Good Cause to Seal Documents Turns on Answers to Deposition Questions

On September 5, 2022, Justice Andrea Masley of the New York County Commercial Division issued a decision in BDO United States v. Franz, Index No. 652816/2020, granting in part and denying in part a renewed motion to permanently seal court documents containing interviews of former employees about the development of proprietary tools in an action for breach of their employment contracts, explaining:

The “party seeking to seal court records has the burden to demonstrate compelling circumstances to justify restricting public access” to the documents. (Id. at 349 [citations omitted].) Good cause must “rest on a sound basis or legitimate need to take judicial action.” (Danco Lab Ltd. v. Chemical Works of Gedeon Richter, Ltd., 274 AD2d 1, 8 [1st Dept 2000] [internal quotations omitted].)

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Here, the court agrees with defendants to the extent that some of defendants’ answers do not implicate competitively sensitive information that requires wholesale sealing of the document. Good cause does not exist to seal non-proprietary information that does not reveal, inter alia, trade secrets, business strategy, and/or internal finances that could harm BDO's competitive standing in the industry. For example, good cause does not exist to seal the entire transcript where many responses merely say “I’m not sure,” “Sorry?”, “Okay,” or responses to this effect. (See, e.g., NYSCEF 207, Transcript of Defendants” Interviews at 24; id. at 100 [“I would have to go back and look at my records and see exactly when I did that.”]; id. at 177-78 [“I do not ever want to deal with lawyers again because that was horrible.”].) These types of answers from the defendants do not reveal any confidential information under any standard, and thus, BDO shall refile a narrowly-tailored redacted version of NYSCEF 207 with redactions that only implicate proprietary information that could cause harm should this information be disclosed to the public. In doing so, BDO should also take into consideration that this transcript does not contain the questions asked to defendants, which may mitigate the risk of adverse harm the disclosure of this transcript could pose.

However, defendants’ contention that the information is publicly available or has been released to the public in prior instances, and therefore, should not be sealed is unavailing. Defendants' answers within the transcript facially contain confidential discussions of, inter alia, business strategy and internal processes as they relate to the software, projects, or business management. (See, e.g., NYSCEF 207, Transcript of Defendants’ Answers at 143.) The case defendants cite to, Matter of Wegmans Food Markets, Inc. v. Tax Appeals Trib. of NY, is entirely irrelevant to this seal motion. (33 NY3d 587, 595 [2019] [reviewing the statutory construction of Tax Law §1105 [c] [1].)

Therefore, the court disagrees with defendants to the extent that they argue that there is no confidential information or proprietary information. It is apparent from transcript that defendants’ responses do reveal business strategy and discussions concerning the development and work on these projects. (See, e.g., NYSCEF 207, Transcript of Defendants’ Interviews at 102.) Therefore, and as discussed in more detail above, good cause exists to narrowly redact portions of defendants' answers that reveal confidential and proprietary information.

Courts will not seal documents that do not reveal, inter alia, trade secrets, business strategy, and/or internal finances that could harm the movant’s competitive standing in the industry. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning sealing documents.