Obesity Research Institute, LLC v. Fiber Research International, LLC et al

Filing 433

ORDER: (1) Granting Motion to File Documents Under Seal (ECF Nos. 426 , 428 ) and (2) Granting In Part and Denying in Part Motion to File Documents Under Seal (ECF No. 430 ). Signed by Judge Cynthia Bashant on 12/8/2017. (mxn)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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OBESITY RESEARCH INSTITUTE,
LLC,

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Plaintiff,

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Case No. 15-cv-00595-BAS-MDD

v.
FIBER RESEARCH
INTERNATIONAL, LLC, et al.,

ORDER:
(1) GRANTING MOTIONS TO
FILE DOCUMENTS UNDER
SEAL (ECF Nos. 426, 428);
AND

Defendants.

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(2) GRANTING IN PART AND
DENYING IN PART MOTION
TO FILE DOCUMENTS UNDER
SEAL (ECF No. 430)

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AND RELATED COUNTERCLAIM.

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Presently before the Court are three motions by the parties to file documents

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under seal. (See ECF Nos. 426, 428, 430.) The motions were filed following this

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Court’s previous Order on the parties’ motions to seal. (ECF No. 420.) Plaintiff

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Obesity Research Institute, LLC’s (“ORI”) filed a renewed request for leave to file

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three documents under seal. (ECF No. 426.) Defendant Fiber Research International,

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LLC’s (“FRI”) filed two renewed requests for leave to file various documents under

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seal. (ECF Nos. 428, 430.)

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Consistent with its previous orders, the Court will refer to each motion by its

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Electronic Case Filing number (“ECF No.”) on the docket for the purposes of this

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order.

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I.

LEGAL STANDARD

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“[T]he courts of this country recognize a general right to inspect and copy

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public records and documents, including judicial records and documents.” Nixon v.

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Warner Commc’ns, Inc., 435 U.S. 589, 597 (1978). “Unless a particular court record

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is one ‘traditionally kept secret,’ a ‘strong presumption in favor of access’ is the

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starting point.” Kamakana v. City & Cty. of Honolulu, 447 F.3d 1172, 1178 (9th Cir.

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2006) (citing Foltz v. State Farm Mut. Auto Ins. Co., 331 F.3d 1122, 1135 (9th Cir.

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2003)). “The presumption of access is ‘based on the need for federal courts, although

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independent—indeed, particularly because they are independent—to have a measure

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of accountability and for the public to have confidence in the administration of

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justice.” Ctr. for Auto Safety v. Chrysler Grp., LLC, 809 F.3d 1092, 1096 (9th Cir.

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2016) (quoting United States v. Amodeo, 71 F.3d 1044, 1048 (2d Cir. 1995)).

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A party seeking to seal a judicial record bears the burden of overcoming the

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strong presumption of access. Foltz, 331 F.3d at 1135. The showing required to meet

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this burden depends upon whether the documents to be sealed relate to a motion that

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is “more than tangentially related to the merits of the case.” Ctr. for Auto Safety, 809

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F.3d at 1102. When the underlying motion is more than tangentially related to the

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merits, the “compelling reasons” standard applies. Id. at 1096–98. When the

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underlying motion does not surpass the tangential relevance threshold, the “good

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cause” standard applies. Id.

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“In general, ‘compelling reasons’ sufficient to outweigh the public’s interest

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in disclosure and justify sealing court records exists when such ‘court files might
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have become a vehicle for improper purposes,’ such as the use of records to gratify

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private spite, promote public scandal, circulate libelous statements, or release trade

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secrets.” Kamakana, 447 F.3d at 1179 (quoting Nixon, 435 U.S. at 598). However,

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“[t]he mere fact that the production of records may lead to a litigant’s embarrassment,

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incrimination, or exposure to further litigation will not, without more, compel the

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court to seal its records.” Id. (citing Foltz, 331 F.3d at 1136). The decision to seal

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documents is “one best left to the sound discretion of the trial court” upon

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consideration of “the relevant facts and circumstances of the particular case.” Nixon,

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435 U.S. at 599.

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Federal Rule of Civil Procedure 26(c), generally, provides the “good cause”

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standard for the purposes of sealing documents. See Kamakana, 447 F.3d at 1179.

