Federal Trade Commission v. DIRECTV, Inc. et al
Filing
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ORDER by Judge Haywood S. Gilliam, Jr., GRANTING IN PART AND DENYING IN PART 298 DIRECTV's request to seal certain trial exhibits. (hsglc3S, COURT STAFF) (Filed on 3/3/2017)
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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FEDERAL TRADE COMMISSION,
Case No. 15-cv-01129-HSG
Plaintiff,
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v.
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DIRECTV, INC., et al.,
Defendants.
ORDER GRANTING IN PART AND
DENYING IN PART DIRECTV’S
REQUEST TO SEAL CERTAIN TRIAL
EXHIBITS
Re: Dkt. No. 298
United States District Court
Northern District of California
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Pending before the Court is the request by Defendants DIRECTV and DIRECTV, LLC
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(collectively, “DIRECTV”) to seal certain exhibits that the parties plan to offer at trial (“trial
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exhibits”). See Dkt. No. 298 to 298-21. DIRECTV and the Federal Trade Commission (“FTC”)
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have filed a joint statement, Dkt. No. 298, two charts summarizing the parties’ positions, Dkt.
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Nos. 298 at 4-16 & 298-3, a declaration by DIRECTV’s counsel, Dkt. No. 298-1 (“Murphy
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Decl.”), a proposed order, Dkt. No. 298-2, all of the trial exhibits subject to the sealing request,
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Dkt. Nos. 298-4 to 298-20, and proof of service, Dkt. No. 298-21. Having carefully reviewed all
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of the materials, the Court GRANTS IN PART and DENIES IN PART DIRECTV’s sealing
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request.
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I.
LEGAL STANDARD
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Courts generally apply a “compelling reasons” standard when considering motions to seal
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documents. Pintos v. Pac. Creditors Ass’n, 605 F.3d 665, 677-78 (9th Cir. 2010). “This standard
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derives from the common law right ‘to inspect and copy public records and documents, including
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judicial records and documents.’” Id. (quoting Kamakana v. City & Cnty. of Honolulu, 447 F.3d
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1172, 1178 (9th Cir. 2006)). “[A] strong presumption in favor of access is the starting point.”
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Kamakana, 447 F.3d at 1178 (citation and internal quotation marks omitted). To overcome this
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strong presumption, the moving party must “articulate compelling reasons supported by specific
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factual findings that outweigh the general history of access and the public policies favoring
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disclosure, such as the public interest in understanding the judicial process.” Id. at 1178-79
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(citations, internal quotation marks, and alterations omitted).
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“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
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improper 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 (citation and internal quotation
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marks omitted). The court must “balance the competing interests of the public and the party who
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seeks to keep certain judicial records secret. After considering these interests, if the court decides
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to seal certain judicial records, it must base its decision on a compelling reason and articulate the
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United States District Court
Northern District of California
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factual basis for its ruling, without relying on hypothesis or conjecture.” Id. (citations, brackets,
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and internal quotation marks omitted). For example, a court may order sealing under the
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“compelling reasons” standard of confidential and proprietary business information that would be
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“readily subject to improper use resulting in significant competitive harm if disclosed publicly and
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available to competitors.” See In re Incretin-Based Therapies Prod. Liab. Litig., No. 13MD2452
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AJB (MDD), 2015 WL 11658712, at *3 (S.D. Cal. Nov. 18, 2015).
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A trial “is at the heart of the interest in ensuring the public’s understanding of the judicial
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process and of significant public events.” Kamakana, 447 F.3d at 1179 (internal quotation marks
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omitted). Therefore, a party seeking to seal evidence at trial must articulate “compelling reasons”
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for doing so. Id.; see also United States v. Bazaarvoice, Inc., No. 13-CV-00133-WHO, 2014 WL
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11297188, at *1 (N.D. Cal. Jan. 21, 2014) (same); Microsoft Corp. v. Motorola, Inc., No. C10-
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1823JLR, 2012 WL 5476846, at *1 (W.D. Wash. Nov. 12, 2012) (same).
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Civil Local Rule 79-5 supplements the “compelling reasons” standard. The party seeking
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to file under seal must “establish[ ] that the document, or portions thereof, are privileged,
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protectable as a trade secret or otherwise entitled to protection under the law. . . . The request
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must be narrowly tailored to seek sealing only of sealable material . . . .” Civ. L.R. 79-5(b).
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Finally, records attached to motions that are only “tangentially related to the merits of a
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case” are not subject to the strong presumption of access. Ctr. for Auto Safety v. Chrysler Grp.,
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LLC, 809 F.3d 1092, 1101 (9th Cir. 2016). Accordingly, parties moving to seal such records must
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meet the lower “good cause” standard of Rule 26(c) of the Federal Rules of Civil Procedure. Id. at
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1097. The “good cause” standard requires a “particularized showing” that “specific prejudice or
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harm will result” if the information is disclosed. Phillips ex rel. Estates of Byrd v. Gen. Motors
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Corp., 307 F.3d 1206, 1210-11 (9th Cir. 2002) (citation and internal quotation marks omitted); see
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also Fed. R. Civ. P. 26(c).
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II.
