Confidentiality Stipulation Insufficient to Support Finding of Good Cause to Seal Documents and None Exists as to Information that is Embarrassing But Not Proprietary

On August 8, 2022, in Cf 125 Holdings LLC v. 125 LLC et al., Index No. 850143/2019, Justice Andrea Masley of the New York County Commercial Division granted in part and denied in part defendant’s motion to seal documents pursuant to Section 216.1 of the Uniform Rules for New State Trial Courts distinguishing communications that contain strategic information and could give a competitor an unearned advantage from documents that contain information that is inflammatory or embarrassing but not proprietary or confidential. The Court explained:

In the business context, courts have sealed records where the disclosure of documents “could threaten a business's competitive advantage.” (Mosallem v Berenson, 76 AD3d 345, 350-351, 905 N.Y.S.2d 575 [1st Dept 2010] [citations omitted].) Records concerning financial information may be sealed where there has not been a showing of relevant public interest in the disclosure of that information. (See Dawson v White & Case, 184 AD2d 246, 247, 584 N.Y.S.2d 814 [1st Dept 1992].) A party “ought not to be required to make their private financial information public ... where no substantial public interest would be furthered by public access to that information” and that “sealing a court file may be appropriate to preserve the confidentiality of materials which involve the internal finances of a party and are of minimal public interest.” (D'Amour v Ohrenstein & Brown, 17 Misc.3d 1130[A], 851 N.Y.S.2d 68, 2007 NY Slip Op 52207[U], *20 [Sup Ct, NY County 2007] [citations omitted].)

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Cindat relies in part on the confidentiality stipulation that it signed in connection to this action for the purposes of discovery. (See NYSCEF 245, Confidentiality Stipulation; NYSCEF 247, So-Ordered Confidentiality Stipulation.) A party’s designation of a document as confidential or restricted, without further explanation or supporting case law, is insufficient to support a finding of good cause to seal court records in whole or in part. (See Mosallem v Berenson, 76 AD3d 345, 905 N.Y.S.2d 575 [noting, rather, that New York courts have found good cause where disclosure of documents could threaten a business’s competitive advantage]; Grande Prairie Energy LLC v Alstom Power, Inc, 5 Misc 3d 1002(A), 798 N.Y.S.2d 709 [Sup Ct, NY County 2004].) While reliance on the parties’ confidentiality order is insufficient to support sealing of a document (Mosallem, 76 AD3d 345), Cindat has demonstrated good cause to prevent disclosure of information which could threaten its competitive advantage, discussed in more detail below.

Here, good cause exists to seal in their entirety NYSCEF 390-408 and NYSCEF 530-535, 537, 539, and 541 as these email communications all reveal proprietary information concerning business strategy surrounding the Project, specifically concerning the Project's financing and potential investors of the Project. (Mosallem, 76 AD3d at 350-355.)

However, the court cannot determine whether good cause exists to seal in their entirety NYSCEF 536, 538, and 540 as these letters, which were signed by Bizzi, without an affidavit from someone with knowledge explaining why the disclosure of the statements in Bizzi’s letters ould harm Cindat's competitive standing in the industry. Sealing court records that contain statements that are merely inflammatory or embarrassing and do not implicate any proprietary or confidential information of the moving party do not constitute good cause to seal court documents. (See In re Will of Hofmann, 284 AD2d 92, 727 N.Y.S.2d 84, [1^st Dept 2001] [finding that embarrassing allegations do not constitute good cause, absent consideration of privacy interests and/or harm to competitive advantage].) Cindat may renew its motion to explain why NYSCEF 536, 538, and 540 should be sealed in their entirety.

The attorneys at Schlam Stone & Dolan are familiar with motions to seal or redact documents for trial. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning such issues.