quinn emanuel trial lawyers | new york 51 Madison Avenue, 22nd Floor, New York, New York 10010-1601 | TEL (212) 849-7000 FAX (212) 849-7100 WRITER'S DIRECT DIAL NO. (212) 849-7163 WRITER'S INTERNET ADDRESS rexlee@quinnemanuel.com quinn emanuel urquhart & sullivan, llp LOS ANGELES | SAN FRANCISCO | SILICON VALLEY | CHICAGO | WASHINGTON, DC | LONDON | TOKYO | MANNHEIM | MOSCOW | HAMBURG | PARIS | SYDNEY | MUNICH March 10, 2016 VIA NYSCEF AND HAND DELIVERY The Honorable Anil C. Singh Supreme Court of the State of New York New York County, Commercial Division 60 Centre Street, Room 218 New York, NY 10013 Mot. Seq. No. 005 Re: Syncora Guarantee Inc. v. Alinda Capital Partners LLC, et al., Index No. 651258/2012 Dear Justice Singh: We represent plaintiff Syncora Guarantee Inc. (“Syncora”) in the above-captioned matter and enclose a copy of the transcript from the parties’ February 24, 2016 conference with the Court regarding Syncora’s motion for leave to file and unredact the First Amended Complaint (Mot. Seq. No. 005). We also write to inform the Court that, after consultation with Lisa Horowitz, counsel for the nonparty witness referred to in the First Amended Complaint, we have agreed to withdraw our motion to unredact the First Amended Complaint solely as to the identification of the non-party witness referred to in paragraphs 62 and 64, and are prepared to redact that individual’s name from the copy of the First Amended Complaint filed on the public docket.1 Syncora otherwise fully maintains its motion for leave to file and unredact all other allegations contained in the First Amended Complaint. Respectfully submitted, /s/ Rex Lee Rex Lee Encl. cc: Mark A. Kirsch, Esq. and Lisa Horowitz, Esq. (via email) 1 Accordingly, we have also redacted the individual’s name from the copy of the transcript enclosed here. 1 of 1
====== SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK CIVIL TERM PART 45 iii-1-Z _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ___X SYNCQRA GUARANTEE, INC , - Plaintiff — against — ALINDA CAPITAL PARTNERS, LLC, AMERICAN ROADS, LLC MACQUARIE SECURITIES (USA), INC., and JOHN S. LAXMI Defendants. I‘$II'1'I11111-I--Z--1Z-3-I-_-11¢11¢1_—.|_-..|||||$._._.._.._-|,|._,__—._1_,_X INDEX NUMBER 551258/12 60 Centre Street New York, New York February 24, 2015 B E F O R E: HONORABLE ANIL SINGH, Supreme Court Justice. A P P E A R A N C E S: QUINN EMANUEL URQUHART & SULLIVAN, ESQS. Attorneys For Plaintiff 51 Madison Avenue New York, New York 10010 BY: JOHN PICKHARDT, ESQ. REX LEE, ESQ. DAVID FARBER, ESQ. GIBSON DUNN & CRUTCHER, LLP Attorneys For Defendant Maoquarie Securities (USA), Inc. 200 Park Avenue New York, New York 10166-0193 BY: MARK A. KIRSCH, ESQ. CHRISTOPHER N. JORALEMON, ESQ. DAVID GOWLAY-BUCK, ESQ. CONTINUED NEXT PAGE... Gloria Ann Brandon, Sr. Court Reporter FILED: NEW YORK COUNTY CLERK 03/10/2016 04:40 PM INDEX NO. 651258/2012 NYSCEF DOC. NO. 195 RECEIVED NYSCEF: 03/10/2016 1 of 24 GEORGE BIRNEAUI‘-‘I, PLLC Attorney for Non Party Witness — 230 Park Avenue New York, New York 10169 BY: LISA S. HORUWITZ, ESQ. Gloria Ann Brandon, Senior Court Reporter. Gloria Ann Brandon, Sr. Court Reporter 2 of 24 Proceedings THE COURT: Remain seated. On the record. I have before me a motion by the Plaintiff for leave to file an unredacted first amended complaint, and the Defendant, Macquarie, doesn't oppose the filing of the first amended complaint, but objects to the filing of an unredacted complaint, so my first question is addressed to counsel for the Plaintiff; Why after you enter into a confidentiality order, a stipulation and order, should I now allow you to file an unredacted complaint? MR. PICKHARDT= Good morning, your Honor. John Pickhardt from Quinn, Emanuel, Urquhart N Sullivan on behalf of the Plaintiff, Syncora Guarantee. Your Honor, the parties did as customary enter into a protective order governing the exchange of materials, which really requires that the parties maintain confidentiality over documents that either of the parties considers in good faith to be subject reasonably to confidentiality. That presents a very different question than the question as is before the Court today, which is whether now that Syncora is planning, or has requested, it's not opposed to Gloria Ann Brandon, Sr. Court Reporter 3 of 24 Proceedings filing an amended pleading should that amended pleading be available to the public, and the presumption is under New York law that it is, notwithstanding the fact that the parties may have confidentiality provisions that govern the exchange, the private exchange of documents between them in the litigation, and in fact, your Honor, the burden is on the defendant to -- THE COURT: So, to cut to the chase, you don't