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The test applied is whether “‘good cause’ exists to protect th[e] information from

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being disclosed to the public by balancing the needs for discovery against the need

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for confidentiality.” Pintos v. Pac. Creditors Ass’n, 605 F.3d 665, 678 (9th Cir. 2010)

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(quoting Phillips ex rel. Estates of Byrd v. Gen. Motors Corp., 307 F.3d 1206, 1213

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(9th Cir. 2002)). Under Rule 26(c), only “a particularized showing of ‘good cause’ .

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. . is sufficient to preserve the secrecy of sealed discovery documents[.]” In re

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Midland Nat. Life Ins. Co. Annuity Sales Practices Litig., 686 F.3d 1115, 1119 (9th

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Cir. 2012) (emphasis added); see also Kamakana, 447 F.3d at 1180 (requiring a

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“particularized showing” of good cause). “Broad allegations of harm, unsubstantiated

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by specific examples or articulated reasoning, do not satisfy the Rule 26(c) test.”

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Beckman Indus., Inc. v. Int’l Ins. Co., 966 F.2d 470, 476 (9th Cir. 1992). Moreover,

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a blanket protective order is not itself sufficient to show “good cause,” let alone

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compelling reasons, for sealing particular documents. See Foltz, 331 F.3d at 1133;

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Beckman Indus., 966 F.2d at 476; San Jose Mercury News, Inc. v. U.S. District Court,

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N. Dist., 187 F.3d 1096, 1103 (9th Cir. 1999).

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II.

ANALYSIS

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A.

ECF No. 426

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In ECF No. 426, ORI seeks leave to file under seal Exhibit 86, Exhibit 90, and

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an unredacted version of Exhibit 130 to the Declaration of Henny den Uijl, filed in

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along with its consolidated motion for summary judgment and opposition to FRI’s

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motion for partial summary judgment. FRI did not file a response to ECF No. 426.

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Exhibits 86 and 90 contain propriety business or product information. Exhibit

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86 is an email chain between ORI and its suppliers, and ORI argues that it contains

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proprietary information regarding its product sourcing and pricing. (ECF No. 426 at

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4-5.) ORI argues that, if this information became public, it would cause “severe

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business harm and competitive disadvantage.” (Id. at 4.) Exhibit 90 is a “formulation

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and product specification” information sheet that ORI argues contains Lipozene’s

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proprietary composition and product specifications. (Id. at 5.) ORI argues that a

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competitor could use this information to “reverse engineer” Lipozene, causing a

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“significant business disadvantage” to ORI. (Id.) ORI’s explanations appear to be

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consistent with the Court’s assessment of these exhibits.

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ORI proposes to seal proprietary information, such as “formulations, sourcing

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information, supply quantities, and marketing strategies,” and financial information

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in Exhibit 130, which is the Expert Report of Neil Beaton and has been partially

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redacted. (ECF No. 426 at 3-4.) ORI argues that failing to seal the proprietary product

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information will cause ORI “irreparable harm.” (Id. at 3.) ORI additionally argues

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that it is a privately held business, making the redacted financial information (“highly

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sensitive figures”) “extremely closely guarded.” (Id. at 4.) ORI further states that the

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disclosure of this specific financial information is “not crucial” to public interest

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because the unredacted, publically available portions of Exhibit 130 provide the

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relevant foundation in this case. (Id.) ORI’s current request is more narrowly tailored

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than its previous request to seal the entire report, and the Court’s assessment of the

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redactions is consistent with ORI’s explanations.
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Having reviewed ORI’s requests, the Court finds that ORI provides

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compelling reasons to seal the aforementioned documents. See Kamakana, 447 F.3d

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at 1179. Therefore, the Court GRANTS ORI’s motion to file documents under seal.

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(ECF No. 426.)

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B.

ECF No. 428

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In ECF No. 428, FRI refiled its request to file under seal an unredacted copy

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of ORI’s memorandum of points and authorities in support of its motion to exclude

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Dr. Fahey and Exhibit D to ECF No. 428, which is the unredacted deposition

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transcript of Medallion Labs representative Timothy Peters and Exhibit 10 to the

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Declaration of Sean D. Flaherty in support of ORI’s aforementioned memorandum.

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Originally, on March 17, 2017, the Court considered these documents, denied FRI’s

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request, and granted FRI leave to refile its request. (ECF No. 324.) The Court denied

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these requests two more times (ECF Nos. 417, 420), ordering FRI to correct certain

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deficiencies before it would consider its requests. The Court will now review its

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amended requests. ORI did not file a response to ECF No. 428.

