Judge Colin Leis, Case Number: BC665489, Date: 2024-12-13 Tentative Ruling

Judge: Colin Leis, Case: BC665489, Date: 2024-12-13 Tentative Ruling

Case Number: BC665489 Hearing Date: December 13, 2024 Dept: 74

Youd v. Freeland et al.

Defendant Amusement Outlook LLC’s Motion to Seal

BACKGROUND

This action arises from fraud, breach of fiduciary duty and conversion claims.

The case was dismissed under a settlement between the parties.

Plaintiff Timothy Youd (Plaintiff) filed his Motion to Enforce Settlement on September 25, 2024. Defendant filed the Motion to Seal on October 7, 2024.

LEGAL STANDARD

Unless confidentiality is required by law, court records are presumed to be open to the public. (Cal. Rules of Court, rule 2.550, subd. (c).) Consequently, pleadings, motions, evidence, and other papers may not be filed under seal merely by stipulation of the parties; rather, a prior court order is necessary. (Cal. Rules of Court, rule 2.551, subd. (a).)

The governing rule here is Cal. Rules of Court, Rule 2.550(d) which states “that the court may order that a record be filed under seal only if it expressly finds facts that establish:

There exists an overriding interest that overcomes the right of public access to the record;

The overriding interest supports sealing the record;

A substantial probability exists that the overriding interest will be prejudiced if the record is not sealed;

The proposed sealing is narrowly tailored; and

No less restrictive means exist to achieve the overriding interest.”

If the court fails to make the required findings, the order is deficient and cannot support sealing. (Overstock.com, Inc. v. Goldman Sachs Group, Inc. (2014) 231 Cal.App.4th 471, 487.) Sanctions may be imposed for overboard requests to seal. (Id. at p. 500.)

DISCUSSION

California law recognizes a constitutional right of access to court proceedings and court documents because the public has an interest in observing and assessing the performance of the judicial system. (In Re Marriage of Tamir (2021) 72 Cal.App.5^th 1068, 1078; see also McNair v. NCAA (2015) 234 Cal.App.4^th 25, 31.)

The first step to seal records within a civil case requires the movant to identify an interest that overcomes the right of public access. Defendant alleges that it has an overriding interest in maintaining the negotiated confidentiality of the Parties’ Settlement Agreement. Public disclosure of private settlement terms can constitute an overriding interest. (See Universal City Studios, Inc. v. Superior Court (2003) 110 Cal.App.4th 1273, 1281-82 (citing NBC Subsidiary (KNBC-TV), Inc. v. Superior Court (1999) 20 Cal.4th 1178, 1222, fn 46).) To seal a settlement agreement pursuant to a confidentiality provision, the moving party must show “serious injury which would result from public disclosure.” (Huffy Corp. v. Superior Corp. (2003) 112 Cal.App.4th 97, 106 (citing Universal City Studios, supra, 110 Cal.App.4th at pp. 1281-1282).)

Defendant alleges that it will suffer severe prejudice from public disclosure of the settlement agreement because disclosure would (1) expose confidential financial affairs, (2) prejudice a business interest, and (3) expose Defendant to lawsuits. Specifically, Defendant asserts the disclosure of information about the changes to Defendant’s equity structure would expose confidential financial affairs. Additionally, Defendant alleges that Plaintiff’s comments violate the non-disparagement clause of the settlement with prejudice Defendant’s business interests. Finally, Defendant alleges that Plaintiff’s statements regarding Defendant’s business practices would damage Defendant’s reputation and expose it to lawsuits based on the statements.

With respect to the exposure of confidential financial affairs, Defendant has sufficiently shown prejudice. Defendant has a right to seal references to confidential settlement terms due to the value confidentiality plays in facilitating settlement agreements. (Monster Energy Co. v. Schechter (2019) 7 Cal.5th 781, 793.) This right does not apply to all terms in the settlement agreement, however, but only applies to the settlement agreement’s unique terms, like the equity structure. The Court declines to seal the settlement agreement’s references to the Release of Claims.

With respect to the non-disparagement clause, Defendant provides no authority supporting that a non-disparagement clause establishes a privacy right overriding the right to public access.

With respect to the business practices, Defendant provides no authority that damage to Defendant’s reputation or potential exposure to opportunistic lawsuits establishes a privacy right overriding the right to public access.

The Court finds that the Defendant’s following redactions are narrowly tailored to protect the confidential settlement terms about the equity structure:

· Motion 1:17

· Motion 3:4 “and… for:”

· Youd Decl., Ex. 4, section 1.1

· Youd Decl., Ex. 4, section 1.2

· Youd Decl., Ex. 4, section 1.3

· Youd Decl., Ex. 4, section 5.3.3

CONCLUSION

The Court grants Defendant’s motion to seal as to: