Childs v. San Diego Family Housing LLC

Opinion

1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 SOUTHERN DISTRICT OF CALIFORNIA 8 9 LENA CHILDS, DONALD CHILDS, and Case No.: 19cv2329 JM (MDD) T. CHILDS, a minor, 10 Plaintiffs, 11 v. 12 SAN DIEGO FAMILY HOUSING, LLC, ORDER GRANTING DEFENDANTS’ 13 LINCOLN MILITARY PROPERTY MOTION TO SEAL 14 MANAGEMENT, LP, and INDEPTH CORPORATION, 15 Defendants. 16 17 18 Defendants San Diego Family Housing, LLC (“SDFH”) and Lincoln Military 19 Property Management, LP (“Lincoln”) move the court to seal “excerpts from four 20 confidential and proprietary business documents.” (Doc. No. 18.) The court finds the 21 motion suitable for submission without oral argument in accordance with Civil Local Rule 22 7.1(d)(1). For the below reasons, the motion is GRANTED. 23 I. BACKGROUND 24 Plaintiffs Lena Childs, Donald Childs, and T. Childs1 (“Plaintiffs”) claim they 25 suffered injury as a result of being exposed to mold while residing in military housing 26 27 28 1 1 located within Naval Amphibious Base Coronado. (Doc. No. 1-2 ¶¶ 15-18.) Defendants 2 state that SDFH is a “public-private venture (‘PPV’)” between the United States Navy and 3 Lincoln/Clark San Diego, LLC, which was formed under the Military Housing 4 Privatization Initiative, 10 U.S.C. §§ 2871-85. (Doc. No. 18-1 at 2.) 5 On May 2, 2019, Plaintiffs filed their initial Complaint in Superior Court for the 6 County of San Diego, which contained claims against Defendants for negligence, private 7 nuisance, breach of contract, breach of the implied warranty of habitability, breach of the 8 implied covenant of peaceful and quiet enjoyment, and constructive eviction. (Doc. No. 9 1-2 at 5.) On December 12, 2019, Defendants removed the case to federal court on the 10 basis that: (1) the events alleged in the Complaint occurred within a federal enclave; 11 (2) SDFH is a federal agency; and (3) at all relevant times, SDFH and Lincoln were acting 12 under federal officers. (Doc. No. 1 ¶ 3.) Following a February 12, 2020 early neutral 13 evaluation and case management conference, the magistrate judge ordered Defendants to 14 file their motion to dismiss based on derivative sovereign immunity by April 10, 2020. 15 (Doc. No. 16.) Additionally, the magistrate judge allowed the parties to engage in 16 jurisdictional discovery for 75 days after the filing of the motion to dismiss. The magistrate 17 judge further ordered that Plaintiffs’ response to the motion to dismiss was due 15 days 18 after the close of the 75-day discovery period, and Defendants’ reply was due seven days 19 after that. On April 10, 2020, Defendants filed the motion to dismiss, (Doc. No. 19), as 20 well as the instant motion to file documents under seal, (Doc. No. 18). On April 13, 2020, 21 the magistrate judge issued a protective order, to which the parties stipulated, limiting the 22 use and disclosure of information deemed confidential by the parties. (Doc. No. 18-1.) 23 II. LEGAL STANDARDS 24 “[T]he courts of this country recognize a general right to inspect and copy public 25 records and documents, including judicial records and documents.” Nixon v. Warner 26 Commc’ns, Inc., 435 U.S. 589, 597 (1978). “Unless a particular court record is one 27 ‘traditionally kept secret,’ a ‘strong presumption in favor of access’ is the starting point.” 28 Kamakana v. City & Cty. of Honolulu, 447 F.3d 1172, 1178 (9th Cir. 2006) (citing Foltz v. 1 State Farm Mut. Auto Ins. Co., 331 F.3d 1122, 1135 (9th Cir. 2003)). “The presumption 2 of access is based on the need for federal courts, although independent – indeed, 3 particularly because they are independent – to have a measure of accountability and for the 4 public to have confidence in the administration of justice.” Ctr. for Auto Safety v. Chrysler 5 Grp., LLC, 809 F.3d 1092, 1096 (9th Cir. 2016) (internal quotation marks and citation 6 omitted). “The common law right of access, however, is not absolute and can be overridden 7 given sufficiently compelling reasons for doing so.” Foltz, 331 F.3d at 1135 (citation 8 omitted). In deciding whether to seal records, courts should consider “the public interest 9 in understanding the judicial process and whether disclosure of the material could result in 10 improper use of the material for scandalous or libelous purposes or infringement upon trade 11 secrets[.]” Id. When the underlying motion is more than tangentially related to the merits, 12 the “compelling reasons” standard applies. Chrysler, 809 F.3d at 1096-98. The party 13 seeking to seal records bears the burden of overcoming the presumption of access. Foltz, 14 331 F.3d at 1135. 15 A trial court has broad discretion to permit sealing of court documents for the 16 protection of “a trade secret or other confidential research, development, or commercial 17 information.” See Fed. R. Civ. P. 26(c)(1)(G); see also Fed. Trade Comm’n v. Qualcomm 18 Inc., No. 17-CV-00220-LHK, 2019 WL 95922, at *2 (N.D. Cal. Jan. 3, 2019). “A trade 19 secret may consist of any formula, pattern, device or compilation of information which is 20 used in one’s business, and which gives him an opportunity to obtain an advantage over 21 competitors who do not know or use it.” Clark v. Bunker, 453 F.2d 1006, 1009 (9th Cir. 22 1972) (quoting Restatement (First) of Torts § 757 cmt. b). “Generally [a trade secret] 23 relates to the production of goods . . . . It may, however, relate to the sale of goods or to 24 other operations in the business[.]” Id. Sealing may also be justified to prevent judicial 25 documents from being used “as sources of business information that might harm a litigant’s 26 competitive standing.” Nixon, 435 U.S. at 598. 