X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Until two weeks ago, the case of Zurich American Insurance Co. v. Rite Aid Corp. was completely invisible to the public. The lawyers had filed every document under seal and the court’s docket was also sealed. But the judge who inherited the case in July wondered why. Now, acting on her own motion, she has unsealed the docket and all of the documents, with the exception of three personal tax returns that were filed as exhibits. In a 17-page opinion, U.S. District Judge Gene E.K. Pratter of the Eastern District of Pennsylvania found that although the case involved two arbitration proceedings that were subject to strict confidentiality provisions, there was no justification for sealing the case once it was filed in court. Documents unsealed by Pratter’s order reveal that the suit centers on an arbitration in which Zurich was ordered to cover Rite Aid for its $4.9 million settlement of a claim brought by Beth Kaplan, a former Rite Aid vice president. The settlement with Kaplan stemmed from the massive accounting scandal at Rite Aid that led to the indictment of two of its top executives and shareholder lawsuits that yielded more than $334 million in settlements. According to court papers, Kaplan claimed that the fraudulent actions of the two indicted executives — former Rite CEO Martin Grass and former general counsel Franklin Brown — resulted in a breach of Rite Aid’s contractual obligations to her. (Grass pleaded guilty to some of the charges; a jury convicted Brown on 10 of the 11 counts against him.) An arbitration panel agreed and awarded her $16 million, less certain offsets. Rite Aid later settled with Kaplan for more than $4.9 million and demanded that Zurich cover the settlement. When Zurich refused, the coverage dispute also went to arbitration. When Rite Aid prevailed in the arbitration, Zurich filed the federal suit seeking to have the arbitration award set aside. Zurich’s lawyers — Geoffrey W. Heineman, Kenneth M. Labbate and Laura K. Seweryn of Ohrenstein & Brown in New York, along with Steven D. Johnson of Philadelphia’s Hecker Brown Sherry and Johnson — initially filed the suit under seal. In May 2004, Judge Franklin S. Van Antwerpen of the Eastern District of Pennsylvania granted Zurich’s motion to maintain all of the documents under seal, but he said in an order that he did so “only to the extent that we can do so as a private agreement between the parties who have assented to it.” Van Antwerpen’s order said it was “understood that this order is not final and the court retains jurisdiction and the right to modify or set aside this order on its own motion or on the proper application of third parties.” The order warned that “in any such proceeding, the burden shall be upon those parties seeking confidentiality to demonstrate good cause for confidentiality and that any injury from disclosure outweighs the presumption of openness and the right of public access.” Soon after, Van Antwerpen was elevated to the 3rd U.S. Circuit Court of Appeals and the case was reassigned to Pratter. When Pratter announced that she was considering unsealing the case, neither Zurich nor Rite Aid objected. But Kaplan’s lawyers — Dino S. Sangiamo and James L. Shea of the Venable firm in Baltimore — urged Pratter to keep the matter sealed. In a letter to Pratter, and later in an oral argument on the judge’s motion, the Venable lawyers argued that many of the documents should remain sealed to protect Kaplan’s reputation and integrity. They argued that due to Kaplan’s stature in the business community and the ignominy of being involved with Rite Aid, disclosure of the arbitration documents would cause her embarrassment. They also urged Pratter to consider the confidentiality protections provided in arbitration and the policy implications that the disclosure of arbitration proceedings would have on the federal policy of encouraging arbitration. But Pratter found that Kaplan’s lawyers failed to satisfy the heavy burden imposed by the 3rd Circuit on parties asking for court records to be sealed. The 3rd Circuit, Pratter said, has held that the right of access to judicial records and proceedings is “extremely broad” and is grounded in “a pervasive common law right” to inspect and copy public records and documents. Sealing records is an “unusual and extraordinary step,” Pratter found, and the 3rd Circuit requires that judges must clearly explain the “compelling countervailing interests to be protected” and make specific findings on the record about the effects of disclosure. Pratter found that “broad allegations of harm” are not enough to justify sealing, and while privacy issues must be considered, a party whose chief concern is embarrassment “must demonstrate that the embarrassment will be particularly serious.” Kaplan’s lawyers failed to meet the test for sealing, Pratter found, because they offered no specific proof of serious harm that would result from unsealing the case. “This court cannot justify a continuation of the seal because it has not been presented with persuasive, current evidence to show how public dissemination of the pertinent materials now would cause the potentially serious embarrassment intimated by Ms. Kaplan,” Pratter wrote. Pratter found that Kaplan “has failed to rebut the public’s broad right of access … and this court does not see any compelling countervailing interests that weigh in Ms. Kaplan’s favor … despite her concerns that unspecified ‘others’ may consider her guilty by association due to her prior position and tenure at Rite Aid.”

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.