KeyBank National Association v. Element Transportation LLC et al

Filing 25

MEMORANDUM OPINION & ORDER re: 12 LETTER MOTION to Seal Document 10 Order 9 LETTER MOTION to Seal Document addressed to Judge John F. Keenan from Rebecca Brazzano dated November 22, 2016. addressed to Judge Joh n F. Keenan from Re filed by KeyBank National Association. Plaintiff-Counterclaim-Defendant KeyBank National Association moves the Court to seal a portion of one exhibit appended to its complaint filed on November 17, 2016 (ECF No. 1), because it c ontains highly proprietary nonparty financial information irrelevant to its claims. KeyBank also requests that the Court authorize the Southern District of New York Clerk of Court's Electronic Case Filing division to deem that exhibit and anothe r unredacted exhibit as annexed to and part of KeyBanks complaint. The Court grants the motion to seal, directs KeyBank to file the exhibit with the redactions proposed at ECF No. 12-1, and authorizes the Clerk of Court to annex the exhibits to KeyBank's complaint. (As further set forth in this Order.) (Signed by Judge John F. Keenan on 1/26/2017) (cf)

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
-----------------------------------------KEYBANK NATIONAL ASSOCIATION,

USDC SDNY
X DOCUMENT
: ELECTRONICALLY FILED
: DOC #: _________________
Plaintiff-Counterclaim-Defendant,
: DATE FILED: 01/26/2017
UNITED STATES DISTRICT COURT
:
SOUTHERN DISTRICT OF NEW YORK
-against:
No. 16 Civ. 8958
-----------------------------------------------------------x :
In re FANNIE MAE LLC, f/k/a
: :
08 Civ. 7831 (PAC)
ELEMENT TRANSPORTATION 2008 SECURITIES
MEMORANDUM OPINON
LITIGATION CORP. (DELAWARE)
: :
09 MD 2013 (PAC)
ELEMENT FINANCIAL
& ORDER
: :
: :
OPINION & ORDER
and
-----------------------------------------------------------x :
ELEMENT FLEET MANAGEMENT CORP., f/k/a
:
ELEMENT FINANCIAL CORP. (ONTARIO),
:
:
HONORABLE PAUL A. CROTTY, United States District Judge:
Defendants-Counterclaim-Plaintiffs. :
------------------------------------------ X
BACKGROUND1
JOHN F. KEENAN, United States District Judge:
The early years of this decade saw boom in home financing
Plaintiff-Counterclaim-Defendant aKeyBank National which was fueled, among
other things, the Court rates and lax portion of New lending instruments, such as
Association moves by low interest to seal acredit conditions. one exhibit
subprime complaint filed on November 17, 2016 (low-documentation loans)
appended to its mortgages (high credit risk loans) and Alt-A mortgages (ECF No.

1), because it boom going. highly proprietary nonparty financial risks on the
kept the contains Borrowers played a role too; they took on unmanageable
information irrelevant market would continue to rise and that refinancing options would always be
assumption that the to its claims. KeyBank also requests
that the Court authorize Lending discipline was lacking in the New York Clerk
available in the future. the Southern District of system. Mortgage originators did
of Court’s Electronic Case Filing divisionthan carry the that risk on their books, the
not hold these high-risk mortgage loans. Rather to deem rising exhibit
and another unredacted exhibit the secondary mortgage market, often as securitized packages
originators sold their loans into as annexed to and part of
KeyBank’s known as mortgage-backed securities (“MBSs”). MBS markets grew almost exponentially.
complaint. The Court grants the motion to seal,
directs KeyBank to filehousingexhibit with2006, the demand for housing dropped abruptly
But then the the bubble burst. In the redactions proposed
at ECF No. 12-1, prices began to fall. In light of the changing housing market, banks modified their
and home and authorizes the Clerk of Court to annex the
exhibits to KeyBank’sand became unwilling to refinance home mortgages without refinancing.
lending practices complaint.

1

Unless otherwise indicated, all references cited as “(¶ _)” or to the “Complaint” are to the Amended Complaint,
1
dated June 22, 2009. For purposes of this Motion, all allegations in the Amended Complaint are taken as true.

1

I.

Background

The following facts are provided for background purposes
and do not constitute findings of fact by the Court.
KeyBank seeks a declaratory judgment and to recover for a
breach of contract against Defendants-Counterclaim-Plaintiffs
Element Transportation LLC and Element Fleet Management Corp.
The parties’ unincorporated subdivisions or predecessors in
interest 1 entered into a set of contracts that sold and assigned
certain truck leases to KeyBank.

