Preview
FILED: NEW YORK COUNTY CLERK 11/07/2014 05:54 PM INDEX NO. 652274/2012
NYSCEF DOC. NO. 244 RECEIVED NYSCEF: 11/07/2014
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
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ONE WILLIAM STREET CAPITAL MANAGEMENT :
L.P., :
: Index No. 652274/2012
Petitioner, :
: IAS Part 3
-and- :
: Justice Bransten
THE DEPOSITORY TRUST COMPANY and :
CEDE & CO., : Motion Seq. No. 10
:
:
-against- :
:
EDUCATION LOAN TRUST IV, et al., :
:
Respondents. :
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______________________________________________________________________________
MEMORANDUM OF LAW IN SUPPORT OF THE JOINT MOTION
FOR LEAVE TO FILE UNDER SEAL OR IN REDACTED FORM
______________________________________________________________________________
ARNOLD & PORTER LLP GREENBERG TRAURIG, LLP
399 Park Avenue 200 Park Avenue
New York, NY 10022 New York, NY 10166
Telephone: (212) 715-1000 Telephone: (212) 801-9200
Facsimile: (212) 715-1399 Facsimile: (212) 801-6400
Attorneys for Plaintiff One William Street Attorneys for Defendants U.S. Education
Capital Management, L.P. Loan Trust IV, LLC; U.S. Education
Servicing LLC; and Dr. Henry Howard
MAYER BROWN LLP
1675 Broadway
New York, NY 10019-5820
Telephone: (212) 506-2500
Facsimile: (212) 262-1910
Attorneys for Defendants Education Loan
Trust IV and The Bank of New York Mellon
One William Street Capital Management, L.P. Index No. 652274/2012
v. Education Loan Trust IV, et al. Page i of ii
TABLE OF CONTENTS
ARGUMENT .................................................................................................................................. 1
I. Legal Standard ........................................................................................................ 1
II. The Price at Which OWS Purchases a Security is a Trade Secret That
Would Harm OWS if Publically Disclosed ............................................................ 4
III. The USELT Respondents’ Sensitive Financial Information Constitutes
Trade Secrets and Public Disclosure Threatens Harm to Their Competitive
Advantage ............................................................................................................... 5
1. The Parity Ratio Spreadsheet ...................................................................... 5
2. Account Statements for the Surplus Fund Account .................................... 9
3. Affidavit of Dr. Henry Howard ................................................................ 11
IV. Exhibit 11 to the Yalowitz Affirmation Should Be Sealed Because
Disclosure Would Harm BNYM’s Competitive Advantage ................................ 11
CONCLUSION ............................................................................................................................. 13
i
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TABLE OF AUTHORITIES
Cases
Applehead Pictures LLC v. Perelman,
80 A.D.3d 181 (1st Dep’t 2010) ......................................................................................... 2, 10
Danco Labs. v. Chemical Work of Gedeon Richter,
274 A.D.2d 1 (1st Dep’t 2000) ................................................................................................. 4
IDW Group, LLC v. Levine Ins. Risk Mgmt. Servs., Inc.,
40 Misc. 3d 368 (N.Y. Sup. Ct. 2013) .............................................................................. 3, 4, 9
Liapakis v. Sullivan,
290 A.D.2d 393 (1st Dep’t 2002) ............................................................................................. 3
Mancheski v. Gabelli Group Capital Partners,
39 A.D.3d 499 (2d Dep’t 2007) ............................................................................................ 2, 4
Matter of Twentieth Century Fox Film Corp.,
190 A.D.2d 483 (1st Dep’t 1993) ..................................................................................... 3, 6, 7
MBIA Insurance Corp. v. Countrywide Home Loans, Inc.,
No. 602825/2008, 2012 WL 7145814 (N.Y. Sup. Ct. Dec. 6,
2012) ................................................................................................................................ passim
Mosallem v. Berenson,
76 A.D.3d 345 (1st Dep’t 2010) ....................................................................................... 1, 2, 3
United States v. Amodeo,
71 F.3d 1044 (2d Cir. 1995)...................................................................................................... 4
United States v. Erie County, N.Y.,
763 F.3d 235 (2d Cir. 2014)...................................................................................................... 3
Wiener v. Lazard Freres & Co.,
241 A.D.2d 114 (1st Dep’t 1998) ............................................................................................. 2
Rules
22 N.Y.C.R.R. 216.1(a) ...................................................................................................................1
ii
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v. Education Loan Trust IV, et al. Page 1 of 14
Petitioner/Plaintiff One William Street Capital Management, L.P. (“OWS”) and
Respondents/Defendants U.S. Education Loan Trust IV, LLC (the “Issuer”), U.S. Education
Servicing LLC, and Dr. Henry Howard (collectively, the “USELT Respondents”), and The Bank
of New York Mellon (“BNYM”), by their respective attorneys, respectfully submit this
memorandum of law in support of their joint motion for permission to file certain documents
under seal or in redacted form. The parties make this motion jointly specifically and solely
because they do not oppose any party’s application for permission to file under seal or in
redacted form. They each take no position with respect to any other party’s statements in
support of its individual section and application, or the substantive basis thereof.
ARGUMENT
I. LEGAL STANDARD
A court is empowered to seal court records pursuant to Section 216.1(a) of the Uniform
Rules for Trial Courts (22 N.Y.C.R.R. 216.1(a)), which provides that:
[e]xcept where otherwise provided by statute or rule, a court shall not enter an
order in any action or proceeding sealing the court records, whether in whole or in
part, except upon a written finding of good cause, which shall specify the grounds
thereof. In determining whether good cause has been shown, the court shall
consider the interests of the public as well as of the parties.
This Court recently clarified New York law regarding when court records should be
sealed and the showing that must be made in MBIA Insurance Corp. v. Countrywide Home
Loans, Inc., No. 602825/2008, 2012 WL 7145814 (N.Y. Sup. Ct. Dec. 6, 2012). As this Court
noted, while there is a presumption under New York law favoring public access to judicial
proceedings and court records, it has been recognized that “the public’s right to access … is not
absolute.” Id. at *4 (citing Mosallem v. Berenson, 76 A.D.3d 345, 349 (1st Dep’t 2010)).
On a motion for permission to file under seal, “the party seeking to seal court records has
1
One William Street Capital Management, L.P. Index No. 652274/2012
v. Education Loan Trust IV, et al. Page 2 of 14
the burden” of demonstrating “a sound basis or legitimate need to take judicial action.” MBIA,
2012 WL 7145814 at *4 (internal quotations and citations omitted). “Although ‘good cause’ is
not defined in Section 216.1(a), [a] finding of ‘good cause’ presupposes that public access to the
documents at issue will likely result in harm to a compelling interest of the movant.” Id.
(quoting Mancheski v. Gabelli Group Capital Partners, 39 A.D.3d 499, 502 (2d Dep’t 2007).1
This Court found that “sealing has been deemed appropriate to shield trade secrets or
where the release of documents could ‘threaten a business’s competitive advantage.’” Id. at *4
(quoting Mosallem v. Berenson, 76 A.D.3d 345, 350 (1st Dep’t 2010)). The Court detailed the
factors the courts should consider in determining whether a party has established either ground
for sealing.
