Securities and Exchange Commission v. Ripple Labs Inc. et al.

Filing 422

ORDER denying #104 Letter Motion to Seal; denying #170 Letter Motion to Seal; denying #221 Letter Motion to Seal; granting #225 Letter Motion to Seal; granting #229 Letter Motion for Leave to File Document. For the foregoing reasons, Defendants motions are GRANTED in part, and DENIED in part. Specifically, 1) Larsen's and Ripple's motions to seal the Legal Memos are DENIED. By February 17, 2022, Larsen and Ripple shall propose specific redactions that comply with the Court's Order. If they have not done so by that date, the Court shall direct the Clerk of Court to (a) unseal the legal memorandum at ECF Nos. 108-1, 130-1, and 179-1 and replace it with the redacted version at ECF No. 178-1, and (b) unseal the legal memorandum at ECF Nos. 108-2, 130-2, and 179-2 and replace it with the redacted version at 178-2. 2) Larsen's motion to seal Exhibit E is DENIED. By February 17, 2022, Larsen shall submit a letter to the Court explaining why Exhibit E should be sealed and propose specific redactions that comply with the Court's Order. If he has not done so by that date, the Court shall direct the Clerk of Court to unseal Exhibit E at ECF No. 179-3. 3) Larsen's motion to file redacted versions of the Larsen Memo, Larsen Reply, and SEC Opposition is DENIED. By February 17, 2022, Larsen shall propose specific redactions that comply with the Court's Order. If he has not done so by that date, the Court shall direct the Clerk of Court to unseal the Larsen Memo, ECF No. 106, the Larsen Reply, ECF No. 222, and the SEC Opposition, ECF No. 183. 4) Ripple's motion to file redacted versions of the Ripple Opposition and the SEC Memo is DENIED. By February 17, 2022, Ripple shall propose specific redactions that comply with the Court's Order. If it has not done so by that date, the Court shall direct the Clerk of Court to unseal the Ripple Opposition, ECF No. 127, and the SEC Memo, ECF No. 131. 5) Garlinghouse's motion to seal Exhibits K, L, and M is GRANTED. 6) The Clerk of Court is directed to unseal the documents at ECF Nos. 172-1, 179-4, and 179-5. 7) Ripple's motion for leave to file a sur-reply is GRANTED. By February 9, 2022, Ripple shall file its sur-reply. 8) The Clerk of Court is directed to terminate the motions at ECF Nos. 104, 170, 221, 225, and 229. SO ORDERED.. (Signed by Judge Analisa Torres on 2/3/2022) (kv)

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document does not depend on “which way the court ultimately rules or whether the document
ultimately in fact influences the court’s decision.” Id. Rather, what is important is whether a
document “would reasonably have the tendency to influence a district court’s ruling on a motion.” Id.
(emphasis in original). Furthermore, the presumption of public access is at its highest when the
material is relevant to a court’s decision on a dispositive motion. Id. at 50.
After finding that documents are judicial documents to which the common law presumption of
access attaches, courts must “balance competing considerations against” that presumption. Lugosch,
435 F.3d at 120 (citation omitted). The sealing of judicial documents “may be justified only with
specific, on-the-record findings that sealing is necessary to preserve higher values and only if the
sealing order is narrowly tailored to achieve that aim.” Id. at 124. Although the protection of
sensitive, confidential, or proprietary business information is a countervailing interest that can
militate in favor of sealing, see SEC v. Telegram Grp. Inc., No. 19 Civ. 9439, 2020 WL 3264264, at
*3 (S.D.N.Y. June 17, 2020), “conclusory statements that documents contain confidential business
information” are insufficient to justify sealing, United States v. Wells Fargo Bank, N.A., No. 12 Civ.
7527, 2015 WL 3999074, at *4 (S.D.N.Y. June 30, 2015). Rather, the moving party must make a
“particular and specific demonstration of fact showing that disclosure would result in an injury
sufficiently serious to warrant protection.” Id. (citation omitted). Moreover, the Court shall not
permit sealing of documents merely because information contained therein is subject to a stipulated
protective order because “bargained-for confidentiality does not overcome the presumption of access
to judicial documents.” Bernstein v. O’Reilly, 307 F. Supp. 3d 161, 168 (S.D.N.Y. 2018).
A. Legal Memoranda and Associated Briefing
Larsen requests that the Court seal the memorandum of law submitted in support of his
motion to dismiss the amended complaint (the “Larsen Memo”), Larsen Mem., ECF No. 106, his
reply memorandum of law (the “Larsen Reply”), Larsen Reply, ECF No. 222, and Exhibits A and B
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filed in support of his motion to dismiss, Legal Mems. I, ECF Nos. 108-1, 108-2. See Larsen Sealing
Mot. I; Larsen Sealing Mot. II. Larsen argues that Exhibits A and B, two legal memoranda (the
“Legal Memos”) provided to him in his capacity as Ripple’s CEO, see Legal Mems. I, 1 should be
filed under seal because (1) they “have been designated as Confidential by [Ripple] pursuant to the
Stipulation and Protective Order entered by the Court, see [Protective Order, ECF No. 53],” and (2)
they “reflect the proprietary internal business strategies, analyses, impressions, and concerns of a
private company and its founder on a range of sensitive topics that have never been made public to
date.” Larsen Sealing Mot. I at 1–2. Larsen also contends that the references to the Legal Memos
made in the Larsen Memo, the Larsen Reply, and the SEC’s memorandum of law in opposition to
Larsen’s motion (the “SEC Opposition”), SEC Opp., ECF No. 183, should be redacted for the same
reasons. See Larsen Sealing Mot. II at 2; Larsen Sealing Mot. I.
In opposition to the SEC’s motion to strike its fourth affirmative defense, Ripple seeks to seal
the Legal Memos, Legal Mems. II, ECF Nos. 130-1, 130-2, and requests that the Court permit
redactions of references to the Legal Memos in both the SEC’s memorandum of law in support of its
motion to strike (the “SEC Memo”), SEC Mem., ECF No. 131, and Ripple’s opposition to the motion
(the “Ripple Opposition”), Ripple Opp., ECF No. 172. See Ripple Sealing Mot. Ripple argues that
the Legal Memos should be sealed because they “discuss aspects of Ripple’s business planning that
are non-public and competitively sensitive” and they “are not material to the case.” Id. at 1.
The Court holds that sealing of the Legal Memos and redaction of the associated briefing is
unjustified. The Legal Memos and the briefing are “unquestionably judicial documents” because
they were submitted to the Court as “supporting material” in connection with two dispositive
motions. Lugosch, 435 F.3d at 121, 123. The Legal Memos are relied on heavily in the amended

