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Civil Practice – Pleadings – Complaint – Under Seal – Public Records Act – Corporate – Derivative Action – Delaware Action

Smith v. Raymond. (Lawyers Weekly No. 10-15-0655, 4 pp.) (Albert Diaz, J.) N.C. Bus. Ct.

Holding: A stipulation in a Delaware Chancery case is insufficient, by itself, to justify sealing plaintiff’s entire complaint.

If the parties believe the complaint should remain sealed, they shall file memoranda of law supporting their position.

The stipulation provides that, if plaintiff relies on confidential information obtained in the Delaware Chancery case to file derivative claims against the nominal defendant or direct claims against the nominal defendant’s directors or officers, plaintiff shall first seek permission of the Delaware Chancery Court to file those claims under seal.

Before this case was designated a complex business case and assigned to this court, another superior court judge allowed the complaint to be filed under seal for “good cause.” The business court may revisit decisions made by a predecessor judge presiding over this matter prior to its designation as a mandatory complex business case.

A request to seal court-filed pleadings is inconsistent with the N.C. Public Records Act. Absent clear statutory exemption or exception, documents falling within the definition of “public records” in the Public Records Act must be made available for public inspection. Court filings are “public records.”

A trial court may limit the public’s right of access to civil court records only when there is a compelling countervailing public interest and sealing of documents is required to protect such interest.

After reviewing the complaint, the court does not find that its wholesale filing under seal is warranted.

First, plaintiff did not attach any documents to the complaint; thus, there is no concern that unsealing the pleading will compromise the parties’ stipulation.

Second, while the complaint quotes excerpts that appear to have been produced in accordance with the stipulation, these consist mainly of letters sent by the nominal defendant’s CEO to defendants, all of whom are or were officers or directors of the nominal defendant.

The court sees nothing in the complaint that supports an order to seal the entire pleading. The parties have not met their heavy burden to show a compelling countervailing public interest that would support sealing the entire complaint.

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