The opinion
BR Fund IV Acq Inv, LLC v Brightwood Capital
Fund III-Inst., LP
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
SUPREME COURT OF THE STATE OF NEW YORK
NEW YORK COUNTY
PRESENT: HON. MARGARET A. CHAN PART 49M
Justice
--------------------X INDEX NO. 651756/2024
BR FUND IV ACQ INV, LLC,BR FUND V ACQ INV, LLC,
04/22/2024,
04/25/2024,
Plaintiffs,
MOTION DATE 05/31/2024
-v-
MOTION SEQ. NO. 001 003 004
BRIGHTWOOD 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 Ill-
INSTITUTIONAL HOLDING CORP~. BRIGHTWOOD DECISION + ORDER ON
CAPITAL FUND Ill HOLDINGS, LP, AND BRIGHTWOOD MOTION
FUND 111-C, LP,
Defendants.
--------------------X
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- Page 1 of4
INSTITUTIONAL, LP, ET AL
Motion No. 001 003 004
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INDEX NO. 651756/2024
NYSCEF DOC. NO. 125 RECEIVED NYSCEF: 09/20/2024
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
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Motion No. 001 003 004
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NYSCEF DOC. NO. 125 RECEIVED NYSCEF: 09/20/2024
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 ofHoffman, 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- Page 3of4
INSTITUTIONAL, LP, ET AL
Motion No. 001 003 004
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INDEX NO. 651756/2024
NYSCEF DOC. NO. 125 RECEIVED NYSCEF: 09/20/2024
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 MAR~
~
CHECK ONE: CASE DISPOSED NON-FINAL DISPOSITION
GRANTED □ DENIED GRANTED IN PART □ OTHER
APPLICATION: SETTLE ORDER SUBMIT ORDER
CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN · FIDUCIARY APPOINTMENT □ REFERENCE
651756/2024 BR FUND IV ACQ INV, LLC, ET AL vs. BRIGHTWOOD CAPITAL FUND 111- Page4 of4
INSTITUTIONAL, LP, ET AL
Motion No. 001 003 004
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