McCracken v. Riot Games CA2/7 ( 2023 )

Filed 10/20/23 McCracken v. Riot Games CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
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has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
MELANIE MCCRACKEN et al., B313724, B323115
Plaintiffs, (Los Angeles County
Super. Ct. No.
v. 18STCV03957)
RIOT GAMES, INC. et al.,
Defendants and Appellants;
CALIFORNIA CIVIL RIGHTS
DEPARTMENT et al.,
Interveners and Respondents.
APPEALS from orders of the Superior Court of Los Angeles
County, Elihu M. Berle, Judge. Affirmed.
Olivier & Schreiber, Monique Olivier, and Christian
Schreiber for Intervener and Respondent California Civil Rights
Department.
Gibson Dunn & Crutcher, Katherine V.A. Smith, Bradley J.
Hamburger, Daniel R. Adler, and Patrick J. Fuster for
Defendants and Appellants Riot Games, Inc., Riot Games Direct,
Inc., Riot Games Merchandise, Inc., and Riot Games Productions,
Inc.
_________________________
In these consolidated appeals, Riot Games, Inc., Riot
Games Direct, Inc., Riot Games Merchandise, Inc., and Riot
Games Productions, Inc. (Riot) contends the trial court abused its
discretion in denying Riot’s motions to seal the amounts paid by
Riot in 14 settlement and separation agreements reached with
current and former female Riot employees to resolve their sex
discrimination, sexual harassment, and equal pay claims.1 The
trial court did not abuse its discretion. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
A. Class Action Litigation Against Riot for Discrimination
Against Women
In 2018 then-current Riot employee Melanie McCracken
and former Riot employee Jessica Negron filed a putative class
action against Riot alleging claims for sex discrimination in pay
and promotions, sexual harassment, and creation of a hostile
work environment for women. The first amended complaint
alleged 12 causes of action: (1) violation of the California Equal
Pay Act (EPA; Lab. Code, § 1197.5 et seq.); (2) discrimination and
1 Unless otherwise indicated, references to settlement
agreements include separation agreements.
2
retaliation in violation of the EPA; (3) sex and gender
discrimination in violation of the Fair Employment and Housing
Act (FEHA; Lab. Code, § 12940 et seq.); (4) harassment in
violation of FEHA; (5) retaliation in violation of FEHA; (6) failure
to prevent discrimination in violation of FEHA; (7) constructive
termination (on behalf of only Negron); (8) violation of Business
and Professions Code section 17200 et seq.; (9) penalties under
the Private Attorneys General Act of 2004 (PAGA; Lab. Code,
§ 2698 et seq.); (10) failure to pay overtime wages; (11) failure to
provide accurate wage statements; and (12) failure to timely pay
wages.
Prior to the filing of the lawsuit, the Civil Rights
Department (CRD) (formerly the Department of Fair
Employment and Housing) had opened an investigation into
Riot’s potential violations of California’s equal pay requirements
and widespread sexual harassment and discrimination in the
workplace. CRD conducted extensive investigative discovery into
Riot’s practices.
In 2019 the parties to the putative class action negotiated a
proposed classwide settlement for $10 million.2 On November 27,
2019 the plaintiffs filed a motion for preliminary approval of the
settlement. The proposed settlement class consisted of
approximately 1,000 women and included “all current and former
female Riot employees and temporary agency contractors who
have not signed general releases and who worked at Riot in
California from November 6, 2014 through the date of
2 In an amended complaint filed with plaintiffs’ motion for
preliminary approval, McCracken was replaced as a proposed
class representative by Gabriela Downie.
3
Preliminary Approval.” The settlement allocated $500,000 to
penalties under PAGA.
The California Department of Industrial Relations,
Division of Labor Standards Enforcement (DLSE) filed a motion
to intervene on December 27, 2019. In early 2020 CRD also
moved to intervene. Both DLSE and CRD objected to approval of
the settlement.3 The agencies asserted the settlements contained
broad releases of the employees’ claims with no changes to
company policy, the payments to the employees undervalued the
claims, and the court lacked jurisdiction over the PAGA claims.
CRD also complained of potential collusion between the
negotiating parties as shown by hidden side settlement
agreements Riot had reached with the proposed class
representatives (McCracken, Negron, and Downie), which the
attorneys failed to disclose to the class or the court. The
plaintiffs subsequently withdrew their motion for preliminary
approval.
The trial court granted the motions to intervene filed by
DLSE and CRD. DLSE filed a complaint in intervention alleging
PAGA claims. CRD’s complaint in intervention alleged hiring,
pay, assignment, promotion, and related discrimination; sexual
harassment; retaliation; failure to prevent discrimination and
3 DLSE is charged with enforcing Labor Code requirements
and government orders governing wage, hour, and working
conditions of California employees. (Lab. Code, § 61; Craib v.