In determining whether information qualifies as a trade secret, the court may consider:
(1) the extent to which the information is known outside of [the] business; (2) the
extent to which it is known by employees and others involved in [the] business;
(3) the extent of measures taken by [the business] to guard the secrecy of the
information; (4) the value of the information to [the business] and to [its]
competitors; (5) the amount of effort or money expended by [the business] in
developing the information; (6) the ease or difficulty with which the information
could be properly acquired or duplicated by others.
Id. (quoting Wiener v. Lazard Freres & Co., 241 A.D.2d 114, 124 (1st Dep’t 1998)).
“Determination of whether the release of documents threatens a harm to a business’s
competitive business advantage hinges on a finding that such information: is proprietary;
involves current or future business strategies; is closely guarded; and, if disclosed, would give a
competitor an unearned advantage.” Id. at *4 (quoting Mancheski, 39 A.D.3d at 503). When
the movants’ “relationship with its competitors … could be compromised by the disclosure of the
details,” the court will find a compelling interest in withholding the information from public
1
As the First Department has stated, “Since there is no absolute definition, a finding of good cause, in essence, boils
down to … the prudent exercise of the court’s discretion.” Applehead Pictures LLC v. Perelman, 80 A.D.3d 181,
192 (1st Dep’t 2010) (internal quotations omitted).
2
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scrutiny.” Matter of Twentieth Century Fox Film Corp., 190 A.D.2d 483, 488 (1st Dep’t 1993).
By contrast, harm to reputation and a general desire for privacy do not constitute good cause.
Mosallem, 76 Ad.3d at 351; see also Liapakis v. Sullivan, 290 A.D.2d 393, 394 (1st Dep’t 2002).
Where the information sought to be sealed or redacted is not material to the court’s
determination, the presumption in favor of public access is lessened, and the showing required of
the party seeking to file the document under seal is also lessened, because in such a situation the
“public interest in the disclosure of these documents . . . is more in the nature of curiosity.”
MBIA, 2012 WL 7145814 at *7; see also IDW Group, LLC v. Levine Ins. Risk Mgmt. Servs., Inc.,
40 Misc. 3d 368, 382 (N.Y. Sup. Ct. 2013) (granting permission to file document under seal
because the information therein “not material to this motion”); United States v. Erie County,
N.Y., 763 F.3d 235, 239 (2d Cir. 2014) (“[I]n order to decide whether a document is a judicial
document protected by the common law right of access, this Court considers whether it is
relevant to the performance of the judicial function and useful in the judicial process.”).
The Second Circuit has explained a lessened standard for the sealing of information that
is not material to the court’s determination of litigants’ substantive rights by placing such
information near the bottom of a “continuum”:
[T]he strong weight to be accorded the public right of access to judicial
documents [is] largely derived from the role those documents played in
determining litigants’ substantive rights—conduct at the heart of Article III—and
from the need for public monitoring of that conduct. As one moves along the
continuum, the weight of the presumption declines. . . . Where statements or
documents in the middle of the continuum are at issue, the weight to be accorded
to the presumption of access must be determined by the exercise of judgment. . . .
Where testimony or documents play only a negligible role in the performance of
Article III duties, the weight of the presumption is low and amounts to little more
than a prediction of public access absent a countervailing reason. Documents that
play no role in the performance of Article III functions, such as those passed
between the parties in discovery, lie entirely beyond the presumption's reach. . . .
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United States v. Amodeo, 71 F.3d 1044, 1049-50 (2d Cir. 1995).
Although state courts have at times employed somewhat similar reasoning, (see MBIA,
2012 WL 7145814 at *7; IDW Group, 40 Misc. 3d at 382), it appears this principle has been
more developed in the federal courts. Nonetheless, as the question of whether to grant
permission to file under seal in both state and federal courts is rooted in the same concerns, this
principle should apply equally in the state courts as well.
Finally, the Court in MBIA also noted that “[w]here sealing is authorized, a document
need not be withheld from the public in its entirety, as ‘[r]edaction is a viable option, predicated
upon the required level of need.’” Id. at *4 (quoting Danco Labs. v. Chemical Work of Gedeon
Richter, 274 A.D.2d 1, 8 (1st Dep’t 2000)).
II. The Price at Which OWS Purchases a Security is a Trade Secret That Would Harm
OWS if Publically Disclosed.
OWS requests that the Court allow OWS to redact pricing information on three exhibits
filed by USELT in support of its opposition to OWS’s motion for summary judgment: Exhibits
D, E and F to the Affirmation of Eric Whitney (Dkt. No. 194). Each of these documents
discloses the price at which OWS purchased the Notes. The price at which OWS purchases a
security is a proprietary trade secret that OWS holds in the highest confidence. Supplemental
Affidavit of Frank Prezioso ¶ 3. The public disclosure of such price would damage OWS’s
competitive advantage in the marketplace and cause OWS material harm. Id.; see also MBIA Ins.
Corp., 2012 WL 7145814 at *4 (quoting Mancheski, 39 A.D.3d at 503) (explaining that a
determination of whether a document threatens harm to a business’s competitive business
advantage hinges on, inter alia, the proprietary nature of the document, whether it is closely
guarded, and whether it would give a competitor an unearned advantage if disclosed).
Likewise, the price at which OWS purchased the Notes is not a fact relevant to the
4
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v. Education Loan Trust IV, et al. Page 5 of 14
motions currently pending before the Court and USELT does not dispute that the price is
immaterial to the Court’s determination. MBIA Ins. Corp., 2012 WL 7145814 at *7 (where
information sought to be sealed is not material to the court’s determination, the presumption in
favor of public access is lessened and the burden of proof lowered). Nor does OWS seek to file
entire documents under seal; if the Court grants this motion, only the pricing information would
be withheld from public disclosure. The harm posed to OWS’s competitive interests and the
irrelevance of the security price to the summary judgment motions, and thus the public, warrant
redaction of the price that OWS paid for the Notes.2
III. The USELT Respondents’ Sensitive Financial Information Constitutes Trade
Secrets and Public Disclosure Threatens Harm to Their Competitive Advantage.
The USELT Respondents seek permission to file under seal (in its entirety) the “Parity
Ratio Calculation Spreadsheet,” which appears as both Exhibit 17 to the Affirmation of Kent A.
Yalowitz (Dkt. No. 190) and Exhibit R to the Affirmation of Eric N. Whitney (Dkt. No. 194).
The USELT Respondents also seek permission to file under seal (in redacted form) Exhibit 10 to
the Affirmation of Kent A. Yalowitz (account statements for the Trust’s Surplus Fund account),
and the Affidavit of Henry Howard (because of its discussion of a document sought to be filed
under seal by BNYM).
