GAREY, et al v. JAMES S. FARRIN, P.C. et al
Filing
297
MEMORANDUM OPINION AND ORDER signed by MAG/JUDGE L. PATRICK AULD on 9/1/2020, that Plaintiffs' Motion (Docket Entry 238 ) is DENIED. FURTHER ORDERED that the First Sealing Motion (Docket Entry 240 ) is GRANTED IN PART and DENIED IN PART as follows: the First Sealing Motion is granted except insofar as it seeks to redact the information contained in the deposit accounts schedule (Schedule 1) on page 339 of the Discovery Responses (see Docket Entry 239 -3 at 339). On or before September 8, 2020, Plaintiffs shall file a corrected version of the relevant financial statement (id. at 338-40) that removes such redaction. FURTHER ORDERED that the Second Sealing Motion (Docket Entry 246 ) is GRANTED IN PART and DENIED IN PART as follows: the Second Sealing Motion is granted except insofar as it seeks redaction of (i) any information other than the specific monetary amounts identified on pages 2, 3, and 7 of the Reply, (ii) references in Har dee's deposition to the insolvent nature of Hardee's firm on its 2018 balance sheet, and (iii) the publically available exhibits to Marcari's deposition (see Docket Entry 247 -3 at 96-101). On or before September 8, 2020, Plaintiffs shall file a corrected version of their Reply (Docket Entry 245 ) and Fox Defendants shall file corrected versions of the Hardee deposition (Docket Entry 252 -1) and Marcari deposition exhibits (Docket Entry 252 -4). (Garland, Leah)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
WILLIAM PARKER GAREY, et al.,
Plaintiffs,
v.
JAMES S. FARRIN, P.C., et al.,
Defendants.
)
)
)
)
)
)
)
)
)
1:16cv542
MEMORANDUM OPINION AND ORDER
This case comes before the Court on “Plaintiffs’ Motion to
Compel Financial Discovery from Fox Defendants” (Docket Entry 238)
(the “Plaintiffs’ Motion”),1 as well as “Plaintiffs’ Motion to File
Documents Partially Under Seal” (Docket Entry 240) (the “First
Sealing
Motion”),
and
“Plaintiffs’
Motion
to
File
Documents
Partially Under Seal” (Docket Entry 246) (the “Second Sealing
Motion”).
For the reasons that follow, the Court will deny
Plaintiffs’ Motion and grant in part and deny in part the First
Sealing Motion and the Second Sealing Motion (collectively, the
“Sealing Motions”).
1
For purposes of the pending motions, “James S. Farrin,
P.C., d/b/a Law Offices of James Scott Farrin; James S. Farrin;
Marcari, Russotto, Spencer & Balaban, P.C.[;] Donald W. Marcari;
Riddle & Brantley, L.L.P.; Wallace Pierce Law, PLLC; Jared Pierce;
Van Laningham & Associates, PLLC d/b/a Bradley Law Group; R.
Bradley Van Laningham; Lanier Law Group, P.A.; Lisa Lanier; Crumley
Roberts, LLP; Chris Roberts; Hardee & Hardee, LLP; Charles Hardee;
and G. Wayne Hardee” (each, a “Fox Defendant”) comprise the “Fox
Defendants.” (Id. at 1 n.1.) [Citations herein to Docket Entry
pages utilize the CM/ECF footer’s pagination.]
Case 1:16-cv-00542-LCB-LPA Document 297 Filed 09/01/20 Page 1 of 22
BACKGROUND
Alleging violations of the Driver’s Privacy Protection Act of
1994, 18 U.S.C. § 2721 et seq., individuals initiated a putative
class action against various lawyers and law firms.
(See Docket
Entry 1 at 1-4; Docket Entry 32 at 1-10; Docket Entry 180 at 1-12.)
Plaintiffs subsequently filed a motion for class certification (see
Docket Entry 184), to which Fox Defendants responded in December
2019 (see Docket Entry 206).
As relevant here, Fox Defendants
opposed Plaintiffs’ certification request on the grounds that class
certification
would
“impos[e]
annihilating
liability
on
[Fox
D]efendants through the aggregation of statutory-damage awards.”
(Id. at 41-42.)
In support of their contentions regarding the
allegedly ruinous liability of the potential class, Fox Defendants
relied upon affidavits (each, a “Declaration,” and collectively,
the “Declarations”) that Fox Defendants provided regarding their
assets.
(See id. at 45 (“[Fox Defendants] don’t have billions of
dollars; a judgment will simply bankrupt the Defendants and cause
innocent employees to lose their jobs.
