Silver Fern Chemical Inc v. Lyons

Opinion

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5 6 7 8 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON 9 AT SEATTLE 10 11 SILVER FERN CHEMICAL, INC., a CASE NO. 2:23-cv-00775-TL Washington corporation, 12 ORDER ON MOTIONS TO SEAL Plaintiff, 13 v. 14 SCOTT LYONS, an individual; TROY KINTO, an individual; KING HOLMES, an 15 individual; ROWLAND MORGAN, an individual; and AMBYTH CHEMICAL 16 COMPANY, a Washington corporation, 17 Defendants. 18 19 This is an action for damages and injunctive relief for the misappropriation of trade 20 secrets, breach of contract, and other related claims. This matter comes before the Court on 21 Plaintiff’s Motions to Seal (Dkt. Nos. 2, 39) and Defendants’ Motion to Seal (Dkt. No. 33). 22 Having reviewed the relevant record, the Court GRANTS in part and DENIES in part Plaintiff’s 23 motions and GRANTS Defendant’s motion. 24 1 I. BACKGROUND 2 The background of this matter is recounted in the Court’s prior order denying Plaintiff’s 3 motion for a temporary restraining order (“TRO”). Dkt. No. 40 at 2–3. In sum, Plaintiff Silver 4 Fern Chemical brings this action against three former employees—Defendants Scott Lyons, Troy

5 Kinto, and King Holmes—and their new employer, Defendant Ambyth Chemical Company, 6 operated by Defendant Rowland Morgan. Dkt. No. 7 at 1–2, 20. Plaintiff alleges that Defendants 7 used Plaintiff’s confidential and trade secret information for their own benefit and to interfere 8 with Plaintiff’s contractual relationships. Id. at 3. 9 In its first motion (Dkt. No. 2, supplemented by Dkt. No. 41), Plaintiff moves to seal, in 10 whole or in part, a variety of materials associated with its TRO request, including: the Complaint 11 (Dkt. No 7); the motion for TRO (Dkt. No. 22); the supporting declaration and exhibits of Sam 12 King, the president of Plaintiff (Dkt. No. 9); the supporting declaration and exhibits of Karen 13 Zell, the comptroller of Plaintiff (Dkt. No. 10); and the supporting declaration and exhibits of 14 Scott Polus, a computer forensics expert (Dkt. No. 11). The types of information Plaintiff moves

15 to seal include revenue and customer numbers, strategies used to obtain new business, customer 16 identities and their requirements, and the structure of employee compensation. Defendants did 17 not timely oppose, but now oppose “to the extent it seeks to seal the information at issue” in the 18 second motion. Dkt. No. 42 at 3. 19 In its second motion (Dkt. No. 39), Plaintiff moves to redact similar information 20 contained in Defendants’ opposition to the motion for TRO (Dkt. No. 26) and supporting 21 declarations from Defendants Scott Lyons (Dkt. No. 27), Troy Kinto (Dkt. No. 28), and King 22 Holmes (Dkt. No. 29). Defendants oppose (Dkt. No. 42), and Plaintiff replied (Dkt. No. 46). The 23 types of information Plaintiff moves to seal are similar to the information at issue in its first

24 1 motion, including customer and supplier identities, specific product transactions, and the 2 structure of employee compensation. 3 Finally, Defendants move to seal two exhibits (Dkt. Nos. 34–35) submitted with a 4 declaration from Defendant Rowland Morgan (Dkt. No. 30). Dkt. No. 33. These exhibits are

5 printouts from Datamyne, a database that compiles data from the U.S. International Trade 6 Commission (“USITC”). Id. at 2. Datamyne is accessible by subscription fee. Id. Plaintiff does 7 not oppose the motion. Dkt. No. 44. 8 II. LEGAL STANDARD 9 There is a strong presumption of public access to court-filed documents. Local Civil Rule 10 (“LCR”) 5(g); accord Kamakana v. City & Cnty. of Honolulu, 447 F.3d 1172, 1178 (9th Cir. 2006). 11 A party seeking to seal records related to motions that are dispositive or otherwise “more 12 than tangentially related to the merits of a case” must “meet the high threshold of showing that 13 ‘compelling reasons’ support secrecy.” See Ctr. for Auto Safety v. Chrysler Grp., LLC, 809 F.3d 14 1092, 1098–99 (9th Cir. 2016); Kamakana, 447 F.3d at 1180. Courts generally consider the

