Tennessee Diversifies Its Valuation-Method Portfolio for Closely Held CorporationsThe Tennessee Supreme Court overruled three decades of precedent in Athlon Sports Communications, Inc. v. Duggan, giving trial courts broad discretion in the method used to determine the “fair value” of shares in “dissenters’ rights” actions.

When a closely held Tennessee corporation seeks to undergo a structural change such as a merger, dissenting minority shareholders are afforded a statutory “appraisal remedy” pursuant to Tennessee Code Annotated § 48-23-101, et seq.  This “dissenters’ rights” statute allows dissenting shareholders to escape the involuntarily altered investment with the “fair value” of their shares, plus accrued interest.  But “fair value” means “the value of the shares immediately before the effectuation of the corporate action to which the dissenter objects” under Tennessee Code Annotated § 48-23-101(4).  This is not the “fair market value” of a bargained-for exchange between motivated buyers and sellers.  If the corporation and dissenting shareholders cannot agree on the shares’ “fair value,” the corporation can commence a proceeding under Section 48-23-301, petitioning the court to determine the “fair value.”  As expected, the abstract notion of “fair value” has proven elusive to courts, corporations, and shareholders alike.

Though the statute is silent as to which methods courts should use to determine “fair value,” the Tennessee Supreme Court implicitly mandated the “Delaware Block Method” in 1983. Through Blasingame v. American Materials, Inc., Tennessee “adopt[ed] the Delaware rule requiring the use of [asset value, market value, and earnings value] in determining the fair value of a dissenting minority stockholder’s shares.”  However, that same year, the Delaware Supreme Court in Weinberger v. UOP, Inc. abandoned exclusive application of the Delaware Block Method in favor of a liberal approach aligned with generally acceptable methods in the financial community.  Although Tennessee courts generally look to Delaware law in unsettled matters of corporate law, Tennessee did not divest itself of exclusive use of the Delaware Block Method for over three decades.

The court in Athlon Sports elected to overrule Blasingame and allow trial courts to consider alternative valuation methods, although the courts may still apply the Delaware Block Method when appropriate.  Specifically, the court adopted the Weinberger approach, allowing “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court.”

Moving forward, corporations, dissenting shareholders, and courts may now consider other valuation methods for “fair value” that include projections of future value, provided that they are provable and not speculative.  Likewise, Tennessee trial and appellate courts may find themselves determining the “strike price” of speculation when it comes to weighing elements of future value now that Athlon Sports has “rung the opening bell” for a new dissenters’ rights regime.

In a decision with potentially significant consequences for determining who will be the next mayor of Nashville, the Tennessee Supreme Court unanimously held yesterday that the Nashville mayoral election must be moved from August to an earlier date.  

Following the resignation of Mayor Megan Barry, the Davidson County Election Commission voted to set the election to fill the vacancy on August 2, 2018, coinciding with the previously scheduled general election for countywide offices and the primary election for state and federal offices.  Ludye Wallace, a candidate for the mayoral vacancy, filed a “Petition for Writ of Certiorari and Writ of Mandamus” in the Chancery Court for Davidson County, challenging the Election Commission’s decision to set the election for August 2, 2018. Wallace alleged that the election date violated Section 15.03 of the Metropolitan Charter, which requires a special election be held “whenever a vacancy shall exist for more than twelve (12) months prior to the date of the next general metropolitan election.”  

The Metro Government and Election Commission filed a motion to dismiss the petition for failure to state a claim.  After conducting a hearing, the trial court held that Wallace was not entitled to the relief sought and that the Election Commission did not violate the Metropolitan Charter in setting the mayoral election in August.  

Wallace filed a notice of appeal on March 15, 2018 and on the same date, filed a motion with the Tennessee Supreme Court requesting that it assume jurisdiction pursuant to Tennessee Code Annotated § 16-3-201(d)(1) and Rule 48 of the Rules of the Tennessee Supreme Court.  Tennessee Code Annotated section 16-3-201(d) permits the Supreme Court to assume jurisdiction of undecided cases when the case is “of unusual public importance” and involves, among other things, “[t]he right to hold or retain public office.” Tennessee Supreme Court Rule 48 sets out the procedure for requesting the Supreme Court to assume jurisdiction and requires the movant to include in the motion an explanation of the unusual public importance of the case.  The Supreme Court granted Wallace’s motion and assumed jurisdiction over the case. Oral arguments were held April 9 and the Court rendered its decision one day later on April 10.

