Expansion of Newsgathering Privilege: Fitch Inc. v. American Savings Bank

Expansion of Newsgathering Privilege: Fitch Inc. v. American Savings Bank

Introduction

The case of In re FITCH, INC. v. American Savings Bank, FSB presents a pivotal moment in the interpretation of New York's Shield Law as it applies beyond traditional journalism. The dispute centers around Fitch, Inc., a prominent financial rating agency, and its refusal to comply with a subpoena issued by American Savings Bank (ASB) seeking internal communications related to securities ratings. The core issue revolves around whether Fitch qualifies for the newsgathering privilege traditionally reserved for professional journalists under New York's Shield Law.

Summary of the Judgment

The United States Court of Appeals for the Second Circuit affirmed the decision of the United States District Court for the Southern District of New York, which held Fitch, Inc. in contempt for refusing to comply with a subpoena. The district court found that Fitch could not assert the newsgathering privilege under New York's Shield Law, as Fitch's activities did not align sufficiently with those of a professional journalist. The appellate court agreed, emphasizing that Fitch's role in structuring financial transactions and its selective reporting based on client relationships distinguished it from traditional journalistic entities.

Analysis

Precedents Cited

The judgment extensively references prior cases to frame the boundaries of the newsgathering privilege:

  • O'Neill v. Oakgrove Const., Inc.: Established the need to protect journalistic autonomy from intrusive discovery processes.
  • In re Pan Am Corp. and In re Scott Paper Co. Sec. Litig.: Recognized competitors like Standard & Poor's as journalists for purposes of asserting privilege.
  • Gonzales v. Nat'l Broad. Co., Inc. and In re Petroleum Prods. Antitrust Litig.: Acknowledged common law privileges for nonconfidential and confidential information respectively.

These precedents collectively underscore the judiciary's stance on distinguishing between traditional journalism and entities engaged in specialized, client-driven reporting.

Legal Reasoning

The court's legal reasoning hinged on the definition and application of New York's Shield Law. Key points include:

  • Definition of Professional Journalist: According to N.Y. Civ. Rights Law § 79-h(a)(6), it includes individuals engaged in gathering and disseminating news through professional mediums. Fitch contended that its activities mirrored those of journalists by analyzing and making information public.
  • Selective Reporting: Unlike traditional journalists who cover newsworthy events broadly, Fitch's ratings are typically commissioned by clients, limiting its reporting scope to client-specific transactions.
  • Active Involvement: Evidence revealed Fitch's active role in structuring financial transactions, indicating a collaboration that diverges from independent journalistic endeavors.
  • Protective Order and Sealed Evidence: The court considered sealed communications demonstrating Fitch's involvement in transaction structuring, which undermined its claim to journalistic privilege.

The court concluded that Fitch's business practices did not align with the autonomous information-gathering typical of journalists, thus negating its ability to assert the newsgathering privilege.

Impact

This judgment has significant implications for entities like financial rating agencies and investment research firms:

  • Limitations on Privilege Claims: Firms that engage in client-specific analyses may find it challenging to claim journalistic privilege under Shield Laws.
  • Enhanced Discoverability: Information held by such agencies can be subject to discovery in litigation, increasing transparency.
  • Regulatory Scrutiny: The decision encourages regulatory bodies to more closely monitor the activities of rating agencies to ensure compliance and accountability.

Future cases involving specialized information-gathering entities must carefully assess whether their activities meet the threshold of professional journalism as defined by relevant statutes and case law.

Complex Concepts Simplified

Newsgathering Privilege

This legal protection allows journalists to refuse compliance with subpoenas seeking confidential information gathered during their reporting activities. It aims to safeguard the independence of the press by preventing legal actions from disrupting the news collection process.

Shield Law

Specifically, New York's Shield Law provides journalists with protections against being forced to disclose confidential sources or unpublished information. To assert this privilege, the entity must qualify as a professional journalist and demonstrate that the information sought is both confidential and integral to their reporting.

Contempt for Non-Compliance

When an entity refuses to comply with a court-ordered subpoena without a valid legal exemption, the court may hold them in contempt. This can result in penalties, including fines or other sanctions, compelling future compliance.

Non-Party Subpoena

A subpoena directed at a party that is not directly involved in the litigation process. In this case, Fitch was a non-party subjected to the subpoena issued by ASB, leading to the legal dispute over privilege claims.

Conclusion

The appellate court's affirmation in Fitch Inc. v. American Savings Bank reinforces the boundaries of journalistic privilege under New York's Shield Law. By delineating the distinct roles between traditional journalists and specialized financial entities, the court has clarified that not all information-gathering organizations are afforded the same legal protections. This decision underscores the necessity for entities to evaluate their operational practices against statutory definitions when asserting privileges, ensuring that the sanctity of press freedom is maintained without inadvertently extending protections to non-journalistic entities.

Case Details

Year: 2003
Court: United States Court of Appeals, Second Circuit.

Judge(s)

John Mercer WalkerJames Lowell OakesRobert A. Katzmann

Attorney(S)

Evan A. Davis, Cleary, Gottlieb, Steen Hamilton, New York, N.Y. (Anil Kalhan, of counsel, on the brief) for Appellant-Cross-Appellee Fitch, Inc. Adrienne B. Koch, Esanu Katsky Korins Siger, LLP, New York, N.Y. (Paul Alston, Alston Hunt Floyd Ing, Honolulu, HI, on the brief), for Plaintiff-Appellee-Cross-Appellant American Savings Bank, FSB. (Floyd Abrams, Adam Zurofsky, and Brian Markley, Cahill Gordon Reindel, New York, NY, submitted a brief for Amicus Curiae Standard Poor's in support of Appellant Fitch, Inc.) (Mark A. Fowler and James J. Coster, Satterlee Stephens Burke Burke LLP, New York, NY, submitted a brief for Amicus Curiae Moody's Investors Service, Inc., in support of Appellant Fitch, Inc.) (Eliot Spitzer, Attorney General of the State of New York, by Michelle Aronowitz and Andrea Oser, Albany NY, submitted a brief for Amicus Curiae State of New York in support of Appellee American Savings Bank, FSB.)

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