ESPN argues in support of ACC's motion to seal

ESPN filed a memorandum with the North Carolina Superior Court on Thursday “in support of the Atlantic Coast Conference (“ACC”) motion to keep ESPN’s agreements under seal, agreements ESPN calls “highly confidential, competitively sensitive trade secrets.”

ESPN’s legal counsel, James P. McLaughlin Jr., of MOORE & VAN ALLEN argues that ESPN “competes vigorously with other sports networks for those media rights, and the terms of ESPN’s agreements are carefully negotiated and closely safeguarded. The terms of ESPN’s agreements are textbook trade secrets.”

ESPN argues that “Publicly disclosing the terms of an ESPN agreement with a prominent rightsholder would be destabilizing and harmful: competing networks would gain a leg up on ESPN in the next round of negotiations with rightsholders, and all other rightsholders negotiating with ESPN would capitalize on the knowledge of what specific terms ESPN has agreed to with—or has not required from—others.

“The broadcasting network asks that the court not let the dispute between the ACC and the Florida State University Board of Trustees compromise those trade secrets and highly sensitive commercial information contained in the agreements.”

Citing precedents, ESPN’s makes the case that “The right to a free and open judiciary is balanced by the essential assurance that a court’s public files not become “sources of business information that harm a litigant’s competitive standing” and that “Special consideration should be given to the privacy interests of non-parties.”

In the memorandum (see below), McLaughlin makes ESPN’s case that FSU’s arguments in opposition to the amended motion to seal the records are unavailing because, he argues, the agreements are not public record in Florida or North Carolina and because “there is no reasonable alternative to sealing.”

ESPN’s legal counsel goes so far as to say under Florida law, (Fla. Stat § 815.045 (2007)) “trade secret information is ‘expressly made confidential and exempt from the public records law because it is a felony to disclose such records.”

“Whether FSU and its lawyers have committed a felony by knowingly disclosing ESPN’s trade secrets is a question for another day,” McLaughlin writes, “but, relevant here, there is no question that trade secrets are carefully guarded throughout the United States, including in Florida. The definition of a trade secret under Florida law is substantially similar to that of North Carolina (and California) law, and the terms of ESPN’s agreements plainly qualify.”

To ensure those protections are maintained, ESPN asks the Court to grant the ACC’s Amended Motion to Seal.

BACKGROUND

The ACC’s Initial Complaint (ECF No. 2) and Amended Complaint (ECF. No. 11) each refer to agreements in which the ACC licenses to ESPN the

right to broadcast live ACC college games. Specifically, the ACC attached to its pleadings a 2012 Amendment to the 2010 Multimedia Agreement granting ESPN the right to broadcast ACC games (Amended Complaint, Ex. 3); a 2016 Restated and Amended Multimedia Agreement (Ex. 5); and a 2016 Network Agreement between ESPN and the ACC about the ACC Network (Ex. 6) (together, the

“Agreements”). Those Agreements enable ESPN to bring ACC game broadcasts and the ACC Network to millions of households in the United States through cable, satellite and digital distribution.

As explained in the accompanying declaration of Nick Dawson, the Senior Vice President of Programming & Acquisitions at ESPN, the Agreements contain ESPN’s most confidential and highly sensitive business information and trade secrets. The Agreements contain sensitive financial terms setting the amount of rights fees and royalties that ESPN will pay, as well as sensitive non-financial

terms about the parties’ future rights and obligations. (Dawson Decl. ¶¶ 6-7.)

