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P&L Development LLC v. Bionpharma Inc.

United States District Court, M.D. North Carolina

May 10, 2019

P&L DEVELOPMENT LLC, Plaintiff,
v.
BIONPHARMA INC. and BIONPHARMA HEALTHCARE LLC, Defendants.

          MEMORANDUM OPINION AND ORDER

          N. CARLTON TILLEY, JR. SENIOR UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on numerous motions to seal by all parties, [Docs. #10, 28, 38, 50, 65, 73, 83, 108, 121, 127, 132]. For the reasons explained below, the motions to seal are variously granted, denied, and granted in part and denied in part.

         I.

         “When presented with a request to seal judicial records or documents, a district court must comply with certain substantive and procedural requirements.” Va. Dep't of State Police v. Washington Post, 386 F.3d 567, 576 (4th Cir. 2004). This is so because “[i]t is well settled that the public and press have a qualified right of access to judicial documents and records filed in civil . . . proceedings.” Doe v. Public Citizen, 749 F.3d 246, 265 (4th Cir. 2014). “Public access serves to promote trustworthiness of the judicial process, to curb judicial abuses, and to provide the public with a more complete understanding of the judicial system, including a better perception of fairness.” Id. at 266.

         However, “[f]or a right of access to exist . . ., the document must be a ‘judicial record.'” In re United States for an Order Pursuant to 18 U.S.C. § 2703(D), 707 F.3d 283, 290 (4th Cir. 2013); otherwise, a motion to seal is merely subject to the good cause standard in Rule 26(c) of the Federal Rules of Civil Procedure, Agro v. Makhteshim Agan of N.A., Inc., No. 1:10CV276, 2011 WL 13157168, at *1 (M.D. N.C. July 13, 2011). A judicial record is a document that “play[s] a role in the adjudicative process, or adjudicate[s] substantive rights” such as when a document is “filed with the objective of obtaining judicial action or relief”. In re United States for an Order Pursuant to 18 U.S.C. § 2703(D), 707 F.3d at 290-91.

         Substantively, a court “must determine the source of the right of access with respect to each document, because only then can it accurately weigh the competing interests at stake”. Va. Dep't of State Police, 386 F.3d at 576 (internal quotations and alteration omitted). At the least, “the common law presumes a right of access” to judicial records. In re United States for an Order Pursuant to 18 U.S.C. § 2703(D), 707 F.3d at 290. The moving party can rebut this presumption by “'showing some significant interest that outweighs the presumption.'” Va. Dep't of State Police, 386 F.3d at 575 (quoting Rushford v. New Yorker Magazine, Inc., 846 F.2d 249, 253 (4th Cir. 1988)). Factors court weigh in this balancing test “include whether the records are sought for improper purpose . . .; whether release would enhance the public's understanding of an important historical event; and whether the public already had access to the information contained in the records.” In re Knight Publ'g Co., 743 F.2d 231, 235 (4th Cir. 1984) (citing Nixon v. Warner Commc'ns, Inc., 435 U.S. 589, 597-608 (1978)).

         In addition to the common law right of access, the First Amendment guarantees access to “particular judicial records and documents”. In re United States for an Order Pursuant to 18 U.S.C. § 2703(D), 707 F.3d at 290. It provides more “substantive protection to the interests of the press and the public” than the common law and can be restricted only where there is a compelling governmental interest and the restriction is narrowly tailored to serve that interest. Rushford, 846 F.2d at 253. Stated differently, “an overriding interest based on findings that [sealing] is essential to preserve higher values” may overcome the First Amendment right of access if the sealing is narrowly tailored to serve that interest. Press-Enter. Co. v. Super. Ct. of Cal., Riverside Cty., 464 U.S. 501, 510 (1984).

