Your Periodic Reminder that in the Ninth Circuit, Sealing a Court Document Requires “Good Cause” or a “Compelling Reason”—DZ Reserve v. Facebook

May 13, 2021   By Nate Walker 

In DZ Reserve v. Facebook, Inc., No. 3:18-cv-04978-JD, 2021 WL 75734 (N.D. Cal. Jan. 8, 2021), plaintiff DZ Reserve and defendant Facebook filed separate administrative motions to seal (i.e., to keep from public view) all or parts of documents they had filed with the court, including discovery letters, supporting declarations, motions, scheduling stipulations, and the complaint itself.  District Judge James Donato denied the motions to seal, concluding that the parties had neither made the showing required for sealing in the Ninth Circuit nor complied with the court’s applicable local rules.

The DZ Reserve decision breaks no new legal ground.  But it’s a good reminder – and confirmation – of the relatively rigorous standards and rules that apply to sealing.

In his ruling, Judge Donato first recognized that there is a “strong presumption in favor of access to court records” and that sealing is an exception.  He next recognized that in evaluating a motion to seal under Ninth Circuit law, one of two standards – “good cause” or “compelling reason” – applies:  

A particularized showing of good cause is required to seal documents related to non-dispositive motions, and a compelling reason supported by specific facts is needed before the Court will consider sealing records involving dispositive motions such as a summary judgment motion.  Kamakana v. City & Cty. of Honolulu, 447 F.3d 1172, 1179-80 (9th Cir. 2006).^[1]

Although Judge Donato did not address which of the two standards applied to the parties’ motions,^[2] he implicitly concluded that neither was met:

[T]he parties seek to seal a mountain of records that ordinarily would be accessible to the public. While the sheer breadth of the sealing requests prompts concerns, the main problem is that the parties often made a sub-par effort to justify their motions. Each side frequently offered perfunctory claims that a document contained “commercially sensitive,” “proprietary,” or “confidential” information relating to “internal assessments and analyses,” and other equally unilluminating statements. ... Such conclusory and unsupported formulations, which for example do not explain how a competitor would use the information to obtain an unfair advantage, are insufficient for sealing.

Judge Donato made clear, with an example, that a conclusory declaration that information is “sensitive” and “confidential” and would “cause competitive harm if publicly known” is insufficient for sealing: 

 [T]he Court highlights an example of the questionable sealing requests. Facebook seeks to seal large portions of plaintiffs’ Third Amended Complaint on the proffered ground that the reliability of Facebook’s Potential Reach estimate for advertisers is “sensitive” and “confidential,” and would cause competitive harm if publicly known. . . . .  Why that may be so is not explained.  Facebook merely insists that unspecified competitors might “gain an unfair advantage against Facebook by exploiting details” about Facebook products. . . .  These allegations stand at the heart of plaintiffs’ claims, and sealing them would make this litigation virtually incomprehensible to the public. The fact that one or another party may have designated the Potential Reach information as confidential under the stipulated protective order in this case merely begs the question of sealing. 

The court also held that the parties’ sealing motions violated the Northern District local rules, which provide that (a) “A sealing order may issue only upon a request that establishes that the document, or portions thereof, are privileged, protectable as a trade secret or otherwise entitled to protection under the law” and (b) “The request must be narrowly tailored to seek sealing only of sealable material.” See Civil L-R 79-5(b)

Judge Donato’s ruling in DZ Reserve closely tracks two other decisions he issued in late 2020 denying sealing motions in other cases:  Carnegie Mellon Univ. v. LSI Corp., No. 18-CV-04571-JD, 2020 WL 5592992 (N.D. Cal. Sept. 18, 2020); CZ Servs., Inc. v. Express Scripts Holding Co., No. 3:18-CV-04217-JD, 2020 WL 4519006 (N.D. Cal. Aug. 5, 2020).

