In re Acadia Pharmaceuticals Inc. Stockholder Derivative Litigation

Opinion

7 8 UNITED STATES DISTRICT COURT 9 FOR THE SOUTHERN DISTRICT OF CALIFORNIA 10 TIFFANY BARNEY, derivatively on Case No. 20-cv-00238-BAS-JLB 11 behalf of ACADIA PHARMACEUTICALS INC., ORDER: 12 Plaintiff, (1) DENYING WITHOUT 13 PREJUDICE PLAINTIFF’S v. MOTION TO SEAL [ECF No. 3]; 14 STEPHEN R. DAVIS, et al., AND 15 Defendants. (2) GRANTING JOINT MOTION 16 TO CONTINUE STAY PROCEEDINGS [ECF No. 10] 17 18 On February 7, 2020, Plaintiff filed a verified stockholder derivative complaint for 19 violations of securities law, breach of fiduciary duty, waste of corporate assets, and unjust 20 enrichment (“Complaint”). (ECF No. 1.) The Court addresses Plaintiff’s Motion to Seal 21 (ECF No. 3) and the parties’ Joint Motion to Stay Proceedings (ECF No. 10) below. 22 I. MOTION TO SEAL 23 Plaintiff has moved to file the Complaint under seal on the basis that Defendant 24 ACADIA Pharmaceuticals, Inc. (“ACADIA”) previously represented that certain 25 information used in the Complaint constituted confidential business information. (Mot. 26 to Seal, ECF No. 3.) Plaintiff states that pursuant to a July 19, 2019 Confidentiality 27 Agreement, she is required to request permission of the Court to file the Complaint under 28 seal. (Id.) 1 “[T]he courts of this country recognize a general right to inspect and copy public 2 records and documents, including judicial records and documents.” Nixon v. Warner 3 Commc’ns, Inc., 435 U.S. 589, 597 (1978). “Unless a particular court record is one 4 ‘traditionally kept secret,’ a ‘strong presumption in favor of access’ is the starting point.” 5 Kamakana v. City & Cty. of Honolulu, 447 F.3d 1172, 1178 (9th Cir. 2006) (citing Foltz 6 v. State Farm Mut. Auto Ins. Co., 331 F.3d 1122, 1135 (9th Cir. 2003)). “The presumption 7 of access is ‘based on the need for federal courts, although independent—indeed, 8 particularly because they are independent—to have a measure of accountability and for the 9 public to have confidence in the administration of justice.” Ctr. for Auto Safety v. Chrysler 10 Grp., LLC, 809 F.3d 1092, 1096 (9th Cir. 2016) (quoting United States v. Amodeo, 71 F.3d 11 1044, 1048 (2d Cir. 1995)). A party seeking to seal a judicial record bears the burden of 12 overcoming the strong presumption of access. Foltz, 331 F.3d at 1135. The showing 13 required to meet this burden depends upon whether the documents to be sealed relate to a 14 motion that is “more than tangentially related to the merits of the case.” Ctr. for Auto 15 Safety, 809 F.3d at 1102. When the underlying motion is more than tangentially related to 16 the merits, the “compelling reasons” standard applies. Id. at 1096–98. When the 17 underlying motion does not surpass the tangential relevance threshold, the “good cause” 18 standard applies. Id. 19 However, although complaints are more than tangentially related to the merits of a 20 case, see Towers v. Iger, No. 15-CV-04609-BLF, 2016 WL 6427898, at *2 (N.D. Cal. 21 Oct. 31, 2016), the parties have not proffered any compelling reason for prohibiting 22 disclosure of this information to the public. Plaintiff’s vague reference to a confidentiality 23 agreement is not sufficient, by itself, to meet the compelling reasons standard. See 24 Mohamed v. Kellogg Co., No. 14-CV-2449-L-MDD, 2018 WL 4489622, at *2 (S.D. Cal. 25 Sept. 18, 2018). Instead, the parties must provide a factual basis for a request to seal to 26 satisfy the burden. See In re Qualcomm Litig., No. 3:17-CV-0108-GPC-MDD, 2017 WL 27 5176922, at *2 (S.D. Cal. Nov. 8, 2017) (finding compelling reasons to seal where the 28 parties, through declarations from company officers, “provide[d] the Court with a factual 1 basis for their claims that disclosing information subject to confidentiality agreements 2 would harm the parties’ respective competition standings”). 3 Thus, the Court DENIES WITHOUT PREJUDICE Plaintiffs’ Motion to Seal. 4 (ECF No. 3.) The party seeking to seal the unredacted portions of the Complaint may file 5 an amended motion that more fully addresses the “compelling reasons” supporting sealing. 6 However, as noted below, the Court is granting the parties’ Joint Motion to stay this action. 7 Thus, if the parties request to lift the stay in accordance with the procedures stipulated to 8 below, any amended motion to seal shall be filed within 7 days after an order lifting stay 9 is entered into by this Court. The unredacted Complaint shall remain under seal in the 10 interim. 11 II. JOINT MOTION TO CONTINUE STAY 12 On February 19, 2020, this Court stayed the instant case pending resolution of a 13 motion to dismiss in a related securities class action, In re Acadia Pharmaceuticals Inc. 14 Securities Litigation, Case No. 3:18-cv1647-AJB-BGS. (ECF No. 6.) Pursuant to the 15 Court’s order, the parties have submitted a status report informing the Court that the issues 16 in the related case are still pending and request a continuance of the stay as a result. (ECF 17 No. 10.) 18 Good cause appearing, the Court GRANTS the Parties’ Joint Motion to Continue 19 to Stay Proceedings in this case pending resolution of the motion to dismiss in the related 20 securities class action. Further, the Court ORDERS as follows: 21 1. All proceedings in this Action, including any obligation to respond to the 22 complaint or any amended complaint, and all discovery and disclosure obligations under 23 the applicable local and federal rules, are hereby stayed until (1) the Defendants file an 24 answer in the Securities Class Action, or (2) the Securities Class Action is dismissed with 25 prejudice and all related appeals have been exhausted, or (3) any Party has given a fifteen 26 (15) day written notice to all counsel of record via email that they no longer consent to the 27 voluntary stay of this Action. If any of these events occur, then within forty-five (45) days 28 of the event, the Parties will meet and confer to agree upon a schedule for proceedings in 1 || the action and file a stipulation regarding the same with the Court. 2 2. Defendants will promptly notify Plaintiff should any other shareholder make 3 litigation or inspection demand or if they become aware of any additional derivative 4 || lawsuits filed in any forum that allege the same or similar misconduct as that alleged in 5 || this Action. 6 3. Notwithstanding this voluntary stay of this Action, Plaintiff may file an 7 |}amended complaint. Defendants shall not be required to move, answer, plead, or otherwise 8 respond to the Complaint (or any amended complaint) during the pendency of the stay of 9 || proceedings. 10 4. The composition of ACADIA's Board of Directors that will be considered in 11 |}connection with determining whether Plaintiff's complaint, amended or otherwise, has 12 adequately pled that a pre-litigation demand on the Company's Board of Directors would 13 || have been futile shall be the composition of the Board of Directors as of February 7, 2020, 14 || the date this action was initiated. 15 5. By entering into this stipulation, the Parties reserve all of their respective 16 rights, claims, and defenses in this Action, and no part of this stipulation shall be construed 17 a waiver of any rights, claims, or defenses. 18 IT IS SO ORDERED. 19 , fl ) J 20 || DATED: July 21, 2020 (if i i A (Haghan 6 21 United States District Judge 22 23 24 25 26 27 28