By Frank G. Runyeon

Law360, New York (May 6, 2020, 10:15 PM EDT ) A legal staffing agency pressed a Manhattan federal judge Wednesday to seal an upcoming hearing in its lawsuit against a former employee that features blackmail allegations, arguing it didn't want any more of its clients' secrets slipping out.

HC2 Inc., known as Hire Counsel, asked U.S. District Judge Lewis J. Liman to shield its customer, WilmerHale, and that law firm's client, Toyota, from exposing sensitive information that would damage those companies' interests, asking that the preliminary injunction hearing be held in secret and arguing for an even more protective process than submitting documents under seal.

The agency claims attorney Andrew Delaney revealed highly-sensitive information during a review of Thai documents after he allegedly tried to blackmail its "law firm customer" and its "corporate client" — companies Delaney identified to Law360 as WilmerHale and Toyota, respectively.

"If we are going to have live testimony, with respect to the supporting evidence, it may be necessary to hold a sealed hearing," said HC2 counsel Ron Rossi of Kasowitz Benson Torres LLP, likening a public hearing on the sensitive matter to "a live fire exercise" and bemoaning the lack of control over witnesses who could reveal the secrets he is trying to protect in the first place.

In a compromise, the judge offered to have sealed declarations submitted by both sides with follow-up depositions where opposing counsel could cross-examine those people. The sides could then challenge what materials are sealed in a more controlled way, the judge reasoned. Delaney and HC2 agreed.

HC2 accuses former at-will employee Delaney of attempting a $450,000 shakedown of the agency, WilmerHale and Toyota, and then revealing sensitive company information in a Florida lawsuit after they failed to pay up.

HC2's complaint did not identify WilmerHale or Toyota, referring to them as the agency's "law firm customer" and that firm's "corporate client." But Delaney subsequently disclosed the names to Law360 in an interview about the suit, much to HC2's chagrin.

Delaney contends that he was fired for raising safety concerns about the spread of COVID-19 in HC2's New York City office in mid-March. He argues that he did not reveal any secrets or extort anyone, but merely requested compensation for retaliatory termination and later pursued legal action.

During the Wednesday hearing, HC2 counsel raised further concerns about secrecy, pushing for a method to ensure that the Florida complaint — which the agency claims contains "a plethora of confidential information" that violates WilmerHale and Toyota's attorney-client privilege — could both be kept secret and submitted as evidence of Delaney violating privacy obligations.

"In a perfect world, that complaint could be submitted under seal so that the court could consider it in the context of the evidence but neither of those third parties would have any fear that it would be more widely disclosed," Rossi argued. "We're fine proceeding with sealing, but wondering whether the court thinks it has the discretion to simply order the sealing."

Judge Liman clarified that he would be happy to handle the sealing himself, but cautioned that he would have to read the Florida complaint and hear arguments from both sides before he could make a decision on whether records should be kept from the public.

"I've dealt with the law in the Second Circuit with respect to information that is submitted in connection with motions being considered to be public — part of court records," Judge Liman said with a little chuckle. "And there being First Amendment-type and access-to-the-courts-type interests that are associated with those types of materials. But I hear the point that you're making as well. I think it would be helpful for me to get some briefing in respect to that also."

HC2 is requesting a procedure whereby WilmerHale and Toyota can shield the complaint from the possibility of disclosure by offering the document for sealing to Judge Liman "in-camera" and allow them to withdraw the document from evidence if the judge doesn't believe it should be sealed, instead of it being unsealed on the public docket.

Delaney counsel Bogdan Rotman stressed that his client believed the allegations in the Florida complaint "are public information" and may file a response challenging HC2's bid for a more secretive process.

Rotman said he plans to attach a series of news articles and reports from nongovernmental organizations to show that the Florida complaint does not contain confidential information at all.

"We believe that anything that has been disclosed is either an opinion or public information," said Rotman.

Delaney himself had planned to file an affidavit, Rotman said, although he walked back that possibility after hearing that Delaney would face cross-examination in a deposition if he did. Early in the call, Rotman briefly touted Delaney's apparent qualifications for the HC2 job working with WilmerHale on a document review for its client Toyota.

"My client is a Thai citizen and he has done FCPA investigations in the past," Rotman noted, referencing the Foreign Corrupt Practices Act. "He has worked on document review, he's conversant with the business culture, with the legal culture in the country of Thailand."

HC2 first filed suit against Delaney in late April, claiming he violated the terms of his contract by disclosing confidential information and attempting to exploit that information for personal gain. In addition, the legal staffing company says his communications with the law firm and corporate client breached his employment agreement.

The judge first denied HC2's requested gag order that would have covered anything Delaney learned on the job, but then issued a temporary restraining order directing Delaney not to divulge any information protected by his nondisclosure agreements and employment contract.

Delaney's counsel has repeatedly told the court that employment and public health counterclaims are forthcoming, grounded in the belief that Delaney was fired after emailing a warning to HC2, Toyota and WilmerHale about sick coworkers spreading COVID-19 in HC2's office.

Rotman told Judge Liman on Wednesday that he expects to be "filing the answer and counterclaims in the next several days."

HC2 is represented by Marc E. Kasowitz, Ronald R. Rossi and Kalitamara L. Moody of Kasowitz Benson Torres LLP.

Delaney is represented by Bogdan Rotman.

The case is HC2 Inc. v. Delaney, case number 1:20-cv-03178, in the U.S. District Court for the Southern District of New York.

--Editing by Jay Jackson Jr.

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