Judge: Teresa A. Beaudet, Case: 21STCV23520, Date: 2023-03-14 Tentative Ruling

Case Number: 21STCV23520    Hearing Date: March 14, 2023    Dept: 50

Superior Court of California

County of Los Angeles

Department 50

Background

Plaintiffs C&M Investment Group, Ltd. (“C&M”) and Karlin Holdings Limited Partnership (jointly, “Plaintiffs”) filed this action on June 23, 2021 against Defendant Harvey Champlin (“Defendant”), asserting causes of action for (1) intentional interference with contractual relations, and (2) intentional interference with prospective economic benefit.

Plaintiffs now move for an order upholding Plaintiffs’ designation of a settlement agreement and deposition testimony excerpts as confidential. Plaintiffs also move to file certain documents in support of their motion to support confidentiality designation under seal. Defendant filed a consolidated opposition to Plaintiffs’ motion to support confidentiality designation and motion to seal records in support of confidentiality designation.

Plaintiffs also move for an order to seal excerpts of their consolidated reply in support of their motion to support confidentiality designation and motion to file under seal records. This motion is unopposed.

Defendant moves for an order sealing Defendant’s consolidated opposition to Plaintiffs’ motion to support confidentiality designation and motion to seal. Plaintiffs filed a non-opposition response to this motion.

On January 30, 2023 a minute order was issued continuing the hearing on the instant motion. The January 30, 2023 minute order provides, inter alia, that “[a]t the hearing defendant raised concern about the scoop [sic] of the sealing, specifically sealing the identities of the parties to the settlement agreement. As a result of the discussion of this concern the Court orders further briefing on this issue.”

Plaintiffs’ Motion to Support Confidentiality Designation

Plaintiffs request that the Court uphold Plaintiffs’ designation of a certain October 13, 2020 settlement agreement and related deposition testimony excerpts as confidential. (Schweitzer Decl., ¶¶ 2-3, Exs. 1-2.) The deposition was conducted in the instant action. (Schweitzer Decl., 3, Ex. 2.) Plaintiffs indicate that they bring this motion pursuant to paragraph 6 of the parties’ stipulated protective order.

On January 17, 2022, the Court in this matter issued an order approving the parties’ “Stipulation and Protective Order – Confidential Designation Only.” Paragraph 6 of the Stipulation and Protective Order provides, inter alia, that “[i]n the event that counsel for a Party receiving Documents, Testimony or Information in discovery designated as ‘Confidential’ challenges, in good faith, such designation with respect to any or all of such items, said counsel shall advise counsel for the Designating Party, in writing, of such objections, the specific Documents, Testimony or Information to which each objection pertains, and the specific reasons and support for such objections (the “Designation Objections”). Counsel for the Designating Party shall have thirty (30) days from receipt of the written Designation Objections to either (a) agree in writing to de-designate Documents, Testimony or Information pursuant to any or all of the Designation Objections and/or (b) file a motion with the Court seeking to uphold any or all designations on Documents, Testimony or Information addressed by the Designation Objections (the “Designation Motion”)…The Designating Party shall have the burden on any Designation Motion of establishing the applicability of its “Confidential” designation…”

Paragraph 1(c) of the Stipulation and Protective Order defines “Confidential” as “any information which is in the possession of a Designating Party who believes in good faith that such information is entitled to confidential treatment under applicable law.”

Plaintiffs indicate that in October 2007, C&M filed a lawsuit in Los Angeles Superior Court entitled C&M Investment Group Ltd. & Karlin Holdings Limited Partnership v. Philip Richard Powers & Neil Campbell, Case No. BC378888, alleging that Philip Richard Powers (“Powers”) and his corporate entities defrauded C&M out of millions of dollars. (Schweitzer Decl., ¶ 4.) On November 17, 2008, Plaintiffs amended the complaint to include Campbell as a defendant based on Plaintiffs’ allegations that Campbell conspired with Powers in the fraudulent scheme. (Schweitzer Decl., ¶ 5.) Plaintiffs indicate that “in September 2021, Campbell was deposed in this action. [A] settlement agreement was marked as an exhibit to his deposition and he provided testimony about the agreement…” (Mot. at p. 3:24-26.) Plaintiffs assert that the settlement agreement and the related deposition testimony are appropriately designated confidential here. Plaintiffs note that the California Supreme Court in Monster Energy Co. v. Schechter (2019) 7 Cal.5th 781, 793 found that “[t]he privacy of a settlement is generally understood and accepted in our legal system, which favors settlement and therefore supports attendant needs for confidentiality. Routine public disclosure of private settlement terms would chill the parties’ ability in many cases to settle the action before trial. Such a result runs contrary to the strong public policy of this state favoring settlement of actions.” (Internal quotations and citations omitted].)  

