Court Seals Commercial Lease Provisions in Landlord Tenant Dispute

October 10, 2019

Commercial leases are not all boilerplate.  The nature and sophistication of the business or industry of the tenant can lead to lease terms, addenda, riders and exhibits that are complicated and in some cases contain what the parties believe to be sensitive or confidential information not for public consumption.  When a dispute arises between the landlord and tenant that lands in court, are these lease terms and conditions something the parties can shield from the public?  What if both agree the terms should be sealed from the public?

In New York, Judiciary Law § 4 makes clear that judicial proceedings “shall be public.”  That statutory mandate is grounded in the public’s First Amendment right of access to court records, Danco Laboratories, Ltd. v. Chemical Works of Gedeon Richter, Ltd.  In civil cases, Uniform Rules for Trial Courts, section 216.1, empowers the courts to seal documents, but only upon a showing of “good cause.”  A good resource for the standard applied and the mechanics of sealing in both civil and criminal proceedings is found in a guidance memo issued by the Office of Court Administration.   Indeed, earlier this year, we wrote about a decision rendered by Justice Andrea Masley in a breach of contract case where she sealed certain documents, finding good cause existed.  In that case, the motion to seal was opposed.

Now, six months later,  in an unrelated case Coresite 32 Ave. of the Americas LLC v. 32 Sixth Ave. Co. LLC, she was faced with yet another application to seal.  This time, however, the motion was unopposed.  Should that matter?  Not at all — the court must still make findings of good cause, and the application must be supported by an affidavit explaining why sealing is justified.

The case involved a dispute between a landlord and its tenant, CoreSite, which is a high-performance data center.  Notwithstanding that the parties agreed which terms and conditions of the lease should be filed under seal, the court, as it had to, engaged in the analysis of whether good cause existed.  So, what exactly did the court consider persuasive to show good cause to seal?  Recognizing that courts have sealed records in business disputes where trade secrets were involved or when disclosure could pose a threat to a competitive advantage, that’s precisely what was found here.  CoreSite’s competitive advantage would be threatened if the financial terms were not sealed.  CoreSite’s competitors could use the information contained in the financial provisions of the lease to undermine CoreSite.  In addition, the Court made a specific finding that building safety and security could be compromised by disclosure of equipment, access pints, floor plans and locations.

The takeaway?  Consider what you’re filing when it comes to business records and whether such a 216.1 application should be made.  Good cause can exist to seal beyond the classic “trade secrets”.  And even if all sides agree that sealing is warranted, a detailed showing must be made to the court as to “why” to overcome the presumption of public access to court records.