Opinion
Case No. 3:17-cv-00955-YY
2023-02-03
Benjamin CHARLES, on behalf of himself and others similarly situated, Plaintiff, v. PORTFOLIO RECOVERY ASSOCIATES, LLC, Defendant.
Bret A. Knewtson, Attorney at Law, Hillsboro, OR, Kelly D. Jones, Kelly D. Jones, Attorney at Law, Portland, OR, Mark G. Passannante, Broer & Passannante, P.S., Vancouver, WA, for Plaintiff. Jeffrey A. Topor, Pro Hac Vice, Tomio B. Narita, Pro Hac Vice, Liana Mayilyan, Pro Hac Vice, Simmonds & Narita LLP, San Francisco, CA, Robert E. Sabido, Sabido Law, LLC, Tigard, OR, for Defendant.
Bret A. Knewtson, Attorney at Law, Hillsboro, OR, Kelly D. Jones, Kelly D. Jones, Attorney at Law, Portland, OR, Mark G. Passannante, Broer & Passannante, P.S., Vancouver, WA, for Plaintiff. Jeffrey A. Topor, Pro Hac Vice, Tomio B. Narita, Pro Hac Vice, Liana Mayilyan, Pro Hac Vice, Simmonds & Narita LLP, San Francisco, CA, Robert E. Sabido, Sabido Law, LLC, Tigard, OR, for Defendant. ORDER Youlee Yim You, United States Magistrate Judge
Currently pending is defendant's motion to maintain seal over the "Asset Sale Agreement" the defendant entered into with non-party U.S. Bank N.A and to publicly file with redactions other documents that referenced the Asset Sale Agreement's terms and were previously filed under seal in connection with defendant's motion to compel arbitration that was resolved in 2018 and 2019. ECF 84. Plaintiff asserts the documents should be unsealed or filed without redactions consistent with the fundamental principle of open access to court records and the public's interest in understanding the judicial process. Resp. 1-5, ECF 87. For the reasons explained below, defendant's motion is granted in part and denied in part.
On April 1, 2008, plaintiff opened a credit card account with U.S. Bank National Association ND. See Findings & Recommendations (Aug. 1, 2018) 1-2, ECF 42. In March of 2013, U.S. Bank charged off approximately $3,500 that plaintiff owed on the account. Id. at 3. Defendant is in the business of purchasing delinquent financial obligations from banks and other financial institutions. Id. at 4. Defendant acquired the "right, title and interest" in plaintiff's charged-off account through an "Asset Sale Agreement" with U.S. Bank executed in June of 2015. Id. at 4-5.
As explained in the court's previous Findings and Recommendations regarding defendant's motion to compel arbitration, U.S. Bank National Association ND merged with U.S. Bank National Association in May of 2013. Findings & Recommendations (Aug. 1, 2018) 4, ECF 42.
Plaintiff filed this class action suit against defendant in 2017, alleging that defendant violated the Fair Debt Collection Practices Act ("FDCPA") in taking certain actions attempting to recover amounts plaintiff allegedly owed on the credit card account. See Compl. ¶ 1, ECF 1. The parties agreed to seek a protective order to maintain the confidentiality of certain documents, including the Asset Sale Agreement, and the court entered the protective order in February of 2018. ECF 30.
On August 1, 2018, the court granted defendant's motion to compel arbitration and stayed the case pending the result of that process. See Findings & Recommendations (Aug. 1, 2018) 2, ECF 42; Order (Feb. 20, 2019) 1-2, ECF 56. Approximately four years later, plaintiff filed a request pursuant to the protective order to "unseal the record relating to the order granting [d]efendant's motion to compel arbitration." ECF 83. Defendant then filed the current motion to maintain documents under seal. Specifically, defendant requests that (1) the Asset Sale Agreement it entered into with U.S. Bank to purchase plaintiff's account remain under seal, and (2) filings referencing the Asset Sale Agreement be unsealed with limited redactions designed to protect the Asset Sale Agreement's confidentiality. Mot. Maintain Seal 3, ECF 84.
