Oliner et al v. Kontrabecki

Filing 47

ORDER by Judge Charles R. Breyer denying 46 Motion to Seal Case. (crblc2, COURT STAFF) (Filed on 12/19/2011)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

United States District Court
For the Northern District of California

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No. Misc 04-00010 CRB

ARON OLINER, as Chapter 11 Trustee of
the Kontrabecki Group LP, and LEHMAN
12 BROTHERS HOLDINGS INC.,
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ORDER DENYING REQUEST TO
SEAL THE RECORD

Plaintiffs and Appellees,
v.
JOHN KONTRABECKI,
Defendant and Appellant.

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The Court has duly considered Aron Oliner, as Chapter 11 Trustee of the Kontrabecki

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Group LP, Lehman Brothers Holdings Inc., and John Kontrabecki’s Joint Request to Seal the

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Record in this action. The record at issue relates to an appeal of a decision of the United

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States Bankruptcy Court for the Northern District of California. This Court dismissed the

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appeal on the basis that the Bankruptcy Court’s order was interlocutory, and therefore this

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Court lacked jurisdiction. The Bankruptcy Court later vacated its decision along with several

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of its other rulings pursuant to a settlement between the parties.

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“The proponent of sealing bears the burden with respect to sealing. A failure to meet

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that burden means that the default posture of public access prevails.” Kamakana v. City &

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County of Honolulu, 447 F.3d 1172, 1182 (9th Cir. 2006).

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Two standards generally govern motions to seal documents like the one at issue here.1

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First, a “compelling reasons” standard applies to most judicial records. See Kamakana, 447

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F.3d at 1178 (holding that “[a] party seeking to seal a judicial record . . . bears the burden of .

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. . meeting the ‘compelling reasons’ standard”); Foltz v. State Farm Mut. Auto. Ins. Co., 331

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F.3d 1122, 1135-36 (9th Cir. 2003). This standard derives from the common law right “to

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inspect and copy public records and documents, including judicial records and documents.”

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Kamakana, 447 F.3d at 1178 (citation and internal quotation marks omitted). To limit this

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common law right of access, a party seeking to seal judicial records must show that

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“compelling reasons supported by specific factual findings . . . outweigh the general history

United States District Court
For the Northern District of California

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of access and the public policies favoring disclosure.” Id. at 1178-79 (internal quotation

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marks and citations omitted).

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Second, a different standard applies to “private materials unearthed during discovery,”

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as such documents are not part of the judicial record. Id. at 1180. Rule 26(c) of the Federal

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Rules of Civil Procedure governs here, providing that a trial court may grant a protective

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order “to protect a party or person from annoyance, embarrassment, oppression, or undue

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burden or expense.”

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The relevant standard for purposes of Rule 26(c) is whether “‘good cause’ exists to

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protect th[e] information from being disclosed to the public by balancing the needs for

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discovery against the need for confidentiality.” Phillips ex rel. Estates of Byrd v. Gen.

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Motors Corp., 307 F.3d 1206, 1213 (9th Cir. 2002). This “good cause” standard presents a

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lower burden for the party wishing to seal documents than the “compelling reasons”

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standard. The cognizable public interest in judicial records that underlies the “compelling

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reasons” standard does not exist for documents produced between private litigants. See

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Kamakana, 447 F.3d at 1180 (holding that “[d]ifferent interests are at stake with the right of

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A third standard covers the “narrow range of documents” such as “grand jury
transcripts” and certain “warrant materials” that “traditionally [have] been kept secret for
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omitted). No party asserts that this third standard is relevant here.
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access than with Rule 26(c)”); Foltz, 331 F.3d at 1134 (“When discovery material is filed

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with the court . . . its status changes.”).

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In Phillips, the Ninth Circuit held that “good cause” is also the proper standard when a
party seeks access to previously sealed discovery attached to a non-dispositive motion. 307

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F.3d at 1213 (“when a party attaches a sealed discovery document to a non-dispositive

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motion, the usual presumption of the public’s right of access is rebutted”). Non-dispositive

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motions “are often ‘unrelated, or only tangentially related, to the underlying cause of

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action,’” and, as a result, the public’s interest in accessing dispositive materials does “not

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apply with equal force” to non-dispositive materials. Kamakana, 447 F.3d at 1179. In light

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United States District Court
For the Northern District of California

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of the weaker public interest in non-dispositive materials, the Court applies the “good cause”

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standard when parties wish to keep them under seal.