Ex. Q.”); see also Docket
Entries 206-18, 208-1.)
Submitted under penalty of perjury, the Declarations (i) state
the relevant Fox Defendant’s assets in his/her individual capacity,
in terms of its total equity, or per a particular balance sheet and
(ii) represent the percentage of a potential judgment that the
relevant Fox Defendant could satisfy.
(See generally Docket
2
Case 1:16-cv-00542-LCB-LPA Document 297 Filed 09/01/20 Page 2 of 22
Entries 206-18, 208-1.) Contending that the Declarations contained
sensitive
financial
information
(see
Docket
Entry
208
at
3
(“Exhibit Q contains financially sensitive information as evidence
in support of a contention that the Fox Defendants’ ability to
satisfy a judgment sought by the Plaintiffs and their legal theory
is
wholly
unrealistic.”)),
Fox
Defendants
moved
to
seal
the
Declarations in part (see Docket Entry 207 at 2 (“Exhibit Q has
been redacted, and the redacted version will be filed publicly.”)).
The Court (per United States District Judge Loretta C. Biggs)
granted this sealing request.
(See Docket Entry 236 at 4-6.)
In response to the Declarations, Plaintiffs served written
discovery on Fox Defendants.
(See Docket Entries 239-1, 239-2
(collectively, the “Financial Discovery”).)
As relevant here, the
Financial Discovery seeks information regarding “Fox Defendants[’]
assets,
liability,
and
income,”
information
that
Plaintiffs
described as “directly relevant to [Fox Defendants’] ability to pay
a judgment, and, therefore, relevant to their defense claiming
annihilating liability.” (Docket Entry 239 at 12.) Fox Defendants
provided largely identical responses to the Financial Discovery
(see Docket Entry 239-3) (the “Discovery Responses”), signed by
defense counsel (see, e.g., id. at 18).
The Discovery Responses
focus primarily on the assertion that “the sensitive financial
information of th[at Fox Defendant] is relevant only insofar as
[the defendant’s] current financial condition could withstand a
3
Case 1:16-cv-00542-LCB-LPA Document 297 Filed 09/01/20 Page 3 of 22
[specific] judgment without th[at] liability being ruinous,” along
with the contention that “Plaintiffs’ much broader request for the
[particular information sought] is unnecessarily invasive and well
out
of
proportion
discovered.”
to
the
underlying
factual
question
to
be
(E.g., Docket Entry 239-3 at 5-6, 8, 10, 13-15, 24,
26-27, 29-32, 34; accord id. at 17.)2
Instead of the requested
information, the Discovery Responses provide one or two unsigned
balance
sheets
per
firm
and
an
unsigned
personal
statement from most of the individual Fox Defendants.
2-340.)3
financial
(See id. at
Notwithstanding the Discovery Responses’ objection to
“producing information on the financial condition of [any Fox
Defendant’s] spouse” (e.g., id. at 31), the financial statements
reflect the existence of both jointly held assets (see, e.g.,
Docket Entry 241 at 339 (deeming deposit accounts schedule not
applicable because “[a]ll accounts are jointly held”)) and greater
individual assets than the Declarations acknowledge (see, e.g.,
Docket Entry 252-3 at 45-55 (discussing assets listed on financial
statement but not included in Declaration)).
2 The Discovery Responses further include various boilerplate
and undeveloped objections, as well as a few additional objections
pertinent to only specific requests in the Financial Discovery.
(See generally Docket Entry 239-3.)
3
Although the Discovery Responses indicate that each
individual Fox Defendant will produce a financial statement, they
do not contain such statements from Lisa Lanier and Wayne Hardee.
(See id.)
4
Case 1:16-cv-00542-LCB-LPA Document 297 Filed 09/01/20 Page 4 of 22
Plaintiffs
Financial
thereafter
Discovery
(see
moved
Docket
to
compel
Entry
responses
238),4
to
contending
the
that
“[they] need to discover whether the Fox Defendants have accurately
represented to the Court their wealth and their ability to pay a
judgment” (Docket Entry 239 at 3).
In so moving, Plaintiffs
primarily
address
focused
‘annihilating
(id. at 5).
on
the
liability’
need
defense
to
against
“Fox
class
Defendants’
certification”
(See generally Docket Entries 239, 245.)
