Arrow Enterprise Computing Solutions, Inc. v. BlueAlly, LLC, et al
ORDER plaintiff's motion for summary judgment [DE91] is GRANTED IN PART on the determinations of law as set forth herein, and it is DENIED IN PART in all remaining respects. Plaintiffs motion to seal [DE96] is GRANTED IN PART AND DENIED IN PART. As set forth herein, the Expert Report filed at docket entry number 95-6 shall remain under seal. Plaintiff, however, is DIRECTED to file a redacted version of the Expert Report, within 14 days of the date of this order, whic h redacts only those portions of the Expert Report that meet the criteria for sealing as set forth herein. The clerk is DIRECTED to unseal documents filed at DE 95, DE 95-1 through 95-5; and DE 109. In light of the courts decision on plaintiffs motio n for summary judgment, this case now is ripe for entry of an order governing deadlines and procedures for final pretrial conference and trialon all remaining claims. The parties are DIRECTED to confer and file within 14 days of the date of this orde r a joint status report informing of 1) estimated trial length; 2) particular pretrial issues which may require court intervention in advance of trial, if any; and 3) at least three suggested alternative trial dates. In addition, where mediation was noted completed already on the docket, in October 2016, the parties shall specify if they wish to schedule a court-hosted settlement conference or additional alternative dispute resolution procedures in advance of trial, and if so the date for completion of such. Signed by District Judge Louise Wood Flanagan on 11/30/2017. (Collins, S.)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
ARROW ENTERPRISE COMPUTING
SOLUTIONS, INC., a Delaware
BLUEALLY LLC, a Delaware limited
liability company; BLUEALLY
DIRECT, LLC, a Virginia limited
liability company; NET DIRECT
SYSTEMS, LLC, a North Carolina
limited liability company; PHILIP
ALBERT SANTONI, an individual; and
CRISTA MARIE SANTONI, an
This matter comes before the court on plaintiff’s motion for summary judgment (DE 91) and
motion to seal (DE 96). After briefing on the summary judgment motion was stayed to permit a
period of additional discovery, defendants BlueAlly, LLC (“BlueAlly”) and BlueAlly Direct, LLC
(“BlueAlly Direct”) (collectively, the “BlueAlly defendants”), filed a response thereto, and plaintiff
replied. In this posture, the issues raised are ripe for ruling. For the following reasons, the court
grants in part plaintiff’s motion for summary judgment on certain determinations of law as set forth
herein, and denies the motion in remaining respects. The court also grants in part and denies in part
plaintiff’s motion to seal as set forth herein.
STATEMENT OF THE CASE
Plaintiff commenced this action on January 22, 2015, and filed second amended complaint
on March 25, 2015, asserting claims for breach of contract and anticipatory breach against the
BlueAlly defendants, and asserting additional claims for breach of contract and unjust enrichment
against defendant Net Direct Systems LLC (“Net Direct”), as well as claims for breach of guaranty
and promissory estoppel against defendants Philip Albert Santoni (“Philip Santoni”) and Crista
Marie Santoni (“Crista Santoni”) (together, the “Santonis”). Plaintiff seeks compensatory and
consequential damages, including lost profits.
The BlueAlly defendants moved to dismiss for failure to state a claim on April 13, 2015.
This court denied the motion on October 22, 2015, and the BlueAlly defendants filed their answer
with affirmative defenses on November 3, 2015. The court entered default as to defendant Net
Direct on November 10, 2015, and as to the Santonis on December 18, 2015.
A period of discovery followed, extended several times by amended case management
orders, most recently with fact discovery concluding December 16, 2016, and expert discovery
concluding February 20, 2017. On November 18, 2016, the BlueAlly defendants filed a motion to
compel discovery, which was granted in part and denied in part by magistrate judge on March 3,
2017. The BlueAlly defendants appealed that decision on March 17, 2017, and, while that appeal
was ripening, plaintiff filed the instant motion for summary judgment and motion to seal. The court
stayed briefing on the motion for summary judgment pending outcome of the appeal. On April 20,
2017, the court affirmed in part and reversed in part the order of magistrate judge, directed
production of certain documents, and provided a schedule for lifting of stay and briefing on the
summary judgment motion.
Plaintiff seeks summary judgment on its breach of contract claim against defendant
BlueAlly, asking for an award of damages in the amount of $7,917,147.00, with an award of costs
and attorneys’ fees in an amount subsequently to be determined.1 In support of its motion, plaintiff
filed a memorandum, a statement of facts, and an appendix containing a “Letter Agreement”
(hereinafter the “Letter Agreement” (DE 94-2)), executed by defendant BlueAlly and defendant Net
Direct, upon which plaintiff bases its breach of contract claim against defendant BlueAlly, as well
as several additional agreements and contractual documents, including:
An October 13, 2010, “Security Agreement” (hereinafter, the “Security Agreement”) (DE
A February 6, 2013, “Letter of Intent” (hereinafter, the “Letter of Intent”) (DE 95);
An August 8, 2013, “Asset Purchase Agreement” (hereinafter, the “Asset Purchase
Agreement”) (DE 95-2; 95-1);
An October 17, 2013, “Guaranty” (hereinafter, the “Guaranty”) (DE 94-25);
An October 28, 2013, “Consent to Asset Purchase Agreement” (hereinafter, the “Consent”)
(DE 94-3); and
An October 28, 2013, “Promissory Note” (hereinafter, the “Promissory Note”) (DE 94-15).
In addition, plaintiff includes in its appendix email correspondence by corporate officers, excerpts
of depositions of corporate officers, an expert report regarding damages (hereinafter “Expert
Report”), as well as discovery responses and other documentation relating to certain transactions
involving the parties. (See DE 94, 95). In opposition to the motion for summary judgment, the
In its motion and memorandum in support thereof, plaintiff seeks summary judgment only on plaintiff’s “breach of
contract” claim, which is the first cause of action in the complaint, against defendant BlueAlly. It does not seek summary
judgment expressly on plaintiff’s claim against defendant BlueAlly for “anticipatory breach of contract,” which is the
third cause of action in the complaint. Nor does plaintiff seek summary judgment on these claims against defendant
BlueAlly Direct. Accordingly, the court addresses solely plaintiff’s claim for breach of contract against defendant
BlueAlly in this order.
BlueAlly defendants rely on the same Letter Agreement and other agreements and contractual
documents attached to plaintiff’s appendix, along with additional excerpts of depositions of
corporate officers and plaintiff’s expert, as well as additional email correspondence and corporate
documentation. (See DE 108, 109). In reply, plaintiff relies upon exhibits previously attached to its
appendix, as well as an additional excerpt of deposition of a corporate officer. (See DE 115-1).
