Business Court Now Requiring More To Keep Documents Under Seal
Where parties seek to keep certain documents they have filed under seal and out of the public eye, the Business Court now requires proof that disclosing the information would harm the parties or others before it will agree to permanently seal the items. Bradshaw v. Maiden, et al, 2020 NCBC 26. Following the Court of Appeals’ reasoning in Doe v. Doe, 823 S.E.2d 583, — N.C. — (N.C. Ct. App. 2018), the Business Court deferred the parties’ requests to seal a number of documents until they provided the Court with evidence of harm should the documents be made public.
Plaintiffs each invested in a private hedge fund, defendant Maiden Capital Opportunity Fund, LP (“Fund”). The Fund was managed exclusively by Maiden Capital, LLC (“Maiden Capital”). Defendant Stephen Maiden (“Maiden”), the managing partner of Maiden Capital, allegedly used the Fund to orchestrate a multi-million Ponzi scheme, resulting in financial losses to Plaintiffs. Defendant SS&C Technologies, Inc. (“SS&C”) administered the Fund’s accounts from 2007 until the Fund’s demise in 2013. Plaintiffs filed suit against the Fund, Maiden Capital, Maiden and SS&C. In support of its motion for summary judgment, SS&C filed a motion to seal, seeking to prevent the public from viewing a number of documents it had filed with the Court in support of its motion. In opposing SS&C’s motion, Plaintiffs relied on a number of documents which they had filed and also sought to seal from public view.
Relying on Business Court Rule 5.2 and Doe’s discussion on the importance of the “presumptive right of public access to court proceedings,” (Opinion, ¶13), the Business Court held a claim that public disclosure of certain documents would breach a confidentiality agreement among the parties was no valid basis to keep the documents sealed. Id. Instead, a party must always prove how the public disclosure of any document would result in harm to a party seeking to seal a document. (Opinion, ¶14). Such requirement must be met even if the document/information is of the type that North Carolina has long-recognized could constitute a trade secret; nonetheless, the party seeking to keep the public from viewing the document must explain how its public disclosure would cause the party harm (e.g., causing the party a disadvantage in the marketplace, allowing competitors an advantage if the information were made public, etc.). (Id., ¶17). Armed with such information, the Business Court can then weigh the potential harm to the party resulting from any potential disclosure against any useful purpose that might arise from public access to the document/information. (Id; ¶21).
Based upon this decision, any business which seeks to prevent the public from viewing any of its confidential information or documents must be prepared to prove to the Business Court how making such documents or information public would cause it harm, pursuant to Business Court Rule 5.2 (which requirements bear a striking resemblance to Local Rule 5.4 of the United States District Court for the Middle District of North Carolina and could thus offer the practitioner further guidance).
Additional legal points from this decision:
Once a document has been publicly filed, it is unlikely the Business Court will agree to seal the document at a later time. (Opinion, ¶20).
Mere “embarrassing or injurious revelations about a party” that could be gleaned from publicly-filed documents are not typically the type of harm that sufficiently justifies sealing a document. (Opinion, ¶23).
Business Court Rule 5.2(d) requires any party provisionally filing a document under seal to then file either a redacted version of the document or a notice of complete redaction (with a non-confidential description of the document) within five (5) days of the sealed filing, so as to aid the Business Court in its evaluation. (Opinion, ¶¶24-25).
If the party seeking to keep a document sealed is not the party filing the document under seal, the non-filing party may file a brief (per Business Court Rule 5.3) providing the evidence and argument necessary for the Business Court to evaluate whether the document should remain sealed. (Opinion, ¶23).
When filing documents sought to be sealed (or even the publicly redacted versions of such documents), the Business Court’s preferred practice is for the documents and any index to be filed as separate documents, with each exhibit or other supporting document separately filed as an attachment to the index by designating the index as the “lead document” in the Court’s e-filing system. (Opinion, ¶27).