Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_16-cv-01381/USCOURTS-cand-4_16-cv-01381-0/pdf.json

Nature of Suit Code: 470
Nature of Suit: Civil (Rico)
Cause of Action: 18:1962 Racketeering (RICO) Act

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

JOEL SJOSTROM, et al.,

Plaintiffs,

v.

HARRY R KRAATZ, et al.,

Defendants.

Case No. 16-cv-01381-DMR 

ORDER DENYING AMENDED 

MOTION TO SEAL THE COMPLAINT

Re: Dkt. No. 10

On March 21, 2016, Plaintiffs Joel Sjostrom and Aegis Retail One, LLC (“Plaintiffs”) filed 

a complaint alleging claims for fraud, breach of fiduciary duty, intentional interference with 

prospective economic relations, violation of federal securities law, violations of the Racketeering 

and Corrupt Organizations Act, and unfair competition against Defendants Harry Kraatz and 

HKSB, LLC. Complaint [Docket No. 1]. On June 21, 2016, Plaintiffs filed a motion to seal the 

complaint in its entirety. Plaintiffs assert that the parties have reached a full settlement, and that 

upon full review of the facts, Plaintiffs now believe that they do not have a sufficient basis to 

litigate the case. Plaintiffs therefore seek to seal the complaint because the allegations made 

therein could harm Kraatz’s reputation. Amended Motion to Seal (“Mot.”) [Docket No. 10]. The 

court has determined that this matter is appropriate for resolution without oral argument pursuant 

to Civil Local Rule 7-1(b). The motion hearing set for July 28, 2016 is hereby vacated. 

I. LEGAL STANDARD

The public has a right of access to judicial proceedings and court records are normally 

open to the public. Nixon v. Warner Communications, 435 U.S. 589, 597 (1978) (“It is clear that 

the courts of this country recognize a general right to inspect and copy public records and 

documents, including judicial records and documents” (citations omitted)). The Ninth Circuit 

“start[s] with a strong presumption in favor of access to court records.” Foltz v. State Farm Mut. 

Case 4:16-cv-01381-DMR Document 12 Filed 07/21/16 Page 1 of 4
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Auto. Ins. Co., 331 F.3d 1122, 1135 (9th Cir. 2003). Two standards govern motions to seal court 

documents. A “compelling reasons” standard applies to dispositive motions, such as motions for 

summary judgment. A “good cause” standard applies to non-dispositive motions, such as 

discovery motions. Kamakana v. City & Cty. of Honolulu, 447 F.3d 1172, 1179 (9th Cir. 2006). 

Motions that are technically non-dispositive may still require the party to meet the “compelling 

reasons” standard when the motion is more than tangentially related to the merits of the case. Ctr. 

for Auto Safety v. Chrysler Grp., LLC, 809 F.3d 1092, 1101 (9th Cir. 2016).

To meet the “good cause standard,” “a ‘particularized showing’ under the . . . standard of 

Rule 26(c) will ‘suffice.’” Kamakana, 447 F.3d at 1180 (quoting Foltz, 331 F.3d at 1138). 

Compelling reasons generally exist when the “‘files might have become a vehicle for improper 

purposes,’ such as the use of records to gratify private spite, promote public scandal, circulate 

libelous statements, or release trade secrets.” Id. (quoting Nixon, 435 U.S. at 598), or where court 

files may serve “as sources of business information that might harm a litigant’s competitive 

standing.” Nixon, 435 U.S at 598-99. 

Under the local rules in this district, sealing orders “may issue only upon a request that 

establishes that the [information] is privileged or protectable as trade secret or otherwise entitled to 

protection under the law.” Civil L.R. 79-5(b). All requests to file under seal must be “narrowly 

tailored,” such that only sealable information is sought to be redacted from public access. Id.

II. ANALYSIS

Plaintiffs seek to seal the complaint in its entirety. Because the complaint is more than 

tangentially related to the merits of the case, the compelling reasons standard governs the sealing 

request. Schwartz v. Cook, No. 5:15-CV-03347-BLF, 2016 WL 1301186, at *1 (N.D. Cal. Apr. 4, 

2016) (compelling reasons standard governed motion to seal portions of the complaint); In re 

NVIDIA Corp. Derivative Litig., No. 06–cv–06110–SBA, 2008 WL 1859067, at *3 (N.D. Cal. 

Apr. 23, 2008) (“While a complaint is not, per se, the actual pleading by which a suit may be 

disposed of, it is the root, the foundation, the basis by which a suit arises and must be disposed 

of.”).

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United States District Court

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Plaintiffs argue that the complaint should be sealed because the fraud-related allegations in 

the complaint could harm the reputation and livelihood of Kraatz, a re-organization specialist who 

assists struggling companies and whose business involves reviewing the confidential information 

of clients during restructuring. Mot. at 4. Plaintiffs contend that allowing the complaint to remain 

public “would not only be an embarrassment to Mr. Kraatz but could be catastrophic as current 

and potential clients will distance themselves from Mr. Kraatz out of caution, if not a belief that 

Mr. Kraatz has ulterior motives.” Id. at 4-5. Similarly, Plaintiff Sjostrom’s declaration in support 

of the motion to seal states: “Due to the nature of the claims alleged in the Complaint, I believe 

harm could occur that may substantially injure defendant Harry Kraatz’s reputation that assists 

struggling businesses to restructure and attract new investors.” Declaration of Joel Sjostrom 

[Docket No. 10-1] at ¶ 5. 

However the Ninth Circuit has made clear that “[t]he mere fact that the production of 

records may lead to a litigant’s embarrassment, incrimination, or exposure to further litigation will 

not, without more, compel the court to seal its records.” Kamakana, 447 F.3d at 1179. When 

sealing documents under the compelling reason standard, a “district court must base its decision 

on a compelling reason and articulate the factual basis for its ruling, without relying on hypothesis 

or conjecture.” Hagestad v. Tragesser, 49 F.3d 1430, 1434 (9th Cir. 1995). In the absence of 

specifically articulated reasons, “meaningful appellate review is impossible.” Id. at 1435. 

Although Plaintiffs nakedly assert that the “[c]omplaint has inadvertently become a vehicle for 

improper purposes that could promote a public scandal or circulate libelous statements,” they do 

not provide any factual basis supporting this claim. Mot. at 5.

In short, Plaintiffs have failed to provide a compelling reason to seal the complaint 

sufficient to overcome the public’s interest in disclosure. Furthermore, Plaintiffs’ request to seal 

the entire complaint is not narrowly tailored and fails to comply with Civil Local Rule 79-5(b). 

Therefore, Plaintiffs’ motion to seal the complaint is denied. 

//

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III. SETTLEMENT OF THE CASE

In their motion, Plaintiffs also state that “the parties have come to a settlement agreement 

and that Plaintiffs have dismissed the Complaint.” Mot. at 4. However, no notice of settlement or 

dismissal has been filed in this case. Therefore, Plaintiffs shall file a status report or dismissal 

within 30 days from the date of this Order. 

IT IS SO ORDERED.

Dated: July 21, 2016

______________________________________

Donna M. Ryu

United States Magistrate Judge

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