Federal Trade Commission v. DIRECTV, Inc. et al

Filing 312

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)

1
2
3
4

UNITED STATES DISTRICT COURT

5

NORTHERN DISTRICT OF CALIFORNIA

6
7

FEDERAL TRADE COMMISSION,

Case No. 15-cv-01129-HSG

Plaintiff,
8
v.
9
10

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

11
Pending before the Court is the request by Defendants DIRECTV and DIRECTV, LLC

12
13

(collectively, “DIRECTV”) to seal certain exhibits that the parties plan to offer at trial (“trial

14

exhibits”). See Dkt. No. 298 to 298-21. DIRECTV and the Federal Trade Commission (“FTC”)

15

have filed a joint statement, Dkt. No. 298, two charts summarizing the parties’ positions, Dkt.

16

Nos. 298 at 4-16 & 298-3, a declaration by DIRECTV’s counsel, Dkt. No. 298-1 (“Murphy

17

Decl.”), a proposed order, Dkt. No. 298-2, all of the trial exhibits subject to the sealing request,

18

Dkt. Nos. 298-4 to 298-20, and proof of service, Dkt. No. 298-21. Having carefully reviewed all

19

of the materials, the Court GRANTS IN PART and DENIES IN PART DIRECTV’s sealing

20

request.

21

I.

LEGAL STANDARD

22

Courts generally apply a “compelling reasons” standard when considering motions to seal

23

documents. Pintos v. Pac. Creditors Ass’n, 605 F.3d 665, 677-78 (9th Cir. 2010). “This standard

24

derives from the common law right ‘to inspect and copy public records and documents, including

25

judicial records and documents.’” Id. (quoting Kamakana v. City & Cnty. of Honolulu, 447 F.3d

26

1172, 1178 (9th Cir. 2006)). “[A] strong presumption in favor of access is the starting point.”

27

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

28

strong presumption, the moving party must “articulate compelling reasons supported by specific

1

factual findings that outweigh the general history of access and the public policies favoring

2

disclosure, such as the public interest in understanding the judicial process.” Id. at 1178-79

3

(citations, internal quotation marks, and alterations omitted).

4

“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

6

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

7

circulate libelous statements, or release trade secrets.” Id. at 1179 (citation and internal quotation

8

marks omitted). The court must “balance the competing interests of the public and the party who

9

seeks to keep certain judicial records secret. After considering these interests, if the court decides

10

to seal certain judicial records, it must base its decision on a compelling reason and articulate the

11
United States District Court
Northern District of California

5

factual basis for its ruling, without relying on hypothesis or conjecture.” Id. (citations, brackets,

12

and internal quotation marks omitted). For example, a court may order sealing under the

13

“compelling reasons” standard of confidential and proprietary business information that would be

14

“readily subject to improper use resulting in significant competitive harm if disclosed publicly and

15

available to competitors.” See In re Incretin-Based Therapies Prod. Liab. Litig., No. 13MD2452

16

AJB (MDD), 2015 WL 11658712, at *3 (S.D. Cal. Nov. 18, 2015).

17

A trial “is at the heart of the interest in ensuring the public’s understanding of the judicial

18

process and of significant public events.” Kamakana, 447 F.3d at 1179 (internal quotation marks

19

omitted). Therefore, a party seeking to seal evidence at trial must articulate “compelling reasons”

20

for doing so. Id.; see also United States v. Bazaarvoice, Inc., No. 13-CV-00133-WHO, 2014 WL

21

11297188, at *1 (N.D. Cal. Jan. 21, 2014) (same); Microsoft Corp. v. Motorola, Inc., No. C10-

22

1823JLR, 2012 WL 5476846, at *1 (W.D. Wash. Nov. 12, 2012) (same).

23

Civil Local Rule 79-5 supplements the “compelling reasons” standard. The party seeking

24

to file under seal must “establish[ ] that the document, or portions thereof, are privileged,

25

protectable as a trade secret or otherwise entitled to protection under the law. . . . The request

26

must be narrowly tailored to seek sealing only of sealable material . . . .” Civ. L.R. 79-5(b).

27

Finally, records attached to motions that are only “tangentially related to the merits of a

28

case” are not subject to the strong presumption of access. Ctr. for Auto Safety v. Chrysler Grp.,
2

1

LLC, 809 F.3d 1092, 1101 (9th Cir. 2016). Accordingly, parties moving to seal such records must

2

meet the lower “good cause” standard of Rule 26(c) of the Federal Rules of Civil Procedure. Id. at

3

1097. The “good cause” standard requires a “particularized showing” that “specific prejudice or

4

harm will result” if the information is disclosed. Phillips ex rel. Estates of Byrd v. Gen. Motors

5

Corp., 307 F.3d 1206, 1210-11 (9th Cir. 2002) (citation and internal quotation marks omitted); see

6

also Fed. R. Civ. P. 26(c).