STATEMENT OF UNDISPUTED FACTS
“[Plaintiff] is a global distributor in the IT market, specializing in providing enterprise and
midrange computing products, services, and solutions to value-added resellers, system integrators,
and independent software vendors.” (Pl’s Statement of Facts (DE 93) ¶ 1).2 “[Plaintiff] began
supplying computing products to [defendant] Net Direct in 2000.” (Id. ¶ 2). “During the course of
their business dealings, Arrow advanced funds and made loans to [defendant] Net Direct.” (Id.).
On October 13, 2010, defendant Net Direct entered into the Security Agreement with
plaintiff, in connection with plaintiff’s extension of credit to defendant Net Direct, granting plaintiff
“a lien on and security interest in all assets” of defendant Net Direct specified in Schedule A to the
Security Agreement, including “[a]ll personal property and fixtures . . . of every kind and
description, tangible or intangible, and all goods, equipment, furniture, inventory, accounts, contract
rights, chattel paper, notes receivable, instruments [or] documents.” (Security Agreement (DE 9421) at 2, 5).3 The Security Agreement provides that defendant Net Direct, designated as “Debtor,”
“will either join with or hereby allows [plaintiff] in executing [sic] one or more financing statements
Undisputed facts are drawn in some instances from those portions of plaintiff’s statement of facts that are admitted
or undisputed by the BlueAlly defendants. (See BlueAlly Defendants’ Statement of Facts (DE 107)).
Page numbers specified in citations to the record in this order refer to the page number of the document designated
in the court’s electronic case filing (ECF) system, and not to page numbering, if any, specified on the face of the
[hereinafter the “Financing Statement(s)”]4 pursuant to the Uniform Commercial Code or other
notices appropriate under applicable law in a form satisfactory to [plaintiff].” (Id.). One item of
default under the Security Agreement is that “[d]ebtor ceases operations, is dissolved, terminates
its existence, does or fails to do anything that allows Obligations to become due before their stated
maturity, or becomes insolvent or unable to meets its debts as they mature.” (Id. at 3).
In early 2013, defendant BlueAlly and defendant Net Direct engaged in negotiations for
BlueAlly to acquire Net Direct. (Pl’s Statement of Facts (DE 93) ¶ 4). The February 6, 2013, Letter
of Intent, negotiated by these parties, provides that defendant Net Direct “shall merge into BlueAlly
. . . with BlueAlly being the surviving entity,” on terms set forth in the Letter of Intent, including
“[u]pon consummation of the merger the separate existence of [Net Direct] shall cease.” (Letter of
Intent (DE 95) at 2).
On August 8, 2013, defendant Net Direct entered into the Asset Purchase Agreement with
defendant BlueAlly Direct, which executed the Asset Purchase Agreement as follows:
The Financing Statement(s) referenced in and associated with the Security Agreement are not in the record.
(Asset Purchase Agreement (DE 95-2) at 21). Defendant Philip Santoni, designating his title as
“President,” executed the Asset Purchase Agreement on behalf of defendant Net Direct. (Id.).
In the Asset Purchase Agreement, BlueAlly Direct agreed to purchase “certain of [Net
Direct’s] assets,” and Net Direct agreed to sell “certain assets used in its business,” as defined in the
Asset Purchase Agreement. (Id. at 3). In particular, the Asset Purchase Agreement provided for
purchase and sale of assets as follows:
(Id. at 3). Assets listed in Schedule 1.1 include approximately 75 “vendors,” among which plaintiff
was one listed; approximately 700 “customers”; and office equipment, inventory, and certain other
items. (Asset Purchase Agreement, Schedules (DE 95-1) at 22-38).5 Assets excluded are “Cash on
Hand,” “Accounts Receivable,” “Prepayments,” “Claims,” and “Taxes.” (Asset Purchase Agreement
(DE 95-2) at 4-5). Among other provisions, the Asset Purchase Agreement provides that “Promptly
following the Closing, Seller will provide Buyer with documents . . . evidencing the release of UCC
The executed copy of the Asset Purchase Agreement (DE 95-2) does not include the schedules thereto; however, an
unexecuted copy of the Asset Purchase Agreement (DE 95-1) includes the schedules.
On October 17, 2013, the Santonis executed the Guaranty, “for the indebtedness of Net
Direct . . . and for the benefit of [plaintiff],” reciting that defendant Net Direct “desires to obtain
credit from [plaintiff],” and the Santonis “desire [plaintiff] to extend or maintain such credit to [Net
Direct].” (Guaranty (DE 94-25) at 2). The Guaranty provides that it is to be “effective regardless
of the solvency or insolvency of [Net Direct] at any time, . . . subsequent incorporation,
reorganization, merger, consolidation, or other change in the composition, nature, personnel, or
location of [Net Direct].” (Id.).
On October 28, 2013, plaintiff, defendant BlueAlly Direct, and defendant Net Direct,
executed the Consent, reciting as follows in reference to the Financing Statement(s) and Asset
(Consent (DE 94-3) at 2). Upon these recitals, the Consent provides that plaintiff has “NO
OBJECTION TO ASSET PURCHASE AGREEMENT,” and that plaintiff “consents to the Asset
Purchase Agreement and sale of [Net Direct’s] contracts from [Net Direct] to [BlueAlly Direct] on
the terms set forth herein and in the Asset Purchase Agreement.” (DE 94-3 at 2). The terms
provided in the Consent included delivery to plaintiff of the Asset Purchase Agreement, and that the
Consent “will not be deemed to be a waiver of any security interests [plaintiff] may have or obtain
in [Net Direct], including but not limited to the Promissory Note dated 10/28/13.” (Id.).
That same date, defendant Net Direct executed said referenced Promissory Note, promising
to pay plaintiff $1,978,318.00, together with interest as specified in the Promissory Note. The
Promissory Note provides that “the entire unpaid balance of this [Promissory Note] shall be due and
payable” on the date “occurring thirty days after the fifth anniversary of the date of [the Promissory
Note],” that is, November 27, 2018, or earlier upon events of default as specified in the Promissory
Note. (Promissory Note (DE 94-15) at 2). The Promissory Note provides that it “is made in
connection with and hereby incorporates by reference the provisions of a certain Letter Agreement
between the Maker and the Holder, dated 10/28/13.” (Id.).
Said Letter Agreement, incorporated by reference into the Promissory Note, is a document
on its face dated October 17, 2013, but with no execution date specified. It includes a heading and
introductory paragraphs on first page and top of the second page as follows:
(Letter Agreement (DE 94-2) at 2-3). The Letter Agreement then sets out certain Net Direct
purchase requirements, and the rate of forgiveness of the Promissory Note, for each successive
anniversary of the Letter Agreement, for a cumulative total of $141,400,000.00 in purchases over
five years. (Id. at 3-4). It also states that “Net Direct will be liable to pay any and all unpaid
principal amounts due under the Promissory Note to the extent not forgiven.” (Id. at 4). It then
includes a provision referencing the Guaranty, and it provides that its terms are “to be read in
conjunction with and executed contemporaneously with the Promissory Note between the parties
dated 10/28/13,” also incorporated by reference into the Letter Agreement. (Id. at 3). Finally, it
concludes with the following provisions:
(Id. at 3-4) (page break omitted, punctuation and syntax unaltered).
