Private Company’s Documents Are Public in a Lawsuit Unless the Court Orders Otherwise
Business owners rarely think about lawsuits until they are faced with them. Their everyday lives involve spending less and making more. For small business owners, they are probably less likely to think of putting in place policies that label certain documents as confidential and trade secrets before it is requested in a lawsuit.
While access to a private company’s information is more restricted when compared to a publicly traded company during the ordinary course of business, it is not so once you are hauled into Court. In Florida, the public has access to all records of the judicial branch of government with some exceptions. A Florida businessman recently found this out when his company was sued by his partner with whom he founded the company.
The two owners allegedly had a dispute that led to stalemate in management. It took three years and eight months from business formation to a business dissolution lawsuit for this particular company. Once the lawsuit began, each party starts to request documents from each other in an attempt to prove his or her respective case. Among the documents requested were the company’s corporate income tax returns, financial statements, and internal documents concerning corporate governance. Producing the documents is not the issue. It becomes an issue when the opposing party would like to file the documents as exhibits or produce in open Court. Think on this. Would you want your financial statements available to the public at large due to fallout on management matters between you and your business partner? Of course not. There are five Court of Appeals districts in Florida and the 4th District which handles cases in Broward, Indian River, Okeechobee, Palm Beach, St. Lucie and Martin Counties, agrees. In this particular lawsuit, both parties agreed that the documents were confidential but they could not agree on the documents being under seal. The documents being under seal would prevent the public at large from seeing confidential documents of litigants in a lawsuit.
According to our rules in Florida, just stating that the documents are confidential is not enough. Typically business documents such as corporate income tax returns and financial statements are not automatically confidential in Court. However, if the documents are legally protected under privacy rights or some other rule and the release of such documents will cause substantial injury to the business owner, more than likely the Court will deem such documents confidential. The Court will not take the parties words that a document is confidential. It will rule on each particular document that it is indeed confidential and have in place some rules on how the necessary parties such as experts will review said documents.
At all times the Court will try to balance the presumption of openness in Court proceedings and the parties’ legal rights to avoid unnecessary foreseeable injury. On May 29, 2013, in the case Rocket Group, LLC v. Jatib, __So.3d__, 2013 WL 2319486 (Fla. 4th DCA 2013), a big step was made legally for corporations when the Court ruled that business documents such as financial records and corporate governance documents are confidential and therefore may be presented under seal.
In light of this ruling, companies perhaps should do the following:
I. Put in place policies that demonstrate an expectation of privacy and confidentiality for certain documents;
II. If you have a trade secret, exhibit behavior at all times during business operation that show you intend to keep it a secret; and
III. If you are in litigation and both parties agree that a document is confidential, still obtain a Court order to ensure it get its full protection under the law and prevent it from becoming a part of the published judicial records.