In Shane Group, Inc. v. Blue Cross Blue Shield of Mich., a unanimous panel of the Sixth Circuit vacated the district court’s orders sealing “most of the parties’ substantive filings” and approving a class action settlement in a price-fixing action against an insurer. In vacating the orders placing documents under seal and the settlement approval, the court explained that “the district court plainly conflated the standards for entering a protective order under [Federal Rule of Civil Procedure] 26 with the vastly more demanding standards for sealing off judicial records from public view.” The court explained that the “obligation to explain the basis for sealing court records is independent of whether anyone objects to it,” that a court must “set forth specific findings and conclusions” to justify sealing, and that any sealing must be “narrowly tailored” to the “compelling reason” offered.
The court rejected the argument that “the discovery . . . in this case . . . required [parties] to submit competitively-sensitive financial and negotiating information, as well as confidential patient health information,” by (1) distinguishing between “discovery materials” and “materials that the parties have chosen to place in the court record,” and (2) pointing out that there had been no “clearly defined and serious injury” or “trade secret” identified. While the court recognized the privacy interests of “innocent third parties,” it noted that the third parties in this case—hospitals—were not protected by any “statutory or regulatory privilege” and had a “lesser privacy interest” than individual bank customers (referencing another case). Thus, the court held that, on remand, the hospitals would have to demonstrate “on a document-by-document, line-by-line basis” that they met the requirements for sealing. The court found that the district court’s abuse of discretion was “most acute” with regard to an expert report purporting to calculate class damages because class members could not “assess for themselves the likelihood of success on their claims” without access to the report. Because the sealing of the documents prevented class members from “participat[ing] meaningfully” in the settlement approval process, the court vacated settlement approval as well.
Although Shane Group was decided only a few months ago, the Sixth Circuit has already relied on it twice in the sealing context. See Rudd Equip. Co. v. John Deere Constr. & Forestry Co., 834 F.3d 589 (6th Cir. 2016) (affirming vacatur of sealing order); Klingenberg v. Fed. Home Loan Mortg. Corp., 2016 U.S. App. LEXIS 12884 (6th Cir. July 11, 2016) (vacating sealing order sua sponte). And because sealing and unsealing orders are reviewable immediately under the “collateral order doctrine,” see Rudd, the Sixth Circuit will likely have many more opportunities to clarify its standard for sealing. Litigants should take heed: sealing documents—and keeping them sealed—will require dotting all i’s and crossing all t’s, even if all parties are agreeable, because the district court’s reasoning will be thoroughly scrutinized on appeal.