DISCUSSION
Here, the Court applies the “compelling reasons” standard because the trial exhibits by
definition have more than a tangential relation to the merits of the case, see Ctr. for Auto Safety,
809 F.3d at 1101, and because the evidence introduced at the trial is central to the public’s
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United States District Court
Northern District of California
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understanding of the judicial process, see Kamakana, 447 F.3d at 1179.
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The Court GRANTS the request to seal Trial Exhibit 1365 because it contains
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DIRECTV’s confidential source code, which is a trade secret. See Apple, Inc. v. Samsung Elecs.
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Co., No. 11-CV-01846-LHK, 2012 WL 6115623, at *2 (N.D. Cal. Dec. 10, 2012) (“Confidential
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source code clearly meets the definition of a trade secret . . . [and therefore] meets the ‘compelling
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reasons’ standard.”); see also Kamakana, 447 F.3d at 1179 (describing “release of trade secrets”
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as an “improper purpose” justifying sealing under the “compelling reasons” standard); Civ. L.R.
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79-5 (trade secrets may be sealed).
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The Court DENIES the request to seal the remaining proffered trial exhibits because
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DIRECTV has not persuasively articulated “compelling reasons” for sealing them. For example,
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some of the trial exhibits contain historical pricing information that would not appear to cause
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significant competitive harm to DIRECTV if divulged. See, e.g., Trial Ex. 72 (DIRECTV
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presentation from 2011, projecting pricing strategy through 2014). Other trial exhibits contain
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more recent pricing information, but do not appear to contain business strategy that would result in
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significant competitive harm to DIRECTV if divulged. See, e.g., Trial Ex. 2119 (DIRECTV’s
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2016 “All Included” National Offer - Business Rules). While many trial exhibits contain financial
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information, DIRECTV has failed to persuasively explain why the introduction of such
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information at an open trial would cause significant competitive harm to the company. This is
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particularly true given that (a) much of the information is historical in nature, see, e.g., Trial Exs.
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660 and 2005 (financial data going back to 2005), and (b) DIRECTV was at all relevant times a
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publicly-traded company or a subsidiary of a publicly-traded company. DIRECTV also has not
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convincingly explained why disclosure of certain trial exhibits containing “customer care metrics
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and strategy” would cause significant competitive harm to the company. See, e.g., Trial Ex. 641
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(graphs of bundle-related executive escalations in 2014 and 2015). DIRECTV similarly has not
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made the requisite showing under the “compelling reasons” standard with regard to trial exhibits
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pertaining to “subscriber data,” and the fact that this information is “not normally available to the
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public” is not alone sufficient. See, e.g., Trial Ex. 2209 (customer churn data from April 2012 to
March 2015); see also Murphy Decl. ¶ 4(d) (claiming that disclosure of non-public customer
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United States District Court
Northern District of California
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churn statistics could harm DIRECTV’s “competitive standing,” without explaining why). In
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addition, the Court is not persuaded that disclosure of certain trial exhibits containing internal
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“web analytics” research would reveal trade secrets or cause competitive harm, see, e.g., Trial Ex.
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1146 (findings on conversion rates for users entering purchase flow). The fact that motions to seal
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these documents were granted under the “good cause” standard is not dispositive here, see
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Kamakana, 447 F.3d at 1180 (“A ‘good cause’ showing will not, without more, satisfy a
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‘compelling reasons’ test.”). Finally, for the great majority of the trial exhibits, DIRECTV seeks
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to seal the documents in their entirety—including substantial portions that the Court considers
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clearly nonsealable. See, e.g., Trial Ex. 804 (containing, inter alia, aggregate demographic data
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that is clearly nonsealable). Such over-inclusive sealing requests run afoul of the “narrowly
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tailored” requirement for sealing in this District. See Civ. L.R. 79-5(b).
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Overall, balancing the competing interests of the public and DIRECTV, the Court finds
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that there are not “compelling reasons” to seal the remaining proffered trial exhibits—particularly
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considering the strong public policy favoring the disclosure of trial proceedings in this
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enforcement action brought by the federal government against a prominent company with a large
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number of customers. At the end of this bench trial, the Court must issue findings of fact and
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conclusions of law regarding the claims at issue in this case. The documents DIRECTV seeks to
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seal go to the heart of the contested liability and restitution issues to be resolved by the Court. For
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this reason, it is difficult to see how the Court could issue a transparent and complete ruling that
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informs the public of the basis for its decision if these exhibits are not a part of the public record to
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which the Court can refer.
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III.
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CONCLUSION
For the foregoing reasons, the Court GRANTS IN PART and DENIES IN PART
DIRECTV’s request to seal certain proffered trial exhibits. If the exhibits that are the subject of
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DIRECTV’s sealing application are offered at trial, only Trial Exhibit 1365 will be sealed.
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However, the versions filed on the Court’s docket at Dkt. No. 298 in support of the sealing
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application will remain under seal. These documents were filed for the sole purpose of enabling
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the Court to make a determination as to whether the documents meet the standard for sealing at
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United States District Court
Northern District of California
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trial. The public interest in accessing these documents will only be triggered if they are actually
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offered at trial, as they will otherwise be irrelevant to the proceedings.
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IT IS SO ORDERED.
Dated: 03/03/2017
______________________________________
HAYWOOD S. GILLIAM, JR.
United States District Judge
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