Schwartz v. Cook et al

Filing 94

ORDER GRANTING IN PART AND DENYING IN PART 66 PLAINTIFF'S AND DENYING 85 DEFENDANT'S ADMINISTRATIVE MOTIONS TO FILE UNDER SEAL. Signed by Judge Beth Labson Freeman on 4/4/2016. (blflc2S, COURT STAFF) (Filed on 4/4/2016)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

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KRISTOPHER A. SCHWARTZ,

Case No. 5:15-cv-03347-BLF

Plaintiff,
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v.

United States District Court
Northern District of California

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ART COOK, et al.,
Defendants.

ORDER GRANTING IN PART AND
DENYING IN PART PLAINTIFF’S AND
DENYING DEFENDANT’S
ADMINISTRATIVE MOTION TO FILE
UNDER SEAL
[Re: ECF 66, 85]

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Before the Court are the parties’ administrative motions to file under seal portions of

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Plaintiff’s First Amended Complaint (“FAC”) and Defendant Bankers Trust Company of South

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Dakota’s (“BTC”)’s Motion to Dismiss, as well as exhibits attached thereto. ECF 66, 85. For the

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reasons stated below, Plaintiff’s motion is GRANTED IN PART and DENIED IN PART and

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BTC’s motion is DENIED without prejudice.

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I.

LEGAL STANDARD
Courts recognize a “general right to inspect and copy public records and documents,

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including judicial records and documents.” Kamakana v. City & Cnty. of Honolulu, 447 F.3d

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1172, 1178 (9th Cir. 2006). Two standards govern motions to seal portions of documents: a

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“compelling reasons” standard, which applies to dispositive motions, and a “good cause” standard,

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which applies to non-dispositive motions. Id. at 1179. Motions that are technically nondispositive

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may still require the party to meet the “compelling reasons” standard when the motion is more

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than tangentially related to the merits of the case. See Ctr. for Auto Safety v. Chrysler Grp., LLC,

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809 F.3d 1092, 1101 (9th Cir. 2016).

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To meet the “good cause standard,” “a ‘particularized showing’ under the . . . standard of

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Rule 26(c) will ‘suffice.’” Kamakana, 447 F.3d at 1180 (quoting Foltz, 331 F.3d at 1135, 1138).

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Compelling reasons generally exist when the “‘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, circulate

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libelous statements, or release trade secrets.” Id. (quoting Nixon v. Warner Commc’ns, Inc., 435

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U.S. 589, 598 (1978)), or where court files may serve “as sources of business information that

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might harm a litigant's competitive standing,” Nixon, 435 U.S at 598-99. The compelling reasons

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standard is invoked “even if the dispositive motion, or its attachments, were previously filed under

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seal or protective order.” Kamakana, 447 F.3d at 1179 (citing Foltz, 331 F.3d at 1136).
In this district, parties seeking to seal judicial records must follow Civil Local Rule 79-5,

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which requires, inter alia, that a sealing request be “narrowly tailored to seek sealing only of

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United States District Court
Northern District of California

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sealable material.” Civil L.R. 79-5(b). In addition, if a party seeks to file under seal a document

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designated as confidential by another party, the party must identify which portions of the

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document contain the designated confidential material and which party has designated the material

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as confidential. Civil L.R. 79-5(e). Within four days, the designating party must file a declaration

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establishing that all of the designated material is sealable. Civil L.R. 79-5(e)(1).

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II.

DISCUSSION
Plaintiff and BTC seek to seal portions of their FAC and Motion to Dismiss, respectively,

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as well as exhibits attached thereto because the documents contain information designated as

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“Confidential” or “Highly-Confidential—Attorneys’ Eyes Only” pursuant to the parties’

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protective order. See ECF 64, Protective Order.1 Because the FAC and Motion to Dismiss are

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more than tangentially related to the merits of the case, the compelling reasons standard governs

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both sealing requests. See, e.g., In re NVIDIA Corp. Derivative Litig., No. 06–cv–06110–SBA,

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2008 WL 1859067, at *3–4 (N.D. Cal. Apr. 23, 2008) (“While a complaint is not, per se, the

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actual pleading by which a suit may be disposed of, it is the root, the foundation, the basis by

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BTC and Defendants Art Cook, Roger Stanger, Ronald Zimmerman, and Buckles-Smith Electric
Company (“Buckles-Smith Defendants”) designated certain documents confidential, and the
parties agreed to treat all documents produced by non-parties Menke & Associates, Inc.
(“Menke”) and Chartwell Financial Advisory, Inc. (“Chartwell”) as “Highly Confidential—
Attorneys’ Eyes Only.” Michals Decl. ¶ 4, ECF 71.
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which a suit arises and must be disposed of”).