In his opposition, Defendant asserts that no grounds exist for Plaintiffs’ proposed confidentiality designation. Defendant contends that a particular provision does not exist that warrants designating the subject documents confidential. (Opp’n at p. 4:21-22.) Defendants also assert that the documents at issue contain no confidential, proprietary, or scandalous information, and that Plaintiffs’ argument as to why the documents should be sealed is speculative.[1] Plaintiffs counter that though Defendant argues that the risk is speculative, he does not dispute the facts that spell out the risk and offers nothing in the way of facts that would mitigate the risk. Moreover, as discussed above, “[t]he privacy of a settlement is generally understood and accepted in our legal system, which favors settlement and therefore supports attendant needs for confidentiality.” (Monster Energy Co. v. Schechter, supra, 7 Cal.5th at p. 793.)

Defendant also asserts that the identities of the parties to the settlement should not be sealed. This is disputed by Plaintiffs, who assert that legal authority recognizes a privacy interest in the identities of parties to a settlement agreement.

Plaintiffs cite to Hinshaw Winkler v. Superior Court (1996) 51 Cal.App.4th 233, disapproved of on other grounds by Williams v. Superior Court (2017) 3 Cal.5th 531. In Hinshaw, “[t]he Hinshaw law firm petition[ed] for a writ of mandate/ prohibition regarding the trial court’s order permitting discovery of the confidential settlement in a doctors’ class action suit against Kaiser Foundation Hospitals (Kaiser). The underlying action, brought by plaintiffs and real parties Doctors Kauffman and Chronister, is legal malpractice against Hinshaw for dropping them from the case before it settled.” (Hinshaw Winkler v. Superior Court, supra, 51 Cal.App.4th at p. 235.) A “discovery dispute arose when Kauffman and Chronister (plaintiffs) sought to subpoena information about the settlements achieved in the Muhawi and Heller lawsuits. After a hearing on plaintiffs’ motion to compel this discovery, the trial court ordered petitioner and the Dyer & White law firm to produce information on the Heller settlement…” (Id. at p. 236.) “The trial court qualified its order by saying that names of individual plaintiffs in the Heller action could be redacted from documents to protect their privacy, and documents protected by attorney client or work product privilege or subject to the ‘right of privacy’ did not need to be produced.” (Ibid.)[2]  

The Court of Appeal in Hinshaw Winkler noted that “[t]he privacy of a settlement is generally understood and accepted in our legal system, which favors settlement and therefore supports attendant needs for confidentiality.” (Hinshaw Winkler v. Superior Court, supra, 51 Cal.App.4th at p. 241.) The Court of Appeal further noted that “plaintiffs argue that if we hold the settlement is private and disclosure would be injurious, the proper remedy is not to deny discovery altogether but to mandate protective measures such as redacting identity. We do not believe redacting names would effectively protect the Muhawi plaintiffs’ privacy. These confidential settlement agreements are entitled to privacy protection.” (Id. at p. 242.) Plaintiffs thus assert that the Hinshaw Winkler Court held that the subject settlement agreement in its entirety (meaning the settling plaintiffs’ identities and the agreement’s terms) was protected from disclosure.

Plaintiffs also asserts that the identities of the parties to the settlement agreement at issue here should be sealed and kept confidential for the additional reason that their disclosure risks significant harm to all parties thereto. Plaintiffs indicate that “[t]he court has broad authority to protect a party, deponent, or other natural person from unwarranted annoyance, embarrassment, or oppression.” (John Z. v. Superior Court (1991) 1 Cal.App.4th 789, 791 [internal quotations omitted].)[3] “This authority necessarily includes the authority to protect the identity of an informant whose safety would be jeopardized by disclosure.” (Ibid.) Plaintiffs assert that such circumstances exist here.

