# WARREN HILL, LLC v. SFR EQUITIES, LLC

> District Court, E.D. Pennsylvania · August 25, 2020

URL: https://www.frixlaw.com/law-library/cases/10399540

## Case

- **Court:** District Court, E.D. Pennsylvania
- **Decided:** August 25, 2020
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA

WARREN HILL, LLC. : CIVIL ACTION
:
v. :
:
SFR EQUITIES, LLC : NO. 18-1228

MEMORANDUM
Bartle, J. August 25, 2020
Chicago Public Media, Inc. (“Chicago Public Media”), a
non-profit media company which operates NPR media station WBEZ,
has moved to intervene in this action pursuant to Rule 24 of the
Federal Rules of Civil Procedure for the limited purpose of
obtaining copies of all judicial records which are currently
under seal. Learning of Chicago Public Media’s pending motion,
Vendor Assistance Program LLC (“VAP”), Bluestone Capital
Markets LLC (“BCM”), Bluestone Finance LLC (“BSF”) and Bryan
Hynes (“VAP intervenors”) also move to intervene but to oppose
the unsealing of the judicial records. Plaintiff Warren Hill,
LLC (“Warren Hill”) and defendant SFR Equities, Inc. (“SFR”)
support the motion of the VAP intervenors and oppose the motion
of Chicago Public Media.1

1. Warren Hill and SFR have in reality stood on the sidelines
in what is a dispute between Chicago Public Media and the VAP
intervenors.
Warren Hill sued SFR in this diversity action for
breach of contract and for an accounting under Illinois law.
Plaintiff’s claim arose out of the sale to SFR of its interest
in VAP and the failure of SFR to pay what was due pursuant to
what was titled the Membership Interest Purchase Agreement
(“MIPA”).

During the course of this action, many of the
documents, including deposition testimony, were filed under seal
pursuant to a Confidentiality Order. On December 3, 2019, this
court entered summary judgment in favor of Warren Hill in the
amount of $6,226,688.19. SFR thereafter filed a notice of
appeal, and the matter is now pending in the Court of Appeals.
SFR has not filed a bond or security to stay the judgment under
Rule 8(a)(1)(B) of the Federal Rules of Appellate Procedure.
Consequently, Warren Hill is proceeding with its efforts to
execute on the judgment. See also Warren Hill LLC v. Neptune
Investors LLC, et al., Civil Action No. 20-0452 (E.D. Pa.).

VAP, Warren Hill’s interest in which it sold to SFR,
is in an unusual business. As a result of the fact that the
state of Illinois cannot or does not pay its bills on time, the
state has established what is known as the Vendor Payment
Program (“VPP”). Under this program, it approved VAP as a
Qualified Purchaser to purchase or take an assignment of the
outstanding accounts receivable of vendors that provide the
state with goods and services. A Qualified Purchaser promptly
pays the vendors 90% of the face value of the accounts
receivable. The Qualified Purchaser makes its money when the
state at some later point pays to it directly or indirectly the
full value of the accounts receivable along with a substantial
interest penalty. The remaining 10% due the vendors is then

remitted.
The MIPA did not simply provide for a sum certain to
be paid to Warren Hill as a result of the sale of its interest
in VAP. In addition, the MIPA required payment to Warren Hill
of 50% of VAP’s net income for three ensuing years under a
complicated formula set forth in the document. The court’s
rulings in this action involved not only the interpretation of
the MIPA but also a review of the finances and financial
arrangements of VAP. The court needed to understand the
structure of VAP and its related entities and the interplay of
their complex operations.

