Thursday, February 21, 2002
C.A. Upholds Trial Court on Unsealing of Record in Credit Card Cases
First District Panel Opts for Disclosure in Test of New Court Rules on Confidentiality
By KENNETH OFGANG, Staff Writer/Appellate Courts
A San Francisco Superior Court judge did not abuse his discretion in opening up portions of the sealed record in litigation against a major credit card lender, the First District Court of Appeal ruled yesterday.
In an early test of new rules limiting the extent to which trial court records may be sealed, Div. Four affirmed Judge Stuart Pollak’s order unsealing documents filed in suits against Providian Financial Corporation and several subsidiaries.
Pollak has been elevated to Div. Three of the Court of Appeal since ruling in the cases last year.
Providian and the subsidiaries are the defendants in a number of class actions filed in 1998 and 1999, questioning fees assessed to credit card holders. The cases were coordinated and assigned to Pollak.
The parties stipulated that any party could file documents under seal in order to protect trade secrets or other confidential information, subject to further action by the court. The plaintiffs, alleging that Providian had “vastly over-designated documents as confidential” in connection with the motions for class certification, moved to unseal documents, as did the Hearst Corporation, which publishes the San Francisco Chronicle.
The motions initially involved 67 documents, but when new confidentiality rules took effect last year, Providian narrowed its objections to 39 documents which it claimed contained “core proprietary information.”
Pollak eventually concluded that 25 of the 39 documents, including telemarketing scripts and some internal memoranda, should be unsealed. Providian appealed with respect to 21 of the 25.
Presiding Justice Laurence Kay, writing for the Court of Appeal, rejected Providian’s argument that the decision was reviewable de novo, saying an abuse-of-discretion standard applied. Pollak was correct, Kay said, in questioning whether the documents at issue actually contained trade secrets and in taking the public interest into account.
The presiding justice cited California Rules of Court, Rules 243.1 and 243.2.
Rule 243.1 implements NBC Subsidiary (KNBC-TV), Inc. v. Superior Court (1999) 20 Cal.4th 1178, which limits circumstances under which records may be sealed in the trial court.
The rule provides that records may be sealed only when a court expressly finds that there is “an overriding interest that overcomes the right of public access.” Rule 243.1 limits sealing to specific documents or portions of documents as to which sealing is found necessary.
Rule 243.2 establishes procedures for sealing and unsealing records. It eliminates the prior practice of allowing documents to be filed under seal based solely on a stipulation of the parties, and requires that a party seeking to file documents under seal bring a noticed motion and lodge the documents in a sealed envelope.
A noticed motion to unseal may be brought by a party, a member of the public, or the court itself.
Because the language of the rules commits the decisions to seal and unseal records to the discretion of the court, Kay said, those rulings are amenable only to abuse-of-discretion review. And because Rule 243.2 requires express findings as a prerequisite to granting a motion to seal, but not to denying a motion to seal or granting a motion to unseal, Pollak did not err by declining to make such findings, Kay concluded.
In reaching the conclusion that Pollak acted within his discretion in unsealing the telemarketing scripts, Kay said the scripts were not trade secrets because they had been disclosed to the public.
“They have no other purpose,” the justice wrote. “The scripts are sales pitches, and once they have been used, sales pitches are not treated as trade secrets.”
Kay went on to say that the trial judge, and the discovery referee whose recommendation he adopted, were “understandably skeptical” of the contention that the internal memoranda contained trade secrets.
A trade secret must, by definition, have economic value and must be the subject of efforts by the proprietor to maintain confidentiality, the presiding justice explained. Providian, he noted, had a practice of stamping certain documents “Confidential” and “Do Not Copy or Distribute,” but none of the memoranda ordered unsealed were stamped in that manner.
“[T]his was not a simple dispute with a limited cast, but a number of class actions that—according to the plaintiffs’ counsel—could involve a nationwide class of millions. Defendants’ methods of soliciting its credit card customers were at the heart of that dispute. There is thus an undeniable force to Hearst’s argument that there is ‘great and legitimate public interest in precisely how Providian went about trying to sell its various products and services to the public.’ When that interest is augmented by the strong presumption in favor of public access reflecting ‘a first principle that the people have the right to know what is done in their courts’… a decision by the trial court that defendants had not made out the case for ‘an overriding interest that overcomes the right of public access’ …was no abuse of discretion.”
The case is In re Providian Credit Card Cases, 02 S.O.S. 901.
Copyright 2002, Metropolitan News Company