Istithmar World PJSC v. Amato et al
OPINION & ORDER re: 7 CROSS MOTION Seeking an Order Granting Respondents Leave to File Their Post-Trial Arbitration Brief in the Public Docket For This Matter, or in the Alternative, an Order Directing that the Arbitration Award Filed by Petitioner Be Withdrawn From the Public filed by Felix P. Herlihy, John F. Amato. For the foregoing reasons, Istithmar's unopposed petition to confirm the Award is granted. Its application for attorney's fees and costs is denied except as to the limi ted extent discussed above. Respondents' cross-petition to file their post-trial brief in the public docket, or alternatively to place the Award under seal, is denied as to both requests. The Clerk of Court is directed to enter judgment accordingly and close this case. (Signed by Judge John F. Keenan on 1/7/2013) (ja)
Case 1:09-md-02013-PAC Document 57
Filed 09/30/10 Page 1 of 45
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
DOC #: _________________
ISTITHMAR WORLD PJSC,
DATE FILED: Jan. 7, 2013
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
In re FANNIE MAE 2008 SECURITIES
08 Civ. 7831 7472 (JFK)
12 Civ. (PAC)
09 MD 2013 (PAC)
OPINION & ORDER
JOHN F. AMATO,
OPINION & ORDER
FELIX P. HERLIHY,
HONORABLE PAUL A. CROTTY, United States District Judge:
For Petitioner Istithmar World PJSC:
Theodore O. Rogers, Jr., Esq.
Robin D. Fessel, Esq. BACKGROUND
SULLIVAN & CROMWELL LLP
The early years of this decade saw a boom in home financing which was fueled, among
For Respondents John F. Amato and Felix P. Herlihy:
other things, by low interest Esq.and lax credit conditions. New lending instruments, such as
Allan J. Arffa, rates
Maria H. Keane, Esq.
subprime mortgages (high credit risk WHARTON Alt-A mortgages LLP
PAUL, WEISS, RIFKIND, loans) and & GARRISON (low-documentation loans)
kept the Keenan, Borrowers played role too; they took on
John F. boom going.United States aDistrict Judge: unmanageable risks on the
assumption that the market would Petitioner and that refinancing options would always be
Before the Court is continue to rise Istithmar World PJSC’s
available in the future. Lending discipline was lacking in confirm the award (the
(“Petitioner” or “Istithmar”) petition tothe system. Mortgage originators did
not hold arising out of the arbitration proceedings initiated
“Award”)these high-risk mortgage loans. Rather than carry the rising risk on their books, the
originators sold their loans Respondents John F. Amato and Felix Herlihy
against Istithmar by into the secondary mortgage market, often as securitized packages
known as mortgage-backed securities Also before the Court is
(together, “Respondents”). (“MBSs”). MBS markets grew almost exponentially.
But then the housing bubble burst. In 2006, the demand file their arbitral
Respondents’ cross-petition seeking leave to for housing dropped abruptly
and home prices began to the public docket for this case, or in the
post-trial brief in fall. In light of the changing housing market, banks modified their
lending practices and became unwilling refinance home mortgages without refinancing.
alternative, an order placingtothe Award under seal. For the
reasons that follow, Istithmar’s petition is granted and
Unless otherwise cross-petition is denied as to both to the Amended
Respondents’ indicated, all references cited as “(¶ _)” or to the “Complaint” arerequests. Complaint,
dated June 22, 2009. For purposes of this Motion, all allegations in the Amended Complaint are taken as true.
Respondents, both of whom had a background in the financial
services industry, entered into employment agreements with
Petitioner on September 11, 2006.
The contracts call for
employment disputes to be resolved by arbitration, and that any
court of competent jurisdiction may enter judgment on the Award.
On July 8, 2009, Respondents sent their supervisor at Istithmar
a joint letter stating that they were resigning “for Good
Reason” pursuant to their contracts.
Istithmar paid Respondents
severance of “more than $1 million plus the benefits” called for
under the contracts. (Pet. Ex. C. at 1, 4–6.)
One year later, Respondents filed a demand for arbitration,
alleging breach of contract.
They sought additional
compensation as well as other damages.
The arbitrator, who was
assigned to the parties by a division of the American
Arbitration Association, conducted a hearing and issued the
aforementioned Award denying Respondent’s claims on March 15,
2012. (Pet. ¶¶ 6–9.)