SFR and the VAP intervenors are all closely
intertwined. SFR appoints one of the six managers of VAP.
Bryan Hynes is a founder of VAP and one of its managers. VAP
created BCM, another intervenor, as a vehicle allegedly to
comply with new federal risk retention regulations. In 2017,
VAP created BSF in Puerto Rico to conduct business there. It
has an operating agreement with BCM, VAP, BSF, and BCM which
have a series of service agreements among themselves. VAP has
also transferred various trust certificates to BCM. Finally,
significant sums of money have been transferred from SFR to some
of the VAP intervenors and vice versa.
The law in this circuit is well established that a
court may grant a motion for permissive intervention under

Rule 24(b) solely to allow the intervenor to challenge a
protective or confidentiality order so as to obtain access to
court documents under seal. The entity seeking intervention for
this limited purpose does not need to establish an independent
basis for subject matter jurisdiction. Pansy v. Borough of
Stroudsburg, 23 F.3d 772, 777-80 (3d Cir. 1994). Said motion is
timely even if it is filed after an action is settled. Id. We
see no reason why the same analysis should not also apply where
a third party seeks to prevent disclosure.
Chicago Public Media argues that it is entitled to the
sealed documents in this action under the common law right of

public access to judicial records — a right that antedates the
Constitution. It includes the right to inspect and copy such
records. In Re Cendant Corp., 260 F.3d 183, 192 (3d Cir. 2001);
Leucadia, Inc. v. Applied Extrusion Techs., Inc., 998 F.2d 157,
161 (3d Cir. 1993).
A judicial record is a document filed with the court
or “otherwise somehow incorporated or integrated into a district
court’s adjudicatory proceedings.” In Re Cendant, 260 F.3d at
192. A judicial record includes “pretrial motions of a
nondiscovery nature, whether preliminary or dispositive, and the
material filed in connection therewith.” Summary judgment
motions and the exhibits related thereto of course are judicial
records.2 Leucadia, Inc., 998 F.2d at 164.

The common law right of public access to judicial
records carries with it a strong presumption in its favor,
although the right of public access is not absolute. In re
Avandia Mktg., 924 F.3d at 672. The burden is on the opposing
party or parties “to overcome the presumption of access to show
that the interest in secrecy outweighs the presumption.”
Leucadia, Inc., 998 F.2d at 165; In re Avandia Mktg., 924 F.3d
at 672. Those seeking to overcome the presumption must “show
that the material is the kind of information that courts will
protect and that the disclosure will work a clearly defined and
serious injury to the party seeking closure.” Id. (internal

quotations omitted). While the existence of trade secrets and
confidential business information may be a basis to deny public
access, embarrassment to a party does not suffice. In re
Avandia Mktg., 924 F.3d at 679; Leucadia, Inc., 998 F.2d at 166.

2. Protection of discovery materials is subject to a different
analysis. See In Re Avandia Mktg., 924 F.3d 662, 670-72
(3d Cir. 2019). Documents of this nature are not involved here.
If the court rules in favor of those seeking to
maintain secrecy, it must articulate “the compelling,
countervailing interests to be protected,” “make specific
findings on the record concerning the effects of disclosure,”
and “provide an opportunity for interested third parties to be
heard.” In re Avandia Mktg., 924 F.3d at 678. Before deciding

that the presumption has been surmounted, the court must make a
document-by-document review. Id.
Chicago Public Media seeks access to documents
identified by docket entry numbers 38, 43, 44, 45, 46, 47, 52,
57, 66, 73, 74, 76, 78, 79, 80, 81, 83, and 84. These documents
have all been filed under seal pursuant to a Confidentiality
Stipulation between the parties and approved as an order by the
court. Under the order, “Confidential Information shall be
limited to information that the source reasonably and in good
faith believes is of a proprietary or commercially sensitive
nature, or should otherwise be subject to confidential

information.” (internal quotations omitted). The order further
provides that “[t]he court reserves the right to rescind, modify
or alter the terms of this Stipulation at any time upon the
motion of any party or upon its own motion.”
The documents sought by Chicago Public Media consist
of motions for summary judgment or for reconsideration, together
with supporting and opposing briefs as well as related exhibits.
All of the court’s orders and memoranda disposing of the motions
are available to the public on the docket. Thus some of what is
contained in the sealed documents has already been unsealed.
The VAP intervenors, as entities or persons who have
an interest in SFR, provided discovery in this litigation. They
maintain at least some of the documents supplied, as well as