Courts have long recognized a "general right to inspect and copy public records and documents, including judicial records and documents." Nixon v. Warner Commc'ns, Inc., 435 U.S. 589, 597 & n.7, 98 S.Ct. 1306, 55 L.Ed.2d 570 (1978); see also Kamakana v. City & Cnty. of Honolulu, 447 F.3d 1172, 1178 (9th Cir. 2006). For all but a narrow class of documents that are "traditionally kept secret," the starting point is a "strong presumption in favor" of access to court records. Kamakana, 447 F.3d at 1178 (quoting Foltz v. State Farm Mut. Auto. Ins. Co., 331 F.3d 1122, 1135 (9th Cir. 2003)). The party seeking to seal a court record from public view must overcome this presumption by showing "compelling reasons supported by specific factual findings" for keeping the document secret. Id. The Ninth Circuit has, however, "carved out an exception" for sealed materials attached to a motion that are not related or "only tangentially related" to the merits of the underlying case. Ctr. for Auto Safety v. Chrysler Grp., LLC, 809 F.3d 1092, 1097 (9th Cir. 2016). In those situations, courts apply a lower "good cause" standard. Id.
The parties here first dispute whether the "compelling interest" or "good cause" standard should apply. See Mot. Maintain Seal 5-7, ECF 84; Resp. 6-8, ECF 87. District courts in the Ninth Circuit are split on the question whether a motion to compel arbitration is dispositive or "only tangentially related" to the merits of the case. Compare Arik v. Meyers, No. 2:19-CV-01908-JAD-NJK, 2020 WL 515843, at *2 (D. Nev. Jan. 31, 2020) (finding motion to compel arbitration dispositive because it "[p]otentially depriv[ed] a party of the ability to litigate in a court") with Wang v. Kahn, No. 20-CV-08033-BLF, 2022 WL 14814116, at *1 (N.D. Cal. Oct. 25, 2022) ("Because a motion to compel arbitration is only tangentially related to the merits of the case, Plaintiff must show good cause to seal the document.") (citing In re Lithium Ion Batteries Antitrust Litig., No. 15-CV-02987-YGR, 2016 WL 5791356, at *1 n.2 (N.D. Cal. Oct. 4, 2016)).
The rationales underlying the cases finding that a motion to compel arbitration is dispositive are more persuasive. A motion to compel arbitration is different than other non-dispositive matters such as a motion to transfer venue to a different federal court, because the motion to compel arbitration significantly affects a party's rights and available remedies in resolving the dispute. See Arik, 2020 WL 515843, at *2 ("[G]ranting a motion to compel arbitration does not simply change the forum for resolution of a dispute, it changes the nature and process of that resolution.").
In fact, the magistrate judges in this district typically issue findings and recommendations and not orders when resolving motions to compel arbitration because they are dispositive. See, e.g., Morris v. Biotronik, Inc., No. 3:22-CV-301-JR, 2022 WL 3705554, at *1 (D. Or. July 11, 2022), report and recommendation adopted, No. 3:22-CV-301-JR, 2022 WL 3704157 (D. Or. Aug. 25, 2022); Marshall v. Healthy Living Network Res., LLC, No. 6:21-CV-01304-MK, 2022 WL 2015325, at *1 (D. Or. May 11, 2022), report and recommendation adopted, No. 6:21-CV-1304-MK, 2022 WL 1988000 (D. Or. June 6, 2022); Williams v. CMH Mfg. W., Inc., No. 2:21-CV-01065-HL, 2021 WL 8156025, at *1 (D. Or. Dec. 16, 2021), report and recommendation adopted, No. 2:21-CV-1065-HL, 2022 WL 633584 (D. Or. Mar. 4, 2022); Smith v. Verizon Wireless (VAW) LLC, No. 3:18-CV-00291-SB, 2018 WL 2294223, at *1 (D. Or. May 3, 2018), report and recommendation adopted, No. 3:18-CV-0291-SB, 2018 WL 2293932 (D. Or. May 18, 2018).