1. The Parity Ratio Spreadsheet
The one document the USELT Respondents request permission to file under seal in its
entirety is the Parity Ratio Calculation Spreadsheet. This document calculates what are referred
to as the Trust’s “parity ratios,” i.e., the Senior Asset Percentage and the Subordinate Asset
2
Section IV of this motion, regarding BNYM’s motion to seal Exhibit 11 to the Yalowitz Affidavit, makes
characterizations of Exhibit 11 as itrelates to OWS’s First Cause of Action. While OWS disagrees with the
substantive description of Exhibit 11, and believes itspapers adequately describe the document, OWS takes no
position with respect to BNYM’s motion to seal. Additionally, OWS’s participation in this joint submission does
not indicate any agreement with the USELT Respondents’ substantive discussion of documents or OWS’s First
Cause of Action.
5
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Percentage. These terms are defined in the Indenture, and establish ratios that compare (A) the
assets of the Trust (less all accrued interest on certain outstanding notes and associated financing
fees and expenses) with (B) the aggregate principal amount of certain outstanding notes.3 The
underlying data to make that calculation is included in the Parity Ratio Calculation Spreadsheet,
which is prepared internally by the Issuer. Supplemental Affidavit of Henry Howard in Support
of Joint Motion to Seal (“Howard Supp. Aff.”) ¶ 3. Under the Indenture and the Fourth
Supplemental Indenture (the “FSI”), these parity ratios may control whether certain actions take
place. For example, pursuant to the Indenture’s Senior Asset Requirement, the Issuer asserts that
no redemption of any kind of the Notes can take place if the Senior Asset Percentage is not at
least 106% and the Subordinate Asset Percentage is not at least 101%. See Indenture at § 3.02;
FSI at § 8(a)(i). Although OWS disputes this prerequisite applies, only the final figures for the
parity ratios are at issue. As it pertains to the first cause of action, there is no dispute in regard to
the calculation of the parity ratios.
Disclosure of the Parity Ratio Calculation Spreadsheet would damage USELT’s
competitive advantage by providing its competitors and counterparties with material, non-public
information about USELT’s financial condition that they could then use to model their
competing investments on, or to obtain an unearned advantage in negotiations with USELT.
Howard Supp. Aff. ¶ 4; see Matter of Twentieth Century Fox Film Corp., 190 A.D.2d 483, 488
(1st Dep’t 1993) (accepting motion to file under seal due to “petitioner’s argument that its
relationship with its competitors, as well as with other artists in its employ, could be
compromised by the disclosure of the details of the contract”); MBIA, 2012 WL 7145814 at *9.
None of the data included in the Parity Ratio Calculation Spreadsheet is publicly known or
3
The relevant notes are the outstanding senior notes for the Senior Asset Percentage, and the outstanding senior and
subordinate notes for the Subordinate Asset Percentage.
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reported. The securitized student loan industry is a competitive environment. Issuers of student
loan-backed notes are constantly surveying what other issuers are doing to mimic (if not outright
copy) their methods in structuring loan portfolios and investment vehicles to achieve the same
results. The Parity Ratio Calculation Spreadsheet contains proprietary information that USELT
keeps in strict confidence and that, if disclosed, competitors could use to their advantage and to
the disadvantage of USELT. Howard Supp. Aff. ¶¶ 5-6.
For instance, by learning the proprietary information contained in the parity ratio
calculations, competitors could use that information to compare and optimize their own
performance against that of USELT. Competitors could use this information to calculate the
income and cash flows of the Trust, which could enable them to change the timing or the price of
their own sales or purchases of student loan-backed notes. A competitor with access to the parity
ratio calculations could use the information to develop an understanding of the portfolio makeup
of the Trust, the interest rates borrowers are paying, and each type of student loan debt and the
corresponding amount in the portfolio. Competitors could also identify both the applicable
interest rates and the amount of interest actually paid pursuant to the Net Loan Rate limitation at
a very discreet, series-by-series level. All of that information is kept confidential to prevent
other issuers from assembling a similarly attractive portfolio to obtain investment, which is a
finite amount and often a zero-sum game. Any investor demand that is generated by competitors
by virtue of learning this information will divert demand away from USELT’s notes, resulting in
a reduced secondary market for the purchase of the notes as well as harm to any future issuances
by USELT using the same proprietary portfolio modeling information. Howard Supp. Aff. ¶ 7-8.
Counterparties, (generally holders of notes issued by USELT), could likewise use this
information to alter their conduct to the detriment of the Trust and other noteholders. Howard
7
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v. Education Loan Trust IV, et al. Page 8 of 14
Supp. Aff. ¶ 9; see Matter of Twentieth Century Fox, 190 A.D.2d at 488 (granting permission to
file under seal where “disclosure of the details” of contract would affect studio’s ability to
negotiate “with other artists in its employ”). The Indenture permits USELT to buy back its notes
on the open market at a discount subject to the satisfaction of certain parity ratios. USELT has,
in fact, purchased some senior notes. By buying senior notes, as it is entitled to do, the Issuer
retires future obligations of the Trust and also eliminates any obligation to pay any carry-over
interest that may have accrued on the purchased notes, thereby creating a healthier balance sheet
for the betterment of the Trust and the remaining noteholders. If the parity ratios and their
underlying data were to become public, noteholders would be able to see the outstanding
principal balances and the amounts of accrued carry-over interest on every series of notes, data
they would use to inform their business judgments about the financial condition of the Trust and
the Issuer’s price sensitivity, thereby affecting the price at which they would be willing to sell
their outstanding notes to the Issuer for open market re-purchase. Similarly, the Parity Ratio
Calculation Spreadsheet would enable noteholders to determine both the cash on hand and the
future cash flows of USELT, which would provide them with yet more information to develop a
financial model to determine the cash flows and to ascertain a range of purchase price points in
negotiating with the Issuer. Howard Supp. Aff. ¶¶ 10-12.
These concerns are not limited to current noteholders. An outside firm armed with this
information could seek to exploit it by buying notes from holders who are not aware of the same
information – which, again, is not publicly available or reported – and engage in a form of
arbitrage by demanding from the Issuer a higher price with knowledge of the Issuer’s negotiating
practices and ability. Howard Supp. Aff. ¶ 13; cf. MBIA, 2012 WL 7145814 at *9 (granting
permission to file under seal information that “would reveal [a party’s] financial ability to
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v. Education Loan Trust IV, et al. Page 9 of 14
negotiate certain claims, giving adversaries a window into the amount available” with which to
negotiate). Purchases at a higher price will harm the competitive advantage of USELT and will
harm the financial condition of the Trust and deprive the remaining noteholders of funds that
would otherwise be available to pay principal and interest on their notes. Howard Supp. Aff. ¶
13.
In comparison with these significant impacts from its release, USELT submits that the
presumption of public access to the Parity Ratio Calculation Spreadsheet is slight and easily
overcome because the extensive data in the document is not material, and plays no role, in
deciding OWS’s motion for summary judgment. The document is relied upon by OWS only to
show that the Senior Asset Requirement was first satisfied in February 2013. USELT contends
that even if the right of special redemption were not terminated prior to February 2013, which
USELT disputes, the Senior Asset Requirement would have been only partially first met, and the
Party Ratio Calculation Spreadsheet fails to demonstrate the Senior Asset Requirement would
have been satisfied, pursuant to Section 3.02 of the Indenture, after giving effect to any such
redemption as well. Thus, neither party asks the Court to weigh the underlying data that
constitutes the sensitive and proprietary financial information of the Trust, the public release of
which would harm the Trust. See IDW Group, 40 Misc. 3d at 382 (presumption of access
lessened when court does not rely upon the document).
