8 UNITED STATES DISTRICT COURT
9 NORTHERN DISTRICT OF CALIFORNIA 10 SAN JOSE DIVISION 11
12 JAIME PRIETO LOMELI, Case No. 19-CV-01141-LHK
13 Plaintiff, ORDER GRANTING IN PART AND DENYING IN PART 14 v. ADMINISTRATIVE MOTION TO FILE UNDER SEAL 15 MIDLAND FUNDING, LLC, et al., Re: Dkt. No. 84 16 Defendants. 17 18 On June 25, 2019, Defendants Midland Funding, LLC and Midland Credit Management, 19 Inc. (collectively, the “Midland Defendants”) filed a Motion to Compel Arbitration. ECF No. 42 20 Defendants Hunt & Henriques, Michael Scott Hunt, and Janalie Ann Henriques (collectively, the 21 “H&H Defendants”) joined in that motion on July 22, 2019. ECF No. 52. On the same day, the 22 H&H Defendants also filed their own Motion to Compel Arbitration. ECF No. 51. In connection 23 with their respective Motions to Compel Arbitration, the Midland Defendants and the H&H 24 Defendants filed redacted versions of several documents as exhibits. Because parties are not 25 permitted to unilaterally redact their filings, Civ. L.R. 79-5(b), the Court ordered all defendants to 26 file a motion to seal. ECF No. 64. Pursuant to the Court’s order, the Midland Defendants filed an 27 1 1 Administrative Motion to Seal on August 22, 2019. ECF No. 65. On September 25, 2019, the 2 Court denied that motion because it was overbroad and not “narrowly tailored to seek sealing only 3 of sealable material” under Civil Local Rule 79-5(b). ECF No. 79. The Court permitted the 4 Midland Defendants to file a renewed motion, which they did on October 11, 2019. ECF No. 82. 5 The Court then denied this first renewed motion on October 21, 2019, for again failing to comply 6 with Civil Local Rule 79-5(b). ECF No. 83. 7 On October 22, 2019, the Midland Defendants filed a second renewed motion to seal. ECF 8 No. 84 (“Second Renewed Mot.”). This motion is now before the Court. For the reasons stated 9 below, the Court GRANTS in part and DENIES in part the administrative motion to file under 10 seal. 11 “Historically, courts have recognized a ‘general right to inspect and copy public records 12 and documents, including judicial records and documents.’” Kamakana v. City & Cnty. of 13 Honolulu, 447 F.3d 1172, 1178 (9th Cir. 2006) (quoting Nixon v. Warner Commc’ns, Inc., 435 14 U.S. 589, 597 & n.7 (1978)). Thus, when considering a sealing request, “a strong presumption in 15 favor of access is the starting point.” Id. (internal quotation marks omitted). 16 Parties seeking to seal judicial records relating to dispositive motions bear the burden of 17 overcoming the presumption with “compelling reasons supported by specific factual findings that 18 outweigh the general history of access and the public policies favoring disclosure.” Kamakana, 19 447 F.3d at 1178–79 (internal quotation marks and citation omitted). Compelling reasons 20 justifying the sealing of court records generally exist “when such ‘court files might have become a 21 vehicle for improper purposes,’ such as the use of records to gratify private spite, promote public 22 scandal, circulate libelous statements, or release trade secrets.” Id. at 1179 (quoting Nixon, 435 23 U.S. at 598). However, “[t]he mere fact that the production of records may lead to a litigant’s 24 embarrassment, incrimination, or exposure to further litigation will not, without more, compel the 25 court to seal its records.” Id. 26 By contrast, records attached to non-dispositive motions generally are not subject to the 27 2 1 strong presumption of access, provided those motions are “not related, or only tangentially related, 2 to the merits of a case.” Ctr. for Auto Safety, 809 F.3d at 1099; see also Kamakana, 447 F.3d at 3 1179 (“[T]he public has less of a need for access to court records attached only to non-dispositive 4 motions because those documents are often unrelated, or only tangentially related, to the 5 underlying cause of action.” (internal quotation marks and citation omitted)). Parties moving to 6 seal records attached to motions unrelated or only tangentially related to the merits of a case need 7 only meet the lower “good cause” standard of Rule 26(c) of the Federal Rules of Civil Procedure. 