EcoVest Asks to File Documents Under Seal in Easement Case

UNITED STATES,
Plaintiff,
v.
NANCY ZAK, et al.,
Defendants.

IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION

THE ECOVEST PARTIES' MOTION FOR LEAVE
TO FILE UNDER SEAL AND BRIEF IN SUPPORT

Pursuant to Federal Rule of Civil Procedure 26(c) and this Court's Procedures for Electronic Filing Under Seal in Civil Cases, EcoVest Capital, Inc., Alan Solon, Ralph Teal, and Robert McCullough (collectively, “the EcoVest Parties”), respectfully move the Court for leave to file under seal Exhibits 96-612 to the Declaration of Amee Frodle in Support of the EcoVest Parties' Response in Opposition to Plaintiff's Motion for Partial Summary Judgment. (ECF No. 365). The EcoVest Parties are not requesting to file any portion of their opposition brief itself under seal.

Plaintiff, by moving for summary judgment on its fraud allegations, has required the EcoVest Parties to put at issue their core proprietary transactional documents for 70 investment offerings (the “EcoVest Offerings”),¹ which contain confidential and proprietary documents created over nearly a decade of business. Taken together, these documents constitute a significant portion of EcoVest's business and are relevant to the EcoVest Parties' defense against the claims set forth in Plaintiff's Motion. Thus, the EcoVest Parties respectfully request to file under seal certain specific documents used in their business and filed in support of their opposition to Plaintiff's Motion: the Confidential Private Placement Memoranda, Final Appraisals, appraisal reviews, appraisal review letters, tax opinions, market studies, and third-party due diligence reports for each of the 70 investment offerings.

The EcoVest Parties' sealing request is narrowly tailored, and no less-restrictive means are available to protect the information at issue. For their opposition to Plaintiff's Motion, the EcoVest Parties have publicly filed in their entirety: (1) their Brief in Opposition to Plaintiff's Motion for Partial Summary Judgment; (2) 4 declarations in support of the Brief in Opposition; (3) 32 deposition transcripts; and (4) 68 other relevant documents produced in this litigation and attached in support of their Opposition Brief. Critically, the EcoVest Parties have also publicly filed Summary Exhibits 88-95, which outline the relevant portions of each of the exhibits the EcoVest Parties seek to file under seal. As a result, the public would receive little added benefit from accessing the information contained within the exhibits the EcoVest Parties seek to seal, and would gain little additional insight into the judicial process.

Thus, the EcoVest Parties' request strikes the appropriate balance between protecting its business interest, by protecting proprietary information, while also ensuring that the important public-access requirement imposed by this Court is protected.

I. Proposed Documents to Be Sealed.

The EcoVest Parties seek leave to file under seal the following categories of documents:

1. Exhibits 166-234 consist of the Confidential Private Placement Memoranda (“PPMs”) for the EcoVest Offerings. These documents were provided only to FINRA-licensed broker dealers, FINRA-licensed financial advisors, and certain accredited investors. See Declaration of Robert McCullough in Support of EcoVest Parties' Opposition to Plaintiff's Motion for Summary Judgment, dated March 10, 2022 (“McCullough Decl.”) ¶¶ 11-17. The PPMs for the EcoVest Offerings were marked “Confidential” and included a “Notice to Investors” that the “PPM and any other information or documents delivered in connection with this PPM are being furnished on a confidential basis solely for use by 'accredited investors,' as defined in Rule 501 of Regulation D as promulgated under the Securities Act, in considering whether to purchase Units in the Offering.” See, e.g., Frodle Decl., Ex. 209, Arcadian Quay PPM, ECOVEST-DOJ_0072627 at 637. The Notice also provided that:

By accepting delivery of this PPM and related documents and information you acknowledge and agree that (a) all of the information contained in this PPM and any related documents and information is confidential and proprietary to the Company, (b) you will not reproduce this PPM or any related documents or information, in whole or in part, (c) you will not circulate this PPM or any related documents or information to another party without the Company's prior written consent, (d) if you do not wish to participate in the Offering, you will return this PPM to the Company or destroy this PPM as soon as practicable, together with any other material relating to the Company that you may have received, and (e) you will obtain the Company's prior written consent before taking any proposed actions that are inconsistent in any manner with the foregoing statements.