On December 10, 2013, defendant BlueAlly announced in a press release (hereinafter “Press
Release”) that “it ha[d] finalized the acquisition of [defendant] Net Direct.” (DE 94-17 at 2). The
Press Release states that “[t]he [Net Direct] team will maintain their roles and continue to serve
clients as BlueAlly.” (Id.). Until about August 1, 2014, defendant BlueAlly Direct or defendant
BlueAlly ordered computing products from plaintiff, and plaintiff forgave a portion of the amount
owed under the Promissory Note, leaving a principal balance of $1,571,000.00 under the Promissory
Note. (Pl’s Statement of Facts (DE 93) ¶ 21; BlueAlly Defs’ Statement of Facts (DE 107) ¶21;
Stasiak Decl. (DE 94-20) ¶15).
On August 1, 2014, Vijay Tanamala (“Tanamala”), signing as “CEO” of defendant BlueAlly,
sent an email to a group of individuals with email addresses ending in “hp.com” “blueally.com” and
“Avnet.com” stating: “let this letter serve as our notification that BlueAlly, LLC wishes to transfer
our HP Enterprise Distribution Agreement from Arrow ECS to Avnet Technology Solutions
(Avnet).” (DE 94-26). Plaintiff received this notification also on or about August 1, 2014. (Stasiak
Decl. (DE 94-20) ¶ 16). Rene Stasiak (“Stasiak”), plaintiff’s Director of Financial Services, states
that this notification “was a clear expression that [defendant BlueAlly] would no longer use Arrow
as its exclusive provider of computing products that Arrow could sell.” (Id. ¶ 17).
Plaintiff has calculated the amount of revenue that would have been generated, but was not,
due to failure by the BlueAlly defendants to purchase products from plaintiff over a five year period
of time. (See Expert Report (DE 95-6) at 15, 26). Subtracting costs and other factors, plaintiff
calculates lost profits in the amount of $7,917,147.00, as the amount of damages the BlueAlly
defendants have caused due to an asserted violation of plaintiff’s first and third causes of action for
breach and anticipatory breach of the Letter Agreement. (Id. at 7). Additional potential damages
arising out of the alleged breach of the Promissory Note and remaining causes of action are not
included in plaintiff’s $7,917,147.00 lost profits calculation. (Id.).
Standard of Review
Summary judgment is appropriate where “the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a). The party seeking summary judgment “bears the initial responsibility of informing the district
court of the basis for its motion, and identifying those portions of [the record] which it believes
demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317,
Once the moving party has met its burden, the non-moving party must then “come forward
with specific facts showing that there is a genuine issue for trial.” Matsushita Elec. Indus. Co. Ltd.
v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986) (internal quotation omitted). Only disputes
between the parties over facts that might affect the outcome of the case properly preclude the entry
of summary judgment. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (holding
that a factual dispute is “material” only if it might affect the outcome of the suit and “genuine” only
if there is sufficient evidence for a reasonable jury to return a verdict for the non-moving party).
“[A]t the summary judgment stage the [court’s] function is not [itself] to weigh the evidence
and determine the truth of the matter but to determine whether there is a genuine issue for trial.” Id.
at 249. In determining whether there is a genuine issue for trial, “evidence of the non-movant is to
be believed, and all justifiable inferences are to be drawn in [non-movant’s] favor.” Id. at 255; see
United States v. Diebold, Inc., 369 U.S. 654, 655 (1962) (“On summary judgment the inferences to
be drawn from the underlying facts contained in [affidavits, attached exhibits, and depositions] must
be viewed in the light most favorable to the party opposing the motion.”).
Nevertheless, “permissible inferences must still be within the range of reasonable probability,
. . . and it is the duty of the court to withdraw the case from the [factfinder] when the necessary
inference is so tenuous that it rests merely upon speculation and conjecture.” Lovelace v. SherwinWilliams Co., 681 F.2d 230, 241 (4th Cir. 1982) (quotations omitted). Thus, judgment as a matter
of law is warranted where “the verdict in favor of the non-moving party would necessarily be based
on speculation and conjecture.” Myrick v. Prime Ins. Syndicate, Inc., 395 F.3d 485, 489 (4th Cir.
2005). By contrast, when “the evidence as a whole is susceptible of more than one reasonable
inference, a [triable] issue is created,” and judgment as a matter of law should be denied. Id. at 48990.
The elements of a breach of contract claim under New York law6 are “the existence of a
facially valid contract, breach and damages.” Mercantile & Gen. Reinsurance Co., plc v. Colonial
Assur. Co., 624 N.E.2d 629, 630 (N.Y. 1993). “[W]ritten agreements are construed in accordance
with the parties’ intent[,] and the best evidence of what parties to a written agreement intend is what
Plaintiff contends that the Letter Agreement, upon which plaintiff basis its breach of contract claim, is governed by
New York law because it incorporates by reference the Promissory Note, which contains a provision specifying that New
York law applies. (See Promissory Note (DE 94-15) at 3). The BlueAlly defendants contend, by contrast, that North
Carolina applies because the Letter Agreement does not itself contain a choice of law provision and it was last executed
in North Carolina. The choice of law analysis in this case is complicated by the fact that defendant BlueAlly was not a
party to the Promissory Note, and by the fact that the Promissory Note also incorporates by reference the Letter
Agreement. (See id. at 2). In addition, this court previously applied North Carolina law to the Letter Agreement without
analysis of choice of law. (See April 20, 2017, order at 8-9; Oct. 22, 2015, order at 5-12). Further, the court notes that
Virginia law governs the terms of the Consent and Asset Purchase Agreement, and Colorado law governs the terms of
the Security Agreement and the Guaranty. Accordingly, the court does not resolve conclusively the determination of
choice of law at this juncture, but rather adopts plaintiff’s suggested choice of law for purposes of the instant analysis.
In any event, the parties have not identified and the court has not found, any material difference between the laws of New
York, North Carolina, Virginia, and Colorado, on the issues presented by the instant motion.
they say in their writing.” Schron v. Troutman Sanders LLP, 986 N.E.2d 430, 433 (N.Y.2013)
(internal quotations omitted). “As such, a written agreement that is complete, clear and unambiguous
on its face must be enforced according to the plain meaning of its terms.” Id. (internal quotations
“Parol evidence – evidence outside the four corners of the document – is admissible only if
a court finds an ambiguity in the contract.” Id. “Whether an agreement is ambiguous is a question
of law for the courts.” Riverside S. Planning Corp. v. CRP/Extell Riverside, L.P., 920 N.E.2d 359,
363 (N.Y.2009) (quotations omitted). “The entire contract must be reviewed and particular words
should be considered, not as if isolated from the context, but in the light of the obligation as a whole
and the intention of the parties as manifested thereby.” Id. (quotations omitted).
