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Lederman v. Prudential Life Insurance Company of America, Inc.

385 N.J. Super. 307, 897 A.2d 362 (App. Div. 2006)

SETTLEMENTS; CONFIDENTIALITY—There is a presumption of public access to court records, therefore even if the parties agree to seal the records, in the absence of serious harm to a party (more than just embarrassment), a court is not obliged to follow the parties’ wishes.

Current and former employees of a life insurance company claimed that they were pressured by the company not to sell insurances to minorities and were discriminated against if they did. The employees signed retainer agreements with a law firm that stipulated that the attorneys would receive a one-third contingency fee. The employees and the company entered into a confidentiality agreement in which the parties agreed to resolve their dispute through binding arbitration, the terms of which were to be kept confidential. The confidentiality agreement provided that any lawsuits with respect to the arbitration needed to be sealed.

One of the employees claimed that, unknown to him or the other employees, the company entered into an agreement with the same law firm, agreeing to pay $15,000,000 to the employees, with the first $5,000,000 to be paid directly to the law firm, in advance of any resolution of the claims. The employee claimed that the advance of legal fees was a bribe and accused the law firm and the company of conspiracy to defraud and deprive the employees of zealous representation. The employee filed a lawsuit, but did not do so under seal. The terms of the lawsuit were leaked to the media, and the company filed for a preliminary restraining order sealing the pleadings and denying public access to the proceedings.

The lower court found that the parties’ agreements to keep the complaint and other documents sealed outweighed the presumption of openness of court proceedings. It reasoned that the parties entered into written agreements with clear confidentiality provisions, and that in order to promote public policy in favor of alternative dispute resolution processes (such as arbitration), the confidentiality provisions had to be honored. The lower court also noted that sealing the records would not hurt the employee, but opening it up would seriously damage the reputation of the company and the law firm. Lastly, it noted that there was no public interest in the case where neither the public safety nor welfare were involved, but rather it was a private consumer fraud case and there was no inherent reason for media access to the documentation.

On appeal, the Appellate Division reversed, holding that there is a presumption of public access to court records. In order to seal such records, a court must determine whether the need for secrecy substantially outweighs the presumption of access. Here, the Court found that the mere fact that unsealing the records would deprive the company of a negotiated contract right is not sufficient unless the company could demonstrate serious harm. It further held that embarrassment to the company by such disclosure is not serious harm. It also noted that since the allegations were already made public, there was no reason to seal the documents “now that the cat [was] out of the bag.”


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