8 Ctr. for Auto Safety, 809 F.3d at 1098–99; Kamakana, 447 F.3d at 1179–80. 9 In addition, parties moving to seal documents must comply with the procedures established 10 by Civil Local Rule 79-5. Pursuant to that rule, a sealing order is appropriate only upon a request 11 that establishes the document is “sealable,” or “privileged, protectable as a trade secret or 12 otherwise entitled to protection under the law.” Civ. L.R. 79-5(b). “The request must be narrowly 13 tailored to seek sealing only of sealable material, and must conform with Civil L.R. 79-5(d).” Id. 14 Civil Local Rule 79-5(d), in turn, requires the submitting party to attach a “declaration 15 establishing that the document sought to be filed under seal, or portions thereof, are sealable,” a 16 “proposed order that is narrowly tailored to seal only the sealable material,” and a proposed order 17 that “lists in table format each document or portion thereof that is sought to be sealed,” as well as 18 an “unredacted version of the document” that “indicate[s], by highlighting or other clear method, 19 the portions of the document that have been omitted from the redacted version.” Id. 20 The usual starting place in resolving a motion to seal is the question of which standard— 21 “compelling reasons” or “good cause”—applies to the documents at issue. However, as explained 22 in the Court’s September 25, 2019 order, the Midland Defendants have conceded that they must 23 satisfy the “compelling reasons” standard. ECF No. 79 at 3 (citing ECF No. 65 at 1). The Court 24 therefore applies the “compelling reasons” standard to the instant motion. 25 The Midland Defendants seek to seal specific portions of two documents: (1) a Bill of 26 Sale, and (2) a Purchase and Sale Agreement. These documents contain the terms and conditions 27 3 1 of a transaction in which Defendant Midland Funding, LCC (“Midland Funding”) purchased a 2 portfolio of credit card accounts from Citibank, N.A. (“Citibank”). Second Renewed Mot. at 2. 3 The Midland Defendants aver that they seek to seal only those terms and conditions that were 4 “closely-negotiated” with Citibank and are generally “deal-breakers that drive the price of the 5 transaction.” Id. at 3. According to the Midland Defendants, the “consumer credit recovery 6 industry” is “highly competitive.” Id. at 4. For that reason, Midland Funding keeps “maintains 7 the confidentiality of its purchase agreements.” Id. at 5. Midland Funding fears that its ability to 8 “negotiate[s] independent arrangement with each original creditor” would be jeopardized if future 9 potential creditors-sellers are able to view Midland Funding’s prior agreements. Id. 10 The Ninth Circuit has made clear that compelling reasons exist to seal court records when 11 the records “might be used . . . ‘as sources of business information that might harm a litigant’s 12 competitive standing.’” Ctr. for Auto Safety, 809 F.3d at 1097 (9th Cir. 2016) (quoting Nixon, 435 13 U.S. at 598). Such business information includes, inter alia, “trade secrets.” Kamakana, 447 F.3d 14 at 1179. The Ninth Circuit has adopted the Restatement’s definition of “trade secret,” Clark v. 15 Bunker, 453 F.2d 1006, 1009 (9th Cir. 1972), which is “any formula, pattern, device or 16 compilation of information which is used in one’s business, and which gives him an opportunity to 17 obtain an advantage over competitors who do not know or use it,” Restatement (First) of Torts § 18 757, cmt. b.