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A. Plaintiff’s Motion

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Plaintiff seeks to seal portions of his FAC and exhibits attached thereto because

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Defendants and/or non-parties Menke and Chartwell designated the information contained therein

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confidential. Bloom Decl. ¶¶ 5-6, ECF 68. Pursuant to Civil Local Rule 79-5(e), BTC and the

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Buckles-Smith Defendants timely filed declarations to support filing certain exhibits to and

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portions of the FAC under seal. See Michals Decl., ECF 71; Garrett Decl, ECF 72-1.

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1. Buckles-Smith Declaration

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In a detailed declaration, the Buckles-Smith Defendants state that the material they support
filing under seal2 contains information about their business performance, structure, and finances

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United States District Court
Northern District of California

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that could be used to gain unfair business advantage against them. Id. ¶ 8. They also state that

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some of the material contains personal information regarding the finances of Buckles-Smith

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employees and shareholders. Id. ¶ 10. The Buckles-Smith Defendants tie these reasons, which the

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Court finds compelling, to redactions that the Court finds to be narrowly tailored. Accordingly, the

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Court GRANTS Plaintiff’s motion to file the following under seal:

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Document
Exhibit D to the FAC

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Exhibit M to the FAC
Exhibit O to the FAC
Exhibit U to the FAC

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FAC ¶ 31

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Description
Contains confidential and personal
information regarding employee and
shareholder finances related to the BucklesSmith Defendants.
Same as above.
Same as above.
Contains confidential commercial business
information in regards to business
performance, as well as confidential and
personal information regarding employee
and shareholder finances related to the
Buckles-Smith Defendants
Contains confidential and personal
information regarding employee and

Order
GRANTED.

GRANTED.
GRANTED.
GRANTED.

GRANTED.

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Specifically, the Buckles-Smith Defendants support sealing Exhibits D, M, O, and U to the FAC
and FAC ¶¶ 31, 60, 123(D) (in part), 135-138, 156, 158-160, 165(C), 167, 168 (A), (C), and (D),
175 (in part), 177-178, 179 (in part), 180 (in part), 181, 182 (in part), 183-184, 231 (A), 235 (in
part), 236 (in part), 249 (A), and 260 (A) and (B).
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FAC ¶ 60
FAC ¶ 123(D)

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FAC ¶¶ 135–38

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FAC ¶¶ 156, 158-60

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FAC ¶¶ 164–71

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United States District Court
Northern District of California

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FAC ¶ 175

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FAC ¶¶ 177–78

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FAC ¶¶ 179–85

shareholder finances related to the BucklesSmith Defendants.
Same as above.
Part of ¶ 123(D) between “updated value as
of June 16, 2014,” and “based upon the
valuation” contains confidential financial and
commercial business information related to
the Buckles-Smith Defendants.
Contains confidential business information
regarding business performance related to
the Buckles-Smith Defendants.
¶¶ 156, 158–60 contain confidential business
information regarding business performance
related to the Buckles-Smith Defendants.
¶¶ 165(C), 168(D) contain confidential
business information regarding business
performance related to the Buckles-Smith
Defendants; ¶ 167 contains confidential
business information regarding business
practices and finances related to the BucklesSmith Defendants; ¶¶ 168(A), (C) contains
confidential business information regarding
business practices and employee
compensation related to the Buckles-Smith
Defendants.
Last quoted phrase of ¶ 175 following
“transfer of” contains confidential business
information regarding company structure
related to the Buckles-Smith Defendants.
¶¶ 177–78 contain confidential business
information regarding company structure and
confidential personal information regarding
employee and shareholder finances related to
the Buckles-Smith Defendants
Part of ¶ 179 following “had been reduced”
contains confidential business information
regarding company structure and confidential
personal information regarding employee
and shareholder finances related to the
Buckles-Smith Defendants; part of ¶ 180
following “Chartwell appraisal and
determined by BTC” contains confidential
business information regarding company
finances related to the Buckles-Smith
Defendants; ¶ 181 contains confidential
business information regarding company
finances related to the Buckles-Smith
Defendants; part of ¶ 182 following “stake in
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GRANTED.
GRANTED as to ¶ 123(D)
between “updated value as
of June 16, 2014,” and
“based upon the valuation”
only; otherwise DENIED.
GRANTED.

