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Current Developments in the Commercial Divisions of the
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Posted: January 30, 2014

Court Allows Filing of Complaint Under Seal Along With Public Redacted Complaint

On January 23, 2014, Justice Bransten of the New York County Commercial Division issued a decision in Shareholder Representative v. Sandoz Inc., 2014 NY Slip Op. 30200(U), granting a motion to file a sealed complaint.

This action arose out of the sale of a pharmaceutical company, which was developing a new drug, to the defendant. The plaintiff alleged that the defendant violated the agreement by failing to meet various “milestones” for the drug’s development.

The plaintiff filed a motion for leave to file the entire complaint under seal. At a hearing on that motion, the court directed the parties to meet and confer regarding how the complaint could be rewritten so that the entire complaint would not have to be sealed. The plaintiff subsequently filed a second motion for leave to file a redacted version of the complaint. The court reviewed the motion under 22 NYCRR 216.1(a), which requires “good cause” for sealing any court record in whole or in part, by balancing the plaintiff’s interest in secrecy with the public interest in access to court records:

Uniform Rule 216.1 further provides that in determining whether good cause has been shown, the court shall consider the interests of the public as well as of the parties. Although good cause is not defined in Section 216.1(a), a finding of good cause presupposes that public access to the documents at issue will likely result in harm to a compelling interest of the movant. The First Department has held that the presumption of the benefit of public access to court proceedings takes precedence, and sealing of court papers is permitted only to serve compelling objectives, such as when the need for secrecy outweighs the public’s right to access, e.g., in the case of trade secrets.

(Internal citations and quotations omitted).

The court found that the complaint contained “technical information about a pharmaceutical drug which is still in development,” meeting the definition of a trade secret, and that the redacted complaint “contains sufficient unredacted information, such that the broad contours of this action and the relief sought therein are publically available,” and granted the motion.

For practitioners wanting to file a complaint under seal, this opinion shows that they will have to convince the court of the existence of a trade secret or some comparable interest, and also reminds them that they can help their cause by drafting their complaint in such a way that as little as possible will have to be redacted and offering to file a redacted complaint.

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