In re Providian Credit Card Cases

• Decision Date: 20 February 2002
• Docket Number: No. A094820.,A094820.
• Citation: 96 Cal.App.4th 292,116 Cal.Rptr.2d 833
• Court: California Court of Appeals Court of Appeals
• Parties: In re PROVIDIAN CREDIT CARD CASES.

116 Cal.Rptr.2d 833

96 Cal.App.4th 292

In re PROVIDIAN CREDIT CARD CASES.

No. A094820.

Court of Appeal, First District, Division 4.

February 20, 2002.

Rehearing Denied March 21, 2002.

Review Denied June 19, 2002.^*

Heller, Ehrman, White & McAuliffe, Brian P. Brosnahan, Jonathan P. Hayden, D. Christopher Kerby, San Francisco, for Defendants and Appellants Providian Financial Corporation, Providian National Bank, Providian Bank and Providian Bancorp Services.

McCutchen, Doyle, Brown & Enersen, Neil L. Shapiro, San Francisco, for Movant and Respondent Hearst Corporation.

KAY, P.J.

Rules 243.1 and 243.2 of the California Rules of Court¹ establish the standard and procedures for courts to employ when a request is made to seal a court record that would otherwise be public, or to unseal a record previously ordered sealed. This appeal presents the first opportunity for an examination of these rules and their operation. We conclude that these rules vest a trial court with a considerable amount of discretion in deciding whether to seal or unseal portions of a judicial record. We further conclude, in light of the strong presumption in favor of public access, that the trial court here did not abuse its discretion in deciding to unseal records over an objection that the materials constituted proprietary trade secrets.

BACKGROUND

It appears from the record that in 1998 and 1999 a number of complaints framed as class actions were filed alleging that defendants Providian Financial Corporation, Providian National Bank, Providian Bank, and Providian Bancorp Services (defendants) had improperly assessed a number of fees and charges to holders of credit cards. The Judicial Council granted a petition to coordinate the actions and designated Judge Stuart Pollak of the San Francisco Superior Court the coordination trial judge (see Code Civ. Proc., § 404; rules 1529, 1540). Thereafter, and in accordance with a stipulation of the parties, the trial court filed a protective order allowing any party producing discovery to designate material as "Confidential, Subject to Court Order" if "disclosure would violate a personal, financial, or other interest protected by law, such as a trade secret or other confidential research, development, or. commercial information, and that such disclosure threatens to cause serious harm that outweighs the public interest in disclosure of such information." The order further provided that "any Confidential Material shall be filed under seal," but that it was "without prejudice to the right of any Party or non-party . . . to apply to the Court for . . . modification of this Order or for any order permitting disclosure of Confidential Material beyond the terms of this Order."

In connection with the plaintiffs' motion to certify the class, defendants filed under seal a large number of documents designated as confidential. At about the same time believing that defendants had "vastly over-designated documents as confidential," the plaintiffs moved that "all documents filed with the Court . . . be immediately unsealed and the confidential designation on such documents be removed." At this point the Hearst Corporation (Hearst), describing itself as an "intervenor," moved that the protective order be "reconsidered" in light of "the strong public policy . . . in favor of . . . openness of judicial records." Defendants opposed plaintiffs' motion to unseal, claiming that it was overbroad and that granting it would compromise "confidential and proprietary information" protected by California's Uniform Trade Secrets Act (Civ. Code, §§ 3426-3426.11). The trial court denied Hearst's motion on October 18, 2000. Plaintiffs' motion was referred to a retired superior court judge acting as a referee.

Near the end of December of 2000, the referee submitted a report in which he recommended that plaintiffs' motion be granted in part, and that 67 exhibits submitted in connection with the class certification motion should be unsealed. On January 1, 2001, while the trial court was considering whether to adopt the referee's recommendations, rules 243.1 and 243.2 became effective. Based on this development, Hearst renewed its request that the trial court examine the records and unseal those materials which did not meet the requirements of the new rules for remaining immune from public access; specifically, Hearst argued that if defendants wished to continue to prevent disclosure of material they claimed constituted trade secrets, the burden of proving so was now on defendants. Defendants responded that 39 of the 67 exhibits "contain core proprietary information" and should remain confidential. To support that claim defendants submitted declarations by Dawn Greiner, a vice president "with responsibility for marketing in Providian's Credit Card Business" and Robert Klein, a marketing consultant. The trial court returned the matter to the referee for reconsideration in light of rules 243.1 and 243.2. The referee submitted a report in which he determined that defendants "adequately identify an overriding interest in the whole of each of the following documents that overcomes the right of public access" with respect to 14 exhibits, but recommended that 25 exhibits be unsealed. Defendants objected to the latter advisory recommendation (see Code Civ. Proc., §§ 643, subd. (c), 644, subd. (b)).

