Amy Friedman v. Guthy-Renker LLC

Filing 176

ORDER GRANTING GUTHY-RENKER APPLICATION TO FILE UNDER SEAL 173 by Judge Otis D. Wright, II (lc)

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United States District Court
Central District of California

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AMY FRIEDMAN and JUDI MILLER,
on behalf of themselves and all others
similarly situated,
Plaintiffs,

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ORDER GRANTING APPLICATION
TO FILE UNDER SEAL [173]

v.

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Case No. 2:14-cv-06009-ODW(AGRx)

GUTHY-RENKER, LLC and WEN BY
CHAZ DEAN, INC.,

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Defendants.

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I.

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INTRODUCTION

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Plaintiffs Amy Friedman and Judi Miller bring this putative class action lawsuit

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against Defendants Guthy-Renker, LLC and Wen By Chaz Dean, Inc., alleging that

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Defendants’ “WEN Cleansing Conditioner” line of haircare products caused their hair

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to fall out. In April 2016, the parties reached a class-wide settlement of all claims.

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Under the settlement agreement, Defendants reserve the right to withdraw from the

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settlement if more than a certain number of class members opt out of the class. The

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parties recently filed their motion for preliminary approval of the class settlement,

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Fed. R. Civ. P. 23(e), and Guthy-Renker now seeks to file under seal the actual

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number of opt-outs that will trigger its right to withdraw. (ECF No. 173.) For the

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reasons discussed below, the Court GRANTS Guthy-Renker’s Application.

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II.

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LEGAL STANDARD

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“Historically, courts have recognized a ‘general right to inspect and copy public

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records and documents, including judicial records and documents.’” Kamakana v.

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City & Cnty. of Honolulu, 447 F.3d 1172, 1178 (9th Cir. 2006). Thus, “a strong

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presumption in favor of access [to such records] is the starting point.” Id. Generally,

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“[a] party seeking to seal a judicial record then bears the burden of overcoming this

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strong presumption by meeting the compelling reasons standard. That is, the party

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must articulate compelling reasons supported by specific factual findings that

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outweigh the general history of access and the public policies favoring disclosure

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. . . .” Id. at 1178–79. However, where the documents or information the parties seek

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to file under seal are unrelated or only “tangentially related” to the underlying claims,

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the presumption of public access can be overcome simply by showing “good cause.”

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Ctr. for Auto Safety v. Chrysler Grp., LLC, 809 F.3d 1092, 1097 (9th Cir. 2016).

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“What constitutes a ‘compelling reason’ [to seal court records] is ‘best left to

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the sound discretion of the trial court.’” Id. (quoting Nixon v. Warner Commc’ns,

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Inc., 435 U.S. 589, 598 (1978)). “The factors relevant to [such] a determination . . .

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include the ‘public interest in understanding the judicial process and whether

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disclosure of the material could result in improper use of the material [such as] for

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scandalous or libelous purposes or infringement upon trade secrets.’” Hagestad v.

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Tragesser, 49 F.3d 1430, 1434 (9th Cir. 1995) (citations and footnote omitted); see

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also Kamakana, 447 F.3d at 1179 (“In general, ‘compelling reasons’ sufficient to

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outweigh the public’s interest in disclosure and justify sealing court records exist

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when such ‘court files might have become a vehicle for improper purposes’ . . . .”

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(quoting Nixon, 435 U.S. at 598)).

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consideration, the district court must base its decision on a compelling reason and

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articulate the factual basis for its ruling, without relying on hypothesis or conjecture.”

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Hagestad, 49 F.3d at 1434.

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“After taking all relevant factors into

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III.

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A.

DISCUSSION

Applicable Standard

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The Court must first decide whether the “compelling reasons” standard or the

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“good cause” standard applies—that is, whether the opt-out threshold is more than

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“tangentially related” to the underlying claim. Ctr. for Auto Safety, 809 F.3d at 1097.

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Here, the opt-out threshold is being filed in support of the parties’ motion for

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preliminary approval of the class-wide settlement.

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obviously has more than a tangential relationship to the claim, and in the class action

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context, the granting of a motion for preliminary approval is necessary to effectuate

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that settlement. See Fed. R. Civ. P. 23(e); Spann v. J.C. Penney Corp., 314 F.R.D.

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312, 319 (C.D. Cal. 2016) (“Approval of a class action settlement requires a two-step

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process—a preliminary approval followed by a later final approval.”). Such a motion

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must, of course, “disclose all terms of the settlement or compromise” to the Court.

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Fed. R. Civ. P. 23(e)(2) advisory committee’s note to 1966 Amendment. And because

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a breach of the opt-out threshold gives Defendants the right to scuttle the settlement

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entirely, it surely constitutes a material term that the Court must consider in

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connection with the motion.

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tangentially related to the underlying claim, and thus the parties must show

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compelling reasons to file that information under seal. See Thomas v. Magnachip

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Semiconductor Corp., No. 14-CV-01160-JST, 2016 WL 3879193, at *7 (N.D. Cal.

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July 18, 2016) (determining that the opt-out threshold filed in support of a motion for

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preliminary approval of class settlement is more than “tangentially related” to the

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merits of the case, and thus the “compelling reasons” standard applies).

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B.

The settlement of a claim

As a result, the opt-out threshold is more than

Compelling Reasons

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1.

