Judge Helen Zukin, Case 22SMCV00231 2023-01-20 Tentative Ruling

Judge: Helen Zukin, Case: 22SMCV00231, Date: 2023-01-20 Tentative Ruling

Case Number: 22SMCV00231 Hearing Date: January 20, 2023 Dept: 207

Background

Plaintiffs Shohreh Iman, as trustee of the Iman Family Trust dated June 26, 2022, and the Estate of Mehrdad Iman (“Plaintiffs”) bring this action against several defendants stemming from the operation of the architectural design firm PlusArch, Inc. (“PlusArch”). Before passing away, Mehrdad Iman (“Iman”) was a 50% shareholder in PlusArch, and Defendant Shabab Ghods (“Ghods”) owned the remaining shares in PlusArch. Defendants Ben Karimi and Karimi & Associates (“Defendants”) provided accounting services to PlusArch. Plaintiffs bring this action asserting Iman was improperly denied profits and distributions from the operation of PlusArch during his life. Defendants bring this motion to seal the stipulation and order regarding good faith settlement filed by Defendants on January 11, 2023.

Sealing Standard

Unless confidentiality is required by law, court records are presumed to be open to the public, pursuant to a potent “open court” policy undergirded by the First Amendment and favoring the public nature of court proceedings. (Cal. Rules of Court, rule 2.550(c); see NBC Subsidiary (KNBC-TV), Inc. v. Superior Court (1999) 20 Cal.4th 1178, 1199-10.) Consequently, pleadings, motions, discovery documents, and other papers may not be filed under seal merely by stipulation of the parties; filing under seal requires a court order. (Cal. Rules of Court, rule 2.551(a); see H.B. Fuller Co. v. Doe¿(2007) 151 Cal.App.4th 879, 888.)

In order to issue a sealing order, the Court must expressly find 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. (Cal. Rules of Court, rule 2.550(d)(1)-(4), (e); see McGuan v. Endovascular Techs., Inc.¿(2010) 182 Cal.App.4th 974, 988.) The constitutional policy favoring for disclosure must be balanced against other factors, e.g., privacy rights. (See People v. Jackson (2005) 128 Cal.App.4th 1009, 1026-27.) The Court acts within its discretion in making factual determinations on a motion to seal. (Universal City Studios, Inc. v. Superior Court (2003) 110 Cal.App.4th 1273, 1285.)

A sealing order must be sought by means of a motion (or application) and accompanied by a memorandum of points and authorities, as well as evidence and testimony containing facts sufficient to justify the mandatory findings required to support a sealing order. (Cal. Rules of Court, rules 2.550(d) and 2.551(b).) The proponent of the sealing order must also conditionally lodge the unredacted matter to be sealed with the court. (Id., rule 2.551(b)(4).)

Analysis

Defendants move to seal the stipulation regarding the good faith determination of their settlement with Plaintiffs. Defendants state such sealing is necessary to prevent disclosure of the financial terms of their settlement.

The California Supreme Court has recognized that “[r]outine public disclosure of private settlement terms would ‘chill the parties’ ability in many cases to settle the action before trial.” (Monster Energy Co. v. Schechter (2019) 7 Cal.5th 781, 793.) Many cases have also recognized that redacting particular amounts from settlement documents is acceptable, even when sealing the entire document may not be. In Universal City Studios, for example, the Court held that the defendant had not shown any prejudice to its business interests if the parties’ settlement was revealed. (Universal City Studios, supra, 110 Cal.App.4th at 1284.) The court noted, however, that the “financial figures” in the settlement agreement had been “redacted.” (Ibid.) Thus, the defendant had “presented no evidence that disclosure of any of the substantive provisions as distinguished from the redacted financial terms of the October 14, 1998, agreement will prejudice any legitimate confidential business practice.” (Ibid.) Thus, the court drew a distinction between disclosing the “routine settlement document” itself and the redacted financial information. (Ibid.)

Defendants here seek to seal not just the confidential financial terms of the settlement, rather Defendants seek to seal the stipulation in its entirety. California Rules of Court, rule 2.551 governs motions to seal. Pursuant to this framework, Defendants were to lodge an unredacted version of the stipulation with the Court and publicly file a redacted version. (Cal. Rules of Court, rules 2.551(b)(4)-(5).) Rather than follow this procedure, Defendants publicly filed the unredacted stipulation on January 11 without filing a redacted version omitting the financial terms of the settlement. Defendants’ motion asks the Court to seal the “unredacted” version of the stipulation, but unlike the Universal City Studios case discussed above, Defendants here have not filed a redacted form of the stipulation. As the “unredacted” stipulation is the only version which was filed by Defendants, Defendants are asking the Court to seal the stipulation in its entirety.

The Court finds Defendants have not shown the proposed sealing is narrowly tailored or that no less restrictive means exists to protect their interest in maintaining the confidentiality of the financial terms of the settlement as required by California Rules of Court, rule 2.550(d). Defendants’ motion extensively quotes the non-financial terms of the stipulation, indicating these portions are not confidential terms which should be sealed from the public. As set forth above, in determining whether sealing is appropriate, Courts draw distinctions between routine, non-confidential settlement terms and sensitive financial information. Defendants have shown sealing of the confidential terms of the settlement is warranted, however they have failed to show sealing the non-financial terms of the stipulation is justified.

Accordingly, Defendants’ motion to seal the “unredacted” stipulation filed on January 11 is CONTINUED to allow Defendants to publicly file a redacted form of the stipulation which obscures the confidential financial terms of the settlement such that the sealing of the January 11 stipulation would then be narrowly tailored under rule 2.550(d).

Conclusion

Defendant’s motion to seal is continued to January 30, 2023. Defendants are to file a redacted form of their January 11 stipulation at least three court days before the continued hearing date.