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8 UNITED STATES DISTRICT COURT
9 NORTHERN DISTRICT OF CALIFORNIA 10 SAN JOSE DIVISION 11
12 JAIME PRIETO LOMELI, Case No. 19-CV-01141-LHK
13 Plaintiff, ORDER GRANTING IN PART AND DENYING IN PART 14 v. ADMINISTRATIVE MOTION TO FILE UNDER SEAL 15 MIDLAND FUNDING, LLC, et al., Re: Dkt. No. 84 16 Defendants. 17 18 On June 25, 2019, Defendants Midland Funding, LLC and Midland Credit Management, 19 Inc. (collectively, the “Midland Defendants”) filed a Motion to Compel Arbitration. ECF No. 42 20 Defendants Hunt & Henriques, Michael Scott Hunt, and Janalie Ann Henriques (collectively, the 21 “H&H Defendants”) joined in that motion on July 22, 2019. ECF No. 52. On the same day, the 22 H&H Defendants also filed their own Motion to Compel Arbitration. ECF No. 51. In connection 23 with their respective Motions to Compel Arbitration, the Midland Defendants and the H&H 24 Defendants filed redacted versions of several documents as exhibits. Because parties are not 25 permitted to unilaterally redact their filings, Civ. L.R. 79-5(b), the Court ordered all defendants to 26 file a motion to seal. ECF No. 64. Pursuant to the Court’s order, the Midland Defendants filed an 27 1 1 Administrative Motion to Seal on August 22, 2019. ECF No. 65. On September 25, 2019, the 2 Court denied that motion because it was overbroad and not “narrowly tailored to seek sealing only 3 of sealable material” under Civil Local Rule 79-5(b). ECF No. 79. The Court permitted the 4 Midland Defendants to file a renewed motion, which they did on October 11, 2019. ECF No. 82. 5 The Court then denied this first renewed motion on October 21, 2019, for again failing to comply 6 with Civil Local Rule 79-5(b). ECF No. 83. 7 On October 22, 2019, the Midland Defendants filed a second renewed motion to seal. ECF 8 No. 84 (“Second Renewed Mot.”). This motion is now before the Court. For the reasons stated 9 below, the Court GRANTS in part and DENIES in part the administrative motion to file under 10 seal. 11 “Historically, courts have recognized a ‘general right to inspect and copy public records 12 and documents, including judicial records and documents.’” Kamakana v. City & Cnty. of 13 Honolulu, 447 F.3d 1172, 1178 (9th Cir. 2006) (quoting Nixon v. Warner Commc’ns, Inc., 435 14 U.S. 589, 597 & n.7 (1978)). Thus, when considering a sealing request, “a strong presumption in 15 favor of access is the starting point.” Id. (internal quotation marks omitted). 16 Parties seeking to seal judicial records relating to dispositive motions bear the burden of 17 overcoming the presumption with “compelling reasons supported by specific factual findings that 18 outweigh the general history of access and the public policies favoring disclosure.” Kamakana, 19 447 F.3d at 1178–79 (internal quotation marks and citation omitted). Compelling reasons 20 justifying the sealing of court records generally exist “when such ‘court files might have become a 21 vehicle for improper purposes,’ such as the use of records to gratify private spite, promote public 22 scandal, circulate libelous statements, or release trade secrets.” Id. at 1179 (quoting Nixon, 435 23 U.S. at 598). However, “[t]he mere fact that the production of records may lead to a litigant’s 24 embarrassment, incrimination, or exposure to further litigation will not, without more, compel the 25 court to seal its records.” Id. 26 By contrast, records attached to non-dispositive motions generally are not subject to the 27 2 1 strong presumption of access, provided those motions are “not related, or only tangentially related, 2 to the merits of a case.” Ctr. for Auto Safety, 809 F.3d at 1099; see also Kamakana, 447 F.3d at 3 1179 (“[T]he public has less of a need for access to court records attached only to non-dispositive 4 motions because those documents are often unrelated, or only tangentially related, to the 5 underlying cause of action.” (internal quotation marks and citation omitted)). Parties moving to 6 seal records attached to motions unrelated or only tangentially related to the merits of a case need 7 only meet the lower “good cause” standard of Rule 26(c) of the Federal Rules of Civil Procedure. 