Plaintiffs
also contended that, “since the Fox Defendants are expected to be
trial witnesses, the discovery is relevant to the Fox Defendants’
character for truthfulness — a cross examination subject which the
Court
may
Evidence.”
allow
under
Rule
608(b)
of
the
Federal
Rules
of
(Docket Entry 239 at 5; accord Docket Entry 245 at 6-7
(asserting that, in support of Plaintiffs’ Motion, “Plaintiffs also
argued that the [Declarations] are subject to investigation to
probe the declarants’ truthfulness — a topic that may be relevant
at trial”).)
alia,
Fox Defendants opposed Plaintiffs’ Motion on, inter
proportionality
“Opposition”) at 6-14.)
grounds.
(See
Docket
Entry
244
(the
In particular, Fox Defendants maintained
that they already “gave [D]eclarations about their net worth” (id.
at 10; accord id. at 17) and the potential business harm they
4 More specifically, Plaintiffs moved to compel responses to
Request 3 through Request 9 of the Financial Discovery served on
individual Fox Defendants and to all of the Financial Discovery
served on entity Fox Defendants. (See Docket Entry 239 at 8-12;
see also Docket Entries 239-1, 239-2.)
5
Case 1:16-cv-00542-LCB-LPA Document 297 Filed 09/01/20 Page 5 of 22
“could incur from being compelled to hand over their sensitive
financial information to Plaintiffs’ counsel,” whom they classify
as “business competitors” (id. at 13), “just isn’t worth it when
compared to the minimal relevance of the information and the
non-existent need for it at this stage of the case” (id. at 14).
In
response,
Plaintiffs
emphasize
that
the
three
Fox
Defendants’ depositions taken during briefing on Plaintiffs’ Motion
“revealed that these [d]efendants have far greater ability to pay
a judgment than they indicated in the [Declarations].”
(Docket
Entry 247 at 3.) For instance, Charles Hardee (“Hardee”) testified
that he owns property and bank accounts jointly with his wife.
(Docket Entry 252-1 at 48-49, 86-87.) He further testified that he
completed a financial statement for PNC Bank in connection with his
beach house “this year” (id. at 41; see also id. at 45 (explaining
that Hardee updated previous financial statement for PNC in 2020)),
which statement included the jointly owned property (see id. at 4748).
However, Hardee omitted such property — which includes a
beach house, his primary residence, and a rental property acquired
in 2019 — on the financial statement that he provided in response
to the Financial Discovery (see id.) and in calculating his assets
for his Declaration (see Docket Entry 208-1 at 7).
Yet, Hardee
testified that he paid cash for the rental property and also paid
down outstanding debt on the beach house within the last year.
(See Docket Entry 252-1 at 92-93.)
Hardee further testified that
6
Case 1:16-cv-00542-LCB-LPA Document 297 Filed 09/01/20 Page 6 of 22
he listed the three bank accounts he jointly owns with his wife on
the PNC financial statement, but not on the financial statement
offered in discovery, even though he owns no individual bank
accounts.
(See id. at 48-49.)
James Farrin (“Farrin”) likewise testified that he regularly
provides a financial statement to First Citizens Bank that includes
information on assets he owns jointly with his wife. (Docket Entry
252-2 at 28, 30.)5
He further acknowledged that he has “never
provided a document excluding [his] joint accounts to a bank” (id.
at 31).
(See id. at 32.)
Farrin also testified that he and his
wife own joint bank and investment accounts, as well as a limited
liability company that owns their beach house. (See id. at 72-74.)
Accordingly, Farrin conceded that he “ha[s] substantial joint
assets that are not disclosed in [his D]eclaration under penalty of
perjury.”
(Id. at 71-72.)6
Farrin further explained that a firm’s balance sheet provides
only “a snapshot of the firm at a period in time” (id. at 58;
accord id. at 21), such that “a firm could have[] a billion dollars
in cash one day and distribute that the same day, and then a
balance sheet run the following day would not show that billion
5 Farrin also indicated that, although he does not include
the information on his financial statement, the bank receives a
separate document detailing the deferred compensation to which he
possesses entitlement. (See id. at 74-75.)
6 He also agreed that “the vast bulk of the money, money or
assets, that’s in [his and his wife’s] joint names has come from
[his] work with James Scott Farrin P.C.” (Id. at 97.)
7
Case 1:16-cv-00542-LCB-LPA Document 297 Filed 09/01/20 Page 7 of 22
dollars in cash” (id. at 21).
Farrin also testified that the
balance sheets provided for James S. Farrin, P.C. (the “Farrin
Firm”) in response to the Financial Discovery constitute “end of
year balance sheets which” present “typically a lower watermark
because [Farrin Firm is] an S Corp and [they] are doing what [they]
can to reduce tax liability” (id. at 56).