Id. Further, the PPMs for each offering also included exhibits, such as offering agreements, development agreements, subscription packages, tax opinions, and other proprietary transaction documents, which were protected by the PPMs' confidentiality provisions. Additionally, broker dealers and financial advisors were required to sign confidentiality agreements before receiving the Confidential PPMs and other proprietary transactional documents.See, e.g., Frodle Decl., Ex. 623, RAIT Financial Trust, ECOVEST-DOJ_1205190; Frodle Decl., Ex. 624, Arkadios Confidentiality Agreement, ARKADIOS_001295.

2. Exhibits 96-165 are the Final Appraisals for each of the EcoVest Offerings. The Final Appraisals were only provided to potential accredited investors upon their request after a separate, non-disclosure Confidentiality Agreement was executed. See, e.g., Frodle Decl., Ex. 625, Investor Confidentiality Agreement, ECOVEST-DOJ_0636445. These agreements provided as follows:

In connection with such Offerings, EVC, its affiliates and other third parties (including, but not limited to, Triloma Securities, LLC, the dealer manager for the Offerings) and the Manager and the Company for each Offering, possess, own, and/or maintain certain Confidential Information. As used in this Agreement, the term “Confidential Information” means any and all confidential, trade secret or proprietary information pertaining to EVC, its affiliates, the Companies or any Offering, whether in oral, visual or written form, including, but not limited to, private placement memoranda, development proformas, draft baseline documents, real property information, tax opinions, surveys, qualified appraisals, and other know-how, techniques, processes, data, materials, products, technology, computer programs, specifications, business plans, marketing plans, financial information, the identity of any third-party vendor related to any Offering, and any other information designated and treated by EVC as confidential.

See id. at 445.

3. In addition, each appraisal contained a notice of “Limited Publication, Distribution, and Use,” which provided, in relevant part, that “[p]ossession of this report or any copy thereof does not carry with it the right of publication.” See, e.g., Frodle Decl., Ex. 96, Dumpling Mountain Final Appraisal, ECOVEST-DOJ_0333900 at 907.

4. Exhibits 304-371 are appraisal reviews prepared by an independent appraiser that summarize and analyze the contents of the Final Appraisals. These appraisal reviews are internal documents for use by EcoVest's staff, EcoVest's legal counsel, and independent due diligence firms.

5. Exhibits 235-303 and 372-439 are tax opinions and appraisal review letters, respectively, furnished by legal counsel. These documents contain legal advice EcoVest received over the course of nearly a decade of operations. The tax opinions were attached to the Confidential PPMs and are covered by the confidentiality provisions contained in those documents. The appraisal review letters issued by counsel are internal transactional documents obtained as part of EcoVest's extensive diligence process.

6. Exhibits 440-494 are market analysis reports prepared by EcoVest's third party consultants for EcoVest's use in preparing its investment offerings.

7. Exhibits 495-612 are independent due diligence reports prepared by third parties, the Bowman Law Firm (“Bowman”), Mick Law P.C. (“Mick”), and Fact Right, LLC (“Fact Right”). The Bowman and Fact Right reports, in particular, explicitly note the confidential nature of the documents. See Frodle Decl., Ex. 495, Dumpling Mountain Bowman Report, ECOVEST-DOJ_0333468 (marked “For Your Information — Do Not Distribute”); Ex. 527, Azalea Bay FactRight Report, ECOVEST-DOJ_0500849 (marked “Confidential — Attorney Client Privileged”). The Mick reports note that they contain “Attorney-Client Privileged Information” for which third-party FINRA-regulated broker-dealers hold the privilege. See, e.g., Frodle Decl., Ex. 600, Neuse Harbor Mick Law Report, KALOS_408951.

II. Legal Standard

While the Eleventh Circuit has long recognized a “common law right of

access” grounded in the notion that “operations of the courts and the judicial conduct of judges are matters of utmost public concern,” see Chicago Tribune Co. v. Bridgestone/Firestone, Inc., 263 F.3d 1304, 1311 (11th Cir. 2001), this “common law right of access” is not absolute and “may be overcome by a showing of good cause,” Romero v. Drummond Co., 480 F.3d 1234, 1246 (11th Cir. 2007). In determining whether good cause to seal materials exists, courts balance the party's privacy or proprietary interests in the information to be sealed with the public's interest in accessing the information. See id.

