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Platypus Wear, Inc. v. United States Fidelity and Guaranty Co.

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA


October 15, 2010

PLATYPUS WEAR, INC., PLAINTIFF,
v.
UNITED STATES FIDELITY AND GUARANTY COMPANY, DEFENDANT.

The opinion of the court was delivered by: Hon. William V. Gallo U.S. Magistrate Judge

ORDER DENYING MOTION TO SEAL OR, ALTERNATIVELY, REDACT SETTLEMENT ) CONFERENCE TRANSCRIPT

(Doc. No. 21)

Defendant United States Fidelity & Guaranty Company (hereafter "Defendant"), has filed a Motion to Seal Or Alternatively, Redact Settlement Conference Transcript (hereafter "Motion"). Plaintiff Platypus Wear, Inc. (hereafter "Plaintiff"), has filed a Statement of Non-Opposition to Defendant's Motion. The Court, having reviewed Defendant's Motion and the transcript at issue, and GOOD CAUSE APPEARING, HEREBY DENIES Defendant's Motion.

I. PROCEDURAL HISTORY PERTAINING TO DEFENDANT'S MOTION

On July 15, 2010, the Court conducted a Settlement Conference in this matter.*fn1 At the Settlement Conference, the case settled. The terms of the settlement were placed on the record in open court.

On July 27, 2010, the official transcript of the terms of the settlement was filed with the Court.

On August 6, 2010, Plaintiff and Defendant filed a Joint Motion to Dismiss the Entire Action without prejudice. On August 10, 2010, the District Judge assigned to this case granted the Joint Motion to Dismiss. The Order Granting the Joint Motion to Dismiss did not reserve the Court's jurisdiction over the case.

On August 17, 2010, Defendant filed the Motion now before the Court. On August 24, 2010, Plaintiff filed a Non-Opposition to the Motion.

On September 15, 2010, Defendant filed a Motion to Amend the Dismissal in Order to Allow Ruling on Motion to Seal or Alternatively, Redact Settlement Conference Transcript. On October 8, 2010, the District Judge assigned to this case granted Defendant's Motion to Amend the Dismissal. The Court's October 8, 2010 Order states: "The Court retains jurisdiction and the case is reopened for the limited purpose of deciding Defendant's Motion to seal, or, in the alternative, redact settlement conference (transcript)."

Defendant seeks a Court order that the transcript recorded in open court containing the terms of the settlement be sealed or redacted in its entirety due to the confidential nature of the discussions at the settlement conference. To support this request, Defendant cites to the Notice of Early Neutral Evaluation Conference filed on January 28, 2010, that states "All (Early Neutral Evaluation) Conference discussions will be informal, off-the-record, privileged and confidential." Defendant also cites to the United States District Court, Southern District of California Local Rule*fn2 16.1.c.1.b., which states: "The (Early Neutral Evaluation) Conference will be informal, off-the-record, privileged and confidential." Further, Defendant cites to Local Rule 16.3.h., which states: "The Settlement Conference will be off-the-record, privileged and confidential, unless otherwise ordered by the Court."

II. ANALYSIS

The United States Supreme Court has acknowledged a common law right of access to court records in a civil proceeding. At the same time, the Supreme Court recognized that the right of access is not absolute. The Court stated that courts should consider "the interests advanced by the parties in light of the public interest and the duty of the courts. Hagestad v. Tragesser, 49 F.3d 1430, 1434 (9th Cir. 1995)[citing Nixon v. Warner Communications, Inc., 435 U.S. 589, 597-598, 602 (1978)].

The Ninth Circuit has held that the approach for determining whether the common law right of access should be overridden requires the court to start with a strong presumption in favor of access. Hagestad, 49 F.3d at 1434 [citing Valley Broadcasting v. United States District Court, 798 F.2d 1289 (9th Cir. 1986)]. ["The presumption of access may be overcome only 'on the basis of articulable facts known to the court, not on the basis of unsupported hypothesis or conjecture.'" Id. at 1293]. "The factors relevant to a determination of whether the strong presumption of access is overcome include the 'public interest in understanding the judicial process and whether disclosure of the material could result in improper use of the material for scandalous or libelous purposes or infringement upon trade secrets.'" Hagestad, 49 F.3d at 1434 [citing EEOC v. Erection Co., Inc., 900 F.2d 168, 170 (9th Cir. 1990)](emphasis added).

After the court takes the relevant factors into consideration, it must base its decision on a compelling reason and articulate the factual basis for its ruling. Pintos v. Pacific Credit Assn., 605 F.3d 665, 667-668 (9th Cir. 2010)[citing Valley Broadcasting, 798 F.2d at 1295; Kamakana v. City and County of Honolulu, 447 F.3d 1172, 1178 (9th Cir. 2006); Foltz v. State Farm Mut. Auto Ins. Co., 331 F.3d 1122, 1135-1136 (9th Cir. 2003)].

