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Privacy issues loom large on NY reinsurance arbitrations

By Linsey Routledge

18 June 2015 at 15:00 BST

Confidentiality agreements are often insufficient to overcome strong presumption of public access to judicial records in New York federal courts.

In the United States, reinsurance arbitrations are frequently subject to confidentiality agreements entered into by parties wishing to keep their disputes private. When parties seek to confirm, modify or vacate an arbitration award in the federal courts located in New York, however, they should not expect that the information placed before the court will remain confidential. There is robust precedent in New York (and other jurisdictions across the United States) that private confidentiality agreements are generally insufficient to overcome the strong presumption of public access to documents filed with the courts. A case recently decided by a federal court in New York adds to this well-settled precedent.

Rooted in history

In the United States, "[t]he common law right of public access to judicial documents is firmly rooted in [the] nation's history."[i]  There is also a qualified First Amendment right of access to judicial documents and judicial proceedings.[ii]  A judicial document is a document that is "relevant to the performance of the judicial function and useful in the judicial process."[iii]

Judicial documents

A strong presumption of access attaches to documents that directly affect the adjudication of matters before a court.[iv]  "It is well settled that the petition, memoranda, and other supporting documents filed in connection with a petition to confirm an arbitration award (including the Final Award itself) are judicial documents that directly affect the Court's adjudication of that petition."[v]   There is, therefore, a strong presumption of public access to those documents.[vi]

Need to show compelling reasons

A party seeking to seal (prevent public access to) the record in a litigation must show there are compelling reasons that overcome the strong presumption of public access to judicial documents.[vii]  Such considerations may involve "higher values" that broadly include attorney-client privilege, national security, law enforcement and privacy rights of innocent third parties.[viii]   Sealing of documents may be justified only when there are specific findings that sealing is necessary and narrowly tailored to protect sensitive information from public disclosure.[ix]

Courts loath to seal

Courts "have generally been loath to seal arbitration awards."[x]  Absent public disclosure causing harm to a party – such as when a document contains proprietary information or trade secrets – an arbitration award and other arbitral documents filed with a petition typically will not be sealed despite the parties' private agreement to keep the information confidential.[xi]

Parties' expectations had little force

A recent federal case, Clearwater Ins. Co. v. Granite State Ins. Co., No. 15-cv-165 (RJS) (S.D.N.Y. Mar. 2, 2015), reaffirms that a strong presumption of access attaches to arbitration information presented to courts. After conditionally sealing the judicial record at the outset of the confirmation proceedings, the court in Clearwater Ins. Co. v. Granite State Ins. Co. relied on the strong presumption of public access and concluded that the arbitration award together with four arbitration briefs filed with the court would be unsealed and made public.[xii]  The court found that the parties' confidentiality agreement and the parties' expectations of privacy had "little force when weighed against the interest of the public monitoring the judicial function."[xiii]  The court observed, "[h]ad the parties wished to hold their confidentiality agreement and [privacy] traditions inviolate, they could have refrained from recommending the Arbitration Briefs to this Court's attention."[xiv]

General disinclination

Clearwater Ins. Co. v. Granite State Ins. Co. demonstrates that federal courts will usually make public those documents filed by the parties which bear upon the judicial resolution of the matter before the court. Absent narrowly tailored sealing requests to prevent disclosure of "higher value" information, courts are generally disinclined to seal confidential arbitration information when the parties' basis for sealing is a private confidentiality agreement.  

AUTHOR: Linsey Routledge is an associate in the New York reinsurance group of Clyde & Co

[i] Lugosch v. Pyramid Co. of Onondaga, 435 F.3d 110, 119 (2d Cir. 2006) 

[ii] Id. at 120. 

[iii] Id. at 119 (citation omitted).

[iv]  United States of Am. v. Amodeo, 71 F.3d 1044, 1049-50 (2d Cir. 1995).

[v] Aioi Nissay Dowa Ins. Co. Ltd. v. ProSight Specialty Mgmt. Co., Inc., No. 12 Civ. 3274 (JPO), 2012 U.S. Dist. LEXIS 118233, at *15 (S.D.N.Y. Aug. 21, 2012) (internal quotations and punctuation omitted). 

[vi] See, e.g., Istithmar World PJSC v. Amato, No. 12 Civ. 7472 (JFK), 2013 U.S. Dist. LEXIS 2205, at *7-8 (S.D.N.Y. Jan. 7, 2013) ("Disputants may be drawn to arbitration out of a desire for privacy, but once one side seeks judicial confirmation of an arbitral award, that petition, as well as the underlying award, become "judicial documents" to which the common law right of access is presumed to attach.").

[vii] Alexandria Real Estate Equities, Inc. v. Fair, No. 11 Civ. 3694 (LTS), 2011 U.S. Dist. LEXIS 138455, at *6 (S.D.N.Y. Nov. 30, 2011).

[viii] Id. at *5-6.

[ix] Lugosch, 435 F.3d at 124. 

[x] Istithmar, 2013 U.S. Dist. LEXIS 2205 at *7. 

[xi] See, e.g., Mut. Marine Office, Inc. v. Transfercom Ltd., 08 Civ. 10367 (PGG), 2009 U.S. Dist. LEXIS 31739, at *13 (S.D.N.Y. Apr. 15, 2009).

[xii] Id. at 2.  

[xiii] Id. 

[xiv] Id. at 2-3.


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