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Milliner v. Mutual Securities, Inc.

United States District Court, N.D. California

October 9, 2019

CHARLOTTE B. MILLINER, et al., Plaintiffs,
v.
MUTUAL SECURITIES, INC., Defendant.

          ORDER ON MOTION FOR RECONSIDERATION AND OTHER PENDING MOTIONS

          Donna M. Ryu, United States Magistrate Judge

         The court currently has four motions before it. Plaintiffs Charlotte B. Milliner and Joann Brem move pursuant to Federal Rule of Civil Procedure 60(b) for relief from a portion of the court's July 8, 2019 order on Defendant Mutual Securities, Inc.'s (“MSI”) motion to enforce the parties' settlement agreement and stipulated protective order. [Docket No. 201.] Plaintiffs also move to vacate the court's September 11, 2018 dismissal order. [Docket No. 193.] Proposed Intervenor Vincent Gilotti moves to intervene. [Docket No. 198.] Finally, as part of MSI's motion to enforce the settlement agreement, the parties have submitted supplemental briefing on Monster Energy v. Schechter, 7 Cal. 5th 781 (2019). [Docket Nos. 212, 214, 216, 217.] All four matters are suitable for resolution without a hearing. Civ. L.R. 7-1(b).

         For the following reasons, the motion for reconsideration is granted in part. The motion to vacate the dismissal, the motion to intervene, and the portion of MSI's motion to enforce the settlement agreement that implicates Monster Energy are all denied without prejudice.

         I. BACKGROUND

         Plaintiffs filed this putative class action against MSI on July 21, 2015 alleging claims stemming from MSI's brokerage agreement with Plaintiffs. This lawsuit is related to another case filed in this court, Milliner v. Bock Evans Financial Counsel, Ltd., No. 15-cv-1763 JD (“Bock Evans”), in which Milliner and Brem challenged the actions of their investment advisor, Bock Evans Financial Counsel, Ltd. The undersigned conducted a settlement conference on June 1, 2018 which resulted in a full resolution of Plaintiffs' individual claims in this lawsuit. Milliner, Brem, and MSI executed a settlement agreement the same day. On June 5, 2018, with the parties' consent pursuant to 28 U.S.C. § 636(c), this matter was reassigned to this court. The case was dismissed on September 11, 2018.

         A. The Court's July 8, 2019 Order on MSI's Motion to Enforce the Settlement Agreement and Parties' Stipulated Protective Order

         In April 2019, MSI filed a motion to enforce the settlement agreement and the parties' stipulated protective order which was entered on January 31, 2016 (Docket No. 23 (Protective Order). [Docket No. 176.] In its motion, MSI presented evidence that in February 2019, Plaintiffs' counsel David Sturgeon-Garcia filed a statement of claim with the Financial Industry Regulatory Authority (“FINRA”) against MSI and five individuals on behalf of a different client, Vincent F. Gilotti (the “Gilotti claim”). In relevant part, MSI argued that Sturgeon-Garcia violated the protective order by attaching a document used in this litigation and marked as confidential as exhibits to the Gilotti claim before FINRA. The specific document at issue, which is Exhibit 2 to the Gilotti claim, consisted of six pages, five of which were labeled “confidential.” MSI also argued that Plaintiffs and/or Sturgeon-Garcia violated the settlement agreement's confidentiality provision by attaching a copy of the settlement agreement to the Gilotti claim.

         On July 8, 2019, the court granted MSI's motion in part, denied it in part, and held part of it in abeyance pending a ruling by the California Supreme Court on a key issue. Milliner v. Mut. Sec., Inc., No. 15-CV-03354-DMR, 2019 WL 2929831 (N.D. Cal. July 8, 2019). The particulars of the July 8, 2019 order are as follows. The court granted MSI's request to seal both the settlement agreement attached to MSI's motion and certain references to the agreement in the order, finding that “[g]iven the particular circumstances of this case . . . good cause exists to permit filing the actual agreement and certain references to it under seal.” Id. at *1 (citing Kamakana v. City & Cty. of Honolulu, 447 F.3d 1172, 1179-80 (9th Cir. 2006); Phillips ex rel. Estates of Byrd v. General Motors Corp., 307 F.3d 1206, 1212 (9th Cir. 2002)).

