NJOY, LLC v. Imiracle (HK) Limited ( 2024 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 NJOY, LLC, Case No. 24-cv-00397-BAS-JLB 12 Plaintiff, ORDER: 13 v. (1) DENYING PLAINTIFF’S EX PARTE REQUEST TO FILE 14 IMIRACLE (HK) LTD., et al., NOTICE OF SUPPLEMENTAL 15 Defendants. AUTHORITY (ECF No. 68); (2) REQUIRING BRICK-AND- 16 MORTAR DEFENDANTS 17 REPLY TO PLAINTIFF’S MOTION TO SEAL (ECF No. 18 102); AND 19 (3) GRANTING PLAINTIFF’S APPLICATION FOR LEAVE 20 TO FILE SURREPLY (ECF No. 21 104) 22 23 Pending before the Court is Plaintiff NJOY, LLC’s Ex Parte Request to File a Notice 24 of Supplemental Authority (ECF No. 68) in support of its Supplemental Brief in Response 25 to the Court’s May 24, 2024, Order (ECF No. 61). The proposed supplemental authority 26 is the Ninth Circuit’s decision in Davidson v. Sprout Foods, Inc., 106 F.4th 842 (9th Cir. 27 June 28, 2024), which NJOY contends is relevant to an FDCA preemption analysis for 28 California’s Unfair Competition Law (“UCL”) claims based on alleged violations of 1 California’s flavor ban, California Health & Safety Code § 104559.5(b)(1). (ECF No. 68 2 at 2:21–23.) 3 Online Retailer Defendants—SV3 LLC, TheSy, LLC, and Empire Imports LLC— 4 have filed a response contesting the relevance of Davidson, clarifying that they are not 5 asserting FDCA preemption of UCL claims based solely on California’s flavor ban. 6 Instead, they maintain that the FDCA preempts UCL claims to the extent NJOY alleges 7 violations of the FDCA itself. (ECF No. 69 at 2: 12–13.) Specifically, Online Retailer 8 Defendants’ FDCA preemption argument is limited to claims asserting that they had an 9 obligation to disclose FDA warning letters and alleged violations of FDA regulatory 10 requirements. (ECF No. 63 at 4:13–16, 6:11–15, 7:3–6.) 11 Given that NJOY’s request aimed to demonstrate that UCL claims based on 12 violations of California’s flavor ban are not preempted by the FDCA, and because the 13 Online Retailer Defendants are not raising a preemption argument regarding these UCL 14 claims, the Court finds no basis to reopen briefing. Accordingly, the Court DENIES 15 Plaintiff’s Ex Parte Request to File Notice of Supplemental Authority. (ECF No. 68.) 16 Additionally, before the Court is NJOY’s Ex Parte Application for Leave to File 17 Surreply in Support of its Motion for Preliminary Injunction (“Ex Parte Application”). 18 (ECF No. 104.) In its Ex Parte Application, NJOY submits that new evidence has surfaced 19 indicating Brick-and-Mortar Defendants—Aroma Avenue Vape Shop, Cigarettes N More, 20 Cloudhaven Vapors, Inc., and Z Vapor Room—continue to violate California’s flavor ban, 21 which prohibits the retail sale and possession of flavored tobacco products with the intent 22 to sell or offer them for sale. NJOY contends this ongoing violation further strengthens 23 the grounds for the motion for a preliminary injunction, which Brick-and-Mortar 24 Defendants oppose. (ECF No. 41.) Brick-and-Mortar Defendants oppose the request to 25 file surreply. (ECF No. 105.) In conjunction with its Ex Parte Application, NJOY has 26 filed a Motion to Seal, requesting that certain portions of the Ex Parte Application be filed 27 under seal. (ECF No. 102.) 28 1 For the reasons herein, the Court ORDERS Brick-and-Mortar Defendants to reply 2 to Plaintiff’s Motion to Seal (ECF No. 102) and GRANTS Plaintiff’s Ex Parte Application 3 for Leave to File Surreply in Support of its Motion for Preliminary Injunction (ECF No. 4 104). 5 I. LEGAL STANDARDS 6 A. Leave to File Surreply 7 Courts generally view motions for leave to file a surreply with disfavor. Hill v. 8 England, No. CVF05869RECTAG, 2005 WL 3031136, at * 1 (E.D. Cal. Nov. 8, 2005) 9 (citing Fedrick v. Mercedes-Benz USA, LLC, 366 F. Supp. 2d 1190, 1197 (N.D. Ga. 2005)). 10 However, permitting the filing of a surreply is within the discretion of the district court. 11 Schmidt v. Shah, 696 F. Supp. 2d 44, 60 (D.D.C. 2010). “Although the court in its 12 discretion [may] allow the filing of a sur-reply, this discretion should be exercised in favor 13 of allowing a surreply only where a valid reason for such additional briefing exists.” 