believe that the part of the stipulation with respect to confidentiality, which designates certain matters confidential, which relate to the conduct of the parties‘ business, you don't think that section applies at all? MR. PICKHARDT: Your Honor, I don't. That's what the Court's determination today should turn on. I think it should turn on the standard for sealing governed by the New York law as opposed to whether this properly fit within the protective order, notwithstanding that we don't think this information properly fit within the protective order. THE COURT: So, if I were to agree with you and use the public interest good cause standard, why do you believe that the information that the Defendants seek to seal doesn't affect their business Gloria Ann Brandon, Sr. Court Reporter 4 of 24 Proceedings in any way; proprietary information, et cetera? MR. PICKHARDT: Your Honor, the easiest answer there, and the one that I, frankly, think is dispositive is that this is incredibly stale information. All of the facts that we are talking about are a decade old, and the Defendant -- THE COURT: So, it's historical in nature? MR. PICKHARDT: It's historical in nature, and they have made conclusory statements in their papers, just lawyer statements; I would note no affidavit, or evidentiary support on which the Court can rely. They have some relevance. They can't cite a single case anywhere where the Court has agreed that information that's a decade old is still commercially sensitive so as to establish the good cause that is required in order for information to be kept out of the public domain. On top of that, your Honor, we would be happy to hand up if it would be helpful to the Court a demonstrative that shows you the information that they're looking to have kept under seal. It is page after page of information that really concerns allegations of fraud. It concerns allegations of information that was concealed from my client when it was considering whether to provide insurance to the Gloria Ann Brandon, Sr. Court Reporter 5 of 24 Proceedings Defendant on these toll roads. It doesn't concern them, unless their core business is fraud. It doesn't concern their ongoing business practices, so you now, regardless, even if this was conduct that occurred last year, it still wouldn't meet the standard, but the fact that it occurred ten years ago is just dispositive. In fact, to find a case that even states a standard that information that may be historical still may have some continuing relevance, they reach out to a case in Pennsylvania, because they can't find a New York case, that says it. What they don't cite from that case, even that case says, presumptively, information that's more than three years old, or older is no longer commercially relevant. That's consistent with the present ruling that came down from Judge Bransten where she found that the information in the Country—Wide case, it was only information from the last 22 years. This is all pre-financial crisis information, and Macquarie is suggesting that the current is the same that they were doing pre-crisis. They have bigger problems than this particular motion. This is simply really an effort by the Defendant to try to keep under wraps information that they don't want revealed to the public because it's Gloria Ann Brandon, Sr. Court Reporter 6 of 24 Proceedings embarrassing. It describes in detail information, you know, that we have seen in discovery. Now that demonstrates that they were aware of erroneous information that was part of their models that they fed to Syncora, and concealed the fact that they knew it was false at the time. That is what they don't want out in the public. There's case upon case, including the Mosallem case, which is probably the one most on point here, which clearly says the fact that something may be embarrassing may be a reason why they don't want it released into the public. That certainly doesn't establish the good cause standard that they have the burden of showing in order to establish that it can be kept under seal. THE COURT: Thank you. Counsel? MR. KIRSCH: Thank you, your Honor. THE COURT: So, really the first question to you is, does the good cause standard apply here, or should the stipulation and order apply to the relief, in essence, that you are asking for? MR. KIRSCH: The stipulation -- Your Honor, first let me introduce myself; Mark Kirsch for Gibson Dunn. Gloria Ann Brandon, Sr. Court Reporter 7 of 24 B Proceedings The stipulation -— let me start by noting that Macquarie has approached the confidentiality issues with a scalpel, not an ax. The complaint, as your Honor has seen, is 41 pages long. It has 105 paragraphs. We're seeking to redact nine paragraphs in