2. Account Statements for the Surplus Fund Account
The first page of Exhibit 10 of the Yalowitz Affirmation consists of a summary prepared
by OWS of the dates and amounts of certain of the Issuer’s open-market purchases of senior
notes. The remainder of the exhibit consists of monthly bank account statements for the Trust’s
Surplus Fund Account that reflect those purchase amounts and other financial activity in the
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account. For the reasons set forth below, USELT requests permission to file Exhibit 10 in
redacted form.
The amount (or price) at which USELT redeems senior notes from noteholders is just one
of the proprietary trade secrets identified in the bank statements that USELT maintains in strict
confidence. Howard Supp. Aff. ¶ 16; see Applehead Pictures LLC v. Perelman, 80 A.D.3d 181,
192 (1st Dep’t 2010) (noting that protection of a trade secret is a “compelling objective” which
outweighs “the public’s right to access”). The bank account statements in Exhibit 10 show,
among other things, (1) the individual transactions that comprise the repurchases, including the
amounts paid; (2) the surplus funds available to the Trust; (3) the balances in the account on a
monthly basis; (4) the securities in which the Trust invested, thus revealing the Trust’s
proprietary and confidential investment decisions and information as to which securities it
chooses to invest its money in; (5) the frequency of the Issuer’s open-market purchases; and (6)
the timing of the Trust’s transfers between its investments. For the same reasons as set forth
above, the public disclosure of this information would enable competitors and counterparties to
try to discern USELT’s pricing models and/or mimic its investment decisions and harm
USELT’s competitive advantage in the marketplace. Howard Supp. Aff. ¶ 16; see MBIA, 2012
WL 7145814 at *7 (noting that revealing financial information can harm movant’s ability to
negotiate). The bank account statements should therefore be filed under seal in their entirety or
in heavily redacted form to keep said information confidential. Finally, to protect the security of
the Trust’s financial accounts, USELT also seeks permission to redact all account numbers
identified in the account statements.
The summary on the first page of Exhibit 10, however, reveals virtually none of the
specifics and detail identified above, and does not disclose, among other things, whether the
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amounts of the repurchases relate to one or more transactions. Accordingly, USELT submits that
the summary page presents information sufficient to permit public access to the relevant matters
in Exhibit 10, without causing harm to USELT and the Trust by disclosing the underlying
specifics of their confidential and proprietary information.
3. Affidavit of Dr. Henry Howard
The USELT Respondents also request permission to file the Affidavit of Henry Howard
in slightly redacted form, as it discusses the contents a document for which BNYM seeks leave
to file under seal, namely Yalowitz Affirmation Exhibit 11. If the Court grants leave with
respect to Exhibit 11, to be consistent, the discussion of the contents of that document in
Paragraph 36 of Dr. Howard’s affidavit should also be redacted.
IV. Exhibit 11 to the Yalowitz Affirmation Should Be Sealed Because Disclosure Would
Harm BNYM’s Competitive Advantage.
The Bank of New York Mellon requests that the Court seal only one document: Exhibit
11 to the Yalowitz Affirmation in Support of Plaintiff’s Motion for Summary Judgment
(“Exhibit 11”). Exhibit 11 is a BNYM draft internal risk management report regarding issues
that relate to Education Loan Trust IV generally, but have no specific relevance to the holders of
the 2007-1B-1 Notes or the specific claims and defenses in this case. The report should be filed
under seal because the potential harm to BNYM’s competitive business advantage resulting from
disclosure far outweighs the modest (at best) interest in public disclosure of the document.4
Indeed, the interest in permitting public disclosure of the document is particularly weak
under the facts of this case. In MBIA, this Court granted the motion to seal repurchase requests
4
BNYM also requests that direct quotations from this document in the supporting papers be redacted in the
publicly-filed versions. Specifically, BNYM seeks the redaction of the quotes from Exhibit 11 contained in One
William Street Capital Management, L.P.’s (“OWS’s”) Memorandum of Law in Support of its Motion for Summary
Judgment at pages 10 and 12; OWS’s Reply Memorandum in Support of their Motion for Summary Judgment at
page 2; Paragraph 27 of OWS’s Rule 19A Statement; and Paragraph 36 of the Affidavit of Henry Howard.
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(and related responses) that were unrelated to the securitizations at issue in that case. MBIA Ins.
Corp. v. Countrywide Home Loans, Inc., No. 602825/2008, 2012 WL 7145814 (N.Y. Sup. Ct.
Dec. 6, 2012). Similarly, here, the information contained in Exhibit 11, though technically
responsive to OWS’s document requests, has limited relevance to the case and has virtually no
relevance to the motion for summary judgment on Count One. The document is an internal Risk
Management report from the Risk Management Platform, which reflects BNYM’s proprietary
strategy for identifying, tracking, assessing, and remedying risk events. It addresses issues
central to all noteholders in the Trust, such as the calculation of carryover interest and the
applicability of the Net Loan Rate and Maximum Rate, but those issues are not central to the
motion for summary judgment, and the overpayment reflected in the report indisputably did not
affect holders of the Notes at issue in this case. Affidavit of Carolyn Lee at ¶¶ 6-7 (“Lee Aff.”).
Thus, the interest in publicly disclosing this document “is more in the nature of curiosity,”
similar to the documents this Court sealed in MBIA. MBIA Ins. Corp., 2012 WL 7145814.
The public disclosure of this document would harm BNYM’s competitive business
advantage. “Determination of whether the release of documents threatens a harm to a business’s
competitive business advantage hinges on a finding that such information: is proprietary;
involves current or future business strategies; is closely guarded; and, if disclosed, would given a
competitor an unearned advantage.” MBIA Ins. Corp., 2012 WL 7145814 (internal quotation
marks omitted). Under this rubric, Exhibit 11 should be sealed for at least two reasons.
First, the form of the document itself is a non-public BNYM platform that depicts
BNYM’s proprietary internal processes for identifying risk and formulating strategies to resolve
any identified risks. This platform, and the procedures and strategies reflected in the form, have
been developed internally by BNYM. Lee Aff. ¶¶ 2-3. The document itself is non-public and is
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not circulated outside of BNYM. Id. To further guard against disclosure, BNYM allows only a
select group of employees within the risk management group at BNYM to prepare and review it.
Id. ¶ 4. It is not widely circulated throughout BNYM, because public disclosure would give
competitors an unfair view into the internal control processes and procedures for identifying risk
at BNYM. Id. ¶¶ 4-5.
