Judge Michael P. Linfield, Case Number: 22STCV09323, Date: 2024-01-25 Tentative Ruling

Judge: Michael P. Linfield, Case: 22STCV09323, Date: 2024-01-25 Tentative Ruling

The Court often posts its tentative several days in advance of the hearing. Please re-check the tentative rulings the day before the hearing to be sure that the Court has not revised the ruling since the time it was posted.

Please call the clerk at (213) 633-0154 by 4:00 pm. the court day before the hearing if you wish to submit on the tentative.

Resp. Party: Defendants Element 7, Inc.; Robert Divito; Josh Black; Element 7, LLC; Element 7 CA, LLC; Sigra, LLC; Element 7 American Canyon LLC; PH Investments Group LLC; Element 7 Willits LLC; Element 7 Mendota LLC; E7 Dunsmuir LLC; Element 7 Lemon Grove, LLC; Element 7 Eureka LLC; Element 7 Walnut Creek LLC; Element 7 Willows LLC; E7 Napa City LLC; E7 Lompoc LLC; Element 7 Chula Vista One LLC; Element 7 SF2 LLC; E7 Salinas LLC; Element 7 San Luis Obispo LLC; and Element 7 Hesperia LLC

SUBJECT: Motion to File Documents Under Seal Pursuant to CRC 2.550, 2.551(d)

SUBJECT: Motion to File Settlement Agreement Under Seal Pursuant to CRC 2.550, 2.551(d)

Moving Party: Defendants Element 7, Inc.; Robert Divito; Josh Black; Element 7, LLC; Element 7 CA, LLC; Sigra, LLC; Element 7 American Canyon LLC; PH Investments Group LLC; Element 7 Willits LLC; Element 7 Mendota LLC; E7 Dunsmuir LLC; Element 7 Lemon Grove, LLC; Element 7 Eureka LLC; Element 7 Walnut Creek LLC; Element 7 Willows LLC; E7 Napa City LLC; E7 Lompoc LLC; Element 7 Chula Vista One LLC; Element 7 SF2 LLC; E7 Salinas LLC; Element 7 San Luis Obispo LLC; and Element 7 Hesperia LLC

The Motion to Seal scheduled for a February 22, 2024 hearing is ADVANCED to February 8, 2024. Any party that wishes to contest this may do so at the hearing on February 8, 2024.

On March 16, 2022, Plaintiffs American Patriot Brands, Inc. and GH Group, Inc. (“Plaintiffs”) filed their Complaint against Defendants Element 7, Inc.; Robert Divito; Josh Black; Element 7, LLC; Element 7 CA, LLC; Sigra, LLC; Element 7 American Canyon LLC; PH Investments Group LLC; Element 7 Willits LLC; Element 7 Mendota LLC; E7 Dunsmuir LLC; Element 7 Lemon Grove, LLC; Element 7 Eureka LLC; Element 7 Walnut Creek LLC; Element 7 Willows LLC; E7 Napa City LLC; E7 Lompoc LLC; Element 7 Chula Vista One LLC; Element 7 SF2 LLC; E7 Salinas LLC; Element 7 San Luis Obispo LLC; and Element 7 Hesperia LLC (“Defendants”). The causes of action arise from the Parties’ business relationships, interactions, and transactions.

On June 3, 2022, Defendant/Cross-Complainant Element 7, LLC filed its Cross-Complaint against Cross-Defendants American Patriot Brands, Inc., Robert Y. Lee, Christopher Herghelegiu, Brian Pallas, and J. Bernard Rice.

On July 27, 2022, Defendant/Cross-Complainant Element 7, LLC filed its Amended Cross-Complaint.

On June 13, 2023, Defendants filed Judicial Council Form CM-200, Notice of Settlement of Entire Case.

On September 21, 2023, the Court dismissed with prejudice this case and retained jurisdiction to make orders to enforce any and all terms of settlement, including judgment, pursuant to Code of Civil Procedure section 664.6.

On January 12, 2024, Plaintiffs filed Motion to Enforce Settlement Via Entry of Stipulated Judgment (“Motion to Enforce Settlement”). In support of their Motion to Enforce Settlement, Plaintiffs concurrently filed: (1) Declaration of Michael Forman; and (2) Declaration of Kyle Kazan.

On January 12, 2024, Plaintiffs filed Motion to File Documents Under Seal Pursuant to CRC 2.550, 2.551(d) (“Plaintiffs’ Motion to Seal”). In support of Plaintiffs’ Motion to Seal, Plaintiffs concurrently filed: (1) Notice of Lodging of Documents Conditionally Under Seal Pursuant to CRC 2.550, 2.551(d); and (2) Proposed Order.

On January 26, 2024, Defendants filed their Opposition to the Motion to Enforce (“Opposition”). In support of their Opposition, Defendants concurrently filed: (1) Declaration of Robert DiVito; and (2) Declaration of Nicole S. Phillis.

