BR Fund IV Acq Inv, LLC v Brightwood Capital

Fund III

2024 NY Slip Op 33314(U)

September 19, 2024

Supreme Court, New York County

Docket Number: Index No. 651756/2024

Judge: Margaret A. Chan

Cases posted with a "30000" identifier, i.e., 2013 NY Slip

Op 30001(U), are republished from various New York

State and local government sources, including the New

York State Unified Court System's eCourts Service.

This opinion is uncorrected and not selected for official

publication.
INDEX NO. 651756/2024

NYSCEF DOC. NO. 125 RECEIVED NYSCEF: 09/20/2024

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SUPREME COURT OF THE STATE OF NEW YORK 

NEW YORK COUNTY 

PRESENT: HON. MARGARET A. CHAN 

Justice 

--------------------X 

BR FUND IV ACQ INV, LLC,BR FUND V ACQ INV, LLC, 

Plaintiffs, 

-vBRIGHTWOOD CAPITAL FUND Ill-INSTITUTIONAL, LP, 

BRIGHTWOOD CAPITAL FUND Ill, LP, BRIGHTWOOD 

CAPITAL FUND 111-U, LP, BRIGHTWOOD CAPITAL FUND 

MANAGERS Ill, LLC,BRIGHTWOOD CAPITAL FUND IllINSTITUTIONAL HOLDING CORP~. BRIGHTWOOD 

CAPITAL FUND Ill HOLDINGS, LP, AND BRIGHTWOOD 

FUND 111-C, LP, 

Defendants. 

--------------------X 

PART 49M 

INDEX NO. 651756/2024 

04/22/2024, 

04/25/2024, 

MOTION DATE 05/31/2024 

MOTION SEQ. NO. 001 003 004 

DECISION + ORDER ON 

MOTION 

The following e-filed documents, listed by NYSCEF document number (Motion 001) 14, 15, 16, 17, 18, 

19,20,21, 73 

were read on this motion to/for SEAL 

The following e-filed documents, listed by NYSCEF document number (Motion 003) 39, 40, 42, 58, 59, 

60,61,62,63,64,65,66,67,68,69, 70, 71 

were read on this motion to/for SEAL 

The following e-filed documents, listed by NYSCEF document number (Motion 004) 90, 91, 92, 93, 94, 

95,96, 97,98,99, 100,101,102,103,109 

were read on this motion to/for SEAL 

In this breach of contract action related to plaintiffs' investment in defendants' 

continuation fund, defendants Brightwood Capital Fund III-Institutional, LP et al. 

(Brightwood) move to seal documents in Motion Sequences 001, 003, and 004. Plaintiffs BR 

Fund IV Acq Inv, LLC and BR Fund V Acq Inv, LLC (Banner Ridge) oppose the motion. 

MS 001 

Defendants move, by order to show cause, to seal Exhibits 1 and 2 of the Complaint 

(NYSCEF #s 3 and 4) and to replace them with redacted versions attached as Exhibits A 

and B to the Affirmation of Sengal Selassie (NYSCEF #s 17 and 18). Exhibit 1 is the 

Transaction Agreement between the parties, and Exhibit 2, the Letter Agreement (together, 

Transaction Documents). Plaintiffs oppose this motion. 

651756/2024 BR FUND IV ACQ INV, LLC, ET AL vs. BRIGHTWOOD CAPITAL FUND 111-

INSTITUTIONAL, LP, ET AL 

Motion No. 001 003 004 

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Defendants note that the documents reveal commercially-sensitive information that 

Brightwood guarded closely and never intended to be public, including detailed information 

regarding Brightwood's business structure, business and tax-planning strategies, internal 

finances and valuation, the identity of the companies in Brightwood's private investment 

portfolio, the identity of non-parties who provide financing to Brightwood, amounts and 

formulas for calculating pricing in the transaction, detailed formulas for the distribution of 

investment proceeds to investors, and information regarding the amounts and calculation of 

Brightwood's management fees (id. at 5). Defendants argue that the disclosure of such 

information to the public will cause commercial and competitive harm to Brightwood and 

there is no overriding public interest in the detailed terms of the transactions between 

private investment funds (id.). Defendants also point out that the Transaction Agreement 

contained a confidentiality provision and plaintiffs' filing thereof on a public docket 

breached that provision (id. at 2). 