GRANTED.

GRANTED as to ¶¶ 165(C),
167, 168(A), 168(C),
168(D) only; otherwise
DENIED.

GRANTED as to last
quoted phrase of ¶ 175
following “transfer of” only;
otherwise DENIED.
GRANTED as to ¶¶ 177–78
only; otherwise DENIED.

GRANTED as to: (1) part
of ¶ 179 following “had
been reduced”; (2) part of
¶ 180 following “Chartwell
appraisal and determined by
BTC”; (3) ¶ 181; (4) part of
¶ 182 following “stake in
the company fell”; and ¶¶
183–84 only; otherwise
DENIED.

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FAC ¶ 231

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FAC ¶¶ 233–37

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United States District Court
Northern District of California

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FAC ¶¶ 249(A)

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FAC ¶¶ 260(A)–(B)

the company fell” contains confidential
business information regarding company
structure and finances related to the BucklesSmith Defendants; ¶¶ 183–84 contains
confidential business information regarding
company finances and performance related
to the Buckles-Smith Defendants
¶ 231(A) contains confidential business
information related to company structure and
finances, and contains confidential personal
information regarding employee and
shareholder finances related to the BucklesSmith Defendants.
Part of ¶ 235 following “shares of BucklesSmith” and part of ¶ 236 following “value as
of June 16, 2014” contain confidential
business information regarding company
finances related to the Buckles-Smith
Defendants.
Part of ¶ 249(A) between “owned
approximately” and “of Buckles-Smith’s
stock,” and following “of Buckles-Smith’s
stock” contain confidential business
information regarding company structure
related to the Buckles-Smith Defendants.

GRANTED as to ¶ 231(A)
only; otherwise DENIED.

GRANTED as to: (1) part
of ¶ 235 following “shares
of Buckles-Smith”; and (2)
part of ¶ 236 following
“value as of June 16, 2014”
only; otherwise DENIED.
GRANTED as to ¶ 249(A)
between “owned
approximately” and “of
Buckles-Smith’s stock,” and
following “of BucklesSmith’s stock” only;
otherwise DENIED.
Part of ¶ 260(A) following “fair market value GRANTED as to: (1) part of
of their shares in the Agreed Value
¶ 260(A) after “fair market
Exhibits,” and sentence in ¶ 260(B) between value of their shares in the
“¶¶ 165, 166 and 168” and “For these
Agreed Value Exhibits”; (2)
reasons” contain confidential business
¶ 260(B) between “¶¶ 165,
information regarding company finances and 166 and 168” and “For these
performance related to the Buckles-Smith
reasons” only; otherwise
Defendants.
DENIED.

2. BTC Declaration
BTC supports filing Exhibits H and P to the FAC under seal. In its declaration, BTC
explains that Exhibit H is a service agreement entered into by BTC and Buckles-Smith. Garrett
Decl. ¶¶ 3, 6. BTC supports filing it under seal because, though BTC had produced to Plaintiff a
version of the agreement with the fee information redacted, Plaintiff attached the unredacted
version produced by Menke to his FAC. Id. ¶¶ 3, 6. Because BTC argues that disclosure of the
fees would put it at a competitive disadvantage but provides no reason for sealing the rest of the
exhibit, see BTC Response at 3-4; Garrett Decl. ¶ 6, the Court finds this request is not sufficiently
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narrowly-tailored. Accordingly, the Court GRANTS Plaintiff’s motion to file Exhibit H under seal

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only with respect to § 8 and page numbered 9 (entitled “Fee Schedule”).