The Tennessee Supreme Court concluded that the Metropolitan Charter’s use of the phrase “general metropolitan election” is unambiguous and means the particular general election at which the Mayor, Vice-Mayor, Councilmen-at-Large, and District Councilmen are elected, while the term “general election” refers to any municipal general election.  Accordingly, the Court held that the next “general metropolitan election” is more than twelve months from the date of the mayoral vacancy and a special election is required.

The Court ordered the Election Commission to set a special election in accordance with Tennessee Code Annotated § 2-14-102(a).  The Court noted in a footnote that Wallace suggested May 1, 2018 as a potential election date, but also noted that the Commission rejected that date as a potential election date and that certain deadlines for election-related actions indicated that date would be a “practical impossibility.”   The matter will be remanded to the Election Commission to determine the new election date.

You’ve Got Issues:  Making a Case for Deep-Issue StatementsWhat’s the first thing that judges and law clerks read in an appellate brief?  The certificate of interested parties, the table of contents, and the table of authorities are matters of form, and, while important, they don’t convey a message.  But a well-written issue statement can frame the narrative, preview the argument, and persuade the reader before a drop of ink is spilled on true substance.  Practitioners in state and federal courts alike would be wise to devote significant time and energy to the issue statement, beginning with choosing which form to use.  The deep-issue statement should be at the top of the list.

In 1935, the Supreme Court established a rules advisory committee, which helped draft the Federal Rules of Civil Procedure.  Since then, Advisory Committees on the Rules of Appellate, Bankruptcy, Evidence, and Civil and Criminal Procedure continually study the rules and recommend changes to ensure that the rules develop with the pace of modern practice.  Proposed amendments to the rules develop in several ways, including intensive study by committee members and public suggestions submitted for consideration.  Since January 2017, five documents have been submitted to the Advisory Committee on Appellate Rules (formerly chaired by now Justice Gorsuch), four of which concern Rule 28 (titled “Briefs”).  The parent suggestion was submitted by well-known legal writing guru Bryan A. Garner, who founded and currently operates LawProse, a notable provider of CLE training in legal writing and editing.

Garner suggested a fundamental change in the way issue statements are presented.  Traditionally, he claims, practitioners use “whether” statements to display their questions.  The conventional “whether” statement is a single sentence fragment representing the attorney’s statement of what he or she believes to be the determinative issue.  As a result, “whether” statements are grammatically incorrect, cumbersome, and difficult to comprehend.  In fact, Garner suggests that the use of a “whether” statement may actually hinder the brief’s overall effect, leaving the judges and law clerks in the dark until they read much further into the argument.

Garner’s solution is an amendment to Rule 28 mandating practitioners use so-called deep-issue statements.  Deep-issue statements usually consist of three short, pointed sentences that recount critical facts in a chronological manner.  The final sentence in the issue statement asks a question and is followed by a question mark.  Critically, the deep-issue statement must be 75 words or less, forcing practitioners to truly condense the question presented to reveal the most vital information.  Deep-issue statements are intended to be dispassionate and non-argumentative and to highlight the logic underlying a particular argument.  As a result, they are more likely to make salient facts stick in the reader’s mind, making it easier for him or her to digest the legal arguments that follow.

In practice, Garner’s suggested amendment would add an entire subsection to Rule 28 under “(a) Appellant’s Brief.”  The subsection purports to govern the means by which practitioners present their statements of the issues, including each of the standards discussed above.  The suggested amendment also includes a prohibition on the use of “whether” statements and examples of how deep-issue statements should be formatted.

Since Garner’s suggestion was filed in January 2017, one judge and two practitioners have written the committee to express their support for the mandatory deep-issue statement.  Notably, Judge Jennifer A. Dorsey of the District of Nevada wrote the committee and praised the deep-issue statement for contributing to “clear, direct, and grammatically correct prose.”  In her experience, deep-issue statements provide clarity for the audience, which directly contributes to trimmer briefs.  She’s such a proponent that she starts her orders and opinions with a deep-issue statement whenever possible.

