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FILED

14 JAN 14 PM 4:21

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DEFENDANT SCOUT ANALYTICS, INC.S MOTION TO SEAL COMPLAINT Case No. 14-2-01133-4 SEA

The Honorable Catherine Shaffer KING COUNTY Noted for Consideration: January 17, 2014 SUPERIOR CLERK (Without Oral COURT Argument)

E-FILED CASE NUMBER: 14-2-01133-4 SEA

SUPERIOR COURT OF WASHINGTON FOR KING COUNTY BIONET SYSTEMS LLC, a Washington limited liability company, COLIN BRYAR, an individual, SARAH BRYER, an individual, HEATHER E. ERDMANN, an individual, J.B. CAPITAL LLC, a Washington limited liability company, ROBERT W. JOHNSON, an individual, STEVE MOORE, an individual, WILLARD B. SAMMS, an individual, SHARON M. SAMMS, an individual, No. 14-2-01133-4 SEA DEFENDANT SCOUT ANALYTICS, INC.S MOTION TO SEAL COMPLAINT TO PREVENT DISSEMINATION OF INFORMATION SUBJECT TO NON-DISCLOSURE AGREEMENT

SCOUT ANALYTICS, INC., a Washington corporation, MARK UPSON, an individual, JOHN CONNORS, an individual, ADAM LUDWIN, an individual, IGNITION MANAGING DIRECTORS FUND III, LLC, a Delaware limited liability company, IGNITION VENTURE PARTNERS III, LP, a Delaware limited partnership, RRE VENTURES IV, LP, a Delaware limited partnership,

DLA Piper LLP (US) 701 Fifth Avenue, Suite 7000 Seattle, WA 98104-7044 | Tel: 206.839.4800

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I.

INTRODUCTION AND RELIEF REQUESTED

Defendant Scout Analytics, Inc. (Scout) hereby files this motion to correct an issue created by plaintiffs when they filed their Complaint and disclosed confidential information that is protected by a strict non-disclosure agreement previously entered into by Scout and a third-party (Company A) that has made a proposal to acquire Scout. Specifically, Scout asks the Court to enter an order permitting the Complaint (Dkt. No. 1) to be sealed and replaced with a slightly redacted version that avoids disclosing the identity of Company A, as set forth in the proposed form of order submitted herewith. Scout respectfully submits that there is a compelling interest in sealing the unredacted version of the Complaint to prevent the dissemination of certain confidential information that falls within the confidentiality provision of the non-disclosure agreement. II. STATEMENT OF FACTS

In 2012, Scout received a merger proposal from Company A. See Declaration of Mark Upson in Support of Stipulated Motion to Seal Complaint (Upson Dec.), 2. In connection with this merger proposal, Scout signed a mutual non-disclosure agreement (NDA), in which it agreed not to disclose Confidential Information, which includes any information about the Proposed Transaction or this Agreement, the existence of this Agreement, [and] the fact that discussions concerning the Proposed Transaction are taking place. Upson Dec. 2. Scout and Company A also recently executed a letter of intent (LOI) to facilitate further negotiations relating to the proposed acquisition. Like the non-disclosure agreement, the letter of intent contains a strict confidentiality provision: This LOI, the related discussions and the interests of each of Acquiror and Target in a potential transaction are confidential information and subject to the confidentiality agreement entered into between the parties[.] Upson Dec. 3. On January 10, 2014, plaintiffs filed the instant lawsuit, the Complaint for which discloses in several places the identity of Company A. See Complaint at 3:3, 3:12, 7:4, 7:10, 7:12, and 8:9. Plaintiffs learned of Company As identity and the fact of the acquisition
DEFENDANT SCOUT ANALYTICS, INC.S MOTION TO SEAL COMPLAINT - 2 Case No. 14-2-01133-4 SEA DLA Piper LLP (US) 701 Fifth Avenue, Suite 7000 Seattle, WA 98104-7044 | Tel: 206.839.4800