On January 26, 2024, Defendants filed their Motion to File Settlement Agreement Under Seal Pursuant to CRC 2.550, 2.551(d) (“Defendants’ Motion to Seal”). In support of Defendants’ Motion to Seal, Defendants concurrently filed: (1) Declaration of Nicole S. Phillis; (2) Notice of Lodging of Confidential Settlement Agreement Conditionally Under Seal Pursuant to CRC 2.550, 2.551(d); and (3) Proposed Order.

On February 1, 2024, Plaintiffs filed their Reply in support of their Motion to Enforce Settlement. Plaintiffs concurrently filed Objections to Declaration of Robert DiVito.

The Court first considers the Motion to Enforce Settlement. The Court then concurrently considers Plaintiffs’ Motion to Seal and Defendants’ Motion to Seal.

Also, Defendants’ Motion to Seal is scheduled to be heard on February 22, 2024. However, the other motions are scheduled to be heard on February 8, 2024. All three motions consider similar issues of law and fact, and the Parties have indicated that Defendants’ Motion to Seal will not be contested.

Given that all of the same issues should be heard and considered at the same time, the Court ADVANCES the February 22, 2024 hearing to February 8, 2024. Any party that wishes to contest this may do so at the hearing on February 8, 2024.

Plaintiffs filed evidentiary objections to the Declaration of Robert DiVito. The following are the Court’s rulings on these objections.

Objection
1	SUSTAINED
2	SUSTAINED
3	SUSTAINED
4	SUSTAINED
5	SUSTAINED

“If parties to pending litigation stipulate, in a writing signed by the parties outside of the presence of the court or orally before the court, for settlement of the case, or part thereof, the court, upon motion, may enter judgment pursuant to the terms of the settlement. If requested by the parties, the court may retain jurisdiction over the parties to enforce the settlement until performance in full of the terms of the settlement.” (Code Civ. Proc., § 664.6, subd. (a).)

“Section 664.6 was enacted to provide a summary procedure for specifically enforcing a settlement contract without the need for a new lawsuit.” (Weddington Prod., Inc. v. Flick (1998) 60 Cal.App.4th 793, 809.) In deciding motions made under Section 664.6, judges “must determine whether the parties entered into a valid and binding settlement.” (Kohn v. Jaymar-Ruby (1994) 23 Cal.App.4th 1530, 1533.)

Plaintiffs move the Court to enter judgment in favor of Plaintiffs and against Defendants. (Motion to Enforce Settlement, p. 10:4–7.)

Plaintiffs argue: (1) that the Court only has jurisdiction to enforce the settlement; (2) that Civil Code section 1511 is inapplicable because the Court need not find a breach of contract to enforce a stipulated judgment; (3) that Defendants missed the deadline to pay the settlement amount; (4) that there is no admissible evidence that Plaintiffs breached the settlement agreement or prevented Defendants from complying with its terms; (5) that Defendants have not provided any information which suggests that Defendants have the ability to pay the settlement amount; and (6) that even if a third party had agreed to invest in Defendants, they still would have missed the deadline. (Motion to Enforce Settlement, pp. 5:24–25, 6:14–15, 7:10, 8:9–10, 9:1–2, 9:9–10.)

Defendants disagree, arguing: (1) that the Court has discretion under Code of Civil Procedure section 664.6, which does not apply where conditions to stipulated judgment are not met or the enforcing party is in breach; (2) that Plaintiffs cannot enforce a settlement agreement they have materially breached; (3) that Plaintiffs materially breached both the Settlement Agreement’s non-disparagement clause and implied covenant of good faith and fair dealing; (4) that Plaintiffs offer only paltry, non-credible evidence; (5) that Plaintiffs’ attempt to attack Defendants’ ample evidence fails; (6) that Plaintiffs apply the wrong standard under Code of Civil Procedure section 664.6 for breach; (7) that Plaintiffs have not and cannot show satisfaction of the condition precedent to entry of stipulated judgment; (8) that Plaintiffs prevented Defendants’ performance to manufacture a “default”; (9) that Defendants missing the optional early payment is not a “default”; and (10) that even if Code of Civil Procedure section 664.6 applies here (which, according to Defendants, it does not), the Court should exercise its discretion to deny the Motion based on the factual disputes and equities. (Opposition, pp. 11:19–21, 13:12, 14:2–3, 15:12–13, 17:3, 18:2–3, 18:17, 19:8, 20:20–21.)

Plaintiffs disagree with these arguments in their Reply, with the notable argument that Defendants have not provided any admissible evidence. (Reply, p. 1:9.)

It is undisputed that the Parties have a valid and binding settlement. Further, on the bases of hearsay and speculation, the Court has sustained all of Plaintiffs objections. Thus, Defendants have not provided any admissible evidence that would explain why they have not complied with section 3 of the Settlement Agreement. Pursuant to the terms of section 6 of the Settlement Agreement, it is clear that time is of the essence and that it would now be appropriate for judgment to be entered in favor of Plaintiffs and against Defendants.

