DealLawyers.com Blog

John has blogged about the perils of emails & texts with books and records requests. Over on TheCorporateCounsel.net, Liz recently blogged about the quote that came out in connection with the SEC’s charges against Binance. Sidley’s Enhanced Scrutiny blog has another good reminder on the risk of business communications being made public — that Delaware courts “strongly favor public access to information, noting that ‘when parties seek the benefits of litigating in a public court, they also assume the responsibility to disclose previously non-public information in order to satisfy the public’s right of access to court documents.’”

The blog discusses a recent case, Sarwal v. Nephrosant, Inc., (Del Ch. 5/23), involving a former executive seeking advancement and indemnification from her prior employer. The plaintiff sought to designate certain information found in the defendant’s answer and counterclaims as confidential. The court rejected all of plaintiff’s arguments for confidentiality. Here’s an excerpt:

The Court of Chancery rejected Sarwal’s claim that the allegations would cause embarrassment to Sarwal, holding that this alone was not cause for confidential treatment, as well her argument that the underlying claims were not viable. And Sarwal’s argument that the factual allegations were “stale” because they occurred one year prior did not weigh in favor of confidential treatment because older information is less likely to cause harm, not more likely to do so.

Lastly, the Court discussed Sarwal’s argument that publicly disclosing the redacted information would harm Nephrosant because it would negatively affect its ability to gain funding. This was a peculiar argument, noted the Court, because Sarwal was claiming that public disclosure would harm Nephrosant, the very party advocating for public disclosure. Even assuming the harm was “sufficiently concrete to justify confidential treatment,” it still would not outweigh the public’s interest in understanding the nature of the dispute between the parties. The Court noted that nearly all actions involving allegations of fiduciary breaches involve at least some potential harm to the company, but this does not permit parties to conceal the nature of their claims and defenses.

The blog also highlights a case from February of this year involving arbitration that applied the same principles when the party who lost the arbitration proceeding sought to vacate the award.

– Meredith Ervine