“A contract is unambiguous if the language it uses has a definite and precise meaning,
unattended by danger of misconception in the purport of the agreement itself, and concerning which
there is no reasonable basis for a difference of opinion.” Greenfield v. Philles Records, Inc., 780
N.E.2d 166, 170-71 (N.Y. 2002). “Ambiguity in a contract arises when the contract, read as a
whole, fails to disclose its purpose and the parties’ intent or where its terms are subject to more than
one reasonable interpretation.” Universal Am. Corp. v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa.,
37 N.E.3d 78, 80 (N.Y. 2015) (internal quotations omitted). “Ambiguity is present if language was
written so imperfectly that it is susceptible to more than one reasonable interpretation.” Brad H. v.
City of New York, 951 N.E.2d 743, 746 (N.Y. 2011).
The BlueAlly defendants contend a genuine issue of material fact exists as to the validity of
the contract and its terms, as well as breach and damages. The court addresses each issue in turn.
The BlueAlly defendants argue that the Letter Agreement is not a valid contract with
defendant BlueAlly because, inter alia, it is not supported by consideration. “[T]here must be
consideration in contracts in order to make them valid.” I. & I. Holding Corp. v. Gainsburg, 12
N.E.2d 532, 534 (N.Y. 1938). “Under the traditional principles of contract law, the parties to a
contract are free to make their bargain, even if the consideration exchanged is grossly unequal or
of dubious value.” Apfel v. Prudential-Bache Sec. Inc., 616 N.E.2d 1095, 1097 (N.Y. 1993). “It is
enough that something of real value in the eye of the law was exchanged.” Id. (quotations omitted).
“[T]he relinquishment of . . . rights and remedies otherwise conferred by law are . . . relevant to the
determination of fair consideration.” Commodity Futures Trading Comm’n v. Walsh, 951 N.E.2d
369, 377 (N.Y. 2011). For example, “relinquishment of disputed claim is valid consideration even
though claim is in fact invalid,” Apfel, 616 N.E.2d at 1097, or “an agreement by [a] creditor to
forbear the collection of a debt presently due is a good consideration for an absolute or conditional
promise of a third person to pay the debt, or for any obligation he may assume in respect thereto.”
Strong v. Sheffield, 144 N.Y. 392, 394, 39 N.E. 330 (1895).
Plaintiff’s execution of the Consent constitutes forebearance of legal rights sufficient to
qualify as consideration for a contract under law. In light of the recitals in the Consent, by
withholding any objection to the Asset Purchase Agreement, plaintiff was thereby relinquishing
certain rights or claims it may have had on the basis of its Security Agreement and Financing
Statement(s), expressly referenced in the Consent. (Consent (DE 94-3) at 2). In particular, the
Consent notes a “certain Financing Statement, dated 13th day of October, 2010,” which reasonably
is interpreted as a reference to the Security Agreement and Financing Statement(s). (Id.) The
consent then notes that, under the Asset Purchase Agreement, defendant Net Direct agreed to sell
“certain of its assets . . . free and clear of any lien and security interest.” (Id.). Such Asset Purchase
Agreement thus could have without plaintiff’s Consent given rise to certain claims and rights under
the Security Agreement and Financing Statement(s), by impacting certain Net Direct collateral and
liens. (Id.). Such claims and rights may have included the ability to declare a default of the Security
Agreement or to exercise all rights and remedies of a secured creditor under the Uniform
Commercial Code. (See Security Agreement (DE 94-21) at 3).
Defendant suggests, nonetheless, that plaintiff gave up nothing through the Consent because
of a caveat in the Consent (hereinafter the “caveat”) that the Consent “will not be deemed to be a
waiver of any security interests Creditor may have or obtain in Seller, including but not limited to
the Promissory Note dated 10/28/13 associated documents.” (Consent (94-3) at 2). But, this caveat
limiting the scope of the Consent is narrower than the full range of rights and claims that plaintiff
was relinquishing through the Consent. Indeed the caveat does not reference back to the Financing
Statement, but rather references only the newly-executed Promissory Note and associated
documents. To interpret the caveat as preserving all possible rights and claims plaintiff could have
upon execution of the Asset Purchase Agreement would render the Consent without any force and
effect. The only reasonable interpretation of the Consent is that it did provide for some forebearance
on the part of plaintiff of certain of its rights and remedies under the Security Agreement and
Financing Statement(s) based upon execution of the Asset Purchase Agreement.
Having so determined, however, an issue remains whether the parties in fact intended for the
Consent to be consideration for the Letter Agreement. On this issue, the text and context of the
Letter Agreement, the Consent, and related documents, provide clues, but they are reasonably
susceptible to different interpretations. On the one hand, the Consent refers to the Promissory Note
and “associated documents,” (Consent (DE 94-3) at 2), permitting an inference that the Consent, like
the Promissory Note, should be read as if incorporated by reference into the Letter Agreement. On
the other hand, there is no statement in any of the documents that the Consent is consideration for
the Letter Agreement; indeed, the Letter Agreement does not reference at all the Consent and the
Consent does not reference at all the Letter Agreement. (See Consent (94-3); Letter Agreement (DE
Plaintiff does not provide a textual argument for linking the Consent to the Letter Agreement,
but rather relies upon parol evidence regarding the negotiations and circumstances of drafting. Such
evidence, however, is subject to a genuine dispute of fact. For example, plaintiff cites to Stasiak’s
statement in his declaration that the parties to the Consent and the Letter Agreement executed such
agreements “on or about” the same date. (Stasiak Decl. (DE 86-20) at 12). The BlueAlly
defendants, by contrast, cite to testimony that the date of execution of the Letter Agreement is
unknown. (See Tanamala Dep. (DE 108-2) at 8; Carney Dep. (DE 108-3) at 4). In addition, Clay
Carney (“Carney”), one of the individuals who signed the Letter Agreement, as Chief Financial
Officer of defendant BlueAlly, testified that he “just [has] a general recollection that we discussed
the – the desire to obtain the Consent in order to conclude the [Asset Purchase Agreement],” and that
he was not aware that “BlueAlly made any promise in return to Arrow in order to obtain this
Consent.” (Carney Dep. (DE 108-3) at 2).