Bulmash (1989) 49 Cal.3d 475, 478.) The CRD is responsible for
protecting individuals from unlawful discrimination.
(Department of Fair Employment and Housing v. Cathy’s
Creations, Inc. (2020) 54 Cal.App.5th 404, 410; see Gov. Code,
§ 12930.)
4
harassment; and recordkeeping violations. Plaintiffs served the
operative third amended class action complaint on August 18,
2020.
On October 30, 2020 CRD filed a motion to compel Riot to
provide further discovery responses, seeking the production of the
settlement and separation agreements Riot reached with
McCracken and approximately 100 other female employees. CRD
argued Riot should be required to disclose the details of the
agreements because Riot maintained the employees who reached
the agreements should be excluded from CRD’s enforcement
action based on waivers in the agreements. CRD further
asserted the settlement agreements should be disclosed to enable
CRD to determine: (1) whether the agreements had enforceable
releases or waivers; (2) which of the settling employees was
covered by CRD’s request for relief in its enforcement action;
(3) whether the relief provided by the side agreements was
adequate and would support an offset against additional relief
sought by CRD; and (4) whether the agreements included terms
that “would chill employee or witness cooperation in this
government enforcement action.”
On January 25, 2021 the trial court granted CRD’s motion
and directed the parties to meet and confer regarding a protective
order. In March 2021 the parties reached an interim agreement
under which the settlement agreements at issue were produced
to CRD subject to an “‘attorneys’ eyes only’” designation on
April 1, 2021. (Capitalization omitted.) The parties agreed that
a protective order would later be entered that would treat the
agreements as “‘highly confidential.’” (Capitalization omitted.)
5
B. The Trial Court Declines To Seal Settlement Amounts
Contained in Settlement Agreements
On April 7, 2021 CRD filed an ex parte application for a
protective order and corrective notice regarding Riot’s settlement
practices. CRD requested a protective order requiring Riot to
obtain prior approval from the court or CRD before entering into
any settlement agreements relating to the lawsuit or an
agreement containing confidentiality or secrecy clauses. CRD
also requested the court issue a corrective notice to all current
and former employees informing them (1) they had a right to
participate and obtain potential relief from the pending
government enforcement action; (2) it is unlawful to retaliate
against employees for participating in a government enforcement
action or speaking with a government agency; and
(3) notwithstanding a non-disparagement or confidentiality term
in any agreement, employees may freely participate in the
government enforcement action and speak with enforcement
agencies.
CRD argued Riot had interfered with CRD’s investigation
“through settlements designed to ‘unlawfully influence’ employee-
witnesses with misleading illegal or unethical terms,
intimidation, and/or consideration.” In support of its application,
CRD lodged conditionally under seal seven settlement
agreements produced by Riot (including for McCracken, Negron,
and Downie) and six separation agreements, all executed from
May 2017 through December 2020. On April 12, 2021 the trial
court denied the ex parte application without prejudice to CRD
filing a noticed motion.
6
On April 19, 2021 Riot filed a motion pursuant to California
Rules of Court, rules 2.550 and 2.551 (sealed records rules)4
seeking to seal the “confidential personnel information of private
employees as well as [Riot’s] financial and business information”
contained in the settlement and separation agreements lodged
conditionally under seal with CRD’s April 7, 2021 ex parte
application (as well as references to the information in CRD’s
supporting memorandum and attorney declaration). Riot
advanced four arguments in support of its motion: (1) protection
of the confidential and private employee information was an
overriding interest that outweighed the public right of access;
(2) there was a substantial probability that Riot’s and third
parties’ interests would be harmed without sealing; (3) the
narrowly tailored redactions Riot proposed were the least
restrictive means available to protect these interests; and (4) the
confidentiality provisions in the settlement agreements provided
a separate basis to seal the documents.
On May 10, 2021 CRD filed a noticed motion for a
protective order and corrective notice seeking the same relief
requested in its ex parte application. CRD again lodged
conditionally under seal the 13 separation and settlement
agreements as exhibits, plus an additional settlement agreement
Riot produced on April 29, 2020. CRD requested issuance of a
corrective notice and protective order requiring approval by the
court, CRD, DLSE, or a settlement judge of any further
individual settlements between Riot and putative class members.
On May 20, 2021 Riot filed a second motion to seal, raising with
4 Further references to rules are to the California Rules of
Court.
7
respect to CRD’s noticed motion the same arguments it asserted
in its first motion to seal.
