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Gustafson v. Goodman Manufacturing Co. LP

United States District Court, D. Arizona

February 1, 2016

James Gustafson, Plaintiff,
Goodman Manufacturing Company LP, et al., Defendants.


James A. Teiltrorg Senior United States District Judge

Pending before the Court are four motions to seal: (1) a Joint Motion and Memorandum of Law in Support of Sealing Portions of Plaintiff’s Motion for Class Certification and Supporting Evidence (Doc. 77); (2) Defendants’ Motion to File under Seal: (A) Portions of Defendants’ Opposition to Plaintiff’s Motion for Class Certification and Memorandum in Support, and Portions of Certain Exhibits Thereto, and (B) Portions of Defendants’ Motion to Exclude Certain Opinions of Paul J. Sikorsky and Memorandum in Support (Doc. 86); (3) a Joint Motion and Memorandum of Law in Support of Sealing Portions of the Supplemental Declaration of Paul J. Sikorsky in Support of Plaintiff’s Motion for Class Certification (Doc. 93); and (4) a Joint Motion and Memorandum of Law in Support of Sealing (A) Portions of Plaintiff’s Reply in Support of Motion for Class Certification, and (B) Certain Exhibits Thereto (Doc. 106). The Court now rules on the motions.

I. Legal Standard

It has long been recognized that the public has a general right of access “to inspect and copy . . . judicial records and documents.” Nixon v. Warner Commc’ns, Inc., 435 U.S. 589, 597 (1978). This right of access extends to all judicial records except those that have “traditionally been kept secret for important policy reasons, ” namely grand jury transcripts and certain warrant materials. Kamakana v. City & Cnty. of Honolulu, 447 F.3d 1172, 1178 (9th Cir. 2006). Nevertheless, “the common-law right of inspection has bowed before the power of a court to insure that its records” do not “serve as . . . sources of business information that might harm the litigant’s competitive standing.” Nixon, 435 U.S. at 598.

“Unless a particular court record is one traditionally kept secret, a strong presumption in favor of access is the starting point.” Kamakana, 447 F.3d at 1178 (quotation omitted). A party seeking to seal a judicial record bears the burden of overcoming this presumption by either meeting the “compelling reasons” standard if the record is a dispositive pleading, or the “good cause” standard if the record is a non-dispositive pleading. Id. at 1180.[1]

What constitutes a “compelling reason” is “best left to the sound discretion of the trial court.” Nixon, 435 U.S. at 599. The Court must “balance the competing interests of the public and the party who seeks to keep certain judicial records secret.” Kamakana, 447 F.3d at 1179. If the Court decides to seal certain judicial records after considering these interests, “it must base its decision on a compelling reason and articulate the factual basis for its ruling, without relying on hypothesis or conjecture.” Id. “In general, ‘compelling reasons’ sufficient to outweigh the public’s interest in disclosure and justify sealing court records exist when such ‘court files might have become a vehicle for improper purposes, ’ such as the use of records to . . . release trade secrets.” Id. (quoting Nixon, 435 U.S. at 598).

A “trade secret may consist of any formula, pattern, device or compilation of information which is used in one’s business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it.” In re Elec. Arts, Inc., 298 F. App’x 568, 569-70 (9th Cir. 2008) (quoting Restatement (First) of Torts § 757, cmt. B (1939)). Notably, as this Court has observed in the past, “because confidentiality alone does not transform business information into a trade secret, a party alleging trade secret protection as a basis for sealing court records must show that the business information is in fact a trade secret.” PCT Int’l Inc. v. Holland Elecs. LLC, 2014 WL 4722326, at *2 (D. Ariz. Sept. 23, 2014) (quotation omitted).

The less-stringent “good cause” standard requires a “particularized showing” that “specific prejudice or harm will result” if the information is disclosed. Phillips ex rel. Estates of Byrd v. Gen. Motors Corp., 307 F.3d 1206, 1210-11 (9th Cir. 2002) (quotation omitted); see Fed. R. Civ. P. 26(c). “Broad allegations of harm, unsubstantiated by specific examples of articulated reasoning” is not enough. Beckman Indus., Inc. v. Int’l Ins. Co., 966 F.2d 470, 476 (9th Cir. 1992).

Here, the pending motions to seal concern documents associated with Plaintiff’s motion for class certification. Although the Ninth Circuit has not spoken on the issue of whether a motion for class certification is a dispositive or non-dispositive pleading, this Court has applied the “good cause” standard to the sealing of documents filed with a motion for conditional certification, see Hart v. U.S. Bank, N.A., 2013 WL 5965637, at *8-9 (D. Ariz. Nov. 8, 2013), and other courts in this circuit have applied the “good cause” standard to documents concomitant to class certification motions, see In re High-Tech Emp. Antitrust Litig., 2013 WL 5486230 (N.D. Cal. Sept. 30, 2013); In re NCAA Student-Athlete Name & Likeness Licensing Litig., 2013 WL 1997252 (N.D. Cal. May 13, 2013; Nygren v. Hewlett-Packard Co., 2010 WL 2107434 (N.D. Cal. May 25, 2010). As noted, however, a panel of the Ninth Circuit recently muddied the waters regarding the standards applicable to a motion to seal. On one hand, if the Court were to follow the Auto Safety test, a motion for class certification likely involves issues that are “more than tangentially related to the merits of the case, ” thereby invoking the “compelling reasons” standard. See Hanon v. Dataproducts Corp., 976 F.2d 497, 509 (9th Cir. 1992) (noting that courts must “consider evidence which goes to the requirements of Rule 23 [at the class certification stage] even [if] the evidence may also relate to the underlying merits of the case”). On the other hand, if the Court were to apply the traditional dispositive/non-dispositive approach, the “good cause” standard would likely apply. See, e.g., In re High-Tech Emp. Antitrust Litig., 2013 WL 5486230, at *2 n.1. Nonetheless, the Court finds that deciding which standard applies in this case is inconsequential because the same records would be sealed under either standard.

II. Analysis

Goodman seeks to seal three categories of information: (1) warranty claim rate information for Goodman evaporator coils, (2) the design and manufacturing processes used by Goodman to produce evaporator coils, and (3) pricing details related to payments made by Goodman for replacements of evaporator coils. See (Docs. 77, 86, 93, 106). The Court will analyze each in turn.

A. Warranty Claim Rate for Goodman Evaporator Coils

A residential air conditioner includes three integrated components: (1) an evaporator coil, (2) a condenser coil, and (3) a compressor. Goodman argues that all documents containing the warranty claim rate and related information for its evaporator coil product should be sealed because disclosing such data “would unfairly equip competitors with information to attempt to dissuade distributors and dealers from selling Goodman products.” (Doc. 77 at 2). According to Goodman, publicizing this information would “unfairly disadvantage Goodman and allow a competitor to attempt to use that information to the competitor’s commercial advantage.” (Id.) Goodman highlights the fact that it keeps its warranty claim rate data strictly confidential and limits access only to those people who “need to know.” (Id.) Goodman also comments that two other district courts permitted Goodman to file its warranty claim rate information under seal. (Id. (citing McVicar v. Goodman Global, Inc., No. SA CV 13-1223-DOC(RNBx) (C.D. Cal.); Kotsur v. Goodman Global, Inc., et al., No. 14-CV-1147-NS (E.D. Pa.))).[2]

The Court agrees with Kotsur and McVicar that the warranty claim rate for Goodman evaporator coils satisfies the “good cause” standard and also concludes that “compelling reasons” exist to seal the claim rates. In Goodman’s industry, warranty claim rates are deemed classified commercial information that are kept strictly ...

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