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FRI requests to seal portions of Mr. Peters’s deposition transcript (Exhibit D)

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that contain testing methodologies and parameters. (ECF No. 428 at 4-5.) FRI argues

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that this testing information is propriety and disclosure could cause irreparable harm.

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(Id.) The redactions applied to the deposition transcript are narrowly tailored, and

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FRI’s explanations appear to be consistent with the Court’s assessment of this

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exhibit.

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FRI argues that the unredacted version of ORI’s aforementioned memorandum

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should be sealed for the same reasons as above, as well as those reasons stated in the

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Court’s earlier Order (ECF No. 420), because it incorporates the same proprietary

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information contained in the related documents. (ECF No. 428 at 6-7.) FRI appears

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to have applied redactions in the memorandum consistent with the Court’s

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assessment of the relevant exhibits as stated in its orders.
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Having reviewed FRI’s requests, the Court finds that FRI provides compelling

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reasons to seal the aforementioned documents. See Kamakana, 447 F.3d at 1179.

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Therefore, the Court GRANTS FRI’s motion to file documents under seal. (ECF No.

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428.)

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C.

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In ECF No. 430, FRI seeks leave to file under seal Exhibits 109, 112, 114-115,

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and 149 to ORI’s consolidated cross-motion for summary judgment and opposition

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to FRI’s motion for partial summary judgment. ORI did not file a response to ECF

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ECF No. 430

No. 430.

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FRI narrowly tailors its request to seal information in Exhibits 114, 115, and

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149. FRI only seeks to redact and seal information identifying current or prospective

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customers of FRI or relating to Propol A pricing information. (ECF No. 430 at 7.)

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FRI argues that competitors could use this information improperly, damaging FRI’s

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business and sales efforts, by either diverting clients, adjusting pricing, or tailoring

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marketing strategies. (Id.) FRI’s explanations appear to be consistent with the Court’s

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assessment of these exhibits.

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Exhibit 109 is a supplemental interrogatory response that lists the names of

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FRI’s owners and “sub-owners.” (ECF No. 430 at 4.) FRI tailored its renewed request

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by requesting to seal only the specific names of the “sub-owners”—thirteen of fifteen

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individuals’ or entities’ names listed. (See ECF No. 430-2.)

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First, FRI misinterprets the Court’s previous Order regarding a lack of case

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law to support its reasoning. (ECF No. 420 at 9 (“FRI argues that Nevada State law,

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which does not require public disclosure of a corporation’s ownership, justifies

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sealing this document. FRI provides no case law to support its reasoning.”); ECF No.

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430 at 6 (“The Court should thus seal the identities of the holding companies . . .

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because . . . [FRI] has an interest in maintaining that information as confidential, as

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permitted under Nevada law . . . .”).) FRI cites to a string of cases stating that
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propriety business or commercially sensitive information is appropriate for sealing,

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but this does not cure the deficiency the Court noted. (ECF No. 430 at 6.) What FRI

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fails to do is to provide legal support explaining why Nevada corporate law allowing

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companies to keep their ownership structure confidential supports sealing that

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information in federal court. In other words, FRI has not shown that “removing

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protections” afforded by state law amounts to a “compelling reason” to seal. (See

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ECF No. 430 at 4-6.) Moreover, FRI has not shown that a corporate ownership

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structure is the type of propriety business or commercially sensitive information that

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merits sealing. See Kite Shipping LLC v. San Juan Nav. Corp., No. 11CV02694

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BTM WVG, 2012 WL 6591579, at *2 (S.D. Cal. Dec. 17, 2012) (declining to seal

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information relating to corporate structure); In re Hydroxycut Mktg. & Sales

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Practices Litig., No. 09MD2087 BTM AJB, 2011 WL 1135114, at *2 (S.D. Cal. Mar.

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29, 2011) (same).