Public Interest

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To determine whether the compelling reasons standard is met, the Court first

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weighs the public interest in access to the information. See Hagestad, 49 F.3d at

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1434. The Plaintiffs in this lawsuit brought claims on behalf of all persons in the

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United States who used any WEN haircare product in the last seven years—a class

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that consists of more than six million people. (Mot. 19–20, ECF No. 153-1.) The

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parties now seek to certify this nationwide class and seek approval of a settlement that

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would bind any person in the class that does not affirmatively opt out of it.

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Transparency is paramount when the Court is adjudicating the fairness of a settlement

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that will bind absent class members, particularly when it concerns a class of this size.

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Guthy-Renker argues that the opt-out threshold itself is not important to any

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individual class members’ decision to either remain in or opt out of the class. (Appl.

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¶ 6, ECF No. 173.) This is likely true for most, but not necessarily all, class members.

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The opt-out threshold is relevant only insofar as it may cause Defendants to withdraw

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from the settlement, in which case the class would not receive their promised payout.

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If this happens, the class members will still be left in the same position as if they had

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originally opted out of the settlement (at least in terms of being able to pursue an

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individual action). As a result, for most class members, the opt-out threshold has no

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logical impact on their decision to opt out or not.

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There is, however, a small subset of persons who may not be left in the same

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position if the settlement falls through, and thus for whom knowledge of the opt-out

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threshold could make a real difference. For example, if the statute of limitations on a

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class member’s individual claim is close to expiring at the time he or she receives

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notice of the settlement, he or she will certainly be interested in knowing how likely

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Defendants are to withdraw from the settlement.

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likelihood is to know what the opt-out threshold actually is, so that the class member

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can use his or her resources and judgment to predict whether or not that threshold will

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be reached. If they believe there is only a low risk of the threshold being exceeded,

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they might elect to join the settlement; but if they deem the risk high, they may think

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it prudent to opt out of the settlement and file an individual action before the statute of

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limitations expires. Thus, contrary to Guthy-Renker’s argument, there is a legitimate

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interest in publicly disclosing this information beyond just the general interest in

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The only way to assess this

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maintaining transparency.

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Potential for Abuse

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On the other hand, Guthy-Renker is correct that there is a significant potential

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for abuse of this information. Class action litigation is riddled with “professional

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objectors”: attorneys for class members who extort additional payments from the

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parties in exchange for not delaying or tanking the whole settlement (e.g., by filing

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objections or appeals). See, e.g., In re Polyurethane Foam Antitrust Litig., No. 1:10

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MD 2196, 2016 WL 1452005, at *2 (N.D. Ohio Apr. 13, 2016). “[P]rofessional

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objectors undermine the administration of justice by disrupting settlement in the hopes

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of extorting a greater share of the settlement for themselves and their clients.” In re

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Initial Pub. Offering Sec. Litig., 728 F. Supp. 2d 289, 295 (S.D.N.Y. 2010). Publicly

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disclosing the opt-out threshold would practically invite professional objectors to

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threaten the settlement by soliciting opt-outs. See In re HealthSouth Corp. Sec. Litig.,

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334 F. App’x 248, 250 n.4 (11th Cir. 2009).

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The Court concludes that this potential for abuse outweighs the interest in

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public access to this information. It makes little sense to open up the entire settlement

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to attack on the off chance that a small subset of class members may perform the

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rather elaborate analysis needed to determine the likelihood of Defendants

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withdrawing from the settlement—not to mention the irony that making this

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information available to them dramatically increases the risk of the threshold being

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met. Moreover, even if the limitations period expires on a class members’ individual

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claim under these circumstances, those claims would likely be subject to equitable

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tolling. See, e.g., McDonald v. Antelope Valley Cmty. Coll. Dist., 45 Cal. 4th 88, 100

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(2008) (equitable tolling of the statute of limitations “applies when an injured person

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has several legal remedies and, reasonably and in good faith, pursues one. Thus, it

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may apply where . . . a first action, embarked upon in good faith, is found to be

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defective for some reason.” (citations, brackets, and internal quotation marks

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omitted)).

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For these reasons, the Court concurs with the numerous other courts that have

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held that the opt-out threshold should be kept confidential.

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3879193, at *7; Spann v. J.C. Penney Corp., 314 F.R.D. 312, 329 (C.D. Cal. 2016); In

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re Skelaxin (Metaxalone) Antitrust Litig., No. 1:12-MD-2343, 2015 WL 1486709, at

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*2 (E.D. Tenn. Mar. 31, 2015); In re Remeron End-Payor Antitrust Litig., No. CIV.

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02-2007 FSH, 2005 WL 2230314, at *18 (D.N.J. Sept. 13, 2005); In re Warfarin

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Sodium Antitrust Litig., 212 F.R.D. 231, 253 (D. Del. 2002), aff’d, 391 F.3d 516 (3d

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Cir. 2004); see also Fed. R. Civ. P. 23(e)(2) advisory committee’s note to 1966

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Amendment (“Further inquiry into the agreements identified by the parties should not

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become the occasion for discovery by the parties or objectors. . . . Some agreements

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may include information that merits protection against general disclosure.”).
IV.

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Thomas, 2016 WL

CONCLUSION

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For the reasons discussed above, the Court GRANTS Guthy-Renker’s Motion.

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Guthy-Renker should file and serve this information in accordance with Local Rules

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79-5.2.2(c) and 79-5.3.

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IT IS SO ORDERED.

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September 26, 2016

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____________________________________
OTIS D. WRIGHT, II
UNITED STATES DISTRICT JUDGE

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