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Bt Collective, A California Non-Profit v. Ip Holdings

November 23, 2011

BT COLLECTIVE, A CALIFORNIA NON-PROFIT
MUTUAL BENEFIT CORPORATION, ON BEHALF OF ITSELF AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,
PLAINTIFF,
v.
IP HOLDINGS, LLC, A WASHINGTON LIMITED LIABILITY COMPANY, AND DOES 1 TO 100 INCLUSIVE, DEFENDANTS.



ORDER DENYING JOINT MOTION TO SEAL MOTION TO DISMISS

I. Introduction

BT Collective, which in 2009 grew and distributed marijuana for medical use, has moved to seal Sunlight Supply's motion to dismiss its product liability complaint, as well as supporting exhibits, because the documents include deposition testimony of BT Collective's principals that exposes violations of the federal Controlled Substances Act. Sunlight Supply initially joined BT Collective's motion to seal, but now opposes it. Earlier in the litigation, Magistrate Judge Gallo entered protective orders barring the disclosure of the deposition testimony. A subsidiary question is whether those protective orders were legitimate in the first place. Although Sunlight Supply agreed to the protective orders at the time, it supports the Court vacating them now. The parties have briefed both questions.

This Court is inclined to pass on the legitimacy of the protective orders at this point. No party has moved to modify them, and BT Collective's principals would likely not have provided potentially incriminating deposition testimony had the protective orders not been in place. But more to the point, the Court doesn't need to consider the legitimacy of the protective orders because sealing judicial records nevertheless demands an independent justification beyond the existence of a protective order that covers them. In other words, the mere fact that discovered material is subject to a protective order does not mean it must be sealed when filed with the Court. See Kamakana v. City and County of Honolulu, 447 F.3d 1172, 1180 (9th Cir. 2006); Foltz v. State Farm Mut. Auto. Ins. Co., 331 F.3d 1122, 1134 (9th Cir. 2003). Indeed, district courts routinely decline to seal documents when the sole basis for the request is a protective order that covers them. See, e.g., Stone v. Advance America, 2011 WL 662972 at *1 (S.D. Cal. Feb. 11, 2011); Bain v. AstraZeneca, 2011 WL 482767 at *1 (N.D. Cal. Feb. 7, 2011); Hershey Co. v. Promotion in Motion, Inc., 2010 WL 1812593 at *3 (D.N.J. May 4, 2010). A case relied on by BT Collective to defend the protective orders makes this important point. See Hobley v. Chicago Police Commander Burge, 225 F.R.D. 221, 224 (N.D. Ill. 2004) (emphasizing distinction "between materials generated by pretrial discovery and materials that are in the public record because they form part of the judicial decision-making process").

It's worth noting, too, that the parties' first joint motion for a protective order requested that "any portions of the deposition transcript that are filed or otherwise submitted . . . be filed or otherwise submitted under seal," but Judge Gallo declined to include such a provision in the protective order that he subsequently entered. (See Dkt. Nos. 15, 17.) That, presumably, is why his first order was captioned "Order Granting In Part and Denying In Part Joint Motion for Protective Order." The parties' second joint motion for a protective order did not even request a sealing provision. (See Dkt. No. 25.) As a result, the protective orders merely provide that "only the parties to this action, their attorneys of record, their expert witnesses, and any other persons ordered by the Court shall be permitted access to and use of the transcript of [the principal's] deposition." (Dkt. No. 17 at ¶ 3; Dkt. No. 25 at ¶ 5.)*fn1

II. The Law

Subject to a couple of exceptions that are inapplicable here, judicial records are presumptively open to public inspection. Pintos v. Pac. Creditors Ass'n, 605 F.3d 665, 678 (9th Cir. 2010); Kamakana, 447 F.3d at 1178; Foltz, 331 F.3d at 1134-35; Phillips v. Gen. Motors Corp., 307 F.3d 1206, 1213 (9th Cir. 2002). This presumption applies to pleadings filed with the Court, obviously, and it extends to discovery material attached to those pleadings. Foltz, 331 F.3dat 1134. The presumption doesn't detach, either, just because the material is subject to a protective order. Id. at 1136. See also Kamakana, 447 F.3d at 1179.

A request to seal judicial records offends the presumption in favor of access, and to overcome it a party "must show that 'compelling reasons supported by specific factual findings . . . outweigh the general history of access and the public policies favoring disclosure.'" Pintos, 605 F.3d at 678 (quoting Kamakana, 447 F.3d at 1178--79). Compelling reasons generally include the use of the records for an improper purpose, "such as . . . to gratify private spite, promote public scandal, circulate libelous statements, or release trade secrets." Kamakana, 447 F.3d at 1179. Avoiding embarrassment or incrimination, however, is not a compelling reason to seal judicial records. Id. (citing Foltz, 331 F.3d at 1136).

A compelling reason is not required, however, to seal nondispositive motions. Those motions, the Ninth Circuit has held, are often unrelated to the underlying causes of action in a case and the public has a reduced interest in accessing them. Pintos, 605 F.3d at 678; Kamakana, 447 F.3d at 1179. "Therefore, when a party attaches a sealed discovery document to a nondispositive motion, the usual presumption of the public's right of accessis rebutted . . . ." Phillips, 307 F.3d at 1213.

Only "good cause" need be shown to seal a nondispositive motion. Pintos, 605 F.3d at 678; Kamakana, 447 F.3d at 1180. This is the same good cause standard that applies to the entry of protective order under Fed. R. Civ. P. 26(c): "The court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense . . . ." The implication here is that if private discovery material is subject to a protective order, it can be sealed almost automatically when attached to a nondispositive motion. The district court doesn't need to conduct a fresh analysis because "it has already determined that 'good cause' exists to protect this information from being disclosed to the public by balancing the needs for discovery against the need for confidentiality." Phillips, 307 F.3d at 1213. Thus, the Ninth Circuit concluded in Kamakana, "a particularized showing under the good cause standard of Rule 26(c) will suffice to warrant preserving the secrecy of sealed discovery material attached to non-dispositive motions." Kamakana, 447 F.3d at 1180 (internal quotations and citations omitted).

III. Discussion

The Court considers first whether BT Collective has offered a compelling reason to seal Sunlight Supply's motion to dismiss, assuming it is a dispositive motion. It considers second whether the motion to dismiss may be considered nondispositive, and if so, whether good cause support sealing it.

A. There is no compelling reason for sealing.

Motions to dismiss are typically treated as dispositive. See In re PPA Products Liability Litigation, 460 F.3d 1217, 1231 (9th Cir. 2006). That means the presumption in favor of access applies and BT Collective must offer compelling reasons for sealing the pleadings. The only real reason it offers, however-the concealment of violations of federal law-is not compelling as a matter of law. Kamakana, 447 F.3d at 1179.*fn2

Related to this, the incidents giving rise to this case transpired in the latter half of 2009 when it was the policy of the Department of Justice to not pursue marijuana collectives operating in compliance with California law-and BT Collective has since dissolved. Even in light of a recent, apparent shift in policy suggesting that California law-abiding marijuana collectives are no longer safe from federal prosecution,*fn3 the Court suspects the prosecution of BT Collective's principals is a remote possibility. So, even assuming the threat of criminal prosecution supports ...


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