FTC v. Thomas Jefferson University ( 2022 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 21-1817
FEDERAL TRADE COMMISSION; COMMONWEALTH OF PENNSYLVANIA
v.
THOMAS JEFFERSON UNIVERSITY; ALBERT EINSTEIN
HEALTHCARE NETWORK
*AETNA, INC.,
Appellant
*(Pursuant to Rule 12(a), Fed. R. App. P.)
Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil Action No. 2-20-cv-01113)
District Judge: Honorable Gerald J. Pappert
Argued on November 16, 2021
Before: AMBRO, JORDAN, and RENDELL, Circuit Judges
(Opinion Filed: February 16, 2022)
Michael H. McGinley (Argued)
Dechert
2929 Arch Street
18th Floor, Cira Centre
Philadelphia, PA 19104
Justin M. Romeo
Rani A. Habash
1900 K Street, N.W.
Washington, DC 20006
Counsel for Appellant Aetna, Inc.
OPINION*
AMBRO, Circuit Judge
Businesses usually keep a tight lid on competitively sensitive information like
pricing rates and contract terms. But Aetna, Inc., a health insurer, was forced to disclose
this information when the Federal Trade Commission subpoenaed it as a non-party in an
antitrust investigation of a healthcare merger. Though a protective order shielded the
documents from the public when the FTC sued in federal court, the parties flouted that
order when they filed several of Aetna’s documents as evidence without first notifying the
insurer.
This filing had serious consequences. A document filed with a district court
becomes a “judicial record,” and a strong presumption attaches in favor of public access to
those documents. Though Aetna quickly moved to seal or partially redact its records, the
District Court denied the motion, concluding Aetna failed to explain satisfactorily how
public disclosure of its documents would harm its competitive interests. Because, based
on the peculiar circumstances of this case, we conclude the District Court should not have
denied Aetna’s motion without a hearing, we vacate the Court’s order and remand.
*
This disposition is not an opinion of the full Court and under I.O.P. 5.7 does not constitute
binding precedent.
2
I. Background
In 2018, two Philadelphia-area health systems, Thomas Jefferson University and
Albert Einstein Healthcare Network, agreed to merge. Before the merger, though, the
Federal Trade Commission launched an antitrust investigation. It concluded the merger
would substantially lessen competition and, in 2020, sued alongside the Commonwealth of
Pennsylvania to block it.
As part of the investigation and litigation, the FTC and the healthcare providers
subpoenaed many non-party businesses, including health insurance companies. Aetna
responded by producing an assortment of business records and providing deposition
testimony. These records contained sensitive commercial information—including
reimbursement rates, negotiation strategies, and contracting information—so they were
designated “Highly Confidential” under the District Court’s Stipulated Protective Order.
“Highly Confidential” documents could only be disclosed to individuals like court
personnel, litigators, and witnesses. And they could be used only “for the purposes of this
[district court] proceeding and the related FTC administrative proceeding, and any appeals
of either proceeding, and for no other purpose whatsoever.” Appx. at 12. Though the
protective order explained it did not authorize the automatic sealing of exhibits—no matter
if they were designated “Confidential” or “Highly Confidential”—the parties could move
to seal any filed document under the Court’s local rules. The parties also agreed that if
they filed a document initially submitted by a non-party or if they identified such a
document in a final pre-hearing exhibit list, they would notify the document’s “submitter
of such inclusion within one day of such filing.” Id. at 14.
3
As the antitrust case moved toward an evidentiary hearing on the FTC’s preliminary
injunction motion, the parties adhered to the terms of the protective order and notified the
various non-parties of their intent to use non-party documents as evidence at the hearing.
On September 2, 2020, the FTC advised Aetna it planned to introduce portions of Aetna’s
“Highly Confidential” records into evidence, including eleven Aetna documents and two
deposition transcripts. A day later, the healthcare providers also alerted Aetna that they
intended to introduce into evidence eight Aetna documents and one deposition transcript.
