Heartland Payment Systems, Inc. v. Mercury Payments Systems LLC

Filing 126

ORDER ON MOTIONS TO SEAL by Judge Claudia Wilken granting in part and denying in part 109 Administrative Motion to File Under Seal; granting in part and denying in part 112 Administrative Motion to File Under Seal; granting in part and denying in part 120 Administrative Motion to File Under Seal. (jebS, COURT STAFF) (Filed on 4/8/2016)

1

IN THE UNITED STATES DISTRICT COURT

2

FOR THE NORTHERN DISTRICT OF CALIFORNIA

3
4

HEARTLAND PAYMENT SYSTEMS, INC.,

No. C 14-0437 CW

5

Plaintiff and CounterDefendant,

ORDER ON MOTIONS
TO SEAL

6
7
8
9
10

v.
MERCURY PAYMENT SYSTEMS, LLC,
Defendant and Counter-Claimant.
________________________________/

United States District Court
For the Northern District of California

Before the Court are administrative motions to seal Defendant
11
and Counter-Claimant Mercury Payment Systems’ unredacted Amended
12
Answer, Affirmative Defenses and Counterclaims to Heartland’s
13
First Amended Complaint (Docket No. 109), Plaintiff and Counter14
Defendant Heartland Payment Systems’ Motion to Dismiss Mercury’s
15
Counterclaims and to Strike Mercury’s Unclean Hands Affirmative
16
Defense (Docket No. 112) and Mercury’s Opposition to Heartland’s
17
Motion to Dismiss and to Strike (Docket No. 120).
18
Pursuant to Civil Local Rule 79-5, a party seeking to file a
19
document under seal must establish that the portions sought to be
20
sealed “are privileged, protectable as a trade secret or otherwise
21
entitled to protection under the law.”

Civ. L.R. 79-5(b).

The

22
request must be “narrowly tailored” to cover only “sealable
23
material.”

Id.

24
“Historically, courts have recognized a ‘general right to
25
inspect and copy public records and documents, including judicial
26
records and documents.’”

Kamakana v. City & Cty. of Honolulu, 447

27
F.3d 1172, 1178 (9th Cir. 2006) (citation omitted).
28

“Unless a

1

particular court record is one ‘traditionally kept secret,’ a

2

‘strong presumption in favor of access’ is the starting point.”

3

Id. (quoting Foltz v. State Farm Mut. Auto. Ins. Co., 331 F.3d

4

1122, 1135 (9th Cir. 2003)).

5

When a party seeks to seal information attached to a

6

dispositive motion, that party must “‘articulate compelling

7

reasons supported by specific factual findings’ that outweigh the

8

general history of access and the public policies favoring

9

disclosure.”

Id. at 1178-79 (quoting Foltz, 331 F.3d at 1135)

United States District Court
For the Northern District of California

10

(brackets omitted).

11

at the heart of the interest in ensuring the ‘public’s

12

understanding of the judicial process and of significant public

13

events.’”

14
15
16

I.

Resolving “a dispute on the merits . . . is

Id. at 1179 (citation omitted).

Mercury’s Motion to File  Under Seal Amended Answer,
Affirmative Defenses, and Counterclaims to Heartland’s
First Amended Complaint
Mercury moves to file under seal an unredacted version of its

17

Amended Answer, Affirmative Defenses and Counterclaims and

18

exhibits attached to them (Docket No. 109).

19

motion on Heartland’s previous designation of certain documents as

20

subject to the parties’ protective order.

21

declaration specifying bases for maintaining certain materials

22

under seal.

23

Mercury bases this

Heartland submitted a

Docket No. 111, Declaration of Kajsa M. Minor.

The Court applies the “compelling reasons” standard and makes

24

the following rulings.

25

Compensation Sols., LLC, 2015 WL 4235356, at *2 (N.D. Cal.)

26

(“Because Plaintiff’s complaint and Defendant’s answer and

27

counter-claim are the pleadings on which this action is based, the

See Delfino Green & Green v. Workers

28
2

1

Court applies the ‘compelling reasons’ standard to Defendant's

2

motions to seal.”).

