Delaware Business Litigation Report

Court of Chancery Denies Rule 5.1 Request to Maintain Confidential Treatment for Allegedly Defamatory Statements

Manhattan Telecommunications Corp. v. Granite Telecommunications, LLC, C.A. No. 2020-0468 JRS (Del. Ch. Nov. 19, 2020)
The Court of Chancery denied a motion for continued confidential treatment of allegedly defamatory statements detailed in the plaintiff’s complaint for, inter alia, defamation, tortious interference, and trade libel. In response to a challenge raised by an interested party, a law professor and blogger, to the confidential treatment, the plaintiff filed a motion to continue confidential treatment of the complaint and its exhibits. The interested party opposed the plaintiff’s motion and argued that he intended to use the redacted information to discuss on his blog and potentially for a law review article.

Court of Chancery Rule 5.1 is a codification of the “powerful presumption of public access to court proceedings and records.” This Rule is not absolute and, upon a demonstration of good cause that public interest in access to Court proceedings is outweighed by the harm of public disclosure of sensitive, non-public information, a party is entitled to confidential treatment of that information. The Court determined the public interest in the redacted information at issue outweighed the potential harm to the plaintiff flowing from the disclosure. The plaintiff’s conclusory allegations of potential harm from these potentially defamatory statements were insufficient to meet the “stringent particularization standard” set forth in the Rule 5.1. The Court compared the examples set forth in Rule 5.1 and plaintiff’s complaint and determined that potentially defamatory statements were not the kind of information the drafters of Rule 5.1 intended to protect. While the plaintiff challenged the legitimacy of the professor’s planned use of the information, the Court noted that it was not the professor’s burden to demonstrate his entitlement to the information, because the public had a right to monitor court proceedings and their results. The Court also noted that it would be nearly impossible to draft an opinion adjudicating the present dispute without referencing the allegedly defamatory statements. 

The Vice Chancellor also was not persuaded by the plaintiff’s reliance on CapStack Nashville 3 LLC v. MACC Venture Partners, 2018 WL 3949274 (Del. Ch. Aug. 16, 2018). In CapStack, the Court denied a request for a temporary restraining order that sought to prevent the defendant from repeating allegedly defamatory statements to third parties, in part because that information was already public through pleadings. The plaintiff argued that CapStack prevented it from alleging that the defendant’s statements caused irreparable harm and disclosing those same statements publicly in court filings. In distinguishing CapStack, the Court noted that the defamation claims in that proceeding were analyzed in the context of a temporary restraining order whereas, in the present dispute, the Court needed only to decide whether the plaintiff demonstrated particularized harm that outweighed the public interest in access to court proceedings and records. Applying the CapStack court’s analysis to the current facts would eviscerate the presumption of public access under Rule 5.1.

Share