U.S. Tobacco Cooperative Inc. et al v. Big South Wholesale of Virginia, LLC d/b/a Big Sky International et al

Filing 56

ORDER granting 27 PROPOSED Sealed Motion; granting 33 PROPOSED Sealed Motion; denying as moot 37 Motion for Judgment on the Pleadings; denying as moot 41 PROPOSED Sealed Motion; granting 50 Motion to Seal Document ; granting 51 Moti on for Leave to File; denying as moot 54 Motion to Seal; granting in part 15 Motion to Seal. It is FURTHER ORDERED that Plaintiffs, within two weeks of the filing date of this order, file: (1) a publicly-available copy of the Original Complaint with the redactions agreed uponat the hearing, and (2) file publicly-available copy of the Amended Complaint with redactions corresponding to those suggested by the court with regard to the Original Complaint. Counsel is reminded to read the order in its entirety for critical deadlines and information. Signed by Senior Judge James C. Fox on 11/21/2013. (Edwards, S.)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
No. 5:13-CV-527-F
U.S. TOBACCO INC., U.S FLUECURED TOBACCO GROWERS, INC.,
and BIG SOUTH DISTRIBUTION, LLC,

)
)
)
)
)

Plaintiffs,

)
)
)
)

V.

ORDER

)

)

BIG SOUTH WHOLESALE OF
VIRGINIA, LLC, d/b/a BIG SKY
INTERNATIONAL, BIG SOUTH
WHOLESALE, LLC, UNIVERSAL
SERVICES FIRST CONSULTING, a/k/a
UNIVERSAL SERVICES CONSULTING
GROUP, JASON CARPENTER,
CHRISTOPHER SMALL, EMORY
STEPHEN DANIEL, and other unnamed
co-conspirators,
Defendants.

)
)
)
)
)
)
)
)
)
)
)
)

This matter came before the court on Tuesday, November 19, 2013, for a hearing on
Emergency Motion to Seal [DE-15] filed by Defendants Big South Wholesale ofVirginia LLC, d/b/a
Big Sky International, Big South Wholesale, LLC, Jason Carpenter, and Christopher Small
(collectively, "Big Sky Defendants"). Present for the Big Sky Defendants were Gavin B. Parsons
and Alan D. Mathis. Plaintiffs were represented by Thomas A. Farrand Kimberly J. Lehman.
Defendants Emory Stephen Daniel and Universal Services First Consulting, a/k/a Universal Services
Consulting Group were represented by W. Sidney Aldridge. This orders memorializes and clarifies
rulings made during the hearing.

I. MOTION TO SEAL

In the Motion to Seal, the Big Sky Defendants request the following relief: (1) to seal the
entire Complaint [DE-l] in this action or in the alternative, to order that a redacted version of the
Complaint be substituted in its place for public use; (2) to temporarily seal or restrict public access
to the Complaint during the consideration of the Motion to Seal; (3) to seal the memorandum [DE14] filed in support of the Motion to Seal, including all attachments and exhibits; (4) seal any
subsequent briefs of submissions filed with respect to Motion to Seal, and (5) order that any future
filings in this case containing certain confidential information be sealed or redacted. The court,
consistent with the practice of this district, directed the Clerk of Court to maintain the Complaint
under temporary seal pending the court's decision on the merits of the Motion to Seal. Thus, only
the remaining four requests for relief remain pending.
A. Standard of Review

The Fourth Circuit has directed that prior to sealing judicial records, a district court must first
determine the source of the public's right to access the judicial records: the common law or the First
Amendment. Stone v. Univ. ofMd, 855 F.2d 178,180 (4th Cir. 1988). Ifthe common law right of
access to judicial records applies, there is a presumption of public access to judicial records, which
can only be rebutted if countervailing interests outweigh the public's interest in access. Rushford

v. New Yorker Magazine, Inc., 846 F.2d 249, 253 (4th Cir. 1988). "Some of the factors to be weighed
in the common law balancing test 'include whether the records are sought for improper purposes,
such as promoting public scandals or unfairly gaining a business advantage; whether release would
enhance the public's understanding of an important historic event; and whether the public already
had access to the information contained in the records."' Virginia Dep 't of State Police v.
2