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Second, FRI has failed again to provide any other compelling reason for why

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this limited information in Exhibit 109 should be sealed. (See ECF No. 420 at 9

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(finding that FRI failed to provide “any other reasons, injuries, or risks to support

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sealing this document.”).) Instead, FRI continues to assert conclusory statements that

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it “has an interest” in keeping this information confidential, and focuses on the

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irrelevancy of the redacted names. (ECF No. 430 at 5-6.) While a court may consider

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the relevancy of the information sought to be sealed, a party still must articulate some

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reasoning for why the information should be kept confidential. See Ctr. for Auto

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Safety, 809 F.3d at 1096-97 (“Under this stringent ‘compelling reasons’ standard, a

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court may seal records only when it finds ‘a compelling reason and articulate[s] the

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factual basis for its ruling, without relying on hypothesis or conjecture.’” (quoting

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Kamakana, 447 F.3d at 1179)); see also Apple Inc., 727 F.3d at 1225-26 (analyzing

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both parties’ arguments that making their “detailed product-specific information”

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public would cause competitive harm before considering public interest and

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relevancy). Thus, the Court finds FRI’s reasoning inadequate.
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FRI applies many of the same arguments as above to Exhibit 112. (ECF No.

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430 at 4-6.) Exhibit 112 is FRI’s operating agreement. FRI tailored its renewed

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request by requesting to seal only the specific names of entities mentioned throughout

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the agreement. (See, e.g., ECF No. 430-3 at 3.) FRI previously argued that this

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agreement “contain[ed] confidential business information, ‘including, but not limited

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to, detailed financial information about Defendants’ business, such as the allocation

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of net income and net losses.’” (ECF No. 430 at 4 (quoting its previous motion to

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seal, ECF No. 364).) As discussed above, FRI fails again to provide any compelling

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reason for why this limited information should be sealed. See Berkeley Research

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Grp., LLC v. United Potato Growers of Am., Inc., No. CV C 16-07205 WHA, 2017

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WL 1650582, at *5 (N.D. Cal. May 2, 2017) (finding that an operating agreement

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should not be sealed); Ne. Series of Lockton Companies, LLC v. Bachrach, No. 12

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CV 1695, 2013 WL 3989295, at *2 (N.D. Ill. Aug. 2, 2013) (same). Instead, FRI

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continues to assert conclusory statements that it “has an interest” in keeping this

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information confidential, and focuses on the irrelevancy of the redacted names. (ECF

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No. 430 at 5-6.) For the reasons stated above, the Court finds FRI’s reasoning

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inadequate.

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Having reviewed FRI’s requests, the Court finds FRI failed to carry its burden

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to demonstrate that sealing Exhibits 109 and 112 is appropriate under the compelling

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reasons standard. See Kamakana, 447 F.3d at 1179. Otherwise, having reviewed

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FRI’s requests, the Court finds that FRI provides compelling reasons to seal Exhibits

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114, 115, and 149. See Kamakana, 447 F.3d at 1179. Therefore, the Court GRANTS

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IN PART AND DENIES IN PART FRI’s motion to file documents under seal.

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(ECF No. 430.)

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III.

CONCLUSION & ORDER

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In light of the foregoing, the Court:

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(1)

GRANTS ORI’s request to file documents under seal in ECF No. 426.

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The Clerk of the Court is directed to file the following exhibits under

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seal: ECF Nos. 341-26, 341-28, and 347-21.

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(2)

GRANTS FRI’s request to file documents under seal in ECF No. 428.

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The Clerk of the Court is directed to file the following exhibits under

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seal: ECF Nos. 429 and 429-1.

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(3)

GRANTS IN PART and DENIES IN PART FRI’s request to file

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documents under seal in ECF No. 430. The Clerk of the Court is directed

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to file the following exhibits under seal: ECF Nos. 431-2, 431-3, and

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431-4.

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If FRI wishes to re-file any denied request, addressing the defects identified in

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this order, it may do so no later than December 22, 2017 after the issuance of this

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Order. Otherwise, FRI is instructed to file the unredacted versions of the

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aforementioned documents as directed by the Court in this Order on the public docket

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no later than December 22, 2017 after the issuance of this Order. When filing the

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documents on the public docket, FRI must strictly adhere to the relevant Federal

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Rules of Civil Procedure, this district’s Civil Local Rules, this Court’s Standing

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Order for Civil Cases, and this district’s Electronic Case Filing Administrative

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Policies & Procedures Manual. Non-compliance with this order or any relevant rules

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may result in sanctions pursuant to Civil Local Rule 83.1.

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IT IS SO ORDERED.

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DATED: December 8, 2017

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