Summary
compelling reasons standard governed motion to seal portions of the complaint
Summary of this case from Sjostrom v. KraatzOpinion
Case No. 5:15-cv-03347-BLF
04-04-2016
KRISTOPHER A. SCHWARTZ, Plaintiff, v. ART COOK, et al., Defendants.
ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S AND DENYING DEFENDANT'S ADMINISTRATIVE MOTION TO FILE UNDER SEAL
[Re: ECF 66, 85]
Before the Court are the parties' administrative motions to file under seal portions of Plaintiff's First Amended Complaint ("FAC") and Defendant Bankers Trust Company of South Dakota's ("BTC")'s Motion to Dismiss, as well as exhibits attached thereto. ECF 66, 85. For the reasons stated below, Plaintiff's motion is GRANTED IN PART and DENIED IN PART and BTC's motion is DENIED without prejudice.
I. LEGAL STANDARD
Courts recognize a "general right to inspect and copy public records and documents, including judicial records and documents." Kamakana v. City & Cnty. of Honolulu, 447 F.3d 1172, 1178 (9th Cir. 2006). Two standards govern motions to seal portions of documents: a "compelling reasons" standard, which applies to dispositive motions, and a "good cause" standard, which applies to non-dispositive motions. Id. at 1179. Motions that are technically nondispositive may still require the party to meet the "compelling reasons" standard when the motion is more than tangentially related to the merits of the case. See Ctr. for Auto Safety v. Chrysler Grp., LLC, 809 F.3d 1092, 1101 (9th Cir. 2016).
To meet the "good cause standard," "a 'particularized showing' under the . . . standard of Rule 26(c) will 'suffice.'" Kamakana, 447 F.3d at 1180 (quoting Foltz, 331 F.3d at 1135, 1138). Compelling reasons generally exist when the "'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." Id. (quoting Nixon v. Warner Commc'ns, Inc., 435 U.S. 589, 598 (1978)), or where court files may serve "as sources of business information that might harm a litigant's competitive standing," Nixon, 435 U.S at 598-99. The compelling reasons standard is invoked "even if the dispositive motion, or its attachments, were previously filed under seal or protective order." Kamakana, 447 F.3d at 1179 (citing Foltz, 331 F.3d at 1136).
In this district, parties seeking to seal judicial records must follow Civil Local Rule 79-5, which requires, inter alia, that a sealing request be "narrowly tailored to seek sealing only of sealable material." Civil L.R. 79-5(b). In addition, if a party seeks to file under seal a document designated as confidential by another party, the party must identify which portions of the document contain the designated confidential material and which party has designated the material as confidential. Civil L.R. 79-5(e). Within four days, the designating party must file a declaration establishing that all of the designated material is sealable. Civil L.R. 79-5(e)(1).
II. DISCUSSION
Plaintiff and BTC seek to seal portions of their FAC and Motion to Dismiss, respectively, as well as exhibits attached thereto because the documents contain information designated as "Confidential" or "Highly-Confidential—Attorneys' Eyes Only" pursuant to the parties' protective order. See ECF 64, Protective Order. Because the FAC and Motion to Dismiss are more than tangentially related to the merits of the case, the compelling reasons standard governs both sealing requests. See, e.g., In re NVIDIA Corp. Derivative Litig., No. 06-cv-06110-SBA, 2008 WL 1859067, at *3-4 (N.D. Cal. Apr. 23, 2008) ("While a complaint is not, per se, the actual pleading by which a suit may be disposed of, it is the root, the foundation, the basis by which a suit arises and must be disposed of").
BTC and Defendants Art Cook, Roger Stanger, Ronald Zimmerman, and Buckles-Smith Electric Company ("Buckles-Smith Defendants") designated certain documents confidential, and the parties agreed to treat all documents produced by non-parties Menke & Associates, Inc. ("Menke") and Chartwell Financial Advisory, Inc. ("Chartwell") as "Highly Confidential—Attorneys' Eyes Only." Michals Decl. ¶ 4, ECF 71.
A. Plaintiff's Motion
Plaintiff seeks to seal portions of his FAC and exhibits attached thereto because Defendants and/or non-parties Menke and Chartwell designated the information contained therein confidential. Bloom Decl. ¶¶ 5-6, ECF 68. Pursuant to Civil Local Rule 79-5(e), BTC and the Buckles-Smith Defendants timely filed declarations to support filing certain exhibits to and portions of the FAC under seal. See Michals Decl., ECF 71; Garrett Decl, ECF 72-1.