         “For private interests to satisfy this standard, ” at least one court has found that “the parties must establish a high likelihood of substantial and irreparable harm if the motions to seal are denied.” Companion Prop. & Cas. Ins. Co. v. Wood, No. 3:14-cv-03719-CMC, 2017 WL 279767, at *2 (D.S.C. Jan. 23, 2017) (analyzing Public Citizen, 749 F.3d at 269-70). The Eastern District of Virginia has thoroughly analyzed the application of the First Amendment right of access in the context of non-governmental interests. See Level 3 Commc'ns, LLC v. Limelight Networks, Inc., 611 F.Supp.2d 572, 580-83 (2009). There, the court recognized that “in limited circumstances” some courts have found that “certain” “private interests might also implicate higher values sufficient to override . . . the First Amendment presumption of public access.” Id. at 580. Examples of those private interests include a criminal defendant's Sixth Amendment right to a fair trial, privacy interests of non-parties, trade secrets, attorney-client relationships, and contractual non-disclosure provisions. Id. at 580-83 (citing cases from various federal courts). Even so, the courts have been careful to note that these interests outweigh the First Amendment presumption of access only in certain circumstances. Id. at 580-83.

         While the First Amendment affords the public greater access than the common law, the First Amendment only applies to documents such as those “filed in connection with plea hearings and sentencing hearings in criminal cases” and “in connection with a summary judgment motion in a civil case.” Rushford, 846 F.2d at 253. Courts use the “'experience and logic' test” to determine if the First Amendment extends further by asking, “(1) whether the place and process have historically been open to the press and general public, and (2) whether public access plays a significant positive role in the functioning of the particular process in question.” In re United States for an Order Pursuant to 18 U.S.C. § 2703(D), 707 F.3d at 291 (internal quotations omitted).

         Once a court has determined whether the common law or First Amendment attaches, it must comply with procedural requirements including providing “the public notice of the request to seal and a reasonable opportunity to challenge the request; . . . consider[ing] less drastic alternatives to sealing; and if it decides to seal . . . stat[ing] the reasons (and specific supporting findings) for its decision and the reasons for rejecting alternatives to sealing.” Va. Dep't of State Police, 386 F.3d at 576.

         II.

         Defendants Bionpharma Inc. and Bionpharma Healthcare LLC (collectively referred to as “Bion”) have moved to seal the Supply Agreements attached as Exhibits C through F of the Verified Complaint. [Doc. #10.] Similarly, and more recently, Plaintiff P&L Development LLC (“PLD”) has moved to seal the Supply Agreements attached as Exhibits C through F to the Amended Complaint and information in that complaint from the Rule 30(b)(6) deposition of Patheon Softgels, Inc. (“Patheon”). [Doc. #127.] The public has had notice of these motions since December 28, 2017 and July 12, 2018, respectively, but has filed no objections despite reasonable opportunity to do so.

         The common law right of access applies to a complaint, U.S. Tobacco, Inc. v. Big South Wholesale of Virginia, LLC, No. 5:13-CV-527-F, 2013 WL 6145549, at *3 (E.D. N.C. Nov. 21, 2013), and likely to documents attached to a complaint. Therefore, Bion or PLD must show a significant countervailing interest that heavily outweighs the public's interest in accessing the Supply Agreements, yet neither has done so. Bion argues that the agreements “contain sensitive pricing information” and “sensitive information concerning the parties' respective obligations and profit allocations” which “[a]ny person” could use “to gain an unfair business advantage”. (Bion's Br. in Supp. at 2.) Similarly, PLD argues that disclosure of the Supply Agreements would permit “a competitor [to] use them for an improper purpose and jeopardize PLD's position in the market.” (PLD's Br. in Supp. at 3.) According to PLD, the agreements “spell out the details of the parties' respective obligations, how PLD and Bion will allocate profits from their business relationship, confidential information and commercially sensitive pricing information that a third party could use to unfairly compete with PLD and Bion.” (Id. at 4.) Disclosure of this information “(particularly with regard to the financial aspects of their partnership) could harm PLD's competitive standing”. (Id. at 5.)

         Indeed, “courts have refused to permit their files to serve as . . . sources of information that might harm a litigant's competitive standing”, but Bion and PLD simply rely on that statement from Nixon without actually explaining how it applies to all of the information in each Supply Agreement. The persuasiveness of Bion's argument, if any, is further undermined by its public disclosure of portions of the agreements, including profit allocations, in its Counterclaim.

