Commercial Division Blog

Posted: February 9, 2022 / Written by: Jeffrey M. Eilender, Samuel L. Butt, Christopher R. Dyess, Joshua Wurtzel, Hillary S. Zilz / Category Discovery/Disclosure

Confidentiality Clause in Agreement Insufficient to Allow Agreement To Be Filed Under Seal

On January 21, 2022, Justice Joel M. Cohen of the New York County Commercial Division issued a decision in Coronado Coal II LLC v. Kinder Morgan Operating L.P., 2022 N.Y. Slip Op. 30253(U), holding that the presence of a confidentiality clause in an agreement is not, without more, sufficient to show that that agreement may be filed under seal, explaining:

Pursuant to § 216.1(a) of the Uniform Rules for Trial Courts, this Court may seal a filing "upon a written finding of good cause, which shall specify the grounds thereof. In determining whether good cause has been shown, the court shall consider the interests of the public as well as of the parties" (22 NYCRR § 216.1[a]).

The Appellate Division has emphasized that "there is a broad presumption that the public is entitled to access to judicial proceedings and court records" (Mosallem v Berenson, 76 AD3d 345, 348, 905 N.Y.S.2d 575 [1st Dept 2010]). "Since the right [of public access to court proceedings] is of constitutional dimension, any order denying access must be narrowly tailored to serve compelling objectives, such as a need for secrecy that outweighs the public's right to [**2] access" (Danco Lab., Ltd. v Chemical Works of Gedeon Richter, Ltd., 274 A.D.2d 1, 6, 711 N.Y.S.2d 419 [1st Dept 2000 [emphasis added]; see also, e.g. Gryphon Dom. VI, LLC v APP Intern. Fin. Co., B. V., 28 AD3d 322, 324, 814 N.Y.S.2d 110 [1st Dept 2006]). "Furthermore, because confidentiality is the exception and not the rule, 'the party seeking to seal court records has the burden to demonstrate compelling circumstances to justify restricting public access'" (Maxim, Inc. v Feifer, 145 AD3d 516, 517, 43 N.Y.S.3d 313 [1st Dept 2016] [citations [*2] omitted]).

In this case, Plaintiff's broad and categorical assertions of good cause do not establish a compelling justification to seal the documents at issue.

.     .     .

[T]he fact that the parties have entered into an Agreement with a confidentiality provision, is not, by itself, a reason to grant the motion, particularly where the provision contains a carve out for judicial or administrative proceedings. Given this, there is little basis for Plaintiff's argument that the revealing of the "confidential [*3] information" contained in the [**3] Agreement would put the parties in breach of that Agreement (see Aktiv Assets LLC v Centerbridge Partners, L.P., 2020 N.Y. Misc. LEXIS 2107, 2020 WL 2520019 [Sup Ct, NY County 2020] [finding that parties argument that "the Agreements are subject to a confidentiality provision [was] unavailing," as they did not demonstrate "that public access to the documents at issue will likely result in harm to a compelling interest or that no alternative to sealing can adequately protect the threatened interest"] [internal citations omitted]).

Commercial cases often involve the disclosure and filing of proprietary or otherwise confidential or sensitive documents and information. The Commercial Division is sensitive to parties' confidentiality concerns and will allow parties to file confidential documents and information under seal, but the party seeking the sealing order must show good cause to rebut the presumption of public access. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning confidentiality orders or sealing motions in the Commercial Division.