Corporate

Delaware Court of Chancery: Non-Party Has Standing As Intervenor to Seek Unsealing of Documents

While not addressing the question of whether a non-party seeking the unsealing of documents has standing pursuant to Court of Chancery Rule 5(g)(6), the Court held that a non-party nonetheless had standing to intervene and seek unsealing under Rule 24. B.F. Rich Co., Inc. v. Gray, C.A. No. 1896-VCP (Del. Ch. Apr. 8, 2011), read letter ruling here. Blog summaries of prior Delaware decisions in this matter are available here and here. See also Espinoza v. Hewlett-Packard Co., summarized here, addressing related issues.

This summary was prepared by Ryan P. Newell of Connolly Bove Lodge & Hutz LLP.

Concerned that Rich Realty Inc. ("RRI") had sold assets without providing notice, RRI shareholder Jepsco, Ltd. ("Jepsco") moved to unseal documents in a matter in which RRI - but not Jepsco - was a party. RRI objected to the request because Jepsco was not a party. RRI pointed to Rule 5(g)(6)'s use of the word "party" as compared to Rule 5(g)(5)'s use of the word "person" as indicative of an intent to limit rights under Rule 5(g)(6) to parties. (The language of Rule 5(g)(6) states, "[a]ny party who objects to the continued restriction on public access to any document filed under seal" as compared to Rule 5(g)(5) which states that "[a]ny person who seeks the continued sealing of any portion of a brief or letter . . . .")

While noting that nonparties in other matters have moved to unseal documents in the Court of Chancery, the Court did not resolve the question as to Jepsco's standing issue under Rule 5(g)(6) and instead found that Jepsco had a basis under Rule 24 to intervene. Under Rule 24(a) a party has standing where a statute confers an unconditional right to intervene or where the party can "claim, rather than prove, an interest in the subject of the litigation . . . ." Under Rule 24(b), a party may intervene where there is a conditional statutory basis or where "an applicant's claim or defense and the main action have a question or fact or law in common."

The Court held that Jepsco had a basis under either Rule 24(a) or 24(b): "Jepsco has claimed an interest relating to the documents in question, and as a practical matter, the continued sealing of those documents in the context of actions taken by one or more of the parties in connection with the settlement of this litigation, may impair or impede Jepsco's interest." Additionally, Jepsco's interest related to RRI's prior action and access to the documents would not prejudice the rights of the parties to the underlying litigation.

Even though the Court held that Jepsco had standing to seek unsealing, the Court asked for clarification from Jepsco as to whether it was seeking a right to inspection subject to a protective order or whether it was seeking to unseal the documents in general.

Read more Delaware business litigation case summaries and commentary on Delaware Corporate and Commercial Litigation Blog, a blog hosted by Francis G.X. Pileggi, of Fox Rothschild LLP.

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