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Warner Norcross + Judd LLP is a corporate law firm with over 230 attorneys serving clients in nine offices throughout Michigan. Among the largest law firms in Michigan, Warner works in virtually all areas of business law.

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By now, we have all heard about the fallout between the automotive supplier, Visteon and its former CEO, Timothy Leuliette. Although most coverage has focused on the salacious backdrop, the battle between Visteon and Leuliette serves as an important reminder that a court is not necessarily bound by two-party non-disclosure agreements and that previously sealed documents can indeed be unsealed by court order. On the broader level, the case raises questions regarding whether private arbitration is an appropriate alternative to litigation for sensitive matters at publicly traded companies.&nbsp;&nbsp;

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At the request of Visteon's board, Leuliette resigned in June 2015 and sought significant retirement benefits he deemed were outlined in his employee agreement. When the two sides couldn't agree, they were ordered to&nbsp;arbitration, despite Visteon's desire to&nbsp;litigate&nbsp;the matter.&nbsp;

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Initially, the private arbitration proceeded with expectation records would remain private and sealed. Among the key issues for consideration was whether or not Leuliette had been fired for cause. As explained in the award, "the circumstances surrounding Leuliette’s termination are somewhat unusual: he was initially terminated without cause and then, nearly a year later, Visteon sought to transform his termination into one with cause based on the result of their investigation of his conduct."

Those investigations centered on Leuliette's purported inappropriate use of corporate computers.&nbsp;&nbsp;

Given the accusations and unusual terms of dismissal, it's not surprising the applicable agreements, including the employee agreement and stock units agreement, failed to address what should happen when a termination without cause is later transformed into a termination with cause.

Arbitration concluded in October 2017, with Leuliette receiving just $16.7 million of the $61 million he originally demanded.&nbsp;

Motion to Confirm Filed in the Eastern District of Michigan

Here's where it gets interesting. In January 2018, Leuliette sought to confirm the arbitration award while asking the court keep the award and all relevant documentation under seal. He argued that virtually all of the filings in the matter should remain private because they concerned “sensitive and private conduct.”

For its part, Visteon filed a motion to seek&nbsp;<a>partial vacatur</a>&nbsp;of the award and urged the Court to unseal all of the pleadings and exhibits, arguing the case involves matters of public concern – the termination of the CEO of a publicly traded company and award of his severance benefits.

Federal Judge Terrance Berg sided with Visteon and ordered the documents be unsealed.&nbsp;

In his opinion, Judge Berg noted, “simply showing that the information would harm [a party’s] reputation is not sufficient to overcome the strong common law presumption in favor of public access to court proceedings and records." The Court acknowledged "arbitration hearings normally proceed outside of the public sphere. However, this veil of secrecy is lifted once the parties turn to federal court to confirm, vacate or modify an arbitration award."

The judge's opinion demonstrates that only the most compelling reasons can overcome the strong presumption in favor of allowing the public to access court documents, and harm to a party’s reputation is simply not compelling enough.

Perhaps the decision will reach beyond the case itself. For publicly traded companies like Visteon, is private arbitration a viable alternative to litigation when it involves high level executives if confidentially is desired? What level of transparency is promised to shareholders?

Visteon v. Leuliette&nbsp;shows there is a great premium on transparency. What individuals and companies perceive, and even agree, is confidential can quickly become public. For Leuliette, that lesson may have come too late.

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Visteon v. Leuliette: Federal Judge Unseals Documents

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Visteon v. Leuliette: Federal Judge Unseals Documents

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