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Bank of America, N.A. v. First Mutual Bancorp of Illinois

July 22, 2010

BANK OF AMERICA, N.A., SUCCESSOR TO LASALLE BANK NATIONAL ASSOC., PLAINTIFF,
v.
FIRST MUTUAL BANCORP OF ILLINOIS, PETHINAIDU VELCUHAMY, DEFENDANTS.
BANK OF AMERICA, N.A., SUCCESSOR TO LASALLE BANK NATIONAL ASSOC., PLAINTIFF,
v.
PETHINAIDU VELUCHAMY AND PARAMESWARI VELUCHAMY, DEFENDANTS.



The opinion of the court was delivered by: Judge David Coar

Magistrate Judge Geraldine Soat Brown

MEMORANDUM OPINION AND ORDER

Pending before the court is Defendants First Mutual's and Mr. and Mrs. Veluchamy's Motion to Retain Certain Sealed Documents Under Seal (Defs.' Mot. to Seal.) [09 C 5108 dkt 157; 09 C 5109 dkt 141].*fn1 Bank of America opposes the motion in substantial part. (BOA's Resp.) [09 C 5108 dkt 159; 09 C 5109 dkt 143.] The court has reviewed the parties' submissions and each of the items that the defendants seek to remain sealed on the public record, and grants defendants' motion in part. The parties shall file unredacted documents or versions of the documents redacted in accordance with the rulings set forth below by July 30, 2010.

In their motion, defendants essentially seek to have three categories of materials sealed: (1) information reflecting interactions they or Mutual Bank had with federal regulators; (2) information reflecting the identity of third-party borrowers; and (3) pursuant to the protective order, information reflecting the "confidential deliberation of parties . . . committees or board." (Defs. Mot. to Seal. at 2.) They additionally assert attorney-client privilege as a basis for sealing. Defendants have construed what may be withheld from the public record too broadly.

First, the fact that the parties stipulated and the court agreed that certain information would be marked confidential when exchanged during discovery does not necessarily mean that such information may not enter the public record when submitted to the court. See Union Oil Co. of Calif. v. Leavell, 220 F.3d 562, 567 (7th Cir. 2000)("Many a litigant would prefer that the subject of the case . . . be kept from the curious . . . , but the tradition that litigation is open to the public is of very long standing."). The 2009 revisions to Northern District of Illinois Local Rule 26.2 prohibited blanket protective orders as a justification for filing documents under seal. The Rule dictates that no documents may be filed under seal "without prior order of court specifying the particular document or portion of a document that may be filed as restricted." N.D. Ill. Loc. R. 26.2, http://www.ilnd.uscourts.gov/home/LocalRules.aspx?rtab=localrule (last visited July 22, 2010). The moving party must make a sufficient showing with regard to each item it seeks withheld from public scrutiny to establish that the information, once submitted to the court, should remain sealed from the public record. As the Seventh Circuit has made clear:

Secrecy is fine at the discovery stage, before the material enters the judicial record. But those documents, usually a small subset of all discovery, that influence or underpin the judicial decision are open to public inspection unless they meet the definition of trade secrets or other categories of bona fide long-term confidentiality.

Baxter Intl., Inc., v. Abbott Labs., 297 F.3d 544 (7th Cir. 2002) (internal citation omitted).

The court will protect financial information about "third party borrowers," that is, people and entities who are not parties to this case. But the defendants' financial information is the subject of this lawsuit, including the now-dismissed counterclaims, and that is generally not protected from public disclosure.

When [litigants] call on the courts, they must accept the openness that goes with subsidized dispute resolution by public (and publicly accountable) officials. Judicial proceedings are public rather than private property, and the third-party effects that justify the subsidy of the judicial system also justify making records and decisions as open as possible. . . . Judges deliberate in private but issue public decisions after public arguments based on public records. . . . Any step that withdraws an element of the judicial process from public view makes the ensuing decision look more like fiat, which requires compelling justification.

Union Oil Co., 220 F. 3d at 568 (internal citations omitted). Defendants' financial and corporate records are relevant in this litigation, and other than pointing to the terms of the protective order, defendants have not explained why their own financial information should be sealed from the public record.*fn2

Likewise, the entire Board of Directors minutes are not appropriately withheld from the record.

The Protective Order protected "confidential deliberations," the disclosure of which is "likely to cause substantial harm to the producing party's business, competitive or privacy interests." (Prot. Order ¶ 4.) [09 C 5108 dkt 85; 09 C 5109 dkt 80.] Defendants generally argue that the minutes are confidential, but they have failed to demonstrate any particular information within the minutes that should be withheld and they have failed to identify any harm that might flow from their disclosure.

This is especially questionable regarding Mutual Bank records given the bank's demise.

Defendants also claim that certain materials reflecting "FDIC advice" or other regulator advice or information should be sealed. (Defs.' Mot. at 3, 5.) Here too, defendants construe too broadly the scope of confidentiality ...


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