Judge Ralph C. Hofer, Case EC067583 2023-02-24 Tentative Ruling

Plaintiff Pointe Assets, LLC, the successor in interest to Catalina Media Development, LLC (CMD), alleges that CMD owns real property in Burbank, commonly referred to as “The Pointe,” an office building and parking garage. Plaintiff alleges that in early 2006, plaintiff entered into an agreement with Krismar Construction Co. concerning construction of the Pointe, which, in turn, for the benefit of CMD, entered into a subcontract with defendant Benson Industries, Inc. (Benson) to design and build an exterior curtain wall glazing system. Benson then hired for the benefit of CMD, defendant Viracon, Inc. (Viracon) which manufactured and supplied certain IG Units for the curtain wall glazing system. Plaintiff alleges that a sealant for the system, PIB, was manufactured and supplied to Viracon by defendants Quanex I.G. Systems, Inc. (Quanex) and/or Truseal Technologies, Inc. (Truseal).

Plaintiff alleges that the project was substantially complete in April of 2009, but in April of 2016 a tenant notified CMD’s property manager of a dirty window. It was then discovered that the problem was not dirt but film formation comprised of PID forming between the panes of glass in the sealed IG units, so that there is no way to clean the film formation or repair the PIB without damaging the IG Units, and the exterior curtain wall glazing system.

The pleading alleges that Benson acknowledged in the subcontract that CMD is a third-party beneficiary of that contract, and plaintiff alleges breaches of the warranties of that subcontract, as well as various theories of product liability, negligence, and breach of warranty against defendants.

The court informed counsel that several defendants had joined in the motion to compel arbitration, and the court would continue the motion to compel arbitration from the other defendants concerning whether the motion was moot or was to go forward. Supplemental briefing was ordered, and the matter continued to June 22, 2018.

At the hearing on June 22, 2018, the court’s tentative ruling was that the motion to compel arbitration was moot in light of the dismissal of the moving party, and to deny the “joinders” without prejudice, and indicated that if the joinder defendants represented that they would file new stand-alone motions to compel arbitration, the court would keep the stay of the matter in place pending the court’s adjudication of those motions, so long as such motions were filed within 30 days of the hearing date. At the hearing, the court asked counsel if any of the joined parties were considering filing their own motion, there was a response in the positive, and the minute order states, “Court orders the stay to remain in effect.” The minute order also states, “Court remarks that you have thirty (30) days to do so.”

On July 20, 2018, defendant Viracon filed a motion to compel arbitration, which was set for hearing on November 30, 2018. On July 23, 2018, defendants Quanex and Truseal filed a motion to compel arbitration and joinder in Viracon’s motion, which was also set for hearing on November 30, 2018.

The matters were continued to December 14, 2018 and heard. The court granted the motion by defendant Viracon, and ordered: “Plaintiff Pointe Assets, LLC and Defendant Viracon, Inc. are ordered to arbitrate this matter according to the Agreement set forth in the subject Subcontract.”

The arbitrator in its May 4, 2020 ruling had determined there was no agreement requiring plaintiff and Viracon to arbitrate the limited remedies before the arbitrator pertaining to the claim or counterclaim, found that resolution of the dispute was not within the jurisdiction and powers granted to the arbitrator, and dismissed the counterclaim and Viracon’s claim without prejudice.

“The Court finds that the Arbitrator exceeded the arbitrator’s powers in declining to conduct arbitration of the claim of plaintiff, and that the award cannot be corrected without affecting the merits of the decision upon the controversy submitted, which this Court has previously found is a decision on the merits to be made in arbitration.

The Ruling on Respondents’ Second Motion Objecting to Jurisdiction, dated May 4, 2020 is vacated, and plaintiff Pointe Assets, LLC and defendant Viracon, Inc. are again ordered to submit the entire controversy between them to binding arbitration pursuant to the terms of the subject Subcontract.

Defendant Viracon seeks to file records with the court in opposition to the motion to confirm the arbitration award which have been designated by plaintiff Pointe Assets as “Confidential” pursuant to a stipulated protective order entered in this matter. Defendant argues that the protective order limits access to and disclosure of the subject documents, which reflect confidential information concerning non-parties to the action.

(b) (1) 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 of points and authorities and a declaration containing facts sufficient to justify the sealing.

