Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 ZEST IP HOLDINGS, LLC, and ZEST Case No.: 3:26-cv-2869-JES-VET ANCHORS, LLC, 12 ORDER GRANTING IN PART AND Plaintiffs, 13 DENYING IN PART PLAINTIFF’S v. MOTION FOR LEAVE TO FILE 14 DOCUMENT UNDER SEAL TERRATS MEDICAL SOCIEDAD 15 LIMITADA, 16 Defendant. 17 18 19 Before the Court is Plaintiffs’ ZEST IP HOLDINGS, LLC, and ZEST ANCHORS, 20 LLC, (collectively “Zest”) Motion for Leave to File the Complaint Under Seal (“Motion”). 21 ECF No. 2. For the reasons set forth below, the Court GRANTS IN PART AND DENIES 22 IN PART the Motion. 23 // 24 // 25 // 26 // 27 // 28 // 1 I. BACKGROUND 2 Plaintiffs bring this action against Defendant Terrats Medical Sociedad Limitada 3 (“Defendant” or “Terrats”), based on Terrats’ alleged breach of a Settlement Agreement 4 the parties entered into on April 3, 2024 (the “Settlement Agreement”). See Compl. ¶¶ 1– 5 4. The Settlement Agreement resolved prior trademark and trade dress litigation between 6 the parties, Zest Anchors, LLC v. Geryon Ventures, LLC, 615 F. Supp. 3d 1206 (S.D. Cal. 7 2022), aff'd in part, rev'd in part and remanded, No. 22-55704, 2023 WL 2783175 (9th 8 Cir. Apr. 5, 2023). 9 II. LEGAL STANDARD 10 Courts in this country have long recognized a presumptive right of public access to 11 court records. Nixon v. Warner Commc’ns, Inc., 435 U.S. 589, 597 (1978). This 12 presumption is “based on the need for federal courts, although independent—indeed, 13 particularly because they are independent—to have a measure of accountability and for the 14 public to have confidence in the administration of justice.” Ctr. for Auto Safety v. Chrysler 15 Grp., LLC, 809 F.3d 1092, 1096 (9th Cir. 2016) (quoting United States v. Amodeo, 71 F.3d 16 1044, 1048 (2d Cir. 1995)). 17 To seal records that attached to motions more than tangentially related to the merits 18 of the case, the moving party must meet the “compelling reasons” standard. Kamakana v. 19 City & Cnty. of Honolulu, 447 F.3d 1172, 1183 (9th Cir. 2006) (citing Foltz v. State Farm 20 Mut. Auto. Ins. Co., 331 F.3d 1122, 1135 (9th Cir. 2003). Under this standard, a court must 21 find “a compelling reason and articulate[s] the factual basis for its ruling, without relying 22 on hypothesis or conjecture.” Ctr. for Auto Safety, 809 F.3d at 1097 (quoting Kamakana, 23 447 F.3d at 1179). For records attached to motions not more than tangentially related to 24 the merits, the lesser “good cause” standard applies. Id. at 1101. 25 Requests to seal must also be “narrowly tailored” to remove from public view only 26 the content that warrants protection. Harper v. Nevada Property 1, LLC, 552 F. Supp. 3d 27 1033, 1040–41 (D. Nev. 2021). Courts must order the filing of redacted versions of 28 confidential information, while leaving meaningful information available to the public, 1 when possible, rather than sealing documents in their entirety. Id. (citing Foltz v. State 2 Farm Mut. Auto. Ins. Co., 331 F.3d 1122, 1137 (9th Cir. 2003)). 3 Within the context of settlement agreements, the mere existence of a confidentiality 4 provision does not constitute a compelling reason to seal. Helix Environmental Planning, 5 Inc. v. Helix Environmental & Strategic Solutions, No. 3:18-cv-02000-AJB-AHG, 2021 6 WL 120829, at *1 (S.D. Cal. Jan. 13, 2021). While parties to a settlement agreement would 7 prefer to keep its terms confidential, “once they turn to the federal court to resolve their 8 disputes … the public administration of justice demands transparency.” Avocados Plus Inc. 9 v. Freska Produce Int’l LLC, No. 2:19-cv-06451-RGK-JC, 2019 WL 12345580, at *2 10 (C.D. Cal. Oct. 8, 2019) (quoting Polaris Innovations Ltd. v. Kingston Tech. Co., No. SA 11 CV 16-00300-CJC(RAOx), 2017 WL 2806897, at *7 (C.D. Cal. Mar. 30, 2017)). But 12 courts also recognize the general benefits of keeping settlement terms confidential, when 13 feasible, as confidentiality encourages parties to resolve disputes. See U.S. E.E.O.C. v. 14 ABM Indus. Inc., No. 1:07-cv-01428 LJO JLT, 2010 WL 582049, at *2 (E.D. Cal. Feb. 12, 15 2010) (citing United States v. Glens Falls Newspapers, Inc., 160 F.3d 853, 858 (2d Cir. 16 1998)). 