Appeal from an order of the United States District Court for the Southern District of New York, Griesa, Judge, granting motion of New York to intervene and modify two orders sealing, respectively, entire record including prospective settlement negotiations, and settlement agreement. Reversed and remanded.
Appeal from a final order of the United States District Court for the Southern District of New York, Thomas P. Griesa, Judge, entered June 10, 1985, granting motion of appellee New York State to intervene in a civil antitrust action between plaintiffs and defendants-appellants, and ordering that two sealing orders issued by a United States magistrate in the above action be modified so as to allow a state grand jury and the State Attorney General to have access to a settlement agreement and to hear testimony and otherwise obtain information regarding that agreement.
Appellants argue that the district court committed reversible error by stripping them of the protection of judicial sealing orders upon which they relied in reaching a settlement in their private antitrust action with plaintiffs.
The district court maintains that, notwithstanding such reliance, the state's ongoing investigation of possible antitrust violations in the ready-mix concrete industry in New York City is sufficiently important to allow a grand jury and the State Attorney General to have access to the settlement agreement.
We hold that, absent an express finding by the district court of improvidence in the magistrate's initial grant of the protective orders or of extraordinary circumstances or compelling need by the State for the information protected thereunder, it was error for the district court to modify the magistrate's orders.
We therefore reverse the order of the district court and remand for further proceedings consistent with this opinion.
Appellants, corporations and individuals involved in the ready-mix concrete industry, were defendants in a private antitrust action, Palmieri v. DIC Concrete Corp. et al., 81 Civ. 6217 (S.D.N.Y. 1982). The district judge assigned the matter to a magistrate to oversee pre-trial discovery. The plaintiffs, Gene F. Palmieri and Gene F. Palmieri, Inc., a concrete contractor incorporated and doing business in New York, alleged, inter alia, in an amended complaint filed on December 8, 1982, four antitrust counts arising from events in the ready-mix concrete industry in New York City during several preceding years. These alleged violations have also been the subject of an ongoing state criminal antitrust investigation since September 1982 or earlier, when the State attorney General served subpoenas duces tecum upon several defendants, pursuant to N.Y. Gen. Bus. L. §§ 340 et seq. (The Donnelly Act). Appellants concede that "[t]here is substantial overlap between the subject matter of the [state] investigation and the subject matter of the [private] action." Joint Aff. in Response to Motion to Intervene and Modify Sealing Order (81 Civ. 6217) P 8. Further, several of the appellants have unsuccessfully attempted in state court to terminate the state investigation and quash the grand jury's subpoenas.*fn1
Beginning in 1983, the magistrate supervising pre-trial proceedings participated in settlement discussions with the attorneys for the parties to the private action, pursuant to the district court's instructions. The parties were concerned that any proceedings or record would be viewed with suspicion by the Attorney General, given that the Attorney General filed affidavits in State Supreme Court from November 1982 through March 1983, including one claim that a prior antitrust action between certain defendants in this action, Julius Nasso Concrete Corp. v. DIC Concrete Corp., et al., (No. 78 Civ. 2865) S.D.N.Y.) had been settled under "unusual" and possibly unlawful circumstances. Jr. Aff., supra, PP 8-10.
Accordingly, defendants moved for entry of a Protective Order, pursuant to Fed. R. Civ. P. 26(c), expressly providing that "all matters" related to discovery would not be "disclosed to any other person, including any government agency or instrumentality. . . ." In granting this motion, the magistrate stated in his Order of December 23, 1983 that defendants "intend to furnish discovery in this action in reliance upon this Order . . . ." The magistrate later sent two letters, in or about May and July 1984 respectively, to Assistant Attorneys General Gabriele and Trahan making clear that the express purpose of the order was to insulate proceedings from inquiry by the Attorney General. In or about February 1984, the Attorney General obtained a copy of plaintiff's deposition transcript that had been inadvertently filed unsealed. In response to this incident, the magistrate entered an Order dated April 19, 1984 directing that all discovery matters be delivered to his office so that he could personally insure that the Attorney General would not have access to them.
The Two Sealing Orders At Issue
Concurrently, the magistrate urged the parties to consider settling the action. In response to their explicit express reservations due to the Attorney General's statements as to the Nasso settlement, the magistrate issued a sealing order, dated May 1, 1984, covering the entire record, including any settlement negotiations, which would be conducted under his supervision in a locked courtroom in the United States Courthouse in White Plains. After a settlement was reached, the magistrate entered a second sealing order on July 5, 1984, directing that the settlement be "sealed and shall not be disclosed by the parties, counsel or their representatives to anyone without further order of this Court . . . ." That same month, in response to an earlier request by the attorney General to learn the terms of the settlement, the magistrate wrote a letter to Assistant Attorney General Trahan denying that request and explaining that it would have been "difficult, if not impossible, to engage in meaningful discovery or ...