27 28 1 III. DISCUSSION 2 In support of their motion to dismiss, Defendants desire to seal “excerpts from four 3 confidential documents” because “these documents contain confidential and proprietary 4 information, which the Defendants can only submit under seal to protect certain proprietary 5 business information, confidential financial discussions and information, and [because] the 6 agreements involve confidential terms with the United States Government and/or United 7 States government-owned entities.” (Doc. No. 18-1 at 4.) The documents consist of: 8 (1) SDFH’s operating agreement with the United States; (2) a ground lease between the 9 SDFH, the Navy, and the United States; (3) a property management agreement between 10 SDFH and Lincoln; and (4) a water intrusion/mold operations and maintenance plan. 11 Defendants argue that a compelling reason to seal the documents exists because the 12 documents contain confidential and proprietary trade secrets that would harm their 13 competitive standing. (Id. at 5-6.) In support of this argument, Defendants state: (1) the 14 operating agreement and ground lease were marked “confidential” by the contracting 15 parties, which includes the United States; (2) the operating agreement and ground lease 16 contain “capital contributions, financial information, business structures, financial 17 arrangements, tax issues, operating expenses, and various management plans;” (3) the 18 documents “disclose how these businesses are structured and run, and how they are 19 financed, and how they execute on their government contracts;” (4) two of the documents 20 contain “comprehensive proprietary management plans;” (5) the Navy is a party to two of 21 the agreements; (6) one of the agreements involves a company in which the Navy has a 22 “proprietary interest;” (7) the fourth document was “prepared by and for the Navy’s public- 23 private venture in coordination with the Navy;” (8) “SDFH and Lincoln are required to 24 protect these documents, limit their disclosure, and when said documents are disclosed, it 25 is always under an executed [p]rotective [o]rder;” (9) the disclosure of the documents 26 “would allow a competitor PPV or military property management company to obtain a 27 significant advantage over SDFH and Lincoln;” and (10) “[t]he federal government has a 28 1 proprietary interest in these documents and would not want their terms and agreements 2 exposed[.]” (Id. at 7.) 3 As pointed out by Defendants, courts in the Ninth Circuit have found comparable 4 types information to constitute trade secrets worthy of protection. See, e.g., Qualcomm, 5 2019 WL 95922, at *3 (“[T]o the extent that the instant motion seeks to seal information 6 that, if published, may harm Qualcomm’s or third parties’ competitive standing and 7 divulges terms of confidential contracts, contract negotiations, or trade secrets, the Court 8 agrees with the parties that compelling reasons exist to seal this information.”); Velasco v. 9 Chrysler Grp. LLC, Case No. CV 13-08080 DDP (VBK), 2017 WL 445241, at *2 10 (C.D. Cal. Jan. 30, 2017) (“[D]istrict courts in this Circuit have sealed records containing 11 ‘information about proprietary business operations, a company’s business model or 12 agreements with clients,’ ‘internal policies and strategies,’ and ‘manufacturing 13 information[.]’”) (internal citations omitted); Selling Source, LLC v. Red River Ventures, 14 LLC, No. 2:09-cv-01491-JCM-GWF, 2011 WL 1630338, at *6 (D. Nev. Apr. 29, 2011) 15 (“Where the material includes information about proprietary business operations, a 16 company’s business model or agreements with clients, there are compelling reasons to seal 17 the material because possible infringement of trade secrets outweighs the general public 18 interest in understanding the judicial process.”). 19 Based on the representations made by Defendants, the information they seek to seal 20 includes trade secrets. Although Defendants do not explain exactly how their competitive 21 advantage would be harmed by publicly releasing the records, it is reasonable to conclude 22 that the Defendants’ formula for successfully obtaining and managing government 23 contracts is information with some proprietary value. The federal government’s choice to 24 deem the records “confidential” is further support for the appropriateness of sealing the 25 documents at this point in the litigation. The court may, however, reexamine the necessity 26 of sealing the documents as the litigation develops. Additionally, portions of the 27 documents currently lodged with the court are heavily redacted in a manner that 28 1 ||undermines the courts’ ability to assess its jurisdiction, and will likely interfere with the 2 ||court’s ability to decide Defendants’ pending motion to dismiss. 3 IV. CONCLUSION 4 For the foregoing reasons, Defendants’ Motion to Seal is GRANTED. The Clerk 5 || of the Court is directed to file the redacted documents currently lodged with the court under 6 ||seal. (See Doc. No. 20.) Additionally, on or before May 21, 2020, Defendants shall 7 || lodge unredacted versions of the documents, which the clerk is directed to also file 8 || under seal. 9 IT IS SO ORDERED. 10 ||DATED: May 14, 2020 He Mf Yhicoly, _ Y T. ILLER ited States District Judge 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28