Opinion
Index No.: 653668/2018
03-27-2019
NEW PENN FINANCIAL, LLC, Plaintiff, v. 360 MORTGAGE GROUP, LLC, Defendant.
NYSCEF DOC. NO. 76 Motion Seq. No. 002, 003, 004 Masley, J.:
Plaintiff New Penn Financial, LLC (New Penn) commenced this action for breach of contract and mutual mistake against defendant 360 Mortgage Group LLC (360) on July 23, 2018. (NYSCEF Doc. No. 2 at 13, 15.) New Penn alleges that it purchased from 360 certain mortgage servicing rights on mortgage loans guaranteed by the Government National Mortgage Association. In connection with this purchase, 360 allegedly provided erroneous calculations, either deliberately or accidentally, in violation of the agreements governing the purchase. (NYSCEF Doc. No. 2 at 3.) The alleged agreements governing the purchase consist of a letter of intent between New Penn's parent corporation and 360 dated March 5, 2018, a Mortgage Servicing Rights Purchase Agreement dated April 23, 2018 (MSRPA 1) and a Mortgage Servicing Rights Purchase Agreement dated May 8, 2018 (MSRPA 2). (NYSCEF Doc. No. 35 at ¶ 4.)
The complaint provides that mortgage servicing rights are contractual rights to service mortgage loans and to receive associated servicing fees. (NYSCEF Doc. No. 2 at 1.)
In motion sequence number 001, 360 moved to dismiss the complaint (001) and filed documents that are now the subject of the following sealing motions. (NYSCEF Doc. No. 9.) At oral argument of these sealing motions, no member of the public or press was present to express interest in this case. (NYSCEF Doc. No. 73 at 3.)
Motion Sequence Number 002
In motion sequence number 002, 360 moves to seal a memorandum of law (NYSCEF Doc. No. 10), exhibit B (NYSCEF Doc. No. 13), exhibit G (NYSCEF Doc. No. 18), exhibit H (NYSCEF Doc. No. 19), exhibit I (NYSCEF Doc. No. 20), exhibit K (NYSCEF Doc. No. 22), exhibit L (NYSCEF Doc. No. 23), exhibit M (NYSCEF Doc. No. 24), exhibit N (NYSCEF Doc. No. 25), exhibit O (NYSCEF Doc. No. 26) and exhibit P (NYSCEF Doc. No. 27).
360 asserts that exhibit B is a letter containing confidential and non-public terms of New Penn's parent corporation's offer to purchase mortgage servicing rights. 360 and New Penn seek to redact these terms because they allegedly could harm New Penn and its parent's competitive advantage in the industry. (NYSCEF Doc. No. 30.) The terms concern pricing, payment and timing.
Exhibits G, H, I, K, L, M, N, O and P contain lists of mortgage loans identified by loan number with data including personal identifying information such as borrower names and addresses. (NYSCEF Doc. No. 29.) 360 argues that the personal identifying information of third-party borrowers and financial data regarding their mortgage loans should be redacted to prevent fraud and identity theft.
To the extent that the memorandum of law cites the loan numbers, personal identifying information of the borrowers, and data concerning these borrowers' mortgage loans, 360 seeks to redact the memorandum of law.
Section 216.1(a) of the Uniform Rules for Trial Courts empowers courts to seal documents upon a written finding of good cause. It provides:
"(a) Except where otherwise provided by statute or rule, a court shall not enter an order in any action or proceeding sealing the court records, whether in whole or in part, except 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 the parties. Where it appears necessary or desirable, the court may prescribe appropriate notice and an opportunity to be heard.
(b) For purposes of this rule, 'court records' shall include all documents and records of any nature filed with the clerk in connection with the action. Documents obtained through disclosure and not filed with the clerk shall remain subject to protective orders as set forth in CPLR 3103 (a)."