Washington Post, 386 F.3d 567, 575 (4th Cir. 2004) (quoting In re Knight Pub!. Co., 743 F.2d 231,
235 (4th Cir. 1984)).
Where the First Amendment guarantees access to judicial records, such access "may be
denied only on the basis of a compelling governmental interest, and only if the denial is narrowly
tailored to serve that interest." Stone, 855 F.2d at 180. "The burden to overcome a First Amendment
right of access rests on the party seeking to restrict access, and that party must present specific
reasons in support of its position." Virginia Dep 't ofState Police, 386 F.3d at 575. As some courts
have observed, however, there is difficulty in applying the First Amendment access analysis in the
context of a civil case involving nongovernmental litigants. See, e.g., Haas v. Golding Transp., Inc.,
No. 1:09-CV-1016, 2010 WL 1257990, *7 n.4 (M.D.N.C. March 26, 2010). Indeed, the District
Court for the Middle District of North Carolina aptly questioned:
[I]n the context of a civil case involving nongovernmental litigants ... how does one
define or discern a 'governmental interest?' Does the government have an interest in
the vindication of an individual's right to personal privacy or a business's right to
freedom from unfair competitive advantage?

!d. Of course, one response to these questions may be, no, the government does not have any interest
in any of these rights, and consequently, most records filed by a nongovernmental litigant in a civil
case will not be sealed where the First Amendment is the source of access. Other courts, however,
"have addressed this conundrum by substituting the notion of 'higher value' for 'governmental
interest' in" the context of civil litigation involving private litigants. !d. (citing Level 3 Comms., LLC

v. Limelight Networks, Inc., 611 F. Supp. 2d 572,580-83 (E.D.Va. 2009) (discussing cases that cited
right to privacy, property rights in trade secrets, privilege against disclosure of attorney-client
communications, and duties created by contract as 'private' interests that might overcome a First

3

Amendment right of access)). In an unpublished per curiam opinion, the Fourth Circuit has ruled that
a district court could have closed a courtroom during a trial and sealed portions of the record to
protect trade secrets. Woven Elec. Corp. v. Advance Grp., Inc., 903 F.2d 913, 1991 WL 54118, at

*6--7 (4th Cir. April15, 1991) (citing In re Iowa Freedom ofInfo. Council, 724 F.2d 658,661 (8th
Cir.1983)). Although the Fourth Circuit did not directly address the "governmental interest" issue,
its opinion in Woven Electric does suggest that under the right circumstances, certain "higher values"
can overcome the First Amendment right of access.
In weighing the competing interests between the presumption of access and the asserted
reason for sealing, a court must comply with the procedure set forth by In re Knight Publishing

Company. First, a court must give the public notice of a request to seal and a reasonable opportunity
to challenge it. 743 F.2d at 235. Although individual notice is not necessary, a court must notify
persons present in the courtroom of the request, or docket it "reasonably in advance of deciding the
issue." Id.

A court must consider less drastic alternatives to sealing, and if it decides to seal

documents, it must "state the reasons for its decision to seal supported by specific findings, and the
reasons for rejecting alternatives to sealing in order to provide an adequate record for review." Id.

B. Discussion
Here, the materials sought to be sealed by the Blue Sky Defendants include (1) the entirety
of the original Complaint; (2) the memorandum [DE-14] filed in support of the Motion to Seal,
including all attachments and exhibits, and (3) all subsequent briefs and attachments that have been
filed with the respect to the Motion to Seal.
With respect to these requests, the procedural requirements of In re Knight Publishing

