"Company Doe" wins challenge but loses anonymity - ruling makes it tougher for companies to confront erroneous online claims

by DLA Piper

A new decision by the Fourth Circuit Court of Appeal will require the lower court to unseal court documents, revealing the identity of a manufacturer that claims it was falsely implicated in a consumer report.1

This case, stemming from the SaferProducts.gov online consumer product report database created under the Consumer Product Safety Improvement Act of 20082, will make it harder for companies to challenge erroneous online reports regarding their products, while keeping the dispute anonymous to the public. 

Under current rules, to limit the impact of false or clearly erroneous consumer claims, the Consumer Product Safety Commission notifies companies implicated by a consumer report about a potentially unsafe product. The company has limited time to object to the information in the claim and submit evidence to support the objection.  If the company establishes its product was not the cause of any alleged harm, the Commission must revise the database accordingly.  This exchange of information is expedited, because the Commission must publish the report within 20 days of submission.

Company Doe’s successful anonymous challenge – and why the record was unsealed anyway

Company Doe challenged a consumer report of harm based on inaccuracies and inconsistencies.  The Commission made redactions and corrections, but intended to publish the corrected report, so Company Doe sought a federal court injunction.  With its complaint, Company Doe filed a motion to litigate under seal and to use a pseudonym, arguing that disclosing its identity would negate the effect of an injunction. 

Notably, Company Doe was successful on the merits of the case and the Commission was permanently enjoined from publishing the consumer report in the SaferProducts.gov database.  But, unfortunately for Company Doe, the merits of the action have no bearing on whether to seal the record.  And that is where things got more difficult.

The District Court sealed the record, acknowledging the Hobson’s choice between accepting inaccurate claims on SaferProducts.gov and further publicizing such claims through unsealed court proceedings.  But, in a recent decision, the Fourth Circuit Court of Appeals reversed and directed the District Court to unseal the record in its entirety.  The court found the public’s right of access to court proceedings is grounded in the First Amendment and safeguards the integrity of the judiciary.  Company Doe had an interest in preserving its reputation and fiscal health, but claims that may embarrass a company or injure its image are commonplace in federal courts.  Ultimately, the Court of Appeals found Company Doe failed to establish any compelling reasons to seal the record or proceed under a pseudonym.

Action steps for companies fighting false consumer reports

While limited to the Fourth Circuit for now, this ruling is a threat for companies falsely accused in product reports on SaferProducts.gov, or other public fora.  But companies challenging false reports may yet avoid Company Doe’s fate.  The key is demonstrating the threat of reputational harm as best as possible through evidence.  The Fourth Circuit in Company Doe made clear that reputational harm is not implicit in an argument to proceed under seal.  Rather, it was Company Doe’s burden to justify curtailing the public’s right of access, which burden was not met.  Those seeking confidentiality in similar court proceedings must bolster the request with concrete proof and specific consequences – perhaps including market research, or evidence of impacts on sales, insurance premiums, or litigation defense costs in other similar cases .  The concurrence in the Company Doe decision even suggested the use of experts to explain the financial consequences of reputational harm.  

While anonymity is still possible after Company Doe, the path is now less certain and more expensive.  Companies are faced with a heightened danger of inviting additional attention when challenging a false or inaccurate report, making the business decision to do so more challenging.

1 Company Doe v. Public Citizen, No. 12-2209 (4th Cir. April 16, 2014).

2 (CPSIA) 15 U.S.C 2051(a)(1); Pub. L. No. 110-314, 122 Stat. 3016 (2008).


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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