At a hearing on June 4, 2021, the trial court granted Riot’s
first motion to seal in part, sealing the employee names and
private identification information but not the remainder of the
settlement and severance agreements. The court explained that
other than the employees’ personal identifying information, Riot
failed to “show an overriding interest that overcomes the right of
public access” to the information. On June 29, 2021 the court
entered a written order specifying the sealed information covered
by its oral ruling, explaining that while the personal private
identification information should remain under seal, “as to the
remaining information Riot seeks to seal, Riot did not meet the
burden of proof required under California Rule of Court 2.551 to
show an overriding interest that overcomes the right of public
access to all the other information.”5
At the June 4 hearing, the trial court granted in part CRD’s
motion for a protective order and corrective notice. The court
rejected CRD’s request to declare void settlement terms that limit
the ability of employees to assist the governmental agencies, and
likewise denied CRD’s request for a protective order preventing
Riot from reaching settlements with employees without court or
5 On June 14, 2021 the trial court granted in part Riot’s ex
parte application requesting clarification of the scope of the trial
court’s June 4, 2021 oral ruling, specifying the type of
information to be sealed as personal identification information,
including the employee names, contact information, social
security numbers, job titles, attorneys, and lawsuit identifying
information. Riot appealed the court’s June 14 ruling, but it does
not on appeal challenge the court’s definition of personal
identifying information.
8
agency approval. However, the court ordered issuance of a
corrective notice to those class members who had been asked to
enter into settlement or separation agreements with Riot.
On June 7, 2021 Riot filed a third motion to seal, seeking to
redact portions of CRD’s reply filed in support of its motion for a
protective order and corrective notice. Riot raised the same
arguments it made in its earlier motions. In light of its ruling on
the first motion to seal, the court deferred ruling on the second
and third motions, and subsequently took the motions off
calendar.6
On September 9, 2021, in response to the private parties’
request for a mandatory settlement conference, CRD filed an ex
parte application seeking clarification of Riot’s and the proposed
class representatives’ standing to settle class and PAGA claims
without the participation of the governmental agencies. In
support of its motion, CRD conditionally lodged under seal three
of the settlement agreements it had previously lodged with prior
motions. On September 13 the court denied the ex parte
application. However, on September 17 Riot filed a fourth motion
to seal, raising essentially the same arguments it had asserted in
its first three motions.
On November 18, 2021 the parties (including DLSE and
CRD) reached a global settlement in principle and subsequently
executed a consent decree and settlement agreement. On
6 At a July 8, 2021 status conference, the trial court took the
second and third motions off calendar because Riot had appealed
the court’s ruling on the first motion, and the later motions
sought to seal the same information. However, the court
addressed the motions in its August 24, 2022 order denying Riot’s
motion to permanently seal the documents.
9
December 27 the parties filed a joint motion for preliminary
approval of the settlement. The settlement terms included a
maximum gross settlement amount of $100 million, with an
$80 million settlement fund for payments to class members and
$4 million (of the $80 million) to be paid to DLSE (75%) and class
members (25%) to resolve the PAGA claims. The court granted
preliminary approval of the settlement on August 10, 2022.
On February 10, 2022 Riot filed a fifth “motion to
permanently seal confidential information in individual
settlement agreements.” (Boldface and capitalization omitted.)
In this catch-all motion, Riot consolidated the (largely identical)
information to be sealed at issue in its four prior motions, raising
the additional argument that circumstances had changed in light
of the parties’ settlement. Riot argued that granting the sealing
motion would end the litigation, and the “balance of public and
private interests” had substantially shifted due to the settlement.
Riot did not present any additional factual support to establish
an overriding interest in confidentiality or a probability of harm
from disclosure.
At a hearing on August 16, 2022 the trial court denied the
fifth motion, finding under rules 2.550 and 2.551 that Riot failed
to establish an interest that overcame “the public’s right to access
these records which were relevant to the court’s rulings, and no
prejudice has been demonstrated.” The court applied the same
analysis to the settlement agreements attached to CRD’s
September 9, 2021 ex parte application (and Riot’s fourth motion
to seal), concluding the public’s right of access to the information
was implicated and “Riot failed to establish a cognizable
overriding interest, still relying almost exclusively on the
supposed confidential nature of the agreements.”
10
On August 24, 2022 the trial court issued a written order
denying Riot’s fourth motion to seal and fifth motion to
permanently seal, except for the sealing of personal identifying
information.
Riot timely appealed the trial court’s June 14 and June 29
orders on the first motion to seal and the court’s August 24, 2022
order granting in part the fourth motion to seal and fifth motion
to permanently seal. We consolidated Riot’s appeals.