(See id. at 55-56; see
also id. at 60 (agreeing that “to get a meaningful evaluation of
the value of the firm and what the firm is worth [one would] have
to consider more than the balance sheet”).) Farrin also noted that
neither the provided balance sheets nor his Declaration account for
the value of the Farrin Firm’s current caseload.
09.)
(See id. at 108-
Farrin additionally acknowledged that he possesses “the
authority to direct the financial operations of the [Farrin F]irm,”
including
“what
funds
get
distributed
versus
what
funds
get
retained” (id. at 20) and any deferred compensation awards (id. at
78), as well as deciding the amount of his annual bonus (see id. at
95) and his salary (id. at 78-79).
Donald
Marcari
(“Marcari”)
similarly
testified
that
his
Declaration “[i]s not accurate,” as it, inter alia, excludes
certain real estate assets (Docket Entry 252-3 at 55),7 including
7 The testimony reflects a more than twelvefold difference
between the amounts identified in the Declaration as individual
assets and the amounts acknowledged in Marcari’s deposition as
individual assets. (Compare Docket Entry 208-1 at 22, with Docket
Entry 247-3 at 54.) Marcari further testified (on May 8, 2020)
that he realized the discrepancy “probably two days ago” and had
“talked to coun[se]l about [withdrawing his Declaration]” but had
(continued...)
8
Case 1:16-cv-00542-LCB-LPA Document 297 Filed 09/01/20 Page 8 of 22
a townhouse that he and another individual purchased, with no debt,
in October 2019 (id. at 47-48).
Marcari also acknowledged that he
possesses a joint stock account and certain real estate with his
estranged wife.
Particularly
(See Docket Entry 252-3 at 56-57, 63-64, 71-72.)
“[t]he
Court
given
should
this
compel
testimony,
the
Plaintiffs
Financial
contended,
Discovery
so
that
Plaintiffs and the Court may have a more accurate picture of the
financial facts that the Fox Defendants voluntarily presented to
the Court in December 2019.”
(Docket Entry 247 at 3.)
Finally,
the parties moved to seal certain information submitted in support
of Plaintiffs’ Motion.
(See Docket Entries 240, 243, 246, 252.)
After the parties finished briefing Plaintiffs’ Motion, the
Court (per United States District Judge Loretta C. Biggs) issued an
opinion
denying
Plaintiffs’
typicality grounds.
Opinion”) at 24.)
class
certification
motion
on
(See Docket Entry 284 (the “Certification
In so doing, the Court declined to address Fox
Defendants’ annihilating liability contentions.
(See id. at 24
n.16 (“Whether a district court should consider the likelihood of
ruinous liability at the certification stage is the subject of some
7(...continued)
not done so.
(Docket Entry 252-3 at 56.)
Notably, Marcari’s
unsigned financial statement, dated as of March 30, 2020, and
produced on April 23, 2020, reveals this significant discrepancy
(see id. at 54-56; see also Docket Entry 241 at 234-39), yet Fox
Defendants’ Opposition, filed May 7, 2020, does not address this
issue (see generally Docket Entry 244); instead, it opposes the
Financial Discovery on the grounds that “Fox Defendants gave
[D]eclarations about their net worth” (id. at 10).
9
Case 1:16-cv-00542-LCB-LPA Document 297 Filed 09/01/20 Page 9 of 22
disagreement.
However, because this Court has decided not to
certify the proposed class for a variety of other reasons, it
chooses not to wade into that debate here.” (citations omitted)).)
DISCUSSION
I. Plaintiffs’ Motion
By declining to engage on the annihilative liability issue,
the Certification Opinion effectively moots the main justification
for
Plaintiffs’
Motion
(see,
e.g.,
Docket
Entry
239
at
12
(asserting that the Financial Discovery “seeks information about
the Fox Defendants[’] assets, liability, and income — all of which
are directly relevant to their ability to pay a judgment, and,
therefore,
relevant
liability”)).
to
their
defense
claiming
annihilating
Accordingly, potential impeachment serves as the
only extant grounds for compelling the Financial Discovery.
(See
Docket Entries 239, 245.) Under the circumstances, the Court finds
that proportionality concerns preclude compelled compliance with
the Financial Discovery.
See Fed. R. Civ. P. 26(b)(1) (“Parties
may obtain discovery regarding any nonprivileged matter that is
relevant to any party’s claim or defense and proportional to the
needs
of
the
case
.
.
.
.”);
Fed.
R.
Civ.
P.
26
advisory
committee’s notes, 2015 Amendment (“The parties and the court have
a collective responsibility to consider the proportionality of all
discovery and consider it in resolving discovery disputes.”).
