Opinion
INDEX NO. 651469/2019
05-14-2019
JAY SCHIFF, Plaintiff, v. ZM EQUITY PARTNERS, LLC, CENTRE LANE PARTNERS, LLC, MORGAN QUINN, and 10TH LANE PARTNERS, LLC, Defendants.
NYSCEF DOC. NO. 41 PRESENT: HON. ANDREA MASLEY Justice MOTION DATE __________ MOTION SEQ. NO. 001
DECISION AND ORDER
Masley, J.:
In motion sequence number 001, defendants Centre Lane Partners, LLC (CLP) and 10th Lane Partners, LLC (LP) move to redact plaintiff Jay Schiff's complaint and the accompanying exhibits filed as NYSCEF Doc. Nos. 2, 3, 4, 5, 9, 11, 12, 14, and 15. (NYSCEF Doc. No. [Doc.] 34, 24 at ¶ 4.)
Plaintiff, an investment manager specializing in private debt investments (Doc. 2 at ¶ 29), commenced this action against defendants CLP, LP, ZM Equity Partners, LLC (ZM), and Morgan Quinn. Plaintiff alleges breach of an employment agreement and the covenant of good faith and fair dealing against ZM and CLP (Doc. 2 at ¶¶ 92-109), breach of an LLC Agreement and the covenant of good faith and fair dealing against LP, (id. at ¶¶ 110-120), tortious interference with the employment agreement against Morgan and LP, (id. at ¶¶ 121-130), tortious interference with the LLC agreement against Morgan, ZM, and LP (id. at ¶¶ 131-136), and declaratory judgments concerning the parties' rights and obligations. (Id. at ¶¶ 137-158.) In connection with the filing of the complaint and its accompanying exhibits, plaintiff allegedly failed to redact certain information. CLP and LP contend that, if their competitors, who also offer financial products, view this information, these competitors will gain an unearned advantage over CLP and LP in hiring as well as pricing, structuring, and evaluating financial instruments.
Specifically, CLP and LP assert that Doc. 3, a letter offering plaintiff employment, contains confidential, proprietary, and competitive business information, including salary details, bonus and incentive compensation structure, the business methods, and conditions of employment. (Doc. 24 at ¶ 4 [i].)
Doc. 4 is plaintiff's Employee Confidentiality and Non-Solicit Agreement with ZM. CLP and LP maintain that this filing contains confidential business strategies, including how plaintiff's contractual arrangements are associated with company investment strategies, financial percentages of investments, and distribution of these investments. (Id. at ¶ 4 [ii].)
Doc. 5 is the 10th Lane Finance Co., LLC Amended and Restated Limited Liability Company Agreement. CLP and LP maintain that this filing discloses confidential and proprietary business strategy, specific monetary capital contribution information of private entities, confidential business corporate structures and strategies, investment methodologies, and private financial information of third parties. (Id. at ¶ 4 [iii].) This filing allegedly discloses highly confidential private investors. (Id.)
Doc. 9 is an email exchange between defendants' counsel and plaintiff's prior counsel. CLP and LP maintain that it contains confidential distribution information such as confidential investor details, distribution dates, the audit schedule, and confidential information of a distinct nonparty entity. (Id. at 4 [iv].)
Doc. 11 contains an email between plaintiff and an individual associated with CLP as well as an email between plaintiff and Morgan. These emails allegedly contain confidential investor details, distribution dates, and confidential information of a distinct non-party entity and investment portal details. (Id. at 4 [v].) They also allegedly include references to member capital and interest distributions. (Id.)
Doc. 12 contains email exchanges between defendants' counsel and plaintiff's prior counsel that allegedly contain confidential investor details, distribution dates, the audit schedule and specifically include terms of the 10th Lane Finance Co., LLC Amended and Restated Limited Liability Company Agreement. (Id. at 4 [vi].)
Doc. 14 is a letter from ZM to plaintiff discussing plaintiff's resignation. It allegedly includes terms of plaintiff's Employee Confidentiality and Non-Solicit Agreement with ZM. (Id. at 4 [vii].)
Doc. 15 is an email exchange between plaintiff and Morgan that allegedly discloses references to 10th Lane Finance Co., LLC Amended and Restated LLC Agreement, that includes confidentiality and non-disclosure provisions, fundraising, investor timing and business strategy, all of which is confidential, competitive financial and business information. (Id. at 4 [viii].)
Lastly, Doc 2, plaintiff's complaint, allegedly contains competitive business information derived from Docs. 3, 4, 5, 9, 11, 12, 14, and 15. (Id. at 4 [ix].)
Plaintiff "takes no position on the [m]otion to [r]edact and [s]eal, because he has no interest in the relief requested ... ." (Doc. 35 at ¶ 3.)
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]).
Preliminary, good cause exists to redact Doc. 3, plaintiff's employment agreement with ZM, to the extent it includes salary details, bonus and incentive compensation structure, business methods and conditions of employment.
Good cause does not exist to redact Doc. 4, plaintiff's confidentiality agreement with ZM. Although CLP and LP maintain that Doc. 4 contains confidential business strategies, including how plaintiff's contractual arrangements are associated with company investment strategies, financial percentages of investments and distribution of these investments, upon review, the court is not persuaded. Moreover, CLP and LP do not articulate, and it is unclear, how any specific contractual provision might threaten defendants' competitive advantage.
Good cause exists to redact Doc. 5, 10th Lane Finance Co., LLC's Amended and Restated LLC Agreement, to the extent it contains specific monetary capital contribution information of private entities, confidential business corporate structures and strategies, investment methodologies, and private financial information of third parties.
Good cause does not exist to redact Doc. 9, an email exchange between defendants' counsel and plaintiff's prior counsel. Although CLP and LP argue that this email exchange contains confidential distribution information, such as confidential investor details, distribution dates, the audit schedule and confidential information of a distinct non-party entity, this is a mischaracterization. Indeed, nothing present in this email exchange qualifies as a trade secret or a threat to defendants' competitive advantage in the industry.
Good cause exits to redact Doc. 11, an email between plaintiff and an individual associated with CLP as well as an email between plaintiff and Morgan, only to the extent that it specifies dates and characterizes the distribution because the defendants have an interest in keeping their financial arrangement private.
Good cause does not exist to redact Doc. 12, an email exchange between defendants' counsel and plaintiff's former counsel, for the same reasons stated with respect to Doc. 9. Further, good cause does not exist to redact Doc. 14, ZM's letter confirming plaintiff's resignation, for the same reasons stated with respect to Doc. 4. Good cause also does not exist to redact Doc. 15, an email exchange between plaintiff and Morgan, for the reasons stated with respect to Doc. 9.
Finally, good cause exists to redact Doc. 2 only to the extent that it may contain information from Docs. 3, 5 and 11 that this court has found good cause to redact.
Pursuant to, and in accordance with, Rule 216, having determined that good cause exists for the redacting of NYSCEF Doc. Nos. 2, 3, 5 and 11 it is now accordingly,
ORDERED that the motion is granted such that the parties shall redact all references to as directed by this decision from NYSCEF Doc. Nos. 2, 3, 5 and 11; and it is further
ORDERED that the parties are directed to re-file NYSCEF Doc. Nos. 2, 3, 5 and 11 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 seal the unredacted version of NYSCEF Doc. Nos. 2, 3, 5 and 11; and it is further
ORDERED that, 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. 5/14/19
DATE
/s/_________
ANDREA MASLEY, J.S.C.