8 Ctr. for Auto Safety, 809 F.3d at 1098–99; Kamakana, 447 F.3d at 1179–80. 9 In addition, parties moving to seal documents must comply with the procedures established 10 by Civil Local Rule 79-5. Pursuant to that rule, a sealing order is appropriate only upon a request 11 that establishes the document is “sealable,” or “privileged, protectable as a trade secret or 12 otherwise entitled to protection under the law.” Civ. L.R. 79-5(b). “The request must be narrowly 13 tailored to seek sealing only of sealable material, and must conform with Civil L.R. 79-5(d).” Id. 14 Civil Local Rule 79-5(d), in turn, requires the submitting party to attach a “declaration 15 establishing that the document sought to be filed under seal, or portions thereof, are sealable,” a 16 “proposed order that is narrowly tailored to seal only the sealable material,” and a proposed order 17 that “lists in table format each document or portion thereof that is sought to be sealed,” as well as 18 an “unredacted version of the document” that “indicate[s], by highlighting or other clear method, 19 the portions of the document that have been omitted from the redacted version.” Id. 20 The usual starting place in resolving a motion to seal is the question of which standard— 21 “compelling reasons” or “good cause”—applies to the documents at issue. However, as explained 22 in the Court’s September 25, 2019 order, the Midland Defendants have conceded that they must 23 satisfy the “compelling reasons” standard. ECF No. 79 at 3 (citing ECF No. 65 at 1). The Court 24 therefore applies the “compelling reasons” standard to the instant motion. 25 The Midland Defendants seek to seal specific portions of two documents: (1) a Bill of 26 Sale, and (2) a Purchase and Sale Agreement. These documents contain the terms and conditions 27 3 1 of a transaction in which Defendant Midland Funding, LCC (“Midland Funding”) purchased a 2 portfolio of credit card accounts from Citibank, N.A. (“Citibank”). Second Renewed Mot. at 2. 3 The Midland Defendants aver that they seek to seal only those terms and conditions that were 4 “closely-negotiated” with Citibank and are generally “deal-breakers that drive the price of the 5 transaction.” Id. at 3. According to the Midland Defendants, the “consumer credit recovery 6 industry” is “highly competitive.” Id. at 4. For that reason, Midland Funding keeps “maintains 7 the confidentiality of its purchase agreements.” Id. at 5. Midland Funding fears that its ability to 8 “negotiate[s] independent arrangement with each original creditor” would be jeopardized if future 9 potential creditors-sellers are able to view Midland Funding’s prior agreements. Id. 10 The Ninth Circuit has made clear that compelling reasons exist to seal court records when 11 the records “might be used . . . ‘as sources of business information that might harm a litigant’s 12 competitive standing.’” Ctr. for Auto Safety, 809 F.3d at 1097 (9th Cir. 2016) (quoting Nixon, 435 13 U.S. at 598). Such business information includes, inter alia, “trade secrets.” Kamakana, 447 F.3d 14 at 1179. The Ninth Circuit has adopted the Restatement’s definition of “trade secret,” Clark v. 15 Bunker, 453 F.2d 1006, 1009 (9th Cir. 1972), which is “any formula, pattern, device or 16 compilation of information which is used in one’s business, and which gives him an opportunity to 17 obtain an advantage over competitors who do not know or use it,” Restatement (First) of Torts § 18 757, cmt. b. Relevant here, courts in our circuit have found confidential terms in commercial 19 agreements to be sealable “business information that may harm a litigant’s competitive standing.” 