3

Mercury’s Second Affirmative Defense: Unclean Hands

4

Material

Ruling

Page 15:9-14
beginning with “A
document
produced" and
ending with
“under
Heartland’s
Interchange Plus
Pricing”

GRANTED, because the lines describe
proprietary pricing information and
communications about pricing (“with the
expectation of confidentiality,” Minor Dec.
¶ 3), which Heartland asserts “could be used
by competitors to undercut Heartland and
expose Heartland to risk of competitive harm,”
id. ¶ 6.

Page 15:14-18
beginning with
“An advertisement
produced” and
ending with “a
small merchant”1

DENIED, because Heartland’s declaration does
not support sealing, id. ¶ 7.

Page 15:18–16:1
beginning with
“Heartland also
offers”

GRANTED, because the lines describe
proprietary pricing information and
communications about pricing (“with the
expectation of confidentiality,” id. ¶ 3),
which Heartland asserts could result in
competitive harm if disclosed, id. ¶ 8.

Page 16:18-19

DENIED, because Heartland’s declaration does
not support sealing, id. ¶ 9.

Page 17:14-21 and
17:22-23 ending
with “email to
Heartland”

GRANTED, because the lines “reveal the
identity of a Heartland customer who is not a
party to this lawsuit, that customer’s
confidential communications with Heartland,
and certain purported terms of that customer’s
agreement with Heartland, without consent of
the customer,” id. ¶ 10. Also, because the
portion to be sealed is an example of a
practice that otherwise is described in nonsealed portions of the Amended Counterclaims
about whether Heartland charges a termination
fee without previously disclosing it, the
public interest in the sealed information is
minimal. See Affirmative Defenses ¶ G; Music
Grp. Macao Commercial Offshore Ltd. v. Foote,
2015 WL 3993147, at *2 (N.D. Cal.).

Page 17:23-27

DENIED, because Heartland’s declaration does

5
6
7
8
9

United States District Court
For the Northern District of California

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26

1

27
28

Heartland’s declaration first refers to the information on
Page 15:18-20 as not sealable, see id. ¶ 7, and, then, sealable,
see id. ¶ 8. The Court reads the reasons to seal in paragraph
eight to apply to Page 15:18–20.
3

1
2
3
4
5
6
7

beginning with
“Even the
smallest”

Mercury’s Counterclaim: Heartland’s Literally False or Misleading
Advertising Claims
Material

Ruling

Page 27:6-14
ending with
“Interchange Plus
Pricing”

GRANTED, because the lines describe
proprietary pricing information and
communications about pricing (“with the
expectation of confidentiality,” Minor Dec.
¶ 3), which Heartland asserts could result in
competitive harm if disclosed, id. ¶ 12.

Page 27:14-15
beginning with “A
document
produced” and
ending with
“HPS084703”

DENIED, because Heartland’s declaration does
not support sealing, id. ¶ 13.

Page 29:9-14
(para. 32) and
Exhibit C

DENIED, because Heartland’s declaration does
not support sealing, id. ¶ 14.

Page 29:15-21
(para. 33)

GRANTED, because the lines describe
proprietary pricing information and
communications about pricing (“with the
expectation of confidentiality,” id. ¶ 3),
which Heartland asserts could result in
competitive harm if disclosed, id. ¶ 15.

Page 30:21

DENIED, because Heartland’s declaration does
not support sealing, id. ¶ 16.

8
9

United States District Court
For the Northern District of California

10
11
12
13
14
15
16
17

not support sealing, Minor Dec. ¶ 11.