The District Court ordered all non-parties seeking sealing of their sensitive business
documents to file motions (not to exceed five pages) by September 8, 2020. In response,
19 entities, including Aetna, filed 35 motions seeking to seal about 4,096 pages of material.
Aetna’s motion sought to seal certain documents and redact others to protect its
competitively sensitive information from disclosure.
Before the Court ruled on that motion, the parties (at the Court’s suggestion) pared
down their exhibit lists and decided not to use Aetna’s documents or testimony. The Court
therefore denied Aetna’s motion as moot.
The preliminary injunction hearing went forward as planned. But on October 12
the parties filed two letters asking the Court to admit additional documents into evidence—
including six produced by Aetna. For unexplained reasons, the parties never notified Aetna
they were seeking to introduce some of its documents into the record and the letters were
not docketed until December 7. The Court granted the parties’ request and admitted the
documents unsealed. It simultaneously denied the FTC’s motion for a preliminary
injunction.
4
Aetna did not know that its documents had been filed with the Court until the
parties’ letters were docketed in December 2020. It then scrambled to file a renewed
motion to seal. The exhibits, it said, contained highly confidential information, including
(to repeat in part) reimbursement, bidding, and pricing data, negotiation strategies, strategic
planning and analyses, and contracting information. Publicly disclosing this information
allegedly would “provide valuable insights to Aetna’s competitors and providers on
Aetna’s current and future negotiating tactics, strategies, product plans, network plans,
contracts, and finances,” and would significantly harm its competitive standing. Appx. at
147. Along with its motion, Aetna attached three sets of documents: a declaration
explaining how disclosure of its documents may harm its competitive standing, a chart
specifying what category of business information each document contained, and redacted
versions of its documents for the public record. But, Aetna added, if the Court needed
additional argument or evidence, it asked for an opportunity to expand on its arguments at
a hearing.
Around the same time the sealing motion was filed, the FTC appealed the District
Court’s order denying the preliminary injunction. The parties then settled, and the District
Court dismissed the case. A few weeks later, it issued a housekeeping order resolving the
three remaining motions still pending on the docket, including Aetna’s motion to seal.
The Court denied that motion in a four-paragraph footnote. Aetna, it said, had failed
to “rebut[] the strong presumption of openness” that attaches to judicial records or meet
“its burden to show that disclosure will work . . . [a] clearly defined and serious injury.”
Id. at 2 n.2. It also noted Aetna had “not sufficiently explained how public dissemination
5
of the pertinent materials now would cause the competitive harm [it] claim[ed].” Id.
(internal quotation marks omitted) (emphasis in original).
Aetna filed this unopposed appeal. We granted its motion to stay the District
Court’s order pending our review.
II. Standard of Review
We review the District Court’s denial of a motion to seal for abuse of discretion, but
our review of the legal principles applied is plenary (that is, without deference). United
States v. Wecht, 484 F.3d 194, 208 (3d Cir. 2007); Bank of Am. Nat’l Tr. & Sav. Ass’n v.
Hotel Rittenhouse Assocs., 800 F.2d 339, 344 (3d Cir. 1986). We also review the Court’s
decision whether to hold a hearing for abuse of discretion. In re Tutu Water Wells CERCLA
Litig., 326 F.3d 201, 209 (3d Cir. 2003).
III. Discussion1
A document filed with a district court becomes a “judicial record.” N. Jersey Media
Grp. Inc. v. United States, 836 F.3d 421, 434 (3d Cir. 2016) (quoting In re Cendant Corp.,
260 F.3d 183, 192 (3d Cir. 2001)). And it is well established in our Circuit that the public
has a “strong common law presumption of access” to judicial records. See Leucadia, Inc.
v. Applied Extrusion Techs., Inc., 998 F.2d 157, 165 (3d Cir. 1993). This right promotes
“confidence in the judicial system by enhancing testimonial trustworthiness and the quality
1
The District Court had jurisdiction over the preliminary injunction action under 28 U.S.C.
§ 1331. We have appellate jurisdiction under 28 U.S.C. § 1291 because orders either
granting or denying access to trial records are appealable as final orders. United States v.
