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The Story Behind The Bankers Trust Story

News: Analysis & Commentary: LEGAL BATTLES


On the evening of Sept. 13, just three hours before BUSINESS WEEK closed its issue dated Sept. 25, the fax machine on the 48th floor of the magazine's publisher, The McGraw-Hill Companies, began to hum. McGraw-Hill General Counsel Kenneth M. Vittor was finishing a routine prepublication legal review of an investigative article about litigation between Procter & Gamble Co. and Bankers Trust Co. What emerged from the machine at 6 p.m. dramatically altered the course of the evening. It was not just a court order prohibiting BUSINESS WEEK from publishing information in the article--it was an order that would set off a scramble within McGraw-Hill and at media organizations across the U.S. and set the stage for a test of First Amendment rights.

The issue: The warring companies seemed to have persuaded a federal judge to issue a "prior restraint" of the piece. Bankers Trust has argued that information in the story was taken from sealed court records obtained by BUSINESS WEEK and that it would suffer "irreparable harm" if the information became public. McGraw-Hill, which wasn't given a chance to argue its side before the order was issued, immediately cast the decision as a blatant violation of its constitutional rights under the First Amendment.

After reading the fax, Vittor, who was warned that he would be personally held in contempt if BUSINESS WEEK violated the order, mobilized a team of lawyers in Cincinnati, where the companies' dispute is unfolding. Within an hour, they attempted to contact U.S. District Court Judge John Feikens, who had signed the order. Unable to locate him, the lawyers called Judge Danny J. Boggs of the Court of Appeals for the Sixth Circuit at his home in Louisville. With the magazine's deadline fast approaching, BUSINESS WEEK's counsel implored the judge to vacate the lower court's order. But Boggs declined to take action.

CHILL FACTOR. His "no" was an extraordinary blow to the magazine. For the first time in its 66-year history, BUSINESS WEEK was forced by the government to pull a story from its publication. "If this order stands, for no compelling reason, it reverses at least 25 years of precedent governing prior restraint," says Stephen B. Shepard, BUSINESS WEEK's editor-in-chief. "It's really censorship."

The courts' actions also set in motion a legal drama that eventually reached all the way to the Supreme Court and could reshape First Amendment law. At issue: freedom of the press vs. the sanctity of the court system. BUSINESS WEEK maintains that if P&G and Bankers Trust prevail, the ability of the media to gather and publish sensitive information could be curtailed. With that argument in hand, McGraw-Hill on Sept. 14 filed an emergency request with the Sixth Circuit appellate court seeking relief from what it believed was a classic case of unconstitutional prior restraint. "The image of judges issuing prior restraints out of their chambers with fax machines, without prior notice to the media, is deeply troubling from a First Amendment perspective," says Vittor. McGraw-Hill has received official support for its position from major media organizations, including The New York Times, Time Warner, Dow Jones, Bloomberg, ABC News, Newsweek, and News America Publishing.

Court orders barring the publication of news articles have been issued in the past by lower courts. Usually, they dealt with national security, trade secrets, a right to a fair trial, or the identity of rape victims. But the U.S. Supreme Court has never sustained such an order. In its appeals, McGraw-Hill cited several such instances, including the 1971 Pentagon Papers case against The Times. BUSINESS WEEK's case focuses on a dispute between two publicly owned corporations--not on the location of troops going to war. "There's no national interest here, just commercial issues," says Victor A. Kovner, a First Amendment lawyer representing BUSINESS WEEK. Still, says Shepard, the magazine never considered ignoring the order. "We're not above the law," he says.

The crux of Bankers Trust's position: A court must be able to enforce its own orders. The bank, which is being sued by P&G for $195.5 million in damages relating to derivatives transactions, contends that preserving the court's power outweighs First Amendment arguments.

PROMISE OF PRIVACY. As is the case in many legal battles, much of the fight between Bankers Trust and P&G had been kept under wraps since January, 1995, when a court order sealed all discovery material designated by either party as confidential. And even though P&G on Sept. 1 filed a public motion in U.S. District Court seeking to add racketeering charges to its earlier allegations, documents filed to support that motion were sealed. "BUSINESS WEEK has no conceivable right to possess--or even to view--the materials, much less to publish them," Bankers Trust told the appellate court. The bank states that "tens of thousands of sensitive internal documents" were exchanged between the parties based on the promise that they would be kept private. To allow BUSINESS WEEK to now use those materials in an article, the bank argues, would undermine the power of the courts to control their own proceedings. "The public interest in the smooth and effective working of discovery and in the enforcement of court orders will be irreparably harmed if BUSINESS WEEK is permitted to flout the district court's protective order," the bank told the court in its brief. The magazine says its reporter obtained the document legally and did not know it was under seal.