The Court determines that the Parties entered into a valid and binding settlement. The Court shall enter judgment that will conform with the written settlement agreement.

A party that requests that a record or portion of a record be filed under seal must file a motion or an application for an order sealing it. The motion must be accompanied by a supporting memorandum and a declaration containing facts sufficient to justify the sealing. (Cal. Rules of Court, rule 2.551(b)(1); Savaglio v Wal-Mart Stores, Inc. (2007) 149 Cal.App.4th 588, 597–601.) All parties that have appeared in the case must be served with a copy of the motion or application. Unless the judge orders otherwise, a party that already possesses copies of the records to be sealed must be served with a complete, unredacted version of all papers as well as a redacted version. (Cal. Rules of Court, rule 2.551(b)(2).)

The moving party must lodge the record with the court in a separate envelope when the motion or application is made, unless good cause exists for not lodging it or it has been lodged previously. (Cal. Rules of Court, rule 2.551(b)(4) and (d).) The lodged record is conditionally under seal pending the judge's determination of the motion or application. (Cal. Rules of Court, rule 2.551(b)(4).)

Pursuant to California Rules of Court, rule 2.550(d), a judge may order that a record be filed under seal only if the judge expressly finds facts that establish all the following:

(1) There exists an overriding interest that overcomes the right of public access to the record.

(3) A substantial probability exists that the overriding interest will be prejudiced if the record is not sealed.

(5) No less restrictive means exist to achieve the overriding interest. (Cal. Rules of Court, rule 2.550(d).)

In ruling on a motion to seal, the court must weigh the competing interests and concerns. This process necessitates (1) identifying the specific information claimed to be entitled to protection from public disclosure, (2) identifying the nature of the harm threatened by disclosure, and (3) identifying and accounting for countervailing considerations. (H.B. Fuller Co. v. Doe (2007) 151 Cal.App.4th 879, 894.) Therefore, to prevail on his or her motion, the moving party must present a specific enumeration of the facts sought to be withheld and the specific reasons for withholding them. (Id. at p. 904.)

The California Supreme Court has held that the First Amendment provides “a right of access to ordinary civil trial and proceedings.” (NBC Subsidiary (KNBC-TV), Inc. v. Super. Ct. (1999) 20 Cal.4th 1178, 1212.) The court further noted its belief that “the public has an interest, in all civil cases, in observing and assessing the performance of its public judicial system.” (Id. at 1210.) There is a presumption of openness in civil court proceedings. (Id. at 1217.) This presumption may apply to seemingly private proceedings. (Burkle v. Burkle (2006) 135 Cal. App.4th 1045, 1052 (divorce proceedings).) Therefore, it is up to this Court to determine if that presumption has been overcome.

Courts must find compelling reasons, prejudice absent sealing and the lack of less-restrictive means, before ordering filed documents sealed. (Hurvitz v. Hoefflin (2000) 84 Cal.App.4th 1232, 1246; NBC Subsidiary (KNBC-TV), Inc. v. Super. Ct. (1999) 20 Cal.4th 1178, 1208-1209 n. 25; Champion v. Super. Ct. (1988) 201 Cal.App.3d 777, 787.) A compelling reason could include to protect confidential trade secrets, which “have been recognized as a constitutionally protected intangible property interest.” (DVD Copy Control Ass’n, Inc. v. Bunner (2003) 31 Cal.4th 864, 878, internal citations omitted.)

A proposed sealing must be narrowly tailored to serve the overriding interest, such as by sealing portions of pleadings or redacting text. (In re Marriage of Burkle (2006) 135 Cal.App.4th 1045, 1052, 1070.) An application to seal must be accompanied by a declaration containing facts sufficient to justify sealing. (Cal. Rules of Court, rule 2.551(b)(1).)

A “contractual obligation not to disclose can constitute an overriding interest” is sufficient to justify sealing the requested documents so long as the moving party establishes that disclosure of the information will result in substantial prejudice. (Universal City Studios, Inc. v. Super. Ct. (2003) 110 Cal. App. 4th 1273, 1283–84.)

Plaintiffs move the Court to seal portions of their Motion to Enforce Settlement and the entire Settlement Agreement attached as an exhibit. Defendants move the Court to seal portions of their Opposition to the Motion to Enforce Settlement and the entire Settlement Agreement attached as an exhibit.

Regarding the Settlement Agreement, the portions of the Motion to Enforce Settlement that discuss it, and the portions of the Opposition to the Motion to Enforce Settlement that discuss it, the Court finds: (1) that there exists an overriding interest that overcomes the right of public access to the record; (2) that the overriding interest supports sealing the record; (3) that a substantial probability exists that the overriding interest will be prejudiced if the record is not sealed; (4) that the proposed sealing is narrowly tailored, and (5) that no less restrictive means exist to achieve the overriding interest.