15 complaint to be “dispositive” in this context. See, e.g., Williams & Cochrane, LLP v. Quechan 16 Tribe of Fort Yuma Indian Rsrv., No. C17-1436, 2017 WL 3600417, at *2 (S.D. Cal. Aug. 17, 17 2017) (denying ex parte motion to seal case). So, too, are motions for preliminary injunctive 18 relief. See Ctr. for Auto Safety, 809 F.3d at 1099–101. 19 “‘[C]ompelling reasons’ sufficient to outweigh the public’s interest in disclosure and 20 justify sealing court records exist when such ‘court files might have become a vehicle for 21 improper purposes,’ such as the use of records to gratify private spite, promote public scandal, 22 circulate libelous statements, or release trade secrets.” Kamakana, 447 F.3d at 1179 (quoting 23 Nixon v. Warner Commc’ns, Inc., 435 U.S. 589, 598 (1978)). Even if compelling reasons are

24 identified, a sealing order must be narrowly tailored. Kamakana, 447 F.3d at 1182. 1 III. DISCUSSION 2 As an initial matter, Plaintiff in its reply withdrew portions of its motions. Plaintiff now 3 consents to unsealing the identity of its database eChempax and the alleged amount of outstanding 4 sales by Defendant Kinto when he left Plaintiff. Dkt. No. 46 at 2. Plaintiff also consents to

5 unsealing the amounts of money earned by Defendants Lyons, Kinto, and Holmes while working 6 for Plaintiff. Id. at 7. Accordingly, this information shall be unsealed or unredacted. 7 A. Plaintiff’s Motions to Seal 8 Insofar as Plaintiff moves to seal specific information that implicates its business interests 9 yet is “‘inconsequential to the merits of’ the underlying dispute,” Plaintiff stands on firm ground. 10 See Virun, Inc. v. Cymbiotika, LLC, No. C22-0325, 2022 WL 17401698, at *3 (C.D. Cal. Aug. 11 19, 2022) (quoting Houston Cas. Co. v. Cibus US LLC, No. C19-0663, 2021 WL 4267406, at *3 12 (S.D. Cal. Sept. 20, 2021)). Such information includes customer identities and their associated 13 needs and transactions. See id. (“Courts in this Circuit regularly grant applications to seal in 14 order to protect the customers whose ‘identities . . . are not generally known to the public’ and

15 who have ‘an interest in maintaining their privacy.’” (quoting Houston Cas. Co., 2021 WL 16 4267406, at *3)). It includes confidential financial information, like revenue. See J.R. Simplot 17 Co. v. Wash. Potato Co., No. C16-1851, 2016 WL 11066581, at *1 (W.D. Wash. Dec. 29, 2016) 18 (sealing “confidential financial information” including “various debt ratios” and “a consolidated 19 balance sheet”); Clean Crawl, Inc. v. Crawl Space Cleaning Pros, Inc., No. C17-1340, 2019 WL 20 6829886, at *1 (W.D. Wash. Dec. 13, 2019) (sealing “specific historical, present, and projected 21 financial data”). It also includes the details of a compensation structure.1 See Kazi v. PNC, Bank, 22 23 1 Defendants argue that the Washington Equal Pay and Opportunity Act (“EPOA”), RCW 49.58 et seq., prohibits an 24 employer from deeming its employee wages to be confidential. Dkt. No. 42 at 9. Plaintiff responds that “the amount of money [Defendants] made at [Plaintiff] is a separate inquiry from the manner in which their commissions were 1 N.A., No. C18-4810, 2020 WL 12862940, at *1 (N.D. Cal. Jan. 22, 2020) (“[Defendant] has 2 shown compelling reasons to seal the particular technical details of its compensation structure to 3 avoid competitive disadvantage . . . .”); Gomo v. NetApp, Inc., No. C17-2990, 2019 WL 4 1170775, at *2 (N.D. Cal. Mar. 13, 2019) (sealing documents containing details regarding