The trial court's eventual order recites the procedural history of the dispute and the legal standards established by rule 243.1. After discussing the nature of the disputed documents, the court ruled: "After reviewing each document at issue with these standards in mind, and with Providian's supporting declarations as they pertain to each document, the Court concludes that none of the documents at issue should remain under seal." Defendants filed a notice of appeal the day the trial court's order was filed.²

REVIEW

The Legal Standards

Defendants are here to argue that 21 of the 25 documents ordered unsealed by the trial court contain trade secrets and proprietary information that is sufficiently sensitive and current that they should have been left protected against disclosure. Among the arguments presented by defendants concerning the examination of an unsealing order made pursuant to rules 243.1 and 243.2 is the fundamental issue of the standard of review to be employed.

In NBC Subsidiary (KNBC-TV), Inc. v. Superior Court (1999) 20 Cal.4th 1178, 86 Cal.Rptr.2d 778, 980 P.2d 337 (NBC Subsidiary), our Supreme Court undertook an exhaustive examination of the First Amendment issues involved with restricting or closing public access to trials. In the course of doing so it noted that "[numerous reviewing courts . . . have found a First Amendment right of access to civil litigation documents filed in court as a basis for adjudication." (Id. at p. 1208, fn. 25, 86 Cal.Rptr.2d 778, 980 P.2d 337.) Having surveyed the relevant state and federal authorities, the Court formulated this rule: "[B]efore substantive courtroom proceedings are closed or transcripts are ordered sealed a trial court must hold a hearing and expressly find that (i) there exists an overriding interest supporting closure and/or sealing; (ii) there is a substantial probability that the interest will be prejudiced absent closure and/or sealing; (iii) the proposed closure and/or sealing is narrowly tailored to serve the overriding interest; and (iv) there is no less restrictive means of achieving the overriding interest." (Id. at pp. 1217-1218, 86 Cal. Rptr.2d 778, 980 P.2d 337, original italics & fns. omitted.)

Rules 243.1 and 243.2 were adopted to comply with the Supreme Court's decision.³ Rule 243.1 requires the express findings enumerated in NBC Subsidiary and also directs that they must be incorporated in the order sealing any part of a record. Rule 243.2 sets out the procedures to be followed in sealing or unsealing a record.⁴

Rules 243.1 and 243.2 do not apply "to records that courts must keep confidential by law." (Judicial Council of Cal., Advisory Com. com., reprinted at 23 pt. 1 West's Ann. Codes, Rules, supra, foil, rule 243.1, p. 172, quoted in fn. 3, ante.) The mere presence of claimed trade secrets does not carry a mandatory confidentiality requirement. Such a requirement is imposed only in actions initiated pursuant to the Uniform Trade Secrets Act for misappropriation of trade secrets. (See Civ. Code, § 3426.5 ["In an action under this title, a court shall preserve the secrecy of an alleged trade secret. . . ."].)⁵ The actions commenced against defendants were not of this nature. Accordingly, and notwithstanding defendants' claim that trade secrets are involved, rules 243.1 and 243.2 state the governing principles.

One of the novel issues presented by this appeal is the appropriate standard of review for the trial court's order. Defendants submit that we must examine the issues de novo, paying no deference to any legal or factual determination made by the trial court. Hearst submits that the factual determinations made by the trial court must be upheld if they have the support of substantial evidence, and his ultimate decision to unseal must be sustained unless we decide that the trial court abused the discretion granted it by rule 243.1(d). Hearst is correct.

Rule 243.1(d) provides that a trial court "may order that a record be filed under seal only if' it makes the requisite findings. This is the traditional language of discretionary power (e.g., Gyler v. Mission Ins. Co. (1973) 10 Cal.3d 216, 219, 110 Cal.Rptr. 139, 514 P.2d 1219; Kemble v. McPhaill (1900) 128 Cal. 444, 446, 60 P. 1092; Santa Cruz R.P. Co. v. Heaton (1894) 105 Cal. 162, 165, 38 P. 693), and courts throughout the country have treated the scope of public access as committed to a trial court's discretion. (E.g., E.E.O.C. v. National Children's Center, Inc. (D.C.Cir.1996) 98 F.3d 1406, 1409, 1410; Brown & Williamson Tobacco Corp. v. F.T.C. (6th Cir.1983) 710 F.2d 1165, 1177; Wilson v....