total, and seven in part. We have had meet and confer discussions with Syncora to see if there was compromise available. Without getting into the back and forth, and the meet and confer, as your Honor can see today, Syncora was unwilling to permit redaction of even a single word. Your Honor noted there's a protective order in the case. Justice Schweitzer entered that order in 2013. The parties have complied with it for the last few years. THE COURT: Why does the protective order apply to the proceedings? MR. KIRSCH: The protective order doesn't make a distinction at all. In fact, Paragraph 3 of the protective order says, "It protects material detrimental to the conduct of that parties‘ business." There's no distinction anywhere in that document between documents supposedly privately exchanged in discovery and pleadings, or any other sort of public Gloria Ann Brandon, Sr. Court Reporter 8 of 24 Proceedings dissemination. It's all treated the same as the public dissemination because the nature of it doesn't change. Depending on whether it's exchanged privately, or put on the front page of the New York Times, there's no reason for the stipulation not to govern. I would say, your Honor, we think Syncora is trying to take advantage of the fact that we gave them the information after signing the stipulation, having Justice Schweitzer enter it. Now they want to publish it in a factual record that is barely under construction. There's a lot of information that's plainly confidential. I could go through it. The fact that it's old is not dispositive. Macquarie is the leading infrastructure deal maker in the world. Actually, they're in the same business today as they were ten years ago. How they model with or without side funds, how they might wish to price, that is as confidential today as it was ten years ago. I would say, also there's a reference in the THE COURT: Let's just sort of —— if I was to agree with Plaintiff's counsel that the good cause standard applies, convince me that there's good cause to seal. Gloria Ann Brandon, Sr. Court Reporter 9 of 24 Proceedings MR. KIRSCH: Sure, your Honor. If your Honor believes that the good cause applies, then some of the paragraphs we wish to redact should not be redacted. Some of those paragraphs cannot meet that standard. Some of them do. THE COURT: Be specific. MR. KIRSCH: Sure. May I focus on the ones that I think do? THE COURT: Absolutely. MR. KIRSCH: Your Honor, look at Paragraph 70 for example. MR. PICKHARDT: Would your Honor like a compilation of the redactions? THE COURT: I do have an unredacted version that was given to me as a courtesy. MR. KIRSCH: I'm sure you do, but we'll hand one up if that's okay. Your Honor, may I approach? THE COURT: Sure. Thank you. MR. KIRSCH: Thank you, your Honor. So, if you look at Paragraph 70, you see there's a reference to Macquarie modeling a proposed return on investment, and whether that was a good Gloria Ann Brandon, Sr, Court Reporter 10 of 24 ll Proceedings return. What Macquarie thinks is a good return inherently is a confidential piece of information. In that same paragraph, your Honor, there's information about how Macquarie modeled, internally proposed capital structure for the deal; you see how much equity, how much subordinated debt, how much are the proceeds of the bonds, what the relative proportions of them would be. That's quite proprietary. If your Honor were to look at Paragraph 72, that discusses, for example, what sensitivities Macquarie applied to its analysis of the proposed transaction. Now, if your Honor were to see Paragraph 71 it discusses a proposed sales price if Macquarie was going to sell these toll roads at issue to a Macquarie affiliated fund. How Macquarie might choose to discuss a deal with affiliates would be of enormous interest because of the price. When you talk with affiliated funds, you might talk about it differently, or come to a different agreement than you would if you were talking to a third-party. Third-parties would love to know that: what's the inside price. It's true on apartments. It's true on condominiums. It's true on toll roads. The paragraph Gloria Ann Brandon, Sr. Court Reporter 11 of 24 12 Proceedings is the fund's reaction to that price of the proposal. If your Honor would look at Paragraph 68, it references internal discussions with a Macquarie affiliate about what price the assets might really he worth, so if one were looking, one would see pricing in the market at the time of the discussion, but internal discussions about price, if there's a difference, that would be of great interest to future competitors, or future investors. THE COURT: Then it was historical information in the sense that it was pre-recession? MR. KIRSCH: Absolutely, your Honor. Your Honor, there's also one other reference I would like to raise. In a couple of paragraphs, there's a reference to a non-party witness. The name has been redacted from the copy filed with the Court. The courtesy copy, the copy that you have is unredacted. THE COURT: What paragraph is that? MR. KIRSCH: Paragraphs 62 and 64, your Honor. There was a person referred to there as a member of the Macquarie deal team. He no longer is employed by Macquarie. We thought there was no reason he had to be identified by name and accused of fraud. Gloria Ann Brandon, Sr. Court Reporter 12 of 24 Proceedings Now his counsel is here today for the non-party witness. Lisa Horowitz is here representing him, but there's no good reason for his name to be bandied about in the complaint. There's other information, your Honor, that simply alleges various forms of misconduct on behalf of Macquarie. Rather than rewarding Syncora for entering into a protective order, getting our most private documents, and then splashing the contents publically in the face of that protective order, we ask your Honor to keep this respectfully redacted until fact discovery is closed, or we can resist it. At that point in time when you have a full factual record, and the nature of the information might be clear to your Honor, your Honor might view it differently, but once it's out, it's out. We say, respectfully, can we close this to the close of fact discovery in four months? The case has been going on for four years now we would say, respectfully, with no harm done. THE COURT: Thank you, counsel. MR. KIRSCH: Thank you. MR. PICKHARDT: Yes, your Honor. with respect to the specific paragraphs that counsel has cited to you, there's a couple of issues Gloria Ann Brandon, Sr. Court Reporter 13 of 24 Proceedings there. l4 The first is, even to the extent that the Court were to credit that argument, the only thing that would be redacted out of those paragraphs as counsel has suggested are the actual numbers themselves, not the entire paragraphs. THE COURT: Why don't you more basic point; when you entered confidentiality order before Judge on that confidentiality order, you address counsel's into a Schweitzer, based get documents, and then you use the documents presumably to amend your pleading, so is a predicate for what you are doing here everything that you obtained through that confidentiality order? MR. PICKHARDT: No, your Honor, I don't think that's the case. THE COURT: Would you have amended, or would you have amended your complaint had you not received the documents? when you started the discussion, you did say to me that discovery has turned up, essentially -- you didn't use the term "rampant fraud," but did you suggest they were committing fraud? MR. PICKHARDT: Yes, your Honor, but the nature of the protective order is not a promise that Gloria Ann Brandon, Sr. Court Reporter 14 of 24 l5 Proceedings going forward, to the extent that materials that are exchanged are relevant to the public proceedings before the Court, that the parties are not going to seek to allow that information to be addressed in public. As your Honor well knows, trials happen every day where there were protective orders in the case, and there are documents that go across the trial that have the word "confidentiality" stamped on them because that's how they were exchanged. THE COURT: Fair enough. But, the procedural posture of this case is very different than if and when we get to trial. MR. PICKHARDT: Fair enough, your Honor. THE COURT: Presumably, then defendants would be able to counter the arguments as to fraud, et cetera, and then there would be, from their perspective at least, a more balanced picture to be shown. MR. PICKHARDT: Your Honor, there's going to be a more balanced picture shown. As Defense Counsel has indicated in their papers, they intend to move to dismiss. There's already been documents that have been exchanged. If they think there's another story here to be told with respect to this complaint, we are going to see it in Gloria Ann Brandon, Sr. Court Reporter 15 of 24 16 Proceedings front of your Honor on the motion to dismiss. Frankly, your Honor, if the Court was to grant this request, it is going to make the motion to dismiss process also cumbersome because we're going to have to be dealing with Swiss cheese briefs in front of the Court. THE COURT: Well, I'm not persuaded by that argument because I have enough cases where there are sealing orders, and there's very easy ways to address that. MR. PICKHARDT: Your Honor, more fundamentally, as the Court said in Mosallem, the fact that a document has been marked as confidential is of little moment with respect to whether it meets