P&G, which supported Feikens' restraining order, has taken a backseat in the current brawl. "This is not our fight," says a company spokesman. "The materials at issue are not P&G's, they are Bankers Trust's." The spokesman adds that the company supported Feikens' action "to preserve the integrity of the court's protective order."

After a nearly round-the-clock vigil at the Cincinnati courthouse by McGraw-Hill lawyers, a three-judge panel of the appellate court on Sept. 15 was named to hear the case on Sept. 18. Meanwhile, access to information about the case suddenly dried up. Of the thousands of public documents filed in the Bankers Trust-P&G case, not one page could be obtained by reporters. Even innocuous public records, such as the court docket, were unavailable. "We're not supposed to give it out," a clerk told BUSINESS WEEK Cleveland Bureau Chief Zachary Schiller on Sept. 15.

McGraw-Hill hoped it would win the green light it needed to publish its controversial story on Monday, the day of the hearing. But the appellate court judges--Robert Krupansky, Alan Norris, and Richard Suhrheinrich--asked 50 minutes of unrelenting questions focused less on the substantive legal issues at stake than on jurisdiction. Why, they asked, had neither party gone back to Feikens to argue the case? "Because of the time constraints, the rules of evidence and practice and procedure be damned," blasted Krupansky. The next morning, the panel unanimously dismissed the appeal, sending it back to the district court and keeping in place Feikens' ban.

On Sept. 19, McGraw-Hill upped the ante. The company filed an appeal with Supreme Court Justice John Paul Stevens, the judge assigned to hear appeals of cases originating in the Sixth Circuit. "There is quite literally no support in this case for the proposition that the prior restraint test has been met," McGraw-Hill told the high court.

As BUSINESS WEEK went to press, Stevens had not ruled on McGraw-Hill's appeal. The scramble continued.

A Journey to the Supreme Court


5 p.m.: BUSINESS WEEK editors finalize an investigative article about a legal battle between Bankers Trust and Procter & Gamble. The battle concerns losses suffered by P&G in derivatives transactions. Information in the story was derived from sealed court documents legally obtained by the magazine.

5:45 p.m.: Federal judge John Feikens, who is overseeing the Bankers Trust/P&G litigation, signs an order prohibiting the magazine from publishing any information taken from the sealed documents.

6 p.m.: Feikens' order is faxed to BUSINESS WEEK.

8 p.m.: McGraw-Hill lawyers, unable to locate Feikens, ask an appellate court judge to lift the order, arguing that it is an unconstitutional violation of the First Amendment.

9 p.m.: The judge declines to take action. Facing an imminent publishing deadline, BUSINESS WEEK is forced to pull the article from the magazine.


McGraw-Hill files an appeal of Feikens' order. It also files two emergency motions with the U.S. Court of Appeals for the Sixth Circuit, one seeking to lift Feikens' order and another asking for an expedited appeal of the matter.


A three-judge appellate court panel is named to hear McGraw-Hill's motion on Sept. 18. Bankers Trust urges the court to uphold Feikens' order, contending that it will be "irreparably harmed" if the confidential information is publicly disclosed.


Numerous media organizations, including The New York Times, Dow Jones, Bloomberg, and the Magazine Publishers of America file amicus briefs with the appellate court, supporting BUSINESS WEEK's First Amendment arguments. Bankers Trust asks the district court to issue a permanent injunction against McGraw-Hill. The three appellate judges hold a 50-minute hearing. Most of the session is spent on concerns relating to jurisdictional issues, not on the merits of the case.


The Sixth Circuit dismisses the appeal on jurisdictional grounds, noting that it should go back to Feikens. McGraw-Hill files an appeal with Supreme Court Justice John Paul Stevens Jr. (left), who is assigned to matters originating in the Sixth Circuit. Feikens sets a hearing of his own on Sept. 21 at 9 a.m.


As BUSINESS WEEK goes to press, Justice Stevens has not ruled on McGraw-Hill's appeal. McGraw-Hill's lawyers continue to press their case.By Linda Himelstein in New York, with Zachary Schiller and Stephen Baker in Cincinnati, and bureau reports

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