Other judges in the Northern District likewise have denied sealing motions for failure to meet the applicable standard and local rules, as shown by the following examples:

• In Re Glumetza Antitrust Litig., Case No. 3:19-cv-05822-WHA (N.D. Cal. Sept. 25, 2020), Dkt. No. 369 (Judge William Alsup) (order denying Humana’s motion to seal allegations within its complaint (allegations of specific confidential knowledge of an antitrust conspiracy), for failure to meet the compelling reason standard).
• Cypress Semiconductor Corp. v Fujitsu Semiconductor Ltd., Case No. 5:20-cv-00193-LHK, (N.D. Cal. Feb. 26, 2020), Dkt. No. 38 (Judge Lucy Koh) (granting request to seal specific pricing information submitted in connection with application for temporary restraining order, but denying request to seal definitions within contracts and other boilerplate contract terms for failure to meet compelling reason standard).
• William v. Morrison & Foerster LLP, Case No. 3:18-cv-02542-JSC (N.D. Cal. Aug. 20, 2020) (Magistrate Judge Jacqueline S. Corley), Dkt. No. 138 (order denying motion to seal discovery letter brief and exhibits, where motion was not “narrowly tailored” to sealable information as required by Civil L.R. 79-5(d)).
• Google LLC v. Sonos, Case No. 3:20-cv-06754-WHA, Dkt. No. 39 (Judge William Alsup) (granting request to seal contracts (in their entirety) and non-public contract information of various individuals, but denying request to seal information revealing the number of party’s employees and ratio of its workforce at its Bay Area and Austin, Texas offices).

Takeaways

To prevail on a sealing motion in the Ninth Circuit:  

1. Narrowly tailor your sealing motion to seek sealing only of genuinely sealable material; generally, limit your request to the specific portions of the document that qualify for sealing.
2. Provide a declaration that provides either (a) a particularized showing of good cause for sealing (for information submitted in connection with a non-dispositive motion) or (b) a compelling reason for sealing, supported by specific facts (for information submitted in connection with a dispositive motion). If competitive harm would result from disclosure of information, identify why that is so.  A conclusory declaration that information is “sensitive” and “confidential” and would “cause competitive harm if publicly known” is by itself insufficient for sealing.
3. If you need additional time to submit declarations in support of a sealing motion, consider asking the Court for an extension. One reason sealing declarations are often thin is that they are an afterthought as the party races to complete a big, complex filing.  To ensure that your sealing declarations are adequate, it may be better to file an administrative motion for more time, and file your sealing declarations a day or two later, making sure, of course, you meet the sealing standard.

About the author:  Nate Walker is a Partner at The Norton Law Firm.  Nate represents clients in intellectual property litigation and other complex commercial disputes.

^[1]  In general, “‘compelling reasons’ sufficient to outweigh the public’s interest in disclosure and justify sealing court records exist when such ‘court files might have become a vehicle for improper purposes,’ such as the use of records to gratify private spite, promote public scandal, circulate libelous statements, or release trade secrets.”  Kamakana, 447 F.3d at 1179 (quoting Nixon, 435 U.S. at 598, 98 S.Ct. 1306). The mere fact that the production of records may lead to a litigant’s embarrassment, incrimination, or exposure to further litigation will not, without more, compel the court to seal its records.  Id.

^[2] To the extent the parties sought to seal information submitted in connection with non-dispositive motions, the “good cause” standard applied.  To the extent they sought to seal the complaint (or a dispositive motion), the “compelling reasons” standard applied.  See Ponomarenko v. Shapiro, No. 16-CV-02763-BLF, 2017 WL 3605226, at *2 (N.D. Cal. Aug. 21, 2017) (“This Court and other district courts in the Ninth Circuit have applied the compelling reasons standard to a motion to seal involving the filing of a complaint because a ‘complaint is the foundation of a lawsuit’”).

Case citation: DZ Reserve v. Facebook, Inc., No. 3:18-cv-04978-JD, 2021 WL 75734 (N.D. Cal. Jan. 8, 2021)