Company have been satisfied. The Blue Sky Defendants' Motion to Seal [DE-15] has been docketed
4

since August 8, 2013, and the court held a hearing on the motion on November 19, 2013. No third
parties or members of the press have attempted to file an objection to the motion to seal, nor did any
other party attend the hearing to voice an objection. Accordingly, the court will consider the merits
ofthe same. 1
The court must first determine whether the common law right of access and/or the First
Amendment right of access attaches to the documents at issue. Cases from within the Fourth Circuit
indicate that only the common law right of access, as opposed to the First Amendment right of
access, attaches to a complaint. See American Civil Liberties Union v. Holder, 652 F. Supp. 2d 654,
662 (E.D. Va. 2009) (determining that a qui tam complaint filed in camera and under seal does not
adjudicate substantive rights or serve as a substitute for trial, and therefor no First Amendment right
of access attaches). As to the parties' respective briefing and attachments regarding the Motion to
Seal, these too constitute judicial records to which the common law presumption of access applies.
See In reApplication of United States for an Order Pursuant to 18 US. C. Section 2703(d), 707 F.3d

283, 290 (4th Cir. 2013) (explaining that "judicial records" are "documents filed with the court [that]
play a role in the adjudicative process, or adjudicate substantive rights" and observing that the
common law presumption of access attaches to "judicial records"). Moreover, there is no indication,
based on the parties' briefings and the court's own research, that the First Amendment provides a
right of access to the documents at issue here.
Because the common law presumption of access attaches to Complaint and the documents
filed in association with the Motion to Seal, the public has a qualified right of access to these judicial

1

Plaintiffs' Motion for Leave to file a Sur-Reply [DE-27] and Motion for Leave to Supplement [DE-33] is
ALLOWED, and the court has considered those additional materials in assessing the merits of the Motion
to Seal.

5

records. This common law presumption of access may be overcome if "there is a 'significant
countervailing interest" in support of sealing that outweighs the public's interest in openness. In re

Application, 707 F.3d at 293. The court finds that the Blue Sky Defendants have met their burden
here. Specifically, the Blue Sky Defendants have proffered evidence tending to show that certain
information contained the Complaint could subject certain individuals to physical harm and/or
harassment. The court finds that these individual's interest in their safety outweighs the public's
interest in access to the Complaint and the materials submitted in connection with the Motion to
Seal. See Dish Network L.L.C. v. Sonicview USA, Inc., No. 09-CV-1553 L(NLS), 2009 WL
2224596, at *7 (S.D. Cal. July 23, 2009) (finding that protecting the identities of individuals who
had served as confidential informants, and thereby protecting them from being subjected to threats
of physical harm, outweighed the presumption of access to court records).
The court does not find, however, that the entirety of the Complaint needs to be sealed. See

Sensormatic Sec. Corp. v. Sensormatic Electronics Corp., 455 F. Supp. 2d 399,437 (D. Md. 2006)
("[T]he court should consider less-drastic alternatives, such as filing redacted versions of the
documents."). Rather, the court finds that the Complaint may be redacted to omit the information
which may subject certain individuals to physical harm. At the hearing in this matter, the court
provided counsel for the parties with its proposed redactions. The parties agreed that the redactions
serve the purpose of omitting from public view the offending information, while still offering access
to the vast majority of the Complaint in a manner which leaves the pleading still understandable.
Accordingly, Plaintiffs are ORDERED to file a redacted version of the Original Complaint [DE-l]

6

within two weeks of the filing date of this order. 2
As to the materials submitted in connection with the Motion to Seal, the court agrees with
the Blue Sky Defendants that almost all of these materials set forth in great detail (1) the identities
of the individuals who may be subject to physical harm and (2) the confidential information, the
disclosure of which would subject these individuals to harm. Moreover, the court finds that the vast
majority of these filings cannot be redacted in any meaningful way. Accordingly, the Clerk of Court
is DIRECTED to maintain the following filings under SEAL:
•

the Memorandum in Support of the Emergency Motion to Seal and attached
Declarations [DE-14; DE-14-1; DE-14-2]

•

Plaintiffs' Memorandum in Response to Motion to Seal and the attachments thereto
[DE-21; DE-21-1; DE-21-2; DE-21-3]

•

the Reply in Support of the Motion to Seal and the attachments thereto [DE-26; DE26-1; DE-26-2; DE-26-3; DE-26-4; DE-26-5]

•

the Motion for Leave to File a Sur-Reply [DE-27] and Memorandum in Support [DE28];

•

the Sur-Reply [DE-3] and certain attachments thereto [DE-30-1; DE-30-2; DE-30-3;
DE-30-6· DE-30-7· DE-30-8· DE-30-9]·
'
'
'
'