10
Case 1:16-cv-00542-LCB-LPA Document 297 Filed 09/01/20 Page 10 of 22
In this regard, it bears emphasis that, although arguably
necessary for evaluating the Declarations’ specific averments, the
Financial
Discovery
seeks
financial information.
a
significant
amount
of
sensitive
(See Docket Entries 239-1, 239-2.)
In
addition, as detailed above, both the financial statements provided
in response to the Financial Discovery and the deposition testimony
obtained
during
briefing
on
Plaintiffs’
Motion
reveal
ample
impeachment evidence, including various “inconsistencies between
the
[Declarations]
and
the
admissions
obtained
in
[the]
depositions” (Docket Entry 247 at 2). Given such developments, the
Financial
Discovery
has
become
disproportionate.
The
Court
therefore will deny Plaintiffs’ Motion.
Ordinarily, the Court must order expense-shifting when it
denies a motion to compel.
See Fed. R. Civ. P. 37(a)(5)(B).
However, “the [C]ourt must not order this payment if the motion was
substantially justified or other circumstances make an award of
expenses unjust.”
Id.
Here, Fox Defendants made their specific
financial condition, including net worth, and the availability of
assets a relevant issue when they relied upon the Declarations in
support of their annihilative liability contentions.
subsequent
Opinion
mooting
rendered
Accordingly,
the
of
those
the
Court
contentions
Financial
finds
by
Discovery
that
the
Only the
Certification
disproportionate.
Plaintiffs’
Motion
“was
substantially justified,” Fed. R. Civ. P. 37(a)(5)(B), as well as
11
Case 1:16-cv-00542-LCB-LPA Document 297 Filed 09/01/20 Page 11 of 22
that “other circumstances make an award of expenses unjust,” id.
Therefore, each party shall bear its own expenses on Plaintiffs’
Motion.
II. Sealing Motions
“[T]he courts of this country recognize a general right to
inspect and copy . . . judicial records and documents.”
Warner Commc’ns, Inc., 435 U.S. 589, 597 (1978).
Nixon v.
“The right of
public access to documents or materials filed in a district court
derives from two independent sources: the common law and the First
Amendment.” Virginia Dep’t of State Police v. Washington Post, 386
F.3d 567, 575 (4th Cir. 2004).
As relevant here, the common-law
presumption of access “can be rebutted if countervailing interests
heavily outweigh the public interests in access,” and “the party
seeking to overcome the presumption bears the burden of showing
some significant interest that outweighs the presumption.”
(internal quotation marks and brackets omitted).
Id.
“[W]hether to
grant or restrict access to judicial records” under the common law
“is a matter of a district court’s ‘supervisory power,’ and it is
[a decision] ‘best left to the sound discretion of the [district]
court, a discretion to be exercised in light of the relevant facts
and circumstances of the particular case.’”
Id. (final set of
brackets in original).
“When presented with a request to seal judicial records,” the
Court begins by “determin[ing] the source of the right of access
12
Case 1:16-cv-00542-LCB-LPA Document 297 Filed 09/01/20 Page 12 of 22
with respect to each document,” as “only then can it accurately
weigh the competing interests at stake.”
Id. at 576 (internal
quotation
The
marks
and
brackets
omitted).
Court
must
then
evaluate the competing interests under the following approach.
First, “it must give the public notice of the request to seal and
a reasonable opportunity to challenge the request.”
Id.8
Next,
“it must consider less drastic alternatives to sealing.”
Id.
Finally, “if it decides to seal[,] it must state the reasons (and
specific supporting findings) for its decision and the reasons for
rejecting alternatives to sealing.”
“Adherence
to
this
procedure
Id.
serves
to
ensure
that
the
decision to seal materials will not be made lightly and that it
will be subject to meaningful appellate review.”
Id.
This
approach also reflects the reality that “[t]he operations of the
courts and the judicial conduct of judges are matters of utmost
public concern,” Landmark Commc’ns, Inc. v. Virginia, 435 U.S. 829,
839 (1978), as well as that “the public’s business is best done in
public,” Cochran v. Volvo Grp. N. Am., LLC, 931 F. Supp. 2d 725,
727 (M.D.N.C. 2013).
8 In this regard, Plaintiffs filed the First Sealing Motion
on April 30, 2020 (see Docket Entry 240 at 3), and the Second
Sealing Motion on May 11, 2020 (see Docket Entry 246 at 3).