Attorney Steven A. Hirsch also wrote to express his support and effectively illustrated his point through an anecdotal exercise.  In doing so, he treated Garner’s suggestion as if it were the subject of an appeal and drafted both “whether” and deep-issue statements.  The “whether” statement, he suggests, might look something like this: “Whether, instead of requiring that an appellant’s brief contain a ‘statement of the issues’ that—like this one—traditionally consists of one lengthy sentence that begins with ‘whether’ and then packs in all the facts essential to presenting the issue, FRAP 28 should be amended to require that principal appellate briefs begin with a multi-sentence issue statement limited to 75 words, usually couched as a syllogism, whose final sentence ends in a question mark.”  In contrast, the deep-issue statement may take the following form: “FRAP 28 requires that the appellant’s brief contain a ‘statement of the issues.’  That statement traditionally consists of one lengthy sentence that begins with ‘whether’ and then packs in all the facts essential to presenting the issue.  Should Rule 28 be amended to require that principal appellate briefs begin—like this one—with a multi-sentence issue statement limited to 75 words, usually couched as a syllogism, whose final sentence ends in a question mark?”  Both examples are comprised of 74 words, but only one is grammatically correct and conveys its point without extensive head scratching.

Garner’s suggestion (and the support for it) are still listed as pending consideration, meaning the committee has not yet foreclosed the possibility.  The deep-issue statement has amassed popularity during the past several decades, owing in part to Garner’s teaching and his many books, some of which he authored with former Supreme Court Justice Antonin Scalia.

Until the committee adopts Garner’s suggestion, it remains just that: a suggestion.  But practitioners would be wise to consider using the deep-issue format or some other expository means to author issue statements.  And the use of deep-issue statements should not be limited to appellate writing.  Any lawyer with a story to tell and a message to convey should consider adopting this practice.

Tennessee Supreme Court Rejects Efforts to Alter Existing Law on the Collateral Source Rule in Personal Injury CasesLast month the Tennessee Supreme Court, in Dedmon v. Steelman, affirmed the long-standing collateral source rule in personal injury cases. As long as an injured plaintiff can establish that the medical expenses they incurred were reasonable and necessary for their treatment, the full amount of the charges from the medical providers can be accepted into evidence. Defendants cannot challenge the reasonableness of these medical expenses with evidence of the actual (discounted) amounts paid to medical providers by the plaintiff’s insurance provider.

Defendants sought to extend the Court’s decision in West v. Shelby County Healthcare Corp. to personal injury cases. West interpreted Tennessee’s Hospital Lien Act (HLA) to preclude a hospital from seeking the balance of medical expenses charged to a patient after the hospital had accepted discounted payment from the insurance company in satisfaction of the debt.  Since a lien only exists for the amount a patient owes, “reasonable charges” could not exceed what the patient was required to actually pay the hospital.

The Court in Dedmon rejected the defendants efforts to limit recovery of injured plaintiffs to the discounted amounts that medical providers accepted from insurance companies in payment of medical expenses. The Court considered and rejected the “actual amount paid,” “benefit of the bargain,” and “reasonable value/actual amount paid” approach adopted in other jurisdictions. Finding that these alternatives created as many problems as they solved, the Court retained Tennessee’s “reasonable value/full bill” approach.

To rebut an injured plaintiff’s claim that the charges are reasonable and necessary, defendants are limited to competent evidence that does not run afoul of the collateral source rule.

Practical effect: No change in Tennessee to proving or disputing an injured plaintiff’s medical expenses.

A Corporation May Not Pick and Choose Its Citizenship to Create Diversity under CAFAThe Sixth Circuit became the third court of appeals to reject the “alternative citizenship” theory of diversity under the Class Action Fairness Act (CAFA).  In Roberts v. Mars Petcare US, Inc., a putative class of Tennessee citizens sued Mars Petcare in Tennessee state court.  Mars Petcare removed the case to federal court, relying on diversity jurisdiction under CAFA, 28 U.S.C. § 1332(d), which provides for federal jurisdiction over class actions involving at least 100 class members, with $5 million or more at stake, and in which “any member of a class of plaintiffs is a citizen of a State different from any defendant.”  Unlike diversity jurisdiction in most other contexts, CAFA allows minimal diversity—as long as one plaintiff maintains citizenship in a state different from one defendant’s citizenship, diversity is satisfied, regardless of where all other parties reside.

