United States District Court, N.D. California
ORDER DENYING AMENDED MOTION TO SEAL THE COMPLAINT
Re: Dkt. No. 10
M. Ryu United States Magistrate Judge
March 21, 2016, Plaintiffs Joel Sjostrom and Aegis Retail
One, LLC (“Plaintiffs”) filed a complaint
alleging claims for fraud, breach of fiduciary duty,
intentional interference with prospective economic relations,
violation of federal securities law, violations of the
Racketeering and Corrupt Organizations Act, and unfair
competition against Defendants Harry Kraatz and HKSB, LLC.
Complaint [Docket No. 1]. On June 21, 2016, Plaintiffs filed
a motion to seal the complaint in its entirety. Plaintiffs
assert that the parties have reached a full settlement, and
that upon full review of the facts, Plaintiffs now believe
that they do not have a sufficient basis to litigate the
case. Plaintiffs therefore seek to seal the complaint because
the allegations made therein could harm Kraatz’s
reputation. Amended Motion to Seal (“Mot.”)
[Docket No. 10]. The court has determined that this matter is
appropriate for resolution without oral argument pursuant to
Civil Local Rule 7-1(b). The motion hearing set for July 28,
2016 is hereby vacated.
public has a right of access to judicial proceedings and
court records are normally open to the public. Nixon v.
Warner Communications, 435 U.S. 589, 597 (1978)
(“It is clear that the courts of this country recognize
a general right to inspect and copy public records and
documents, including judicial records and documents”
(citations omitted)). The Ninth Circuit “start[s] with
a strong presumption in favor of access to court
records.” Foltz v. State Farm Mut.Auto. Ins.
Co., 331 F.3d 1122, 1135 (9th Cir. 2003). Two standards
govern motions to seal court documents. A “compelling
reasons” standard applies to dispositive motions, such
as motions for summary judgment. A “good cause”
standard applies to non-dispositive motions, such as
discovery motions. Kamakana v. City & Cty. of
Honolulu, 447 F.3d 1172, 1179 (9th Cir. 2006). Motions
that are technically non-dispositive may still require the
party to meet the “compelling reasons” standard
when the motion is more than tangentially related to the
merits of the case. Ctr. for Auto Safety v. Chrysler
Grp., LLC, 809 F.3d 1092, 1101 (9th Cir. 2016).
the “good cause standard, ” “a
‘particularized showing’ under the . . . standard
of Rule 26(c) will ‘suffice.’”
Kamakana, 447 F.3d at 1180 (quoting Foltz,
331 F.3d at 1138). Compelling reasons generally exist when
the “‘files might have become a vehicle for
improper purposes, ’ such as the use of records to
gratify private spite, promote public scandal, circulate
libelous statements, or release trade secrets.”
Id. (quoting Nixon, 435 U.S. at 598), or
where court files may serve “as sources of business
information that might harm a litigant’s competitive
standing.” Nixon, 435 U.S at 598-99.
the local rules in this district, sealing orders “may
issue only upon a request that establishes that the
[information] is privileged or protectable as trade secret or
otherwise entitled to protection under the law.” Civil
L.R. 79-5(b). All requests to file under seal must be
“narrowly tailored, ” such that only sealable
information is sought to be redacted from public access.
seek to seal the complaint in its entirety. Because the
complaint is more than tangentially related to the merits of
the case, the compelling reasons standard governs the sealing
request. Schwartz v. Cook, No. 5:15-CV-03347-BLF,
2016 WL 1301186, at *1 (N.D. Cal. Apr. 4, 2016) (compelling
reasons standard governed motion to seal portions of the
complaint); In re NVIDIA Corp. Derivative Litig.,
No. 06-cv-06110-SBA, 2008 WL 1859067, at *3 (N.D. Cal. Apr.
23, 2008) (“While a complaint is not, per se, the
actual pleading by which a suit may be disposed of, it is the
root, the foundation, the basis by which a suit arises and
must be disposed of.”).
argue that the complaint should be sealed because the
fraud-related allegations in the complaint could harm the
reputation and livelihood of Kraatz, a re-organization
specialist who assists struggling companies and whose
business involves reviewing the confidential information of
clients during restructuring. Mot. at 4. Plaintiffs contend
that allowing the complaint to remain public “would not
only be an embarrassment to Mr. Kraatz but could be
catastrophic as current and potential clients will distance
themselves from Mr. Kraatz out of caution, if not a belief
that Mr. Kraatz has ulterior motives.” Id. at
4-5. Similarly, Plaintiff Sjostrom’s declaration in
support of the motion to seal states: “Due to the
nature of the claims alleged in the Complaint, I believe harm
could occur that may substantially injure defendant Harry
Kraatz’s reputation that assists struggling businesses
to restructure and attract new investors.” Declaration
of Joel Sjostrom [Docket No. 10-1] at ¶ 5.
the Ninth Circuit has made clear that “[t]he mere fact
that the production of records may lead to a litigant’s
embarrassment, incrimination, or exposure to further
litigation will not, without more, compel the court to seal
its records.” Kamakana, 447 F.3d at 1179. When
sealing documents under the compelling reason standard, a
“district court must base its decision on a compelling
reason and articulate the factual basis for its ruling,
without relying on hypothesis or conjecture.”
Hagestad v. Tragesser, 49 F.3d 1430, 1434 (9th Cir.
1995). In the absence of specifically articulated reasons,
“meaningful appellate review is impossible.”
Id. at 1435. Although Plaintiffs nakedly assert that
the “[c]omplaint has inadvertently become a vehicle for
improper purposes that could promote a public scandal or
circulate libelous statements, ” they do not provide
any factual basis supporting this claim. Mot. at 5.
short, Plaintiffs have failed to provide a compelling reason
to seal the complaint sufficient to overcome the
public’s interest in disclosure. Furthermore,
Plaintiffs’ request to seal the entire complaint is not
narrowly tailored and fails to comply with Civil Local Rule
79-5(b). Therefore, Plaintiffs’ motion to seal the
complaint is denied.
SETTLEMENT OF THE CASE
their motion, Plaintiffs also state that “the parties
have come to a settlement agreement and that Plaintiffs have
dismissed the Complaint.” Mot. at 4. However, no notice
of settlement or dismissal has been filed in this case.
Therefore, Plaintiffs ...