Here, Defendant fails to state reasons for its request to seal the transcript containing the terms of the settlement sufficient to override the "public('s) interest in understanding the judicial process." First, Defendant's citations to the Notice of Early Neutral Evaluation Conference and Local Rule 16.1.c.1.b. are inapposite. The settlement was reached after a settlement conference, not an Early Neutral Evaluation Conference. While the principle of "confidentiality" is applicable in both scenarios, it simply is inaccurate to cite to the rules of the Early Neutral Evaluation Conference to support Defendant's contention in this context.

Second, Defendant also cites to Local Rule 16.3 to support its Motion. Local Rule 16.3 provides rules regarding the conduct of settlement conferences in this Court. While Local Rule 16.3 states that the settlement conference will be off-the-record, privileged and confidential, Defendant misconstrues the Rule.

The Court sees a very distinct and important difference between maintaining the confidentiality of the actual discussions had in the settlement conference (absent a stipulation to the contrary) on one hand, and memorializing on the record in open court the terms of an agreed upon settlement on the other. The latter will not be confidential unless specific, articulable and compelling reasons justifying secrecy are made known to the Court before (or at least during) the on the record session. Afterwards is generally too late to make this showing.

Local Rule 16.3.d. specifically states: "The judge conducting the settlement conference may receive in camera communications from each party and its counsel, and must maintain such in confidence unless there is a stipulation to the contrary." Therefore, Local Rule 16.3 contemplates that the court may engage the parties separately and together in in camera settlement discussions which are to be kept confidential unless the party or attorney who engaged in the discussions with the judge allows the judge to disclose any part of those discussions to his/her opponent(s). The Local Rule does not state nor imply that once the settlement conference discussions are completed, and the terms of the settlement are placed on the record in open court, that the transcript containing the terms of the settlement be sealed or redacted. In practice, any party to a settlement may specifically request that the transcript be sealed when the terms of the settlement are placed on the record in open court. In fact, the confidentiality of settlement terms is often discussed with the judge who presided over the settlement discussions prior to placing the settlement terms on the record in open court.

Here, neither party discussed with the Court at any time during the settlement discussions, or prior to, during, or after the settlement terms were placed on the record in open court, that the terms of the settlement were to be confidential or that the transcript should be sealed for that, or any other, reason. In fact, it is the Court's recollection that the parties requested that the terms of the settlement be placed on the record with at least the implicit understanding that by doing so, the agreement would become a matter of public record. Therefore, the Court concludes that Defendant's citation to Local Rule 16.3 supports the "public interest in understanding the judicial process." Also, Defendant has not presented the Court with any facts by which it could conclude that public availability of the transcript will result in "improper use of the (transcript) for scandalous or libelous purposes or infringement of trade secrets." Nor does the Court's review of the discussions with the parties at the settlement conference, and an in camera review of the transcript, support such an assertion. Therefore, Defendant has failed to overcome the strong presumption of the right of access to the Court's records, which in this case is the transcript of the hearing in which the terms of the settlement of this action were placed on the record in open court.

Moreover, Ninth Circuit law supports the Court's settlement process, as used in this case. In Doi v. Halekulani Corp., 276 F.3d 1131, 1138 (9th Cir. 2002), a settlement of that action was negotiated in off-the-record discussions with the court. Thereafter, the parties announced in open court that the case had settled and recited the terms of the settlement. The court held that a settlement agreement announced on the record is binding even if a party has a "change of heart" after agreeing to its terms but before the terms are reduced to writing. See also Grimes v. Barber, 2009 WL 5062348 (N.D. Cal. 2009). Further, a qualification of the terms of a settlement agreement not stated when the terms of the settlement are placed on the record is unenforceable. WG Security Products v. Tyco International, Ltd., 306 Fed. Appx. 353, 2008 WL 5272759 (9th

Cir. 2008).

Here, Defendant seeks to insert, after-the-fact, a confidentiality provision into the parties' recitation of the terms of the settlement placed on the record in open court. Defendant's request is made after the terms of the settlement were placed on the record in open court, after the terms of the settlement were reduced to writing, and without mention of such a confidentiality provision during the private, off-the-record discussions with the Court, or at the time the settlement terms were placed on the record in open court. Even though Defendant's Motion is not opposed by Plaintiff, the Court views Defendant's request to have the transcript sealed or redacted to protect its confidentiality as a "change of heart" or a qualification to the terms of the settlement, after it agreed to the terms of the settlement and after the terms of the settlement were reduced to writing. See Grimes, supra, WG Security Products, supra.

As a result of the foregoing, Defendant's Motion is DENIED.


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