14 Johnson v. Wennes, No. 08-cv-1798, 2009 WL 1161620, at *2 (S.D. Cal. Apr. 28, 2009). 15 B. Motion to Seal 16 “[T]he courts of this country recognize a general right to inspect and copy public 17 records and documents, including judicial records and documents.” Nixon v. Warner 18 Commc’ns, Inc., 435 U.S. 589, 597 (1978). “Unless a particular court record is one 19 ‘traditionally kept secret,’ a ‘strong presumption in favor of access’ is the starting point.” 20 Kamakana v. City & Cty. of Honolulu, 447 F.3d 1172, 1178 (9th Cir. 2006) (citing Foltz v. 21 State Farm Mut. Auto Ins. Co., 331 F.3d 1122, 1135 (9th Cir. 2003)). “The presumption 22 of access is ‘based on the need for federal courts, although independent—indeed, 23 particularly because they are independent—to have a measure of accountability and for the 24 public to have confidence in the administration of justice.’” Ctr. for Auto Safety v. Chrysler 25 Grp., LLC, 809 F.3d 1092, 1096 (9th Cir. 2016) (quoting United States v. Amodeo, 71 F.3d 26 1044, 1048 (2d Cir. 1995)). 27 A party seeking to seal a judicial record bears the burden of overcoming the strong 28 presumption of access. Foltz, 331 F.3d at 1135. The showing required to meet this burden 1 depends upon whether the documents to be sealed relate to a motion that is “more than 2 tangentially related to the merits of the case.” Ctr. for Auto Safety, 809 F.3d at 1102. When 3 the underlying motion is more than tangentially related to the merits, the “compelling 4 reasons” standard applies. Id. at 1096–98. When the underlying motion does not surpass 5 the tangential relevance threshold, the “good cause” standard applies. Id. For instance, an 6 action’s complaint, and its associated exhibits, are more than tangentially related to the 7 merits of the case. Id. at 1098. Similarly, a party’s opposition to a motion to dismiss is 8 more than tangentially related to the merits of the case. Id. 9 “In general, ‘compelling reasons’ sufficient to outweigh the public’s interest in 10 disclosure and justify sealing court records exist when such ‘court files might have become 11 a vehicle for improper purposes,’ such as the use of records to gratify private spite, promote 12 public scandal, circulate libelous statements, or release trade secrets.” Kamakana, 447 13 F.3d at 1179 (quoting Nixon, 435 U.S. at 598). As to this last category, courts have been 14 willing to seal court filings containing confidential business information, “such as 15 marketing strategies, product development plans, licensing agreements, and profit, cost, 16 and margin data,” where the parties have been able to point to concrete factual information 17 to justify sealing. See, e.g., Cohen v. Trump, No. 13-cv-2519-GPC-WVG, 2016 WL 18 3036302, at *5 (S.D. Cal. May 27, 2016). However, “[t]he mere fact that the production 19 of records may lead to a litigant’s embarrassment, incrimination, or exposure to further 20 litigation will not, without more, compel the court to seal its records.” Kamakana, 447 21 F.3d at 1179. A blanket protective order is not itself sufficient to show “good cause,” let 22 alone compelling reasons, for sealing particular documents. See Foltz, 331 F.3d at 1133; 23 San Jose Mercury News, Inc. v. U.S. Dist. Ct., N. Dist., 187 F.3d 1096, 1103 (9th Cir. 24 1999). The decision to seal documents is “one best left to the sound discretion of the trial 25 court” upon consideration of “the relevant facts and circumstances of the particular case.” 26 Nixon, 435 U.S. at 599. 27 In addition, parties moving to seal documents must comply with the procedures set 28 forth in this Court’s standing order for filing documents under seal. See Standing Order of 1 the Hon. Cynthia Bashant for Civil Cases ¶5. The rule permits sealing to “only those 2 documents, or portions thereof, necessary to protect such sensitive information.” Id. Thus, 3 although sometimes it may be appropriate to seal a document in its entirety, whenever 4 possible a party must redact. See Kamakana, 447 F.3d at 1183 (noting a preference for 5 redactions so long as they “have the virtue of being limited and clear”); Murphy v. Kavo 6 Am. Corp., No. 11-cv-00410-YGR, 2012 WL 1497489, at *2–3 (N.D. Cal. Apr. 27, 2012) 7 (denying motion to seal exhibits but directing parties to redact confidential information). 