In its supplemental opposition, Defendant asserts that “Plaintiffs’ supplemental briefing identifies no authority for the proposition that there is any ‘overriding interest’ under C.R.C. 2.550(d)(1) not sufficiently protected by sealing the terms of the settlement agreement at issue, as opposed to the identity of the parties to the agreement.” (Suppl. Opp’n at p. 5:8-10.) Defendant notes that the Hinshaw Winkler and John Z. cases cited by Plaintiffs did not involve any motion to seal under California Rules of Court, rule 2.550. However, the Court agrees with Plaintiffs that this distinction is without a meaningful difference. In addition, as Plaintiffs note, Defendant does not cite to any contrary authority demonstrating that there is no privacy interest in the identities of the parties to a settlement agreement.[4]

Defendant also notes that in John Z. v. Superior Court, supra, 1 Cal.App.4th at page 792, the “[i]nformant presented a four-page declaration reciting the threat he/she received from one of the contractors and his/her reason for treating the threat as serious.” Defendant asserts that to the extent Plaintiffs cite John Z. for the notion that risk of harm may exist for an informant, Plaintiffs provide no specific evidence of a threat or other harm. Plaintiffs counter that Defendant “ignores Plaintiffs’ robust evidence substantiating the risk of harm. See Consolidated Reply at 3-5; 11/02/2022 Supplemental Schweitzer Decl. ¶¶ 2-7, Exs. 6-11.” (Plaintiffs’ Reply to Suppl’ Opp’n at p. 1:17-18.)

Based on the foregoing and a consideration of the arguments presented by the parties, the Court finds that Plaintiffs have demonstrated good cause for the Court to uphold Plaintiffs’ designation of the subject settlement agreement, including the identities of the parties to the settlement agreement, and the related deposition testimony excerpts as confidential.

Motions to Seal

Generally, court records are presumed to be open unless confidentiality is required by law. (Cal. Rules of Court, rule 2.550, subd. (c) .) If the presumption of access applies, the court may order that a record be filed under seal “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.” (Cal. Rules of Court, rule 2.550, subd. (d).)

Plaintiffs’ Motions to Seal

            Plaintiffs seek to seal (1) excerpts of the Memorandum of Points and Authorities in support of Plaintiffs’ motion to support confidentiality designation, (2) Exhibit 1 to the Declaration of Lauren Schweitzer in support of Plaintiffs’ motion to support confidentiality designation (a settlement agreement), and (3) excerpts of Exhibit 2 to the Declaration of Lauren Schweitzer in support of Plaintiffs’ motion to support confidentiality designation (excerpts of deposition testimony relating to the subject settlement agreement) (collectively, the “Sealed Documents”).

Plaintiffs assert that the Sealed Documents are sensitive, nonpublic information because they pertain to a settlement agreement, because making this information public could have ramifications for Plaintiffs pertaining to potential similar future deals, and for the reasons discussed in Plaintiffs’ Memorandum of Points and Authorities in support of Plaintiffs’ motion to support confidentiality designation. (Schweitzer Decl., ¶ 5.) Plaintiffs cite to Monster Energy Co. v. Schechter, supra, 7 Cal.5th at page 793, where the California Supreme Court noted, as set forth above, that “[t]he privacy of a settlement is generally understood and accepted in our legal system, which favors settlement and therefore supports attendant needs for confidentiality. Routine public disclosure of private settlement terms would chill the parties’ ability in many cases to settle the action before trial. Such a result runs contrary to the strong public policy of this state favoring settlement of actions.” (Internal quotations and citations omitted.)

Defendant filed a consolidated opposition to Plaintiffs’ motion to support confidentiality designation and motion to seal. Defendant argues that no grounds exist for Plaintiffs’ sealing request for the same reasons that no grounds exist for the confidentiality designation. As set forth above, the Court finds that Plaintiffs have demonstrated good cause for the Court to uphold Plaintiffs’ confidentiality designation. In addition, Defendant’s arguments pertaining to the sealing of the identities of the parties to the settlement agreement are set forth above in connection with the motion to support confidentiality designation.

 The Court also finds that Plaintiffs have demonstrated that they have an overriding interest that supports sealing the Sealed Documents, and that a substantial probability exists that the overriding interest will be prejudiced absent sealing. Plaintiffs also note that if the Sealed Documents are not sealed then the relief that Plaintiffs seek by way of their motion to support confidentiality designation would be rendered moot.  

In addition, Plaintiffs assert that the proposed sealing is narrowly tailored, as Plaintiffs have only redacted portions of the Memorandum of Points and Authorities and Exhibit 2 to

Ms. Schweitzer’s declaration. Plaintiffs assert that this approach represents the least restrictive means of ensuring that the right to confidentiality of the settlement agreements is preserved. Defendant contends that the proposed sealing is not narrowly tailored and is not the least restrictive means of achieving the overriding interest because Plaintiffs seek to seal the existence of the settlement agreement, not just its content. Plaintiffs respond to this point in their reply, and

the issue pertaining to the sealing of the identities of the parties to the settlement agreement is discussed above. The Court finds that Plaintiffs have demonstrated that the proposed sealing is narrowly tailored and that no less restrictive means exist to achieve the overriding interest.