DISCUSSION
A. Public Access to Court Records and Standard of Review
“Courts in California have long recognized a common law
right of access to public documents, including court records.” (In
re Marriage of Tamir (2021) 72 Cal.App.5th 1068, 1078 (Tamir);
accord, Overstock.com, Inc. v. Goldman Sachs Group, Inc. (2014)
231 Cal.App.4th 471, 483 (Overstock).) Under the common law,
“court records are presumed to be ‘“open to the public unless they
are specifically exempted from disclosure by statute or are
protected by the court itself due to the necessity of
confidentiality.”’” (Tamir, at p. 1078; accord, Overstock, at p. 483;
see NBC Subsidiary (KNBC-TV), Inc. v. Superior Court (1999)
20 Cal.4th 1178, 1213-1214 (NBC Subsidiary) [“[W]e agree with
numerous other courts . . . that history does suggest such a
general right of access to civil trials and related proceedings.”].)
In NBC Subsidiary, the Supreme Court recognized a First
Amendment right of access to civil court proceedings, observing
this right generally includes “access to civil litigation documents
filed in court as a basis for adjudication.” (NBC Subsidiary,
supra, 20 Cal.4th at pp. 1208, & fn. 25, 1209; accord, Tamir,
11
supra, 72 Cal.App.5th at p. 1078; Overstock, supra,
231 Cal.App.4th at p. 485 [“Since NBC Subsidiary, the California
Courts of Appeal have regularly employed a constitutional
analysis in resolving disputes over public access to court
documents.”].) As the court in NBC Subsidiary explained, “We
believe that the public has an interest, in all civil cases, in
observing and assessing the performance of its public judicial
system, and that interest strongly supports a general right of
access in ordinary civil cases.” (NBC Subsidiary, at p. 1210.)
In 2001, in response to NBC Subsidiary, the Judicial
Council adopted the sealed records rules currently found in
rules 2.550 and 2.551. (Mercury Interactive Corp. v. Klein (2007)
158 Cal.App.4th 60, 68 (Mercury); see Overstock, supra,
231 Cal.App.4th at p. 486.) The sealed records rules create a
presumption of public access to court-filed documents.
(Rule 2.550(c).) Although the rules do not apply to “discovery
motions and records filed or lodged in connection with discovery
motions or proceedings” (rule 2.550(a)(3)), they apply to
“discovery materials used at trial or submitted as a basis of
adjudication of matters other than discovery motions or
proceedings.” (Ibid.) A court may order a record filed under seal
“only if it expressly finds facts that establish: [¶] (1) There exists
an overriding interest that overcomes the right of public access to
the record; [¶] (2) The overriding interest supports sealing the
record; [¶] (3) A substantial probability exists that the
overriding interest will be prejudiced if the record is not sealed;
[¶] (4) The proposed sealing is narrowly tailored; and [¶] (5) No
12
less restrictive means exist to achieve the overriding interest.”
(Rule 2.550(d).)7
“While the court must consider the same criteria pertinent
to a motion to seal when ruling on a request to unseal
(rule 2.551(h)(4)), an order to unseal—as well as an order denying
sealing—does not require express factual findings by the trial
court.” (Overstock, supra, 231 Cal.App.4th at p. 488; accord,
Tamir, supra, 72 Cal.App.5th at p. 1079.)
We review an order denying a motion to seal under the
sealed records rules under the same standard as an order
granting a motion to unseal. (Tamir, supra, 72 Cal.App.5th at
pp. 1079-1080; Providian Credit Card Cases (2002)
96 Cal.App.4th 292, 301-302 (Providian).) When reviewing an
order denying a motion to seal, the reviewing court evaluates de
novo whether the sealed records rules apply and determines
“whether substantial evidence supports the trial court’s express
or implied findings that the requirements for sealing are not
met.” (Overstock, supra, 231 Cal.App.4th at p. 492; see Tamir, at
p. 1081 [“[A]ppellants are challenging an order unsealing court
records. . . . [W]e review the record for substantial evidence
supporting the . . . order.”]; Providian, at pp. 302-303 [in
reviewing unsealing of documents, reviewing court determines
whether substantial evidence supports trial court’s express or
implied findings].) We review the court’s “ultimate decision to
unseal” for an abuse of discretion. (Providian, at p. 299; see
7 Rule 2.551(b) governs the procedures for filing records
under seal; rule 2.551(h) specifies procedures for unsealing. “In
determining whether to unseal a record, the court must consider
the matters addressed in rule 2.550(c)-(e).” (Rule 2.551(h)(4).)
13
Overstock, at p. 492 [referencing trial court’s “ultimately
discretionary decision to deny sealing”].)