8 II. ANALYSIS 9 A. Leave to File Surreply 10 NJOY contends that the newly obtained information from Brick-and-Mortar 11 Defendants provides relevant details that were unavailable when initially filing its motion 12 for a preliminary injunction and supporting reply. (ECF No. 104 at 2:9–11.) NJOY argues 13 this evidence shows that Brick-and-Mortar Defendants are in violation of California law, 14 specifically Cal. Health & Safety Code § 104559.5(b)(1), which prohibits the sale of 15 flavored tobacco products and bars retailers from possessing such products with the intent 16 to sell or offer them for sale. (ECF No. 104-1 at 3:10–14.) Further, they maintain that the 17 new evidence supports Plaintiff’s arguments for a preliminary injunction and would assist 18 the Court in its evaluation of the motion. (ECF No. 104 at 2:9–15.) 19 Brick-and-Mortar Defendants argue that NJOY lacks standing under the UCL 20 because it does not sell flavored vape products in California. (ECF No. 105 at 2:8–9.) As 21 such, they argue NJOY’s Ex Parte Application should be denied, asserting it remains 22 untimely and NJOY’s lack of standing has not changed. (Id. at 2:16–17.) 23 After reviewing and considering the request, the Court finds a valid reason to grant 24 NJOY’s request to file a surreply. Specifically, NJOY has presented substantial new 25 evidence obtained through discovery, which was not available at the time of filing its initial 26 motion for a preliminary injunction. This evidence comes directly from Brick-and-Mortar 27 Defendants and may suggest ongoing violations of California law, which potentially 28 impact NJOY and the public interest. As such, the Court grants Plaintiff’s Ex Parte 1 Application for Leave to File Surreply in Support of its Motion for Preliminary Injunction. 2 (ECF No. 104.) 3 B. Motion to Seal 4 NJOY seeks to file under seal specific portions of its Ex Parte Application, including 5 sections of the proposed Surreply and exhibits attached as Exhibit A. (ECF No. 102.) 6 These sections contain information designated as confidential by Brick-and-Mortar 7 Defendants under the Court’s Protective Order. (ECF No. 88.) Accordingly, NJOY moves 8 to seal the following portions of Exhibit A, which includes selected lines from the proposed 9 surreply and the following exhibits: 10 • Surreply: lines 2:5–6; 2:8–10; 2:16–24; 3:1–19; 3:14–17; and footnote 2 11 • Exhibits: 1, 2, 3, 4, and 5 in their entirety 12 First, the Court recognizes that Plaintiff’s Ex Parte Application is more than 13 tangentially related to the merits of the case. “Particularly relevant here, a motion for 14 preliminary injunction frequently requires the court to address the merits of a case, which 15 often includes the presentation of substantial evidence.” Ctr. for Auto Safety, 809 F.3d at 16 1099 (citing Stormans v. Selecky, 586 F.3d 1109, 1127 (9th Cir. 2009)). Thus, the 17 “compelling reasons” standard applies. 18 Moreover, the Court finds there are not sufficient compelling reasons to seal the 19 proposed portions of the Surreply and exhibits in support of NJOY’s Ex Parte Application, 20 as the public interest in access to materials that the Court will rely on in its decision-making 21 process outweighs the justification provided for sealing them. Additionally, Brick-and- 22 Mortar Defendants have failed to adhere to procedural requirements. The Court’s standing 23 order notes: “[t]he fact that both sides agree to seal a document or that a stipulated 24 protective order was issued is insufficient cause for sealing.” Standing Order § 5.a. 25 “Parties often seek to seal a document only because another party designated the document 26 as sensitive under a protective order . . . [i]n these circumstances, the moving party must 27 first meet and confer with the designating party to determine whether the designating party 28 maintains that any portion of the documents must be filed under seal.” Id. § 