Based on the foregoing, the Court finds that Plaintiffs have demonstrated good cause to seal the Sealed Documents.

            Plaintiffs also move to file under seal excerpts of their consolidated reply in support of Plaintiffs’ motion to support confidentiality designation and motion to file under seal records (the “Reply Excerpts”). Plaintiffs note that the reply includes a discussion of the subject settlement agreement and related deposition testimony. For the reasons discussed above in connection with Plaintiffs’ motion to file under seal records in support of motion to support confidentiality designation, the Court finds that Plaintiffs have also demonstrated that there exists an overriding interest to seal the Reply Excerpts, and that a substantial probability exists that the overriding interest will be prejudiced if the Reply Excerpts are not sealed.

Plaintiffs also indicate that they have taken the step of redacting the sensitive portions of the Reply while allowing the public access to the remainder, and thus assert that the proposed sealing order is narrowly tailored and is the least restrictive means of protecting Plaintiffs’ overriding interest. The Court agrees.

Based on the foregoing, the Court finds that Plaintiffs have demonstrated good cause to seal the Reply Excerpts.  

Defendant’s Motion to Seal

Defendant moves for an order sealing Defendant’s consolidated opposition to Plaintiffs’ motion to support confidentiality designation and motion to seal.

Defendant notes that on November 9, 2022, the Court continued the hearing on Plaintiffs’ instant motion to support confidentiality designation and motion to seal, and that the November 9, 2022 Order provides, inter alia, that “Defendant’s consolidated opposition to the motions contains redacted information. Defendant has not filed a motion to seal the redacted portions of the opposition. Pursuant to California Rules of Court, rule 2.551, subdivision (a), ‘[a] record must not be filed under seal without a court order.’” In his instant motion to seal, Defendant asserts that he “does not, in actuality, believe that his opposition warrants sealing. In fact, [Defendant] opposes sealing and contends that, under the Order and C.R.C. 2.551, the onus of requesting and obtaining any requisite sealing order remains firmly on Plaintiffs. Nonetheless, to comply with the Court’s previous ruling and to expedite resolution of the underlying sealing dispute, [Defendant] hereby requests leave to file his October 25, 2022 opposition conditionally under seal.” (Mot. at p. 3:11-16.)

In their nonopposition response to the motion, Plaintiffs note that “[t]he Sealed Opposition Documents include a detailed discussion of the settlement agreement and related testimony sought to be protected from public view,” and assert that the opposition documents should thus be filed under seal. (Plaintiffs’ Non-Opposition Response at p. 1:8-16.) For the reasons discussed above in connection with Plaintiffs’ motion to file under seal records in support of motion to support confidentiality designation, the Court finds that there also exists an overriding interest to seal Defendant’s consolidated opposition, and that a substantial probability exists that the overriding interest will be prejudiced if the opposition is not sealed.

The Court also agrees with Plaintiffs that the proposed sealing is narrowly tailored and is the least restrictive means of protecting Plaintiffs’ overriding interest, as the proposed sealing is to redact only those sensitive portions of the consolidated opposition. Plaintiffs also note that the relief Plaintiffs seek by way of their motion to support confidentiality designation would be mooted if the sensitive portions of Defendant’s consolidated opposition are not sealed.    

Based on the foregoing, the Court finds that good cause has been shown to seal the redacted portions of Defendant’s consolidated opposition.

Conclusion

Based on the foregoing, the Court grants Plaintiffs’ motion to support confidentiality designation, including the identities of the parties to the settlement agreement. 

The Court grants Plaintiff’s motion to file under seal records in support of motion to support confidentiality designation. The Court grants Plaintiff’s motion to file under seal records in support of reply motion to support confidentiality designation. The Court grants Defendant’s motion to seal the redacted portions of Defendant’s consolidated opposition.  

Pursuant to California Rules of Court, rule 2.551, subdivision (e), the Court directs the clerk to file this order, maintain the records ordered sealed in a secure manner, and clearly identify the records as sealed by this order. The Court further orders that no persons other than the Court and Court staff, as necessary, are authorized to inspect the sealed records.

Plaintiffs are ordered to give notice of this order.

DATED:  March 14, 2023                              ________________________________

Hon. Teresa A. Beaudet

Judge, Los Angeles Superior Court