Richards v. Centripetal Networks, Inc. et al

Filing 138

ORDER by Judge Haywood S. Gilliam, Jr. GRANTING IN PART AND DENYING IN PART 127 MOTION TO SEAL. (ndr, COURT STAFF) (Filed on 1/27/2025)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 ALBERT RICHARDS, 8 Plaintiff, v. United States District Court Northern District of California 9 10 CENTRIPETAL NETWORKS, INC., et al., 11 Defendants. Case No. 23-cv-00145-HSG ORDER GRANTING IN PART AND DENYING IN PART MOTION TO SEAL Re: Dkt. No. 127 12 13 Pending before the Court is an administrative motion to seal materials that Plaintiff filed in 14 opposition to Defendants’ motion for summary judgment. Dkt. No. 127. For the reasons detailed 15 below, the Court GRANTS IN PART and DENIES IN PART the motion. 16 I. LEGAL STANDARD 17 Courts generally apply a “compelling reasons” standard when considering motions to seal 18 documents. Pintos v. Pac. Creditors Ass’n, 605 F.3d 665, 678 (9th Cir. 2010) (quoting Kamakana 19 v. City & Cty. of Honolulu, 447 F.3d 1172, 1178 (9th Cir. 2006)). “This standard derives from the 20 common law right ‘to inspect and copy public records and documents, including judicial records 21 and documents.’” Id. (quoting Kamakana, 447 F.3d at 1178). “[A] strong presumption in favor of 22 access is the starting point.” Kamakana, 447 F.3d at 1178 (quotations omitted). To overcome this 23 strong presumption, the party seeking to seal a judicial record attached to a dispositive motion 24 must “articulate compelling reasons supported by specific factual findings that outweigh the 25 general history of access and the public policies favoring disclosure, such as the public interest in 26 understanding the judicial process” and “significant public events.” Id. at 1178–79 (quotations 27 omitted). “In general, ‘compelling reasons’ sufficient to outweigh the public’s interest in 28 disclosure and justify sealing court records exist when such ‘court files might have become a 1 vehicle for improper purposes,’ such as the use of records to gratify private spite, promote public 2 scandal, circulate libelous statements, or release trade secrets.” Id. at 1179 (quoting Nixon v. 3 Warner Commc’ns, Inc., 435 U.S. 589, 598 (1978)). “The mere fact that the production of records 4 may lead to a litigant’s embarrassment, incrimination, or exposure to further litigation will not, 5 without more, compel the court to seal its records.” Id. The Court must “balance[] the competing interests of the public and the party who seeks to United States District Court Northern District of California 6 7 keep certain judicial records secret. After considering these interests, if the court decides to seal 8 certain judicial records, it must base its decision on a compelling reason and articulate the factual 9 basis for its ruling, without relying on hypothesis or conjecture.” Id. Civil Local Rule 79-5 10 supplements the compelling reasons standard set forth in Kamakana: the party seeking to file a 11 document or portions of it under seal “must explore all reasonable alternatives to filing documents 12 under seal, minimize the number of documents filed under seal, and avoid wherever possible 13 sealing entire documents . . . .” Civil L.R. 79-5(a). The party must further explain the interests 14 that warrant sealing, the injury that will result if sealing is declined, and why a less restrictive 15 alternative to sealing is not sufficient. See Civil L.R. 79-5(c). Records attached to nondispositive motions must meet the lower “good cause” standard of 16 17 Rule 26(c) of the Federal Rules of Civil Procedure, as such records “are often unrelated, or only 18 tangentially related, to the underlying cause of action.” See Kamakana, 447 F.3d at 1179–80 19 (quotations omitted). This requires a “particularized showing” that “specific prejudice or harm 20 will result” if the information is disclosed. Phillips ex rel. Estates of Byrd v. Gen. Motors Corp., 21 307 F.3d 1206, 1210–11 (9th Cir. 2002); see also Fed. R. Civ. P. 26(c). “Broad allegations of 22 harm, unsubstantiated by specific examples of articulated reasoning” will not suffice. Beckman 23 Indus., Inc. v. Int’l Ins. Co., 966 F.2d 470, 476 (9th Cir. 1992) (quotation omitted). 24 II. DISCUSSION 25 At Defendants’ request and consistent with Civil L.R. 79-5(f), Plaintiff filed a motion to 26 consider whether another party’s material should be sealed. Dkt. No. 127. The motion addresses 27 two exhibits that Plaintiff filed in opposition to Defendants’ motion for summary judgment, 28 Exhibits 41 and 77 to the Declaration of Mark L. Hejinian, as well as references to those exhibits 2 1 in Plaintiff’s opposition papers. Id. When Defendants produced Exhibits 41 and 77 to Plaintiff in 2 discovery, they were designated as “Confidential.” See id. at 2. Defendants state that Exhibits 41 3 and 77 contain “highly sensitive and competitive financial information concerning Centripetal, 4 including non-public investor information and compensation information.” See Dkt. No. 134 at 1. 