Court Opinion

ID: 4206978
Source: CourtListenerOpinion
Date Created: 2017-09-28 14:06:20.298251+00
Date Added: 2024-06-11T14:40:56.298365
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
ADT HOLDINGS, INC., in its individual
capacity and as attorney-in-fact for

ZONOFF, INC., and ADT LLC,

)
)
)
)
Plaintiffs, )
v. ) C.A. No. 2017-0328-JTL

)

)

)

)

MICHAEL HARRIS and RING INC.,

Defendants.

MEMORANDUM OPINION

Date Submitted: September 19, 2017
Date Decided: Septernber 28, 2017

Steven L. Caponi, K&L GATES LLP, Wilmington, Delaware; Attorneyfor Plaz'ntijj%.

Megan Ward Cascio, Lauren Neal Bennett, MORRIS, NICHOLS, ARSHT & TUNNELL
LLP, Wilmington, Delaware; Mark C. Scarsi, Ashlee N. Lin, Katherine R. Pierucci, J.
Sarnuel Payne, MILBANK, TWEED, HADLEY & MCCLOY LLP, Los Angeles,

California; Attorneysfor Defendants.

Jeremy D. Anderson, FISH & RICHARDSON P.C., Wilmington, Delaware; Attomeyfor
Nonparly Legrcma’ Home Systems, Inc.

LASTER, V.C.

On the eve of trial, nonparty Legrand Home Systems, Inc. (“Legrand”) moved to
seal certain trial exhibits so that they Would not become part of the public trial record.
Legrand also sought to close the courtroom for any testimony or attorney argument
regarding the exhibits. Legrand claimed this relief Was necessary because the exhibits
contained sensitive, confidential information and that Legrand Would suffer irreparable
harm if the information Was made public. The parties to the case did not oppose Legrand’s
motion. The court, however, bears an independent obligation to balance the harm Legrand
claims it Will suffer against the public right of access, Which is at its height during a trial.
Legrand’s motion is denied.

“The public’s right of access to judicial records has been characterized as
fundamental to a democratic state.”l The right of access enables the public to “judge the
product of the courts in a given case.”2 This, in turn, “helps ensure ‘quality, honesty and
respect for our legal system.”’3 Consequently, “all court proceedings are presumptively

open to the public.”4

 

lln re Cont’l Ill. Sec. Ll'tl`g., 732 F.2d 1302, 1308 (7th Cir. 1984).
2 Va. Dep’t ofState Poll'ce v. Wash. Post, 386 F.3d 567, 575 (4th Cir. 2004).

3 Horres v. Chick-fil-A, Inc., 2013 WL 1223605, at *1 (Del. Ch. Mar. 27, 2013)
(quoting Com"l Ill., 732 F.2d at 1308).

4 In re Nat'l Ciz‘y Corp. S’holders Ll'tz'g., 2009 WL 1653536, at *1 (Del. Ch. Jun 5,
2009) (citing Richmona'Newspapers, Inc. v. Virgl'nia, 448 U.S. 555, 579 n.17 (1980)).

Court of Chancery Rule 5.1 “reflects the Court of Chancery’s commitment to these
principles.”5 lt states that, “[e]xcept as otherwise provided” in Rule 5.1, “proceedings in a
civil action are a matter of public record.”6 This language “makes clear that most
information presented to the Court should be made available to the public.”7

Rule 5.1(b)(3) provides that a “party or person seeking to obtain or maintain
Confidential Treatment always bears the burden of establishing good cause for
Confidential Treatment.” Rule 5.1(b)(2) defines “good cause” as follows:

For purposes of this Rule, “good cause” for Confidential Treatment shall

exist only if the public interest in access to Court proceedings is outweighed

by the harm that public disclosure of sensitive, non-public information would

cause. Examples of categories of information that may qualify as

Confidential Inf`ormation include trade secrets; sensitive proprietary

information; sensitive financial, business, or personnel information; sensitive

personal information such as medical records; and personally identifying

information such as social security numbers, financial account numbers, and
the names of minor children.8

ln determining whether good cause has been established, the court must “balanc[e] . . . the
public interest against the harm that public disclosure might entail with respect to sensitive

nonpublic information.”9 The court will not order confidential treatment “merely because

 

5 Horres, 2013 WL 1223605, at *2.
6 Ct. Ch. R. 5.1(3).

7 Sequoia Presl'a’ential Yacht Gp. LLC. v. FE P’rs LLC, 2013 WL 3724946, at *2
(Del. Ch. July 15, 2013).

8 Ct. ch. R. 5.1(b)(2).

9 Rel'd v. Siniscalchi, 2014 WL 6486589, at *1 (Del. Ch. Nov. 20, 2014).

disclosure has the potential for collateral economic consequences.”10 lnstead, the harm
must be “particularized.”ll

The fact that Legrand’s motion is unopposed does not change these standards.
Although the parties to the case have not opposed it, the motion seeks to overcome the
public interest in open trials. The real opposition is from the public. lndeed, when
considering such a motion, the court “serves not only the litigants before it; it has a public
function as well.”12 lt is therefore necessary for the court to examine Legrand’s motion to
determine whether it has carried its burden, notwithstanding the lack of a formal opposition
to the motion.

Legrand also argued that, as a nonparty, it should benefit from a lighter burden when
seeking to obtain confidential treatment. lt is true that, when refusing to grant a party’s
motion to seal exhibits, the court has reasoned, in part, that “[t]hose who decide the litigate
in a public forum (rather than pursue a private dispute-resolution procedure) must do so in
a manner consistent with the right of the public to follow and monitor the proceedings and

result of their dispute.”13 But that principle does not alter the necessary showing to

overcome the public’s right of access. An everyday reality of doing business is the

 

10 Al Jazeera Am., LLC v. AT& TServs., Inc., 2013 WL 5614284, at *5 (Del. Ch.
oct 14, 2013).

ll S€quol'a, 2013 WL 3724946, at *2.
lelJazeem, 2013 WL 5614284, at *1.