5 compensation structure). 6 Plaintiff has demonstrated compelling reasons to seal a large portion of the information it 7 identifies. See Microsoft Corp. v. Motorola, Inc., No. C10-1823, 2012 WL 5476846, at *1 (W.D. 8 Wash. Nov. 12, 2012) (“‘[C]ompelling reasons’ may exist if sealing is required to prevent 9 judicial documents from being used ‘as sources of business information that might harm a 10 litigant’s competitive standing.’” (quoting In re Elec. Arts, 298 F. App’x 568, 569–70 (9th Cir. 11 2008))). As Plaintiff explains, its “customer and vendor lists derive their value from their 12 confidentiality.” Dkt. No. 46 at 3 (citing Dkt. No. 9 ¶¶ 27–29). Plaintiff states that it invested a 13 great deal of resources to collect and store this information, and disclosure would result in a loss 14 of that investment. Id. (citing Dkt. No. 9 ¶¶ 22–24, 27–29, 59). Defendants miss the mark when

15 they protest that Plaintiff lists the chemicals it sells on their website (Dkt. No. 42 at 7), or when 16 they assert general characteristics of the chemical distribution industry (id. at 8): The value of the 17 information at issue is the connection between customers and specific chemicals, and Defendants 18 do not show that the information at issue is publicly available or widely known.2 As Plaintiff 19 20 determined.” Dkt. No. 46 at 7. Further, Plaintiff no longer seeks to seal the amounts of money earned by Defendants 21 Lyons, Kinto, and Holmes while working for Plaintiff. Dkt. No. 46 at 7. 2 Curiously, Defendants cite Datamyne as evidence that certain information is “publicly available” and thus not 22 proper for sealing. Dkt. No. 42 at 8. Yet Defendants move to seal information taken from Datamyne, admitting that the information is only available to Defendants’ declarant because he pays a subscription fee for it. Dkt. No. 33 at 2 (“It might be seen as unfair to Datamyne to place [the information] in the public record, where other people, who 23 have not paid the subscription fee [for Datamyne], would have access to them.”). Further, Plaintiff affirms that its information is not even available on Datamyne, as they have taken steps to keep their USITC data confidential. See 24 Dkt. No. 46 at 5; Dkt. No. 46-1 (King declaration). 1 states, “Simply calling it ‘widely known’ does not make it so, and Defendants have provided no 2 evidence that it is.” Dkt. No. 46 at 6. 3 At the same time, Plaintiff frequently sweeps too broadly where a more targeted approach 4 would suffice to protect its interests while maximizing the public’s access to and understanding

5 of the instant matter. See Hesche v. NXP USA Inc., No. C19-5268, 2020 WL 8461529, at *1 (D. 6 Ariz. Oct. 30, 2020) (“[T]he Court will not seal a document in its entirety when only a portion of 7 the document contains material that satisfies the applicable legal standard for sealing.”); cf. Foltz 8 v. State Farm Mut. Auto. Ins. Co., 331 F.3d 1122, 1137 (9th Cir. 2003) (“[T]he limited number 9 of third-party medical and personnel records can be redacted easily to protect third-party privacy 10 interests while leaving other meaningful information. . . . We do not see how the presence of a 11 small number of third-party privacy interests that can be redacted with minimal effort constitutes 12 ‘good cause,’ let alone a compelling reason, . . . to overcome the strong presumption in favor of 13 public access.”). 14 Broad redactions are often found in the Complaint (Dkt. No. 7), the Motion for TRO

