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Oops! Orrick Associate Lets Slip Mercury Backdating Document


— February 20, 2007

I’m glad that my name is not M. Todd Scott at the moment, and I offer my heartfelt condolences to him. This is every young litigation associate’s worst nightmare.

If it’s any comfort, I deal with “sealed” court documents almost every day. The rules and procedures for having records sealed are rather complex and not very intuitive.1 I see experienced lawyers screw up the process on a regular basis. Here is poor Mr. Scott’s story:

Orrick Associate M. Todd Scott

A fourth-year associate at Orrick, Herrington & Sutcliffe inadvertently disclosed a sensitive document about stock option backdating that the firm has spent the last five months fighting to keep under seal.

The document — a complaint in a shareholder derivative action against former executives of Mercury Interactive Corp. — contains explosive allegations against the executives and quotes extensively from e-mails in which the executives allegedly discuss backdating their own stock options.

“What do you want to do about [Chief Financial Officer Douglas Smith]’s option since the price is going up?” former General Counsel Susan Skaer is quoted asking CEO Amnon Landon in one e-mail. “Keep waiting?”

The complaint, Morillo v. Abrams, 1:05-cv-50710, had been filed under seal on Sept. 22 as part of a confidentiality agreement with the executives’ lawyers — but without judicial approval. The Recorder and two other news organizations have been trying since then to unseal the complaint and its supporting exhibits.

But a Dow Jones News Service reporter discovered Friday that Orrick associate M. Todd Scott had inadvertently filed the complaint publicly with a motion to stay the derivative action in October. The Wall Street Journal posted the complaint on its Web site over the weekend and wrote a story about it on page A-4 of Tuesday’s print edition.

In a filing for an emergency hearing on Tuesday, Orrick partner James Kramer wrote that Scott thought the complaint had been filed under seal when Scott included it as an exhibit to his own declaration.

“At the time the exhibit was filed, counsel for Ms. Skaer intended for the exhibit to be filed under seal, and, indeed, believed the exhibit had been filed under seal,” Kramer wrote. “Counsel continued in this belief until the afternoon of Feb. 16, 2007, at which time the court clerk notified all parties that the exhibit had not been filed under seal and was publicly available.”

Keep in mind that the court and the opposing party[s] always had access to the document in question, whether it was filed under seal or not. It’s just that now the public has access to it too.

My best wishes to Mr. Scott. Details here from Scott Graham of The Recorder, via Law.com.

1. See, e.g., NBC Subsidiary (KNBC-TV), Inc. v. Superior Court (Locke) (1999) 20 Cal.4th 1178; CRC Rule 2.551 et seq.


I’m glad that my name is not M. Todd Scott at the moment, and I offer my heartfelt condolences to him. This is every young litigation associate’s worst nightmare.

If it’s any comfort, I deal with “sealed” court documents almost every day. The rules and procedures for having records sealed are rather complex and not very intuitive.1 I see experienced lawyers screw up the process on a regular basis. Here is poor Mr. Scott’s story:

Orrick Associate M. Todd Scott

A fourth-year associate at Orrick, Herrington & Sutcliffe inadvertently disclosed a sensitive document about stock option backdating that the firm has spent the last five months fighting to keep under seal.

The document — a complaint in a shareholder derivative action against former executives of Mercury Interactive Corp. — contains explosive allegations against the executives and quotes extensively from e-mails in which the executives allegedly discuss backdating their own stock options.

“What do you want to do about [Chief Financial Officer Douglas Smith]’s option since the price is going up?” former General Counsel Susan Skaer is quoted asking CEO Amnon Landon in one e-mail. “Keep waiting?”

The complaint, Morillo v. Abrams, 1:05-cv-50710, had been filed under seal on Sept. 22 as part of a confidentiality agreement with the executives’ lawyers — but without judicial approval. The Recorder and two other news organizations have been trying since then to unseal the complaint and its supporting exhibits.

But a Dow Jones News Service reporter discovered Friday that Orrick associate M. Todd Scott had inadvertently filed the complaint publicly with a motion to stay the derivative action in October. The Wall Street Journal posted the complaint on its Web site over the weekend and wrote a story about it on page A-4 of Tuesday’s print edition.

In a filing for an emergency hearing on Tuesday, Orrick partner James Kramer wrote that Scott thought the complaint had been filed under seal when Scott included it as an exhibit to his own declaration.

“At the time the exhibit was filed, counsel for Ms. Skaer intended for the exhibit to be filed under seal, and, indeed, believed the exhibit had been filed under seal,” Kramer wrote. “Counsel continued in this belief until the afternoon of Feb. 16, 2007, at which time the court clerk notified all parties that the exhibit had not been filed under seal and was publicly available.”

Keep in mind that the court and the opposing party[s] always had access to the document in question, whether it was filed under seal or not. It’s just that now the public has access to it too.

My best wishes to Mr. Scott. Details here from Scott Graham of The Recorder, via Law.com.

1. See, e.g., NBC Subsidiary (KNBC-TV), Inc. v. Superior Court (Locke) (1999) 20 Cal.4th 1178; CRC Rule 2.551 et seq.

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