BBK Tobacco & Foods LLP v. Central Coast Agriculture Incorporated

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 BBK Tobacco & Foods LLP, No. CV-19-05216-PHX-MTL

10 Plaintiff, ORDER

11 v.

12 Central Coast Agriculture Incorporated,

13 Defendant. 14 15 Before the Court are motions to seal filed by Plaintiff BBK Tobacco & Foods, LLP 16 (“BBK”) (Docs. 233, 240, 244) and Defendant Central Coast Agriculture Incorporated 17 (“CCA”) (Doc. 242), and a Request for Issuance of an Order to Show Cause (Doc. 249) 18 filed by CCA. 19 I. 20 The parties previously stipulated to a Protective Order that permits the “most 21 sensitive” information, including but not limited to trade secrets or other “highly sensitive 22 and proprietary confidential information,” to be designated as “HIGHLY 23 CONFIDENTIAL–FOR COUNSEL EYES ONLY.” (Doc. 52 at 2–3.) 24 On October 5, 2021, BBK filed a Motion for Extension of Time (Doc. 209) to 25 respond to CCA’s Motion for Partial Summary Judgment (Doc. 203). In the Motion and 26 attached supporting declaration, BBK inadvertently disclosed information that CCA had 27 marked, pursuant to the stipulated Protective Order, “HIGHLY CONFIDENTIAL – 28 ATTORNEYS’ EYES ONLY.” (Docs. 209, 209-1.) The next day, upon realizing its 1 mistake, BBK filed a Motion to Seal its unredacted filing. (Doc. 213.) The Court granted 2 the motion. (Doc. 217.) 3 That same day, October 6, 2021, BBK filed a (purportedly) corrected, redacted 4 version of its Motion for Extension of Time to File Response to CCA’s Motion for Partial 5 Summary Judgment. (Doc. 214.) Instead of properly redacting the confidential 6 information, however, BBK merely inserted, by way of Adobe or similar software, black 7 boxes over the text of its motion and supporting declaration, thereby permitting anyone to 8 access the unredacted information by simply clicking on and moving the shaded box. (Doc. 9 249-1 ¶ 12.) Because the information was not properly redacted, it was disclosed by third- 10 party commercial electronic databases, such as LexisNexis, which reproduce court dockets. 11 (Id. ¶¶ 14–15.) 12 On November 1, 2021, BBK filed a redacted Opposition to CCA’s Renewed Motion 13 for Partial Summary Judgment. (Doc. 229.) The opposition was accompanied by numerous 14 exhibits, which had likewise been redacted as necessary. BBK also filed a motion to seal 15 unredacted versions of the opposition and accompanying Exhibit A (Doc. 233.) Those 16 documents are currently lodged under seal at Docs. 234 and 235. BBK likewise lodged 17 under seal unredacted versions of Exhibits G, M, Q, Z, and BB, in anticipation of a motion 18 to seal by CCA. (Docs. 238-1, 238-2, 238-3, 238-4, 238-5.) CCA’s motion was filed three 19 days later. (Doc. 242.) 20 In filing its opposition (Doc. 229), BBK again failed to redact some of CCA’s highly 21 confidential information. To remedy this oversight, BBK filed a motion to seal the 22 improperly redacted opposition (Doc. 240) and a corrected, redacted opposition (Doc. 241). 23 In the refiled opposition, however, BBK again inserted shaded boxes to conceal the 24 confidential information rather than redacting it properly. (Doc. 249 ¶ 17.) BBK also failed 25 to request that the Court seal three duplicate copies of the opposition that had been filed 26 inadvertently. (Docs. 230, 231, 232.) At the time, BBK did not realize that the duplicates 27 had been filed. (See Doc. 244 at 1.) 28 On November 4, 2021, CCA informed BBK that several of its documents (Docs. 1 214, 214-1, 230, 231, 232, 241) were improperly redacted. BBK immediately contacted 2 the Clerk of the Court to request that the documents be temporarily sealed pending the 3 filing of a motion to seal. The Clerk temporarily sealed the documents as requested, and 4 BBK filed a motion to seal (Doc. 244). BBK then filed appropriately redacted versions of 5 Docs. 214, 214-1, and 241. (Docs. 245, 245-1, 246.) BBK did not file corrected versions 6 of Docs. 230, 231, or 232, as those were merely duplicates of the opposition that was filed 7 initially at Doc. 229. 8 On November 16, 2021, CCA filed a redacted Reply in support of its motion for 9 partial summary judgment. (Doc. 251.) It also filed a motion to seal an unredacted version 10 of the Reply. (Doc. 252.) 11 II. 12 The public has a right to inspect and copy public judicial records and documents. 13 Nixon v. Warner Commc’ns, Inc., 435 U.S. 589, 567 (1978). Although that right is not 14 absolute, there is a “strong presumption in favor of access to court records.” Ctr. for Auto 15 Safety v. Chrysler Grp., LLC, 809 F.3d 1092, 1096 (9th Cir. 2016) (quoting Foltz v. State 16 Farm Mut. Aut. Ins. Co., 331 F.3d 1122, 1135 (9th Cir. 2003)). The party seeking to seal a 17 judicial record bears the burden of overcoming that presumption by either showing 18 “compelling reasons” if the record is a dispositive pleading or “good cause” if the record 19 is a non-dispositive pleading. See Kamakana v. City & Cnty. of Honolulu, 447 F.3d 1172, 20 1179–80 (9th Cir. 2006); see also Ctr. for Auto Safety, 809 F.3d at 1096–97. Motions to 21 seal a summary judgement motion or its exhibits must meet the compelling reasons 22 standard. See Kamakana, 447 F.3d at 1179, 1181. 23 III. 24 A. Motions to Seal 25 1. BBK’s Motions 26 BBK has three pending motions to seal. (Docs. 233, 240, 244.) In the first, BBK 27 seeks to file the following information, contained in Docs. 229 and 229-2, under seal: (1) 28 BBK’s annual revenues from sales of products using BBK’s RAW marks, BBK’s annual 1 unit sales of products using BBK’s RAW marks, and the names of some of BBK’s 2 customers; (2) BBK’s non-public marketing expenditures; and (3) information about 3 BBK’s settlement discussions with CCA and third parties, including BBK’s settlement 4 positions, strategies, and proposed terms. (Doc. 233.) BBK argues that the disclosure of 5 this information, which is kept confidential and not shared with third parties, would place 6 it at a competitive disadvantage. (Doc. 233-1 ¶¶ 4–9.) 7 The Supreme Court has recognized that “sources of business information that might 8 harm a litigant’s competitive standing” may be filed under seal notwithstanding the 9 public’s general right to inspect and copy judicial records. Warner Commc’ns, Inc., 435 10 U.S. at 598–99; see also MD Helicopters Inc. v. Boeing Co., No. CV-17-02598-PHX-JAT, 11 2019 WL 2184762, at *2 (D. Ariz. May 21, 2019). Likewise, courts have frequently held 12 that settlement discussions and negotiations meet the compelling reasons standard. See, 13 e.g., San Diego Comic Convention v. Dan Farr Prods., No. 14-cv-1865, 2018 WL 14 2717880, at *1–2 (S.D. Cal. June 5, 2018); Brightwell v. McMillan Law Firm, No. 16-cv- 15 1696, 2017 WL 5885667, at *1–2 (S.D. Cal. Nov. 29, 2017); Prosurance Group, Inc. v. 16 Liberty Mutual Group, Inc., No. 10-cv-0260, 2011 WL 704456, at *1 (N.D. Cal. Feb. 18, 17 2011). This case is no exception. BBK has sufficiently shown that revealing its confidential 18 revenue and sales figures, marketing expenditures, and the content of its settlement 19 discussions would likely harm its competitive standing. (Doc. 233-1 ¶¶ 4–9.) Moreover, 20 BBK’s request is narrowly tailored. BBK does not seek to file either its Opposition or 21 Exhibit A entirely under seal, but rather seeks to file under seal only those particular sub- 22 exhibits, paragraphs, and lines that reference sensitive financial or settlement information. 23 Pursuant to its narrow request, BBK has filed publicly available, redacted versions of the 24 documents. (See Docs. 229-1, 246.) BBK’s interest in keeping the above information 25 confidential therefore outweighs the public’s interest in accessing a miniscule portion of 26 the record. BBK’s motion to seal (Doc. 233) will therefore be granted. 