17 Courts must, therefore, balance the parties’ need for secrecy against the public’s 18 interest in transparency, including its interest in “understanding the judicial process.” 19 Pintos v. Pacific Creditors Ass’n, 605 F.3d 665, 679 & n.6 (9th Cir. 2010). Some courts 20 have adopted a middle approach in cases involving motions to enforce a settlement, 21 keeping under seal only those settlement terms that are irrelevant to the issues presented, 22 while disclosing the terms pertinent to the motion. See United States ex rel. Lesnik v. 23 Eisenmann SE, No. 16-cv-01120-LHK, 2021 WL 2092944, at *3 (N.D. Cal. May 11, 24 2021); Pizza v. Fin. Indus. Regul. Auth., Inc., No. 13-cv-0688 MMC (NC), 2015 WL 25 1383142, at *2 (N.D. Cal. Mar. 19, 2015). 26 // 27 // 28 // 1 III. DISCUSSION 2 A complaint is the foundation of a civil lawsuit and is, therefore, more than 3 tangentially related to the merits of the action. Thus, the compelling reasons applies. See 4 Williams & Cochrane, LLP v. Quechan Tribe of the Fort Yuma Indian Reservation, No. 5 3:17-cv-01436-GPC-MDD, 2017 WL 7362744, at *1–2 (S.D. Cal. Nov. 7, 2017); Wasito 6 v. City of San Diego, No. 19-CV-2395 JLS (JLB), 2019 WL 6877554, at *1 (S.D. Cal. Dec. 7 16, 2019). The Court addresses each proposed redaction in turn. 8 A. Granted Redactions 9 The Court finds that Plaintiffs have established compelling reasons to seal 10 paragraphs 9, 21–25, 27, and 33 of the Complaint. See Compl. ¶¶ 9, 21–25, 27, 33; Herbert 11 Decl. ¶ 3. These paragraphs disclose specific, confidential terms of the Settlement 12 Agreement. Namely, financial obligations, detailed product-specific restrictions and 13 commercialization permissions negotiated between the parties, the precise scope of mutual 14 releases, the conditions attached thereto, and the parties’ specific performance obligations. 15 Publicly disclosing these terms would provide competitors with concrete insight into the 16 specific concessions each side made and the constraints each party accepted, which could 17 readily be exploited by competitors in their own contract negotiations. This constitutes a 18 factual, non-speculative basis for sealing that goes well beyond the mere existence of a 19 confidentiality provision. But see Helix Environmental Planning, 2021 WL 120829, at *1. 20 The requested redactions are also narrowly tailored. The surrounding paragraphs that 21 will remain publicly available fully disclose the nature of the Settlement Agreement, the 22 prior litigation it resolved, the general categories of obligations it imposed, and the alleged 23 breach at the heart of this action. See Compl. ¶¶ 1–8, 10–12, 14–20, 26, 28–32. Sealing the 24 specific financial and operational details within these paragraphs strikes the appropriate 25 balance between the public’s interest in disclosure and the parties’ legitimate interest in 26 protecting sensitive information. See Lesnik, 2021 WL 2092944, at *3. 27 // 28 // 1 B. Denied Redactions 2 The Court denies Plaintiffs’ Motion as to paragraphs 13 and 26, the text in paragraph 3 39 through and including the phrase “the Settlement Agreement required it to do,” and 4 paragraph (c) of the Prayer for Relief. Plaintiffs have not met their burden of demonstrating 5 a compelling reason to seal this material. 6 1. Paragraph 13 7 Paragraph 13 of the Complaint describes certain venue-related terms of the 8 Settlement Agreement. See Compl. ¶ 13. The surrounding, unredacted paragraphs, 9 collectively address the Court’s jurisdiction and venue over this action, including Terrats’ 10 express consent to jurisdiction and venue in this Court under the Settlement Agreement. 