(2) A copy of the motion or application must be served on all parties who have appeared in the case. Unless the court orders otherwise, any party that already possesses copies of the records to be placed under seal must be served with a complete, unredacted version of all papers as well as a redacted version.”

The rules for sealing records “do not apply to discovery motions and records filed or lodged in connection with discovery motions or proceedings.” The rules “do apply to discovery materials that are used at trial or submitted as a basis for adjudication of matters other than discovery motions or proceedings.” CRC Rule 2.550(a)(3); NBC Subsidiary, Inc. v. Superior Court (1999) 20 Cal.4th 1178, 1208-1209 n. 25.

With respect to the existence of an overriding interest, the Legislative Comment to CRC Rule 2.550 notes that the Rule is a codification of the standards set forth in the California Supreme Court opinion in NBC Subsidiary (KNBC-TV), Inc. v. Superior Court (1999) 20 Cal.4th 1178. The comment notes that “NBC Subsidiary provides examples of various interests that courts have acknowledged may constitute ‘overriding interests’. (See id., at p. 1222, fn. 46).”

“As observed, ante, 86 Cal. Rptr.2d at page 798, 980 P.2d at page 355, the court in Press–Enterprise II, supra, 478 U.S. 1, 14, 106 S.Ct. 2735, 92 L.Ed.2d 1, implied that an accused's interest in a fair trial constitutes an “overriding interest” supporting closure. We assume that the high court similarly would find that a civil litigant's right to a fair trial also constitutes an overriding interest supporting closure.

Courts have acknowledged various other overriding interests. (Globe, supra, 457 U.S. 596, 607, 102 S.Ct. 2613, 73 L.Ed.2d 248 [protection of minor victims of sex crimes from further trauma and embarrassment]; accord, Press–Enterprise II, supra, 478 U.S. 1, 9, fn. 2, 106 S.Ct. 2735, 92 L.Ed.2d 1; Press–Enterprise I, supra, 464 U.S. 501, 512, 104 S.Ct. 819, 78 L.Ed.2d 629 [privacy interests of a prospective juror during individual voir dire]; Rovinsky, supra, 722 F.2d 197, 200 [protection of witnesses from embarrassment or intimidation so extreme that it would traumatize them or render them unable to testify]; Publicker, supra, 733 F.2d 1059, 1073 [protection of trade secrets, protection of information within the attorney-client privilege, and enforcement of binding contractual obligations not to disclose]; Comment, The First Amendment Right of Access to Civil Trials After Globe Newspaper Co. v. Superior Court, supra, 51 U. Chi. L.Rev. at pp. 299–310 [safeguarding national security, ensuring the anonymity of juvenile offenders in juvenile court]; Fenner & Koley, supra, 16 Harv. C.R.-C.L. L.Rev. at pp. 440–444 [ensuring the fair administration of justice, and preservation of confidential investigative information].)

Quite apart from questions relating to closure based upon the content of information, it is recognized that courtroom access may be denied or regulated by reasonable “time, place, and manner restrictions” in order to maintain dignity and decorum, or when courtroom capacity precludes entry by every person who wishes to attend. (Richmond Newspapers, supra, 448 U.S. 555, 581, fn. 18, 100 S.Ct. 2814, 65 L.Ed.2d 973 (lead opn.); Fenner & Koley, supra, 16 Harv. C.R.-C.L. L.Rev. at pp. 444–446.)”

Defendant argues that the motion concerns three of the 18 documents attached to the Ekman Declaration in support of Viracon’s opposition to the motion to confirm the arbitration award, and that these documents are critical to Viracon’s opposition because they establish that CMD, a non-party to this action, did not suffer an injury in fact and did not incur the damages encompassed by the arbitration panel’s final award. Defendant argues that as a result, plaintiff Pointe Assets lacks standing, and the case must be dismissed.

The documents involved include, first, a Membership Interests Purchase and Sale Agreement (MIPSA) executed by CMD Investment I, BPP Pointe, LLC, and Coinvest Pointe, LLC (Buyers) relating to the sale of CMD Investment I’s membership interest in CMD, the owner of the Pointe building. Defendant indicates that none of those parties to the agreement are parties to this action, and that, among other things, the price paid for the membership interest is not publicly available, and the agreement contains additional terms which the non-parties would likely consider confidential and are not publicly available.