1. Buckles-Smith Declaration
In a detailed declaration, the Buckles-Smith Defendants state that the material they support filing under seal contains information about their business performance, structure, and finances that could be used to gain unfair business advantage against them. Id. ¶ 8. They also state that some of the material contains personal information regarding the finances of Buckles-Smith employees and shareholders. Id. ¶ 10. The Buckles-Smith Defendants tie these reasons, which the Court finds compelling, to redactions that the Court finds to be narrowly tailored. Accordingly, the Court GRANTS Plaintiff's motion to file the following under seal:
Specifically, the Buckles-Smith Defendants support sealing Exhibits D, M, O, and U to the FAC and FAC ¶¶ 31, 60, 123(D) (in part), 135-138, 156, 158-160, 165(C), 167, 168 (A), (C), and (D), 175 (in part), 177-178, 179 (in part), 180 (in part), 181, 182 (in part), 183-184, 231 (A), 235 (in part), 236 (in part), 249 (A), and 260 (A) and (B). --------
| Document | Description | Order |
|---|---|---|
| Exhibit D to the FAC | Contains confidential and personalinformation regarding employee andshareholder finances related to the Buckles-Smith Defendants. | GRANTED. |
| Exhibit M to the FAC | Same as above. | GRANTED. |
| Exhibit O to the FAC | Same as above. | GRANTED. |
| Exhibit U to the FAC | Contains confidential commercial businessinformation in regards to businessperformance, as well as confidential andpersonal information regarding employeeand shareholder finances related to theBuckles-Smith Defendants | GRANTED. |
| FAC ¶ 31 | Contains confidential and personalinformation regarding employee and | GRANTED. |
| shareholder finances related to the Buckles-Smith Defendants. | ||
| FAC ¶ 60 | Same as above. | GRANTED. |
| FAC ¶ 123(D) | Part of ¶ 123(D) between "updated value asof June 16, 2014," and "based upon thevaluation" contains confidential financial andcommercial business information related tothe Buckles-Smith Defendants. | GRANTED as to ¶ 123(D)between "updated value asof June 16, 2014," and"based upon the valuation"only; otherwise DENIED. |
| FAC ¶¶ 135-38 | Contains confidential business informationregarding business performance related tothe Buckles-Smith Defendants. | GRANTED. |
| FAC ¶¶ 156, 158-60 | ¶¶ 156, 158-60 contain confidential businessinformation regarding business performancerelated to the Buckles-Smith Defendants. | GRANTED. |
| FAC ¶¶ 164-71 | ¶¶ 165(C), 168(D) contain confidentialbusiness information regarding businessperformance related to the Buckles-SmithDefendants; ¶ 167 contains confidentialbusiness information regarding businesspractices and finances related to the Buckles-Smith Defendants; ¶¶ 168(A), (C) containsconfidential business information regardingbusiness practices and employeecompensation related to the Buckles-SmithDefendants. | GRANTED as to ¶¶ 165(C),167, 168(A), 168(C),168(D) only; otherwiseDENIED. |
| FAC ¶ 175 | Last quoted phrase of ¶ 175 following"transfer of" contains confidential businessinformation regarding company structurerelated to the Buckles-Smith Defendants. | GRANTED as to lastquoted phrase of ¶ 175following "transfer of" only;otherwise DENIED. |
| FAC ¶¶ 177-78 | ¶¶ 177-78 contain confidential businessinformation regarding company structure andconfidential personal information regardingemployee and shareholder finances related tothe Buckles-Smith Defendants | GRANTED as to ¶¶ 177-78only; otherwise DENIED. |
| FAC ¶¶ 179-85 | Part of ¶ 179 following "had been reduced"contains confidential business informationregarding company structure and confidentialpersonal information regarding employeeand shareholder finances related to theBuckles-Smith Defendants; part of ¶ 180following "Chartwell appraisal anddetermined by BTC" contains confidentialbusiness information regarding companyfinances related to the Buckles-SmithDefendants; ¶ 181 contains confidentialbusiness information regarding companyfinances related to the Buckles-SmithDefendants; part of ¶ 182 following "stake in | GRANTED as to: (1) partof ¶ 179 following "hadbeen reduced"; (2) part of¶ 180 following "Chartwellappraisal and determined byBTC"; (3) ¶ 181; (4) part of¶ 182 following "stake inthe company fell"; and ¶¶183-84 only; otherwiseDENIED. |
| the company fell" contains confidentialbusiness information regarding companystructure and finances related to the Buckles-Smith Defendants; ¶¶ 183-84 containsconfidential business information regardingcompany finances and performance relatedto the Buckles-Smith Defendants | ||
| FAC ¶ 231 | ¶ 231(A) contains confidential businessinformation related to company structure andfinances, and contains confidential personalinformation regarding employee andshareholder finances related to the Buckles-Smith Defendants. | GRANTED as to ¶ 231(A)only; otherwise DENIED. |
| FAC ¶¶ 233-37 | Part of ¶ 235 following "shares of Buckles-Smith" and part of ¶ 236 following "value asof June 16, 2014" contain confidentialbusiness information regarding companyfinances related to the Buckles-SmithDefendants. | GRANTED as to: (1) partof ¶ 235 following "sharesof Buckles-Smith"; and (2)part of ¶ 236 following"value as of June 16, 2014"only; otherwise DENIED. |
| FAC ¶¶ 249(A) | Part of ¶ 249(A) between "ownedapproximately" and "of Buckles-Smith'sstock," and following "of Buckles-Smith'sstock" contain confidential businessinformation regarding company structurerelated to the Buckles-Smith Defendants. | GRANTED as to ¶ 249(A)between "ownedapproximately" and "ofBuckles-Smith's stock," andfollowing "of Buckles-Smith's stock" only;otherwise DENIED. |
| FAC ¶¶ 260(A)-(B) | Part of ¶ 260(A) following "fair market valueof their shares in the Agreed ValueExhibits," and sentence in ¶ 260(B) between"¶¶ 165, 166 and 168" and "For thesereasons" contain confidential businessinformation regarding company finances andperformance related to the Buckles-SmithDefendants. | GRANTED as to: (1) part of¶ 260(A) after "fair marketvalue of their shares in theAgreed Value Exhibits"; (2)¶ 260(B) between "¶¶ 165,166 and 168" and "For thesereasons" only; otherwiseDENIED. |
2. BTC Declaration
BTC supports filing Exhibits H and P to the FAC under seal. In its declaration, BTC explains that Exhibit H is a service agreement entered into by BTC and Buckles-Smith. Garrett Decl. ¶¶ 3, 6. BTC supports filing it under seal because, though BTC had produced to Plaintiff a version of the agreement with the fee information redacted, Plaintiff attached the unredacted version produced by Menke to his FAC. Id. ¶¶ 3, 6. Because BTC argues that disclosure of the fees would put it at a competitive disadvantage but provides no reason for sealing the rest of the exhibit, see BTC Response at 3-4; Garrett Decl. ¶ 6, the Court finds this request is not sufficiently narrowly-tailored. Accordingly, the Court GRANTS Plaintiff's motion to file Exhibit H under seal only with respect to § 8 and page numbered 9 (entitled "Fee Schedule").