B. Riot Forfeited Its Argument the Sealed Records Rules Do
Not Apply
On appeal, Riot contends the sealed records rules do not
apply to the payment amounts in the settlement agreements
because the amounts were not submitted as a basis for
adjudication of any issues raised by CRD in its ex parte
application and motions. However, Riot did not argue in any of
its first four motions to seal that the sealed records rules did not
apply, instead asserting in its first motion (repeated in the
following three in similar language) that the “[m]otion is made
pursuant to Rules 2.550 and 2.551 of the California Rules of
Court.” And in its summary of argument, Riot asserted
“California Rules of Court 2.550 and 2.551 govern the sealing of
records filed with the Court.” Riot argued in its first heading
that “Protection of Riot’s confidential information and private
employee personnel information overcome the right of public
access,” followed by its argument that “A substantial probability
exists that Riot’s and third party interests will be prejudiced if
[CRD’s] ex parte application and supporting documents are not
sealed,” and then “Riot’s proposed redactions are narrowly
tailored to protect its overriding business interests, and no less
restrictive means exist to achieve this purpose.” (Capitalization
and boldface omitted.) Riot’s final argument was that the
confidentiality provisions in the settlement agreements
supported sealing the documents.
14
Nowhere in its briefs in support of the sealing motions did
Riot contend rules 2.550 and 2.551 did not apply.8 Accordingly,
Riot has forfeited this argument. (Quiles v. Parent (2018)
28 Cal.App.5th 1000, 1013 [“‘Failure to raise specific challenges
in the trial court forfeits the claim on appeal.’”]; Nellie Gail
Ranch Owners Assn. v. McMullin (2016) 4 Cal.App.5th 982, 997
[“‘As a general rule, theories not raised in the trial court cannot
be asserted for the first time on appeal; appealing parties must
adhere to the theory (or theories) on which their cases were
tried.’”]; Newton v. Clemons (2003) 110 Cal.App.4th 1, 11 [“‘[I]t is
fundamental that a reviewing court will ordinarily not consider
claims made for the first time on appeal which could have been
but were not presented to the trial court.’”].)
Riot contends it did not forfeit the argument that the sealed
records rules did not apply because it stated in its notice of
motion for each of the first four motions that the terms it sought
to seal were “‘irrelevant to the adjudication of any merits issues
before the Court.’” However, Riot’s passing reference to relevance
in its notice of motion, absent any discussion of whether the
sealed records rules applied, did not preserve the issue for
appeal. (See Morgan v. Imperial Irrigation Dist. (2014)
223 Cal.App.4th 892, 913-914 [individual plaintiffs forfeited
challenge to standards for setting water rates where the
individuals discussed the standards at trial but failed to
challenge their validity, explaining that “[b]y waiting to raise
8 As discussed, Riot’s fifth, catch-all motion relied on the
arguments in its prior motions to seal, adding only that the
public interest in the individual settlements had diminished due
to the global settlement of the class action and resolution of the
government investigation.
15
such an issue until appeal, they have deprived both the District
of the opportunity to address the [i]ndividuals’ concerns and the
trial court of the opportunity to resolve the issue”]; Premier
Medical Management Systems, Inc. v. California Ins. Guarantee
Assn. (2008) 163 Cal.App.4th 550, 564 [general arguments in
trial court that fees awarded were excessive, duplicative, or
unrelated to the motion were not sufficient to preserve issue for
appeal].)9
Riot alternatively urges us to exercise our discretion to
address the applicability of the sealed records rules because the
issue involves a question of law subject to de novo review and
implicates important issues of public policy. (In re S.B. (2004)
32 Cal.4th 1287, 1293 [“application of the forfeiture rule is not
automatic,” although “the appellate court’s discretion to excuse
forfeiture should be exercised rarely and only in cases presenting
an important legal issue”]; Adams v. Murakami (1991) 54 Cal.3d
105, 115, fn. 5 [“a reviewing court has discretion to decide” a
forfeited issue “if it presents a pure question of law arising on
undisputed facts, particularly when the issue is a matter of
important public policy”].) Contrary to Riot’s contention,
although the decision whether the sealed records rules apply is a
question of law subject to de novo review (Overstock, supra,
9 Riot also contends the argument in its motions to seal that
CRD’s filings had “‘little to no public interest’” preserved its
argument the sealing rules did not apply. But this assertion was
in the context of Riot’s argument it and its employees had a need
to protect their confidential information, which “[overcame] the
right of public access”—the factors listed in rule 2.550(d)(1) and
(2). (Boldface and capitalization omitted.)
