1260 BB Property, LLC v. Certain Underwriters at Lloyd’s and London Market Companies, et al.

Case Number

23CV00285

Case Type

Hearing Date / Time

Wed, 04/16/2025 - 10:00

Nature of Proceedings

Joint Motion To Seal Confidential Documents Pursuant To California Rules of Court, Rules 2.550 and 2.551, And The Parties’ Joint Protective Order

Tentative Ruling

For Plaintiff 1260 BB Property, LLC: Jared M. Katz, Eric J. Munoz, William J. Ryan, Gregory J. Scandaglia, Mullen & Henzell L.L.P.

                                   

For All Defendants other than Defendant Liberty Mutual Fire Insurance Company: Tyler M. Costanzo, Clausen Miller P.C. (Mission Viejo, California), Sava Alexander Vojcanin and Charles W. Deutsch, Clausen Miller P.C. (Chicago, Illinois)

                                   

For Defendant Liberty Mutual Fire Insurance Company: Nicholas J. Boos, Maynard Nexsen LLP

                                   

RULING

For all reasons discussed herein, the joint motion of the parties to seal confidential documents pursuant to California Rules of Court, rules 2.550 and 2.551, and the parties’ joint protective order, is granted, in part. The clerk of the court is directed to lodge the declaration of Charles Deutsch filed on December 2, 2024, in support of defendants other than Liberty Mutual And Lexington Insurance Company’s motion to compel the continued deposition of 1260 BB Property, LLC, under seal. On or before April 25, 2025, defendants shall file a public redacted version of the declaration of Charles Deutsch filed on December 2, 2024, which redacts pages 493 through 673, 805 to 806, and 816 to 822, of exhibit D to that declaration. If defendants fail to file the public redacted version of the declaration of Charles Deutsch ordered herein within the prescribed time, the clerk of the court shall transfer the lodged declaration to the public file. Except as herein granted, the motion is otherwise denied.

Background

On May 9, 2023, with leave of court pursuant to a stipulation by the parties, plaintiff 1260 BB Property, LLC, filed a first amended complaint (FAC) against multiple entity defendants who sell insurance in the State of California, alleging four causes of action: (1) breach of contract; (2) declaratory judgment against defendants/primary insurers; (3) declaratory judgment against defendants/excess insurers; and (4) breach of the implied covenant of good faith and fair dealing. As alleged in the operative FAC:

Plaintiff is the owner of the Four Seasons Resort The Biltmore Santa Barbara (the hotel), which is located in Santa Barbara, California. (FAC, ¶ 2.) The hotel was insured under policies procured by Four Seasons Hotel Ltd. (Four Seasons) for the policy period of April 1, 2017, to April 1, 2018. (Id. at ¶ 2 & 7.)

During the policy period, the hotel suffered substantial property damage and economic loss from the Thomas Fire and an ensuing debris flow and mudslide, which totaled in excess of $64 million. (FAC, ¶ 2.) On the claims related to the fire, plaintiff suffered in excess of $6.7 million in insured losses, of which certain defendant insurers have paid $5,953,000 but have refused to pay in excess of $793,000. (Id., at ¶ 3.) On the claims related to the mudslide, plaintiff suffered in excess of $58 million in insured losses, of which certain defendants responsible for the first layer of primary insurance of $50 million have paid $46,670,264. (Id. at ¶ 4.) The excess insurers have refused to pay any amount for plaintiff’s losses above the $50 million primary policy limits. (Ibid.)

Attached to the complaint as Exhibits B through M are copies of relevant insurance policies related to the losses claimed by plaintiff in this action.

Relevant to the present proceeding, on December 2, 2024, all defendants other than Liberty Mutual Fire Insurance Company (collectively, the other defendants) filed a motion for an order (the PMQ Motion) compelling plaintiff to produce its designated person most qualified Joseph Hicks (the PMQ) for a continued deposition. The PMQ Motion was opposed by plaintiff.

In addition, on various dates in December 2024, multiple motions for summary judgment and for summary adjudication were filed in this action.

On December 9, 2024, the other defendants jointly filed five motions: (1) a motion for summary judgment; (2) a motion for summary adjudication re Coral Casino membership fees; (3) a motion for summary adjudication re interest expense; (4) a motion for summary adjudication re number of occurrences; and (5) a motion for summary adjudication re increased insurance premiums.

On December 11, 2024, Liberty Mutual Fire Insurance Company (Liberty Mutual) filed a motion for summary judgment and for alternate adjudication of the third cause of action for declaratory judgment, the fourth cause of action for breach of the implied covenant of good faith and fair dealing, and plaintiff’s claim for punitive damages.

On January 22, 2025, the court entered a Minute Order granting the PMQ Motion subject to conditions set forth in that order, and ordered the PMQ of plaintiff to, among other things, “appear for deposition, through its person most qualified, and answer deposition questions without written answers prepared by counsel.” (Jan. 22, 2025, Minute Order [Ruling ¶ 1].)

