Court of Chancery Denies Motion For Continued Sealing Of Portions Of Derivative Complaint
Stone v. Ritter, C.A. No. 1570-N, 2005 WL 2416365 (Del. Ch. Sept. 26, 2005).
Defendants sought continued sealing of portions of derivative complaint.
In connection with a prior books and records inspection, Defendants produced documents to Plaintiffs, including board and committee minutes and a report by KPMG. Defendants designated these documents confidential pursuant to a stipulation of confidentiality. Subsequently, Plaintiffs sought permission to file a derivative complaint against Defendants under seal. The Court granted Plaintiffs' motion, ordered the Plaintiffs to file a public version of the complaint within five days in accordance with Court of Chancery Rule 5(g) and directed the Defendants to show cause as to why sealed portions of the complaint should not be publicly disclosed. Defendants sought continued sealing of paragraphs containing information derived from the documents described above. Plaintiffs opposed continued sealing.
The Court denied the Defendants' motion to continue sealing portions of the complaint. The Court held that disclosure of historical information regarding procedures and internal controls that had been revised would not harm the Defendants. With respect to disclosure of board minutes, the Court stated that the reasonable expectation of confidentiality with respect to documents produced in a books and records action does not continue indefinitely in the context of litigation. According to the Court, references to the minutes would not threaten to chill internal deliberations of a board or committees because the allegations referred to alleged failures to act and did not reveal discussions, opinions or assessments of board members.