16
231 Cal.App.4th at p. 492), the determination rests on factual
findings by the trial court as to whether the information was
submitted as a basis for adjudication. (Rule 2.550(a)(3).) Riot
failed to request the trial court make this determination in the
first place. Riot asserts the court reached this question because it
concluded the documents were relevant to CRD’s motion. But the
court’s consideration of relevance was in the context of its finding
under rule 2.550(d)(1) that the public interest in access to the
information was high. And as to Riot’s argument California has
a “strong interest in confidential settlement agreements,” the
court addressed these policy concerns in applying rule 2.550. We
therefore decline to exercise our discretion to decide the issue.10
C. The Trial Court Did Not Abuse Its Discretion in Denying
Riot’s Motions To Seal
1. Substantial evidence supports the trial court’s finding
there was not an overriding interest in keeping the
settlement amounts confidential that overcame the
right of public access
Riot contends the ““binding contractual agreement[s]’” it
reached with its employees not to disclose the settlement
amounts, and California’s interest in maintaining the
10 Even if we were to reach Riot’s contention, the settlement
amounts were relevant to CRD’s ex parte application and motions
for a protective order and corrective notice because the amounts
(whether high or low) were central to the question whether Riot
had improperly reached side agreements with its current and
former employees in an effort to thwart their cooperation with
CRD in its investigation.
17
confidentiality of settlement agreements to promote settlement,
served as overriding interests in keeping the settlement amounts
confidential. The trial court rejected these arguments,
concluding in denying Riot’s fifth motion to seal that “Riot failed
to establish a cognizable overriding interest, still relying almost
exclusively on the supposed confidential nature of the
agreements,” and any overriding interest did not overcome the
public’s right to access the information. As to the employees’
interests, the court found Riot presented no evidence that any
employees objected to public disclosure of the settlement
amounts. Even assuming Riot had an interest in maintaining
confidentiality of the settlement payments and other financial
information, the trial court did not abuse its discretion in finding
this was not an “overriding interest” that overcame the right of
public access.
Riot relies on the Supreme Court’s acknowledgment in a
footnote in NBC Subsidiary that “enforcement of binding
contractual obligations not to disclose” information is an example
of an overriding interest identified by the federal courts. (NBC
Subsidiary, supra, 20 Cal.4th at p. 1222, fn. 46; see Universal
City Studios, Inc. v. Superior Court (2003) 110 Cal.App.4th 1273,
1283 [defendant’s “contractual obligation not to disclose can
constitute an overriding interest within the meaning of” the
predecessor to rule 2.550(d), but defendant failed to show
prejudice to support sealing request].)
Riot also relies on California’s policy favoring settlement,
citing Monster Energy Co. v. Schechter (2019) 7 Cal.5th 781. The
Supreme Court in Monster Energy in the context of an alleged
breach of a confidentiality agreement in a settlement agreement
observed, “‘The privacy of a settlement is generally understood
18
and accepted in our legal system, which favors settlement and
therefore supports attendant needs for confidentiality.’
[Citation.] Routine public disclosure of private settlement terms
would ‘chill the parties’ ability in many cases to settle the action
before trial. Such a result runs contrary to the strong public
policy of this state favoring settlement of actions.’” (Id. at
pp. 793, 795.)
In addition, as Riot points out, although parties are
prohibited from reaching settlement agreements that keep
confidential factual information pertaining to claims for sexual
assault, sexual harassment, or workplace harassment,
discrimination, or retaliation, the Legislature carved out an
exception that allows parties to maintain the confidentiality of
the amounts paid in the settlement agreements. (See Code Civ.
Proc., § 1001, subds. (a) [prohibiting any settlement agreement
provision that “prevents or restricts the disclosure of factual
information related to a claim” for sexual assault or harassment,
or harassment, discrimination or retaliation in the workplace or
by the owner of a housing accommodation], (e) [“This section does
not prohibit the entry or enforcement of a provision in any
agreement that precludes the disclosure of the amount paid in
settlement of a claim.”].)
Riot argues the Legislature’s express protection of the
confidentiality of settlement amounts “puts a thumb on the scale
in favor of sealing.” However, the general policy to foster
settlements by keeping settlement terms confidential does not
mean protection from disclosure of the settlement amounts in a
particular case serves an overriding interest that overcomes the
public interest. “[T]he question in the context of sealing is
whether the state-recognized privacy interest in financial
19
information overrides the federal constitutional right of access to
court records. This is necessarily a balancing inquiry, dependent
on the facts and circumstances of the particular case.”
(Overstock, supra, 231 Cal.App.4th at p. 504; accord, Tamir,
supra, 72 Cal.App.5th at p. 1088.)