•

the Motion for Leave to Supplement Plaintiffs Opposition to Defendants' Motion
to Seal and attachment thereto [DE-33; DE-33-1] and Memorandum in Support [DE34]

•

the Response in Opposition to Plaintiffs' Motions for Leave to File a Sur-Reply and
for Leave to Supplement [DE-35]

2

As the court rules and explains below, Plaintiffs will be filing a redacted Amended Complaint, to which
all Defendants must file a responsive pleading or motion. The previous Answers, Counterclaim, and Reply
to Counterclaim filed by the parties are therefore no longer the operative pleading in this action. Although
the court could order the parties to file redacted versions of those pleadings, the court finds that to do so
would be an exercise in futility, especially considering that the court will not be issuing any ruling which will
be based on those pleadings. The Clerk of Court is instead DIRECTED to maintain Answer [DE-23], Reply
[DE-23]-in addition to the Original Complaint [DE-I)-under SEAL.
7

The court does not perceive, however, that either Docket Entry 14-3, or Docket Entry 35-1, which
both contain unpublished opinions, needs to be sealed. The Clerk of Court is therefore DIRECTED
to unseal those filings.
Additionally, the court does not perceive that the following attachments to the Sur-Reply
must be maintained under seal, especially considering that these documents go to the heart of the
parties' claims and/or defenses in this action: (1) the Asset Purchase Agreement [DE-30-4]; (2) the
Certificate of Assumed or Fictitious Name [DE-30-5]; (3) the Employment Agreement [DE-30-10],
(4) and the Consulting and Compensation Agreement [DE-30-11]. Nevertheless, because the court
did not explicitly discuss those documents with the parties at the hearing, and out of an abundance
of caution, those documents will continue to be maintained under seal for a period of fourteen days.
If any party wishes to file an objection to the unsealing of or any of the other documents the court
has determined do not need to be sealed, the party may file a notice of objection/supporting
memorandum. If no such objection and supporting memorandum is filed during that time period,
the Clerk of Court is DIRECTED to unseal those documents.
C. Future Filings
The Blue Sky Defendants also request that this court order that any future filings in this case
containing certain confidential information be sealed or redacted. The court expressed its preference
at the hearing to be able to do just that. The court and the parties recognized, however, that under
binding Fourth Circuit precedent and the applicable Local Rules, the court cannot issue rulings
preemptively allowing sealing or redaction. Instead, if the parties believe that certain information in
future filings should not be publicly available, the parties must file a motion to seal in accordance

8

with the applicable Local Rules and the CM/ECF Policy Manual. See Local Civil Rule 79.2;
Electronic Case Filing Administrative Policies and Procedures Manual, § T.
The court urges the parties, however, to confer in good faith prior to the filing of any motions
to seal and attempt to agree on the appropriate redactions to be made. The court is confident based
on the parties' stated intention at the hearing to cooperate with each other that such agreement is
possible.
Additionally, counsel for Plaintiffs expressed during the course of the hearing his belief that
the parties are not required to respond to a motion, which is also the subject of the motion to seal,
until the court rules on the motion to seal. This is not the case. The applicable time periods for filing
responses to motions for relief apply, regardless of whether the court has ruled on the motion to seal
the pertinent motion for relief.

II. MOTION FOR JUDGMENT ON THE PLEADINGS AND MOTION FOR LEAVE TO
FILE AN AMENDED COMPLAINT
The parties also discussed at the hearing the pending Motion for Judgment on the Pleadings
[DE-37] and Motion for Leave to File an Amended Complaint [DE-51]. Counsel for all the
Defendants stated, on the record, that Defendants consent to the filing of the Amended Complaint.
See Fed. R. Civ. P. 15(a)(2) ("[A] party may amend its pleading only with the opposing's party

written consent or with the court's leave."). Although this oral consent technically does not satisfy
Rule 15(a)(2), which requires written consent, the court finds that the Defendants' oral consent
suffices to allow this court to find that justice requires the Motion for Leave [DE-51] be ALLOWED.
See id. (providing "[t]he court should freely give leave when justice so requires").