20 Nixon, 435 U.S. at 598. For instance, the Ninth Circuit deemed “pricing terms, royalty rates, and 21 guaranteed minimum payment terms” to be sealable trade secrets in In re Elec. Arts, Inc. 298 F. 22 App’x 568, 569 (9th Cir. 2008). Other courts in our district have sealed “product rates, exclusivity 23 requirements, and other confidential terms,” Nicolosi Distrib., Inc. v. Finishmaster, Inc., No. 18- 24 CV-03587-BLF, 2018 WL 3932554, at *3 (N.D. Cal. Aug. 16, 2018); “confidentiality clauses, 25 along with lists of the parties’ obligations and terms of payment,” Finisar Corp. v. Nistica, Inc., 26 No. 13-CV-03345-BLF(JSC), 2015 WL 3988132, at *5 (N.D. Cal. June 30, 2015); and “certain 27 4 1 details relating to a licensing agreement” that “could be valuable to other potential licensees.” 2 Icon-IP Pty Ltd. v. Specialized Bicycle Components, Inc., No. 12-CV-03844-JST, 2015 WL 3 984121, at *3 (N.D. Cal. Mar. 4, 2015). 4 In this case, the Court is satisfied that disclosing key terms in Midland Funding’s 5 agreements with Citibank may put Midland Funding “at a disadvantage in future negotiations for 6 similar agreements” with potential creditor-sellers, Icon-IP Pty Ltd., 2015 WL 984121, at *3, or 7 provide information to competitors that those competitors could use to “undercut” Midland 8 Funding, Nicolosi Distrib., Inc., 2018 WL 3932554, at *3. Therefore, the sealing of such 9 information is appropriate under the compelling reasons standard. 10 However, the Midland Defendants also seek to seal public information such as the 11 locations of Citibank and Midland Funding, as well as information that the parties publicly 12 disclose in their filings. Such information is not sealable under the compelling reasons standard. 13 Accordingly, the Court rules on the motion to seal as follows: 14 Document Location Ruling 15 The Bill of Sale attached as Exhibit B Exhibit 1: Sale ID GRANTED. to the Declaration of Sean Mulcahy 16 (ECF No. 42-1, Ex. C) and as Exhibit 2 to the Declaration of William Peck 17 (ECF. No. 42-1, Ex. B) 18 The Bill of Sale attached as Exhibit B Exhibit 1: Sale Balance GRANTED. to the Declaration of Sean Mulcahy 19 (ECF No. 42-1, Ex. C) and as Exhibit 2 to the Declaration of William Peck 20 (ECF. No. 42-1, Ex. B) The Bill of Sale attached as Exhibit B Exhibit 1: Number of GRANTED. 21 to the Declaration of Sean Mulcahy Accounts 22 (ECF No. 42-1, Ex. C) and as Exhibit 2 to the Declaration of William Peck 23 (ECF. No. 42-1, Ex. B) The Purchase and Sale Agreement Page 2, ¶ 1.12 GRANTED. 24 attached as Exhibit A to the 25 Declaration of Sean Mulcahy (ECF No. 42-1, Ex. C) 26 27 5 Document Location Ruling 1 The Purchase and Sale Agreement Page 3, ¶ 2.2 GRANTED. 2 attached as Exhibit A to the Declaration of Sean Mulcahy (ECF 3 No. 42-1, Ex. C) The Purchase and Sale Agreement Page 5, ¶ 3.3.1(h) GRANTED. 4 attached as Exhibit A to the 5 Declaration of Sean Mulcahy (ECF No. 42-1, Ex. C) 6 The Purchase and Sale Agreement Page 6, ¶ 3.4(a) GRANTED. attached as Exhibit A to the 7 Declaration of Sean Mulcahy (ECF 8 No. 42-1, Ex. C) The Purchase and Sale Agreement Page 7, ¶ 3.4(b) GRANTED. 9 attached as Exhibit A to the Declaration of Sean Mulcahy (ECF 10 No. 42-1, Ex. C) The Purchase and Sale Agreement Page 7, ¶ 3.4(c) GRANTED. 