Antar, 38 F.3d 1348, 1355–56 (3d Cir. 1994); see also In re Newark Morning Ledger Co.,
260 F.3d 217, 220 (3d Cir. 2001).
6
of justice dispensed by the court.” In re Avandia Mktg., Sales Practices & Prods. Liab.
Litig., 924 F.3d 662, 672 (3d Cir. 2019) (internal quotation marks omitted). It also gives
the public “a more complete understanding of the judicial system and a better perception
of its fairness.” Id. (internal quotation marks omitted). Though a party may overcome this
strong presumption by showing the right is outweighed by “compelling, countervailing
interests,” the “common law right of access begins with a thumb on the scale in favor of
openness.” Id. at 672, 676. The party moving to seal the documents must name a specific
injury to be prevented—“[b]road allegations of harm, bereft of specific examples or
articulated reasoning, are insufficient.” Id. at 673 (internal quotation marks omitted).
The District Court held Aetna fell short of that burden. The latter’s motion failed
to articulate a “specific risk of current harm” or “sufficiently explain[]” how public
disclosure of its documents would “cause the competitive harm [it] claim[ed].” Appx. at
2 n.2. Importantly, the Court was silent on whether Aetna’s competitive interests might
outweigh the public right of access. It simply thought Aetna had not explained with the
required specificity the connection between the alleged sensitive content in the documents
and the potential current harm.
To be sure, Aetna’s motion and accompanying declaration lacked some precision.
The presumption of public access to judicial records is strong, and conclusory briefs and
declarations seeking to seal documents miss the mark. In re Avandia, 924 F.3d at 673.
Aetna’s more developed brief on appeal better reflects the attention to detail necessary to
argue against the common law right of access in normal circumstances.
7
But these were not normal circumstances. Instead, Aetna—a non-party—was
forced to file a rushed motion after several unexplained foot faults by the parties. First, the
parties apparently violated the protective order by failing to notify Aetna that they had
submitted its documents as exhibits for the preliminary-injunction motion. Then the letters
asking the Court to admit the documents, for unknown reasons, did not appear on the public
docket for nearly two months. The Court admitted the exhibits a day later, before Aetna
could respond. Faced with the prospect that its sensitive business information could
become publicly available at any moment, Aetna, understandably, hurried to file a motion
to seal. It recognized in that motion an incomplete understanding of which documents
were submitted and how its information was used. See Appx. at 143 n.4 (“Because Aetna
is not presently aware of which documents were submitted, it is unable to fully brief the
Court except for the documents identified in Aetna’s September 8, 2020 motion.”). It thus
asked for the opportunity to supplement its evidence and arguments in a hearing if the
District Court needed further explanation.
The Court did indeed believe Aetna needed to provide more explanation. Yet it
declined to hold a hearing and, to repeat, denied the motion for “not sufficiently
explain[ing] how public dissemination of the pertinent materials now would cause the
competitive harm [Aetna] claim[ed].” Id. at 2 n.2 (internal quotation marks omitted)
(emphasis in original). Though ordinarily no hearing need occur when considering a
motion to seal, a party must be given a full opportunity to present its argument. Cf. Stanley
v. Univ. of S. Cal., 13 F.3d 1313, 1326 (9th Cir. 1994) (“The refusal to hear oral testimony
at a preliminary injunction hearing is not an abuse of discretion if the parties have a full
8
opportunity to submit written testimony and to argue the matter.” (emphasis added)). And
“[i]n some cases, an oral hearing may be indispensable due to the complicated factual
disputes underlying the case.” In re Eckstein Marine Serv. LLC, 672 F.3d 310, 319 (5th
Cir. 2012), overruled on other grounds by In re Bonvillian Marine Serv., Inc., 19 F.4th 787(5th Cir. 2021). This is such a case.
Given the unusual circumstances surrounding the filing of Aetna’s documents, it
was due a full opportunity to argue its motion. Here the Court denied Aetna’s motion not
because it lacked compelling grounds for sealing the records, but because those reasons
were insufficiently explained and supported by evidence. Aetna deserves the opportunity
to make that explanation and present evidence at a hearing.