In sum, while the Consent is sufficient to constitute consideration for a contract, there is a
genuine issue of fact whether the parties intended for the Consent to serve as consideration for the
Letter Agreement. Accordingly, plaintiff’s motion for summary judgment must be denied for this
reason on the basis of the element of contract validity.7
The BlueAlly defendants suggest that plaintiff’s breach of contract claim against defendant BlueAlly Direct
necessarily fails for the additional reason that it is not a signatory to the Letter Agreement. Plaintiff, however, does not
move for summary judgment on its claims against defendant BlueAlly Direct, and the BlueAlly defendants have not
The BlueAlly defendants argue that they are not bound by any obligations in the Letter
Agreement because the conditions precedent to contract formation in the Letter Agreement did not
come to pass. For the reasons set forth below, the court rejects defendants’ argument as to this issue
as a matter of law. Therefore, the court grants summary judgment to plaintiff in part, as to this issue.
Defendant BlueAlly’s obligations in the Letter Agreement are contingent upon two
alternative conditions precedent, particularly, that defendant BlueAlly either: 1) “purchases the
assets of NetDirect [sic]” or 2) “has any control over the Net Direct operations.” (Letter Agreement
(DE 94-2) at 4). The court need not address the second condition precedent, because there is no
genuine issue of fact as to satisfaction of the first condition. The first condition was satisfied
because defendant BlueAlly “purchase[d] the assets of Net Direct” through its wholly owned
subsidiary, defendant BlueAlly Direct. (Asset Purchase Agreement (DE 95-2) at 4, 21). In particular,
defendant BlueAlly Direct executed the Asset Purchase Agreement “By: BlueAlly, LLC, its sole
member” and by Tanamala, CEO of defendant BlueAlly. (Id. at 21).
Defendant BlueAlly argues that the court must preserve the corporate distinction between
the entity BlueAlly and BlueAlly direct, and that, as a result, there is at least a dispute of fact over
whether BlueAlly purchased the assets of Net Direct. The court recognizes the general rule that “[a]
corporate parent which owns the shares of a subsidiary does not, for that reason alone, own or have
legal title to the assets of the subsidiary.” Dole Food Co. v. Patrickson, 538 U.S. 468, 475 (2003);
see JPMorgan Chase Bank, N.A. v. Malarkey, 884 N.Y.S.2d 787, 790 (2009) (stating same). The
moved for summary judgment. Accordingly, the court leaves this issue raised for conclusive determination another day.
The BlueAlly defendants also suggest that the Letter Agreement is not a valid contract because it does not meet the
criteria for a “valid requirements contract” between plaintiff and the BlueAlly defendants. (Mem. in Opp. (DE 106) at
8). The court addresses further herein the interpretation of the material terms of the Letter Agreement and the issues of
fact raised therefrom.
court need not disregard this general rule or any corporate distinctions, however, in determining as
a matter of law that the first condition precedent was satisfied.
The instant issue presented in interpreting the first condition precedent is not whether the
corporate distinction between BlueAlly and BlueAlly direct should be maintained for any or all other
purposes, including for purposes of liability or other issues associated with the conduct of the
parties, as discussed further below, but rather whether the parties, in executing the Letter Agreement
intended that the first condition precedent would be satisfied upon purchase of Net Direct by
defendant BlueAlly, through its wholly owned subsidiary BlueAlly Direct. Considering the
language of the conditions precedent in context of the Consent and the Asset Purchase Agreement
itself, there is no reasonable basis to conclude that the parties intended to exempt defendant
BlueAlly from its obligations in the Letter Agreement by purchasing Net Direct through a wholly
owned subsidiary rather than directly itself.
The BlueAlly defendants own admissions in the record are consistent with this interpretation
of the first condition in the Letter Agreement. (See BlueAlly Defs’ Statement of Facts (DE 107) ¶19
(“After execution of the Consent and the Letter Agreement, BlueAlly, through its wholly owned
subsidiary BlueAlly Direct, finalized its acquisition of Net Direct’s assets in the fall of 2013 . . . .
RESPONSE: Admitted for purposes of the motion. Local Civil Rule 56.1(a)(2).”); BlueAlly Defs’
Response to Interrogatories (DE 94-8) at 4 (“BlueAlly Direct was formed for the purpose of
acquiring the Net Direct assets.”)).
In sum, the court grants summary judgment in part to plaintiff solely on the legal issue that
the first condition precedent in the Letter Agreement was satisfied.
Satisfaction of the first condition precedent triggers defendant BlueAlly’s promise to “cause
NetDirect [sic] to fulfill all purchase obligations required for forgiveness of the Promissory Note[.]”
(Letter Agreement (DE 94-2) at 5). In turn, the Letter Agreement describes “purchase obligations
required for forgiveness of the Promissory Note” as follows:
The business goals required for loan forgiveness are simple. . . . Net
Direct purchases its product requirements using [plaintiff] as its
exclusive Partner Demand Manager during the five year term of the
loan . . . .
(Letter Agreement (DE 94-2) at 3).
The parties have suggested through their arguments on summary judgment differing
interpretations of these terms of the Letter Agreement, each of which could have a material impact
on the issue of breach and damages, and each of which is supported by aspects of the text and
context of the Letter Agreement. In particular, it is unclear from the terms of the Letter Agreement
whether the parties intended to 1) bind defendant BlueAlly to cause only Net Direct to purchase its
product requirements, and only those product requirements as were present at the time of the
independent existence of Net Direct, from plaintiff (an interpretation favoring the BlueAlly
defendants); or 2) bind the BlueAlly defendants to cause Net Direct, and any successor BlueAlly
entity, to purchase their product requirements, even if changing during the course of a five year term,
from plaintiff (an interpretation favoring plaintiff). Support for both interpretations may be found
in the language and context of the Letter Agreement and related documents.
On the one hand, in support the interpretation favoring plaintiff, the Letter Agreement
expressly incorporates the Promissory Note executed by defendant Net Direct, which contemplates
five years of annual principal payments, forgivable under that time period through purchases
detailed in the Letter Agreement. (Promissory Note (DE 94-15) at 2). The Promissory Note was
executed on the same date as the Consent, which also expressly references the Promissory Note, as
well as the Asset Purchase Agreement. (Consent (DE 94-3) at 2). By virtue of these documents,
read together, it reasonably may be inferred that the parties contemplated in the Letter Agreement
that Net Direct, or whatever successor entity followed from the Asset Purchase Agreement, would
have purchase requirements for any products on plaintiff’s “Line Card,” (Letter Agreement (DE 942) at 3), that could be applied to forgiveness of the Promissory Note.
This interpretation is further supported by certain aspects of the language and context of the
In particular, the Letter Agreement is addressed equally and without
differentiation to both defendant Net Direct and defendant BlueAlly. In its text, it uses the pronoun
“you” and “your” without defining such term or specifying whether it applies only to defendant Net
Direct or defendant BlueAlly or both, including where it calls for “your five year commitment to
utilize Arrow as your exclusive Partner Demand Manager through which you obtain all of your
requirements for any product that is available on Arrow’s Line Card.” (Letter Agreement (DE 94-2)
at 2 (emphasis added)). It reiterates this ambiguity by stating “If this proposal is agreeable to you,
please indicate your acceptance of its terms by signing a copy in the space provided below and
returning it to me.” (Id. at 4 (emphasis added)). In turn, the space provided below the text of the
Letter Agreement provides for signatures by both defendant Net Direct and defendant BlueAlly. (Id.