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FILED: NEW YORK COUNTY CLERK 11/07/2014 05:54 PM INDEX NO. 652274/2012 NYSCEF DOC. NO. 244 RECEIVED NYSCEF: 11/07/2014 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ----------------------------------------- x ONE WILLIAM STREET CAPITAL MANAGEMENT : L.P., : : Index No. 652274/2012 Petitioner, : : IAS Part 3 -and- : : Justice Bransten THE DEPOSITORY TRUST COMPANY and : CEDE & CO., : Motion Seq. No. 10 : : -against- : : EDUCATION LOAN TRUST IV, et al., : : Respondents. : ----------------------------------------- x ______________________________________________________________________________ MEMORANDUM OF LAW IN SUPPORT OF THE JOINT MOTION FOR LEAVE TO FILE UNDER SEAL OR IN REDACTED FORM ______________________________________________________________________________ ARNOLD & PORTER LLP GREENBERG TRAURIG, LLP 399 Park Avenue 200 Park Avenue New York, NY 10022 New York, NY 10166 Telephone: (212) 715-1000 Telephone: (212) 801-9200 Facsimile: (212) 715-1399 Facsimile: (212) 801-6400 Attorneys for Plaintiff One William Street Attorneys for Defendants U.S. Education Capital Management, L.P. Loan Trust IV, LLC; U.S. Education Servicing LLC; and Dr. Henry Howard MAYER BROWN LLP 1675 Broadway New York, NY 10019-5820 Telephone: (212) 506-2500 Facsimile: (212) 262-1910 Attorneys for Defendants Education Loan Trust IV and The Bank of New York Mellon One William Street Capital Management, L.P. Index No. 652274/2012 v. Education Loan Trust IV, et al. Page i of ii TABLE OF CONTENTS ARGUMENT .................................................................................................................................. 1 I. Legal Standard ........................................................................................................ 1 II. The Price at Which OWS Purchases a Security is a Trade Secret That Would Harm OWS if Publically Disclosed ............................................................ 4 III. The USELT Respondents’ Sensitive Financial Information Constitutes Trade Secrets and Public Disclosure Threatens Harm to Their Competitive Advantage ............................................................................................................... 5 1. The Parity Ratio Spreadsheet ...................................................................... 5 2. Account Statements for the Surplus Fund Account .................................... 9 3. Affidavit of Dr. Henry Howard ................................................................ 11 IV. Exhibit 11 to the Yalowitz Affirmation Should Be Sealed Because Disclosure Would Harm BNYM’s Competitive Advantage ................................ 11 CONCLUSION ............................................................................................................................. 13 i One William Street Capital Management, L.P. Index No. 652274/2012 v. Education Loan Trust IV, et al. Page ii of ii TABLE OF AUTHORITIES Cases Applehead Pictures LLC v. Perelman, 80 A.D.3d 181 (1st Dep’t 2010) ......................................................................................... 2, 10 Danco Labs. v. Chemical Work of Gedeon Richter, 274 A.D.2d 1 (1st Dep’t 2000) ................................................................................................. 4 IDW Group, LLC v. Levine Ins. Risk Mgmt. Servs., Inc., 40 Misc. 3d 368 (N.Y. Sup. Ct. 2013) .............................................................................. 3, 4, 9 Liapakis v. Sullivan, 290 A.D.2d 393 (1st Dep’t 2002) ............................................................................................. 3 Mancheski v. Gabelli Group Capital Partners, 39 A.D.3d 499 (2d Dep’t 2007) ............................................................................................ 2, 4 Matter of Twentieth Century Fox Film Corp., 190 A.D.2d 483 (1st Dep’t 1993) ..................................................................................... 3, 6, 7 MBIA Insurance Corp. v. Countrywide Home Loans, Inc., No. 602825/2008, 2012 WL 7145814 (N.Y. Sup. Ct. Dec. 6, 2012) ................................................................................................................................ passim Mosallem v. Berenson, 76 A.D.3d 345 (1st Dep’t 2010) ....................................................................................... 1, 2, 3 United States v. Amodeo, 71 F.3d 1044 (2d Cir. 1995)...................................................................................................... 4 United States v. Erie County, N.Y., 763 F.3d 235 (2d Cir. 2014)...................................................................................................... 3 Wiener v. Lazard Freres & Co., 241 A.D.2d 114 (1st Dep’t 1998) ............................................................................................. 2 Rules 22 N.Y.C.R.R. 216.1(a) ...................................................................................................................1 ii One William Street Capital Management, L.P. Index No. 652274/2012 v. Education Loan Trust IV, et al. Page 1 of 14 Petitioner/Plaintiff One William Street Capital Management, L.P. (“OWS”) and Respondents/Defendants U.S. Education Loan Trust IV, LLC (the “Issuer”), U.S. Education Servicing LLC, and Dr. Henry Howard (collectively, the “USELT Respondents”), and The Bank of New York Mellon (“BNYM”), by their respective attorneys, respectfully submit this memorandum of law in support of their joint motion for permission to file certain documents under seal or in redacted form. The parties make this motion jointly specifically and solely because they do not oppose any party’s application for permission to file under seal or in redacted form. They each take no position with respect to any other party’s statements in support of its individual section and application, or the substantive basis thereof. ARGUMENT I. LEGAL STANDARD A court is empowered to seal court records pursuant to Section 216.1(a) of the Uniform Rules for Trial Courts (22 N.Y.C.R.R. 216.1(a)), which provides that: [e]xcept where otherwise provided by statute or rule, a court shall not enter an order in any action or proceeding sealing the court records, whether in whole or in part, except upon a written finding of good cause, which shall specify the grounds thereof. In determining whether good cause has been shown, the court shall consider the interests of the public as well as of the parties. This Court recently clarified New York law regarding when court records should be sealed and the showing that must be made in MBIA Insurance Corp. v. Countrywide Home Loans, Inc., No. 602825/2008, 2012 WL 7145814 (N.Y. Sup. Ct. Dec. 6, 2012). As this Court noted, while there is a presumption under New York law favoring public access to judicial proceedings and court records, it has been recognized that “the public’s right to access … is not absolute.” Id. at *4 (citing Mosallem v. Berenson, 76 A.D.3d 345, 349 (1st Dep’t 2010)). On a motion for permission to file under seal, “the party seeking to seal court records has 1 One William Street Capital Management, L.P. Index No. 652274/2012 v. Education Loan Trust IV, et al. Page 2 of 14 the burden” of demonstrating “a sound basis or legitimate need to take judicial action.” MBIA, 2012 WL 7145814 at *4 (internal quotations and citations omitted). “Although ‘good cause’ is not defined in Section 216.1(a), [a] finding of ‘good cause’ presupposes that public access to the documents at issue will likely result in harm to a compelling interest of the movant.” Id. (quoting Mancheski v. Gabelli Group Capital Partners, 39 A.D.3d 499, 502 (2d Dep’t 2007).1 This Court found that “sealing has been deemed appropriate to shield trade secrets or where the release of documents could ‘threaten a business’s competitive advantage.’” Id. at *4 (quoting Mosallem v. Berenson, 76 A.D.3d 345, 350 (1st Dep’t 2010)). The Court detailed the factors the courts should consider in determining whether a party has established either ground for sealing. In determining whether information qualifies as a trade secret, the court may consider: (1) the extent to which the information is known outside of [the] business; (2) the extent to which it is known by employees and others involved in [the] business; (3) the extent of measures taken by [the business] to guard the secrecy of the information; (4) the value of the information to [the business] and to [its] competitors; (5) the amount of effort or money expended by [the business] in developing the information; (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. Id. (quoting Wiener v. Lazard Freres & Co., 241 A.D.2d 114, 124 (1st Dep’t 1998)). “Determination of whether the release of documents threatens a harm to a business’s competitive business advantage hinges on a finding that such information: is proprietary; involves current or future business strategies; is closely guarded; and, if disclosed, would give a competitor an unearned advantage.” Id. at *4 (quoting Mancheski, 39 A.D.3d at 503). When the movants’ “relationship with its competitors … could be compromised by the disclosure of the details,” the court will find a compelling interest in withholding the information from public 1 As the First Department has stated, “Since there is no absolute definition, a finding of good cause, in essence, boils down to … the prudent exercise of the court’s discretion.” Applehead Pictures LLC v. Perelman, 80 A.D.3d 181, 192 (1st Dep’t 2010) (internal quotations omitted). 2 One William Street Capital Management, L.P. Index No. 652274/2012 v. Education Loan Trust IV, et al. Page 3 of 14 scrutiny.” Matter of Twentieth Century Fox Film Corp., 190 A.D.2d 483, 488 (1st Dep’t 1993). By contrast, harm to reputation and a general desire for privacy do not constitute good cause. Mosallem, 76 Ad.3d at 351; see also Liapakis v. Sullivan, 290 A.D.2d 393, 394 (1st Dep’t 2002). Where the information sought to be sealed or redacted is not material to the court’s determination, the presumption in favor of public access is lessened, and the showing required of the party seeking to file the document under seal is also lessened, because in such a situation the “public interest in the disclosure of these documents . . . is more in the nature of curiosity.” MBIA, 2012 WL 7145814 at *7; see also IDW Group, LLC v. Levine Ins. Risk Mgmt. Servs., Inc., 40 Misc. 3d 368, 382 (N.Y. Sup. Ct. 2013) (granting permission to file document under seal because the information therein “not material to this motion”); United States v. Erie County, N.Y., 763 F.3d 235, 239 (2d Cir. 2014) (“[I]n order to decide whether a document is a judicial document protected by the common law right of access, this Court considers whether it is relevant to the performance of the judicial function and useful in the judicial process.”). The Second Circuit has explained a lessened standard for the sealing of information that is not material to the court’s determination of litigants’ substantive rights by placing such information near the bottom of a “continuum”: [T]he strong weight to be accorded the public right of access to judicial documents [is] largely derived from the role those documents played in determining litigants’ substantive rights—conduct at the heart of Article III—and from the need for public monitoring of that conduct. As one moves along the continuum, the weight of the presumption declines. . . . Where statements or documents in the middle of the continuum are at issue, the weight to be accorded to the presumption of access must be determined by the exercise of judgment. . . . Where testimony or documents play only a negligible role in the performance of Article III duties, the weight of the presumption is low and amounts to little more than a prediction of public access absent a countervailing reason. Documents that play no role in the performance of Article III functions, such as those passed between the parties in discovery, lie entirely beyond the presumption's reach. . . . 3 One William Street Capital Management, L.P. Index No. 652274/2012 v. Education Loan Trust IV, et al. Page 4 of 14 United States v. Amodeo, 71 F.3d 1044, 1049-50 (2d Cir. 1995). Although state courts have at times employed somewhat similar reasoning, (see MBIA, 2012 WL 7145814 at *7; IDW Group, 40 Misc. 3d at 382), it appears this principle has been more developed in the federal courts. Nonetheless, as the question of whether to grant permission to file under seal in both state and federal courts is rooted in the same concerns, this principle should apply equally in the state courts as well. Finally, the Court in MBIA also noted that “[w]here sealing is authorized, a document need not be withheld from the public in its entirety, as ‘[r]edaction is a viable option, predicated upon the required level of need.’” Id. at *4 (quoting Danco Labs. v. Chemical Work of Gedeon Richter, 274 A.D.2d 1, 8 (1st Dep’t 2000)). II. The Price at Which OWS Purchases a Security is a Trade Secret That Would Harm OWS if Publically Disclosed. OWS requests that the Court allow OWS to redact pricing information on three exhibits filed by USELT in support of its opposition to OWS’s motion for summary judgment: Exhibits D, E and F to the Affirmation of Eric Whitney (Dkt. No. 194). Each of these documents discloses the price at which OWS purchased the Notes. The price at which OWS purchases a security is a proprietary trade secret that OWS holds in the highest confidence. Supplemental Affidavit of Frank Prezioso ¶ 3. The public disclosure of such price would damage OWS’s competitive advantage in the marketplace and cause OWS material harm. Id.; see also MBIA Ins. Corp., 2012 WL 7145814 at *4 (quoting Mancheski, 39 A.D.3d at 503) (explaining that a determination of whether a document threatens harm to a business’s competitive business advantage hinges on, inter alia, the proprietary nature of the document, whether it is closely guarded, and whether it would give a competitor an unearned advantage if disclosed). Likewise, the price at which OWS purchased the Notes is not a fact relevant to the 4 One William Street Capital Management, L.P. Index No. 652274/2012 v. Education Loan Trust IV, et al. Page 5 of 14 motions currently pending before the Court and USELT does not dispute that the price is immaterial to the Court’s determination. MBIA Ins. Corp., 2012 WL 7145814 at *7 (where information sought to be sealed is not material to the court’s determination, the presumption in favor of public access is lessened and the burden of proof lowered). Nor does OWS seek to file entire documents under seal; if the Court grants this motion, only the pricing information would be withheld from public disclosure. The harm posed to OWS’s competitive interests and the irrelevance of the security price to the summary judgment motions, and thus the public, warrant redaction of the price that OWS paid for the Notes.2 III. The USELT Respondents’ Sensitive Financial Information Constitutes Trade Secrets and Public Disclosure Threatens Harm to Their Competitive Advantage. The USELT Respondents seek permission to file under seal (in its entirety) the “Parity Ratio Calculation Spreadsheet,” which appears as both Exhibit 17 to the Affirmation of Kent A. Yalowitz (Dkt. No. 190) and Exhibit R to the Affirmation of Eric N. Whitney (Dkt. No. 194). The USELT Respondents also seek permission to file under seal (in redacted form) Exhibit 10 to the Affirmation of Kent A. Yalowitz (account statements for the Trust’s Surplus Fund account), and the Affidavit of Henry Howard (because of its discussion of a document sought to be filed under seal by BNYM). 1. The Parity Ratio Spreadsheet The one document the USELT Respondents request permission to file under seal in its entirety is the Parity Ratio Calculation Spreadsheet. This document calculates what are referred to as the Trust’s “parity ratios,” i.e., the Senior Asset Percentage and the Subordinate Asset 2 Section IV of this motion, regarding BNYM’s motion to seal Exhibit 11 to the Yalowitz Affidavit, makes characterizations of Exhibit 11 as itrelates to OWS’s First Cause of Action. While OWS disagrees with the substantive description of Exhibit 11, and believes itspapers adequately describe the document, OWS takes no position with respect to BNYM’s motion to seal. Additionally, OWS’s participation in this joint submission does not indicate any agreement with the USELT Respondents’ substantive discussion of documents or OWS’s First Cause of Action. 