Charlotte B Milliner v. Mutual Securities, Inc.

• Court: District Court, N.D. California
• Decided: June 28, 2021
• Docket: 4:15-cv-03354-DMR
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 CHARLOTTE B. MILLINER, et al., Case No. 15-cv-03354-DMR

8 Plaintiffs, ORDER DENYING MOTION TO 9 v. INTERVENE

10 MUTUAL SECURITIES, INC., Re: Dkt. No. 198 11 Defendant.

12 Vincent F. Gilotti moves pursuant to Federal Rule of Civil Procedure 24 to intervene for 13 the purpose of unsealing a settlement agreement that was attached to Defendant Mutual Securities, 14 Inc.’s (“MSI”) motion to enforce the agreement. [Docket No. 198.] MSI opposes the motion. [Docket No. 208.] This motion is suitable for resolution without a hearing. Civ. L.R. 7-1(b). For 15 the following reasons, the motion is denied. 16 I. BACKGROUND 17 Plaintiffs Charlotte B. Milliner and Joann Brem filed this putative class action against MSI 18 in 2015 alleging claims stemming from MSI’s brokerage agreement with Plaintiffs. On June 1, 19 2018, following a settlement conference before the undersigned, the parties resolved Plaintiffs’ 20 claims and executed a written settlement agreement that contained a confidentiality provision. 21 The parties subsequently consented to have this court conduct all further proceedings pursuant to 22 28 U.S.C. § 636(c). The case was dismissed on September 11, 2018. 23 In April 2019, MSI filed a motion to enforce the settlement agreement and the stipulated 24 protective order entered in this case, arguing that Plaintiffs and their counsel, David Sturgeon- 25 Garcia, breached them, including the settlement agreement’s confidentiality provision. [Docket 26 No. 176.] In relevant part, MSI presented evidence that in February 2019, Sturgeon-Garcia filed a 27 statement of claim with the Financial Industry Regulatory Authority (“FINRA”) against MSI and 1 five individuals on behalf of a different client, Proposed Intervenor Gilotti (the “Gilotti claim”). 2 In his claim, Gilotti noted that Milliner and Brem settled their individual claims against MSI and 3 dismissed the class claims with prejudice, and in support of the statement that “any and all claims 4 held by putative class members, like Mr. Gilotti, were preserved,” Gilotti cited the settlement 5 agreement and attached a complete copy as an exhibit to his claim. [Docket No. 173-4 (Fredricks 6 Decl. April 5, 2019) ¶ 4, Ex. 3 (Gilotti claim).]1 MSI also argued that Milliner was in breach of 7 the settlement agreement because she had not requested a dismissal of her FINRA claims against 8 MSI. 9 In connection with its motion to enforce, MSI moved to seal the settlement agreement in 10 its entirety, as well as the portions of its motion quoting the settlement agreement. [Docket Nos. 11 173, 185.] Plaintiffs opposed the motion. [Docket No. 174.] 12 On July 8, 2019, the court ruled on portions of the motion and held in abeyance the portion 13 of the motion regarding Sturgeon-Garcia’s use of the settlement agreement pending a decision by 14 the California Supreme Court. Milliner v. Mut. Sec., Inc. (“Milliner I”), No. 15-CV-03354-DMR, 2019 WL 2929831 (N.D. Cal. July 8, 2019). The court also ordered Sturgeon-Garcia to withdraw 15 the settlement agreement from Gilotti’s FINRA claim and granted MSI’s motion to seal, finding 16 that “[g]iven the particular circumstances of this case, where MSI argues that Plaintiffs and their 17 counsel have breached the settlement agreement’s confidentiality provision, good cause exists to 18 permit filing the actual agreement and certain references to it under seal.” Id. at *1, 4 (citing 19 Kamakana v. City & Cty. of Honolulu, 447 F.3d 1172, 1179-80 (9th Cir. 2006) and Phillips ex rel. 20 Estates of Byrd v. General Motors Corp., 307 F.3d 1206, 1212 (9th Cir. 2002)). 21 On July 23, 2019, Plaintiffs filed a notice of appeal of the July 8, 2019 order to the United 22 States Court of Appeals for the Ninth Circuit. [Docket No. 197.] Gilotti filed the instant motion 23 the following day, July 24, 2019. [Docket No. 198.] On October 9, 2019, the court issued an 24 order on several motions, including Gilotti’s motion to intervene. Milliner v. Mut. Sec., Inc. 25 (“Milliner II”), No. 15-CV-03354-DMR, 2019 WL 5067012, at *1 (N.D. Cal. Oct. 9, 2019). In 26 27 1 relevant part, the court held that it lacked jurisdiction to decide the matter (as well as two other 2 pending motions) because Plaintiffs’ filing of a notice of appeal of the July 8, 2019 Order had 3 “divest[ed] the district court of its control over those aspects of the case involved in the appeal.” 4 Id. at *4 (quoting Griggs v. Provident Consumer Disc. Co., 459 U.S. 56, 58 (1982) (per curiam)). 5 Therefore, it denied the motion to intervene without prejudice, along with the other pending 6 motions. Id. at *4. 7 The Ninth Circuit ultimately granted MSI’s motion to dismiss Plaintiffs’ appeal for lack of 8 jurisdiction. Milliner as Tr. of Charlotte B. Milliner Tr. Dated Jan. 30, 1997 v. Mut. Sec., Inc., 9 No. 19-16463, 2020 WL 4252641 (9th Cir. Mar. 31, 2020). Accordingly, Gilotti’s motion to 10 intervene is now appropriate for decision. 11 II. REQUEST FOR JUDICIAL NOTICE 12 In connection with his motion, Gilotti asks the court to take judicial notice of two FINRA 13 “BrokerCheck Reports” for Thomas Herbert Bock and Mary C. Evans. [Docket No. 206 (RJN).] 14 According to Gilotti, BrokerCheck is a “free tool from FINRA to research the background and 15 experience of financial brokers, advisers and firms.” Id. at 1 (citing https://brokercheck.finra.org). 16 FINRA’s website states, “BrokerCheck gives you a snapshot of a broker’s employment history, 17 regulatory actions, and investment-related licensing information, arbitrations and complaints.” 18 https://brokercheck.finra.org (last visited Jun. 15, 2021). 19 Exhibit 1 to the RJN appears to be a BrokerCheck Report for Bock. RJN Ex. 1. Under the 20 section, “Disclosure Events,” the report states that “[a]ll individuals registered to sell securities or 21 provide investment advice are required to disclose customer complaints and arbitrations, 22 regulatory actions, employment terminations, bankruptcy filings, and criminal or civil judicial 23 proceedings.” Id. at 5. Bock’s report contains three final “disclosure events,” including an entry 24 that states that an action was filed in “United States District Court” on July 21, 2015, provides the 25 case number for Plaintiffs’ lawsuit, includes a brief description of the allegations, the status 26 “settled,” and states the settlement amount. Id. at 9-10. It also states that “Mutual Securities, Inc.” 27 was the “employing firm when activities occurred which led to the complaint.” Id. at 9. 1 action was filed in “United States District Court” on July 21, 2015, provides the case number for 2 Plaintiffs’ lawsuit, includes the status “settled,” and states the settlement amount. RJN Ex. 2 at 3 10-11. It also states that “Mutual Securities, Inc.” was the “employing firm when activities 4 occurred which led to the complaint.” Id. at 10. 5 Gilotti asks the court to take judicial notice of the two BrokerCheck Reports pursuant to 6 Federal Rule of Evidence 201. Under Rule 201, a court may take judicial notice of “an 7 adjudicative fact if it is ‘not subject to reasonable dispute.’” Khoja v. Orexigen Therapeutics, Inc., 8 899 F.3d 988, 999 (9th Cir. 2018) (quoting Fed. R. Evid. 201(b)). A fact is “not subject to 9 reasonable dispute” if it is “generally known,” or “can be accurately and readily determined from 10 sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b). While a court 11 may take judicial notice of “matters of public record,” it may not take judicial notice of disputed 12 facts stated in public records. Lee v. City of Los Angeles, 250 F.3d 668, 689-90 (9th Cir. 2001). 13 “Just because [a] document itself is susceptible to judicial notice does not mean that every 14 assertion of fact within that document is judicially noticeable for its truth.” Khoja, 899 F.3d at 15 999. If a court takes judicial notice of a document, it must identify the specific fact or facts it is 16 noticing from the document. Id. 17 It appears that Gilotti asks the court to take judicial notice of the fact that MSI “and/or its 18 agents” reported to FINRA the case number for Plaintiffs’ complaint against MSI, the fact of its 19 settlement, and the amount of the settlement. RJN 1. MSI did not object or respond to the RJN. 20 However, Gilotti attached the BrokerCheck Reports directly to the RJN. Neither document was 21 authenticated by anyone with personal knowledge or described in a declaration. Additionally, the 22 document pertaining to Evans appears to be altered with redactions on multiple pages, with no 23 explanation. See, e.g., RJN Ex. 1 at 1, 3, 4. Since there is no evidence to substantiate what the 24 documents are, Gilotti’s request for judicial notice is denied. 25 III. DISCUSSION 26 A. Legal Standards 27 “Nonparties seeking access to a judicial record in a civil case may do so by seeking 1 (9th Cir. 1999). Rule 24(b) governs permissive intervention. It provides in relevant part that “[o]n 2 timely motion, the court may permit anyone to intervene who . . . (B) has a claim or defense that 3 shares with the main action a common question of law or fact.” Fed. R. Civ. P. 24(b)(1). 4 “Generally, permissive intervention under Rule 24(b) requires ‘(1) an independent ground for 5 jurisdiction; (2) a timely motion; and (3) a common question of law and fact between the movant’s 6 claim or defense and the main action.’” Blum v. Merrill Lynch Pierce Fenner & Smith, Inc., 712 7 F.3d 1349, 1353 (9th Cir. 2013) (quoting Beckman Indus., Inc. v. Int’l Ins. Co., 966 F.2d 470, 473 8 (9th Cir. 1992)). Additionally, while “[a] motion for permissive intervention pursuant to Rule 9 24(b) is directed to the sound discretion of the district court,” San Jose Mercury News, 187 F.3d at 10 1100, Rule 24(b)(3) instructs that “[i]n exercising its discretion, the court must consider whether 11 the intervention will unduly delay or prejudice the adjudication of the original parties’ rights.” 12 In the Ninth Circuit, “[a] third party seeking permissive intervention purely to unseal a 13 court record does not need to demonstrate independent jurisdiction or a common question of law 14 or fact.” Cosgrove v. Nat’l Fire & Marine Ins. Co., 770 F. App’x 793, 795 (9th Cir. 2019) (citing 15 Beckman, 966 F.2d at 473). “In ruling on a motion to intervene for this purpose, a court must 16 evaluate whether the countervailing interests opposing public disclosure can overcome the 17 presumption in favor of [the public’s right of access to judicial records],” including “balanc[ing] 18 the public interest with potential prejudice to the parties and the other factors to be considered in 19 deciding a permissive intervention motion.” Id. (citing San Jose Mercury News, 187 F.3d at 20 1102). 21 B. Discussion 22 In this case, Gilotti seeks to intervene solely for the purpose of unsealing the parties’ 23 settlement agreement. Essentially, the court must determine whether Gilotti satisfies the 24 applicable requirements of Rule 24(b) and whether the settlement agreement should remain under 25 seal. See San Jose Mercury News, 187 F.3d at 1101-03. 26 Neither side addresses the timeliness of Gilotti’s motion in their briefing. See id. at 1100- 27 01 (analyzing timeliness of motion to intervene to challenge a protective order). They also do not 1 770 F. App’x at 795 (remanding motion for permissive intervention to unseal for consideration of 2 permissive intervention factors). Instead, the bulk of Gilotti’s motion focuses on whether the 3 settlement agreement should remain sealed. 4 For its part, MSI primarily argues that the motion should be denied because Gilotti cannot 5 satisfy the commonality requirement of Rule 24(b).2 It also argues that Gilotti’s motion is an 6 improper motion for reconsideration of the court’s July 8, 2019 sealing order that does not comply 7 with the requirements of Local Rule 7-9. Neither argument has merit. As noted above, since 8 Gilotti is moving to intervene to unseal a court record and not to litigate a claim on the merits, he 9 need not demonstrate “a common question of law or fact.” See Cosgrove, 770 F. App’x at 795 10 (citing Beckman, 966 F.2d at 473). Further, Rule 7-9 does not apply, since Gilotti is not a party to 11 this action and is independently moving for relief. See Civ. L.R. 7-9(a) (providing that “any party 12 may make a motion before a Judge requesting that the Judge grant the party leave to file a motion 13 for reconsideration . . .” (emphasis added)). 14 Turning to the Rule 24(b) requirements, in determining whether Gilotti’s motion for 15 intervention is timely, the court must consider three factors: “(1) the stage of the proceeding at 16 which [Gilotti] seeks to intervene; (2) the prejudice to other parties; and (3) the reason for and 17 length of the delay.” San Jose Mercury News, 187 F.3d at 1101 (citation and quotation marks 18 omitted). None of these factors support a finding that the motion is untimely. This case was 19 dismissed in September 2018. Gilotti filed his motion on July 24, 2019, less than three weeks 20 after the July 8, 2019 order sealing the settlement agreement, and MSI offers no argument as to 21 how it is prejudiced by this motion. Therefore, the court finds that Gilotti’s motion is timely. 22 The Rule 24(b)(3) factors also do not weigh against permissive intervention. Given the 23 stage of the proceedings and the fact that the case has long been dismissed, Gilotti’s intervention 24 for the purpose of unsealing the settlement agreement will not “unduly delay or prejudice the 25 adjudication” of Plaintiffs’ and MSI’s rights. Accordingly, the court will consider the merits of 26