As a corporation, Mars Petcare is a citizen of both its state of incorporation, Delaware, and the state where it maintains its principal place of business, Tennessee.  A class of Tennessee plaintiffs facing a Tennessee defendant cannot satisfy even minimum diversity.  Yet Mars Petcare argued that diversity nevertheless existed under CAFA based on the company’s Delaware citizenship.  Under Mars Petcare’s argument, the company could pick between its Delaware and Tennessee citizenship to either satisfy or defeat diversity.  The Sixth Circuit easily rejected the company’s argument, relying on § 1332’s plain meaning, historical context, and constitutional avoidance.  For purposes of CAFA’s diversity calculus, Mars Petcare is a citizen of Delaware and Tennessee, not Delaware or Tennessee.

The court apparently had no trouble arriving at this decision; it published an opinion just two days after oral argument.  In doing so, the Sixth Circuit joined the Fourth and Eleventh Circuits in rejecting various class-action defendants’ alternative-citizenship theory of diversity, leaving the theory with unanimous rejection in the courts of appeals to have addressed it so far.

Clawing Back Secrets after Shane GroupIt is clear by now that the federal courts in Tennessee are not a safe place for most sensitive business information. Legitimate trade secrets are safe. Well-established privileges (e.g., attorney-client privilege) still apply. And the courts still respect statutory requirements to protect things like personal health information. But unless your sensitive business information is a matter of national security, a recent series of Sixth Circuit opinions means you cannot expect to get or keep a broad seal covering documents in the courts’ records. Now that Tennessee’s federal courts cannot keep your secrets, how do you get them back?

Redact and Replace

The core principle of Shane Group is that the public generally is entitled to see whatever the courts rely on in deciding the merits of the cases before them. So if your secrets are irrelevant to the merits of the case—e.g., names of customers or suppliers unrelated to litigation with a third party—consider redacting the irrelevant secrets and filing a substitute document with the court.

This gets more complicated (and expensive) when relevant and irrelevant information are intertwined in a document or a document would require extensive line-by-line redactions. When redactions are not cost effective, consider substituting a stipulation to the relevant facts.

Redact and Justify

The courts are serious about maintaining themselves as open institutions, and the extra procedural requirements of the Shane Group cases make it much easier for a court to just deny a motion to seal. But if your secrets are necessary for deciding the merits of your case and they satisfy the substantive standards of Shane Group, the extra procedural steps are demanding but clear.   

Narrowly redact the protected information, and make a chart as you go documenting, line-by-line, the reason for the redaction backed up by legal citation. If you make it easy for the court to follow what you redacted and easy to adopt your explanations in its order, you stand a much better chance of keeping the original document under seal.

Work With (or Around) Opposing Counsel

Each of these approaches is more difficult when your secrets are in the other party’s filings. If both parties have secrets in the record, consider collaborating on an agreed order dealing with both parties’ sensitive information in a Shane Group-compliant way. If opposing counsel sees Shane Group as an opportunity to gain leverage, consider whether your current protective order gives you the right to claw back or redact documents already produced in discovery.

Keep Your Head Down, But Not In the Sand

While you are preparing Shane Group-compliant replacements or justifications, try not to draw the court’s attention to the sealed documents. This means avoiding new motions to seal documents that might trigger a general “show cause” order.

Do not, however, simply hope that no one will notice. The Sixth Circuit has vacated seals on its own motion, and district courts in Tennessee are following the Sixth Circuit’s lead by proactively addressing old seals. If your secrets are under seal in an active case in Tennessee’s federal courts, you should expect to encounter Shane Group sooner or later. Be prepared.

Sixth Circuit Clarifies Where to Appeal in a Transferred CaseLast month, the Sixth Circuit subtly deepened a circuit split over a significant question of appellate jurisdiction within the federal courts: When a lawsuit begins in one U.S. district court but is transferred to a second district court within another federal circuit before reaching a final judgment, which court of appeals has jurisdiction to review the first district court’s interlocutory decisions?