ESPN’s ability to negotiate favorable terms with television content providers depends in significant part on ESPN’s ability to maintain the secrecy of the terms of its various media rights agreements, including those between ESPN and the ACC. (Id. ¶¶ 8-9.) Likewise, ESPN’s ability to compete with other television networks for content rights depends in significant part on ESPN’s ability to maintain the secrecy of its various media rights agreements, including those at issue here. (Id. ¶¶ 12-13.) And ESPN’s competitive position in the marketplace is essential to ESPN’s overall financial success. (Id. ¶¶ 10, 14.) To safeguard the sensitive information contained in its media rights agreements, ESPN takes numerous precautions. ESPN closely guards copies of the agreements in its possession and includes confidentiality terms in the agreements themselves that prevent rightsholders—including the ACC and member schools like FSU—from publicly disclosing them. (Id. ¶ 15.) ESPN also monitors litigations around the country that might implicate the agreements and intervenes to secure heightened protections for their terms. See In re NCAA Grant-in-Aid Cap Antitrust 1 A true and accurate copy of Nick Dawson’s declaration has been attached hereto as Exhibit A (“Dawson Decl.”). Litig., 4:14-md-2541 (N.D. Cal.), Dkt. No. 512 (holding that ESPN’s agreements were to be treated as “strictly confidential – outside litigation counsel only”).

The ACC has moved to seal all portions of the Initial Complaint and Amended Complaint that quote, characterize or summarize the agreements, as well as the Agreements themselves. That includes portions of a complaint filed by FSU in Florida state court that the ACC attached to its pleading and that also quotes and describes certain of the Agreements. (Am. Compl. Ex. 16.) ESPN submits this memorandum in support of the ACC’s motion to keep these highly confidential, competitively sensitive trade secrets under seal.

ARGUMENT

I. THE AGREEMENTS SHOULD BE SEALED BECAUSE THEY CONTAIN HIGHLY CONFIDENTIAL, COMMERCIALLY

SENSITIVE TRADE SECRETS.

“[T]he right to inspect and copy judicial records is not absolute ... courts have refused to permit their files to serve ... as sources of business information that might harm a litigant’s competitive standing”. Nixon, 435 U.S. at 598; see also Doe v. Doe, 823 S.E.2d 583, 598 (N.C. Ct. App. 2018). “A corporation may possess a strong interest in preserving the confidentiality of its proprietary and trade-secret information, which in turn may justify partial sealing of court records.” Doe, 823 S.E.2d at 598. Thus, “a trial court may, in the proper circumstances, shield portions of court proceedings and records from the public”. Virmani v. Presbyterian Health Servs. Corp., 350 N.C. 449, 463 (N.C. 1999). In particular, “[i]nformation that is a trade secret or other confidential research, development, or commercial information can be sealed by the Court upon motion by the parties, in the interest of protecting the public interest in protecting confidential and proprietary business information”. Taylor v. Fernandes, 2018 NCBC LEXIS 4, at *5-6 (N.C. Super. Ct. Jan. 18, 2018) (unpublished) (internal quotations omitted); see also Golden Triangle #3, LLC, 2021 NCBC LEXIS 118, at *10 (collecting cases) (recognizing that “[i]nternal business operations and strategies are included within the categories that North Carolina courts have treated as confidential and proprietary trade secrets warranting protection”).

Courts should exercise this discretionary power “when its use is required in the interest of the proper and fair administration of justice or where, for reasons of public policy, the openness ordinarily required of our government will be more harmful than beneficial”. Virmani, 350 N.C. at 463. As this Court recently made clear in Golden Triangle #3, LLC v. RMPMallard Pointe, LLC, those confidentiality concerns are heightened when they implicate the interests of non-parties, and, as a result, “special consideration should be given to the privacy interests of non-parties”. 2021 NCBC LEXIS 118, *8 (citing Eshelman v. Puma Biotechnology, Inc., 2018 U.S. Dist. LEXIS 1459, at *2 (E.D.N.C. Jan. 4, 2018); Robinson v. Bowser, 2013 U.S. Dist. LEXIS 101194, at *12-13 (M.D.N.C. July 19, 2013)).

Those same critical practices are followed in the federal courts of this state2 and also by the state of Florida.3 North Carolina law specifically recognizes the importance of protecting trade secrets from public disclosure: A trade secret consists of business or technical information,

including but not limited to a formula, pattern, program, device, compilation of information, method, technique, or process that: Derives independent actual or potential commercial value from not being generally known or readily ascertainable through independent development or reverse engineering by persons who can obtain economic value from its disclosure or use; and [i]s the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Krawiec v. Manly, 811 S.E.2d 542, 547 (N.C. 2018) (citing N.C. Gen. Stat. § 66-152(3) (2017)).