Petitioner now asks this Court to confirm
the Award and enter judgment in its favor.
Respondents do not oppose confirmation of the Award, but do
object to Petitioner’s filing of the Award in the public docket.
Respondents claim that the filing breached a confidentiality
stipulation entered into by the parties on March 18, 2011.
cross-petition filed on November 14, 2012, Respondents seek an
order granting them leave to place in the public docket the
post-trial brief that they prepared for the arbitrator prior to
Alternatively, Respondents request that the Award be
removed from the docket and placed under seal. (Cross-Pet. ¶¶ 1,
The cross-petition also asserts that Respondents offered to
release their claims in exchange for the Award being sealed, but
that Petitioners rejected this offer. (Id. ¶ 27.)
In an answer to Respondents’ cross-petition dated November
28, 2012, Petitioner argues that the Award does not constitute
“confidential information” under the parties’ confidentiality
Petitioner admits that it rejected Respondents’
offer to release all claims in exchange for sealing the Award,
but states that it wants judicial confirmation of the Award to
be in the public record “to ensure its res judicata effect.”
(Pet’r Ans. ¶¶ 23, 27.)
Petitioner notes that it offered to
redact portions of the Award, but that Respondents did not
identify any portions for redaction. (Id.)
The answer also adds
Petitioner’s request for “costs and fees incurred in defending
against Respondents’ baseless claims.” (Id. at 7.)
Petitioner then filed a “Reply to Answer to Petition” on
December 4, 2012.
Here it repeats its position that the Award
is not subject to the confidentiality stipulation, and further
represents that the Award does not contain confidential
discovery material. (Pet’r Reply at 2–3.)
Petitioner also urges
that Respondent has not overcome the strong presumption of
public access that applies to arbitration awards. (Id. at 9–11.)
Finally, Respondents filed a reply in support of their
cross-petition on December 5, 2012.
In it, they urge that
allowing them to file their post-trial brief in the docket would
be appropriate, and suggest that they could redact portions of
it to assuage concerns about confidential information, or
alternatively that Petitioner could also be permitted to file
their own post-trial brief. (Resp. Reply at 3–4.)
Alternatively, Respondents contend that the Award contains
private information about them, such that they are justified in
requesting that it be sealed, and they maintain that the
underlying information referenced in the Award is covered by the
confidentiality stipulation. (Id. at 6–8.)
The Confidentiality Stipulation
The confidentiality stipulation between the parties
purports to cover “the handling of all information contained in
documents, recordings, testimony, exhibits, and any other
written, recorded or graphic matter . . . produced or obtained
by any party in connection with this proceeding.” (Cross-Pet.
Ex. C at 1.)
The agreement calls for confidential information
to be stamped as such by the party seeking to protect it. (Id.
It also directs that
[p]rior to disclosing Confidential Information to any court
in connection with any motion or application relating to
the Proceeding, the party intending to file such
information shall, to the extent practicable, give the
producing party 10 days notice to allow the producing party
to seek an appropriate order to preserve confidentiality.
(Id. ¶ 6.)
The parties strenuously disagree as to whether the Award is
subject to the confidentiality stipulation.
In their cross-
petition, Respondents assert that Petitioners violated the
stipulation by publicly filing the Award without giving them
They argue that the stipulation covers not only
discovery material, but also the information contained therein.
Because this information is discussed at length in the Award,
Respondents claim that this makes the Award subject to the
Petitioners respond that filing the Award publicly
is not a breach of the stipulation, because the stipulation
covers only material that has been specifically marked as
confidential by a party.
The Court concludes that it need not decide whether the
confidentiality stipulation covers the Award, because the Court
is not a party to the stipulation and is not bound to it. See,
e.g., Century Indem. Co. v. Axa Belgium, No. 11 Civ. 7263, 2012
WL 4354816, at *14 (S.D.N.Y. Sept. 24, 2012); see also Aioi
Nissay Dowa Ins. Co. v. ProSight Specialty Mgmt. Co., No. 12
Civ. 3274, 2012 WL 3583176, at *6 (S.D.N.Y. Aug. 21, 2012)
(“Respondents may have an action for breach of contract against
[Petitioner] for its alleged failure to adhere to its
obligations under the confidentiality agreement — the Court
makes no finding whatsoever on that question.”).