27 2 MSI also opposed Gilotti’s motion on the ground that Plaintiffs’ appeal of the July 8, 2019 order 1 Gilotti’s request to unseal the settlement agreement. 2 In assessing whether documents may be filed under seal there is “a strong presumption in 3 favor of access.” Foltz v. State Farm Mut. Auto. Ins., 331 F.3d 1122, 1135 (9th Cir. 2003). The 4 Ninth Circuit established standards governing requests to seal in Kamakana v. City & County of 5 Honolulu, 447 F.3d 1172, 1180-81 (9th Cir. 2006). In accordance with the strong public policy 6 favoring access to court records, “[a] party seeking to seal a judicial record . . . bears the burden of 7 overcoming this strong presumption by meeting the ‘compelling reasons’ standard.” Id. at 1178. 8 “Under this stringent standard, a court may seal records only when it finds ‘a compelling reason 9 and articulate[s] the factual basis for its ruling, without relying on hypothesis or conjecture.’” Ctr. 10 for Auto Safety v. Chrysler Grp., LLC, 809 F.3d 1092, 1096–97 (9th Cir. 2016) (quoting 11 Kamakana, 447 F.3d at 1179). If the court finds a compelling reason to seal a record, it must then 12 “conscientiously balance[ ] the competing interests of the public and the party who seeks to keep” 13 the records secret. Kamakana, 447 F.3d at 1179. 14 However, the Ninth Circuit has “carved out an exception to the presumption of access to 15 judicial records” for “court records attached only to non-dispositive motions.” Id. (quoting Foltz, 16 331 F.3d at 1135). The court has reasoned that “the public has less of a need for access to court 17 records attached only to non-dispositive motions because those documents are often ‘unrelated, or 18 only tangentially related, to the underlying cause of action.’” Id. (quoting Foltz, 331 F.3d at 19 1135). “A ‘good cause’ showing under Rule 26(c) will suffice to keep sealed records attached to 20 non-dispositive motions.” Id. at 1180 (citing Foltz, 331 F.3d at 1135). The Ninth Circuit recently 21 distinguished “dispositive” and “non-dispositive” motions. Ctr. for Auto Safety, 809 F.3d at 1097- 22 98. It explained that these terms are not “mechanical classifications” and that “public access [to 23 judicial records] will turn on whether the motion is more than tangentially related to the merits of 24 a case.” Id. at 1097, 1101. Therefore, a party must satisfy the more demanding “compelling 25 reasons” standard to seal a motion that is more than tangentially related to the merits of the case. 26 Id. at 1101-02. 27 In this case, the sealed settlement agreement was attached to a motion to enforce a 1 settlement agreement’s confidentiality provision and that Milliner failed to request dismissal of 2 her FINRA claims against MSI in accordance with the agreement. Gilotti does not explain how 3 the motion was “more than tangentially related to the merits” of the case, see id. at 1101, and the 4 court finds that the issues presented in MSI’s motion have nothing to do with the merits of the 5 litigation. Accordingly, consistent with its July 8, 2019 order on sealing, the court finds that the 6 good cause standard for sealing applies to the settlement agreement. See Milliner I, 2019 WL 7 2929831 at *1. [See also Docket No. 184 (May 21, 2019 Order re: Administrative Motion to File 8 Under Seal).]3 9 Rule 26 provides that a “court may, for good cause, issue an order to protect a party or 10 person from annoyance, embarrassment, oppression, or undue burden or expense.” Fed. R. Civ. P. 11 26(c)(1). “For good cause to exist, the party seeking protection