WASHINGTON -- A federal appeals court ruled yesterday that a federal district judge acted unconstitutionally last fall in barring Business Week magazine from publishing an article based on secret court filings.
The 2-1 decision, by the 6th U.S. Circuit Court of Appeals in Cincinnati, was a broad victory for free-press rights.
The ruling lambasted the judge for issuing the ban and for keeping it in effect while he studied Business Week's reporting techniques.
The ruling also set a firm precedent against deals reached among lawyers handling business lawsuits to keep court filings secret.
It requires federal judges to closely monitor any efforts to "seal" such documents from public view. A judge may not "abdicate" that duty, the court said.
"The private litigants' interest in protecting their vanity or their commercial self-interest simply does not qualify as grounds for imposing a prior restraint," the appeals court said.
"It is not even grounds for keeping the information under seal."
Stephen B. Sheppard, the magazine's editor, called the ruling "a very strong reaffirmation of the First Amendment rights of the press and a strong slap at courts for randomly sealing documents."
Kenneth H. Vittor, general counsel for the magazine's parent, McGraw-Hill Inc., said "we feel vindicated" after a fight that began in mid-September and continued for five months during a five-month battle that led to before yesterday's ruling.
Bankers Trust Co., one of the two companies that sought the publishing ban, will not pursue the dispute further, according to its managing director, Thomas A. Parisi, in New York. The other company was Procter & Gamble Co. of Cincinnati.
The appeals court criticized U.S. District Judge John Feikens of Detroit for every legal move he made after Bankers Trust and P&G asked for an order to halt publication of the Business Week article.
That article -- published three weeks later, after the judge took the seal off the court filings -- was based partly on court papers from a lawsuit P&G had filed against Bankers Trust.
The magazine article, based on hundreds of thousands of pages of paper and 6,500 tape recordings, said the materials revealed "a pervasive pattern of fraud" in Bankers Trust's handling of investors' accounts.
The appeals court, in its criticism of Judge Feikens, remarked: "At no time did the District Court appear to realize that it was engaged in a practice that, under all but the most exceptional circumstances, violates the Constitution."
The appeals court opinion was written by Judge Gilbert S. Merritt of Nashville.
Judge Feikens, the court added, made no First Amendment inquiry before issuing the gag order Sept. 13, held a hearing on extraneous issues about Business Week's editorial processes, and kept the gag order in effect for three more weeks.
The appeals court ruled that the case was not dead even though the magazine ultimately published its article.
Similar threats, the court noted, could arise, and the magazine remained under a ruling by Judge Feikens that it had acted illegally in obtaining the documents.
That ruling, the appeals court said, was based on a misreading of Supreme Court decisions. It noted that the Supreme Court had never upheld a pre-publication ban on the press, even when a planned article threatened national security or someone's right to a fair trial. $ $TC Although the ruling was a victory for Business Week, the magazine did not escape some criticism. One of the appeals court judges, Boyce F. Martin Jr. of Louisville, Ky., who supported the ruling, said he "would not hold out [the magazine] as the torch-bearer for freedom of the press."
He said he was "at a loss" as to why the story was considered newsworthy.
Mr. Sheppard, the magazine editor, said of Judge Martin's editorial criticism: "That's ridiculous."
The dissenting judge, Bailey Brown, sharply criticized the strategy of the magazine's attorneys. He said the court should not have decided the constitutional issue because the magazine had long since published its article. He did not criticize the outcome, however.
Pub Date: 3/06/96