         As to MSI's argument that Plaintiffs and/or Sturgeon-Garcia violated the settlement agreement's confidentiality provision by attaching a copy of the settlement agreement to the Gilotti claim, Plaintiffs Milliner and Brem argued that they had not “disclosed anything to anyone, ” and that as a matter of law, their lawyer “is not bound by the settlement agreement's confidentiality provision because he was not a party to the agreement, ” citing Monster Energy Company v. Schechter (“Monster Energy I”), 26 Cal.App. 5th 54 (2018), review granted, 239 Cal.Rptr.3d 662 (2018). Id. at *3. Noting that the California Supreme Court had granted review of Monster Energy I, the court found that “the question of whether Sturgeon-Garcia is bound by the confidentiality provision in the settlement agreement remains unsettled.” Id. Accordingly, the court ordered the following:

[P]ending the California Supreme Court's decision in Monster Energy, Sturgeon-Garcia shall comply with the confidentiality provision of the settlement agreement unless and until relieved of this obligation by this court. Specifically, within seven days of the date of this order, Sturgeon-Garcia must withdraw the settlement agreement from Gilotti's FINRA claim. Nothing in the record suggests that Gilotti will be prejudiced in any way by its withdrawal, or that the settlement agreement in this case is material or even relevant to Gilotti's claim. This portion of MSI's motion is held in abeyance. Within 14 days of the California Supreme Court's decision in Monster Energy, the parties shall submit a joint letter advising the court of the decision. The court will order further briefing, if necessary, or take the matter under submission on the papers already filed.

Id. at *4.

         With respect to MSI's argument that Sturgeon-Garcia had violated the protective order, the court described the relevant terms, which provide that “any Disclosure or Discovery Material that is designated as ‘confidential'” constitutes “protected material.” Id. at *5 (Protective Order § 2.13). Under the protective order, “[a] Receiving Party may use Protected Material that is disclosed or produced by another Party or by a Non-Party in connection with this case only for prosecuting, defending, or attempting to settle this litigation, or any manner deemed a related matter within the meaning of Civil Local Rule 3-12.” Protective Order at § 7.1. Further, a receiving party may only disclose protected material to certain categories of individuals. Protective Order at § 7.2.

         Plaintiffs responded that the six pages of Exhibit 2 “are not MSI documents and were not produced by Defendant in this case, ” but were instead “produced by a third party in response to a subpoena by Plaintiffs, ” and therefore MSI lacked standing to enforce the protective order as MSI was not the designating party. Milliner, 2019 WL 2929831, at *6, n.3 (emphasis in original). Plaintiffs also argued that the protective order allows for disclosure of protected material to FINRA, as it is a regulatory agency. Id. at *6. Noting that there was no “dispute that the documents, marked confidential by a third party, constitute ‘protected material, '” the court rejected these arguments, holding that Sturgeon-Garcia's submission of the documents with the Gilotti claim violated the protective order:

Sturgeon-Garcia's submission of these documents with the Gilotti claim . . . violates section 7.1 of the protective order, which provides that “[a] Receiving Party may use Protected Material that is disclosed or produced by another Party or by a Non-Party in connection with this case only for prosecuting, defending, or attempting to settle this litigation, or any manner deemed a related matter within the meaning of Civil Local Rule 3-12.” [Protective Order] at § 7.1. The exception in section 7.2(h) permits only a “receiving party” to disclose protected material to self-regulatory organizations, and the protective order defines “receiving party” as “a Party that receives Disclosure or Discovery Material from a Producing Party.” Id. at § 2.14. Sturgeon-Garcia is not a party to this litigation. Finally, the protective order provides that “[w]ithin 60 days after the final disposition of this action . . . each Receiving Party must return all Protected Material to the Producing Party or destroy such material.” Id. at ยง 13. It ...

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