Publicly Filing Confidential Information Can Lead to Claim

Where limited partners had entered into agreements which, by their terms, contained information that was deemed confidential in nature, the limited partners arguably breached those agreements by disclosing the confidential information in their publicly-filed complaint.  Chi v. Northern Riverfront Marina and Hotel, LLC, 2022 NCBC 46 (J. Earp). As a result, Defendants’ breach of contract counterclaim would not be dismissed.

Plaintiffs each entered into a Partnership Agreement with Defendant Wilmington Riverfront Development, LLC (“WRD”) to form North Riverfront Marina and Hotel, LLC (“NRMH”).  Pursuant to the Partnership Agreement, WRD was the general partner in NRMH and each plaintiff, by signing a Subscription Agreement, became a limited partner in NRMH. Both the Subscription Agreement and an Offering Circular (attached to the Partnership Agreement) contained a provision noting that the terms of each were confidential in nature.  When the relationship soured, Plaintiffs filed their lawsuit and attached the Offering Circular as an exhibit and also listed various information from the Partnership Agreement in their publicly-filed complaint.  WRD and NRMH filed counterclaims, contending that Plaintiffs had breached their agreements by including the confidential information in their public filings. Plaintiffs moved to dismiss, contending their filing was protected by a “litigation privilege.”            

The Business Court disagreed.  Finding that no North Carolina case law exists to support the “litigation privilege” as asserted by Plaintiffs, the Business Court noted that Plaintiffs could have followed Business Court Rule 5 and filed the pleading under seal. (Opinion, ¶23). Moreover, Plaintiffs’ contention that WRD and NRMH had waived the breach by attaching some of the same confidential information to their counterclaim which Plaintiffs themselves had attached to their complaint was also rejected by the Business Court, as the Court determined that WRD and NRMH had only made the information public after Plaintiffs had. ( Id., ¶24).

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