Defendant argues that there is an overriding interest held by the non-parties in the confidentiality of the first two documents, which contain highly sensitive business information, which supports permitting these documents to be filed under seal. Defendant argues that with respect to the third document, the Assignment, although it does not implicate the rights of non-parties or damages suffered by non-parties, plaintiff has not waived the “Confidential” designation, and Viracon does not wish to violate the court’s protective order. As noted above, under CRC Rule 2.551, a motion for an order sealing a record “must be accompanied by … a declaration containing facts sufficient to justify the sealing.”

The declaration then indicates that the motion involves the MIPSA, and states, “Among other things, the price paid for CMD Investment I’s membership interest is not publicly-available. The MIPSA also contains transactional terms that non-parties likely consider to be confidential.” [Ekman Decl., para. 7]. It is not clear how counsel for Viracon would have personal knowledge of this information. With respect to the other two documents, the declaration merely indicates that the motion involves those documents but includes no indication of what information is included in those documents which would be confidential, proprietary, or otherwise subject to a sealing order. [Ekman Decl., paras. 8, 9].

The overriding interests asserted here accordingly appear to be the interest of defendant in not violating the protective order, pursuant to which defendant agreed to maintain the confidentiality of materials designated by plaintiff as confidential, and the purported interest of third parties in what Viracon, without establishing any personal knowledge or facts, speculates could be confidential business information. With respect to the interest in not violating the protective order, there is some recognition that a valid agreement not to disclose can support a finding of an overriding interest, but in this situation, defendant has a stipulation and order in this lawsuit, based on a confidentiality designation of another party, and has no personal knowledge with respect to whether the documents in fact include confidential or proprietary information, but is at this point simply bound to accept plaintiff’s designation.

The Second District in Universal City Studios, Inc. v. Superior Court (2003) 110 Cal.App.4th 1273, found that a potential overriding interest includes, “a binding contractual agreement not to disclose.” Universal City, at 1283. The court of appeal emphasized, however, that an overriding interest analysis also requires a showing that there is a “substantial probability that it will be prejudiced absent closure or sealing.” Id. In that case, the Second District found the second element had not been satisfied. In that case, the agreement had been heavily redacted, so sealing did not appear necessary, and there had been no showing of any prejudice to a legitimate confidential business practice. In addition, the request requested the sealing of a public court order, as well as the sealing of pleadings in a case having nothing to do with the settlement, so failed to meet the requirement of being narrowly tailored.

The confidential designation here does not establish that the materials are in fact confidential, or appropriately protected with respect to a sealing determination. With respect to the interest of third parties in their business information, it is generally the burden of the party seeking to protect sensitive business information from public disclosure to establish that the information is subject to such protection. See Bridgestone/Firestone, Inc. v. Superior Court (1992) 7 Cal.App.4th 1348, 1390.

Plaintiff Pointe Assets has filed a “Response” to the motion, first arguing that the documents proposed to be submitted under seal in opposition to plaintiff’s motion provide no basis for vacating the arbitration award. This point does not address the issue now before the court in this motion, which is whether there is a valid basis for the court to permit the documents to be filed under seal. Again, it is plaintiff which has designated these documents “Confidential,” and presumably has personal knowledge with respect to why those designations were made and whether they are appropriate. The moving party defendant Viracon has indicated in the moving papers that if the court is not inclined to permit the documents to be filed under seal, Viracon will file them as documents to be included in the public record to oppose the motion to confirm the arbitration award. The court will consider all documents which any of the parties deem proper to make a determination of the motion to confirm on its merits, unless the party relying on such a document voluntarily withdraws the document from consideration if it is not accepted for filing under seal. Viracon has indicated that it will not be withdrawing those documents but filing them in the public record. The question remains whether the documents will be permitted to be filed under seal or will be required to be filed as part of the public record.

Plaintiff argues that the MIPSA includes confidential business terms of the purchase, including the price paid by non-parties for their membership interest, which are not publicly available, and that the MIPSA is part of a larger transaction between its parties and that the parties have obligations of confidentiality toward each other with respect to the proprietary terms of the transaction.