Judiciary Law § 4 provides that judicial proceedings shall be public. "The public needs to know that all who seek the court's protection will be treated evenhandedly," and "[t]here is an important societal interest in conducting any court proceeding in an open forum." (Baidzar Arkun v Farman-Farma, 2006 NY Slip Op 30724[U],*2 [Sup Ct, NY County 2006] [citation omitted]). The public right of access, however, is not absolute. (see Danco Lab, Ltd. v Chemical Works of Gedeon Richter, Ltd., 274 AD2d 1, 8 [1st Dept 2000]).
The "party seeking to seal court records bears the burden of demonstrating compelling circumstances to justify restricting public access" to the documents. (Mosallem v Berenson, 76 AD3d 345, 348-349 [1st Dept 2010] [citations omitted]). The movant must demonstrate good cause to seal records under Rule § 216.1 by submitting "an affidavit from a person with knowledge explaining why the file or certain documents should be sealed." (Grande Prairie Energy LLC v Alstom Power, Inc., 2004 NY Slip Op 51156 [U], *2 [Sup Ct, NY County 2004]). Good cause must "rest on a sound basis or legitimate need to take judicial action." (Danco Labs., 274 AD2d at 9). Agreements to seal are insufficient as such agreements do not establish "good cause." (MBIA Ins. Corp. v Countrywide Home Loans, Inc., 2012 NY Slip Op 33147[U], * 9 [Sup Ct, NY County 2012]).
In the business context, courts have sealed records where trade secrets are involved or where the disclosure of documents "could threaten a business's competitive advantage." (Mosallem, 76 AD3d at 350-351 [citations omitted]). Additionally, the First Department has affirmed the sealing of records concerning financial information where there has not been a showing of relevant public interest in disclosure of the financing. (see Dawson v White & Case, 184 AD2d 246, 247 [1st Dept 1992].) For instance, in Dawson v White & Case, the First Department stated that the plaintiff appellant failed to show "any legitimate public concern, as opposed to mere curiosity, to counter-balance the interest of defendant's partners and clients in keeping their financial arrangement private." (Id. [internal quotation marks and citation omitted]).
Preliminarily, good cause exists to redact exhibits G, H, I, K, L, M, N, O and P insofar as they contain third-party borrower loan numbers, third-party borrower personal identifying information, and third-party borrower data concerning the mortgage loans. (See In re: Credit-Based Asset Servicing and Securitization LLC, 2014 WL 7177629 n2 [SD NY Bankr, December 9, 2014].) Good cause also exists to redact the memorandum of law to the extent that it too cites this information. (Id.) Additionally, good cause exists to redact exhibit B insofar as it contains terms concerning pricing, payment and timing because the parties have an interest in keeping their financial arrangement private and there is no showing of relevant public interest in disclosure of the financing. (Dawson v White & Case, 184 AD2d at 247.) Indeed, disclosing these terms as they pertain to the structuring of the purchase may well disadvantage New Penn and its parent corporation's competitive advantage in the mortgage services industry to the extent that they continue to make such purchases.
Motion Sequence Number 003
In motion sequence number 003 (003), New Penn moves to redact 360's memorandum of law (NYSCEF Doc. No. 10) and the MSRPA 1 and 2 filed as Exhibit C and D (NYSCEF Doc. Nos. 14 and 15.) and (2) sealing unredacted copies of these three documents as exhibits 1 (NYSCEF Doc. No. 14), 3 (NYSCEF Doc. No. 15), and 5 (NYSCEF Doc. No. 10) to the Miller Affidavit.
New Penn argues that the economic and other terms of these purchases are subject to and result from extensive negotiations and therefore, are competitively sensitive. (NYSCEF Doc. No. 37 at ¶ 3.) New Penn maintains that if a future seller of mortgage servicing rights knows the terms under which New Penn or its parent purchased or offered to purchase a particular pool of these mortgage servicing rights, New Penn and its parent would be at a disadvantage in subsequent negotiations. (Id.)
