Judge Daniel M. Crowley, Case Number: 23STCV06297, Date: 2024-07-30 Tentative Ruling

Plaintiff Haliburton International Foods, Inc.’s, unopposed motion to seal portions of the deposition transcript submitted by Defendant California Department of Tax and Fee Administration as Exhibit 3 to its Notice of Lodgment of Exhibits in Support of Motion for Summary Judgment and references to those transcript sections in Defendant’s Memorandum of Points and Authorities in Support of Motion for Summary Judgment and Defendant’s Statement of Undisputed Material Facts in Support of Motion for Summary Judgment is continued to August 30, 2024, at 8:30 a.m. Plaintiff is to file proposed redactions of the MSJ documents with this Court by August 16, 2024.

Plaintiff Haliburton International Foods, Inc. (“Haliburton”) (“Plaintiff”) moves unopposed for an order sealing portions of the deposition transcript submitted by Defendant California Department of Tax and Fee Administration (“DTFA”) (“Defendant”) as Exhibit 3 to its Notice of Lodgment of Exhibits in Support of Motion for Summary Judgment (“MSJ”), as well as references to the information contained in those transcript sections in Defendant’s Memorandum of Points and Authorities in Support of MSJ and Defendant’s Statement of Undisputed Material Facts in Support of MSJ. (Notice of Motion, pg. 2; CRC, Rules 2.550(d)(1)-(5).) Plaintiffs move on the grounds that (1) there exists an overriding interest that overcomes the right of public access to the record; (2) the overriding interest supports sealing the record; (3) a substantial probability exists that the overriding interest will be prejudiced if the record is not sealed; (4) the proposed sealing is narrowly tailored; and (5) no less restrictive means exist to achieve the overriding interest. (Notice of Motion, pg. 2.)

Plaintiff alleges a single cause of action against Defendant for illegal collection of Use Tax. Plaintiff’s cause of action arises from its purchase and use of liquid nitrogen from January 1, 2005 through December 31, 2005 (“Period at Issue”), the California State Board of Equalization’s (“CDTFA”) audit of Plaintiff for the Period at Issue regarding its use tax obligations, and subsequent tax on Plaintiff in the amount of $38,722.18. (See Complaint ¶47-49.)

On June 10, 2023, Plaintiff filed the instant motion. As of the date of this hearing no opposition has been filed.

CRC Rule 2.551(a) provides, as follows: “A record must not be filed under seal without a court order. The court must not permit a record to be filed under seal based solely on the agreement or stipulation of the parties.”

CRC Rule 2.551(b)(1) provides, as follows: “A party requesting that a record be filed under seal must file a motion or an application for an order sealing the record. The motion or application must be accompanied by a memorandum and a declaration containing facts sufficient to justify the sealing.”

CRC Rule 2.550(d) provides, as follows: “The court may order that a record be filed under seal only if it expressly finds facts that establish: (1) There exists an overriding interest that overcomes the right of public access to the record; (2) The overriding interest supports sealing the record; (3) A substantial probability exists that the overriding interest will be prejudiced if the record is not sealed; (4) The proposed sealing is narrowly tailored; and (5) No less restrictive means exist to achieve the overriding interest.”

(A) Specifically state the facts that support the findings; and (B) Direct the sealing of only those documents and pages, or, if reasonably practicable, portions of those documents and pages, that contain the material that needs to be placed under seal. All other portions of each document or page must be included in the public file.”

The protection of trade secrets may constitute an “overriding interest” that warrants restricting public access. (In re Providian Credit Card Cases (2002) 96 Cal.App.4th 292, 299 [stating trade secrets are subject to sealing, provided the moving party treats them as confidential].) A trade secret is “information, including a formula, pattern, compilation, program, device, method, technique, or process that: (1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” (Id., quoting Civ. Code §3426.1(d).)