27 In its second pending motion (Doc. 240), BBK requests that the Court seal its 28 initially filed, redacted Opposition to CCA’s motion for partial summary judgment (Doc. 1 229). This motion to seal was filed to remedy BBK’s failure to redact some of CCA’s 2 confidential information from its Opposition. BBK has since filed another, properly 3 redacted version of the Opposition. (Doc. 246.) Its initially filed Opposition is therefore 4 duplicative. The Court will order it stricken from the record and BBK’s motion to seal 5 (Doc. 240) will be denied. 6 In the third pending motion (Doc. 244), BBK requests that Docs. 214, 214-1, 230, 7 231, 232, and 241 be filed under seal. Like Doc. 229, Docs. 230, 231, 232, and 241 are 8 improperly redacted versions of BBK’s Opposition to CCA’s motion for partial summary 9 judgment. Again, because BBK has since filed a correctly redacted version of its 10 Opposition (Doc. 246), these earlier filed, improperly redacted versions are needlessly 11 duplicative and will be ordered stricken from the record. Docs. 214 and 214-1—the 12 originally filed, improperly redacted versions of BBK’s Amended Motion for a Rule 56(d) 13 Extension and accompanying Exhibit A—have likewise been correctly redacted and 14 refiled. (Docs. 245, 245-1.) The Court will therefore order the duplicative, originally filed 15 documents stricken from the record and will deny BBK’s motion to seal (Doc. 244). 16 2. CCA’s Motions 17 CCA has two pending motions to seal. (Docs. 242, 252.) In the first, CCA requests 18 that the Court seal four categories of confidential information: (1) CCA’s financial 19 information, including statements about profitability and CCA’s balance sheet (Doc. 241 20 at 11 n.5, 15 n.9, 16:1.1); (2) CCA’s confidential market research, comprising market 21 research unrelated to the instant case and meant to guide CCA’s future business strategies 22 (Docs. 241 at 15:12–15, 31:8–10; 230-4 (Exhibit M); 230-8 (Exhibit Q ¶¶ 30, 31); 231-9 23 (Exhibit BB)); (3) CCA’s future business plans, including information regarding potential 24 future product releases (Docs. 241 at 28:4–6, 30:21–22; 231-7 (Exhibit Z)); and (4) CCA’s 25 sales history, including units of products sold and information about amounts of products 26 sold by CCA’s customers (Docs. 241 at 9:8–9, 20:6, 9–13; 229-8 at 4–5 (Exhibit G)). BBK 27 opposes CCA’s motion only with respect to CCA’s request to seal certain statements about 28 its profitability. (Doc. 248.) The Court will first address CCA’s unopposed requests and 1 will then turn to its request to seal statements relating to its profitability. 2 CCA argues that compelling reasons support its motion to seal its confidential 3 market research. The market research was obtained from CCA’s consultant, MFour, and is 4 specific to CCA’s goals and business. (Doc. 242-1 ¶¶ 5–6.) It is used by CCA to guide its 5 operations and to inform its strategic decisions. (Id.) CCA contends that the research should 6 be sealed because its disclosure would permit CCA’s competitors to replicate CCA’s 7 business practices and strategies without having to invest the considerable time and 8 resources ordinarily required to obtain meaningful market research. The disclosure, CCA 9 argues, would therefore unduly disadvantage CCA in the highly competitive cannabis 10 market. The Court agrees. The market research is a source of distinct competitive 11 advantage for CCA. See McMorrow v. Mondelez Int’l, Inc., No. 17-cv-2327-BAS-JLB, 12 2020 WL 406314, at *2 (S.D. Cal. Jan. 24, 2020) (“The Court finds compelling reasons to 13 seal these exhibits because Defendant’s marketing and research information gives 14 Defendant a competitive advantage.”). CCA’s request is also narrow. CCA seeks only to 15 seal the exhibits that comprise the market research and the specific lines in BBK’s 16 Opposition that expressly reference such research. In this instance, therefore, CCA’s 17 interest in keeping the research confidential outweighs the public’s interest in access. 