We therefore vacate and remand. On remand, Aetna must still show how its
“compelling, countervailing interests” outweigh the presumption of public access, using
“specific examples” and “articulated reasoning.” In re Avandia, 924 F.3d at 672–73, 676
(internal quotation marks omitted).
9
Federal Trade Commission and Commonwealth of Pennsylvania v. Thomas Jefferson
University and Albert Einstein Healthcare Network
No. 21-1817
______________________________________________________
RENDELL, Circuit Judge, concurring in the judgment
I agree with the majority that we should remand this case to the District Court, but
for a different reason. Although a hearing would have been helpful in allowing Aetna to
fully present its arguments for sealing, I cannot conclude that the District Court’s failure
to hold such a hearing was an abuse of discretion. Aetna may well have been in a hurry
to file, but there was no hint that taking further evidence was necessary to evaluate the
Motion, which ran to some eleven pages and included a supporting Declaration from an
Aetna Vice President, as well as an explanatory chart. The real problem with the District
Court’s Order lies in its lack of explicit analysis, which frustrates appellate review, and
thus compels remand. See, e.g., June Med. Servs., L.L.C. v. Phillips, 22 F.4th 512, 519
(5th Cir. 2022) (citing S.E.C. v. Van Waeyenberghe, 990 F.2d 845, 848–49 (5th Cir.
1993)) (“[A] district court abuses its discretion in sealing or unsealing documents . . .
when it fails to provide sufficient reasons for its decision to enable appellate review.”);
E.E.O.C. v. Nat’l Children’s Ctr., Inc., 98 F.3d 1406, 1410 (D.C. Cir. 1996) (“Without a
full explanation, we are unable to review the district court's exercise of its discretion. We
therefore remand this case to the district court so that the court can further explain its
decision to seal certain portions of the record.”).
1
When presented with a motion to seal, a district court must conduct a “document-
by-document review” of the relevant exhibits, explicitly weighing the relevant factors and
explicating the basis for its decision. See In re Avandia Mktg., Sales Pracs. & Prod.
Liab. Litig., 924 F.3d 662, 672 (3d Cir. 2019) (citing Leucadia, Inc. v. Applied Extrusion
Techs., Inc., 998 F.2d 157, 167 (3d Cir. 1993)). Salient considerations include, inter alia,
a demonstrable risk of current harm, Leucadia, Inc., 998 F.2d at 167, the movant’s status
as a nonparty, Republic of Philippines v. Westinghouse Elec. Corp., 949 F.2d 653, 662
(3d Cir. 1991), and the adjudicatory significance of the exhibits, Apple Inc. v. Samsung
Elecs. Co., 727 F.3d 1214, 1226 (Fed. Cir. 2013).
Here, the District Court did not adequately elucidate its reasoning in denying
Aetna’s Motion. The Court stated that “Aetna and United have not sufficiently explained
‘how public dissemination of the pertinent materials now would cause the competitive
harm they claim.’” Appx. 2 (quoting Leucadia, Inc., 998 F.2d at 167 (emphasis in the
original)). This is puzzling because Aetna’s Motion and Declaration explained that, inter
alia, the reimbursement rate and bidding information disclosed in VP Morris’s 2020
Deposition Transcript would, if publicized, disadvantage Aetna vis-à-vis providers in
future negotiations. Moreover, the District Court did not provide the requisite
‘document-by-document’ review; it relied on a blanket conclusory statement without
describing how Aetna had failed in its burden as to each exhibit under consideration. Nor
did the District Court state how it weighed other important factors that would impact its
ruling, such as Aetna’s nonparty status and the exhibits’ lack of significance in the
litigation. These factors would ordinarily counsel in favor of sealing.
2
On remand, the Court can provide a fuller explanation for why all, some, or none
of Aetna’s exhibits merit sealing, after a careful and explicit consideration of the relevant
factors.
3