In Kalama v. Matson Navigation Co., Inc., a panel of the Sixth Circuit answered: Appellate jurisdiction exists in the court of appeals encompassing the transferee district court, where the case reaches a final judgment.  The Kalama appeal arose out of convoluted multidistrict litigation.  The plaintiffs initially brought the underlying lawsuit in the Northern District of Ohio.  The action was eventually transferred to the Eastern District of Pennsylvania, which dismissed some, but not all, defendants from the lawsuit.  The Eastern District of Pennsylvania then re-transferred the case back to the Northern District of Ohio.  The case reached a final judgment when the Northern District of Ohio dismissed the remaining defendants.  Several plaintiffs then appealed only the Eastern District of Pennsylvania’s dismissal to the Sixth Circuit, which encompasses Ohio, but not Pennsylvania.

The Kalama appeal put the Sixth Circuit in the strange position of reviewing an order that arose in a district court outside of its territorial jurisdiction.  Such a situation arises infrequently for good reason.  Federal courts may only exercise jurisdiction to the extent authorized by Congress.  One such jurisdictional authorization, codified at 28 U.S.C. § 1294, provides that “appeals from reviewable decisions of the district . . . courts shall be taken . . . to the court of appeals for the circuit embracing the district.”  Under a straightforward reading of § 1294, the Eastern District of Pennsylvania’s decision should have been appealed to the Third Circuit, not the Sixth.

Yet the Sixth Circuit did not take that position in Kalama.  Instead, it held that it may review a non-final order issued by a district court outside of the Sixth Circuit if the case eventually reaches a final judgment within the Sixth Circuit.  Under the court’s reasoning, all previous non-final orders “merge” with the final judgment and become appealable in the court of appeals embracing the district court that issues the final judgment.  The Seventh, D.C., Fourth, and Second Circuits also follow this theory.

While this “merger” theory appears to contradict § 1294, in the Sixth Circuit’s opinion that is not so.  In Kalama, the court followed the D.C. Circuit by expressly adopting an interpretation of § 1294 that comports with the merger theory.  According to the Sixth Circuit, a “reviewable” decision is synonymous with an “appealable” decision.  A non-final order, such as the partial dismissal in Kalama, is not “reviewable”—that is, appealable—until the case reaches a final judgment.  Thus, under the Sixth Circuit’s interpretation, § 1294 authorizes appeal of a non-final order to the court of appeals embracing the district court that ends up reaching a final judgment.  In Kalama, that court was the Sixth Circuit.

The Tenth and Eleventh Circuits disagree.  Both have rejected the merger theory, and both hold that, under the plain language of § 1294, any decision arising in a district court within a sister court of appeals must be appealed to that court of appeals.  According to the Tenth and Eleventh Circuits, “reviewable” is not synonymous with “immediately appealable.”

Furthermore, neither court minds that this interpretation can practically leave a party without the opportunity to appeal a decision.  For example, imagine that you are representing a defendant in an action initially filed in Colorado (a Tenth Circuit state), but recently consolidated into multidistrict litigation in Alabama (an Eleventh Circuit state).  The Alabama district court denies your motion for summary judgment and refuses your request for the court to certify its decision for immediate review under 28 U.S.C. § 1292(b).  You have no right to appeal the district court’s interlocutory decision at this stage.  Next, the district court in Alabama re-transfers your case to the district court in Colorado for trial, where you lose.  Now, you would want to appeal the Alabama court’s initial denial of your motion for summary judgment, but the Tenth Circuit’s interpretation of § 1294 prevents it.  You are left without an avenue to appeal the decision.

Luckily for practitioners within the Sixth Circuit, including Tennessee, this conundrum should not arise under the rule announced in Kalama.  As long as a case reaches final judgment within the Sixth Circuit, any interlocutory decisions may safely be appealed to the Sixth Circuit.  However, practitioners should keep their guard up when a case is transferred out of the Sixth Circuit to the Tenth or Eleventh.  In that circumstance, it is prudent to make every effort available to get an unfavorable, interlocutory decision reviewed before transfer—through either Rule 54(b) or § 1292(b), or by seeking an extraordinary writ—because the opportunity may be lost post-transfer.