Plaintiff argues that the operating agreement is a private contract not publicly available in California as plaintiff is a limited liability company, and that the operating agreement contains proprietary information about how the parties are invested in Pointe, the governance of their interests, who manages the company, and procedures for dissolution of the company, which are sensitive confidential business issues.

Plaintiff has not submitted a declaration stating these arguments as fact, or a declaration from any of the interested third parties seeking to protect this information. It is not explained how the aspects of plaintiff’s operation cited are proprietary, sensitive, or confidential. It is not explained how any of the involved parties or non-parties have obligations of confidentiality toward one another. It is not clear, for example, if plaintiff or anyone involved is subject to some sort of confidentiality agreement included in any of these documents, or separately expressed or implied with respect to the terms of the overall transaction. It is not clear if there is a valid confidentiality agreement with respect to plaintiff maintaining the confidentiality of its own operating agreement or the assignment agreement to which it is a party. Such confidentiality agreements are not submitted to the court for evaluation of any applicability to the subject documents, or to certain terms included within the documents.

More importantly, even if the court were to accept defendant’s representation, evidently without personal knowledge, concerning the monetary terms of the transaction between the non-parties reflected in the MIPSA not being publicly disclosed, this is only one specific term, of one of the three documents, and it is not satisfactorily established that the sealing order sought is narrowly tailored.

Similarly, even if the court were to accept the arguments in the opposition, which are not supported by any evidentiary showing or a declaration stating facts as required under the Rule, the arguments suggest that sealing any of the documents in their entirety is not narrowly tailored. Plaintiff’s argument is that the MIPSA includes confidential terms such as the price paid, and other unspecified “business terms,” “certain” of which are purportedly, “not at issue here.” [Response, p. 3]. The argument is that the operating agreement includes proprietary information about how the parties are invested, the terms agreed on for governance, who manages the company, and procedures for dissolution. [Response p. 3]. As to the assignment agreement, the argument is that there would be improper disclosure of unspecified “confidential information about parties to this action,” as well as non-parties and members, “and warranties not subject to this action (i.e, between CMD and other vendors).” [Response, pp. 3-4]. It appears that any sealing order could accordingly be more narrowly tailored and is not clear why the parties are urging that the entire documents be filed under seal, rather than the portions of those documents which include the purportedly confidential information.

Here, defendant’s counsel indicates that he attempted to obtain consent to the filing of this motion to seal unopposed from counsel for plaintiff, and also suggested that defendant was open to redacting the documents to get an agreement on filing redacted versions publicly. [Ekman Decl., paras. 13, 16, 17]. The motion was sent to plaintiff’s counsel in advance, and plaintiff’s counsel requested additional time to respond, which was granted, but despite follow up by counsel for defendant, counsel for plaintiff failed to respond by the deadline instructed by the court for the filing of this motion to seal. [Ekman Decl., paras. 15-18].

It appears that defendant believes that there is a strong possibility that the proposed sealing could be more narrowly tailored, and that there are less restrictive means than sealing the entirety of the documents, or, indeed, all three of the documents, but that without the requested response from plaintiff, defendant cannot alone provide the information the court needs to determine if that possibility applies here.

Plaintiff in the Response indicates that plaintiff was not able to respond to Viracon’s request concerning stipulating to the motion within the timeframe demanded, and that by the time plaintiff provided a deadline by which it could do so, the motion had already been filed, so that in the response plaintiff provides its position on the motion to seal. Plaintiff offers no redaction option but continues on in the Response to ultimately request that “all of said documents should be filed under seal.” [Response, p. 4].

Defendant in reply primarily argues that the documents do provide a basis for vacating the arbitration award and argues the merits of it opposition to the motion to confirm. Defendant notes that while the motion appears unopposed, plaintiff in the Response still appears unable to confirm that the three documents are confidential, but then argues that since the parties agree that the three documents implicate the confidential information of non-parties to this case they should be filed under seal. As set forth above, under CRC Rule 2.551 (a), “The court must not permit a record to be filed under seal based solely on the agreement or stipulation of the parties.”

“An order sealing the record must (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.”

“If the court denies the motion or application to seal, the clerk must return the lodged record to the submitting party and must not place it in the case file unless that party notifies the clerk in writing within 10 days after the order denying the motion or application that the record is to be filed.”

