Delaware Court of Chancery Holds that Confidentiality Requirements in Arbitration Provisions Are Not Enough to Shield Proceedings from Public Access.
June 11, 2024
Under Rule 5.1 of the Delaware Court of Chancery, proceedings in a civil action are generally a matter of public record. A recent decision by the Court of Chancery reinforced the importance of maintaining public access to court proceedings in the interests of transparency and accountability.
In Product Madness, Inc. v. Brooke Kingston, the Court of Chancery recently held that filings related to an arbitration award were improperly designated as confidential, because Court proceedings and filings are open to the public under Rule 5.1. The rule allows a person to obtain confidential treatment only if they can demonstrate good cause for confidential treatment. The good cause exception covers only information shown to be sensitive and non-public, and if the harm from disclosure outweighs the public interest in access.
The arbitration was initiated by Kingston against Product Madness, a developer of casino games, pursuant to the mandatory arbitration provision in Product Madness’s Terms of Service. Kingston argued that, because the Terms of Service required the arbitration proceedings to be confidential, the filings were entitled to confidential treatment under Rule 5.1. Product Madness challenged Kingston’s designation of the material related to the arbitration as confidential, and the Court agreed.
With the decision to unseal the filings, the Court set the rule that an agreement requiring confidentiality in an arbitration provision does not guarantee that the proceedings will be kept from the public record. Instead, parties must establish good cause for confidential treatment according to the language of Rule 5.1. Examples of categories of information that may qualify as confidential information include trade secrets; sensitive proprietary information; sensitive financial, business, or personnel information; sensitive personal information such as medical records; and personally identifying information such as social security numbers, financial account numbers, and the names of minor children.
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