On the other hand, in support of an interpretation favoring the BlueAlly defendants, the
Letter Agreement does not state anywhere that it requires the BlueAlly defendants to purchase
“their” needs for certain products from Arrow; rather it requires defendant Net Direct to purchase
“its product requirements using Arrow as its exclusive Partner Demand.” (Letter Agreement (DE
94-2) at 3 (emphasis added)). While the Letter Agreement is addressed to both Net Direct and
defendant BlueAlly, it is reasonable to interpret the initial five paragraphs of the Letter Agreement
as referring to obligations and agreements of defendant Net Direct for two reasons. First, the initial
paragraph of the Letter Agreement states that “Arrow and Net Direct herein referred [sic] to as the
‘Parties’” (Id. at 2), which could be interpreted either as an imperfection in drafting or an intent to
limit the purchasing obligations strictly to those of defendant Net Direct.
Second, all the paragraphs of the Letter Agreement consistently reference defendant Net
Direct by name, and only defendant Net Direct, up until the last one, which then references only
defendant BlueAlly and its obligations. (See Letter Agreement (DE 94-2) at 2-4). Examples of the
references to Net Direct include, but are not limited to: 1) “We very much appreciate the opportunity
to make a proposal to assist you in meeting Net Direct’s procurement goals”; 2) “[Arrow] would like
to extend to you the following terms in the hope of creating a relationship we are confident will give
Net Direct . . . a competitive advantage in serving your customers”; 3) “Arrow and Net Direct LLC
are parties to three forgivable loans”; 4) “If the goals are met for five, consecutive years, Net Direct
will never have to repay any portion of the loan”; 5) “The Business goals required for loan
forgiveness are simple[:] . . . . Net Direct purchases its product requirements using Arrow as its
exclusive Partner Demand Manager”; 6) “Should Net Direct not purchase $20,000,000 in product
by the first anniversary of Letter Agreement, [plaintiff] will forgive the Promissory Note at the rate
of 1.5% of the first year invoiced amount . . . .”; 7) “To the extent Net Direct has not purchased
$141,000,000 in product by the fifth anniversary of this Letter Agreement, Net Direct agrees to pay
the unpaid pro-rata portion of the intended forgiven loan amount to [plaintiff]”; 8) “Net Direct
agrees to keep full, clear, and accurate records of all purchases made by Net Direct for a period of
five  years.” (Id. at 2-4 (emphasis added)).
The interpretation favoring the BlueAlly defendants further is supported by general Uniform
Commercial Code rules governing interpretation of requirements contracts. In particular:
When an enterprise is sold, the question may arise whether the buyer is bound by an
existing output or requirements contract. That question is outside the scope of this
Article, and is to be determined on other principles of law. Assuming that the
contract continues, the output or requirements in the hands of the new owner
continue to be measured by the actual good faith output or requirements under the
normal operation of the enterprise prior to sale. The sale itself is not grounds for
sudden expansion or decrease.
Uniform Commercial Code § 2-306, Comment 4 (emphasis added); see N.Y. U.C.C. Law § 2-306
(same). In this manner, if the parties had wished to negotiate an expansion of requirements to those
of future successor entities of Net Direct, the parties could have negotiated terms to the Letter
Agreement clearly specifying language, for example, that the BlueAlly defendants were obligated
to cause defendant Net Direct, “and any successor thereto created by the Asset Purchase Agreement
to fulfill all their purchase requirements,” but the Letter Agreement does not so specify.
In so holding, the court also rejects suggestions in the BlueAlly defendants’ opposition to
summary judgment that the Letter Agreement created no obligations whatsoever on the part of
defendant BlueAlly. (See Mem. in Opp. (DE 106) at 8). The BlueAlly defendants contend, for
example, that they did not assume any Net Direct obligations, except as specifically identified in the
Asset Purchase Agreement. But, this argument ignores that, in the Letter Agreement, separate and
apart from the Asset Purchase Agreement, defendant BlueAlly plainly bound itself to “cause
NetDirect [sic] to fulfill all purchase obligations required for forgiveness of the Promissory Note.”
(Letter Agreement (DE 94-2) at 2-5). While there is an ambiguity in the Letter Agreement, as noted
above, as to the nature and extent of those purchase obligations, the ambiguity does not extend to
the question of whether defendant BlueAlly is required by the Letter Agreement to cause Net Direct
to fulfill purchase obligations. Thus, on this limited issue of contract interpretation, plaintiff is
entitled in part to a ruling as a matter of law, and plaintiff’s motion for summary judgment is granted
in that limited part.
In other respects as set forth above, the Letter Agreement is ambiguous because it is
susceptible, in material part, to more than one reasonable interpretation as to the issue of the nature
and extent of purchase obligations. Accordingly, the court turns next to considering genuine issues
of material fact arising from the parol evidence introduced and from other evidence bearing on
breach, pertaining to such issue.
Where the Letter Agreement is ambiguous, the court considers next whether the parol
evidence in the record, viewed in the light most favorable to the BlueAlly defendants, demonstrates
a genuine issue of material fact as to the interpretation of the Letter Agreement. As set forth below,
For example, in support of its interpretation of the Letter Agreement, plaintiff points to a
September 19, 2013, email regarding a draft of the Letter Agreement from Carney, who ultimately
signed the Letter Agreement, and Stasiak, stating that “the documents are consistent with our
expectations concerning exclusivity and other elements of our go forward relationship.” (Sept. 19,
2013, email (DE 94-10) at 2). This email, however, viewed in the light most favorable to the
BlueAlly defendants, is not determinative in resolving the ambiguities in the references to defendant
Net Direct in the Letter Agreement, as discussed herein above. Indeed, the statement in the email
suffers from the same degree of ambiguity as the Letter Agreement itself, by not specifying whether
the BlueAlly defendants are agreeing to cause Net Direct, and any successor entity thereof, to meet
their purchasing requirements through plaintiff.