Is It Worth Fighting For (Recusal)?: The Tennessee Supreme Court Clarifies Judicial Canons on Personal Knowledge and Independent InvestigationsIn 2012, Jeanie Holsclaw filed an action against Ivy Hall Nursing Home, Inc. for retaliatory discharge.  Following several years of extensive discovery and the recusal of two trial judges, Ivy Hall sought to have a certified rehabilitation counselor examine Holsclaw.  At the hearing on Ivy Hall’s motion to examine Holsclaw, the judge informed the parties for the first time that she had called the director of the rehabilitation counselor program at the University of Tennessee to “understand what [a rehabilitation counselor] might or might not be able to testify to [based on] their background [and] education.”  Neither of the parties raised an objection at the hearing, but Ivy Hall filed a motion for the trial court judge to recuse herself after obtaining a copy of the transcript.  The trial court judge denied Ivy Hall’s motion to recuse, explaining that she had “done no investigation of [Ivy Hall’s] expert witness whatsoever” and that her “action would not lead a reasonable person to question [her] ability to be impartial.”

In a divided decision, the Tennessee Court of Appeals concluded that, based on Canons 2.11 and 2.9 of the Tennessee Code of Judicial Conduct, the trial court judge should have recused herself.  Specifically, the majority’s decision concluded that “even though [the court] f[ound] no malice in the trial judge’s well-meaning, but misguided action,” the personal knowledge gained from the extrajudicial conversation created an “appearance of impropriety,” thereby necessitating recusal.

In a per curiam opinion, the Tennessee Supreme Court reversed the Court of Appeals and addressed two important questions:  (1) What constitutes “personal knowledge” of a case under Canon 2.11?; and (2) At what point does a judge’s independent investigation create an “appearance of impropriety” whereby the “judge’s impartiality might reasonably be questioned”?

Relying primarily on a Minnesota Supreme Court decision, the Tennessee Supreme Court explained that “personal knowledge” is knowledge derived from “a close relationship between the judge and some substantive fact of a case,” such as where the judge knows of incriminating evidence against a particular defendant as a result of the judge’s role as a former prosecutor.  Conversely, “personal knowledge” does not include information a judge learns “in the course of her general judicial capacity.”  The Court indicated that the trial court judge here did not come close to having “personal knowledge” of the case because she “did not seek this information for the purpose of discrediting a party or a witness, or even for the purpose of ruling on whether to allow a particular certified rehabilitation counselor to testify as an expert.”  Instead, she contacted the director at the University of Tennessee to know “whether such an expert potentially would be able to provide information helpful to resolving the issues in the case and also because the trial judge was considering naming a court-appointed expert.”

The Court, however, found that the trial judge violated Canon 2.9 – which prohibits a judge from engaging in ex parte communications and independent investigations – by contacting a non-party, concerning a pending matter, and outside the presence of the parties.  But this does not end the inquiry for recusal.  Recusal is only required when “the trial judge’s impartiality might reasonably be questioned” – a question, according the Court, that the Court of Appeals failed to consider separately.  On this point, the Court found, “nothing in the record leads us to the conclusion that a person of ordinary prudence . . . would question whether [the trial judge] can be impartial in the proceedings.”  The Court also noted that, “importantly, the trial judge ultimately allowed [Ivy Hall’s] proposed expert to examine [Holsclaw] again.”

Writing the sole dissent, Justice Page departed with the decision only on the question of “appearance of impropriety.”  In particular, Justice Page concluded that because the trial judge’s ex parte communication “could have potential impact on the trial court’s decision-making process,” it “create[d] an appearance of impropriety.”  Justice Page further noted that the trial court judge’s decision to allow the expert’s examination of Holsclaw did not “alleviate the perception of impropriety created by her contacting an outside source ex parte and off the record.”