True, some courts have reasoned that a motion to compel arbitration is not dispositive because the federal court still retains jurisdiction over the case to enforce the arbitration award. See Herko v. Metropolitan Life Ins. Co., 978 F. Supp. 141, 142 n.1 (W.D.N.Y. 1997) (concluding that a motion to compel arbitration is not a dispositive motion because "the FAA provides that there is no final exercise of Article III power until after arbitration is complete and the arbitrator's decision is either affirmed, modified, or vacated by the district court judge where the actions remain lodged"). But the "limited and highly deferential" review of the eventual award has the practical effect of "putting the parties effectively out of federal court." In re Uber Text Messaging, No. 18-CV-02931-HSG, 2019 WL 8200602, at *2 (N.D. Cal. May 30, 2019) (quoting Comedy Club, Inc. v. Improv W. Assocs., 553 F.3d 1277, 1288 (9th Cir. 2009); Harmston v. City & Cty. of San Francisco, 627 F.3d 1273, 1278-79 (9th Cir. 2010)) (simplified). Moreover, "granting a motion to compel arbitration does not simply change the forum for resolution of a dispute, it changes the nature and process of that resolution" because, for example, the discovery allowed in arbitration is significantly more restrictive than that available in federal court. Arik, 2020 WL 515843, at *2.
Having determined that the motion to compel arbitration is dispositive, the next task is to apply the controlling "compelling interest" standard to the materials defendant seeks to keep under seal. "In general, compelling reasons sufficient to outweigh the public's interest in disclosure and justify sealing court records exist when such court files might have become a vehicle for improper purposes, such as the use of records to gratify private spite, promote public scandal, circulate libelous statements, or release trade secrets." Kamakana, 447 F.3d at 1179 (citing Nixon, 435 U.S. at 598, 98 S.Ct. 1306) (internal quotation marks omitted). "The mere fact that the production of records may lead to a litigant's embarrassment, incrimination, or exposure to further litigation will not, without more, compel the court to seal its records." Id. (citing Foltz, 331 F.3d at 1136).
Defendant seeks to maintain a single document under seal—the Asset Sale Agreement that was part of the transaction through which defendant acquired plaintiff's account—and asks for an "Order allowing it to file unsealed copies of the (1) Response to Motion to Compel Arbitration, Dkt. No. 35; (2) Reply to Motion to Compel Arbitration, Dkt. No. 38; and (3) Findings & Recommendation, Dkt. No. 42 with redactions only to references or quotes to the ASA." Mot. Maintain Seal 2, ECF 84.
The court's decision to compel arbitration was based primarily on the arbitration provision contained in the 2010 Cardmember Agreement that governed plaintiff's original credit card account, and the "Bill of Sale," which transferred to defendant the right to, among other things, attempt to collect on plaintiff's charged-off account. Findings & Recommendations (Aug. 1, 2018) 11-26, ECF 42. Both of those documents and the exhibit establishing that plaintiff's U.S. Bank Account was included in the Bill of Sale are publicly available and not filed under seal. See ECF 23-1; 23-2.
The Asset Sale Agreement includes terms of the transaction between U.S. Bank and defendant such as "agreed procedure by which PRA will purchase the accounts, how the accounts were selected and the terms under which U.S. Bank could repurchase certain accounts, the representations and warranties made by U.S. Bank with respect to the sale of the portfolio, operational aspects of how accounts would be handled as part of the purchase, the methods by which parties will handle documentation associated with the accounts, and requirements relating to the maintenance of insurance," and more. Stephen Decl. ¶ 3, ECF 84-1. Defendant represents that these are "privately negotiated deal points" that "reflect [defendant's] internal business strategy and are kept confidential by the company." Id.