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Here, the parties wish to seal the entire record of the appeal. Rule 26(c) does not

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govern this request because the record of the appeal does not constitute “private materials

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unearthed during discovery” but rather, materials that have become part of the judicial

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record. Kamakana, 447 F.3d at 1180. They are, in fact, the entire judicial record.

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The parties argue that the documents fall within the Phillips exception to the general

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presumption of access because they argue the Court’s order was non-dispositive. Mot. at 3;

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see Foltz, 331 F.3d at 1135 (holding that the Phillips exception is “expressly limited to the

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status of materials . . . attached to a non-dispositive motion”) (emphasis in original). The

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parties argue that since this Court’s order found the orders from which Kontrabecki appealed

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to be interlocutory, the orders appealed from were thus non-dispositive of the case. Thus, the

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parties argue, this Court’s order denying Kontrabecki leave to appeal and dismissing the

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appeal for lack of jurisdiction was also non-dispositive.

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The Court disagrees. The cases addressing the use of the “good cause” standard deal

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with the attachment of previously-sealed documents to non-dispositive motions. See, e.g.,

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Phillips, 307 F.3d at 1213 (“when a party attaches a sealed discovery document to a non-

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dispositive motion, the usual presumption of the public’s right of access is rebutted”)

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(emphasis added).
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First, the parties are not requesting the sealing of documents that were produced by

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private parties during discovery. They are requesting the sealing of the entire court record

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itself. Second, they are not requesting the sealing of documents that they state were

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previously sealed. The parties do not state that the documents they wish to seal were

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governed by a protective order or previously sealed. Third, they are not requesting the

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sealing of documents attached to a non-dispositive motion. The parties are requesting the

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sealing of the court record itself, including motions and the opinion of this Court. Fourth, as

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the district court order disposed of the appeal, it is rather disingenuous to characterize it as a

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“non-dispositive order.” Thus, the “good cause” standard does not apply here.

United States District Court
For the Northern District of California

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Accordingly, the Court applies the “compelling reasons” standard. In general,

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“compelling reasons” sufficient to outweigh the public’s interest in disclosure and justify

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sealing court records exist when such ‘court files might have become a vehicle for improper

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purposes,” such as the use of records to gratify private spite, promote public scandal,

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circulate libelous statements, or release trade secrets. Id. at 1179. A party seeking to seal

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judicial records must show that “compelling reasons supported by specific factual findings . .

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. outweigh the general history of access and the public policies favoring disclosure.” Id. at

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1178-79 (internal quotation marks and citations omitted). “The mere fact that the production

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of records may lead to a litigant’s embarrassment, incrimination, or exposure to further

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litigation will not, without more, compel the court to seal its records.” Id.

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The parties have not addressed, and thus, have not met this standard. The parties

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conclusory statements, aimed at the “good cause standard,” regarding embarrassment,

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incrimination and undue burden are unavailing. See Mot. at 3 (arguing sealing the record

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necessary to protect Kontrabecki from “embarrassment,” the record “constitutes annoyance,”

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and is an “undue burden, as it inhibits his pursuit of his professional and business

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endeavors”). While the Court appreciates the record may lead to some embarrassment or

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annoyance, this matter was the subject of multiple press accounts at the time, and has become

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a matter of the public record. The parties have provided no specific factual findings

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demonstrating the likelihood that the continued existence of the record – which is and has
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been public since 2004 – would be used to gratify private spite, promote public scandal,

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circulate libelous statements, or release trade secrets.

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A strong presumption in favor of access is the starting point of our analysis.

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Kamakana, 447 F.3d at 1178. A party seeking to seal a judicial record then bears the burden

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of overcoming this strong presumption by meeting the “compelling reasons” standard. Id.

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That is, the party must articulate compelling reasons supported by specific factual findings

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that outweigh the general history of access and the public policies favoring disclosure, such

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as the public interest in understanding the judicial process. Id. The parties here have not

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articulated any compelling reasons supported by specific factual findings. Their broad

United States District Court
For the Northern District of California

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statements regarding general embarrassment are insufficient. Accordingly, the joint request

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to seal the record is DENIED.

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IT IS SO ORDERED.

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CHARLES R. BREYER
UNITED STATES DISTRICT JUDGE

Dated: December 19, 2011

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