18
19
20
21
22
23
24
25
26
27
28
4

1
2
3
4
5
6
7
8
9

United States District Court
For the Northern District of California

10
11
12
13
14
15
16
17
18
19
20
21

Page 32:18-33:8

GRANTED IN PART and DENIED IN PART. Page
32:18–24 describes proprietary pricing
information and communications about pricing
(“with the expectation of confidentiality,”
id. ¶ 3), which Heartland asserts could result
in competitive harm, if disclosed, id. ¶ 17.
However, Page 32:25–33:8 describes the name of
a new fee, internal Heartland communications
about the importance of the fee and internal
Heartland communications about how it expected
customers to react to the fee. Although
Heartland identifies an interest in
maintaining communications about its pricing
strategy confidential, the information is
relevant to Mercury’s theory of how the name
of the fee is deceptive for its “fair and
upfront pricing” and Unfair Competition Law
(UCL) claims and, thus, there is a strong
public interest in the information. See
Kamakana, 447 F.3d at 1179. Cf. In re Elec.
Arts, Inc., 298 F. App’x 568, 569 (9th Cir.
2008) (unpublished) (“A ‘trade secret may
consist of any formula, pattern, device or
compilation of information which is used in
one’s business, and which gives him an
opportunity to obtain an advantage over
competitors who do not know or use it.’”
(quoting Restatement of Torts § 757, cmt. B)).
Also, Heartland’s prior motion to dismiss
referred to this fee by name and argued that
Mercury “ignore[d] that Heartland specifically
discloses this fee in Heartland’s Merchant
Application and identifies it as a fee charged
by Heartland[.]” Docket No. 94, Heartland’s
Motion to Dismiss at 8. Finally, Heartland
has not explained precisely how the
information on Page 32:25–33:8 would be used
by competitors to harm it. Thus, Heartland
provides sufficiently compelling reasons to
seal lines revealing pricing terms, but not
lines revealing how Heartland expected
customers to react to it.

22
23
24
25
26
27
28
5

Page 33:14-18
ending with
“HPS082903.”

GRANTED, because the lines describe
proprietary pricing information and
Heartland’s financial situation, which
Heartland asserts could result in competitive
harm if disclosed. Id. ¶ 18. Yet, given that
this information ultimately may be relevant to
Mercury’s “fair and upfront pricing” claim,
the public interest in disclosure might
outweigh the reasons Heartland provides for
sealing later in the litigation. See Music
Grp. Macao, 2015 WL 3993147, at *6 (“It may
well be that, as this case progresses the
balance shifts in favor of disclosure.”).

Page 33:18-26
beginning with
“One Heartland
executive”

DENIED. Heartland asserts that these lines
“describe proprietary pricing terms and
formulas and compilations of information used
by Heartland in its business which give
Heartland an opportunity to obtain an
advantage over competitors who do not know or
use it,” and contain pricing strategy
information that competitors could use to
undercut Heartland. Id. ¶ 19. Yet the lines
refer to how Heartland benefited from the fee,
how it should use or adjust the fee and how it
should explain the fee to customers, all of
which relate to the merits of Mercury’s “fair
and upfront pricing” and UCL claims and, thus,
there is a strong public interest in the
information. See Kamakana, 447 F.3d at 1179.
In addition, Heartland has not explained
precisely how the information would be used by
competitors to harm it.

Page 37:9-38:2

GRANTED IN PART and DENIED IN PART. Heartland
explains that the lines reveal confidential
nonparty customers’ information without the
customers’ consent. Minor Dec. ¶ 20. Yet
this reason only justifies redacting the names
of the customers. Thus, the motion to seal is
GRANTED to the extent the names are redacted,
but DENIED as to the information about the
customers’ interactions with Heartland.

Page 38:3–4

DENIED, because Heartland’s declaration does
not support sealing, id. ¶ 21.

Page 38:10–12 and
Exhibit C

DENIED, because Heartland’s declaration does
not support sealing, id. ¶ 22.

1
2
3
4
5
6
7
8
9

United States District Court
For the Northern District of California

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

6

Page 38:12-20
beginning with
“Heartland’s
‘Monthly
Minimum’”

GRANTED, because the lines contain proprietary
pricing information and communications about
pricing, which Heartland asserts could result
in competitive harm if disclosed, and because
the lines reveal confidential nonparty
customers’ information without the customers’
consent. Minor Dec. ¶ 23. Yet, given that
non-customer-identifying information
ultimately may be relevant to Mercury’s “fair
and upfront pricing” claim, the public
interest in disclosure might outweigh the
reasons Heartland provides for sealing later
in the litigation. See Music Grp. Macao, 2015
WL 3993147, at *6.