5 Because Plaintiff filed these documents in opposition to the motion for summary judgment, the 6 Court applies the compelling reasons standard. United States District Court Northern District of California 7 Exhibit 41. Exhibit 41 is a spreadsheet, reflecting Centripetal’s internal tracking of its 8 outstanding shares. In addition to information such as the quantity of shares issued and the price 9 per share, Exhibit 41 includes the identity of and contact information for Centripetal’s 10 shareholders. Defendants argue that disclosing this information “would have a chilling effect on 11 Centripetal’s ability to raise new capital and attract institutional investors” because investors 12 “expect their confidentiality to be preserved . . . .” See id. at 2. The spreadsheet also indicates 13 whether any of the shareholders are Centripetal employees. Defendants explain that “[a] primary 14 means of compensation for Centripetal’s employees is in the form of confidential and non-public 15 stock options.” See id. at 3. Defendants urge that disclosing these compensation arrangements 16 would therefore “harm Centripetal’s talent retention, allowing competitors and recruiters to have 17 insight into Centripetal’s compensation structure and poach talent.” Id. 18 Exhibit 77. Exhibit 77 is an email exchange between Plaintiff and Defendant Jonathan 19 Rogers, which includes a 2020 capitalization table. Defendants contend that the capitalization 20 table “helps Centripetal maintain the calculation of its market value,” and “any public disclosure 21 of this information would allow competitors to extrapolate information that it can use to 22 understand Centripetal’s market value even today.” See id. 23 The Court agrees that Exhibit 41 contains sensitive financial information of non-party 24 investors. Such detail, particularly the identities and contact information of individual investors is 25 unrelated to the public’s understanding of the judicial proceedings in this case, and the public’s 26 interest in disclosure of this document is minimal. However, Exhibits 41 and 77 also contain 27 Centripetal financial information that is essential to Plaintiff’s remaining breach of contract and 28 fraud claims. At bottom, Plaintiff contends that Centripetal failed to notify him when the 3 United States District Court Northern District of California 1 company issued certain equity securities. Plaintiff cites the 2020 capitalization table, and the 2 information contained within it, as the “red flag” that alerted him that Defendants may have failed 3 to comply with their contractual obligations to provide notice of specific triggering events under 4 his Convertible Promissory Notes. See Dkt. No. 128-2. The “interest in ensuring the public’s 5 understanding of the judicial process and of significant public events,” Kamakana, 447 at 1179, is 6 thus not served if the basis for Plaintiff’s claims is redacted. Accordingly, the Court GRANTS IN 7 PART and DENIES IN PART the administrative motion to seal. 8 The Court GRANTS IN PART the administrative motion to seal Exhibit 41. The Court 9 finds that the portions of Exhibit 41 that identify specific investors divulge sensitive information 10 unrelated to the public’s understanding of the judicial proceedings in this action and the Court 11 finds that there are compelling reasons to file such information under seal. This includes the 12 information in the columns in Exhibit 41 for “Certificate ID”; “Shareholder”; “Holder Type”; 13 “Email”; and “Relationship.” The Court further finds that references to the specific investor 14 identities contained in Exhibit 41, including the two sentences in Plaintiff’s opposition brief, are 15 properly sealed. See Dkt. No. 128 at 13. Defendants have not presented compelling reasons to 16 seal the rest of the information contained in Exhibit 41 or to seal Exhibit 77, and any other 17 portions of Plaintiff’s materials citing to these Exhibits. The Court therefore DENIES the 18 remainder of the motion to seal. 19 III. CONCLUSION 20 The Court GRANTS IN PART and DENIES IN PART the administrative motion to file 21 under seal. Dkt. No. 127. Pursuant to Civil Local Rule 79-5(g)(1), documents filed under seal as 22 to which the administrative motion is granted will remain under seal. However, the Court 23 DIRECTS the parties to meet and confer and file public versions and revised redactions as needed 24 of all documents for which the proposed sealing has been denied within seven days of this order. IT IS SO ORDERED. 25 26 27 28 Dated: 1/27/2025 ______________________________________ HAYWOOD S. GILLIAM, JR. United States District Judge 4

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