Financial newsletters covered by reporter’s privilege, courts say
From the Summer 2005 issue of The News Media & The Law, page 32.
Platts, a division of McGraw-Hill Cos. that publishes financial newsletters, has fought subpoenas for its confidential information in the federal courts for more than two years.
The Commodity Futures Trading Commission has subpoenaed information Platts obtained from sources in the energy trading industry. In the most recent in a series of subpoena struggles with the CFTC, Platts will argue its case in a federal court in Washington, D.C., later this year.
Although the CFTC claims Platts should not qualify for the reporter’s privilege, case law supports a privilege for financial newsletters.
For more than 10 years, courts have focused on the intent of the party claiming the privilege. In 1992, a federal judge in Massachusetts held that reporter’s privilege protected a financial newsletter publisher because it disseminated investigative information of public concern. The court explicitly stated in Summit Technology v. Healthcare Capital Group, that the publisher’s status as a member of the “organized press” was irrelevant.
In 1993, a federal judge in New York also found that Standard & Poor’s, a financial newsletter publisher, qualified for reporter’s privilege protection. In In re: Pan Am Corporation, the judge ruled that the publisher’s intent was important, and because Standard & Poor’s gathered material with the intent to disseminate it publicly, it was engaging in “newsgathering.”
Financial newsletters may lose the reporter’s privilege, however, if they become involved with the transactions they report.
In 2003, for example, a federal appellate court in New York held that Fitch Inc., a financial newsletter publisher that rates securities and debt offerings, did not qualify for the privilege under New York’s shield law. In In re Fitch Inc., a three-judge panel explained that because Fitch was involved in the transactions it rated, Fitch’s activities were “inconsistent with traditional journalism.” The court also noted that Fitch investigated only the specific companies it was hired to rate, which meant the company was producing reports based on client needs rather than newsworthiness.
A federal court in Michigan took the Fitch holding even further in 2004, ruling that the most important factor in determining a publisher’s status for privilege purposes is its involvement with the matters on which it reports. In Compuware Corporation v. Moody’s Investors Services, a federal judge held that even though a financial newsletter company only performed ratings when it was hired to do so, it qualified for the privilege anyway because the company was not involved in the transactions it was rating.
Despite the courts’ holdings in favor of privilege in this area, financial publications like Platts that objectively gather information are still fighting subpoenas.
Confidential sources are crucial to Platts’ mission of providing information on the global energy market, said Mary Skafidas, a Platts spokeswoman.
“Platts is only able to report on the marketplace effectively because of its reputation as an objective and independent third party,” she said. “It relies on its journalists to obtain information on the energy markets, and that ability would be impaired if sources believed that the government could readily obtain their identities and unpublished information from Platts.” — AG