Plaintiff also cites to an October 16, 2013, email from Carney to Tanamala, in which Carney
states, referring to the Letter Agreement, “[t]he last paragraph refers to BlueAlly and essentially
states that we’ll continue to buy product through Arrow for up to 5 years so long as the [Net Direct]
loan is not yet fully forgiven.” (Oct. 16, 2013, email (DE 94-13) at 2) (emphasis added). This
statement, while more pertinent than the September 19, 2013 email, does not conclusively resolve
the ambiguity in the Letter Agreement. Viewed in the light most favorable to plaintiff, it suggests
that the BlueAlly defendants understood the Letter Agreement to bind the BlueAlly defendants to
fulfill all their purchase requirements for products sold by plaintiff. However, viewed in the light
most favorable to the BlueAlly defendants, it is not sufficiently precise on the point of ambiguity
discussed herein to resolve the issue as a matter of law. Rather, the statement is subject to
competing inferences in light of all the evidence in the record, including additional evidence, as
described below, regarding negotiation of a separate contractual relationship between plaintiff and
Such additional evidence includes a November 1, 2013, email from Carney to Tanamala
containing a draft proposal for transmission to plaintiff to “understand what steps are necessary to
establish and formalize a direct relationship between Arrow and BlueAlly.” (Nov. 1, 2013, email
(DE 72-5) at 2). A June 16, 2014, email between plaintiff’s sales employees discussing plans to
present BlueAlly with a volume purchase agreement, noting also “[w]e need to figure out how to
separate the ‘baggage’ from the old Net Direct Systems with the new BllueAlly [sic] company.
Obviously, our competition is treating them as a new company.” (June 16, 2014, email (DE 109-1)
at 2; see Steve Kane Deposition (DE 109-3) at 3-5). Viewed in the light most favorable to the
BlueAlly defendants, these statements reflect an understanding that the Letter Agreement did not
require the BlueAlly defendants, beyond Net Direct or its successor entities, to make all of their
purchases through plaintiff, and that a new agreement specifically setting out such obligations would
In sum, the Letter Agreement is ambiguous in material terms leading to a genuine issue of
fact as to the interpretation of the Letter Agreement, as to the issue of the nature and extent of
purchase obligations under the Letter Agreement. Therefore, plaintiff’s motion for summary
judgment must be denied in that part on the issue of interpretation of the Letter Agreement.
Breach and damages
Because there is a genuine issue of material fact as to interpretation of the Letter Agreement,
there is a genuine issue of fact as to whether and to what extent defendant BlueAlly breached its
promise in the Letter Agreement and the damages, if any, resulting therefrom. In particular, the
nature and extent of the breach by the BlueAlly defendants, if any, depends on whether the Letter
Agreement obligates defendant BlueAlly to meet purchase requirements only of Net Direct,
defendant BlueAlly Direct, some other successor entity, or defendant BlueAlly, after August 1,
2014, the date of the alleged breach by the BlueAlly defendants. (See Stasiak Decl. (DE 94-20) ¶
In addition, even assuming that the Letter Agreement properly is interpreted broadly to
require the BlueAlly defendants to cause Net Direct and any other successor entity to meet their
product requirements using plaintiff, the record permits an inference that defendant BlueAlly
independently had or developed its own product requirements by August 1, 2014. Such evidence
includes announcements made regarding asset purchase in December 2013, as well as evidence
discussed above regarding negotiations for a volume purchase agreement between plaintiff and
defendant BlueAlly. (See, e.g., Frequently Asked Questions (DE 94-18) at 2-3 (“[W]e are here to
serve you, now with even more solutions and products! We will continue to connect and offer you
the latest in our product offerings, and now we have a wider portfolio, which means more options
for your business.”; “[W]e will offer existing solutions as well as new solution offerings in 2014”;
“Moving forward, BlueAlly will honor all present pricing agreements. Future pricing will continue
to vary case by case”) (emphasis added); Press Release (DE 94-17) at 2 (“The firm will be actively
adding new locations and employees in 2014, and will remain active in the acquisition space.”; Nov.
1, 2013, email (DE 72-5) at 2; June 16, 2014, email (DE 109-1) at 2; see Steve Kane Deposition (DE
109-3) at 3-5; Tanamala Deposition (DE 108-2) at 12-13)).
Plaintiff contends that only defendant Net Direct owned a “reseller business” prior to the
Asset Purchase Agreement, suggesting that any reseller business operated by the BlueAlly
defendants must be attributed to defendant Net Direct. (Pl’s Reply (DE 115) at 9). For example,
plaintiff cites the December 10, 2013, Press Release, which states: “BlueAlly, LLC . . . announced
today that it has finalized the acquisition of Net Direct Systems (NDS). The combined entity of over
400 employees and $100M revenue will operate under the BlueAlly brand.” (Press Release (DE 9417) at 2). Viewed in the light most favorable to the BlueAlly defendants, this statement permits an
inference that a “combined entity” will operate following the acquisition, not that the BlueAlly
Defendants will operate Net Direct’s reseller business. The same is true of an undated “Frequently
Asked Questions” document submitted by plaintiff. (See Frequently Asked Questions (DE 94-18)
2-3 (“[t]he combination of Net Direct Systems/BlueAlly is a strategic and beneficial move for
customers. . . .”) (emphasis added)).
In addition, plaintiff cites to BlueAlly discovery responses stating: 1) “BlueAlly Direct was
interested in acquiring the assets of Net Direct Systems to be able to operate as a value added
reseller.” (Discovery Responses (DE 94-8) at 3), and 2) “[T]he BlueAlly Defendants admit that
BlueAlly did not and does not sell products.” (Id. at 5). Evidence as discussed above regarding
negotiations for a volume purchase agreement between plaintiff and defendant BlueAlly, however,
permits an inference that the BlueAlly defendants developed on their own a “reseller business,” with
its own requirements for products sold by plaintiff, after the Asset Purchase Agreement. (See, e.g.,
Frequently Asked Questions (DE 94-18) at 2-3; Press Release (DE 94-17) at 2; Nov. 1, 2013, email
(DE 72-5) at 2; June 16, 2014, email (DE 109-1) at 2; see Steve Kane Deposition (DE 109-3) at 3-5;
Tanamala Deposition (DE 108-2) at 12-13)).
Thus, a genuine issue of fact remains as to whether and to what extent defendant Net Direct
or the BlueAlly defendants in any form had “purchase obligations” and “product requirements” that
continued by the time of the alleged breach in August 2014. (Letter Agreement (DE 94-2) at 3, 5).
Accordingly, plaintiff has failed to demonstrate an absence of genuine issue of material fact as to
defendant BlueAlly’s breach of the Letter Agreement.
In addition, because there exists a genuine issue of fact as to whether and to what extent a
breach occurred, there is also a genuine issue of fact as to damages or the extent thereof. The Expert
Report, upon which plaintiff relies for its damages calculation, assumes a breach to the full extent
alleged by plaintiff. (See, e.g., Expert Report (DE 95-6) at 7) (I have been asked to measure
Arrow’s Lost Profits resulting from BlueAlly’s alleged breach of the Letter Agreement.”) (emphasis
added). In addition, the Expert Report calculates lost revenue based upon “purchases which
BlueAlly has made from value-added distributors other than Arrow,” without applying or
differentiating purchasing requirements of Net Direct at the time of the Asset Purchase Agreement.
(Expert Report at 10; see also id. (noting that in calculating future lost revenue from October 2016
to October 2018, the Expert Report analyzed “historical sales to Net Direct and BlueAlly,” noting
“Arrow’s sales to Net Direct and BlueAlly from 2010 to 2013 show some volatility while showing
significant growth in some years and significant losses in other years”).
Therefore, plaintiff’s motion for summary judgment must be denied on the issues of breach
Motion to Seal
Plaintiff moves to seal the Expert Report, which concerns plaintiff’s asserted damages due
to the alleged breach of contract by the BlueAlly defendants. The BlueAlly Defendants do not
oppose this motion.
In evaluating a motion to seal, in accordance with the mandatory procedure outlined by the
Fourth Circuit in Stone v. University of Maryland, 855 F.2d 178 (4th Cir.1988), the court must first
“determine [whether] the source of [the public’s] right of access . . . is based on the common law
or the First Amendment” with respect to each document to be sealed. Id. at 180. This is because
“different levels of protection may attach to the various records and documents involved in [a] case.”
Id. “The common law presumes a right to inspect and copy [all] judicial records and documents,”
and this presumption “may be overcome if competing interests outweigh the interest in access.” Id.
(citing Nixon v. Warner Communications, Inc., 435 U.S. 589, 597 (1978); Rushford v. The New
Yorker Magazine, Inc., 846 F.2d 249, 253 (4th Cir.1988); In re Washington Post Co., 807 F.2d 383,
390 (4th Cir.1986)).
The First Amendment guarantees a heightened presumption of access “only to particular
judicial records and documents,” including “documents filed in connection with [a] summary
judgment motion in civil case.” Id. (citing Rushford, 846 F.2d at 253). “Where the First Amendment
guarantees access, . . . access may be denied only on the basis of a compelling governmental interest,
and only if the denial is narrowly tailored to serve that interest.” Id. (citing Rushford, 846 F.2d at
253; Press-Enterprise Co. v. Superior Court, 464 U.S. 501, 510 (1984)).
To ensure proper weighing of such interests, “a court must first give the public notice of a
request to seal and a reasonable opportunity to challenge it.” Id. at 181 (citing In re Knight
Publishing Co., 743 F.2d 231, 235 (4th Cir.1984)). “While individual notice is unwarranted, the
court must notify persons present in the courtroom of the request, or docket it ‘reasonably in advance
of deciding the issue.’” Id. (quoting Knight, 743 F.2d at 235). “The court must consider less drastic
alternatives to sealing and, if it decides to seal documents, must ‘state the reasons for its decision
to seal supported by specific findings, and the reasons for rejecting alternatives to sealing in order
to provide an adequate record for review.’” Id.
Plaintiff contends that the Expert Report should be sealed for the following reasons:
Arrow competes in a highly competitive industry where the terms of sale are highly
confidential. The Expert Report contains this commercially sensitive information
regarding Arrow’s business practices with one of its customers. For example, the
Expert Report contains detailed information concerning Arrow’s revenues, costs, and
profit margin with respect to specific sales. In Arrow’s industry, sales costs and
profit margin information are this information is particularly sensitive and provides
a competitively sensitive.
The public dissemination of the information contained in the Expert Report would
blunt Arrow’s competitive edge in the marketplace. For this reason, not only the
costs and profit margin information, but also the Expert Report as a whole, should
be sealed. . . . The sensitive nature of this commercial material is obvious from the
face of the Expert Report. If made public, Arrow’s competitors would gain valuable
insight into the inner workings of the company, giving them an unfair advantage in
the marketplace. Additionally, public disclosure of the Expert Report would
undermine Arrow’s efforts at recruiting and retaining customers, as competitors
would be able to use Arrow’s information to outbid Arrow. The risk that a
competitor might gain such an advantage is enough to justify sealing the Expert
(Mot. to Seal, Mem. (DE 97) at 5-6). These reasons given for sealing, however, only apply to
portions of the Expert Report. Significant portions of the Expert Report, particularly its narrative
text, do not contain sensitive information regarding sales, costs, and profits, beyond what is already
revealed in documents available publicly or in the record in this case, such as plaintiff’s summary
judgment brief (e.g., DE 92 at 21), and numerous other exhibits attached to the summary judgment
Accordingly, the court GRANTS IN PART and DENIES IN PART plaintiff’s motion to seal.
The court grants the motion insofar as the Expert Report filed at docket entry number 95-6 shall
remain under seal. Plaintiff, however, is DIRECTED to file a redacted version of the Expert Report,
within 14 days of the date of this order, which redacts only those portions of the Expert Report that
meet its descriptive criteria set forth above, but leaves unredacted those portions that provide
information already available in the record, or to the public, or otherwise not disclosing sensitive
In addition, the court notes that there has been no motion to seal filed regarding the
remaining documents filed provisionally under seal at docket entry number 95 (see DE 95, and 95-1
through 95-5), and those filed provisionally under seal at docket entry number 109. Therefore, in
accordance with section V.G. of the court’s Electronic Case Filing Administrative Policies and
Procedures Manual, the clerk is DIRECTED to unseal such documents (DE 95-1 through 95-5; and
DE 109). Finally, where the court has not disclosed herein information subject to sealing in
accordance with the foregoing, the instant order shall not be filed under seal.
Based on the foregoing, plaintiff’s motion for summary judgment (DE 91) is GRANTED IN
PART on the determinations of law as set forth herein, and it is DENIED IN PART in all remaining
respects. Plaintiff’s motion to seal (DE 96) is GRANTED IN PART AND DENIED IN PART. As
set forth herein, the Expert Report filed at docket entry number 95-6 shall remain under seal.
Plaintiff, however, is DIRECTED to file a redacted version of the Expert Report, within 14 days of
the date of this order, which redacts only those portions of the Expert Report that meet the criteria
for sealing as set forth herein. The clerk is DIRECTED to unseal documents filed at DE 95, DE 951 through 95-5; and DE 109.
In light of the court’s decision on plaintiff’s motion for summary judgment, this case now
is ripe for entry of an order governing deadlines and procedures for final pretrial conference and trial
on all remaining claims. The parties are DIRECTED to confer and file within 14 days of the date
of this order a joint status report informing of 1) estimated trial length; 2) particular pretrial issues
which may require court intervention in advance of trial, if any; and 3) at least three suggested
alternative trial dates. In addition, where mediation was noted completed already on the docket, in
October 2016, the parties shall specify if they wish to schedule a court-hosted settlement conference
or additional alternative dispute resolution procedures in advance of trial, and if so the date for
completion of such.
SO ORDERED, this the 30th day of November, 2017.
LOUISE W. FLANAGAN
United States District Judge
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