Compelling reasons exist to maintain the Asset Sale Agreement under seal exist because "public disclosure of this information would competitively harm" defendant's business. J.R. Simplot Co. v. Washington Potato Co., No. C16-1851RSM, 2016 WL 11066581, at *1 (W.D. Wash. Dec. 29, 2016) (maintaining seal over documents that would reveal confidential financial information and affect future negotiations). The Asset Sales Agreement contains specific proprietary information about the purchase price and financial value of the accounts defendant purchased from U.S. Bank, as well as how defendant arrived at the bid it offered to U.S. Bank to purchase the accounts. Dreano Decl. ¶¶ 4-5, ECF 93-2. Because the nature of defendant's business requires the submission of competitive bids to purchase unpaid accounts, the disclosure of the terms defendant used to secured the sale from U.S. Bank could allow defendant's competitors to undercut defendant in the marketplace. Id. ¶ 5-7. Moreover, the disclosure of other terms could allow delinquent account holders to discover defendant's litigation strategy and avoid making payments, which could further damage defendant's business. Id. ¶ 10. Both defendant and U.S. Bank "work diligently" to keep the terms of the Asset Sale Agreement, which were privately negotiated at arms-length, confidential from their competitors. Id. ¶¶ 3-4; Levy Decl. ¶ 3, ECF 95.
And finally, the vast majority of the terms of the Asset Sale Agreement had no bearing on the court's analysis of defendant's motion to compel arbitration. Rather, the key portion of the Asset Sale Agreement was the Bill of Sale, which was attached as Exhibit B to the Asset Sale Agreement, and which demonstrated that defendant acquired the right to collect on plaintiff's account. See Findings & Recommendations (Aug. 1, 2018) 4-5, ECF 42. Thus, the "public's interest in disclosure" of the full terms of the Asset Sale Agreement is limited insofar as they relate to the motion to compel arbitration, and does not outweigh the competitive harms to defendant and non-party U.S. Bank that could result from their disclosure. See United States v. Chen, No. 17-CR-00603-BLF, 2022 WL 2789557, at *2 (N.D. Cal. July 14, 2022) (non-party seeking to maintain seal had "established that all of the exhibits it seeks to seal in this category could serve as 'sources of business information that might harm [its] competitive standing' such that compelling reasons support sealing those exhibits.") (quoting In re Elec. Arts, Inc., 298 F. App'x 568, 569 (9th Cir. 2008)).
The same "compelling reasons" support allowing defendant to publicly file plaintiff's Response to Motion to Compel Arbitration (ECF 35) and defendant's Reply to Motion to Compel Arbitration (ECF 38) with the proposed redactions, as those documents reference, quote, or describe the terms of the Asset Sale Agreement. There is no compelling reason, though, to re-file the court's Findings and Recommendations (ECF 42) with redactions. The Findings and Recommendations were entered on August 1, 2018; accompanying the entry of the Findings and Recommendations was an order directing the parties submit any requested redactions by August 15, 2018. ECF 42 & 43. Neither party submitted any proposed redactions, and counsel for defendant confirmed via email with the court and plaintiff's counsel that defendant did not believe any redactions to the Findings and Recommendations were necessary. Defendant offers no argument for why the court should now reverse course and redact portions of the Findings and Recommendations that have been publicly available for over four years, especially when both parties had the opportunity to offer proposed redactions when the Findings and Recommendations was originally filed.
For all the reasons stated in this Order, defendant's Motion to Maintain Document Under Seal (ECF 84) is granted in part and denied in part. The Asset Sale Agreement shall remain under seal. Defendant shall file unsealed copies of the Response to Motion to Compel Arbitration (ECF 35), and the Reply to Motion to Compel Arbitration (ECF 38) with the proposed redactions within 14 days of this Order. The court's Findings and Recommendations (ECF 42) have already been filed without redactions at the parties' earlier direction, and thus Defendant's motion to re-file a redacted version of the Findings and Recommendations is denied.
IT IS SO ORDERED.