Seeking Urgent Protective Relief To Seal Court Documents Does Not Waive The Right To Later Arbitrate Dispute

On October 3, 2024, Justice Joel M. Cohen denied a motion to stay arbitration brought by an employee against his former employer, holding that the employer’s decision to seek urgent protective relief from the Court did not waive its right to arbitrate. In Jason Owen v. Array U.S. Inc., et al., Index No. 651471/2022, Jason Owen asserted claims for breach of contract in court against his employer, Array, based upon alleged wrongful termination and denial of compensation. During the briefing of a motion to dismiss in the case, Owen filed several documents on the public docket that Array moved to seal as confidential. The Court granted the sealing motion. Array then initiated a JAMS arbitration proceeding, claiming that Owen had misappropriated confidential information that had been publicly disclosed in the court filings. Owen responded by moving to permanently stay the arbitration on the ground that Array had waived its right to arbitrate.

The Court found no waiver had occurred despite Array’s actions in Court to seal the confidential documents. It explained:

“[N]ot every foray into the courthouse effects a waiver of the right to arbitrate.” . . . “[W]here urgent need to preserve the status quo requires some immediate action which cannot await the appointment of arbitrators, waiver will not occur where plaintiff moves in court for protective relief in order to preserve the status quo while at the same time exercising its right under the contract to demand arbitration” . . . . Here, the fact that Owen submitted the Confidential Documents in this Court, and that Array responded with a motion to seal (which Owen did not oppose), does not bring Array’s “entirely separate” arbitration claim within the scope of the claims being litigated in this Court. Array has not sought, and the Court has not provided, any ruling as to whether Owen has misappropriated Array’s trade secrets or confidential information. The Court simply determined that the request to seal the documents complied with the standards applicable to such requests.

The attorneys at Schlam Stone & Dolan frequently counsel clients concerning arbitration and the sealing of confidential information during litigation. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning such issues.