In the amended complaint, the SEC alleges that the Legal Memos were provided to Larsen. See Amend. Compl. ¶¶ 52,
56, ECF No. 46.

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complaint, see Amend. Compl. ¶¶ 51–60, and are discussed extensively in briefing on the motions to
dismiss and the motion to strike, see Larsen Mem. at 4–6; Larsen Reply at 5–7; SEC Opp. at 6–11;
SEC Mem. at 4–7; Ripple Opp. at 18–19. Indeed, Larsen, Ripple, and the SEC urge the Court to
review the Legal Memos in full when considering the parties’ respective positions. See, e.g., Larsen
Reply at 6; Ripple Opp. at 18–19; SEC Mem. at 3 n.1, 4–7. The Court determines, therefore, that the
Legal Memos and the associated briefing are judicial documents to which a high presumption of
public access attaches because they are relevant to dispositive motions. Brown, 929 F.3d at 50.
Moreover, the Court concludes that Larsen and Ripple have not made a “particular and
specific” factual demonstration of the harm that would result from disclosure. New York v. Actavis,
PLC, No. 14 Civ. 7473, 2014 WL 5353774, at *2, *4 (S.D.N.Y. Oct. 21, 2014) (citation omitted).
And, even if disclosure of some of the information in the Legal Memos could injure Ripple’s business
interests, it does not justify sealing the Legal Memos in their entirety; rather, it supports redacting
those portions of the Legal Memos that relate to those potential harms, and leaving in public view
those portions relating to the relevant legal advice Ripple and Larsen allegedly relied upon, which is
discussed at length in the parties’ briefing. See Lugosch, 435 F.3d at 124. Additionally, it is
immaterial that the Legal Memos are subject to the parties’ stipulated protective order because
“bargained-for confidentiality does not overcome the presumption of access to judicial documents.”
Bernstein, 307 F. Supp. 3d at 168. The SEC has proposed specific redactions that address these
concerns. See ECF Nos. 178-1, 178-2.
Accordingly, the motions to seal the Legal Memos and the associated briefing are DENIED.
B. Exhibit E and Associated Briefing
Larsen requests that the Court seal a copy of an email attached as an exhibit in support of the
SEC Opposition (“Exhibit E”), ECF No. 179-3, and redact those portions of the SEC Opposition that
quote the email, ECF No. 183. Larsen Sealing Mot. II at 2. Exhibit E is quoted and discussed in the
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SEC Opposition, see SEC Opp. at 10, 40, and the amended complaint, see Amend. Compl. ¶¶ 56–57.
Larsen provides no justification for sealing Exhibit E and redacting the SEC Opposition. See Larsen
Sealing Mot. II.
Again, the Court finds that Exhibit E and the SEC Opposition are judicial documents because
they are relevant to the Court’s ruling on a dispositive motion. See Brown, 929 F.3d at 50.
Accordingly, the request is DENIED.
C. Exhibits K, L, and M
Garlinghouse requests redactions to three exhibits filed in support of his motion to dismiss.
See Garlinghouse Sealing Mot. These exhibits consist of two internal Ripple communications
(“Exhibit K” and “Exhibit M”), ECF Nos. 226-1, 226-3, and one communication between third
parties discussing information obtained from Ripple (“Exhibit L”), ECF No. 226-2. Garlinghouse
explains that Exhibits K, L, and M “reflect Ripple’s proprietary internal business strategies, analyses,
impressions, and concerns on a variety of sensitive topics that remain confidential, including, for
example Ripple’s business relationships, product development, and legal and regulatory
developments, risks, and requirements.” Garlinghouse Sealing Mot. at 2. He contends that they
“contain irrelevant and sensitive information concerning human resources and employee issues, and
the identities of third-party customers and prospective investors.” Id. Garlinghouse cites Exhibits K,
L, and M in his reply memorandum of law to provide context for certain quotations in the amended
complaint. See ECF No. 224 at 7–8. The amended complaint also refers to these documents.
Amend. Compl. ¶¶ 407–08, 420.
The Court finds that Exhibits K, L, and M are judicial documents for the reasons discussed
above. See Brown, 929 F.3d at 50. But, Garlinghouse sets forth specific facts justifying redaction,
see Wells Fargo Bank, 2015 WL 3999074, at *4; Telegram, 2020 WL 3264264, at *3, and his