Additionally, Plaintiffs' Motion to Seal [DE-50] the proposed Amended Complaint is

9

ALLOWED for the reasons stated by the court with regard to the Defendants' Motion to Seal [DE15]. 3 Plaintiffs are DIRECTED to file an Amended Complaint, with redactions corresponding to
those suggested by the court with regard to the Original Complaint, within two weeks of the filing
date of this order. Upon the Plaintiffs' filing of the redacted Amended Complaint, Defendants have
the normal time under the rules to file an appropriate response or pleading.
The parties expressed at the hearing that the Blue Sky Defendants' Motion for Judgment on
the Pleadings [DE-37] is now moot and it is accordingly DENIED as such.

The Blue Sky

Defendants' Motion to Seal [DE-54] the filings associated with the Motion for Judgment on the
Pleadings [DE-54] is therefore also DENIED as moot.
III. CONCLUSION

For the foregoing reasons, the Emergency Motion to Seal [DE-15] is ALLOWED in part; the
Motion to File a Sur-Reply [DE-27] and Motion to Supplement [DE-33] are ALLOWED; the Motion
for Leave to File the First Amended Complaint [DE-51] and Motion to Seal [DE-50] are
ALLOWED, and the Motion for Judgment on the Pleadings [DE-37] and Motion to Seal [DE-54]
are DENIED as moot. Additionally, the proposed sealed Motion [DE-41] is DENIED as moot in
light of the court's ruling in its November 4, 2013, Order [DE-46].
The Clerk of Court is DIRECTED to maintain the following filings under seal:
•
•
•
•

the Original Complaint [DE-l];
the Memorandum in Support of the Emergency Motion to Seal and attached
Declarations [DE-14; DE-14-1; DE-14-2];
Plaintiffs' Memorandum in Response to Motion to Seal and the attachments thereto
[DE-21· DE-21-I· DE-21-2· DE-21-3]·
'
'
'
'
the Blue Sky Defendants' Answer to Complaint and Counterclaim [DE-23];

3

Additionally, the Clerk of Court is DIRECTED to maintain the unredacted proposed Amended Complaint
[DE-49] under SEAL.

10

•
•
•
•
•

•
•

the Reply in Support of the Motion to Seal and the attachments thereto [DE-26; DE26-1· DE-26-2· DE-26-3· DE-26-4· DE-26-5]·
'
'
'
'
'
the Motion for Leave to File a Sur-Reply [DE-27] and Memorandum in Support [DE28];
the Sur-Reply [DE-3] and certain attachments thereto [DE-30-1; DE-30-2; DE-30-3;
DE-30-6· DE-30-7· DE-30-8· DE-30-9]·
'
'
'
'
the Answer to the Counterclaim [DE-32];
the Motion for Leave to Supplement Plaintiff's Opposition to Defendants' Motion
to Seal and attachment thereto [DE-33; DE-33-1] and Memorandum in Support [DE34];
the Response in Opposition to Plaintiffs' Motions for Leave to File a Sur-Reply and
for Leave to Supplement [DE-35]; and
the proposed Amended Complaint [DE-49].

Additionally, the Clerk of Court is DIRECTED to maintain the following materials under
seal for a period of fourteen days:

•
•
•
•

the Asset Purchase Agreement [DE-30-4];
the Certificate of Assumed or Fictitious Name [DE-30-5];
the Employment Agreement [DE-30-10], and
the Consulting and Compensation Agreement [DE-30-11]

If any party has an objection to the unsealing of those documents, they must file an objection and
supporting memorandum. Otherwise, if no objection/supporting memorandum is filed within that
time period, the Clerk of Court is DIRECTED to unseal those materials.

Finally, it is FURTHER 0 RD ERED that Plaintiffs, within two weeks of the filing date ofthis
order, file: (1) a publicly-available copy of the Original Complaint with the redactions agreed upon
at the hearing, and (2) file publicly-available copy of the Amended Complaint with redactions
corresponding to those suggested by the court with regard to the Original Complaint.

SO ORDERED.

11

Jr

This the 1.. J day ofNovember, 2013.

enior United States District Judge

12