Accordingly, all interested persons have received “notice of the
request to seal and a reasonable opportunity to challenge the
request,” Washington Post, 386 F.3d at 576, yet the docket reflects
no objections to the Sealing Motions (see Docket Entries dated Apr.
30, 2020, to present).
13
Case 1:16-cv-00542-LCB-LPA Document 297 Filed 09/01/20 Page 13 of 22
However, “the mere filing of a document with a court does not
render the document judicial.”
In re Policy Mgmt. Sys. Corp., 67
F.3d 296 (table), Nos. 94–2254 & 94-2341, 1995 WL 541623, *4 (4th
Cir. 1995); see also United States v. Moussaoui, 65 F. App’x 881,
889 (4th Cir. 2003) (“The unclassified appendix contains a wide
variety of materials, such as pleadings, hearing and deposition
transcripts, and some discovery materials. Some of these documents
fall within the common law presumption of access, while others are
subject to the greater right of access provided by the First
Amendment.
Still others may not qualify as ‘judicial records’ at
all.” (citing United States v. Amodeo, 44 F.3d 141, 145-46 (2d Cir.
1995))); Amodeo, 44 F.3d at 145 (“We think that the mere filing of
a paper or document with the court is insufficient to render that
paper a judicial document subject to the right of public access.
We think that the item filed must be relevant to the performance of
the judicial function and useful in the judicial process in order
for it to be designated a judicial document.”). Rather, “documents
filed with the court are ‘judicial records’ if they play a role in
the adjudicative process, or adjudicate substantive rights.” In re
U.S. for an Order Pursuant to 18 U.S.C. Section 2703(D), 707 F.3d
283, 290 (4th Cir. 2013).
Accordingly, “[b]ecause discovery motions” often “involve
procedural, rather than ‘substantive’ rights of the litigants,”
Kinetic Concepts, Inc. v. Convatec Inc., No. 1:08cv918, 2010 WL
14
Case 1:16-cv-00542-LCB-LPA Document 297 Filed 09/01/20 Page 14 of 22
1418312, at *9 (M.D.N.C. Apr. 2, 2010), courts have found that no
right of public access attaches to materials filed with discovery
motions.
See id. at *9-10; see also, e.g., Chicago Tribune Co. v.
Bridgestone/Firestone, Inc., 263 F.3d 1304, 1312 (11th Cir. 2001)
(“The better rule is that material filed with discovery motions is
not subject to the common-law right of access, whereas discovery
material filed in connection with pretrial motions that require
judicial resolution of the merits is subject to the common-law
right, and we so hold.”).
In such circumstances, the “good cause”
standard of Rule 26(c) applies to the sealing request. See Kinetic
Concepts, 2010 WL 1418312, at *10; see also BASF Agro B.V. v.
Makhteshim Agan of N. Am., Inc., No. 1:10cv276, 2015 WL 12991090,
at *4 (M.D.N.C. July 21, 2015) (“If the[ relevant] documents only
asked this court to rule on procedural discovery grounds, this
court would only need to find that good cause existed for sealing
these documents.”).
Alternatively, to the extent that the materials qualify as
“‘judicial records’ because they were filed with the objective of
obtaining judicial action or relief pertaining to [the Motion],” In
re U.S., 707 F.3d at 291, the common-law right of access applies,
see BASF Agro, 2015 WL 12991090, at *4 (explaining that “it may
also be that these briefs and exhibits are judicial records because
they were filed with the objective of . . . supporting . . . a
motion to compel” and, as such, “the common-law presumption of
15
Case 1:16-cv-00542-LCB-LPA Document 297 Filed 09/01/20 Page 15 of 22
access attaches to these documents”).
States
Court
of
Appeals
for
the]
Thus, “because the [United
Fourth
Circuit
has
not
definitively resolved the access right question in the discovery
motion context, the Court will conduct the ‘competing interests’
balancing test that would govern if the common-law access right did
apply, along with the ‘good cause’ inquiry.”
Kinetic Concepts,
2010 WL 1418312, at *10.
Under Rule 26(c), “[t]he [C]ourt may, for good cause, issue an
order to protect a part undue burden or expense y or person from,”
inter alia, “undue burden or expense,” Fed. R. Civ. P. 26(c)(1),
including by restricting access to certain materials, see, e.g.,
Fed.
R.
Civ.
P.
26(c)(1)(F)-(H)
(authorizing
sealing
of
depositions, confidential commercial information, and “specified
documents or information”). “Similarly, the common law presumption
of access may be overcome if competing interests outweigh the
interest in access, such as where a need exists to prevent court
files from becoming sources of business information that might harm
a litigant’s competitive standing.”