18 CCA next argues that compelling reasons justify sealing information relating to its 19 future business plans. The Court agrees. The information relates primarily to a potential 20 new product line. It is described in the one-page Exhibit Z and referred to in BBK’s 21 Opposition. The information has been kept highly confidential, and its public disclosure 22 would work to the advantage of CCA’s competitors and negate the time, ingenuity, and 23 resources expended by CCA in creating the product development plan. (Doc. 242-1 ¶¶ 8– 24 10). “The protection of proprietary business information and prospective business plans is 25 a compelling reason to permit the filing of documents under seal.” Pinkerton Tobacco Co. 26 v. Art Factory AB, No. 2:20-cv-01322-SB-MRW, 2020 U.S. Dist. LEXIS 245439, at *2 27 (C.D. Cal. Dec. 28, 2020) (quoting Morawski v. Lightstorm Entm’t, Inc., No. CV 11-10294- 28 MMM-JCG, 2013 U.S. Dist. LEXIS 208103, at *4 (C.D. Cal. Jan. 14, 2013)). The Court 1 will accordingly grant CCA’s motion to seal information relating to its future business 2 plans. 3 The Court will likewise grant CCA’s motion to seal information relating to its sales 4 history. The information details CCA’s sales data with respect to various locations and 5 products and CCA’s sales trends. CCA states that it bases its future business plans and 6 product development plans on its sales history. (Doc. 242-1 ¶¶ 11–15). “[P]ast financial 7 data may meaningfully predict [a company’s] future business plans, such that public 8 disclosure of such information may provide a competitive advantage to [a company’s] 9 competitors.” Microsoft Corp. v. Motorola, No. C10-1823JLR, 2012 U.S. Dist. LEXIS 10 164255, at *17–20 (W.D. Wash. Nov. 12, 2012). CCA’s interest in keeping its sales history 11 confidential is substantial, particularly given its position in the emerging cannabis market. 12 Compelling reasons therefore justify granting CCA’s motion to seal. 13 Finally, CCA requests that the Court seal certain of its financial information, 14 including its balance sheet and statements about its profitability. The Court has already 15 determined that compelling reasons justify CCA’s request to file its balance sheet under 16 seal and has granted a motion to seal on that basis. (Doc. 194). The Court will not revisit 17 its ruling. 18 CCA also requests that the Court seal certain statements relating to its profitability. 19 It argues that their public disclosure would unfairly give CCA’s competitors an opportunity 20 to access private information about CCA’s operations and strategic decisions. BBK 21 opposes CCA’s request. (Doc. 248.) It argues that because CCA has placed its profitability 22 in the public domain, it has not discharged its burden of demonstrating compelling reasons 23 to overcome the presumption in favor of public access to judicial records. 24 CCA previously requested that the Court seal the same statements it seeks to have 25 sealed here. (Doc. 207.) BBK did not oppose CCA’s motion. (Doc. 216 at 3.) The Court 26 granted CCA’s request. (Doc. 217.) While not dispositive, BBK’s decision not to oppose 27 CCA’s motion informed the Court’s decision. 28 BBK has since changed its tune, and now opposes CCA’s request to seal the exact 1 statements—albeit in a new document—that the Court previously ordered sealed. In so 2 doing, BBK implicitly challenges the Court’s prior ruling. Indeed, BBK acknowledges in 3 its Response that if the Court accepts its arguments, documents previously ordered sealed 4 by the Court will need to be unsealed. (Doc. 248 at 3 n.2.) Thus, notwithstanding its label, 5 its Response is properly construed as a request that the Court reconsider its prior Order. 6 See, e.g., Burk v. State Farm Fire & Cas. Ins. Co., No. CV-14-02642-PHX-SMM, 2017 7 U.S. Dist. LEXIS 217278, at *3 (D. Ariz. Apr. 25, 2017) (construing plaintiff’s opposition 8 to defendant’s Daubert motion as a motion for reconsideration). So construed, BBK’s 9 argument must fail. 10 BBK’s implicit motion for reconsideration is untimely. Under Local Rule 7.2(g)(2), 11 “[a]bsent good cause shown, any motion for reconsideration shall be filed no later than 12 fourteen (14) days after the date of the filing of the Order that is the subject of the motion.” 