Wendt v. Wendt
706 A.2d 1021, 45 Conn. Supp. 208, 45 Conn. Super. Ct. 208 (1996)
Rule of Law:
While judicial proceedings are presumptively open to the public, a court may order a divorce hearing closed and files sealed if the testimony involves 'insider' corporate information that, if disclosed, would compromise the integrity of financial markets.
Facts:
- The defendant, Gary C. Wendt, is the president and CEO of General Electric Capital Services, Inc. and a senior vice president of General Electric Corporation.
- As a high-ranking executive, Wendt possesses significant vested and unvested stock options and ownership in General Electric, a publicly traded company.
- Wendt and the plaintiff wife are involved in a contested dissolution of marriage action.
- Because of his position, Wendt is considered an 'insider' with access to non-public information regarding the value and strategic use of these assets.
- The divorce proceedings require testimony regarding these financial assets, specifically Wendt's valuation of them and his intentions to exercise options.
- Wendt asserts that public disclosure of this testimony, prior to official SEC filings, would affect the market value of General Electric shares.
- Dow Jones and Companies (parent of the Wall Street Journal) seeks access to report on the financial disclosures.
Procedural Posture:
- The plaintiff wife filed an action for dissolution of marriage against the defendant in the Superior Court of Connecticut.
- The defendant filed a motion to seal the file and close the hearing pursuant to state statutes and practice rules.
- The plaintiff filed an objection to the defendant's motion.
- Dow Jones and Companies filed a motion to intervene in the case to oppose the closure, which the trial court granted.
- The trial court heard legal arguments from all parties regarding the motion to close the hearing.
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Issue:
Does the potential disclosure of non-public 'insider' information regarding a corporate executive's stock options and future trading intentions constitute an overriding interest sufficient to outweigh the public's constitutional right of access to divorce proceedings?
Opinions:
Majority - The Court
Yes, the protection of financial markets from the destabilizing effects of insider information disclosure constitutes an overriding interest that justifies closing the courtroom. The Court reasoned that while the First Amendment and Connecticut practice rules establish a presumption of openness, this right is not absolute. Mere embarrassment or the protection of a high profile reputation is insufficient to close a court. However, because the defendant is a corporate 'insider,' his testimony regarding unvested stock options and future trading plans constitutes material non-public information. If this information were revealed in open court before being filed with the SEC, it would allow observers to trade unfairly, potentially violating securities laws and impacting the Dow Jones Industrial Average. The Court determined that the public interest in maintaining the integrity of the stock market and protecting millions of investors outweighs the public's right to view this specific divorce proceeding.
Analysis:
This case illustrates a specific, high-stakes exception to the general policy of open courts in family law. Typically, the wealth of the parties is not a valid reason to seal a file. However, Wendt distinguishes between personal wealth and 'market-moving' information. The court prioritized federal securities concerns and market stability over the First Amendment right of access, essentially ruling that a divorce court cannot be used as a vehicle for insider trading tips. This creates a precedent that high-ranking corporate executives may be entitled to privacy in divorce not because they are wealthy, but because their specific financial data is inextricably checking with public market health.
