Court Removes Agreement from Public Record in Law Firm Partnership Dispute

Partnership disputes and other conflicts among the owners of a business a fraught with risk for the participants. Should the disagreement wind up on court, the litigation could sap the company’s resources and distract the people in charge. Another concern is that publicity from the proceeding could harm the reputation of the business and everyone involved. Depending on the nature of the litigation, it is also possible that confidential materials, including the partnership agreement itself, could be exposed to the public. 

A case involving two high-profile law firms addressed the treatment of sensitive information in a dispute involving two former partners. Clifford Chance sued to recover roughly $5.8 million in profit distributions that had gone to two attorneys who subsequently left for Sidley Austin. The ex-partners, Michael Sabin and Clifford Cone, responded by included full, unredacted partnership agreements that they had signed on to during their Clifford Chance membership.

According to Clifford Chance, these filings were unnecessarily expansive, as they included unnecessary private information relating to firm governance, profit allocation and partner responsibilities, most of which had nothing to do with case issue. While Sabin and Cone argued that where compelled to attach the documents, Clifford Chance moved to seal them, arguing that public access to the agreements caused competitive harm. The court agreed and removed the agreements from public view.

While the information in a partnership agreement might be considered a trade secret, each situation is unique, and there might be cases where a judge chooses not to seal the document from public view. Courts generally disfavor blanket sealing and require a particularized showing of likely competitive harm. Should you be engaged in a partnership dispute, it is important to consider the potential exposure of internal matters when you decide how to proceeds.

In disputes likely to involve sensitive information, a protective order might be warranted. Parties can agree to the redaction or sealing of confidential material and submit an order for the judge’s approval. Litigants should also be careful only to attach what is necessary for the court to decide the issue at hand. Often, an excerpt or summary will have the same practical effect as a full agreement.

The Law Offices of Donald W. Hudspeth P.C. in Phoenix represents Arizona clients in all types of shareholder and partnership disputes. To discuss your situation and particular concerns, please call 866-696-2033 or contact us online.