13 AlJazeera, 2013 WL 5614284, at *7.

possibility that a business partner may end up in litigation in a public court. For information
to be sealed from public view, the person seeking confidential treatment must make the

showing required by Rule 5.l(b)(3), which applies equally to any “party or person” who

wishes to keep a matter secret.14

Legrand’s motion is cursory and conclusory. Legrand claims that the exhibits

contain “confidential, proprietary, and commercially-sensitive business information.”15

Legrand asserts that disclosure of the information

would subject Legrand to significant injury. Namely, Legrand’s confidential,
proprietary, and commercially-sensitive business information would be
known to those within its industry, including competitors and those with
which Legrand negotiates services. Competitors would have Legrand’s
pricing structure and understand the nature of its outsourced services, and
vendors with whom Le grand negotiates would be privy to the terms to which
Legrand has previously agreed. Such disclosure would cause Legrand
economic harm because the availability of that information would
disadvantage Legrand when competing for customers and negotiating with
vendors.16

During argument, Legrand reiterated these conclusory assertions. Legrand also contended
that mere disclosure of the existence of a relationship between Legrand and Zonoff, lnc., a
delianct entity whose fate lies at the heart of this action, would cause Legrand competitive

harm.

 

14 Ct. Ch. R. 5.1(b)(3) (emphasis added).
15 Mot. 11 13.

16 1a.1[14.

The contents of the exhibits do not support Legrand’s characterizationsl Legrand
first asked to seal in its entirety a Joint Development Agreement between Legrand and
Zonoff dated June 15, 2013. As the date evidences, the agreement’s terms are more than
four years old, a vintage which exceeds by more than a year the default three-year period
for the expiration of confidentiality designations under Rule 5.l(g). The contents of the
Joint Development Agreement are unremarkable. lt is simply a common form master
services agreement that sets forth general terms on which the parties will do business
together. lt contains customary recitals acknowledging a business relationship between the
parties, several pages of “General Provisions,” a section on indemnification, and routine
provisions addressing confidentiality lt also contains provisions relating to intellectual
property and licenses, which Legrand emphasized, but they too are standard and
unremarkable. For example, they provide that each party retains title to the intellectual
property that it brings to the deal.17 Legrand has not carried its burden to show that the Joint
Development Agreement, or any portion of it, warrants confidential treatment.

Legrand also sought to seal the appendices to the Joint Development Agreement,
which included Statements of Work. The Statements of Work contain descriptions of the

tasks to be addressed, but they too are relatively general. They resemble generic

 

17 See, e.g., Lucent Techs., lnc. v. Gateway, Inc., 543 F.3d 710, 714 (Fed. Cir. 2008)
(discussing joint development agreement distinguishing “existing technology” and “new
work” along similar lines); see also 2 Raymond T. Nimmer, Law ofComputer Technology
§ 4:26 (4th ed. 2017) (discussing joint development arrangements and suggesting
agreements “might provide that sole ownership of the intellectual property vests in the
original author”).

descriptions of the coding process, far removed from lines of code or innovative product
features. By analogy to the tasks that litigators perform, the descriptions resemble items
such as “draft complaint” or “depose key witnesses,” rather than more particularized items
that might warrant concern.

Legrand also focused in the Statements of Work on language specifying payment
terms and per unit licensing fees. Legrand claimed that the disclosure of this information
from 2013 might disadvantage Legrand in future negotiations The conclusory assertion
that a company faces an unsubstantiated risk of “economic disadvantage with respect to
competitors and others within the industry” is not sufficient to overcome the principle of
public access.18 ln this case, the pricing terms are from four years ago and concern services
in the dynamic technology industry. Legrand has not provided any reason to think that the
pricing remains current. There is nothing about the terms that implies they were specifically
negotiated, as opposed to representing standard rates. Legrand has not carried its burden to
show that the appendices warrant confidential treatment.

Legrand also sought to seal in its entirety an escrow agreement between Legrand
and lron Mountain lntellectual Property Management, LLC. This document is a standard

form agreement, on a pre-printed form prepared by lron Mountain, that governs an

 

18 AlJazeera, 2013 WL 5614284, at *4.

industry-standard software escrow between the parties.19 The escrow agreement itself does
not contain any technical information Legrand has not carried its burden to show that the
escrow agreement warrants confidential treatment.

Moving beyond these documents, Legrand claimed that its relationship with Zonoff
was itself commercially sensitive and should not be revealed. Having evaluated Legrand’s
arguments, l find that there is no credible reason to believe that a standard, arms’-length
relationship between Legrand and a software developer from over four years ago remains
highly sensitive such that its disclosure would cause competitive harm. Moreover, the
existence of the relationship and its terms are important facts for the case, because they are
relevant to determining whether Zonoff entered into a contested transaction at the heart of
the case in the ordinary course of business. A high-level understanding of the Legrand-
Zonoff relationship is necessary for the court to decide the matter and for the public to
understand the case.

Legrand has failed to show that any of the exhibits are highly sensitive such that
Legrand would suffer serious harm sufficient to warrant keeping the exhibits out of the
public record. Relatedly, Legrand has failed to show that the courtroom should be sealed
for testimony regarding the commercial relationship between Legrand and Zonoff.

Legrand’s motion for confidential treatment is therefore denied.

 

19 See Nimmer, supra note 17, § 7: 136 (“So-called escrow agreements are often used
to” facilitate “a third party arrangement in which source code is deposited, allowing for
future access by the licensee if the licensor breached a stated condition or is unavailable.”).