5.a. 1 Accordingly, NJOY reached out to Brick-and-Mortar Defendants, the designating 2 party, on October 2, 2024, prior to filing an application to file under seal. (ECF No. 102 3 at 3:22–25.) This was done to obtain their legal rationale for labeling certain information 4 as “Confidential” and requesting it be sealed. Per NJOY, counsel for Brick-and-Mortar 5 Defendants responded: “[NJOY’s] sole cause of action against [the Brick-and-Mortar 6 Defendants] is unfair competition. [NJOY’s] claim if the motion to dismiss survives is 7 essentially that the [Brick-and-Mortar Defendants] are taking away sales or market share 8 from [NJOY]. Therefore, the sales records of [the Brick-and-Mortar Defendants], their 9 distributors, their sales volume and the and other documents are trade secrets so as not to 10 be shared with [NJOY] or the public.” (ECF No. 102 at 3:27–4:4.) 11 However, Brick-and-Mortar Defendants’ response is insufficient. The Court’s 12 standing order notes: “the designating party must file a response to the sealing motion 13 within seven days that satisfies the sealing standard . . . If no response is filed, the Court 14 may order that the document be filed in the public records.” Standing Order § 5.b. Brick- 15 and-Mortar Defendants have failed to meet this requirement. 16 At the same time, the Court recognizes that sensitive business information may be 17 subject to sealing under the compelling reasons standard. See Fed. Trade Comm’n v. 18 Qualcomm, Inc., No. 17-cv-00220-LHK, 2019 WL 95922, at *2 (N.D. Cal. Jan. 3, 2019) 19 (finding compelling reasons for “information that, if published, may harm [a party’s] or 20 third parties’ competitive standing and divulges terms of confidential contracts, contract 21 negotiations, or trade secrets”). The specified lines in the proposed Surreply, along with 22 the exhibits attached as Exhibit A, contain sales and purchase records that include sensitive 23 information on pricing, sales volumes, and profit details or references to such data. 24 However, while some of this information may indeed be commercially sensitive, Plaintiff’s 25 proposed redactions are overbroad, as they extend to information beyond what is necessary 26 to protect confidential business interests. 27 Therefore, the Court orders Brick-and-Mortar Defendants to respond to Plaintiff’s 28 Motion to Seal and propose more narrowly tailored redactions. 1 || TN. CONCLUSION 2 For the foregoing reasons, the Court ORDERS Brick-and-Mortar Defendants to 3 ||respond to Plaintiff's Motion to Seal (ECF No. 102). The Court grants the Brick-and- 4 ||Mortar Defendants the opportunity to file a response demonstrating that the documents 5 the compelling reasons standard and proposing a narrowly tailored redacted version 6 ||to protect sensitive information, such as pricing, volume, and profit terms, or other 7 information that could harm their competitive standing. Ifthe Defendants fail to provide a 8 sufficient response, NJOY may file the documents publicly on the docket. Further, as 9 ||required by this Court’s standing order, Defendants must support their response with a 10 || declaration from a competent witness. Any response must be filed no later than November 11 |/22, 2024, 12 Moreover, the Court GRANTS Plaintiff's Ex Parte Application for Leave to File a 13 ||Surreply in Support of its Motion for Preliminary Injunction (ECF No. 104). After 14 || reviewing the Brick-and-Mortar Defendants’ response to NJOY’s motion to seal, the Court 15 |} will set a deadline for NJOY to file its surreply. The Court will also establish a deadline 16 || for Brick-and-Mortar Defendants to file a response, should they choose to do so. 17 Finally, given that Online Retailer Defendants are not raising a preemption argument 18 |/regarding the UCL claims based on California’s flavor ban, the Court finds no basis to 19 ||reopen briefing. Accordingly, the Court DENIES Plaintiff's Ex Parte Request to File a 20 || Notice of Supplemental Authority. (ECF No. 68.) 21 IT IS SO ORDERED. 22 /\ yy 23 || DATED: November 13, 2024 ( yi uA (Hophta. 6 24 United States District Judge 25 26 27 28 ~ _