5 One William Street Capital Management, L.P. Index No. 652274/2012 v. Education Loan Trust IV, et al. Page 6 of 14 Percentage. These terms are defined in the Indenture, and establish ratios that compare (A) the assets of the Trust (less all accrued interest on certain outstanding notes and associated financing fees and expenses) with (B) the aggregate principal amount of certain outstanding notes.3 The underlying data to make that calculation is included in the Parity Ratio Calculation Spreadsheet, which is prepared internally by the Issuer. Supplemental Affidavit of Henry Howard in Support of Joint Motion to Seal (“Howard Supp. Aff.”) ¶ 3. Under the Indenture and the Fourth Supplemental Indenture (the “FSI”), these parity ratios may control whether certain actions take place. For example, pursuant to the Indenture’s Senior Asset Requirement, the Issuer asserts that no redemption of any kind of the Notes can take place if the Senior Asset Percentage is not at least 106% and the Subordinate Asset Percentage is not at least 101%. See Indenture at § 3.02; FSI at § 8(a)(i). Although OWS disputes this prerequisite applies, only the final figures for the parity ratios are at issue. As it pertains to the first cause of action, there is no dispute in regard to the calculation of the parity ratios. Disclosure of the Parity Ratio Calculation Spreadsheet would damage USELT’s competitive advantage by providing its competitors and counterparties with material, non-public information about USELT’s financial condition that they could then use to model their competing investments on, or to obtain an unearned advantage in negotiations with USELT. Howard Supp. Aff. ¶ 4; see Matter of Twentieth Century Fox Film Corp., 190 A.D.2d 483, 488 (1st Dep’t 1993) (accepting motion to file under seal due to “petitioner’s argument that its relationship with its competitors, as well as with other artists in its employ, could be compromised by the disclosure of the details of the contract”); MBIA, 2012 WL 7145814 at *9. None of the data included in the Parity Ratio Calculation Spreadsheet is publicly known or 3 The relevant notes are the outstanding senior notes for the Senior Asset Percentage, and the outstanding senior and subordinate notes for the Subordinate Asset Percentage. 6 One William Street Capital Management, L.P. Index No. 652274/2012 v. Education Loan Trust IV, et al. Page 7 of 14 reported. The securitized student loan industry is a competitive environment. Issuers of student loan-backed notes are constantly surveying what other issuers are doing to mimic (if not outright copy) their methods in structuring loan portfolios and investment vehicles to achieve the same results. The Parity Ratio Calculation Spreadsheet contains proprietary information that USELT keeps in strict confidence and that, if disclosed, competitors could use to their advantage and to the disadvantage of USELT. Howard Supp. Aff. ¶¶ 5-6. For instance, by learning the proprietary information contained in the parity ratio calculations, competitors could use that information to compare and optimize their own performance against that of USELT. Competitors could use this information to calculate the income and cash flows of the Trust, which could enable them to change the timing or the price of their own sales or purchases of student loan-backed notes. A competitor with access to the parity ratio calculations could use the information to develop an understanding of the portfolio makeup of the Trust, the interest rates borrowers are paying, and each type of student loan debt and the corresponding amount in the portfolio. Competitors could also identify both the applicable interest rates and the amount of interest actually paid pursuant to the Net Loan Rate limitation at a very discreet, series-by-series level. All of that information is kept confidential to prevent other issuers from assembling a similarly attractive portfolio to obtain investment, which is a finite amount and often a zero-sum game. Any investor demand that is generated by competitors by virtue of learning this information will divert demand away from USELT’s notes, resulting in a reduced secondary market for the purchase of the notes as well as harm to any future issuances by USELT using the same proprietary portfolio modeling information. Howard Supp. Aff. ¶ 7-8. Counterparties, (generally holders of notes issued by USELT), could likewise use this information to alter their conduct to the detriment of the Trust and other noteholders. Howard 7 One William Street Capital Management, L.P. Index No. 652274/2012 v. Education Loan Trust IV, et al. Page 8 of 14 Supp. Aff. ¶ 9; see Matter of Twentieth Century Fox, 190 A.D.2d at 488 (granting permission to file under seal where “disclosure of the details” of contract would affect studio’s ability to negotiate “with other artists in its employ”). The Indenture permits USELT to buy back its notes on the open market at a discount subject to the satisfaction of certain parity ratios. USELT has, in fact, purchased some senior notes. By buying senior notes, as it is entitled to do, the Issuer retires future obligations of the Trust and also eliminates any obligation to pay any carry-over interest that may have accrued on the purchased notes, thereby creating a healthier balance sheet for the betterment of the Trust and the remaining noteholders. If the parity ratios and their underlying data were to become public, noteholders would be able to see the outstanding principal balances and the amounts of accrued carry-over interest on every series of notes, data they would use to inform their business judgments about the financial condition of the Trust and the Issuer’s price sensitivity, thereby affecting the price at which they would be willing to sell their outstanding notes to the Issuer for open market re-purchase. Similarly, the Parity Ratio Calculation Spreadsheet would enable noteholders to determine both the cash on hand and the future cash flows of USELT, which would provide them with yet more information to develop a financial model to determine the cash flows and to ascertain a range of purchase price points in negotiating with the Issuer. Howard Supp. Aff. ¶¶ 10-12. These concerns are not limited to current noteholders. An outside firm armed with this information could seek to exploit it by buying notes from holders who are not aware of the same information – which, again, is not publicly available or reported – and engage in a form of arbitrage by demanding from the Issuer a higher price with knowledge of the Issuer’s negotiating practices and ability. Howard Supp. Aff. ¶ 13; cf. MBIA, 2012 WL 7145814 at *9 (granting permission to file under seal information that “would reveal [a party’s] financial ability to 8 One William Street Capital Management, L.P. Index No. 652274/2012 v. Education Loan Trust IV, et al. Page 9 of 14 negotiate certain claims, giving adversaries a window into the amount available” with which to negotiate). Purchases at a higher price will harm the competitive advantage of USELT and will harm the financial condition of the Trust and deprive the remaining noteholders of funds that would otherwise be available to pay principal and interest on their notes. Howard Supp. Aff. ¶ 13. In comparison with these significant impacts from its release, USELT submits that the presumption of public access to the Parity Ratio Calculation Spreadsheet is slight and easily overcome because the extensive data in the document is not material, and plays no role, in deciding OWS’s motion for summary judgment. The document is relied upon by OWS only to show that the Senior Asset Requirement was first satisfied in February 2013. USELT contends that even if the right of special redemption were not terminated prior to February 2013, which USELT disputes, the Senior Asset Requirement would have been only partially first met, and the Party Ratio Calculation Spreadsheet fails to demonstrate the Senior Asset Requirement would have been satisfied, pursuant to Section 3.02 of the Indenture, after giving effect to any such redemption as well. Thus, neither party asks the Court to weigh the underlying data that constitutes the sensitive and proprietary financial information of the Trust, the public release of which would harm the Trust. See IDW Group, 40 Misc. 3d at 382 (presumption of access lessened when court does not rely upon the document). 