III. Argument

There is good cause to seal the exhibits at issue here because these documents contain confidential and commercially sensitive information regarding EcoVest's business strategies, including information about the processes and procedures EcoVest implemented when developing its investment offerings. See GEO Specialty Chemicals, Inc. v. Kakavand, No. 1:16-CV-2629-WSD, 2016 WL 4447435, at *1 (N.D. Ga. Aug. 24, 2016) (granting plaintiff's motion to file under seal documents showing specific product compositions and other market sensitive information) (citing Romero, 1245); Reid v. Viacom Int'l, Inc., 2016 WL 4157208, at *5 (N.D. Ga. 2016) (granting motion to seal confidential business agreements). This is particularly true when the hundreds of documents at issue are taken together. Insight into these business decisions would be of great value to competitors, who might seek to use this information to their advantage by modeling their own product offerings and internal procedures after EcoVest's. The documents also contain advice of legal counsel on various issues spanning almost a decade of EcoVest's operation. See Souffrant v. Toyota Motor Sales, U.S.A., Inc., No. 17-23357-CIV, 2017 WL 5494988, at *4-5 (S.D. Fla. Nov. 16, 2017) (sealing exhibit containing advice of counsel and concluding that there was no compelling interest in public access to the exhibit).

Further, EcoVest does not publicly disclose this information. To the contrary, EcoVest limits access to this information outside of the company to FINRA registered broker-dealers, FINRA-licensed financial advisors and accredited investors eligible to invest in EcoVest's offerings, see McCullough Decl. ¶¶ 11-17, as well as to the Internal Revenue Service on a strictly confidential basis.² Third parties, including financial advisors and broker dealers, who received these documents were required to sign nondisclosure agreements. See, e.g., Frodle Decl., Ex. 623; Frodle Decl., Ex. 624. And, as described above in detail, many of these documents, including the PPMs, Final Appraisals, and independent due diligence reports were marked “confidential.”

The EcoVest Parties have publicly filed on the record in this litigation exemplars of some of the categories of documents at issue here. When taken as a whole, however, the core transactional documents across all of the EcoVest Offerings reveal the proprietary transactional structure of EcoVest's offerings and provide valuable insight into EcoVest's business operations.

In comparison to the harm to EcoVest, the public's interest in accessing the underlying proprietary documents is low given that the EcoVest Parties have publicly filed their opposition brief, dozens of other exhibits, and eight summary exhibits outlining the relevant sections of each document they wish to seal, and in light of the fact that exemplary versions of these documents have already been filed on the public docket. Importantly, the summary exhibits being publicly filed provide context and support for the EcoVest Parties' contentions, without revealing EcoVest's proprietary transaction structure.Thus, the EcoVest Parties' Motion to Seal strikes the appropriate balance between the public's right of access and against the EcoVest Party's interest in keeping the information confidential. See Romero, 480 F.3d at 1246.

Dated: March 16, 2022

Respectfully submitted,

Sean Akins
Benjamin J. Razi (admitted pro hac vice)
Sean Akins (admitted pro hac vice)
Marianna Jackson (admitted pro hac vice)
Matthew V. Miller (admitted pro hac vice)
Nicholas Pastan (admitted pro hac vice)
Kandyce Korotky (admitted pro hac vice)
Amee Frodle (admitted pro hac vice)
John Zipp (admitted pro hac vice)
Wesline N. Manuelpillai (admitted pro hac vice)
COVINGTON & BURLING LLP
850 Tenth St. NW
Washington, DC 20001
Tel.: (202) 662-6000
Fax: (202) 662-6291
Email: brazi@cov.com

Thomas T. Tate
Georgia Bar No. 698879
Elizabeth L. Clack-Freeman
Georgia Bar No. 126888
ANDERSEN, TATE, & CARR, P.C.
One Sugarloaf Centre
1960 Satellite Blvd., Suite 4000
Duluth, Georgia 30097
Tel: (770) 822-0900
Fax: (770) 822-9680
Email: ttate@atclawfirm.com

Attorneys for Defendants EcoVest Capital, Inc., Alan N. Solon, Robert M. McCullough, and Ralph R. Teal, Jr.

*I certify that this pleading has been prepared with one of the font and point selections approved by the Court in LR 5.1C. 

[PROPOSED] ORDER

Before the Court is the EcoVest Parties' request to file under seal pursuant to Federal Rule of Civil Procedure 26(c), Exhibits 96-612 to the Declaration of Amee Frodle in Support of the EcoVest Parties' Opposition to Plaintiff's Motion for Partial Summary Judgement (ECF No. 365).

The Court, having considered the Motion, and good cause having been shown, now finds that the Motion should be GRANTED.

IT IS HEREBY ORDERED that the Clerk of Court is to file the above-referenced Exhibits under seal.

IT IS SO ORDERED this _____ day of __________ 2022.

Hon. Amy Totenberg
Senior United States District Judge