Here, the Agreements are filled with trade secrets and information that is highly confidential and commercially sensitive. The Agreements contain competitively sensitive financial terms, such as rights fees provisions and royalty provisions, as well as non-public, non-financial terms such as future rights provisions, termination provisions and distribution obligations.

2 See, e.g., 360 Mortg. Grp., LLC v. Stonegate Mortg. Corp., No. 5:14-CV-00310-F, 2016 U.S. Dist. LEXIS 68694, at *14 (E.D.N.C. May 25, 2016) (“Generally speaking, the need to keep proprietary business information confidential is often a sufficiently compelling justification for sealing judicial documents”); In re Application of P.T.C. Prod. & Trading Co., 2020 U.S. Dist. LEXIS 234509, at *4 (W.D.N.C. Dec. 10, 2020) (“Confidential financial and business information may be appropriately sealed”); ATI Indus. Automation, Inc. v. Applied Robotics, Inc., 801 F. Supp. 2d 419, 428 (M.D.N.C. 2011) (granting motion to seal in order to protect trade secrets); Silicon Knights, Inc. v. Epic Games, 2011 U.S. Dist. LEXIS 147633, at *60 (E.D.N.C. Mar. 15, 2011) (unpublished) (granting parties’ motions to seal documents or portions thereof containing alleged trade secrets).

3 See Fla. Stat. § 119.0715(2) (2023) (“A trade secret . . . is confidential and exempt from s. 119.07(1) and s. 24(a), Art. I of the State Constitution”); see also Coventry First v. State of Florida, 30 So. 3d 552, 561 (Fla. Dist. Ct. App. 2010) (citing Fla. Stat. § 815.045 (2007) (“Under Florida law, trade secret information is ‘expressly made confidential and exempt from the public records law because it is a felony to disclose such records’”).

There is no question that ESPN “derives independent actual or potential commercial value from [these Agreements] not being generally known or readily ascertainable” by persons who would “obtain economic value from [their] disclosure”. Id. One of ESPN’s fundamental business functions is to negotiate media agreements with athletic conferences and other producers of athletic performances on as favorable terms as possible. Due to the individualized and competitive nature of that negotiation process, the contracts ESPN enters into with different parties vary, as do the negotiation processes themselves. Making the Agreements between ESPN and the ACC public would erode ESPN’s ability to negotiate. Thus, the contents of the Agreements are closely-guarded trade secrets and considered to be among ESPN’s most confidential and highly sensitive business information. See, e.g., GE Betz, Inc.

v. Conrad, 752 S.E.2d 634, 649 (2013) (“pricing information, customer proposals, historical costs, and sales data” constituted trade secrets); XPO Logistics, Inc. v. Anis, 2016 NCBC 52, at *51 (N.C. Super. Ct. July 12, 2016) (unpublished) (“business and financial information” including information on business strategy, pricing and competitive offerings constituted trade secrets). Other courts confronting the question of confidentiality for these same agreements (and others like them) have required strict protections against public disclosure. For example, In re NCAA Grant-in-Aid Cap Antitrust Litigation, the court recognized “valid trade secret and confidentiality concerns asserted by the Big 10 and the other conferences and by their network partners” and, as a result, ordered protections for sensitive information in ESPN broadcast

license agreements. (4:14-md-2541, Dkt. No. 490 at Tr. 49:2-10 (N.D. Cal.).) Similarly, in In re NCAA Student-Athlete Name & Likeness Licensing Litigation, the court declined to order the production of men’s basketball and football licensing agreements, including ACC agreements, in response to requests that “call[ed] for highly confidential commercial information from the nonparties and [we]re not tailored to minimize the potential prejudice that the nonparties could suffer by releasing such information”. (11-MC-63, Dkt. No. 16 at p. 12 (N.D. Cal.).) ESPN’s competitors have articulated the same view about their own agreements. In those other litigations, ESPN competitors including CBS and Fox