15 (Dkt. No. 22), and the King Declaration (Dkt. No. 9). For example, Plaintiff moves to seal a list 16 of “databases and information” that it maintains as “confidential” (Dkt. No. 7 at 15-18; Dkt. No. 17 9 at 8-11), but the list is almost entirely comprised of generically stated categories of 18 information, not the information itself. In another example, Plaintiff moves to seal the details of 19 an alleged instance of misappropriation by Defendant Kinto (Dkt. No. 7 at 34–36; Dkt. No. 22 at 20 17–18), but whole sentences or paragraphs are redacted where narrow redactions of names and 21 other identifying details would suffice. 22 Sometimes, Plaintiff sweeps so broadly that nothing remains. For example, Plaintiff 23 moves to seal the entirety of the Polus Declaration, which details evidence regarding the

24 computer activity of Defendants Lyons, Kinto, and Holmes, and is thus consequential to the 1 merits of the underlying dispute. Dkt. No. 11. To be sure, the declaration may contain 2 information, like customer identities, that is properly sealed on its own. But Plaintiff does not 3 propose targeted redactions, nor does it explain why the entire declaration needs to be sealed. 4 Similarly, Plaintiff moves to seal the brief Zell Declaration (Dkt. No. 10) but does not explain

5 why it needs to be completely sealed rather than redacted in part. Plaintiff also moves to seal all 6 exhibits to various declarations in support of its TRO, even where nearly the entire contents of an 7 exhibit were publicly revealed in another filing.3 For example, in the Complaint, Plaintiff asserts 8 that on March 9, 2023, “Defendant Kinto emailed [a] customer and asked her to ‘Please give me 9 a call on this. . .Call my cell phone number.’ The customer responded that she was in a meeting 10 but would ‘give [him] a call shortly.’” Dkt. No. 1 ¶ 81. But these emails, which are attached as 11 exhibits to the King Declaration (Dkt. Nos. 9-24, 9-25), are filed completely under seal (Dkt. 12 Nos. 4-24, 4-25) when only the customer’s identity should be redacted. 13 Accordingly, the Court GRANTS in part and DENIES in part Plaintiff’s motions. Plaintiff is 14 ORDERED to review and refile the documents with appropriate, targeted redactions in accordance

15 with this Order. 16 B. Defendants’ Motion to Seal 17 The materials at issue that Defendants seek to seal (Dkt. Nos. 34–35) contain information 18 from Datamyne, a subscription database that belongs to a non-party to this matter. The 19 information is not publicly available (unless someone pays for access) and derives independent 20 economic value from its exclusivity. See, e.g., DiscoverOrg Data, LLC v. Bitnine Global, Inc., 21 No. C19-8098, 2020 WL 6562333, at *5 (N.D. Cal. Nov. 9, 2020) (finding that plaintiff 22 adequately pleaded that its subscription-only database qualified for trade secret protection). 23 3 A cursory review reveals that at least some of the exhibits are appropriately sealed in their entirety, but the Court 24 will not pick through each exhibit to check for its appropriateness. That burden remains on Plaintiff. 1 Moreover, while not dispositive, the Court observes that the Parties agree that this information 2 should be sealed in light of its sourcing from Datamyne. Dkt. Nos. 33, 44. The Court agrees and 3 therefore GRANTS the motion. 4 IV. CONCLUSION

5 Accordingly, the Court rules: 6 (1) Plaintiff’s Motions to Seal (Dkt. Nos. 2, 39) are GRANTED in part and DENIED in part. 7 Plaintiff is ORDERED to file, within thirty (30) days of this Order, redacted 8 versions of the Complaint (Dkt. No. 7), Motion for TRO (Dkt. No. 22), King 9 Declaration (Dkt. No. 9), Zell Declaration (Dkt. No. 10), Polus Declaration (Dkt. 10 No. 11), and all exhibits in accordance with this Order. 11 (2) Defendants’ Motion to Seal (Dkt. No. 33) is GRANTED. 12 Dated this 19th day of July 2023. 13 A 14 Tana Lin United States District Judge 15

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