Takeaways

For judges, this decision is good news in the sense that it provides guidance on when recusal may or may not be appropriate.  It also suggests that trial court judges could avoid this whole problem by relying on the exception in Canon 2.9(A)(2) to ex parte communications with outside experts by providing the parties prior notice and a chance to respond to the advice received.  For litigants, this decision most likely forecloses potential avenues for filing a motion to recuse by setting a high bar for what constitutes “impartiality [that] might reasonably be questioned.”  Indeed, the Court found nothing to question the impartiality of the trial judge in this case.  Then again, if the ultimate goal is to have a case handled by an impartial judge, then this decision will most likely result in more transparency with judges disclosing to the parties any contemplated contact with experts in order to avoid any appearance of impartiality.

Edmund SauerAlthough Tennessee appellate decisions are readily available, information about how those decisions will affect businesses, legal practice, and people in the state is scarce. We are pleased to introduce our new blog to help fill that information gap — Tennessee Appellate Review. By providing commentary and insights on federal and state appellate news and developments in Tennessee, we aim to make the Tennessee Appellate Review blog a helpful resource for our clients and the Tennessee legal community.

Bradley’s Tennessee Appellate Team has extensive experience handling hundreds of appeals in federal and state appellate courts. Together, we will analyze important pending cases and appellate decisions and assess their importance.

You can expect to hear from us twice a month on topics such as:

  • Federal and state cases to watch
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  • Proposed rule changes
  • Opinions from the Supreme Court of the United States

To make sure you don’t miss information about how current and future Tennessee appellate decisions may affect you, simply subscribe to receive our posts via email by entering your email address in the right-hand column of the blog or by subscribing here.

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Editor, Tennessee Appellate Review
Partner, Bradley Arant Boult Cummings LLP

Bad News/Good News: The Courts Don’t Care About Your SecretsIt used to be fairly simply to share a secret with a federal court in Tennessee by filing a sensitive document “under seal.” It isn’t anymore. The courts don’t care about keeping your secrets, at least not as much as they care about preserving public access to the courts.

Before a recent trio of Sixth Circuit opinions, a motion to file sensitive business information “under seal” might only involve a single page or even a single sentence citing an agreement between the parties. When used in moderation (and even when not used in moderation), those perfunctory motions were routinely granted by the courts. As a result, many cases went forward with significant documents that were available to the parties and the court, but not the public. From the perspective of litigants and trial courts, it was easy and efficient. But according to the Sixth Circuit, it was wrong.

Last summer, starting with Shane Group, Inc. v. Blue Cross Blue Shield of Michigan, the Sixth Circuit reminded the lower courts that only a few narrow categories of information—true trade secrets, information covered by a recognized privilege, and information protected by statute (e.g., taxpayer IDs and protected health information)—are entitled to a judicial seal. Otherwise, the public courts are just that: public. The substantive standards in Shane Group are nothing new—they come directly from a 1983 decision, Brown & Williamson Tobacco Corp. v. FTC —but the renewed emphasis still represents a fundamental change to the practice of Tennessee’s federal courts.

The Sixth Circuit added new procedural requirements to reinforce the old substantive standard, and they’re working. Any order sealing records must explain how the document in question satisfies Shane Group. So, moving forward, any litigant seeking a seal must do that legal and factual work for the district court. And, looking backward, every generic, one-page order is vulnerable. The Sixth Circuit has vacated those orders on its own when it encounters them on appeal, and district courts have been issuing “show cause” orders requiring parties to justify pre-Shane Group seals as a part of routine case management.

The bad news for litigants is this: The courts don’t care about protecting your run-of-the-mill secrets. So, if you have documents under seal in federal courts in Tennessee (or elsewhere in the Sixth Circuit), don’t expect them to stay that way.

The good news is the same: The courts don’t care about revealing your secrets either. Accordingly, now that they cannot promise to keep your secrets, district judges and magistrate judges seem open to working with litigants to keep unnecessary secrets out of the courts’ records to begin with. Generally, the courts are happy to help the parties find ways to document the relevant facts while leaving voluminous, largely irrelevant, and commercially sensitive documents to the side.

Everyone has secrets. If yours are under seal in the federal courts, you should be preparing a Shane Group strategy now. Your show cause order is coming. If your secrets aren’t under seal yet, you need to have a Shane Group strategy for discovery and motion practice. We’ll address both of those topics in future posts.