It would appear that the outcome of this proceeding would then be that defendant would notify the court that the record is to be filed publicly, over the protest of plaintiff, and that it would be most just under the circumstances to continue this matter to permit the parties to provide the proper evidentiary and statutory showing through supplemental briefing.

This issue will be discussed at the hearing. The court expects that prior to the continued hearing, the parties will engage in good faith meet and confer regarding the factual basis for plaintiff’s confidentiality designations, as well as whether the documents can be redacted of confidential information only, with the balance of the unredacted material to be duly filed. Any further briefing shall include a declaration reporting the results of the meet and confer, and a declaration from plaintiff by a witness or witnesses with personal knowledge, including, if necessary, third parties, setting forth facts supporting an overriding interest in keeping each of the documents, or certain portions thereof, confidential, including an explanation of any confidentiality agreement or agreements.

The supplemental briefing should also submit and serve the documents proposed to be filed under seal conditionally under seal with appropriate redactions or explain why the request for sealing of the entirety of the documents is as narrow as possible, and why materials cannot be effectively redacted of confidential content. The court is skeptical that the entirety of any of the documents is subject to confidentiality and a sealing order. It would appear that, at the very least, information such as the title of the document, its parties, and likely its signatories and even some of its terms would be properly publicly disclosed. The parties seeking to have the documents filed under seal must meet the statutory burden of showing that the proposed sealing is narrowly tailored, and that no less restrictive means exist to achieve the overriding interest. It is quite possible that none of the documents or any portions of them would be subject to a sealing order.

The Court is not persuaded from the showing made that an overriding interest will be prejudiced if the documents are not filed under seal, as the motion has failed to submit a declaration of a person with personal knowledge establishing the confidential or proprietary nature of the documents, or any portion thereof, and plaintiff in its “response” to the motion has failed to submit any declaration or evidentiary showing whatsoever. The proposed sealing and motion also does not satisfy the Court that it is narrowly tailored or that no less restrictive means exist to achieve the purported overriding interest. The entire documents have been filed conditionally under seal, when defendant suggests in the motion, and the arguments made by plaintiff in the response further suggest, that redacted versions of the documents would sufficiently protect any interests involved.

The parties are ordered to engage in good faith meet and confer regarding the factual basis for plaintiff’s confidentiality designations, as well as whether the documents can be redacted of confidential information only, with the balance of the unredacted material to be duly filed.

Any further briefing shall include a declaration from plaintiff by a witness or witnesses with personal knowledge (which would likely not include counsel for plaintiff), including, if necessary, third parties, setting forth facts supporting an overriding interest in keeping each of the documents, or certain portions thereof, confidential, including submission of and explanation of any confidentiality agreement or agreements.

The supplemental briefing should also submit conditionally under seal and serve the documents proposed to be filed under seal with appropriate redactions or explain why the request for sealing of the entirety of the documents is as narrow as possible, and why materials cannot be effectively redacted of confidential content. Any party seeking to have the documents filed under seal must meet the burden of showing that the proposed sealing is narrowly tailored, and that no less restrictive means exist to achieve the overriding interest.

If the parties stipulate in advance that the documents are to be filed as public records, the parties must notify the court of such a circumstance no later than the date the first supplemental brief is due. Supplemental briefs are not to exceed 15 pages, although supporting declarations will not be subject to page limitations, but should be a reasonable length. All supplemental papers are to be served by electronic service.

Please make arrangement in advance if you wish to appear via LACourtConnect/Microsoft Teams by visiting www.lacourt.org to schedule a remote appearance. Please note that LACourtConnect/Microsoft Teams offers free audio and video appearance. Counsel and parties (including self-represented litigants) are encouraged not to personally appear. With respect to the wearing of face masks, Department D recognizes that currently, the Los Angeles Department of Public Health strongly recommends masks indoors, especially when interacting with individuals whose vaccination status is unknown; for individuals who have a health condition that puts them at higher risk for severe illness; individuals who live with someone who is at higher risk; and for individuals who are around children who are not yet eligible for vaccines. In accordance with this guidance, it is strongly recommended that anyone personally appearing in Department D wear a face mask. The Department D Judge and court staff will continue to wear face masks. If no appearance is set up through LACourtConnect/Microsoft Teams, or otherwise, then the Court will assume the parties are submitting on the tentative.