New Penn claims that 360's memorandum of law contains information that should be redacted concerning the direct quotes from MSPRA 1 and MSPRA 2 on pages 14 and 24. (NYSCEF Doc. No. 42.) With respect to MSRPA 1, New Penn seeks to redact certain highlighted portions of the representations, warranties and covenants of the seller and purchaser, certain indemnification and termination provisions, exhibits B and C, Schedule 4.08 to 4.13 (b), and pricing and duration terms. (NYSCEF Doc. No. 38.) As to MSPRA 2, New Penn seeks to redact pricing and duration terms, highlighted representations and warranties of the seller and purchaser, highlighted covenant and indemnification provisions, termination provisions, and schedule 4.08 to 4.13(b).
360 argues that it had the right under the confidentiality agreement that it entered into with New Penn to file these documents at issue in 003. (NYSCEF Doc. No. 55 at 7.) Additionally, 360 argues that New Penn has not asserted compelling justifications.
Although the parties make much about certain provisions in their confidentiality agreement, their confidentiality agreement is not relevant with respect to the court's analysis on this motion to redact. (See MBIA Ins. Corp. v Countrywide Home Loans, Inc., 2012 NY Slip Op 33147[U], * 9 [Sup Ct, NY County 2012]). Indeed, this court must make a finding of good cause with respect to the documents at issue. Here, good cause exists to redact MSRPA 1 with respect to the representations, warranties and covenants of the seller and purchaser, highlighted indemnification and termination provisions, exhibits B and C, Schedule 4.08 to 4.13 (b), and pricing and duration terms. (NYSCEF Doc. No. 38.) As to MSRPA 2, good cause exists to redact the highlighted pricing and duration terms, certain representations and warranties of the seller and purchaser, certain covenant and indemnification provisions, termination provisions, and schedule 4.08 to 4.13(b). Disclosing these terms as they pertain to the structuring of the purchase may well threaten New Penn and its parent corporation's competitive advantage in the mortgage services industry to the extent that they continue to make such purchases. (Mosallem, 76 AD3d at 350-351 [citations omitted]). Additionally, good cause exists to redact MSRPA 1 and MSRPA 2 because New Penn has an interest in keeping its financial arrangement private and there is no showing of relevant public interest. (Dawson v White & Case, 184 AD2d at 247.) To the extent that the memorandum of law quotes MSRPA 1 and MSRPA 2, good cause exists to further redact it.
Motion Sequence Number 004
In motion sequence number 004, 360 moves to redact Exhibit Q appended to the Reply Affirmation submitted in 001. Exhibit Q contains a list of 22,630 mortgage loans, identified by loan number and includes personal identifying information such as borrower names and addresses. (NYSCEF Doc. No. 68. at 1.) 360 argues that this information should be redacted to prevent fraud and identity theft. New Penn does not oppose. For the reasons stated above concerning motion sequence number 002, good cause exists to redact this information. (See In re: Credit-Based Asset Servicing and Securitization LLC, 2014 WL 7177629 n2 [SD NY Bankr, December 9, 2014].)