Kinetic Concepts, 2010 WL
1418312, at *10 (internal quotation marks, brackets, and citation
omitted).
Accordingly, under both Rule 26(c) and the common-law
sealing analysis, courts frequently limit disclosure of sensitive
financial
information.
(See,
e.g.,
Docket
Entry
236
at
4-5
(authorizing sealing of financial information in Declarations);
Docket Entry 183 at 1-3 (defining, in Consent Protective Order
16
Case 1:16-cv-00542-LCB-LPA Document 297 Filed 09/01/20 Page 16 of 22
entered “pursuant to Rule 26” (id. at 1), “‘Protected Information’”
(id. at 2) to include “[f]inancial information and records of the
[d]efendant law firms and named individual defendants” (id. at
3)).)
Here, the Sealing Motions seek to seal certain information in
Plaintiffs’ exhibits and reply memorandum in support of Plaintiffs’
Motion (the “Reply”).
246 at 1-2.)
sealing
of
(See Docket Entry 240 at 1-2; Docket Entry
In particular, the First Sealing Motion requests
financial
information,
including
the
financial
statements and balance sheets, in the Discovery Responses.
(See
Docket Entry 240 at 1-2; see generally Docket Entries 239-3, 2394.) In addition, the Second Sealing Motion asks the Court to seal,
inter
alia,
references
to
certain
financial
information
in
Plaintiffs’ Reply and supporting exhibits thereto, which contain
deposition testimony from Farrin, Hardee, and Marcari. (See Docket
Entry 246 at 1-2; see generally Docket Entries 245, 252-1 to 2524.)9
Although Plaintiffs generally express “no opinion” as to the
confidentiality of the requested information (Docket Entry 240 at
9
Plaintiffs filed a redacted version of their Reply,
reflecting “agreed upon” redactions (Docket Entry 246 at 2; see
generally Docket Entry 245), as well as placeholder deposition
transcript exhibits (see Docket Entries 245-1 to 245-3) to permit
Fox Defendants to specify, under the parties’ consent protective
order, “which portions of the deposition transcripts are claimed to
ultimately be entitled to redaction” (Docket Entry 246 at 2). Fox
Defendants thereafter submitted redacted versions of the deposition
transcripts and exhibits. (See Docket Entries 252-1 to 252-4.)
17
Case 1:16-cv-00542-LCB-LPA Document 297 Filed 09/01/20 Page 17 of 22
2; Docket Entry 246 at 3),10 Fox Defendants maintain that the
“sensitive financial information” (Docket Entry 243 at 1; Docket
Entry 252 at 1) in the relevant materials merit sealing (see
generally Docket Entries 243, 252).
Under the circumstances, the Court finds that much of the
information that the parties seek to redact qualifies as the type
of sensitive financial information that warrants protection from
public disclosure. See, e.g., Feed.ing BV v. Principle Sols., LLC,
No. 14-C-1241, 2015 WL 136402, at *4 (E.D. Wis. Jan. 8, 2015)
(granting request to seal balance sheets); Randolph v. ADT Sec.
Servs., Inc., Civ. Action No. 09-1790, 2012 WL 2234362, at *11 (D.
Md.
June
14,
2012)
(sealing
“documents
[that]
contain
[an
individual’s] tax returns and other personal financial data or
discuss such information”).
Further, as to the exhibits, “the
parties have narrowly tailored their proposed redactions to allow
for public access to the vast majority of the filings — a less
drastic alternative to sealing the documents in their entireties”
(Docket Entry 236 at 4).
(See Docket Entries 239-3, 239-4, 252-1
to 252-4.)
However, the proposed redactions in the Reply sweep beyond
protection of Fox Defendants’ specific financial information, to
encompass, for instance, Plaintiffs’ assertion that “there is
10 Plaintiffs note, however, that “if any of the redacted
information provided by the Fox Defendants is inaccurate, then[, in
Plaintiffs’ view,] it is not entitled to protection.”
(Docket
Entry 246 at 2-3.)
18
Case 1:16-cv-00542-LCB-LPA Document 297 Filed 09/01/20 Page 18 of 22
reason to believe that some, if not all, of the Fox Defendants have
been less than candid with the Court regarding the very topic on
which Plaintiffs seek discovery” (Docket Entry 247 at 11; cf.
Docket Entry 245 at 11), as well as Plaintiffs’ assertion that the
deposed Fox Defendants’ “testimony was not consistent with the
spirit, and in some instances, the letter of the [Declarations].