In order to timely close the

deal, Element Transportation agreed to pay any obligations owed
to KeyBank under the assigned leases until (i) KeyBank reviewed
agreements between Element Transportation and the lease
servicer, nonparty Celadon Group, Inc., to satisfy itself that
Celadon would be responsible for payments under the assigned
leases, (ii) performed due diligence and received internal
credit authorization on Celadon, and (iii) confirmed in writing
to Element Transportation that it had performed these duties.
This agreement is known as the Perfect Pay provision.

Element

Fleet, the corporate parent of Element Transportation,
guarantied Element Transportation’s Perfect Pay obligation under
a separate Parent Guaranty.

If, after sixty days, KeyBank did

1

For clarity’s sake, this background makes no distinction
between KeyBank and its unincorporated subdivision Key Equipment
Finance or Element Transportation’s and Element Fleet’s
predecessors in interest, which are listed in the caption.
2

not perform its duties, Element Transportation could, at its
discretion, repurchase the assigned leases.

Either Element

Transportation’s repurchase or KeyBank’s confirmation in writing
that it performed its duties automatically terminated Element
Transportation’s Perfect Pay obligations and Element Fleet’s
Parent Guaranty.
KeyBank alleges that it could not confirm in writing to
Element Transportation that it performed its duties, because
Celadon is not creditworthy.

When a November 12, 2016 payment

for $450,755.58 came due under the assigned leases, Element
Transportation paid only $255,580.30, leaving a $195,175.28
shortfall.

Because Element Transportation did not repurchase

the assigned leases and KeyBank did not confirm in writing that
it performed its duties, KeyBank contends that Element
Transportation and Element Fleet are responsible for paying the
$195,175.28 shortfall to KeyBank.

KeyBank alleges that Element

Transportation and Element Fleet breached the contract by
failing to pay.
Additionally, KeyBank seeks a declaratory judgment that the
Parent Guaranty is in full effect and that Element Fleet, who
did not sign the contract, is the party that the Parent Guaranty
may be enforced against because it is the successor in interest
to the contractor.

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Finally, Element Transportation and Element Fleet answered
and counterclaimed against KeyBank for breach of contract,
alleging that KeyBank performed its duties but did not confirm
its completion in writing as it was obligated to do.
Alternatively, they argue that KeyBank breached the implied
covenant of good faith and fair dealing.
KeyBank filed its complaint on November 17, 2016, and
intended to append two exhibits:

Exhibit 1, the Master Sale and

Assignment Agreement (unredacted), and Exhibit 2, Specification
of Assigned Assets No. 1 (redacted).

Due to a technical glitch,

KeyBank failed to attach either exhibit when it filed on ECF.
Both exhibits were served on Element Transportation and Element
Fleet. (See Answer & Counterclaim ¶¶ 1, 4.)
KeyBank seeks to seal a portion of Assignment Schedule No.
1, which is appended to the Specification of Assigned Assets No.
1.

This portion of Assignment Schedule No. 1 contains highly

proprietary nonparty financial information including vehicle
identification numbers, borrower’s credit scores, guarantor’s
names, asset location, and the value of payments remaining on
the leases.

Element Transportation and Element Fleet consent to

KeyBank’s proposed redactions. (See Letter Mot. in Support of
Request to File Sealed Documents 4 (Dec. 12, 2016), ECF No. 12.)

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II.
A.

Discussion

Legal Standard

Federal Rule of Civil Procedure 26(c) permits a court, on a
showing of good cause, to issue an order “to protect a party or
person from annoyance, embarrassment, oppression, or undue
burden or expense.” Fed. R. Civ. P. 26(c)(1).

The public has a

right to access judicial documents that is rooted in both the
common law and the First Amendment. Lugosch v. Pyramid Co. of
Onondaga, 435 F.3d 110, 119-120 (2d Cir. 2006).

Thus, if the

party seeks to protect judicial documents, its showing of good
cause must be sufficient to overcome the public’s presumed right
of access.

Judicial documents are those documents “relevant to

the performance of the judicial function and useful in the
judicial process.” Id. at 119 (quoting United States v. Amodeo
(Amodeo I), 44 F.3d 141, 145 (2d Cir. 1995)).

If the court

concludes that the documents at issue are judicial documents, a
presumption of access attaches, and the court must determine the
weight to be given to the presumption based on a consideration
of the role the documents play in the court’s exercise of
Article III power. Id.