Page 38:23-25

DENIED, because Heartland’s declaration does
not support sealing, Minor Dec. ¶ 24.

Page 38:28-39:1

GRANTED IN PART and DENIED IN PART. The
motion is GRANTED to the extent the lines
reveal confidential nonparty customer
information without the customer’s consent.
Id. ¶ 25. However, this reason only justifies
redacting the customer’s name. Thus, the
motion to seal is GRANTED to the extent the
name is redacted, but DENIED with regard to
the information about the customer’s
interactions with Heartland.

Page 39:2-8

DENIED, because these lines describe whether a
given regulation existed in an industry and
Heartland communications about how customers
have reacted to a fee. Although Heartland
identifies an interest in maintaining
communications about its pricing strategy
confidential, the name of the fee, how
customers react to it and Mercury’s theory of
how it is deceptive relate to the merits of
Mercury’s “fair and upfront pricing” and UCL
claims and, thus, there is a strong public
interest in the information. See Kamakana,
447 F.3d at 1179. Also, Heartland has not
explained precisely how the information would
be used by competitors to harm it. Thus,
Heartland fails to provide sufficiently
compelling reasons to seal lines revealing how
Heartland characterizes its pricing and how
customers react to it.

Page 43:26-44:1

DENIED, because Heartland’s declaration does
not support sealing, Minor Dec. ¶ 27.

1
2
3
4
5
6
7
8
9

United States District Court
For the Northern District of California

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

7

1
2
3
4

Page 44:3-24 and
Exhibit F

5
6
7
8
9

II.

GRANTED. Heartland characterizes this
information as internal documents and
communications between Heartland and customers
that demonstrate “Heartland’s marketing and
communications strategy.” Id. ¶ 28. Also,
there appears to be minimal public interest in
this information because, although it relates
to Mercury’s defamation claim by describing
Heartland’s marketing and communication
strategy, the basis for that claim is the
content of an advertisement—“Pennies Add Up”—
that is not sealed. Accordingly, the balance
favors sealing the material at this time.

Heartland’s Motion to File  Under Seal Motion to Dismiss

Heartland moves to file under seal portions of its motion to

United States District Court
For the Northern District of California

10

dismiss Mercury’s Amended Counterclaims and Memorandum of Points

11

and Authorities, and portions of the Declaration of Lisa A. Jacobs

12

in support of the motion to dismiss (Docket No. 112).

13

applies the “compelling reasons” standard and makes the following

14

rulings.

15

Heartland’s Motion to Dismiss

16

Material

Ruling

Page 7:24-26

GRANTED. The lines contain information about
“Heartland’s pricing strategy and billing
methodology,” which Heartland asserts could
result in competitive harm if disclosed, and
reveal confidential nonparty customer
information without the customer’s consent.
Docket No. 112-1, Declaration of Kajsa M.
Minor ¶ 5. Yet, given that this information
ultimately may be relevant to Mercury’s “fair
and upfront pricing” claim, the public
interest in disclosure might outweigh the
reasons for sealing later in the litigation.
See Music Grp. Macao, 2015 WL 3993147, at *6.

17
18
19
20
21
22

The Court

23
24
25
26
27
28
8

Page 16:6-14

GRANTED IN PART and DENIED IN PART. The
motion is GRANTED to the extent it redacts
“the identity of two Heartland customers who
are not parties to this lawsuit, those
customer[s’] confidential interactions with
Heartland, and the terms of those customer[s’]
agreements with Heartland, without consent of
those customers,” Minor Dec. ¶ 6. Redaction
may prevent disclosure of their identities.
The motion otherwise is DENIED. Although
Heartland identifies an interest in
maintaining communications about its pricing
strategy confidential, the lines refer to
Mercury’s allegations about Heartland’s
disclosures to merchants and a refund
Heartland provided to an unidentified merchant
and, thus, relate to the merits of Mercury’s
“fair and upfront pricing” claim and support a
strong public interest in the information.
See Kamakana, 447 F.3d at 1179. Also,
Heartland has not explained precisely how the
information would be used by competitors to
harm it.