Substantial evidence supports the trial court’s finding that
even if Riot showed an overriding interest in keeping the
settlement amounts confidential, the public’s interest in access
outweighed this interest. The relevance of the information was
“high” in light of CRD’s motion for a corrective notice that would
advise employees they could freely cooperate with the
governmental agencies regardless of the confidentiality
provisions in any settlements they reached. The public would
have an interest in understanding the extent to which Riot was
offering employees settlement payments to thwart the
governmental agencies’ investigations. As the trial court
explained, CRD raised concerns with “potential witness
tampering through offers of consideration” in the settlement
agreements, which it sought to address through its request for
corrective notice.
Riot argues the right to public access is not significant here
because there was a global settlement of the class action that
revealed the nature of the factual allegations and payment of
$100 million in the settlement. Riot asserts, “With the filing of a
46-page consent decree that catalogs all the relevant facts and
provides significant monetary and injunctive relief to a class of
employees and contractors, the public will have learned more
than enough about Riot’s employment practices. . . . There is no
public interest in learning about the specific amounts of older
individual settlements with former employees and contractors
20
that were part of confidential agreements.” Riot ignores the
significance of the governmental agencies’ claim that Riot was
impeding cooperation by its current and former employees with
the enforcement agencies by reaching side settlements with
confidentiality provisions. And it was only after the agencies
intervened that Riot withdrew its $10 million settlement offer,
and then later agreed to a class settlement of $100 million.11 The
public had an interest in understanding the amount of the
individual payments Riot made to the employees to settle their
claims, for example, whether Riot was paying its employees
$10,000 or $100,000 to settle their harassment or discrimination
claims. A payment out of proportion to appropriate compensation
could support CRD’s allegations of witness tampering.
Moreover, as discussed, the public has a general right of
access in civil cases. (See NBC Subsidiary, supra, 20 Cal.4th at11 Riot’s reliance on Doe 1 v. Superior Court (2005)
132 Cal.App.4th 1160, 1171 and Jalali v. Root (2003)
109 Cal.App.4th 1768, 1784 is misplaced. Doe 1 involved the
application of the mediation confidentiality privilege to personnel
records of the Los Angeles Archdiocese, not a decision whether to
seal records. (See Doe 1 at 1163-1164.) In Jalali, the court
reversed a judgment for Jalali in her legal malpractice proceeding
against her former lawyer who she claimed gave her bad tax
advice with respect to a $2.75 million settlement offer she
accepted. (Jalali, at pp. 1773, 1783.) As a final “housekeeping
matter,” without any legal analysis, the court took “the
prophylactic step” of ordering the record of the confidential
settlement agreement sealed pending further order of a court or
showing of good cause. (Id. at pp. 1783-1784.) Jalali does not
provide any guidance on resolution of the balancing test under
rule 2.550.
21
p. 1210; In re Marriage of Burkle (2006) 135 Cal.App.4th 1045,
1055 (Burkle); see rule 2.550(c) [“court records are presumed to
be open”].) Under the sealed records rules, it was Riot’s burden
to establish facts showing it had an overriding interest in
confidentiality that overcame the public right of access. (Rule
2.550(d)(1); Providian, supra, 96 Cal.App.4th at p. 301 [“it was
defendants’ burden to prove the existence of trade secrets
[citations], and to overcome the presumption in favor of public
access”].)
Thus, while Riot may have established a legitimate interest
in confidentiality, substantial evidence supports the trial court’s
finding this interest was outweighed by the public’s right of
access to the settlement amounts. (See McNair v. National
Collegiate Athletic Assn. (2015) 234 Cal.App.4th 25, 36 [“On
balance, therefore, the NCAA’s interest in ensuring the
confidentiality of its investigations is insufficient to overcome
presumption of, and the courts’ obligation to protect the
constitutional interest in, the openness of court records in
ordinary court proceedings.”]; Providian, supra, 96 Cal.App.4th
at p. 301 [“If the trial court found the declarations conclusory or
otherwise unpersuasive, it could conclude, as it did, that
defendants had failed to demonstrate any ‘overriding interest
that overcomes the right of public access.’”].)
2. Riot did not establish a substantial probability of
prejudice to any overriding interest
Riot argues, as it did in the trial court, that it and its
employees would suffer three types of harm from disclosure of the
settlement amounts: invasion of Riot’s privacy interests, invasion
of the privacy interests of Riot’s employees; and competitive
22
harm. Substantial evidence supports the trial court’s finding
Riot failed to establish a substantial probability of prejudice, as
required by rule 2.550(d)(3).