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negotiations with Company A because a principal of plaintiff BioNet Systems LLC serves on Scouts board of directors. (This principal has not been named as a defendant in the lawsuit.) After plaintiffs filed their Complaint, Scouts attorneys reviewed it, appeared on Scouts behalf in the lawsuit, and promptly notified plaintiffs counsel that the Complaint publicly discloses Company As identity, which information is explicitly covered by the NDA and LOI. See Declaration of Andrew R. Escobar in Support of Defendant Scout Analytics, Inc.s Motion to Shorten Time (Escobar Dec.) 2. Despite being made aware of the problem plaintiffs had caused by publicly filing a document containing Company As name and the fact that Company A is in merger negotiations with Scout, plaintiffs did not respond to Scouts requests for plaintiffs to agree to stipulate to filing a redacted version of the Complaint and requesting that the Court enter an order sealing the original Complaint. Escobar Dec. 3. Accordingly, defense counsel informed plaintiffs counsel by email and voicemail earlier today that it would be filing the Motion to Seal and a motion to shorten time for hearing the Motion to Seal. Escobar Dec. 3. III. QUESTION PRESENTED

Should the Court enter an order permitting the Complaint to be sealed to protect against the public dissemination of Company As identity, which is subject to Scouts NDA and LOI with Company? IV. EVIDENCE RELIED UPON

This motion is based on the Declaration of Mark Upson in Support of Defendant Scout Analytics, Inc.s Motion to Seal the Complaint and the Declaration of Andrew R. Escobar in Support of Defendant Scout Analytics, Inc.s Motion to Shorten Time. V. ARGUMENT

Under the five-factor test set forth in Seattle Times Co. v. Ishikawa, 97 Wn.2d 30 (1982) there exists a compelling interest that overrides the publics right to the open administration of justice that requires the original Complaint filed in this action to be sealed to prevent the
DEFENDANT SCOUT ANALYTICS, INC.S MOTION TO SEAL COMPLAINT - 3 Case No. 14-2-01133-4 SEA DLA Piper LLP (US) 701 Fifth Avenue, Suite 7000 Seattle, WA 98104-7044 | Tel: 206.839.4800

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improper disclosure of information that is strictly confidential under the NDA and LOI entered into by Scout and Company A, which agreements served as the source for plaintiffs learning the identity of Company A and the existence of the merger negotiations. The five Ishikawa factors are: (1) The proponent of closure or sealing must make some showing of the need therefore; (2) Anyone present when the closure and/or sealing motion is made must be given an opportunity to object to the suggested restriction; (3) The court, the proponent(s) of closure/sealing and any objector(s) should carefully analyze whether the requested method for curtailing access would be both the least restrictive means available and effective in protecting the interests threatened; (4) The court must weigh the competing interests of the parties and the public; and (5) The order must be no broader in its application or duration than necessary to serve its purpose. Ishikawa, 97 Wn.2d at 3740. Sealing the Complaint is appropriate in this case. First, there is a strong need to keep

15 Company As name confidential. 16 discussions and the identities of the parties involved are highly sensitive pieces of information 17 that should be protected from public disclosure because, among other things, the mere 18 disclosure of a partys identity could disrupt the delicate dance of ongoing merger negotiations. 19 See, e.g., Flamm v. Eberstadt, 814 F.2d 1169, 1176 (7th Cir. 1987) (explaining rationale for 20 keeping details of merger negotiations confidential before holding that corporation was not 21 required to disclose ongoing merger negotiations until agreement was produced on price and 22 structure of deal). This is why it is a very common practice for companies engaged in merger 23 and acquisition discussions, like Scout and Company A, to enter into strict non-disclosure 24 agreements with respect to their negotiations. Here, by disclosing the identity of Company A, 25 the Complaint discloses information that is explicitly covered by the NDA and LOI entered into 26
DEFENDANT SCOUT ANALYTICS, INC.S MOTION TO SEAL COMPLAINT - 4 Case No. 14-2-01133-4 SEA DLA Piper LLP (US) 701 Fifth Avenue, Suite 7000 Seattle, WA 98104-7044 | Tel: 206.839.4800

The existence of ongoing, unconsummated merger

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by Scout and Company A. Sealing the Complaint as soon as possible is required to prevent the dissemination (or further dissemination) of Company As identity. Second, although plaintiffs would not agree to stipulating to sealing the original Complaint, plaintiffs have not provided any reason for objecting to such sealing, and there are no known (or potential) objectors. Third, attached to the Escobar Dec. as Exhibit A is a slightly redacted version of the Complaint, which replaces the name of Company A with the label Company A. Allowing Scout to essentially substitute this slightly redacted replacement Complaint for the original Complaint is the least restrictive means of protecting Company As identity, yet allowing the public access to the substance of plaintiffs allegations. Fourth,

Scout has a significant interest in avoiding an unwarranted disruption of its ongoing discussions with Company A by ensuring that information that is subject to the NDA and LOI that it entered into with Company A remains confidential. Plaintiffs (should) have an interest in rectifying the public dissemination of the confidential information that they acquired through BioNets principals position on Scouts board of directors. The public, however, has little if any interest in learning the name of the company that has proposed a merger with Scout, which name is irrelevant to the disposition of this litigation. Fifth, redaction of only Company As name is no broader than necessary to serve the purpose of protecting the interests of Scout and Company A. For all these reasons, Scout respectfully requests that the Court enter the attached Proposed Order to Seal.