Plaintiffs on the other hand argue that no "good cause" exists to partially seal the 

Transaction Documents and that such documents are central to Banner Ridge's breach of 

contract claim against Brightwood. Plaintiff also argues that the confidentiality provision in 

the Transaction Agreement does not apply because the Transaction Agreement only 

requires that the Transaction Agreement remain confidential "except as required by [l]aw" 

(NYSCEF # 73 - Dfts' MOL at 3). Plaintiffs also point out that the Letter Agreement 

contains no such provision (id.). Plaintiffs argue that defendants fail to substantiate their 

assertions that such disclos-μres will harm defendants (id. at 2-3). Plaintiffs also note that 

Banner Ridge filed the Exhibits on April 4, but Banner Ridge did not have them removed 

from the public docket until two weeks later on April 19 (id. at 5). 

MS003 

Along with their submission of the Affirmation of Brandon Fetzer in Support of the 

Plaintiffs' Order to Show Cause for a Preliminary Injunction (NYSCEF # 46), plaintiffs filed 

11 exhibits under provisional seal (NYSCEF # 28-38 and# 47-57). Plaintiffs assert that 

while they remained unconvinced that there is good cause to seal the exhibits attached to 

the Fetzer Affirmation, they filed the documents under seal as a precautionary measure 

since the information therein was similar to that in the pending Motion Sequence 001 

(NYSCEF # 40 at 2). Plaintiffs also submitted a proposed Order to Show Cause, requesting 

that the court require defendants to explain why the exhibits should remain under seal. In 

response, defendants filed papers to support a partial sealing of nine of the documents and 

provided redacted versions of exhibits B through H (NYSCEF #s 63-69) and J through K 

(NYSCEF #s 70 and 71) of the Fetzer Affirmation. 

Defendants contend that the exhibits contain information similar to that in Motion 

Sequence 001 (NYSCEF # 61- Dfts' MOL at 4-5). Specifically, the exhibits to the Fetzer 

Affirmation include emails and attachments that disclose confidential, commercially 

sensitive details regarding Brightwood's valuation, balance sheets, the identities of 

companies in its private investment portfolio, the identities of non-parties who provide 

financing to Brightwood (along with the amounts of financing), and the financial terms of 

private transactions, including pricing formulas, distribution of investment proceeds, and 

Brightwood's management fees and discounts (id.). Defendants argue that public disclosure 

of this information would place them at a competitive disadvantage by allowing competing 

funds, investors, and market counterparties to access detailed, confidential business and 

651756/2024 BR FUND IV ACQ INV, LLC, ET AL vs. BRIGHTWOOD CAPITAL FUND 111-

INSTITUTIONAL, LP, ET AL 

Motion No. 001 003 004 

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financial information, including the terms on which Brightwood enters agreements with 

other parties (id). 

MS004 

Defendants move, by order to show cause, to seal exhibits A, C, D, F, G, H, J, Kand 

M to the Affirmation of Sengal Selassie in Opposition to Plaintiffs' Application for a 

Preliminary Injunction (Selassie Affirmation) (NYSCEF #s 77, 79, 80, 82, 83, 84, 86, 87, 

and 89). Defendants also filed redacted versions of these exhibits to the motion (NYSCEF #s 

93-101). 

Because of the similarities between the materials in Motion Sequences 003 and 004, 

the parties make almost identical arguments in support and in opposition of their sealing. 