California courts ordinarily grant requests to seal information “involv[ing] confidential matters relating to . . . business operations,” particularly where “public revelation of these matters would interfere with its ability to effectively compete in the marketplace.” (Universal City Studios, Inc. v. Superior Court (2003) 110 Cal.App.4th 1273, 1286; see also Huffy Corp. v. Superior Court (2003) 112 Cal.App.4th 97, 108 [“[D]ocuments which are not trade secrets may nonetheless be subject to sealing in the face of a proper . . . showing of prejudice to an overriding interest.”], citation omitted.)

Plaintiff moves to seal the deposition of Ian Schenkel, who has served as Plaintiff’s CEO and president and was designated as the Person Most Knowledgeable (“PMK”) regarding certain deposition topics specified by Defendant. Specifically, the information sought for sealing is testimony relating to proprietary techniques involved in the preparation of Plaintiff’s food products, such as techniques relating to the roasting of vegetables. (Decl. of Schenkel ¶6.)

Plaintiff argues these materials should be sealed because they constitute Plaintiff’s proprietary business information and trade secrets, and public disclosure of this information would cause significant harm to Plaintiff’s interests that outweighs the public’s right to access. (Motion, pg. 5.)

Plaintiff preserves the confidential and proprietary nature of this information through its policies and practices against inadvertent disclosure. (See Decl. of Schenkel ¶3.) Plaintiff’s policies prohibit employees and vendors from accessing information “beyond that which is reasonably necessary to perform their duties” and limits disclosure and use to what is “reasonably necessary” for employees and vendors “to execute their duties.” (Decl. of Schenkel ¶3.) Plaintiff enforces its policies through various protocols, such as “limiting access to certain internal systems to authorized Haliburton employees and vendors on a ‘need-to-know’ basis.” (Decl. of Schenkel ¶4.) For non-company individuals with a business purpose for being at Plaintiff’s facility and that are likely to come in contact with areas of Plaintiff’s facility where proprietary processes and equipment are visible, Plaintiff requires that individual to sign a Non-Disclosure Agreement before allowing that individual to enter the facility. (Decl. of Schenkel ¶5.) This includes requiring Defendant’s experts to review the Protective Order and sign a Certification that they understood that they were bound by the Protective Order. (Decl. of Rawles ¶2.)

Information relating to Plaintiff’s proprietary techniques warrants protection from disclosure, as they are competitively sensitive and constitute Plaintiff’s trade secrets. (See McGuan v. Endovascular Techs., Inc. (2010) 182 Cal. App. 4th 974, 988-989 [affirming order to seal documents that would reveal the defendants’ confidential business methods and processes].) Plaintiff has invested “substantial resources and internal analysis” in ensuring that its techniques for preparing its food products are “cutting-edge” and “distinct” from those used by its competitors and give Plaintiff a competitive advantage. (Decl. of Schenkel ¶6.) Public disclosure of that information would provide Plaintiff’s competitors with access to confidential materials that would reveal Plaintiff’s proprietary food science and business strategies. (Decl. of Schenkel ¶7.) If that information were publicly known, then competitors could use Plaintiff’s trade secret and proprietary information, insights, and internal business analysis to damage or destroy Plaintiff’s protected, competitive edge in the food production industry. (Decl. of Schenkel ¶7.)

Plaintiff sufficiently demonstrated that the information contained in the portions of the MSJ amounts to confidential information such that there exists an overriding interest that overcomes the right of the public access to the records, the overriding interest supports sealing the record, a substantial probability exists that the overriding interest will be prejudiced if the record is not sealed.

However, Plaintiff failed to submit proposed redactions for the Court to review and for the Court to effectuate sealing the documents. Plaintiff is advised that, from practical standpoint, the Court can only seal documents, and not lines or pages within a document. Without the proposed redactions, this Court has no way of assessing whether the sealing is narrowly tailored and that no less restrictive means exist to achieve the overriding interest.

Accordingly, the Court continues Plaintiff’s motion to August 30, 2024, at 8:30 a.m, and directs Plaintiff to file proposed redactions with this Court by August 16, 2024.

Plaintiff’s motion to seal is continued to August 30, 2024, at 8:30 a.m. Plaintiff is to file proposed redactions of the MSJ documents with this Court by August 16, 2024.

Hon. Daniel M. Crowley

Judge of the Superior Court