The opinion of the court was delivered by: Paul G. Gardephe, U.S.D.J.
Defendants Reserve International Liquidity Fund, Ltd. (the "Fund"), Reserve Management Co., Inc. ("RMCI"), Resrv Partners, Inc., The Reserve Fund (the "Reserve"), Bruce R. Bent, Bruce R. Bent II, and Arthur Bent III's (collectively, "Defendants") move to file under seal certain materials associated with Plaintiffs' remand motion, including reports of the state court-appointed Temporary Supervisor of the Fund and documents containing information or statements from those reports. Defendants also seek to file under seal documents in the remand submissions that disclose the names of current and former Fund investors. (Def. Br. 8--9) Plaintiffs Caxton International Limited and Caxton Equity Growth Holdings, LP oppose Defendants' motion For the reasons set forth below, Defendants' motion is GRANTED as to the names of current and former investors, but is otherwise DENIED.
Following the October 6, 2008 filing of this action in state court, Plaintiffs and Defendants executed a Confidentiality Stipulation and [Proposed] Protective Order, dated October 28, 2008 (the "Confidentiality Stipulation").*fn1 (Eaton Decl., Ex. A) On November 6, 2008, the parties stipulated to the appointment of Denis O'Connor of Alix Partners LLP as "Temporary Supervisor" of the Fund, which the state court so-ordered on November 7, 2008 (the "Supervisor Stipulation and Order"). (Id., Ex. B; see Eaton Decl. ¶ 4) The Supervisor Stipulation and Order required O'Connor to prepare for the state court and the parties a "Preliminary Report" setting forth:
(A) for the period of September 12, 2008 through the present, verification of (i) all Fund assets . . .; (ii) the number and type of Fund shares held by each investor; (iii) all transfers, involving assets or cash, into or out of any Fund accounts maintained by the [D]efendants; (iv) all purchases or sales of securities by the Fund; (v) all redemption requests received by the Fund including, without limitation, verification of the date and time of each redemption request, and the amount of money returned to Fund shareholders pursuant to each such redemption request; and
(B) [an] examination of the Fund's policies and procedures with respect to redemptions, calculations of the Fund's NAV and the Fund's internal controls. (Eaton Decl., Ex. B, ¶¶ 2--3)
The Supervisor Stipulation and Order also required O'Connor to provide a weekly report to the Court and parties setting forth: "(i) the Fund's cash balance; (ii) details of the Fund's assets, and [their] current market value . . .; (iii) the number of shares currently outstanding; and (iv) any other information concerning the management and operations of the Fund, or the status of any partial distributions of the Fund's cash holdings, that [he] deems appropriate (the 'Weekly Report')." (Id. ¶ 5(C))
The Supervisor Stipulation and Order provides that, "Mr. O'Connor's Weekly Reports to the Court and the parties shall be designated 'Confidential' and shall be subject to the terms of the parties' Confidentiality Stipulation." (Id. ¶ 12) The Confidentiality Stipulation provides that all material designated as "Confidential" shall be disclosed only to: the Court; the parties and their outside counsel; other persons involved in the litigation; and outside counsel to investors in the Fund -- provided that such counsel execute the Endorsement annexed to the Confidentiality Stipulation -- and their clients. (Eaton Decl., Ex. A, ¶ 7) The Confidentiality Stipulation further provides that if any party seeks to file with the Court material that has been designated as "Confidential," that party shall request that the material "be held under seal until further order of the Court." (Id. ¶ 5(e))
Defendants removed this action to this Court on January 27, 2009, and Plaintiffs subsequently moved to remand this action to state court. In a letter dated February 26, 2009, Plaintiffs alerted this Court to the fact that certain documents relevant to their remand motion had been filed under seal in state court. (Letter of Mark P. Ressler to Court dated Feb. 26, 2009, at 1--2). Plaintiffs made clear in their letter, however, that they did not believe that these documents contained confidential information and that they had in fact objected to defendants' assertions of confidentiality in state court. (Id.) This Court declined to enter a sealing order at that time, finding that it could not make the "specific, on the record findings" necessary to support a sealing order under Lugosch v. Pyramid Co. of Onondaga, 435 F.3d 110, 119 (2d Cir. 2006). (Mar. 19, 2009 Order at 3--4) Defendants now seek an order requiring that the following documents (the "Disputed Materials") be filed under seal: (1) the Temporary Supervisor's Preliminary Report (Hanin Decl. in Supp. of Pltf. Remand Mot. ("Hanin Decl."), Ex. 14); (2) the draft First Amended Complaint (Hanin Decl., Ex. 1; Eaton Decl. in Supp. of Def. Opp. to Remand Mot., Ex. 5) (3) a December 12, 2008 letter from Plaintiffs' counsel to the state court (Hanin Decl., Ex. 15); (4) a January 15, 2009 letter from Plaintiffs' counsel to the state court (Hanin Decl., Ex. 18); and (5) the parties' remand motion papers. (Def. Br. 1 n.1) While Defendants' papers are not entirely clear, it appears that they are seeking a sealing order concerning these documents because they contain information obtained and/or reported by the Temporary Supervisor. (Eaton Decl. ¶¶ 14-15) Defendants also seek to file under seal documents that disclose the names of current and former investors in the Fund. (Id. at ¶ 14; Def. Br. 8--9)
I. LEGAL STANDARD FOR SEALING
"The common law right of public access is firmly rooted in our nation's history." Lugosch v. Pyramid Co. of Onondaga, 435 F.3d 110, 119 (2d Cir. 2006). "The presumption of access is based on the need for federal courts, although independent -- indeed, particularly because they are independent -- to have a measure of accountability and for the public to have confidence in the administration of justice." Id. (quoting United States v. Amodeo, 71 F.3d 1044, 1048 (2d Cir. 1995)).
The Second Circuit has articulated a three-step process for determining whether documents should be placed under seal. First, a court must determine whether the presumption of access attaches. A presumption of access attaches to any item that constitutes a "judicial document" -- i.e., an "item . . . relevant to the performance of the judicial function and useful in the judicial process." Lugosch, 435 F.3d at 119 (quotation omitted). Second, if the court determines that the item to be sealed is a judicial document, the court must then determine the weight of the presumption of access. "[T]he weight to be given the presumption of access must be governed by the role of the material at issue in the exercise of Article III judicial power and the resultant value of such information to those monitoring the federal courts." Id. (quotation omitted). "Generally, the information will fall 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. (quotation omitted). Finally, after determining the weight of the presumption of access, the court must "balance competing considerations against it." Id. at 120. (quotation omitted). "Such countervailing factors include but are not limited to the danger of impairing law enforcement or judicial efficiency and the privacy interests of those resisting disclosure." Id. (quotation omitted).
The Second Circuit has further explained that "[d]ocuments may be sealed if specific, on the record findings are made demonstrating that closure is essential to preserve higher values and is narrowly tailored to serve that interest." Id. (quoting In re New York Times Co., 828 F.3d 110, 116 (2d Cir. 1987)). "Broad and general findings by the ...