StoneX Group Inc. v. shipman

Background

StoneX brought this action against Howard Shipman, asserting claims under the Defend Trade Secrets Act and the Computer Fraud and Abuse Act, as well as claims involving trade-secret misappropriation, breach of fiduciary duty, and conversion. StoneX alleged that after his employment ended, Shipman accessed its servers without authorization and extracted data, including software connected with its electronic-market-making business.

StoneX filed its complaint and papers supporting a requested temporary restraining order under seal. Shipman later filed an answer, counterclaims, and supporting materials under seal. Those materials included an exhibit containing what Shipman described as a complete copy of certain StoneX source code. Shipman asserted that a StoneX employee who formerly worked for BTIG had illegally taken the code from BTIG.

BTIG, which the opinion describes as a competitor of StoneX, investigated whether former employees had taken its source code and related proprietary information before joining StoneX. BTIG’s forensic expert reportedly found dozens of instances in which portions of BTIG code appeared verbatim in StoneX’s systems. BTIG then sued StoneX in California state court.

BTIG’s motion

BTIG moved under Federal Rule of Civil Procedure 24(b) for permission to intervene. Permissive intervention allows a nonparty with a claim or defense sharing a legal or factual question with the existing case to participate for a limited purpose. BTIG did not seek to become a party to StoneX’s case or to litigate StoneX’s claims against Shipman. It sought access to unredacted versions of specified sealed filings, including the complaint, Shipman’s answer and counterclaims, declarations, and papers supporting StoneX’s temporary restraining-order request.

BTIG requested that the materials be provided only to its outside counsel. It argued that the documents might contain BTIG software code or evidence showing how BTIG’s code moved from StoneX’s systems. StoneX opposed the motion. Its arguments focused mainly on whether the documents should be unsealed, including claims that they contained confidential and proprietary business information and that BTIG was attempting to bypass discovery limits imposed in the California litigation. Shipman did not oppose intervention.

Court’s analysis

The court explained that permissive intervention is the proper procedure for a nonparty seeking to modify a protective or sealing order. The court also considered whether intervention would delay the case or prejudice StoneX or Shipman. It found no such delay or prejudice because the claims in the case had already been adjudicated, with only StoneX’s attorney-fee issue remaining. The limited intervention would not make BTIG a party to the case.

The court separately analyzed access to the sealed materials. It held that the complaint, Shipman’s answer, counterclaims, and supporting declaration were judicial documents—documents submitted to the court in connection with the case—and therefore were subject to a strong presumption of public access. The court found that StoneX had not shown that access would interfere with the court’s work. It also found that limiting access to BTIG’s outside counsel adequately protected StoneX’s asserted privacy and competitive interests.

The court noted uncertainty about whether papers supporting a temporary restraining-order motion that the court never decided qualify as judicial documents. StoneX withdrew that request after reaching a stipulation with Shipman. The court nevertheless concluded that BTIG had shown an extraordinary circumstance or compelling need sufficient to justify modifying the sealing orders. BTIG’s evidence that the requested materials could contain its allegedly misappropriated software code, together with its pending California litigation, supported limited access. The court also rejected StoneX’s argument that BTIG was seeking discovery barred by the California court, explaining that the California court had allowed discovery concerning the alleged misappropriation of BTIG’s information.

Ruling

The court granted BTIG’s motion to intervene for the limited purpose of accessing sealed documents. It ordered StoneX to provide BTIG’s outside counsel with unredacted copies of ECF Nos. 30, 31, 32, 33, 35, 35-2, 36, 37-1, 51, 56, 57, 57-1, 67, and 71. The order prohibited BTIG’s outside counsel from providing unredacted copies to BTIG or to any BTIG agent or principal. The Clerk of Court was directed to terminate the motion.