13 The Court ordered the challenged profitability statements sealed on October 7, 2021. (Doc. 14 217.) BBK filed its Response to CCA’s motion to seal 29 days later, on November 5, 2021. 15 (Doc. 248.) Moreover, BBK has not shown good cause for its delay. BBK explains its 16 change of position as follows: “At the time [CCA initially moved to seal the challenged 17 profitability statements], BBK elected not to oppose CCA’s motion as a matter of courtesy. 18 Since that time, however, the statements at issue have become (due to BBK’s own technical 19 errors and oversights [see, e.g., Docs. 213, 240 and 244]) a topic of additional discussion 20 between the parties. That discussion has caused BBK to revisit the issue of the true 21 confidentiality of the CCA statement about its profitability.” (Doc. 248 at 3.) BBK’s 22 explanation does not demonstrate good cause. Indeed, it makes clear that BBK seeks only 23 to remedy its prior decision not to challenge CCA’s earlier motion. BBK advances no 24 argument now that it could not have raised in response to CCA’s original motion to seal 25 the challenged profitability statements.* “Motions for reconsideration . . . are not the place

26 * BBK argues that a publicly available CCA job posting, which makes generic statements about CCA’s profitability, shows that CCA does not consider statements about its 27 profitability to be confidential. (Doc. 248 at 4.) BBK further states that the job posting only just came to its attention. (Id. at 2.) But BBK has apparently been able to access the job 28 posting for some time, as it was “previously mentioned by one of BBK’s expert witnesses.” (Id.) Moreover, the information provided in the job posting is not the same information the 1 for parties to make new arguments not raised in their original briefs.” Motorola, Inc. v. 2 J.B. Rodgers Mech. Contractors, 215 F.R.D. 581, 586 (D. Ariz. 2003). 3 Even if BBK’s implicit motion for reconsideration were timely, it would yet be 4 denied. Motions for reconsideration should be granted only in rare circumstances. 5 Defenders of Wildlife v. Browner, 909 F. Supp. 1342, 1351 (D. Ariz. 1995). In this District, 6 motions for reconsideration of interlocutory orders may be granted only if: “(1) There are 7 material differences in fact or law from that presented to the Court and, at the time of the 8 Court’s decision, the party moving for reconsideration could not have known of the factual 9 or legal differences through reasonable diligence; (2) There are new material facts that 10 happened after the Court’s decision; (3) There has been a change in the law that was 11 decided or enacted after the Court’s decision; or (4) The movant makes a convincing 12 showing that the Court failed to consider material facts that were presented to the Court 13 before the Court’s decision.” Motorola, 215 F.R.D. at 586. The instant motion does not 14 come within the scope of any of these narrow categories. Instead, BBK’s implicit motion 15 is, as CCA suggests, “merely an inappropriate attempt by BBK to belatedly argue that CCA 16 did not meet the sealing standard in the first instance.” (Doc. 250 at 4.) 17 For these reasons, the Court will grant CCA’s motion to seal and deny BBK’s 18 implicit motion for reconsideration. Moreover, because CCA’s latest motion (Doc. 252) 19 requests that the Court seal the exact same statements about CCA’s profitability—this time 20 in CCA’s Reply in support of its renewed motion for summary judgment—the Court will 21 grant the motion. 22 B. Request for an Order to Show Cause 23 In addition to its motions to seal, CCA asks that the Court issue an order to show 24 cause requiring BBK to explain (1) why it has repeatedly violated the Court’s Protective 25 Order and (2) the steps it is taking to remedy the disclosure of CCA’s confidential 26 information. (Doc. 249.) CCA also requests the opportunity to seek an award of fees for 27 time spent responding to BBK’s violations of the Protective Order. (Id. at 6.) The Court