BTC also argues that the first page of Exhibit P should be sealed. BTC Response at 4-5. BTC explains that the first page is an email from BTC to Chartwell including advice from BTC's counsel about reducing the risk of litigation. Garrett Decl. ¶ 6. BTC argues that this page should be filed under seal because it contains legal advice shared between parties with a common interest. Id.; see also BTC Response at 4-5. The Court finds this reason for sealing to be compelling. Accordingly, the Court GRANTS Plaintiff's administrative motion to file Exhibit P under seal only with respect to the email included in the exhibit's first page.
3. No Supporting Declaration
Because no party filed a declaration in support of sealing the following exhibits and portions of Plaintiff's FAC, the Court DENIES Plaintiff's motion to seal: Exhibits G, L, N, T, and V to the FAC and ¶¶ 31, 56-59, 61-63, 100-04, 106-09, 118, 123(C), 143-45, 150-55, 161-62, 172-173, 174, 176, 186-90, 204, 225-30, 243, 261(A), 262(B)-(C), and 264 of the FAC.
B. BTC's Motion
The Court now turns to BTC's motion to file portions of its Motion to Dismiss and Exhibit 1 attached thereto under seal. BTC's Mot., ECF 85. BTC similarly argues that those materials contain information copied or extracted from discovery material designated as "Confidential" or "Highly Confidential—Attorney's Eyes Only" under the protective order. Id. at 2.
BTC's request is deficient in a number of ways. First, BTC filed an unredacted version of Exhibit 1, but failed to file an unredacted version of its Motion to Dismiss, as required by Civil Local Rule 79-5(d)(2). This precludes the Court from determining the merits of BTC's request for sealing portions of the Motion to Dismiss.
Second, though BTC submitted an accompanying declaration that identifies which party designated which materials as confidential, see Garrett Decl. ¶¶ 3, 4, ECF 85-1, the designating parties failed to file declarations establishing that the designated material is sealable. Instead, the parties filed a stipulation, agreeing that the material BTC seeks to file "must be filed under seal to maintain the confidentiality of such documents" but also that "they are in no way agreeing that any particular documents or information were appropriately designed as CONFIDENTIAL and/or HIGHLY CONFIDENTIAL—ATTORNEY'S EYES ONLY." Stipulation at 2, ECF 88. The parties provide no substantive reasons for sealing the designated material.
As noted above, "[r]eference to a stipulation or protective order that allows a party to designate certain documents as confidential is not sufficient to establish that a document, or portions thereof, are sealable." Civ. L.R. 79-5(d)(l)(A); see also MMCA Grp. Ltd., 2008 WL 5411340, at *1. Furthermore, sealing is a matter for court determination, not stipulation. See Civ. L.R. 79-5(b). Accordingly, the Court DENIES BTC's request to file portions of its Motion to Dismiss and Exhibit 1 thereto without prejudice.
III. ORDER
For the foregoing reasons, Plaintiff's motion to seal is GRANTED in part and DENIED in part. Pursuant to Civil Local Rule 79-5(e)(2), Plaintiff must file the unredacted and lesser redacted documents no earlier than April 5, 2016 and no later than April 11, 2016.
In addition, BTC's motion to seal is DENIED without prejudice. BTC may submit an unredacted version of its Motion to Dismiss and the parties may submit additional declarations in support of BTC's sealing motion by no later than April 8, 2016, at which point the Court will reconsider the motion. If no additional declaration is submitted, BTC must file unredacted versions of its Motion to Dismiss and Exhibit 1 attached thereto by no later than April 14, 2016.
IT IS SO ORDERED. Dated: April 4, 2016
/s/_________
BETH LABSON FREEMAN
United States District Judge