Sealing of the Award
There is a strong presumption that judicial proceedings and
documents are a matter of public record. See, e.g., Lugosch v.
Pyramid Co. of Onondaga, 435 F.3d 110, 119 (2d Cir. 2006);
Jessup v. Luther, 277 F.3d 926, 927–28 (7th Cir. 2002).
Disputants may be drawn to arbitration out of a desire for
privacy, but once one side seeks judicial confirmation of an
arbitral award, that petition as well as the underlying award
become “judicial documents” to which the common law right of
access is presumed to attach. See Century Indem. Co., 2012 WL
4354816, at *13 (citations omitted).
The Court must therefore
determine whether the party seeking to seal the records has
rebutted the strong presumption of access. See DiRussa v. Dean
Witter Reynolds Inc., 121 F.3d 818, 826 (2d Cir. 1997) (quoting
Nixon v. Warner Commc’ns, Inc., 435 U.S. 589, 599 (1978)); Mut.
Marine Office, Inc. v. Transfercom Ltd., No. 08 Civ. 10367, 2009
WL 1025965, at *5 (S.D.N.Y. Apr. 15, 2009) (noting that the
party seeking the seal “must offer specific facts ‘demonstrating
that closure is essential to preserve higher values and is
narrowly tailored to serve that interest.’” (citing Lugosch, 435
F.3d at 120)).
Courts in this district have generally been loath to seal
arbitration awards. See Century Indem. Co., 2012 WL 4354816;
Aioi Nissay Dowa Ins. Co., 2012 WL 3583176; Alexandria Real
Estate Equities, Inc. v. Fair, No. 11 Civ. 3694, 2011 WL 6015646
(S.D.N.Y. Nov. 30, 2011);
Church Ins. Co. v. Ace Prop. & Cas.
Ins. Co., No. 10 Civ. 698, 2010 WL 3958791 (S.D.N.Y. Sept. 23,
2010); In re Faiveley Transp. Malmo AB, No. 08 Civ. 3330, 2010
WL 8946362 (May 10, 2010);
Scott D. Boras, Inc. v. Sheffield,
No. 09 Civ. 8369, 2009 WL 3444937 (S.D.N.Y. Oct. 26, 2009); Mut.
Marine Office, 2009 WL 1025965; Global Reinsurance Corp.-U.S.
Branch v. Argonaut Ins. Co., Nos. 07 Civ. 8196, 07 Civ. 8350,
2008 WL 1805459 (S.D.N.Y. Apr. 21, 2008, amended Apr. 24, 2008)
(“In circumstances where an arbitration award is confirmed, the
public in the usual case has a right to know what the Court has
done.”). But see Abu Dhabi Inv. Auth. v. Citigroup, Inc., No. 12
Civ. 283 (S.D.N.Y. July 2, 2012) (permitting arbitration award
and other documents to be filed under seal); DiRussa v. Dean
Witter Reynolds, Inc., 936 F. Supp. 104 (S.D.N.Y. 1996), aff’d
121 F.3d 818 (2d Cir. 1997).
The existence of a confidentiality
agreement between the parties has not been found dispositive,
see Mut. Marine Office, 2009 WL 1025965, at *5, nor has the
likelihood of embarrassment to the loser been found to overpower
the preference for transparency, see Alexandria Real Estate
Equities, 2011 WL 6015646 at *3 (finding the “possibility of
future adverse impact on [Respondent’s] employment”
insufficiently serious and too speculative to warrant sealing
the arbitration award).
It may nevertheless be appropriate to
redact certain portions of documents that contain trade secrets
or other sensitive material. See Faively, 2010 WL 8946362 at *1
(directing parties to refile redacted copies that omit
proprietary business information); Scott D. Boras, 2009 WL
3444937 at *1 (same).
In an effort to rebut the presumption of access,
Respondents contend only that they “have a very strong interest
in keeping their private information about their employment with
a foreign entity confidential,” as well as information about
their investment history and employee records. (Resp. Reply at
There are two problems with this position.
First, as a
factual matter, the Award is overwhelmingly concerned with
Respondents’ own claims about their employment contracts and
about the aborted carried interest program at Istithmar.
cannot reasonably be characterized as a font of sensitive
material about Respondents. 1
Second, and more important,
Respondents have not shown why the type of information found in
the Award is different or more proprietary than one might find
in any other case concerning a contractual or employment
Summarily, Respondents have fallen far short of
meeting their burden of showing why the Award should be sealed.