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BTC also argues that the first page of Exhibit P should be sealed. BTC Response at 4-5.

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BTC explains that the first page is an email from BTC to Chartwell including advice from BTC’s

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counsel about reducing the risk of litigation. Garrett Decl. ¶ 6. BTC argues that this page should

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be filed under seal because it contains legal advice shared between parties with a common interest.

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Id.; see also BTC Response at 4-5. The Court finds this reason for sealing to be compelling.

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Accordingly, the Court GRANTS Plaintiff’s administrative motion to file Exhibit P under seal

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only with respect to the email included in the exhibit’s first page.
3. No Supporting Declaration

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United States District Court
Northern District of California

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Because no party filed a declaration in support of sealing the following exhibits and

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portions of Plaintiff’s FAC, the Court DENIES Plaintiff’s motion to seal: Exhibits G, L, N, T, and

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V to the FAC and ¶¶ 31, 56-59, 61-63, 100-04, 106-09, 118, 123(C), 143-45, 150-55, 161-62, 172-

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173, 174, 176, 186-90, 204, 225-30, 243, 261(A), 262(B)-(C), and 264 of the FAC.

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B. BTC’s Motion

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The Court now turns to BTC’s motion to file portions of its Motion to Dismiss and Exhibit

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1 attached thereto under seal. BTC’s Mot., ECF 85. BTC similarly argues that those materials

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contain information copied or extracted from discovery material designated as “Confidential” or

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“Highly Confidential—Attorney’s Eyes Only” under the protective order. Id. at 2.

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BTC’s request is deficient in a number of ways. First, BTC filed an unredacted version of

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Exhibit 1, but failed to file an unredacted version of its Motion to Dismiss, as required by Civil

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Local Rule 79-5(d)(2). This precludes the Court from determining the merits of BTC’s request for

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sealing portions of the Motion to Dismiss.

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Second, though BTC submitted an accompanying declaration that identifies which party

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designated which materials as confidential, see Garrett Decl. ¶¶ 3, 4, ECF 85-1, the designating

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parties failed to file declarations establishing that the designated material is sealable. Instead, the

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parties filed a stipulation, agreeing that the material BTC seeks to file “must be filed under seal to

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maintain the confidentiality of such documents” but also that “they are in no way agreeing that any
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particular documents or information were appropriately designed as CONFIDENTIAL and/or

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HIGHLY CONFIDENTIAL—ATTORNEY’S EYES ONLY.” Stipulation at 2, ECF 88. The

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parties provide no substantive reasons for sealing the designated material.
As noted above, “[r]eference to a stipulation or protective order that allows a party to

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designate certain documents as confidential is not sufficient to establish that a document, or

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portions thereof, are sealable.” Civ. L.R. 79-5(d)(1)(A); see also MMCA Grp. Ltd., 2008 WL

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5411340, at *1. Furthermore, sealing is a matter for court determination, not stipulation. See Civ.

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L.R. 79-5(b). Accordingly, the Court DENIES BTC’s request to file portions of its Motion to

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Dismiss and Exhibit 1 thereto without prejudice.

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III.

ORDER

United States District Court
Northern District of California

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For the foregoing reasons, Plaintiff’s motion to seal is GRANTED in part and DENIED in

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part. Pursuant to Civil Local Rule 79-5(e)(2), Plaintiff must file the unredacted and lesser redacted

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documents no earlier than April 5, 2016 and no later than April 11, 2016.

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In addition, BTC’s motion to seal is DENIED without prejudice. BTC may submit an

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unredacted version of its Motion to Dismiss and the parties may submit additional declarations in

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support of BTC’s sealing motion by no later than April 8, 2016, at which point the Court will

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reconsider the motion. If no additional declaration is submitted, BTC must file unredacted

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versions of its Motion to Dismiss and Exhibit 1 attached thereto by no later than April 14, 2016.

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IT IS SO ORDERED.

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Dated: April 4, 2016

_____________________________________
BETH LABSON FREEMAN
United States District Judge

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