bears the burden of showing 12 specific prejudice or harm will result if no protective order is granted.” Phillips ex rel. Ests. of 13 Byrd v. Gen. Motors Corp., 307 F.3d 1206, 1210-11 (9th Cir. 2002) (citations omitted). “Broad 14 allegations of harm, unsubstantiated by specific examples or articulated reasoning” are 15 insufficient. Beckman, 966 F.2d at 476. “If a court finds particularized harm will result from 16 disclosure of information to the public, then it balances the public and private interests to decide 17 whether a protective order is necessary.” Phillips, 307 F.3d at 1211. 18 Here, counsel explains that MSI considered the confidentiality provision in the settlement 19 agreement “a material term,” and that without such a provision, MSI “very likely would not have 20 agreed to settle the case.” [Docket No. 185 (Ahern Decl. May 24, 2019) ¶ 2.] He explains that the 21 confidentiality provision was important “to guard against” an argument “that MSI effectively 22 admitted liability in this case by settling” that could be used against it in future litigation. Id. 23 According to counsel, “[p]art of that calculus in deciding to settle was that Sturgeon-Garcia would 24 not be able to try to equate the settlement to an admission of liability,” and that by filing the 25 settlement agreement with Gilotti’s FINRA claim, Sturgeon-Garcia “has effectively eviscerated 26 that material term of the settlement.” Id. at ¶ 3. Counsel also notes that the only reason MSI filed 27 1 a copy of the settlement agreement with the court was to try to enforce the agreement. He 2 concludes that this case involves “private parties and subject-matter that does not generally affect 3 the public interest,” and that the “interest in fostering settlement through the use of confidentiality 4 provisions outweighs any interest in the public having access to the settlement agreement.” Id. at 5 ¶¶ 4, 5. 6 The court finds that good cause supports sealing the settlement agreement. The parties’ 7 inclusion of the confidentiality provision in the settlement agreement itself supports the conclusion 8 that they intended to keep the settlement agreement confidential and out of the public record.4 9 Numerous courts in this district have recognized the importance of protecting confidential 10 settlement communications and materials “in order to promote settlement” and have concluded 11 that this general policy satisfies the more demanding “compelling reasons” standard to seal 12 judicial records. See, e.g., Celgard, LLC v. Targray Tech. Int’l Inc., No. 19-CV-02401-VKD, 13 2019 WL 3841997, at *2 (N.D. Cal. Aug. 15, 2019) (finding compelling reasons favored sealing 14 portions of records “that reveal the parties’ confidential settlement communications,” even though 15 the parties “did not enter into a formal confidentiality agreement with respect to their 16 communications”); In re Volkswagen “Clean Diesel” Mktg., Sales Pracs., & Prod. Liab. Litig., 17 No. 2672 CRB (JSC), 2020 WL 2425792, at *4 (N.D. Cal. May 12, 2020) (granting motions to 18 seal “proposed settlement terms and actual settlement negotiations” under compelling reasons 19 standard); United Tactical Sys., LLC v. Real Action Paintball, Inc., No. 14-CV-04050-MEJ, 2015 20 WL 13390186, at *3 (N.D. Cal. Nov. 10, 2015) (noting “[c]onfidential settlements benefit society 21 and the parties involved by resolving disputes relatively quickly, with slight judicial intervention, 22 and presumably result in greater satisfaction to the parties. Sound judicial policy fosters and 23