Their May 2020 deposition testimony revealed that these Defendants
have far greater ability to pay a judgment than they indicated in
the December 2019 [Declarations]” (Docket Entry 247 at 3).
Fox
Defendants provide no justification for sealing such information
(see Docket Entry 252) and the Court finds that none exists,
particularly
given
that
resolution
of
Plaintiffs’
Motion
necessitated disclosure of at least the general tenor, if not the
exact wording, of much of the information that the parties seek to
redact in Plaintiffs’ Reply, see, e.g., Washington Post, 386 F.3d
at 579 (“[O]nce announced to the world, the information lost its
secret
characteristic.”
(internal
quotation
marks
omitted)).
Accordingly, the Court finds that sealing remains proper only as to
the specific monetary amounts identified on pages 2, 3, and 7 of
the Reply.
Similarly, in light of its disclosure herein, the information
in the deposit account schedule on page 339 of the Discovery
Responses does not qualify for sealing.
339.)
Likewise,
because
unredacted
(See Docket Entry 241 at
testimony
from
Hardee’s
19
Case 1:16-cv-00542-LCB-LPA Document 297 Filed 09/01/20 Page 19 of 22
deposition testimony reveals that the 2018 “balance sheet show[s]
that [his firm] w[as] insolvent” (Docket Entry 252-1 at 52), no
justification exists for redacting that information elsewhere in
his deposition.
See Washington Post, 386 F.3d at 579.11
Finally,
the redacted version of the Marcari deposition transcript omits
exhibits containing publically available information.
(Compare
Docket Entry 252-3, and Docket Entry 252-4, with Docket Entry 247-3
at 96-101.)
Fox Defendants offer no explanation for this omission
(see generally Docket Entry 252), and the Court discerns no reason
for sealing the particular exhibits.
Accordingly, the Court will
direct the parties to publically file those withheld exhibits.
CONCLUSION
The Certification Opinion moots the primary justification for
Plaintiffs’ Motion and proportionality concerns prevent compelled
compliance with the Financial Discovery solely for impeachment
purposes.
their
Additionally, Fox Defendants have justified sealing
undisclosed
financial
information,
but
not
any
other
information in the Reply or exhibits.
11 Notwithstanding this disclosure, the balance sheet itself
properly remains subject to sealing because it contains detailed
information regarding the firm’s assets and liabilities that extend
beyond the simple fact that, on paper, the firm’s liabilities
outstrip its assets on a particular date. See, e.g., Feed.ing BV,
2015 WL 136402, at *4 (granting request to seal balance sheets,
noting that they “provide particular breakdowns and dollar amounts
allocated to designated areas of business operations and would be
uniquely valuable if made available to [the defendant’s]
competitors”).
20
Case 1:16-cv-00542-LCB-LPA Document 297 Filed 09/01/20 Page 20 of 22
IT IS THEREFORE ORDERED that Plaintiffs’ Motion (Docket Entry
238) is DENIED.
IT IS FURTHER ORDERED that the First Sealing Motion (Docket
Entry 240) is GRANTED IN PART and DENIED IN PART as follows:
the
First Sealing Motion is granted except insofar as it seeks to
redact the information contained in the deposit accounts schedule
(Schedule 1) on page 339 of the Discovery Responses (see Docket
Entry 239-3 at 339).
On or before September 8, 2020, Plaintiffs
shall file a corrected version of the relevant financial statement
(id. at 338-40) that removes such redaction.
IT IS FURTHER ORDERED that the Second Sealing Motion (Docket
Entry 246) is GRANTED IN PART and DENIED IN PART as follows:
Second Sealing
Motion
is
granted
except
insofar
as
it
the
seeks
redaction of (i) any information other than the specific monetary
amounts
identified
on
pages
2,
3,
and
7
of
the
Reply,
(ii) references in Hardee’s deposition to the insolvent nature of
Hardee’s firm on its 2018 balance sheet, and (iii) the publically
available exhibits to Marcari’s deposition (see Docket Entry 247-3
at 96-101).
On or before September 8, 2020, Plaintiffs shall file
a corrected version of their Reply (Docket Entry 245) and Fox
Defendants shall file corrected versions of the Hardee deposition
21
Case 1:16-cv-00542-LCB-LPA Document 297 Filed 09/01/20 Page 21 of 22
(Docket Entry 252-1) and Marcari deposition exhibits (Docket Entry
252-4).
This 1st day of September, 2020.
/s/ L. Patrick Auld
L. Patrick Auld
United States Magistrate Judge
22
Case 1:16-cv-00542-LCB-LPA Document 297 Filed 09/01/20 Page 22 of 22
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