11 See id. ¶¶ 9–14. Read in context, the specific language Plaintiffs seek to redact in paragraph 12 13 does not disclose anything that is not already apparent or readily inferrable from the 13 surrounding unredacted text. Where the public record already makes plain the substance of 14 what a party seeks to conceal, sealing is not warranted. See Harper, 552 F. Supp. 3d at 15 1040–41; Wasito, 2019 WL 6877554, at *2. 16 2. Paragraph 26 17 Paragraph 26 of the Complaint describes a fee-shifting provision in the Settlement 18 Agreement entitling the prevailing party in any litigation to enforce or interpret the 19 agreement to recover its costs and attorneys’ fees. See Compl. ¶ 26. Fee-shifting clauses of 20 this type are standard features of commercial settlement agreements. Their disclosure 21 provides competitors with no meaningful insight into the specific business operations, 22 economic position, or strategic priorities of either party. As a result, a competitor armed 23 with this knowledge could not gain a material negotiating advantage. Thus, the Motion is 24 denied with respect to this paragraph. 25 3. Paragraph 39 in Part 26 Paragraph 39 of the Complaint sets forth Zest’s performance of its obligations under 27 the Settlement Agreement in support of the breach of contract claim. See Compl. ¶ 39. The 28 text through and including the phrase “the Settlement Agreement required it to do” 1 describes in general terms that Zest performed its contractual obligations, without reference 2 to the specific terms underlying that performance. That general description does not 3 disclose sensitive commercial information and is directly relevant to a claim element the 4 public has an interest in understanding. The text following that phrase, however, describes 5 the specific nature of Zest’s performance obligations and warrants protection for the same 6 reasons supporting the sealing of paragraphs 21–25 and 27. Accordingly, the Motion is 7 denied as to the text through the phrase “the Settlement Agreement required it to do,” and 8 granted as to all text in paragraph 39 following that phrase. See Harper, 552 F. Supp. 3d at 9 1040–41. 10 4. Prayer for Relief, Paragraph (c) 11 Paragraph (c) of the Prayer for Relief seeks an award of attorneys’ fees and costs 12 pursuant to the Settlement Agreement and California law. See Compl., Prayer for Relief ¶ 13 (c). For the same reasons that sealing paragraph 26 is unwarranted, sealing paragraph (c) 14 of the Prayer for Relief is also not justified. A request for fees pursuant to a contractual 15 fee-shifting clause is a standard form of relief in commercial breach of contract actions and 16 discloses nothing about the specific, sensitive terms of the Settlement Agreement that 17 would provide competitors with any meaningful negotiating advantage. See Helix 18 Environmental Planning, 2021 WL 120829, at *1. 19 IV. CONCLUSION 20 For the foregoing reasons, the Court GRANTS IN PART AND DENIES IN PART 21 Plaintiffs’ Motion as follows: 22 1. The Motion is GRANTED as to paragraphs 9, 21–25, 27, and 33 of the 23 Complaint, and as to the text in paragraph 39 following the phrase “the 24 Settlement Agreement required it to do.” 25 2. The Clerk of Court is DIRECTED to file under seal the unredacted 26 Complaint lodged with the Court. 27 // 28 // 1 3. The Motion is DENIED as to paragraph 13, paragraph 26, the text in 2 paragraph 39 through and including the phrase “the Settlement 3 Agreement required it to do,” and paragraph (c) of the Prayer for Relief. 4 4. Within fourteen (14) days of this Order, Plaintiffs SHALL FILE a 5 revised redacted version of the Complaint, that 1s consistent with this 6 Order, on the public docket. 7 IT IS SO ORDERED. 8 Dated: May 26, 2026 10 Honorable James E. Simmons Jr. 11 United States District Judge 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28