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KeyBank National Association v. Element Transportation LLC

United States District Court, S.D. New York

January 26, 2017

KEYBANK NATIONAL ASSOCIATION, Plaintiff-Counterclaim-Defendant,
v.
ELEMENT TRANSPORTATION LLC, f/k/a ELEMENT FINANCIAL CORP. (DELAWARE) and ELEMENT FLEET MANAGEMENT CORP., f/k/a ELEMENT FINANCIAL CORP. (ONTARIO), Defendants-Counterclaim-Plaintiffs.

          MEMORANDUM OPINON & ORDER

          JOHN F. KEENAN, United States District Judge:

         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 contains 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 another unredacted exhibit as annexed to and part of KeyBank's 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.

         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 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.

         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.)

         II. Discussion

         A. 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)). 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, ...


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