Page 17:6-15 and
17:25-18:1

GRANTED. The lines contain information about
“Heartland’s pricing strategy and billing
methodology,” which Heartland asserts could
result in competitive harm if disclosed, and
reveal confidential nonparty customers’
information without the customers’ consent.
Minor Dec. ¶ 7. Yet, given that this
information ultimately may be relevant to
Mercury’s “fair and upfront pricing” claim,
public interest in disclosure might outweigh
the reasons for sealing later in the
litigation. See Music Grp. Macao, 2015 WL
3993147, at *6.

Pages 24:18-24,
25:2-3, 25:10-12
and 25:14-16

GRANTED. The lines contain information about
“Heartland’s pricing strategy and billing
methodology,” which Heartland asserts could
result in competitive harm if disclosed.
Minor Dec. ¶ 8. Yet, given that this
information ultimately may be relevant to
Mercury’s “fair and upfront pricing” claim,
the public interest in disclosure might
outweigh the reasons for sealing later in the
litigation. See Music Grp. Macao, 2015 WL
3993147, at *6.

1
2
3
4
5
6
7
8
9

United States District Court
For the Northern District of California

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

9

1
2

Jacobs Declaration
Material

Ruling

Exhibit 4

GRANTED IN PART and DENIED IN PART. The
motion is GRANTED to the extent it redacts
information revealing confidential nonparty
customer information without the customer’s
consent. Minor Dec. ¶ 9. That reason
justifies redacting information that would
reveal the identity of the customer. However,
the motion otherwise is DENIED because the
exhibit contains additional information that
appears unrelated to such identifying
information, e.g., names of deposits and fees.
To the extent Heartland asserts that “Mercury
produced this document in the litigation and
designated it ‘Confidential’ pursuant to the
Stipulated Protective Order,” id., Mercury has
not filed a declaration in support of sealing.

3
4
5
6
7
8
9

United States District Court
For the Northern District of California

10
11
12

III. Mercury’s Motion to File Under Seal Opposition to Motion
to Dismiss Under Seal
Mercury moves to file under seal an unredacted version of its

13

opposition to Heartland’s motion to dismiss (Docket No. 120).

14

Mercury bases this motion on Heartland’s previous designation of

15

the documents at issue as subject to the parties’ protective

16

order.

17

maintaining certain materials under seal, while indicating that

18

other materials need not remain under seal.

19

Declaration of Kajsa M. Minor.

20

reasons” standard and makes the following rulings.

21

Material

Ruling

22

Page 8:23–24

DENIED, because Heartland’s declaration does
not support sealing, Minor Dec. ¶ 6.

Page 10:5–7

DENIED, because Heartland’s declaration does
not support sealing, id. ¶ 7.

Page 13:16–17

DENIED, because Heartland’s declaration does
not support sealing, id. ¶ 8.

Page 13:22–23

DENIED, because Heartland’s declaration does
not support sealing, id. ¶ 9.

23

Heartland submitted a declaration specifying bases for

24
25
26

Docket No. 122,

The Court applies the “compelling

27
28
10

Page 13:25–26

GRANTED, because the lines describe
proprietary pricing information and
Heartland’s financial situation, which
Heartland asserts could result in competitive
harm if disclosed. Id. ¶ 10. Yet, given that
this information ultimately may be relevant to
Mercury’s “fair and upfront pricing” claim,
the public interest in disclosure might later
outweigh the reasons for sealing. See Music
Grp. Macao, 2015 WL 3993147, at *6.