Accordingly, it will remain on the public docket.
The Post-Trial Brief
Perhaps because Respondents recognize that their attempt to
seal the Award is a long shot, their main request is that the
Court allow them to file their post-trial brief from the
arbitration in the public docket.
They argue that “[o]ne of the
fundamental purposes of agreeing to resolve disputes through
confidential proceedings is to protect both sides from the
possibility of an award that would cast one party in a negative
light.” (Cross-Pet. ¶ 30.)
Respondents acknowledge that their
post-trial brief contains information marked as confidential by
To the extent that Respondents’ position is that they wish to conceal
the very fact of “their employment with a foreign entity,” see Resp.
Reply at 8, the Court notes that Respondents’ work for Istithmar has
been publicized in media reports and press releases, see, e.g.,
Jonathan Keehner & Serena Saitto, “Dubai’s Trail of Dud Deals Shows
Sovereign Wealth Gone Awry,” Bloomberg, http://www.bloomberg.com/apps/
news?pid=newsarchive&sid=aywz2PJu7wf8 (Sept. 14, 2009); Press Release,
Istithmar, Istithmar Brings Seasoned Investment Professionals on Board
as Co-Chief Investment Officers (Sept. 26, 2006), available at
Petitioners, but urge that, essentially, turnabout is fair play.
Petitioner opposes Respondents’ request on the grounds that the
post-trial brief “is filled with irrelevant and impertinent
arguments (which the arbitrator rejected) and extensive
Confidential Information produced by Istithmar,” see Pet’r Reply
at 12, and echoed these concerns at oral argument.
Aside from their opinion of the equities in this situation,
Respondents offer little of substance to support their request.
They provide no precedent for the filing of arbitral post-trial
briefs in the docket of the confirming court.
Nor do they
invoke any rationale more compelling than the desire to see
their side of the dispute with Istithmar reflected in the public
The Court declines to allow its docket to be used as a
depository to that end.
Respondents’ request is denied.
Petitioner’s Request for Costs and Fees
As noted earlier, Petitioner’s answer to the cross-petition
(as well as its subsequent reply to Respondents’ answer to the
original petition) includes a request for “costs and fees
incurred in defending against Respondents’ baseless claims.”
(Pet’r Ans. at 7; accord Pet’r Reply at 12.)
Rule 54(d)(1) of
the Federal Rules of Civil Procedure provides that, as a general
matter, “costs — other than attorney’s fees — should be allowed
to the prevailing party.” Fed. R. Civ. P. 54(d)(1).
Petitioner’s request is therefore granted to the limited extent
of the costs associated with commencing the action to confirm
the arbitration award. See Aioi Nissay Dowa Ins. Co., 2012 WL
3583176, at *4; Abondolo v. Jerry WWHS Co., 829 F. Supp. 2d 120,
130 (E.D.N.Y. 2011); In re Arbitration Between Westchester Fire
Ins. Co. v. Massamont Ins. Agency, Inc., 420 F. Supp. 2d 223,
227–28 (S.D.N.Y. 2005).
Attorney’s fees, however, are not to be awarded absent
statutory authority unless the Court determines that opposing
counsel has acted “in bad faith, vexatiously, wantonly, or for
oppressive reasons.” E.g., Int’l Chem. Workers Union (AFL–CIO),
Local No. 227 v. Basf Wyandotte Corp., 74 F.2d 43, 47 (2d Cir.
1985) (citations and internal quotation marks omitted).
Petitioner has cited no authority to support its application,
and the Court is aware of none. See Fed. R. Civ. P. 54(d)(2);
Westchester Fire, 420 F. Supp. 2d at 227–28.
Nor does the Court
find that Respondents or their counsel have acted in a
sanctionable manner. See Abondolo, 829 F. Supp. 2d at 130.
Accordingly, the request is denied.
For the foregoing reasons, Istithmar’s unopposed petition
to confirm the Award is granted.
Its application for attorney’s
fees and costs is denied except as to the limited extent
Respondents' cross-petition to file their
post-trial brief in the public docket, or alternatively to place
the Award under seal, is denied as to both requests.
of Court is directed to enter judgment accordingly and close
New York, New York
United States District Judge
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