7
8
9

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

11
United States District Court
Northern District of California

10

understanding of the judicial process, see Kamakana, 447 F.3d at 1179.

12

The Court GRANTS the request to seal Trial Exhibit 1365 because it contains

13

DIRECTV’s confidential source code, which is a trade secret. See Apple, Inc. v. Samsung Elecs.

14

Co., No. 11-CV-01846-LHK, 2012 WL 6115623, at *2 (N.D. Cal. Dec. 10, 2012) (“Confidential

15

source code clearly meets the definition of a trade secret . . . [and therefore] meets the ‘compelling

16

reasons’ standard.”); see also Kamakana, 447 F.3d at 1179 (describing “release of trade secrets”

17

as an “improper purpose” justifying sealing under the “compelling reasons” standard); Civ. L.R.

18

79-5 (trade secrets may be sealed).

19

The Court DENIES the request to seal the remaining proffered trial exhibits because

20

DIRECTV has not persuasively articulated “compelling reasons” for sealing them. For example,

21

some of the trial exhibits contain historical pricing information that would not appear to cause

22

significant competitive harm to DIRECTV if divulged. See, e.g., Trial Ex. 72 (DIRECTV

23

presentation from 2011, projecting pricing strategy through 2014). Other trial exhibits contain

24

more recent pricing information, but do not appear to contain business strategy that would result in

25

significant competitive harm to DIRECTV if divulged. See, e.g., Trial Ex. 2119 (DIRECTV’s

26

2016 “All Included” National Offer - Business Rules). While many trial exhibits contain financial

27

information, DIRECTV has failed to persuasively explain why the introduction of such

28

information at an open trial would cause significant competitive harm to the company. This is
3

1

particularly true given that (a) much of the information is historical in nature, see, e.g., Trial Exs.

2

660 and 2005 (financial data going back to 2005), and (b) DIRECTV was at all relevant times a

3

publicly-traded company or a subsidiary of a publicly-traded company. DIRECTV also has not

4

convincingly explained why disclosure of certain trial exhibits containing “customer care metrics

5

and strategy” would cause significant competitive harm to the company. See, e.g., Trial Ex. 641

6

(graphs of bundle-related executive escalations in 2014 and 2015). DIRECTV similarly has not

7

made the requisite showing under the “compelling reasons” standard with regard to trial exhibits

8

pertaining to “subscriber data,” and the fact that this information is “not normally available to the

9

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

11
United States District Court
Northern District of California

10

churn statistics could harm DIRECTV’s “competitive standing,” without explaining why). In

12

addition, the Court is not persuaded that disclosure of certain trial exhibits containing internal

13

“web analytics” research would reveal trade secrets or cause competitive harm, see, e.g., Trial Ex.

14

1146 (findings on conversion rates for users entering purchase flow). The fact that motions to seal

15

these documents were granted under the “good cause” standard is not dispositive here, see

16

Kamakana, 447 F.3d at 1180 (“A ‘good cause’ showing will not, without more, satisfy a

17

‘compelling reasons’ test.”). Finally, for the great majority of the trial exhibits, DIRECTV seeks

18

to seal the documents in their entirety—including substantial portions that the Court considers

19

clearly nonsealable. See, e.g., Trial Ex. 804 (containing, inter alia, aggregate demographic data

20

that is clearly nonsealable). Such over-inclusive sealing requests run afoul of the “narrowly

21

tailored” requirement for sealing in this District. See Civ. L.R. 79-5(b).

22

Overall, balancing the competing interests of the public and DIRECTV, the Court finds

23

that there are not “compelling reasons” to seal the remaining proffered trial exhibits—particularly

24

considering the strong public policy favoring the disclosure of trial proceedings in this

25

enforcement action brought by the federal government against a prominent company with a large

26

number of customers. At the end of this bench trial, the Court must issue findings of fact and

27

conclusions of law regarding the claims at issue in this case. The documents DIRECTV seeks to

28

seal go to the heart of the contested liability and restitution issues to be resolved by the Court. For
4

1

this reason, it is difficult to see how the Court could issue a transparent and complete ruling that

2

informs the public of the basis for its decision if these exhibits are not a part of the public record to

3

which the Court can refer.

4

III.

5

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

7

DIRECTV’s sealing application are offered at trial, only Trial Exhibit 1365 will be sealed.

8

However, the versions filed on the Court’s docket at Dkt. No. 298 in support of the sealing

9

application will remain under seal. These documents were filed for the sole purpose of enabling

10

the Court to make a determination as to whether the documents meet the standard for sealing at

11
United States District Court
Northern District of California

6

trial. The public interest in accessing these documents will only be triggered if they are actually

12

offered at trial, as they will otherwise be irrelevant to the proceedings.

13
14
15
16

IT IS SO ORDERED.
Dated: 03/03/2017
______________________________________
HAYWOOD S. GILLIAM, JR.
United States District Judge

17
18
19
20
21
22
23
24
25
26
27
28
5