28 Court ordered sealed. BBK is thus mistaken insofar as it suggests that sealed information has been made publicly available by CCA. 1 will deny CCA’s request. While CCA is correct that BBK has violated the Court’s 2 Protective Order on several occasions and that BBK’s erroneous filings have caused CCA 3 (and the Court) to expend considerable time and resources, the Court finds that BBK’s 4 violations were inadvertent and, in several cases, were caused by technological malfunction 5 rather than carelessness on BBK’s part. “Although BBK’s counsel (through their 6 assistants) used the redaction tool within Adobe recommended as a means to perform 7 effective redactions, some as-yet unidentified technological error caused the redacted text 8 to not be completely ‘scrubbed’ from the document.” (Doc. 254 at 2.) That BBK’s failure 9 to effectively redact certain documents was inadvertent is evidenced by the fact that some 10 of BBK’s own highly confidential information was not effectively redacted. (Id.) 11 Moreover, BBK’s counsel has stated that it continues to investigate the issue and that, in 12 the meantime, it is taking steps to ensure that any future filings will be properly 13 redacted. (Id.) 14 BBK has also taken prompt and significant steps to remedy the adverse 15 consequences of its errors. For example, each time BBK has been notified that it failed to 16 properly redact confidential information, it has immediately called the Clerk of Court to 17 request that the documents be temporarily sealed and has subsequently filed a prompt 18 motion to seal. (Id. at 1, 3.) Similarly, upon being notified that CCA’s confidential, 19 ineffectively redacted information was being published on third-party commercial 20 databases, BBK promptly contacted the databases and had the documents removed from 21 public access. (Id. at 4.) 22 Therefore, while BBK has undoubtedly been careless with respect to certain of its 23 filings, the Court concludes that an order to show cause is unwarranted at this time. 24 Nevertheless, the Court admonishes BBK to exercise greater care in ensuring that its 25 documents are appropriately redacted in the future. The failure to do so will result in 26 adverse consequences.

27 28 1 IV. 2 Accordingly, 3 IT IS ORDERED granting BBK’s Motion to Seal (Doc. 233). 4 IT IS FURTHER ORDERED denying BBK’s Motions to Seal (Docs. 240, 244). 5 IT IS FURTHER ORDERED granting CCA’s Motions to Seal (Docs. 242, 252). 6 IT IS FURTHER ORDERED denying CCA’s Request for Issuance of an Order || to Show Cause (Doc. 249). 8 IT IS FURTHER ORDERED directing the Clerk of Court to file the unredacted 9|| version of BBK’s Opposition to CCA’s Renewed Motion for Partial Summary Judgment || Codged at Doc. 234) and the unredacted version of accompanying Exhibit A (lodged at 11 || Doc. 235) under seal. 12 IT IS FURTHER ORDERED directing the Clerk of Court to file the unredacted 13 || version of Exhibits G, M, Q, Z, and BB (lodged at Doc. 238) under seal. 14 IT IS FURTHER ORDERED directing the Clerk of Court to file the unredacted version of CCA’s Reply in Support of Renewed Motion for Summary Judgment (lodged at Doc. 253) under seal. 17 IT IS FURTHER ORDERED that the duplicative, ineffectively redacted versions || of BBK’s Opposition to CCA’s Renewed Motion for Partial Summary Judgment (Docs. 229, 230, 231, 232, 241) are stricken from the record. The accompanying attachments, 20 || however, are not stricken from the record. 21 IT IS FINALLY ORDERED that the duplicative, ineffectively redacted versions || of BBK’s Amended Motion for a Rule 56(d) Extension and accompanying Exhibit A 23 || (Docs. 214, 214-1) are stricken from the record. 24 Dated this 23rd day of November, 2021. 25 *° Wichal T. Hburde 27 Michael T. Liburdi 28 United States District Judge

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