deposition testimony, contain “Client Marketing Information and
CRM [Customer Resource Management] . . . Information Concerning
VAP Members or Employee Bonus and Compensation Structure,” their
“Rationale for Their Business Restructuring and Compliance with
Program Terms and Risk Retention Laws,” and their “Interactions
and Agreements with their Lenders and Bankers.” The VAP
intervenors argue that this information is “highly confidential,
competitively sensitive, and amount[s] to business secrets that
are protected from disclosure.” They further contend that there
is “no countervailing public interest.” Finally, they assert
that they only provided the information in issue because of

reliance on the Confidentiality Stipulation.
At the request of the VAP intervenors, and with the
concurrence of all the parties, the court directed SFR to
provide to the VAP intervenors for review copies of all
documents under seal which they supplied as well as copies of
deposition transcripts of their employees under seal. After
review, they submitted a supplemental brief detailing their
opposition to the unsealing of each of these records.
The VAP intervenors rely heavily on our Court of
Appeals decision in Leap Sys., Inc. v. Moneytrax, Inc., 638 F.3d
216 (3d Cir. 2011) to prevent disclosure. This case is
inapposite. There, the parties were involved in a contentious

business dispute involving misappropriation of proprietary and
confidential information and breach of contract. They
ultimately entered into a settlement agreement which counsel
placed on the record in the courtroom while the district judge
presided. The judge placed the settlement agreement under seal.
Thereafter, a third party moved to intervene and unseal. The
Court of Appeals affirmed the district court’s refusal to do so.
It emphasized that the judge had assured the parties of
confidentiality and had specifically found that the parties
would not have entered into the settlement agreement absent the
judge’s assurance in this regard. Under these circumstances,

the Court of Appeals held that this assurance outweighed the
common law right of access. The Court added that the case did
not involve “matters of legitimate public concern” as the
parties were private entities whose dispute had “no impact on
the safety or health of the community.” Id. at 222.
In this case, the court did not assure any party of
confidentiality. On the contrary, the parties and non-parties
were on notice from the outset that the court reserved “the
right to rescind, modify, or alter the terms of the
[Confidentiality] Stipulation any time upon the motion of any
party or upon its own motion.” In addition, this case is imbued
with public interest. While it is true that VAP enters into
private agreements with the vendors of the state of Illinois, it

does so under a statutory scheme for the payment of the state’s
debts and under the watchful eye of the state and its residents
as a result of the various public filing requirements. This
contrasts sharply with the purely private dispute involved in
Leap.
The records in issue do reveal much about the
governance, structure, contractual arrangements, finances, and
dealings with clients, lenders, and banks of the VAP
intervenors. While it is understandable that they would want to
keep confidential as much of this information as possible, the
standard to maintain confidentiality is stringent.

After making a document-by-document review, the court
finds that the VAP intervenors have not overcome the presumption
of public accessibility to judicial records and have not shown
that “disclosure will work a clearly defined and serious injury”
to them. In re Avandia Mktg., 924 F.3d at 672. None of the
information rises to the level of highly sensitive business
secrets entitled to protection.
The documents at issue explain the workings of the VPP
established by the state of Illinois as well as the workings of
VAP as a Qualified Purchaser which buys the state’s accounts
receivable and later receives vast sums of money including
interest penalties from the state. VAP is owned in part by SFR
and is clearly intertwined with the other VAP intervenors as it

conducts its business with the state. Significant money and
things of value have moved from some of these entities to other
of these entities. The sealed documents were necessary for the
court to be able to understand and determine what SFR owed to
Warren Hill, that is, to determine the amount that constituted
50% of VAP’s net income for the three-year period under the
MIPA. The public clearly has a valid interest in the records at
issue. The VAP intervenors’ interest in secrecy is clearly
subordinate.
Accordingly, the motion of Chicago Public Media to
intervene and to obtain access to the judicial records in issue

will be granted. The motion of the VAP intervenors to intervene
will be granted but the motion to the extent that it seeks to
block disclosure of judicial records will be denied. The Clerk
will be directed to unseal the records at issue.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10399540. Public record. Not legal advice.