have taken unequivocal positions—and submitted sworn declarations attesting— that their broadcasting agreements are highly confidential, commercially sensitive trade secrets, and that their disclosure would irreparably threaten their business interests. See In re NCAA Grant-in-Aid Cap Antitrust Litigation, 4:14-md-2541 (N.D. Cal.), Dkt. No. 410 (CBS Broadcasting, Inc.) (provided here as Exhibit B); Dkt. No. 423 (Fox Networks (Exhibit C). The industry recognizes how important and safely guarded this information is.

Courts in North Carolina routinely seal trade secret information, and even seal competitively sensitive or personal information that does not rise to the level of trade secrets. See e.g., SciGrip, Inc. v. Osae, 2018 NCBC LEXIS 10, at *44 (unpublished) (granting motion to seal “confidential commercial information” notwithstanding that the Court “did not reach the issue of which information, if any, qualifies for trade secret protection”); Karriker v. Harpoon Holdings, L.P., 2023 NCBC LEXIS 124, at *2 (N.C. Super. Ct. Oct. 6, 2023) (unpublished) (granting motion to seal confidential business information); Anderson v. Lab. Corp. of Am. Holdings, 2023 U.S. Dist. LEXIS 23532, at *64 (“the motion to seal, as it relates to LabCorp’s confidential and sensitive business information, is granted”); SMD Software, Inc. v. EMove, Inc., 2013 U.S. Dist. LEXIS 35970, at *2 (E.D.N.C. Mar. 15, 2013) (granting motion to seal “confidential and proprietary information which could be harmful to plaintiffs if revealed to the marketplace”).

II. FSU’S ARGUMENTS IN OPPOSITION TO THE AMENDED MOTION TO SEAL ARE UNAVAILING

FSU’s arguments in opposition to the Amended Motion to Seal do not change the analysis. The Agreements are not public records under Florida or North Carolina law, and there is no reasonable alternative to sealing.

a. The Agreements Are Not Public Records Under Florida Law

FSU has claimed that the Agreements need not remain confidential— despite its contractual obligations otherwise—on the theory that the Agreements have become public records under Florida law.4 They have not, for the reasons the ACC has explained.5 Moreover, FSU’s argument rings hollow. For more than a decade, FSU never disclosed the Agreements nor maintained that they were public records; apparently, not until its commercial dispute with the ACC did FSU contend that it had an obligation to make the Agreements public.

4 FSU argues, out of one side of its mouth, that “the terms of the ESPN Agreements belong in the first instance to the members”, see Opp’n at 2, but, out of the other side of its mouth, that members are not bound to the confidentiality restrictions therein. Id. at 5. In addition to that intractable contradiction in position, FSU also ignores its own express confidentiality obligations under the Agreements as a Conference Institution. (See Media Rights Agreement ¶ 25.11; Network Agreement ¶ 18.11.)

5 The ACC is not an "agency" within the meaning of the Florida Statute. Fla Stat. § 119.011(2). Nor does the ACC act as FSU's agent. See News & Sun-Sentinel Co. v. Schwab, Twitty & Hanser Architectural Group, Inc., 596 So. 2d 1029 (Fla. 1992). Nor does the fact that a public entity is a member of a private entity—in this case, a private entity with its own existence separate from its members—convert a private entity into a public agency. See S. Env’t Law Ctr. v. The N. Carolina