11 attached as Exhibit A to the 12 Declaration of Sean Mulcahy (ECF No. 42-1, Ex. C) 13 The Purchase and Sale Agreement Page 8, ¶ 4.4 GRANTED. attached as Exhibit A to the 14 Declaration of Sean Mulcahy (ECF 15 No. 42-1, Ex. C) The Purchase and Sale Agreement Page 9, ¶ 6.2(a) GRANTED. 16 attached as Exhibit A to the Declaration of Sean Mulcahy (ECF 17 No. 42-1, Ex. C) The Purchase and Sale Agreement Page 10, ¶ 6.2(b) GRANTED. 18 attached as Exhibit A to the 19 Declaration of Sean Mulcahy (ECF No. 42-1, Ex. C) 20 The Purchase and Sale Agreement Page 10, ¶ 6.2(d) GRANTED. attached as Exhibit A to the 21 Declaration of Sean Mulcahy (ECF No. 42-1, Ex. C) 22 The Purchase and Sale Agreement Page 10, ¶ 6.2(e) GRANTED. 23 attached as Exhibit A to the Declaration of Sean Mulcahy (ECF 24 No. 42-1, Ex. C) The Purchase and Sale Agreement Page 13, ¶ 6.11 GRANTED. 25 attached as Exhibit A to the 26 Declaration of Sean Mulcahy (ECF No. 42-1, Ex. C) 27 6 Document Location Ruling 1 The Purchase and Sale Agreement Page 13-14, ¶ 6.13 GRANTED. 2 attached as Exhibit A to the Declaration of Sean Mulcahy (ECF 3 No. 42-1, Ex. C) The Purchase and Sale Agreement Page 14, ¶ 6.14 GRANTED. 4 attached as Exhibit A to the 5 Declaration of Sean Mulcahy (ECF No. 42-1, Ex. C) 6 The Purchase and Sale Agreement Page 15, ¶ 7.2 GRANTED. attached as Exhibit A to the 7 Declaration of Sean Mulcahy (ECF 8 No. 42-1, Ex. C) The Purchase and Sale Agreement Page 16-17, ¶ 10.1 GRANTED. 9 attached as Exhibit A to the Declaration of Sean Mulcahy (ECF 10 No. 42-1, Ex. C) The Purchase and Sale Agreement Page 17, ¶ 10.2 GRANTED. 11 attached as Exhibit A to the 12 Declaration of Sean Mulcahy (ECF No. 42-1, Ex. C) 13 The Purchase and Sale Agreement Page 19, ¶ 12.3 DENIED because the attached as Exhibit A to the locations of Citibank, N.A. 14 Declaration of Sean Mulcahy (ECF and Midland Funding LLC 15 No. 42-1, Ex. C) are public information. The Purchase and Sale Agreement Page 21, Title of DENIED because the 16 attached as Exhibit A to the Citibank, N.A. information is publicly Declaration of Sean Mulcahy (ECF signatory disclosed in Exhibit 2 to the 17 No. 42-1, Ex. C) Bill of Sale. The Purchase and Sale Agreement Page 21, Name and DENIED because the 18 attached as Exhibit A to the Signature of Midland information is not 19 Declaration of Sean Mulcahy (ECF Funding LLC signatory proprietary or confidential No. 42-1, Ex. C) business information. 20 The Purchase and Sale Agreement Page 22, File Names DENIED because the attached as Exhibit A to the information is publicly 21 Declaration of Sean Mulcahy (ECF disclosed in Exhibit 1 to the No. 42-1, Ex. C) Bill of Sale. 22 The Purchase and Sale Agreement Page 22, Sale ID GRANTED. 23 attached as Exhibit A to the Declaration of Sean Mulcahy (ECF 24 No. 42-1, Ex. C) The Purchase and Sale Agreement Page 22, Number of GRANTED. 25 attached as Exhibit A to the Accounts 26 Declaration of Sean Mulcahy (ECF No. 42-1, Ex. C) 27 7 The Purchase and Sale Agreement Page 22, Sale Balance | GRANTED. 2 attached as Exhibit A to the Declaration of Sean Mulcahy (ECF 3 || | No. 42-1, Ex. C) 4 The Purchase and Sale Agreement Page 22, Sale Rate DENIED because the attached as Exhibit A to the information is publicly 5 Declaration of Sean Mulcahy (ECF disclosed in Exhibit 1 to the No. 42-1, Ex. C) Bill of Sale. 6 The Midland Defendants shall refile the Purchase and Sale Agreement consistent with this 7 order and Civil Local Rule 79-5(f). 8 9 IT IS SO ORDERED. 10 Dated: November 1, 2019 11 te . %L LUCY H. KOH United States District Judge 13
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Z 18 19 20 21 22 23 24 25 26 27 28 Case No. 19-CV-01141-LHK ORDER GRANTING IN PART AND DENYING IN PART ADMINISTRATIVE MOTION TO FILE UNDER