion should make parties wary of sealing voluminous amounts of court filings in the future, and provides a reminder that documents put under seal should be supported by a need to protect information from public disclosure. While it may seem that the worst repercussion of over-sealing is the eventual unsealing of documents, this decision shows that the results can be worse.

Caution: Sealed Package – There Is More At Risk Than Unsealing