the good cause standard. In that case, the Court applied the good cause standard, and it is, notwithstanding the existence of a protective order, the defendants‘ burden to have requested information kept out of the public record. To persuade the Court that it met its burden, it must do so by presenting, if it is not apparent from the face of the document itself, evidence of that good cause, which it has not done. It is certainly not apparent from the face of the document that facts and figures of this general Gloria Ann Brandon, Sr. Court Reporter 16 of 24 17 Proceedings type of nature from ten years ago meet the good cause standard of being commercially sensitive, so frankly, we have not been able to find, as I indicated earlier, a single precedent of a Court treating this type of historical information, you know, as sufficient to meet the good cause standard under New York law. When we entered into the protective order, counsel certainly was not unfamiliar with the fact that to the extent that there is information that is pertinent to the public proceeding, it's going to be the good cause standard under New York law that applies. They were not somehow duped into, you know, some misunderstanding as to the fact that information that is exchanged that has been marked as confidential may some day, to the extent it is relevant to a proceeding, become public. My client was aware of that, and we understand that. We have produced information that we have requested be maintained confidential pursuant to the protective order. We understand that will, ultimately, only be the case to the extent that Macquarie finds it relevant if we can meet the good cause standard. That's how this process has continued to work, given the presumption that when we Gloria Ann Brandon, Sr. Court Reporter 17 of 24 Proceedings have open Court proceedings, that unless there is a compelling reason why information should not be public, that it is public. We think they simply have not met the burden here. With respect to the individual who is mentioned, his role in this transaction is already a matter of public record. THE COURT: But, what's the problem with redacting his name? You can understand someone running a business could be sensitive about their name being associated with fraud. MR. PICKHARDT: Absolutely, your Honor, and frankly, he should be concerned about that, and we don't disagree that it would be his honestly held desire that this information not be public, and if the Court instructs us to redact just his name from those paragraphs, it is not going to do severe, create severe problems with respect to the presentation of the case, so this is not a big deal. I will say that, that also doesn't meet any of the established standards for good cause. What is being alleged here is literally quoting from e-mails that he sent. That's what's being described In fact, I don't say this individual engaged in Gloria Ann Brandon, Sr. Court Reporter 18 of 24 19 Proceedings fraud. All we are doing is quoting from e-mails that he sent at the time, so we don't think there's some salacious accusations that are somehow unfairly, you know, being presented against him, but if the Court out of sensitivity to this particular former employee is concerned about him being connected to what is very flagrant conduct by the Defendant that is at issue here, again, it's not going to create a huge problem for us to redact just his name. THE COURT: Okay, thank you. MR. KIRSCH: May I be heard briefly, your Honor? THE COURT: Very briefly. I gave your adversary the last word. MR. KIRSCH: Thank you. All I'm going to say, for us it's just a matter of fairness to revisit this at the end of the fact discovery in four months. Thank you. THE COURT: Why don't you address that last point about counsel's alternative position, you know, what's the harm four months from now for the Court to revisit the issue? MR. PICKHARDT: Well, your Honor, the burden is not on us to allege what the harm is. What Gloria Ann Brandon, Sr. Court Reporter 19 of 24 20 Proceedings counsel is trying to do is, frankly, shift the burden here. THE COURT: Well, no. Counsel is trying, at least from what I hear him saying, there will be a fuller picture developed, and at that point the issue can be addressed. MR. PICKHARDT: Your Honor, we believe that this case, which concerns fraudulent conduct by the Defendant, these are claims for fraud and negligent misrepresentation that have already been upheld, are a matter of public relevance and concern. That's what the Mosallem case held, as well. That was a case that concerned kickbacks by a corporation. The Court said notwithstanding those kickbacks happened ten years, that's a matter of public concern. We think