2. Account Statements for the Surplus Fund Account The first page of Exhibit 10 of the Yalowitz Affirmation consists of a summary prepared by OWS of the dates and amounts of certain of the Issuer’s open-market purchases of senior notes. The remainder of the exhibit consists of monthly bank account statements for the Trust’s Surplus Fund Account that reflect those purchase amounts and other financial activity in the 9 One William Street Capital Management, L.P. Index No. 652274/2012 v. Education Loan Trust IV, et al. Page 10 of 14 account. For the reasons set forth below, USELT requests permission to file Exhibit 10 in redacted form. The amount (or price) at which USELT redeems senior notes from noteholders is just one of the proprietary trade secrets identified in the bank statements that USELT maintains in strict confidence. Howard Supp. Aff. ¶ 16; see Applehead Pictures LLC v. Perelman, 80 A.D.3d 181, 192 (1st Dep’t 2010) (noting that protection of a trade secret is a “compelling objective” which outweighs “the public’s right to access”). The bank account statements in Exhibit 10 show, among other things, (1) the individual transactions that comprise the repurchases, including the amounts paid; (2) the surplus funds available to the Trust; (3) the balances in the account on a monthly basis; (4) the securities in which the Trust invested, thus revealing the Trust’s proprietary and confidential investment decisions and information as to which securities it chooses to invest its money in; (5) the frequency of the Issuer’s open-market purchases; and (6) the timing of the Trust’s transfers between its investments. For the same reasons as set forth above, the public disclosure of this information would enable competitors and counterparties to try to discern USELT’s pricing models and/or mimic its investment decisions and harm USELT’s competitive advantage in the marketplace. Howard Supp. Aff. ¶ 16; see MBIA, 2012 WL 7145814 at *7 (noting that revealing financial information can harm movant’s ability to negotiate). The bank account statements should therefore be filed under seal in their entirety or in heavily redacted form to keep said information confidential. Finally, to protect the security of the Trust’s financial accounts, USELT also seeks permission to redact all account numbers identified in the account statements. The summary on the first page of Exhibit 10, however, reveals virtually none of the specifics and detail identified above, and does not disclose, among other things, whether the 10 One William Street Capital Management, L.P. Index No. 652274/2012 v. Education Loan Trust IV, et al. Page 11 of 14 amounts of the repurchases relate to one or more transactions. Accordingly, USELT submits that the summary page presents information sufficient to permit public access to the relevant matters in Exhibit 10, without causing harm to USELT and the Trust by disclosing the underlying specifics of their confidential and proprietary information. 3. Affidavit of Dr. Henry Howard The USELT Respondents also request permission to file the Affidavit of Henry Howard in slightly redacted form, as it discusses the contents a document for which BNYM seeks leave to file under seal, namely Yalowitz Affirmation Exhibit 11. If the Court grants leave with respect to Exhibit 11, to be consistent, the discussion of the contents of that document in Paragraph 36 of Dr. Howard’s affidavit should also be redacted. IV. Exhibit 11 to the Yalowitz Affirmation Should Be Sealed Because Disclosure Would Harm BNYM’s Competitive Advantage. The Bank of New York Mellon requests that the Court seal only one document: Exhibit 11 to the Yalowitz Affirmation in Support of Plaintiff’s Motion for Summary Judgment (“Exhibit 11”). Exhibit 11 is a BNYM draft internal risk management report regarding issues that relate to Education Loan Trust IV generally, but have no specific relevance to the holders of the 2007-1B-1 Notes or the specific claims and defenses in this case. The report should be filed under seal because the potential harm to BNYM’s competitive business advantage resulting from disclosure far outweighs the modest (at best) interest in public disclosure of the document.4 Indeed, the interest in permitting public disclosure of the document is particularly weak under the facts of this case. In MBIA, this Court granted the motion to seal repurchase requests 4 BNYM also requests that direct quotations from this document in the supporting papers be redacted in the publicly-filed versions. Specifically, BNYM seeks the redaction of the quotes from Exhibit 11 contained in One William Street Capital Management, L.P.’s (“OWS’s”) Memorandum of Law in Support of its Motion for Summary Judgment at pages 10 and 12; OWS’s Reply Memorandum in Support of their Motion for Summary Judgment at page 2; Paragraph 27 of OWS’s Rule 19A Statement; and Paragraph 36 of the Affidavit of Henry Howard. 11 One William Street Capital Management, L.P. Index No. 652274/2012 v. Education Loan Trust IV, et al. Page 12 of 14 (and related responses) that were unrelated to the securitizations at issue in that case. MBIA Ins. Corp. v. Countrywide Home Loans, Inc., No. 602825/2008, 2012 WL 7145814 (N.Y. Sup. Ct. Dec. 6, 2012). Similarly, here, the information contained in Exhibit 11, though technically responsive to OWS’s document requests, has limited relevance to the case and has virtually no relevance to the motion for summary judgment on Count One. The document is an internal Risk Management report from the Risk Management Platform, which reflects BNYM’s proprietary strategy for identifying, tracking, assessing, and remedying risk events. It addresses issues central to all noteholders in the Trust, such as the calculation of carryover interest and the applicability of the Net Loan Rate and Maximum Rate, but those issues are not central to the motion for summary judgment, and the overpayment reflected in the report indisputably did not affect holders of the Notes at issue in this case. Affidavit of Carolyn Lee at ¶¶ 6-7 (“Lee Aff.”). Thus, the interest in publicly disclosing this document “is more in the nature of curiosity,” similar to the documents this Court sealed in MBIA. MBIA Ins. Corp., 2012 WL 7145814. The public disclosure of this document would harm BNYM’s competitive business advantage. “Determination of whether the release of documents threatens a harm to a business’s competitive business advantage hinges on a finding that such information: is proprietary; involves current or future business strategies; is closely guarded; and, if disclosed, would given a competitor an unearned advantage.” MBIA Ins. Corp., 2012 WL 7145814 (internal quotation marks omitted). Under this rubric, Exhibit 11 should be sealed for at least two reasons. First, the form of the document itself is a non-public BNYM platform that depicts BNYM’s proprietary internal processes for identifying risk and formulating strategies to resolve any identified risks. This platform, and the procedures and strategies reflected in the form, have been developed internally by BNYM. Lee Aff. ¶¶ 2-3. The document itself is non-public and is 12 One William Street Capital Management, L.P. Index No. 652274/2012 v. Education Loan Trust IV, et al. Page 13 of 14 not circulated outside of BNYM. Id. To further guard against disclosure, BNYM allows only a select group of employees within the risk management group at BNYM to prepare and review it. Id. ¶ 4. It is not widely circulated throughout BNYM, because public disclosure would give competitors an unfair view into the internal control processes and procedures for identifying risk at BNYM. Id. ¶¶ 4-5.