Corporations Seek to Seal Divorce Records

According to The National Law Journal, U.S. courts are receiving more requests to seal divorce records - requests from corporations, not couples.

Divorce lawyers say corporations, along with the rich and powerful, are increasingly asking judges to seal the divorce records of top executives either to protect trade secrets and crucial financial information or simply to avoid embarrassment.

Courts have long protected children in divorce cases by sealing records, but they are now doing the same for companies, treating trade secrets, assets, stock values, and executive salaries as valuable, sensitive information that needs special protection.

With state court records now available on the Internet in 30 states, fears of data theft or data leaks are at an all-time high among businesses.

For example, investment giant Capital Group Cos. recently convinced a California judge to limit access and seal secret company information in the divorce trial of one of its executives.

Also in California, a billionaire investor seeking to keep his financial records sealed in his divorce is appealing a March court ruling that struck down a California law allowing financial data in divorce records to be sealed. A group of newspapers is challenging that year-old law on constitutional grounds.

In New Hampshire, a new law that seals financial statements in divorce and child support cases is being challenged before the state supreme court by five newspapers (Associated Press v. State of New Hampshire).

In Connecticut, the sealing of divorce records triggered a major controversy in 2003 when The Connecticut Law Tribune discovered a "super-secret docketing system" that gave special treatment to prominent divorce cases and other civil matters. The Connecticut judiciary passed new rules that set standards for the closing of courtrooms and sealing of materials, among them a rule requiring a judge to explain the reasons for the closure or sealing and why they override the right of access.

According to The National Law Journal, several states have even introduced legislation in recent years to restrict public access to divorce records. California, New Hampshire, and Virginia successfully passed bills limiting access, and Utah and South Dakota are considering similar measures.

First Amendment lawyers and family law practitioners say that the desire for corporate secrecy outweighs the public's right to know. But companies counter that some information contained in divorce proceedings could jeopardize their competitive positions and business interests, as well as the privacy interests of its associates and employees, if revealed to the public.