Riot argues as to its privacy interests that prejudice is
“certain” because it bargained for confidential settlement terms,
and “[o]nce the cat is out of the bag,” there is no way to restore
the bargain to Riot. But Riot failed to explain how, other than
the harm in having to pay for something it was not getting,
disclosure would cause it harm. Riot also cites to public policy
concerns, observing that refusing to seal the settlement amounts
would generally chill settlement efforts. This argument fails to
show how disclosure would prejudice Riot.12 As the Seventh
Circuit reasoned in Goesel v. Boley Intern. (H.K.) Ltd. (7th Cir.
2013) 738 F.3d 831, 835, in denying a motion to seal the terms of
two settlement agreements, “because there is potential public
value to disclosing settlement terms, including amount, parties
have to give the judge a reason for not disclosing them—and the
fact that they don’t want to disclose is not a reason.” (See Tamir,
supra, 72 Cal.App.5th at p. 1088 [“[T]he general right to financial
privacy, without more, does not preempt the public’s right of
12 Riot’s reliance on Cassidy v. California Bd. of Accountancy
(2013) 220 Cal.App.4th 620, 625 is misplaced. There, the plaintiff
included in the appellate record the tax returns and financial
information of the company that accused Cassidy of practicing as
a certified public accountant without a license, even though the
documents were not admitted into evidence or considered by the
administrative judge or superior court. (Id. at pp. 624-625.) On
these narrow circumstances, sealing was appropriate under
rule 2.550(d). (Id. at p. 625; see Strawn v. Morris, Polich &
Purdy, LLP (2019) 30 Cal.App.5th 1087, 1098 [“Tax returns are
privileged from disclosure.”].)
23
access.”]; Copley Press v. Superior Court (1998) 63 Cal.App.4th
367, 376 [“[W]e find no authority that the amount of money a
person receives in judgment or court-approved settlement as the
result of tortious conduct is confidential. The fact of a damage
award, whatever size, is not in itself a private fact deserving
protection and secrecy in public education is not in the public
interest. The settlement amount is not a trade secret, within a
privilege, or likely to place anyone in ‘clear and present danger of
attack.’”].)
Riot points to a single sentence in the declaration filed by
Emily Winkle, Riot’s chief people officer, asserting disclosure of
settlement terms “would impact Riot’s ability to settle with other
parties in the future, and would allow future parties an
advantage in negotiating for similar terms.”13 But Winkle fails to
explain how disclosure of the settlement agreements would
impact settlement negotiations with future employees, especially
given public disclosure of the $100 million class settlement. Riot
also contends disclosure would threaten the privacy rights of its
current and former employees. Riot suggests members of the
public may be able to discover the identity of the settling
employees, but this is speculative given the trial court’s order
sealing all personal identifying information for the employees.
And, as the trial court observed, Riot made no effort to establish
that any of the settling employees “wanted the settlement
amounts to be kept confidential in the context of the proceedings
involving [CRD] and its motions.” Riot points to no evidence to
the contrary.
13 Winkle submitted the same declaration in support of Riot’s
first, third, and fourth motions to seal.
24
Finally, Riot argues it will suffer a competitive
disadvantage if the settlement amounts are disclosed, relying on
Winkle’s statement in her declaration that the settlement
agreements “contain sensitive business information, including
but not limited to Riot’s negotiation of individual settlement and
severance terms with former employees, its determination of
severance benefits for individual employees, and its monthly
salaries for such employees.” Further, Riot argues, “[i]f this
information were to become public, it would permit Riot’s
competitors to assess Riot’s business strategy, particularly with
regards to its employee compensation and benefits, and allow
them to tailor their own hiring and retention strategies to more
effectively compete against Riot.” But absent personal
identifying information, Riot’s competitors will not know how to
evaluate the monthly salaries of Riot’s employees. For example,
the competitors would not know the background, experience, and
position of a specific employee, which would limit the usefulness
of the information.
In light of the conclusory and speculative showing of harm
by Riot, substantial evidence supports the trial court’s finding
Riot failed to show a substantial probability of prejudice to the
interests of Riot or its employees. (See Providian, supra,
96 Cal.App.4th at pp. 296-297 [trial court did not abuse discretion
in unsealing 21 documents allegedly containing trade secrets and
propriety information where declarations from defendant’s vice
president and consultant stated only that the documents
contained “‘core proprietary information’”]; cf. Universal City
Studios, Inc. v. Superior Court, supra, 110 Cal.App.4th at p. 1286
[“fact-specific” declaration from senior vice president and
controller explaining how disclosure would “cause ‘competitive
25
harm’ to defendant in its negotiations with competitors and
customers” would have supported sealing of information but for
company’s public disclosure of document in other case].)
DISPOSITION
The orders are affirmed. CRD is to recover its costs on
appeal.
FEUER, J.
We concur:
PERLUSS, P. J.
SEGAL, J.
26