A recent Commercial Division case in the Supreme Court,New York County (2019 NY Slip Op 30880[U]), is illustrative.There, plaintiff New Penn Financial, LLC commenced an action for breach of contract and mutual mistake against defendant 360 Mortgage Group LLC, alleging that 360 Mortgage had providederroneous calculations inconnection with New Penn’s purchase ofcertain mortgage servicing rights from 360 Mortgage.360 mortgage moved to dismiss. In connection with this motion,several of the parties’ filings contained confidential information, which both parties moved pursuant to 22 NYCRR §216.1 to seal from public viewing. In support of its motion to seal, New Penn argued, among other things,that the mortgage servicing rights purchase agreements (MSRPAs) at issue contained confidentiality provisions intended to keep the negotiatedterms of the transactions secret from competitors and potential future transactional counterparties.

The new rule is calculated to eliminate these problems. Given that the existing rule on sealing requires the moving party to show good cause and the court to consider the “interests of the public,” see 22 N.Y.C.R.R. §216.1, there will be cases where parties fail to meet the standard, or decide that it is not worth the effort to try. Ensuring accurate records and public access to judicial proceedings are, without a doubt, laudable goals.

The new rule is calculated to eliminate these problems. Given that the existing rule on sealing requires the moving party to show good cause and the court to consider the “interests of the public,” see 22 N.Y.C.R.R. § 216.1, there will be cases where parties fail to meet the standard, or decide that it is not worth the effort to try.Ensuring accurate records and public access to judicial proceedings are, without a doubt, laudable goals. But it cannot be overlooked that the new process will involve definite costs.

In a September 10, 2015 memorandum from the Subcommittee to the Advisory, however, the Subcommittee specifically highlights and explains the proposed modifications to paragraph 12 of the SFO, which pertains to the filing of confidential documents under seal. Under the current SFO, parties wishing to file documents under seal can either (1) file hard copies of confidential documents in a formal motion to seal pursuant to 22 NYCRR 216.1 (¶ 12(a)), or (2) bypass a formal motion to seal by simply providing a set of motion papers to the Justice’s chambers without filing them at all (¶ 12(b)). After the motion on the merits, chambers either returns or destroys the documents it was provided.