         The Supply Agreements were entered into in 2003, 2004, 2011, and 2012 by the parties' predecessors. While the agreements include information about the parties' sale of certain generic pharmaceutical drugs, they are negotiated instruments and products of compromise that do not necessarily reveal the extent of the parties' business capabilities independent of these particular circumstances. Instead, the agreements memorialize what each party was willing to do at the time it entered into (or became the assignee of) each agreement. For example, whatever may be the “financial aspects” to which PLD refers, those are terms to which each party agreed at the time it entered into or amended the agreements in order to do business at the time with the other party. Furthermore, the agreements expired in March 2018. Had either party sufficiently supported its argument at the time it filed its motion to seal, the passage of time has now lessened those concerns, and there is no information about the parties' present business relationship with each other or otherwise in the generic pharmaceutical drug market. In sum, neither party has met its burden of showing a significant countervailing interest that outweighs the public's interest in accessing the Supply Agreements, contracts that are at the heart of this action and which this Court found PLD to have shown a substantial likelihood of success proving Bion breached.

         As for the information in the Amended Complaint from the Rule 30(b)(6) deposition of Patheon, PLD does not believe that information should be sealed. Accordingly, pursuant to Local Rule 5.4(b), Patheon or Bion was to have filed a brief in support of sealing that information. No. such brief has been filed, and the motion to seal these portions of the Amended Complaint is denied. Therefore, Bion's Motion to Seal [Doc. #10] is denied, and PLD's Motion to Seal [Doc. #127] is denied.

         III.

         PLD has moved to seal certain portions of its brief and declarations filed in support of its Motion for Temporary Restraining Order and/or Preliminary Injunction. [Doc. #28.] PLD presumes only the common law right of access applies, (see generally Br. in Supp.), and argues that the redacted portions of the filings contain the parties' confidential information including “the details of the parties' relationship, the process used for forecasting PLD's product needs and submitting orders to Bion, detailed information about purchase orders submitted by PLD to Bion, Bion's shipment (or lack thereof) of the products, . . . information about PLD's customers and the terms on which they do business together . . ., [and] some of the specific terms of the parties' contracts”, (id. at 2-3). PLD contends that less drastic measures would not adequately protect it because release of the information could harm PLD's competitive standing. (Id. at 3-4.) The public has had notice of PLD's request since January 2, 2018, and has not opposed the motion despite reasonable opportunity to do so.

         The declarations and brief at issue are judicial records, as PLD submitted them to obtain judicial relief and the Court used them in assessing whether or not to grant PLD's requested preliminary relief. (See Mem. Order (Jan. 26, 2018) [Doc. #85].) Accordingly, at the very least, the common law right of access applies. To determine whether or not the First Amendment right of access applies, the experience and logic test is applied. As the court in Agro explained, “preliminary relief proceedings are typically conducted in an open fashion in part because courts must consider the public interest in deciding whether to grant such relief”. 2011 WL 13157168, at *3 (internal quotations and citations omitted). “On the other hand, . . . certain forms of preliminary relief may be granted without notice to the adverse party, let alone notice to the general public” which “reflects the temporary nature of such relief” and “diminishes the public's interest in access to related documents.” Id. Furthermore, any “public interest in curbing judicial misconduct . . . is tempered by the preliminary and temporary nature of the requested relief”. Id. Therefore, as in Agro, it is determined that there is no First Amendment right of access to these documents.

