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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: April 8, 2021

Court Rejects Overbroad Motion to Seal Records

On March 25, 2021, Justice Reed of the New York County Commercial Division issued a decision in Cortlandt St. Recovery Corp. v. Bonderman, 2021 NY Slip Op. 21074, rejecting an over-broad motion to seal court records, explaining:

Pursuant to 22 NYCRR ยง 216.1(a), a court is empowered to seal court records upon a written finding of good cause. 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 and must overcome the broad presumption of public entitlement to judicial proceedings and court records.” Sealing may be permissible if disclosure could be harmful to a party and would not serve a legitimate public purpose, and no alternative to sealing can adequately protect the threatened interest. Neither the potential for embarrassment or damage to reputation, nor the general desire for privacy, constitutes good cause to seal court records.

In moving, plaintiff sought to seal over 60 documents and deposition transcripts (the Exhibits or Exhibits) for which it initially filed placeholder pages on NYSCEF pending plaintiff’s further review of those materials. Plaintiff acknowledged that it might not be necessary to seal all of the Exhibits, but requested a sealing order for the unspecified period of its review. Not long after, plaintiff filed unredacted copies of many of the Exhibits on NYSCEF, but did not update the court as to the status of its review.

Concerning commercial matters, the movant must demonstrate that the material it seeks to have sealed contains trade secrets, confidential business information, or proprietary information. Such materials and information generally would involve closely guarded information about current or future business plans or strategies, the disclosure of which likely would provide an advantage to a competitor. Even though the motion and the cross motion are unopposed, the court is required to make its own inquiry to determine whether sealing is warranted.

Plaintiff’s vague and conclusory assertions, which do not address any particular document or deposition transcript, or explain how or why public disclosure might cause potential harm, are insufficient to meet its burden on this motion. Review of several of the unfiled Exhibits reveals that they primarily involve transactions from as long as 15 years ago. One of the Exhibits indicate that information about certain of those transactions was provided to banks or rating agencies, so it is not clear what information was closely guarded. Plaintiff has not indicated what portions of the voluminous remaining withheld Exhibits it deems sensitive and confidential, and this is not self-evident from the materials, especially as many documents about this case have now been disclosed on NYSCEF.

For example, Exhibit 11 to the Attorney Affirmation is an expert’s opinion as to the alter ego status of certain entities, but what in the report requires sealing or why is not addressed. Exhibit 84 to the Attorney Affirmation primarily addresses the law of Luxembourg and financial instruments relating to a 2006 transaction, but why this information would require protection so many years later is not sufficiently addressed. In addition, redacted portions of the OMOL rely on documents, or are quotes from documents, that plaintiff has now filed in unredacted form. Thus, there no longer appears to be a reason for such redactions in the OMOL. That the documents and testimony have been designated confidential by the parties, is not sufficient alone to demonstrate entitlement to sealing.

In cross-moving, defendants contend that deposition transcripts of current or former employees of two private equity firms should be sealed because they concern the business operations and internal practices and procedures of those firms. This assertion is conclusory, does not address whether information about such operations or internal practices has been closely guarded, and thus is insufficient to meet a movant’s burden to demonstrate compelling circumstances to justify restricting public access.

As an example, in exhibit 7 to the Attorney Affirmation, a deposition transcript, the deponent discusses certain entities, but his testimony is primarily about transactions that occurred prior to 2007. The court cannot assume that this information has been guarded, or that disclosure of it, at this point, would cause harm. In exhibit 23 to the Attorney Affirmation, the information discussed also appears dated and/or, primarily, general industry knowledge. In exhibit 49, the deponent does not appear to extensively address internal business operations or practices and procedures in a specific manner. Defendants have not sufficiently demonstrated what information discussed in the depositions: (1) is proprietary; (2) was maintained in a confidential manner over the years; or (3) would lead to an unearned advantage for competitors if disclosed. There also has been no showing that selected redaction, or the sealing of attachments to deposition transcripts, would not suffice to provide genuinely needed protection. While it may be that some of the Exhibits, including the ones discussed above, contain information such that sealing or redaction would be permissible, this has not been sufficiently demonstrated here.

As neither party has met its burden, the motion and cross motion are denied, but denial is without prejudice to either party making another motion to seal which concisely and specifically addresses each exhibit that the party seeks to have sealed or redacted. Any currently unfiled Exhibits, or any portion of the OMOL, that is not the subject of a motion to seal made within 45 days of the date of this order shall be uploaded to NYSCEF, as described below.

(Internal quotations and citations omitted) (emphasis added).

This decision relates to a common issue in complex commercial litigation: the balancing of the New York courts’ need to make their proceedings public and litigants’ need to protect sensitive commercial information. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding protecting sensitive commercial information during litigation.

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