News organizations fail in bid to unseal records produced in pre-trial discovery

The Recorder
By Scott Graham
December 20, 2007

Documents filed with a court in civil litigation are not automatically available to the public, the Sixth District Court of Appeal has ruled Wednesday in a case brought by Bloomberg News, The Recorder newspaper and the San Francisco Chronicle.

A unanimous panel led by Justice Wendy Duffy ruled that a trial judge had erred by unsealing e-mails, spreadsheets and other discovery appended to a shareholder complaint in the Mercury Interactive Corp. stock option backdating litigation.

“Discovery is not automatically submitted ‘as a basis for adjudication’ — and thus does not perforce become accessible to the public — simply by virtue of it becoming a part of the court file,” Duffy wrote in Mercury Interactive Corp. v. Klein, H031175 (.pdf). Rather, she concluded, the documents must be submitted “to the trial court for its consideration in deciding a substantive matter in that action.”

The news organizations had argued that the discovery exhibits could reveal important details on how former Mercury executives allegedly manipulated the timing of stock option grants to try to maximize payouts. Mercury, now owned by Hewlett-Packard Co., paid $117.5 million to settle a federal shareholder case over backdating in October. Attorneys for several former Mercury executives said the documents filed in a parallel state case were subject to a stipulated confidentiality agreement, and were never used as a basis for adjudication because the case was dismissed on standing issues — not decided on the merits.

Read the full story in The Recorder.