A court’s determination generally falls

“somewhere on a continuum from matters that directly affect an
adjudication to matters that come within a court’s purview
solely to insure their irrelevance.” Id. (quoting United States
v. Amodeo (Amodeo II), 71 F.3d 1044, 1048 (2d Cir. 1995)).
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Once

it has determined the weight of the presumption of access, the
court must balance countervailing considerations including the
privacy interests of the party seeking closure. Id. at 120.
Whether the First Amendment protects the public’s access to
certain documents may be determined in two ways.

First, under

the so-called “experience and logic” approach, the court asks
“whether the documents ‘have historically been open to the press
and general public’ and whether ‘public access plays a
significant positive role in the functioning of the particular
process in question.’” Id. (quoting Hartford Courant Co. v.
Pellegrino, 380 F.3d 83, 91 (2d Cir. 2004)).

A determination

that the documents are judicial documents generally supports a
finding that they were historically open to the public. Id.
Second, the court may consider the degree that the documents
“derived from or [are] a necessary corollary of the capacity to
attend the relevant proceedings.” Id. (alteration in original)
(quoting Hartford Courant Co., 380 F.3d at 93)).

Even where the

First Amendment protects public access, the protection is
qualified and the documents may be sealed where the court makes
specific, on the record findings demonstrating both that closure
is essential to preserve higher values and that closure is
narrowly tailored to serve that interest. Id.

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B.

Application

KeyBank seeks to seal an appendix to a contract that is
irrelevant to its claims and that contains highly proprietary
personal financial information of nonparties to this dispute.
As KeyBank notes, “The information regarding individual leases
contained in Exhibit 2 has no bearing on [the Court’s]
determination and will play no role in the Court’s evaluation of
Key’s breach of contract and declaratory judgment claims.”
(Letter Mot. 2-3.)

Thus, KeyBank filed the entirety of

Assignment Schedule No. 1 to the Specification of Assigned
Assets No. 1 for completeness purposes only.
The Court questions whether such a document, which KeyBank
clearly does not intend for the Court to rely on (nor could the
Court reasonably do so) is even a judicial document. See Amodeo
I, 44 F.3d at 145 (“[T]he mere filing of a paper or document
with the court is insufficient to render that paper a judicial
document subject to the right of public access.”); see id.
(quoting F.T.C. v. Standard Fin. Mgmt. Corp., 830 F.2d 404, 410
(1st Cir. 1987) for the proposition that judicial documents are
those “relevant and material to the matters sub judice”)).
Because KeyBank has shown that the requested closure is
essential to preserve higher values and narrowly tailored to
serve that interest, the determination of whether an irrelevant
appendix to a concededly judicial document is itself a judicial
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document is academic here.

Nevertheless, the appendix’s

irrelevance to the issues before the Court and the absence of
KeyBank’s intent that the Court consider the appendix places the
presumption of public access at the nadir of the continuum of
the weight to be given to the presumption.

KeyBank has made a

specific and particular showing of sufficiently serious injury
to overcome this weak presumption.

Namely, KeyBank asserts that

the sensitive nonparty financial information it seeks to protect
is all the data a competitor would need to determine its
valuation of the leases. (See Letter Mot. 3.)

This competitive

injury is sufficiently serious to warrant protection. See Louis
Vuitton Malletier S.A. v. Sunny Merch. Corp., 97 F. Supp. 3d
485, 511 (S.D.N.Y. 2015) (granting a motion to redact documents
containing advertising expenditures and plans, merchandising
strategies, policies, and sales); GoSMiLE, Inc. v. Dr. Johnathan
Levine, D.M.D. P.C., 769 F. Supp. 2d 630, 649-50 (S.D.N.Y. 2011)
(granting a motion to seal “highly proprietary material
concerning the defendants’ marketing strategies, product
development, costs and budgeting”).

KeyBank has also narrowly

tailored their redactions, strictly limiting them to the portion
of the appendix containing the irrelevant nonparty financial
information.

The Court directs KeyBank to file Exhibit 2,

Specification of Assigned Assets No. 1 in the redacted form
proposed at ECF No. 12-1.
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KeyBank informs the Court that it intended to file two
exhibits to its complaint but that, due to a technical glitch,
the exhibits are not docketed on ECF.

The complaint expressly

references the exhibits and Element Transportation and Element
Fleet's answer and counterclaim confirm that the exhibits were
served as part of the complaint.

The Court authorizes the Clerk

of Court to append Exhibit 1, the Master Sale and Assignment
Agreement (unredacted), and Exhibit 2, Specification of Assigned
Assets No. 1 (redacted), to KeyBank's complaint at ECF No. 1.
SO ORDERED.

Dated:

New York, New York
January '12017

&,

John F. Keenan =
United States District Judge

9