Discussion 

Under New York law, there is a presumption that the public has a right to access 

judicial proceedings and court records (Mosa.llem v Berenson, 76 AD3d 345, 348 [1st Dept 

2010], citing Mancheski v Ga.belli Group Capital Partners, 39 AD3d 499, 501 [2d Dept 

2007]). However, this right is not absolute (Danco Labs v Chemical Works of Gedeon 

Richter, 274 AD3d 1, 8 [1st Dept 2000]). A court can seal or redact court records under 

section 216. l(a) of the Uniform Rules for Trial Courts upon a showing of "good cause" (22 

NYCRR 216.l[a]). At the same time, "[c]onfidentiality is clearly the exception, not the rule" 

(Matter of Hoffman, 284 AD2d 92, 93 - 94 [1st Dept 2001]), and the party seeking to seal 

court records must demonstrate compelling circumstances justifying restricted public 

access (Mancheski, 39 AD3d at 502). 

Upon review of the documents sought to be sealed and the defendants' proposed 

redactions, together with plaintiffs' opposition to sealing, the court finds good cause exists 

under 216.1 of the Uniform Rules of Trial Courts for sealing all of the proposed documents, 

except for the Letter Agreement (NYSCEF # 4) (see Dawson v White & Case, 184 AD2d 

246, 247 [1st Dept 1992] [sealing is warranted in the absence of "any legitimate public 

concern, as opposed to mere curiosity, to counter-balance the interest [a business'] partners 

and clients have in keeping their financial arrangements private"]; D'Amour v Ohrenstein 

& Brown, LLP, 17 Misc 3d 1130[A], *20 [Sup Ct, NY County 2007] ["[s]ealing a court file 

may be appropriate to preserve the confidentiality of materials which involve the internal 

finances of a party and ~re of minimal public interest"]). Here, defendants are primarily 

seeking to partially seal confidential financial information and the names of non·parties. In 

those instances in which defendants seek to seal information that is already public-facing in 

the Complaint, as such information goes to the parties' central arguments, good cause was 

not sufficiently established. 

Conclusion 

For the foregoing reasons, it is hereby 

ORDERED that plaintiffs' motions to seal (MS 001, MS 003, and MS 004) are 

granted in part and denied in part; and it is further 

651756/2024 BR FUND IV ACQ INV, LLC, ET AL vs. BRIGHTWOOD CAPITAL FUND 111-

INSTITUTIONAL, LP, ET AL 

Motion No. 001 003 004 

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ORDERED that the Clerk of the Court is directed, upon service upon the clerk of a 

copy of this Decision and Order with notice of entry, to seal the following NYSCEF 

documents: 3, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 

57, 77, 79, 80, 82, 83, 84, 86, 87, 89; and it is further 

ORDERED that until further order of the court, the Clerk of the Court shall deny 

access to those documents (NYSCEF #s 3, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 47, 48, 

49, 50, 51, 52, 53, 54, 55, 56, 57, 77, 79, 80, 82, 83, 84, 86, 87, 89) to anyone (other than the 

staff of the Clerk or the court) except for counsel of record for any party to this action, any 

party, and any representative of the counsel of record for a party upon presentation to the 

County Clerk of written authorization from said counsel and appropriate identification; and 

it is further 

ORDERED that service upon the Clerk of the Court shall be made in accordance 

with the procedures set forth in the Protocol on Courthouse and County Clerk Procedures 

for Electronically Filed Cases (accessible at the ''E·Filing" page on the court's website at the 

address www .nycourts.gov/supctmanh). 

9/19/2024 

DATE 

CHECK ONE: 

MAR~ 

APPLICATION: 

CHECK IF APPROPRIATE: ~ CASE DISPOSED 

GRANTED □ DENIED 

SETTLE ORDER 

INCLUDES TRANSFER/REASSIGN · 

NON-FINAL DISPOSITION 

GRANTED IN PART 

SUBMIT ORDER 

FIDUCIARY APPOINTMENT 

651756/2024 BR FUND IV ACQ INV, LLC, ET AL vs. BRIGHTWOOD CAPITAL FUND 111-

INSTITUTIONAL, LP, ET AL 

Motion No. 001 003 004 

□ OTHER 

□ REFERENCE 

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