But even setting aside all other factors, Florida law expressly exempts trade secrets from disclosure, according to the very same statutes trumpeted by FSU: “A trade secret held by an agency is confidential and exempt from s. 119.07(1) and s. 24(a), Art. I of the State Constitution.” Fla. Stat. § 119.0715(2) (2023). Indeed, in Florida, “[t]he Legislature f[ound] that it is a public necessity that trade secret information . . . be expressly made confidential and exempt from the public records law because it is a felony to disclose such records”. Fla. Stat. § 815.045 (2023). Whether FSU and its lawyers have committed a felony by knowingly disclosing ESPN’s trade secrets is a question for another day, but, relevant here, there is no question that trade secrets are carefully guarded throughout the United States, including in Florida. The definition of a trade secret under Florida law is substantially similar to that of North Carolina (and California) law, and the terms of ESPN’s agreements plainly qualify. See, e.g., TB Food U.S., LLC v. Am. Mariculture Inc., 2:17-cv-9-FtM-29NPM, Doc. 456, at *35-36 (M.D. Fla. Nov. 17, 2021) (“Florida law defines a trade secret as information that: (a) derives independent economic value from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic R.R. Co., 378 N.C. 202 (2021). value from its disclosure or use; and (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”); In re NCAA Grant-in-Aid Cap Antitrust Litig., 4:14-md-2541, Dkt. No. 490 at Tr. 49:2-10 (N.D. Cal.) (finding threatened disclosure of network agreements raised “valid trade secret and confidentiality concerns”); In re NCAA Student-Athlete Name & Likeness Licensing Litig., 11-MC-63, Dkt. No. 16 (N.D. Cal.) (same).

b. The Agreements Are Not Public Records Under North Carolina Law

FSU has also claimed that the Agreements have become public records under North Carolina law. Not so, again, for the reasons the ACC has explained.6 But that aside, as FSU points out themselves, there also is a trade secret exemption to disclosure under North Carolina’s Public Records Act: Nothing in this Chapter shall be construed to require or authorize

a public agency or its subdivision to disclose any information that:

(1) Meets all of the following conditions:

(a) Constitutes a “trade secret” as defined in G.S. 66-152(3).

(b) Is the property of a private “person” as defined in G.S. 66-152(2).

(c) Is disclosed or furnished to the public agency in connection with the owner's performance of a public contract or in connection with a bid, application, proposal, industrial development project, or in compliance with laws, regulations, rules, or ordinances of the United States, the State, or political subdivisions of the State.

(d) Is designated or indicated as “confidential” or as a “trade secret” at the time of its initial disclosure to the public agency. N.C. Gen. Stat. § 132-1.2(1).

6 N.C. Gen. Stat. § 132-1.2A, applies only to documents that relate to the University of North Carolina’s “membership in or communications with” the ACC. The Agreements do not qualify.

The Agreements plainly qualify for this exception. First, the Agreements are trade secrets under North Carolina law. See supra Section I.

Second, the Agreements are the property of ESPN and the ACC, both indisputable “person[s]” as defined under the Trade Secrets Protection Act. See G.S. 66-152(2).

Third, the Agreements never have been furnished to North Carolina conference schools UNC and NCSU, and any disclosure of their terms were made in connection with “bid, applications, or proposals”.

Fourth, as FSU admits itself, when the ACC disclosed the Agreements to counsel for FSU, it indicated the Agreements were confidential. See Opp’n at 5. As such, the Agreements qualify for the trade secret exemption to disclosure under North Carolina’s Public Records Act. See State ex rel. Utils. Comm’n v. MCI Telecommunications Corp., 514 S.E.2d 276, 283 (N.C. Ct. App. 1999) (applying the trade secrets exemption to the Public Records Act) (“to provide public access to this information would provide competitors rather extensive insight into [] business plans and operations ... disclosure of such information would thwart the creativity and innovation that competition brings to the marketplace, and prohibit the competitive environment our legislature intended to create”); see also N.C. Electric Membership v. N.C., Econ. Comm., 425 S.E.2d 440, 446 (N.C. Ct. App. 1993). The two cases FSU cites purportedly disputing application of the trade secret exemption are inapposite. Neither trade secrets nor the Public Records Act were at issue in Appeal of Atlantic Coast Conference. See 112 N.C. App. 1, 7-8, 1213 (N.C. Ct. App. 1993). FSU quotes excerpts of the Court’s discussion—out of context—regarding why the ACC’s headquarters qualify as property “incident to the