Page 13:28–14:2

DENIED. Heartland asserts that the lines
contain pricing strategy information “which,
if made public, could be used by competitors
to undercut Heartland and expose Heartland to
risk of competitive harm.” Minor Dec. ¶ 11.
Yet the lines describe internal Heartland
communications about how it expected customers
to react to a fee. Although Heartland
identifies an interest in maintaining
communications about its pricing strategy
confidential, the information is relevant to
Mercury’s theory of how the name of the fee is
deceptive for the merits of Mercury’s “fair
and upfront pricing” and UCL claims and, thus,
there is a strong public interest in the
information. See Kamakana, 447 F.3d at 1179.
Also, Heartland has not explained precisely
how the information about how it perceived
customers would react to the fee would be used
by competitors to harm Heartland. Thus,
Heartland provides insufficient reason to seal
lines revealing how Heartland characterizes
its pricing and expected customers to react.

1
2
3
4
5
6
7
8
9

United States District Court
For the Northern District of California

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

11

1

Page 14:17–24

GRANTED IN PART and DENIED IN PART. Heartland
explains that the lines reveal confidential
nonparty customers’ information without the
customers’ consent. Minor Dec. ¶ 12. Yet
this reason only justifies redacting the names
of the customers. To the extent Heartland
also asserts that the lines describe
“Heartland’s pricing strategy and billing
methodology with respect to certain
merchants,” and that revealing this
information could result in competitive harm,
id., Heartland fails to show compelling reason
to seal the remainder of the information. The
lines describe merchants complaining that they
were charged an early termination fee that
Heartland previously had not disclosed,
allegations relevant to Mercury’s “fair and
upfront pricing” and UCL claims and, thus,
supporting a strong public interest in the
information. See Kamakana, 447 F.3d at 1179.
Also, Heartland has not explained precisely
how the information about customer complaints
would be used by competitors to harm
Heartland. Thus, the motion to seal is
GRANTED to the extent the names are redacted,
but DENIED with regard to the remainder of the
information about the customers’ complaints.

Page 15:5–6

GRANTED IN PART and DENIED IN PART. The
motion is GRANTED to the extent the lines
reveal confidential nonparty customer
information without the customer’s consent,
Minor Dec. ¶ 25. However, this reason only
justifies redacting the name of the customer.
Thus, the motion is GRANTED to the extent the
name is redacted, but DENIED with regard to
the remainder of the information about the
customer’s interactions with Heartland.

2
3
4
5
6
7
8
9

United States District Court
For the Northern District of California

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

12

1
2
3
4
5
6
7
8
9

United States District Court
For the Northern District of California

10

Page 15:13–17

DENIED. These lines describe whether a given
regulation existed in an industry and
Heartland communications about how customers
have reacted to a fee. Although Heartland
identifies an interest in maintaining
communications about its pricing strategy
confidential, the name of the fee, how
customers react to it and Mercury’s theory of
how it is deceptive relate to the merits of
Mercury’s “fair and upfront pricing” and UCL
claims and, thus, there is a strong public
interest in the information. See Kamakana,
447 F.3d at 1179. Also, Heartland has not
explained precisely how the information would
be used by competitors to harm it. Thus,
Heartland fails to provide sufficiently
compelling reasons to seal lines revealing how
Heartland characterizes its pricing and how
customers react to it.
CONCLUSION

11
12

For the reasons above, the Court GRANTS IN PART and DENIES IN

13

PART the motions to seal (Docket Nos. 109, 112, 120).

14

party believes there are particularized compelling reasons to seal

15

the portions for which the Court denies the motions, it must file

16

within four days of the date this Order issues a supplemental

17

declaration addressing the deficiencies identified above.

18

neither party does so, then within ten days of the date this Order

19

issues the parties shall file public versions of the documents

20

addressed above in compliance with this Order and the District’s

21

Civil Local Rules 79-5(e)(2) and (f)(1)–(3).

22
23
24

If either

If

IT IS SO ORDERED.
Dated: April 8, 2016
CLAUDIA WILKEN
United States District Judge

25
26
27
28
13