24 4 As noted, the court denies Gilotti’s request that the court take judicial notice of documents that purportedly reflect the fact that MSI and/or its agents reported the fact of and details about the 25 settlement of this case to FINRA. However, even if the court granted Gilotti’s RJN, the outcome of this motion would be the same. Gilotti contends that MSI was “required to report all of the 26 material settlement terms of this case to FINRA within 30 days,” Reply 1 (emphasis removed), and the settlement agreement permits disclosure “as required by law.” Gilotti offers no authority 27 that disclosure of any terms of the settlement agreement “as required by law” either discounts the 1 protects this form of alternative dispute resolution” and finding compelling reasons supported 2 || granting request to seal confidential settlement agreement (quoting Kalinauskas v. Wong, 151 3 F.R.D. 363, 365 (D. Nev. 1993)). Further, MSI’s concern that the parties’ settlement would be 4 || used against it as an admission of liability finds support in the law; as the court in Celgard 5 || explained, the policy of protecting settlement negotiations in order to promote settlement 6 “underlies Federal Rule of Evidence 408, which provides that evidence of conduct or statements 7 || made during settlement negotiations is not admissible when offered to prove liability, although it 8 may be admitted for other purposes.” 2019 WL 3841997, at *2 (citations omitted). 9 The court also finds that Gilotti’s and the public’s interest in this matter do not outweigh 10 || MSI’s interests in keeping the settlement agreement under seal. This is consistent with the court’s 11 July 8, 2019 order directing Sturgeon-Garcia to withdraw the settlement agreement from Gilotti’s 12 || FINRA claim; as the court found, “[n]Jothing in the record suggests that Gilotti will be prejudiced

13 in any way by its withdrawal, or that the settlement agreement in this case is material or even

v 14 || relevant to Gilotti’s claim.” Méilliner I, 2019 WL 2929831, at *4. Gilotti offers no argument or

15 explanation regarding his or the public’s interest in a settlement agreement between private a 16 parties. See Facebook, Inc. v. ConnectU, Inc., No. C 07-01389 JW, 2008 WL 11357787, at *3-4

= 17 (N.D. Cal. July 2, 2008) (finding that “the terms of the [parties’] settlement and the negotiations

18 preceding it” are “records .. . of the kind ‘traditionally kept secret’” and not subject to disclosure). 19 In sum, the court concludes that good cause supports maintaining the settlement agreement 20 || under seal. Gilotti’s motion to intervene to unseal the settlement agreement is therefore denied. 21 || Iv. CONCLUSION 22 For the foregoing reasons, Gilotti’s motion to intervene to unseal the settlement agreement 23 || is denied. IST 24 CLUS Sy □□ 25 IT IS SO ORDERED. i) □□ Sy © ORDERED | \° 26 || Dated: June 28, 2021 2/\yr 185 5 < 27 7\ Ly □□□ Xiph Roane Ys 28 United NatebiseetSfrate Judge □□ 41n ON □□□□