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proposed redactions protect any potentially sensitive information while leaving unobstructed the
language relevant to the Court’s decision on his motion to dismiss, see Lugosch, 435 F.3d at 120.
Accordingly, Garlinghouse’s request to redact Exhibits K, L, and M is GRANTED.
D. Sealed Documents Not Addressed by the Parties
Both Ripple and the SEC filed documents under seal in anticipation that the other party would
request to seal them. See Ripple Sealing Mot. at 1–2; ECF No. 178 at 2 n.2. These requests were not
made. Accordingly, the Court shall direct the Clerk of Court to unseal those documents.
II.

Sur-Reply
Ripple requests leave to file a sur-reply in response to the SEC’s reply memorandum of law in

support of the SEC’s motion to strike Ripple’s fourth affirmative defense (“SEC Reply”), ECF No.
205. See Ripple Sur-Reply Mot. Ripple argues that the SEC Reply raises new arguments related to
the Court’s ability to take judicial notice of information contained in a report produced by a private
consulting firm. See id. at 1. In its proposed sur-reply, Ripple argues that the Court should not take
judicial notice of this report and disputes the conclusions that the Court should draw from this report
if the Court decides to the contrary. Id. at 1–2.
Motions for leave to file a sur-reply “are subject to the sound discretion of the court.”
Barbour v. Colvin, 993 F. Supp. 2d 284, 288 (E.D.N.Y. 2014) (citation omitted). Courts grant leave
to file sur-replies when they address arguments raised for the first time in a reply brief. See, e.g.,
Stepski v. M/V Norasia Alya, No. 06 Civ. 1694, 2010 WL 11526765, at *1 (S.D.N.Y. Mar. 3, 2010).
Ripple has provided good cause for the Court to grant its request to file a sur-reply because the surreply is directed to arguments the SEC raises for the first time in its reply. See id.
Accordingly, Ripple’s motion for leave to file a sur-reply is GRANTED.

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CONCLUSION
For the foregoing reasons, Defendants’ motions are GRANTED in part, and DENIED in part.
Specifically,
1) Larsen’s and Ripple’s motions to seal the Legal Memos are DENIED. By February 17,
2022, Larsen and Ripple shall propose specific redactions that comply with the Court’s
Order. If they have not done so by that date, the Court shall direct the Clerk of Court to
(a) unseal the legal memorandum at ECF Nos. 108-1, 130-1, and 179-1 and replace it with
the redacted version at ECF No. 178-1, and (b) unseal the legal memorandum at ECF Nos.
108-2, 130-2, and 179-2 and replace it with the redacted version at 178-2.
2) Larsen’s motion to seal Exhibit E is DENIED. By February 17, 2022, Larsen shall
submit a letter to the Court explaining why Exhibit E should be sealed and propose
specific redactions that comply with the Court’s Order. If he has not done so by that date,
the Court shall direct the Clerk of Court to unseal Exhibit E at ECF No. 179-3.
3) Larsen’s motion to file redacted versions of the Larsen Memo, Larsen Reply, and SEC
Opposition is DENIED. By February 17, 2022, Larsen shall propose specific redactions
that comply with the Court’s Order. If he has not done so by that date, the Court shall
direct the Clerk of Court to unseal the Larsen Memo, ECF No. 106, the Larsen Reply,
ECF No. 222, and the SEC Opposition, ECF No. 183.
4) Ripple’s motion to file redacted versions of the Ripple Opposition and the SEC Memo is
DENIED. By February 17, 2022, Ripple shall propose specific redactions that comply
with the Court’s Order. If it has not done so by that date, the Court shall direct the Clerk

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of Court to unseal the Ripple Opposition, ECF No. 127, and the SEC Memo, ECF
No. 131.
5) Garlinghouse’s motion to seal Exhibits K, L, and M is GRANTED.
6) The Clerk of Court is directed to unseal the documents at ECF Nos. 172-1, 179-4, and
179-5.
7) Ripple’s motion for leave to file a sur-reply is GRANTED. By February 9, 2022, Ripple
shall file its sur-reply.
8) The Clerk of Court is directed to terminate the motions at ECF Nos. 104, 170, 221, 225,
and 229.
SO ORDERED.
Dated: February 3, 2022
New York, New York

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