DEFENDANT SCOUT ANALYTICS, INC.S MOTION TO SEAL COMPLAINT - 5 Case No. 14-2-01133-4 SEA

DLA Piper LLP (US) 701 Fifth Avenue, Suite 7000 Seattle, WA 98104-7044 | Tel: 206.839.4800

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Respectfully submitted this 14th day of January, 2014. DLA PIPER LLP (US)

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DEFENDANT SCOUT ANALYTICS, INC.S MOTION TO SEAL COMPLAINT - 6 Case No. 14-2-01133-4 SEA DLA Piper LLP (US) 701 Fifth Avenue, Suite 7000 Seattle, WA 98104-7044 | Tel: 206.839.4800

/s/ Andrew R. Escobar Stellman Keehnel, WSBA No. 9309 Andrew R. Escobar, WSBA No. 42793 Katherine A. Heaton, WSBA No. 44075 Attorneys for Defendant Scout Analytics, Inc.

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CERTIFICATE OF SERVICE I hereby certify that I caused a true and correct copy of the foregoing to be served upon counsel of record for the parties in the manner indicated below:

John DuWors, WSBA No. 33987 NEWMAN DU WORS LLP 1201 Third Avenue, Suite 1600 Seattle, WA 98101 Fax: (206) 274-2801 E-mail: duwors@newmanlaw.com Counsel for Plaintiffs

Via Hand-Delivery Via U.S. Mail Via KCSC E-Service Via Facsimile Via E-mail

DATED at Seattle, Washington, this 14th day of January, 2014.

/s/ Andrew R. Escobar Andrew R. Escobar

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DEFENDANT SCOUT ANALYTICS, INC.S MOTION TO SEAL COMPLAINT - 7 Case No. 14-2-01133-4 SEA DLA Piper LLP (US) 701 Fifth Avenue, Suite 7000 Seattle, WA 98104-7044 | Tel: 206.839.4800

IN THE SUPERIOR COURT OF WASHINGTON STATE FOR KING COUNTY BIONET SYSTEMS LLC, et al., Pla&'t&((s, ). SCOUT ANALYTICS, I'-., et al., ,e(e'2a'ts. ) ) ) ) ) ) ) ) I. FINDINGS: T3e Cou.t 3a)&'4 .e)&e5e2 t3e a66l&-a't0s 7ot&o' a'2 2e-la.at&o' to seal s6e-&(&- 2o-u7e'ts o. t3&s (&le, a'2 6u.sua't to a66l&-a8le -ase la5 a'2 -ou.t .ules, (&'2s -o76ell&'4 -&.-u7sta'-es to 4.a't t3e o.2e. as (ollo5s9 Cause No. No. !"#"$ %%"! SEA

PROPOSED ORDER TO SEAL


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The Complaint was filed without redacting the name of the company (Company A) that has proposed a merger with defendant Scout Analytics, Inc. (Scout). Company As identity and the fact that it has made a merger proposal is subject to a non-disclosure agreement and a confidential letter of intent entered into by Scout and Company A. Plaintiffs are current shareholders of Scout who learned of Company As proposal and its identity through a non-defendant director of Scout who is a principal of plaintiff BioNet Systems, LLC. Under these circumstances, the Court finds that there is a

compelling interest in sealing the unredacted complaint to prevent the dissemination of certain confidential information that falls within the confidentiality provision of the nondisclosure agreement, and replacing it with a slightly redacted version of the Complaint. Because the slightly redacted version of the Complaint redacts only Company As name, the interest in preventing the public disclosure of information subject to a nondisclosure agreementinformation that was acquired by plaintiffs only through that nondisclosure agreementoutweighs the public interest in access to the unredacted version of the Complaint. Under the Ishikawa factors, the Complaint is to be sealed and

Order to Seal (June 2011) - 1


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replaced with a copy of the redacted version attached as Exhibit A to the Declaration of Andrew R. Escobar in Support of Motion to Shorten Time and to Seal.
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