         PLD must then rebut the common law right of access by showing a significant interest that outweighs the public's interest in access. As PLD argues, courts have recognized that a party has an interest in protecting “sources of business information that might harm [its] competitive standing”. Nixon, 435 U.S. at 598. While PLD has identified specific information to be sealed rather than requesting to seal documents in their entireties, it has not sufficiently supported its general arguments that disclosure “would harm PLD's competitive standing” or what information “a third party could use” - or how it could use that information - “to unfairly compete with PLD” and “gain an unfair business advantage”, not only at the time the motion to seal was filed, but now in 2019, long after the parties' Supply Agreements expired in March 2018. PLD relies on these conclusory arguments to support sealing all of the information it identified in its brief and supporting declarations, without explaining why the disclosure of specific information - which ranges from numbers of capsules to statements of irreparable harm to terms from the Supply Agreements - would harm PLD. This leaves the Court to guess PLD's concerns. For example, how does public disclosure of the Naproxen Supply Agreement's requirement that PLD provide Bion with eighteen month rolling forecasts harm PLD? Not only has the Supply Agreement expired, but, as noted above, the terms of that agreement resulted from negotiations and compromise and do not reveal PLD's actual business capabilities or secrets. Similarly, how does public disclosure of PLD's “typical monthly forecast for each of the drugs” or the amount of capsules of each drug PLD ordered and Bion committed to ship in any given month harm its competitive standing, not only at the time PLD moved to seal this information, but especially now in 2019? Furthermore, despite PLD's argument otherwise, much of the information PLD requests to be sealed was already public in its Complaint.

         In sum, unless otherwise noted below, PLD has not met its burden of showing a significant countervailing interest that outweighs the public's right of access to this information. The heart of this action is the four Supply Agreements between PLD and Bion and whether or not PLD and Bion were contractually permitted to do what they are alleged to have done. For purposes of PLD's Motion for a Temporary Restraining Order, the Court found that PLD had shown a substantial likelihood of success on the merits of its breach of contract claims. Even the temporary nature of such an order does not displace the necessity for PLD to show a significant countervailing interest that can restrict the public's access to the very documents and related information at the center of the parties' dispute. PLD has largely failed to do so, as explained below.

         PLD has also requested that information remain sealed “permanently throughout the pendency of this case.” (Br. in Supp. at 5.) However, because the First Amendment right of access applies at summary judgment and trial, PLD would need to meet a higher burden to restrict access to information at later stages of this case. Therefore, to the extent any portion of PLD's motion to seal is granted, it is granted only for purposes of PLD's Motion for Temporary Restraining Order and/or Preliminary Injunction.

         PLD's Motion to Seal [Doc. #28] is granted in part and denied in part as follows:

PLD’s Brief in Support of its Motion for Temporary Restraining Order and/or Preliminary Injunction

Location of

Information

Requested to

be Sealed

Ruling Explanation
p. 1 Denied. PLD has not met its burden to show a significant countervailing interest.
p. 4 Denied Public information, (see Compl. ¶ 13 & Am. Compl. ¶ 42); PLD has not met its burden to show a significant countervailing interest.
p. 6 Denied. Public information, (see generally Compl.; see also id. ¶¶ 23, 40-42 & Am. Compl. ¶¶ 58, 84-87); PLD has not met its burden to show a significant countervailing interest.
p. 7 Denied. Public information, (see generally Compl. & Am. Compl.; see also Compl. ¶¶ 22, 38, 50, 61 & Am. Compl. ¶¶ 52, 82, 101, 118); PLD has not met its burden to show a significant countervailing interest.
p. 12 Denied. Public information, (see Mem. Order (Jan. 26, 2018) (granting in part PLD’s Mot. for TRO)); PLD has not met its burden to show a significant countervailing interest.
p. 13-14 Denied. Public information, (see Mem. Order (Jan. 26, 2018) (granting in part PLD’s Mot. for TRO)); PLD has not met its burden to show a significant countervailing interest.
p. 15 Denied. Public information, (see Compl. ¶ 12 & Am. Compl. ¶¶ 11(d), 40, 41; Countercl. ¶¶ 1, 19); PLD has not met its burden to show a significant countervailing interest.
p. 17 Denied. Public information, (see Compl. ¶¶ 27, 39, 40, 41, 52, 62 & Am. Compl. ¶¶ 68, 84, 85, 86, 103, 121); PLD has not met its burden to show a significant countervailing interest.
p. 18 Denied. PLD has not met its burden to show a significant countervailing interest.
p. 19-20 Denied. Public information, (see Compl. ¶¶ 22, 27, 38, 39, 50, 52, 61, 62 & Am. Compl. ¶¶ 57, 68, 82, 84, 101, 103, 118, 121); PLD has not met its burden to show a significant countervailing interest.

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