Pursuant to, and in accordance with, Rule 216, having determined that good cause exists for: (1) the redacting of NYSCEF Doc. Nos. 10, 13, 18, 19, 20, 22, 23, 24, 25, 26 and 27 as detailed in this decision; (2) the redacting of NYSCEF Doc. Nos. 10, 14, 15 as detailed in this decision; and (3) the redacting of Exhibit Q as detailed in this decision, and the grounds having been specified, it is now accordingly,
ORDERED that motion sequence number 002 is granted such that 360 and New Penn shall redact all references to pricing, payment and timing terms as directed by this decision from NYSCEF Doc. No. 13; and it is further
ORDERED that 360 and New Penn shall redact all references to third-party borrower loan numbers, third-party borrower personal identifying information, and third-party borrower data concerning the mortgage loans as directed by this decision from NYSCEF Doc. Nos. 10, 18, 19, 20, 22, 23, 24, 25, 26 and 27; and it is further
ORDERED that 360 and New Penn are directed to re-file NYSCEF Doc. Nos. 10, 13, 18, 19, 20, 22, 23, 24, 25, 26 and 27 in redacted form within 10 days of the date of this decision. Future submissions containing or referencing confidential information, as outlined in this decision, shall likewise be redacted prior to being filed publicly in NYSCEF, and shall also be filed in unredacted form and sealed; and it is further
ORDERED that the County Clerk, upon service on him of a copy of this order, is directed to unseal this action and accept NYSCEF Doc. Nos. 10, 13, 18, 19, 20, 22, 23, 24, 25, 26 and 27 in redacted form; and it is further
ORDERED that NYSCEF Doc. Nos. 10, 13, 18, 19, 20, 22, 23, 24, 25, 26 and 27 shall also be filed in unredacted form and sealed. Until further order of the court, the County Clerk shall deny access to the unredacted documents to anyone (other than the staff of the County Clerk or the court) except for counsel of record for any party to this case, a party, and any representative of counsel of record for a party upon presentation to the County Clerk of written authorization from the counsel; and it is further
ORDERED that motion sequence number 003 is granted such that 360 and New Penn shall redact all references to representations, warranties and covenants of the seller and purchaser, highlighted indemnification and termination provisions, exhibits B and C, Schedule 4.08 to 4.13 (b), and pricing and duration terms as directed by this decision from NYSCEF Doc. No. 14; and it is further
ORDERED that 360 and New Penn shall redact all references to pricing and duration terms, representations and warranties of the seller and purchaser, certain covenant and indemnification provisions, termination provisions, and schedule 4.08 to 4.13(b) as directed by this decision from NYSCEF Doc. Nos. 15; and it is further
ORDERED that 360 and New Penn shall redact the quotations from MSRPA 1 and MSRPA 2 from the memorandum of law as directed by this decision from NYSCEF Doc. No. 10; and it is further
ORDERED that 360 and New Penn are directed to re-file NYSCEF Doc. Nos. 10, 14, 15 in redacted form within 10 days of the date of this decision. Future submissions containing or referencing confidential information, as outlined in this decision, shall likewise be redacted prior to being filed publicly in NYSCEF, and shall also be filed in unredacted form and sealed; and it is further
ORDERED that the County Clerk, upon service on him of a copy of this order, is directed to unseal this action and accept NYSCEF Doc. Nos. 10, 14, and 15 in redacted form; and it is further
ORDERED that NYSCEF Doc. Nos. 10, 14 and 15 shall also be filed in unredacted form and sealed. Until further order of the court, the County Clerk shall deny access to the unredacted documents to anyone (other than the staff of the County Clerk or the court) except for counsel of record for any party to this case, a party, and any representative of counsel of record for a party upon presentation to the County Clerk of written authorization from the counsel; and it is further
ORDERED that motion sequence number 004 is granted such that 360 shall redact all references to third-party borrower loan numbers, third-party borrower personal identifying information, and third-party borrower data concerning the mortgage loans as directed by this decision from Exhibit Q; and it is further
ORDERED that 360 is directed to file Exhibit Q in redacted form within 10 days of the date of this decision. Future submissions containing or referencing confidential information, as outlined in this decision, shall likewise be redacted prior to being filed publicly in NYSCEF, and shall also be filed in unredacted form and sealed; and it is further
ORDERED that the County Clerk, upon service on him of a copy of this order, is directed to unseal this action and accept Exhibit Q in redacted form; and it is further
ORDERED that Exhibit Q shall also be filed in unredacted form and sealed. Until further order of the court, the County Clerk shall deny access to the unredacted documents to anyone (other than the staff of the County Clerk or the court) except for counsel of record for any party to this case, a party, and any representative of counsel of record for a party upon presentation to the County Clerk of written authorization from the counsel; and it is further
ORDERED that this order does not authorize sealing or redacting for purposes of trial. Dated: 3/27/19
ENTER:
/s/ _________
J.S.C.