the case addresses those same public interests. They will also implicate those cases today, and in four months, we think in the interim we are going to have a briefing on a motion to dismiss. We may have argument on a motion to dismiss, so this is an active and continuing issue, and we don't think that they have met the standards to argue that these things should be under seal, and if they don't meet the good cause standard because they have some public relevance, then they have public relevance and should Gloria Ann Brandon, Sr. Court Reporter 20 of 24 21 Proceedings not be subject to a sealing order. Whether that sealing order be temporary or -- THE COURT: I'm going to reserve decision. MISS HOROWITZ: Lisa Horowitz. Your Honor, can I be heard for the non-party witness? THE COURT: Go ahead. MISS HOROWITZ: We just want to say that he is not now, nor has he ever been a party. He left Macquarie's employ over five years ago and set up his own small investment firm. He has worked very hard to establish that firm in a very competitive industry where reputation is very important. He is right now in a very sensitive point in that business with three deals. In this age of digital media searchs and sounds bytes taken out of context, although I maintain that, unequivocally, there was no wrongdoing on his part, this could get blown up into a story that would cause catastrophic economic damage to his business. He might not be able to recover, and his employees who have no connection to these parties, or transaction, or anything would be very badly damaged in the process, so you know, they refer to him in paragraph 62 of the complaint as Macquarie's lead manager on the project. I think that specificity, Gloria Ann Brandon, Sr. Court Reporter 21 of 24 22 Proceedings without actually having to name him by name, it doesn't impede them in pursuing their claims at all to do that. I think as a nonparty witness may be the good cause standard is not really the one to -- it's for more of a privacy standard. I ask that the Court, please -- THE COURT: Counsel, do you want to respond to that? MR. PICKHARDT: Sure, your Honor. To the extent there is a privacy standard, I think counsel is correct that when you are talking about individuals, the Courts only look to the privacy standard. THE COURT: Is not just an individual; a non-party. MR. PICKHARDT: And the non—parties. This is similar to the Bank of America case, but what the Courts have held is that information, not just the identity of the individual, it's bank account numbers, envelope numbers, that sort of private health information, that sort of information is what Courts have historically considered to be within the scope of what can be protected as a privacy interest for an individual. Gloria Ann Brandon, Sr. Court Reporter 22 of 24 23 Proceedings I think here we're talking about statements that were made in e-mails ten years ago, two statements. THE COURT: We're not talking about statements. We're talking about the standard to redact the name MR. PICKHARDT: No. Correct, your Honor, but I'm saying as far as what's attributed to this individual, (A) his role, (B) it's statements that he made, that's not the sort of information for which Courts have historically, in New York, have said there's a privacy interest in that individual that can be concealed, or sealed, that they were the individual who made those statements that are contained in document. So, again, your Honor, I don't want to sort of belabor this that individual because we have relevant player e-mails that we point; our intent here is not to drag through the mud for some reason some interest in doing so. He is a here. He was the author of some think are, ultimately, going to be very relevant and important for the Court. That's why, you know, the allegations are in there, so I don't think the we're -— if the standard has been met, but you know, Court was to order that his name be Gloria Ann Brandon, Sr. Court Reporter 23 of 24 24 Proceedings redacted, as I said earlier, we don't think there's some grand problem to the administration of the case that would ensue. THE COURT: Okay, thank you. I'll reserve decision. We're on for compliance, as well. Is there anything that needs to be discussed about that? Off the record. (Whereupon, a discussion was held off the record.) THE COURT: Counsel, I want a copy of the motion. Plaintiff, it's your motion, so please, order the motion. '!::\r1lr'k'k':':":l':|r'.|\' Certified to be a true and accurate transcription of the minutes taken in the above-captioned matter. S1,}-..-f....»* I Gloria/Ann Brandon, Senior Court Reporter Gloria Ann Brandon, Sr. Court Reporter 24 of 24
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