operation of an educational institution” for purposes of a tax exemption. Id. at 8-9. That is plainly inapplicable to the instant case. FSU’s only other citation is equally unavailing. FSU cites Volume Services, Inc. v. Ovations Food Services, L.P. to quote two words without explanation: ”public contract[s]”. 2018 NCBC LEXIS 108, at *49 (N.C. Super. Ct. Oct. 17, 2018). This case, however, favors exemption. There, the Court denied a motion to dismiss a misappropriation of trade secrets claim, reasoning that the Defendant’s defense of disclosure under the Public Records Act was unpersuasive where the “information disclosed included detailed financial and operational reports, pricing policies, and sales data”, the disclosure of which harmed plaintiffs when a competitor used such information “to assist it in preparing a competing bid”. Id. at *100. That rationale favors application of the exemption for trade secrets here.

c. There Is No Reasonable Alternative to Sealing

ESPN respectfully submits that no alternative would adequately protect its commercially sensitive trade secrets. The North Carolina Business Courts have repeatedly sealed confidential, even non-trade secret, information See Karriker, 2023 NCBC LEXIS 124, at *2; SciGrip, 2018 NCBC LEXIS 10, at *44; Taylor, 2018 NCBC LEXIS 4, at *4-5. The presence of some non-confidential information in otherwise confidential materials does not preclude sealing. See, e.g., Vamsi Nallapati & IGM Surfaces, LLC v. Justh Holdings, LLC, 637 F. Supp. 3d 357, 366 (E.D.N.C. 2022) (concluding there was no “reasonable alternative to 14 sealing” both “sensitive business information that if disclosed would harm Defendants’ business interests” and other “non-confidential information”).

FSU cannot argue that sealing is unnecessary here because FSU has improperly disclosed their contents elsewhere. As shown in the complaint provided to this court at Exhibit 16 to the Amended Petition, FSU has used its litigation in Florida to publicly disclose confidential information from ESPN’s Agreements. But both the ACC and its member schools, including FSU, are prohibited by the terms of the Agreements from disclosing the confidential information they contain. (See Media Rights Agreement ¶ 25.11; Network Agreement ¶ 18.11.) Any improper disclosure by FSU in the Florida proceedings has no effect on the merits of the motion to seal the Agreements here. See, e.g., Chi. Lock Co. v. Fanberg, 676 F.2d 400, 404 (9th Cir. 1982) (“Trade secrets are protected, therefore, in a manner akin to private property . . . when they are disclosed or used through improper means”) (emphasis added); Mission Wellness Pharm. v. Caremark LLC, 641 F. Supp. 3d 673,

681 (D. Ariz. 2022) (“Trade secrets only lose their protected status when they are generally known or ascertainable by proper means”). A contrary finding would reward a disclosing party for its own improper disclosure of confidential information.

CONCLUSION

For the foregoing reasons, ESPN requests that the Court grant Plaintiff’s Amended Motion to Seal.

This is the 22nd day of February, 2024.

Respectfully Submitted,

/s/ James P. McLoughlin, Jr.

MOORE & VAN ALLEN

James P. McLoughlin, Jr.

William M. Butler

100 North Tryon Street, Suite 4700

Charlotte, NC 28202-4003

Tel: (704) 331-1000

jimmcloughlin@mvalaw.com

billbutler@mvalaw.com

CRAVATH, SWAINE & MOORE LLP

J. Wesley Earnhardt (Pro Hac Vice

Forthcoming)

David H. Korn (Pro Hac Vice Forthcoming)

Worldwide Plaza

825 Eighth Avenue

New York, NY 10019

Tel: (212) 474-1000

wearenhardt@cravath.com

dkorn@cravath.com

Counsel for ESPN, Inc.

CERTIFICATE OF COMPLIANCE

I hereby certify that the foregoing Memorandum of Law in Support of Motion to Intervene complies fully with the 7,500 word count applicable to briefs in support of motions pursuant to Rule 7.8 of the North Carolina Business Court Rules.

This is the 22nd day of February, 2024.

/s/ James P. McLoughlin, Jr