On February 10, 2025, the parties to this action jointly filed a motion for an order (the motion to seal) sealing documents identified in the declaration of Charles W. Deutsch submitted in support of the other defendants’ motions for summary adjudication re interest expense, summary adjudication re number of occurrences, and motion for summary judgment; the declaration of Nicholas J. Boos submitted in support of Liberty Mutual’s motion for summary judgment; and various pages contained within exhibit D to the PMQ Motion further described herein.

On February 25, 2025, plaintiff filed an opposition to the other defendants’ motion for summary adjudication re interest expense.

On February 26, 2025, plaintiff separately filed oppositions to the other defendants’ motions for summary adjudication re Coral Casino membership fees, re increased insurance premiums, and re number of occurrences, and to Liberty Mutual’s motion for summary judgment or, in the alternative, summary adjudication.

On February 27, 2025, plaintiff filed an opposition to the other defendants’ motion for summary judgment.

On March 12, 2025, the court issued a Minute Order (the MSA Minute Order) denying the motions of the other defendants for summary adjudication re increased insurance premiums, re Coral Casino membership fees, re interest expense, and re the number of occurrences, on the grounds that these motions are procedurally improper under California law. In addition, the court continued the hearings on the Liberty Mutual motion for summary and alternate adjudication, and the motion by the other defendants for summary judgment, to April 23, 2025.

The motion to seal:

In support of the motion to seal, the parties submit the declaration of Charles W. Deutsch (Deutsch), counsel for the other defendants. Deutsch states that the parties to this action entered into a “Stipulated Confidentiality Agreement and Protective Order” (the protective order), pursuant to which a party may designate documents as “Confidential” or “Highly Confidential” and under seal pursuant to California Rules of Court, rules 2.550 and 2.551. (Deutsch Decl., ¶ 3 & Exh. A.) Deutsch further states that the protective order provides that the parties shall take steps to maintain the confidentiality of any documents designated as confidential. (Ibid.) Deutsch asserts that in the various motions for summary judgment or adjudication filed by the other defendants and described above, the other defendants have submitted exhibits which have been designated as “Confidential” or “Highly Confidential” pursuant to the protective order. (Id. at ¶ 4.)

According to Deutsch, the exhibits submitted by the other defendants in support of the motion for summary adjudication re interest expense for which these defendants seek a sealing order include: (1) plaintiff’s expert report of William Polash of FGMK, LLC (the Polash Report) submitted as exhibit C to the motion; (2) excerpts from the deposition transcript of Michael Cerf (Cerf) submitted as exhibit E to the motion; (3) a Second Amended and Restated Business Loan Agreement between HTW, L.L.C., and The Northern Trust Company (the Second Amended Loan Agreement) submitted as exhibit J to the motion; (4) the Northern Trust Company Statements of Account for Account No. 1508482 (the Account Statements) submitted as exhibit K to the motion; and (5) a Loan Agreement between plaintiff and Bank of America (the BOA Loan Agreement) submitted as exhibit L to the motion. (Deutsch Decl., ¶ 5.)

Deutsch further states that the other defendants seek an order sealing excerpts from the deposition of Cerf which were submitted as exhibit J in support of their motion for summary adjudication re number of occurrences, and exhibit W in support of their motion for summary judgment. (Deutsch Decl., ¶¶ 6-7.)

As to the PMQ Motion, Deutsch states that the other defendants seek an order sealing the following documents which appear within exhibit D to that motion: (1) a “Transfer Approval Confirmation of a Domestic Wire, FSSB00055957-55958” (the Wire Transfer Approval), which appears in pages 805 to 806 of exhibit D; (2) correspondence dated January 2, 2018, (the January Correspondence) which appears in pages 816 to 822 of exhibit D; and (3) a Hotel Management Agreement (the Management Agreement) between Four Seasons and Channel Drive LLC, which appears in pages 493 through 673 of exhibit D. (Deutsch Decl., ¶ 8.)

The parties also submit the declaration of Liberty Mutual’s counsel, Nicholas J. Boos (Boos), who declares that, in connection with Liberty Mutual’s motion for summary judgment or alternate adjudications described above, Liberty Mutual submitted as exhibit G to that motion excerpted portions of the Cerf deposition which were designated by plaintiff as confidential pursuant to the protective order.

Analysis

California has “long recognized a common law right of access to public documents, including court records.” (Overstock.com, Inc. v. Goldman Sachs Group, Inc. (2014) 231 Cal.App.4th 471, 483 (Overstock).) There exists a presumption that “[c]ourt records are 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.” (McGuire v. Superior Court (1993) 12 Cal.App.4th 1685, 1687.) A court may order a document to be filed under seal only upon an express factual finding establishing an “overriding interest that overcomes the right of public access to the record”, that “the overriding interest supports sealing the records”, that “a substantial probability exists that the overriding interest will be prejudiced if the record is not sealed”, that “the proposed sealing is narrowly tailored”, and that “no less restrictive means exist to achieve the overriding interest.” (Cal. Rules of Court, rule 2.550(d)(1)-(5); Sander v. State Bar of California (2013) 58 Cal.4th 300, 319, fn. 7.)

“A party requesting that a record be filed under seal must file a motion or an application for an order sealing the record. The motion or application must be accompanied by a memorandum and a declaration containing facts sufficient to justify the sealing.” (Cal. Rules of Court, rule 2.551 (b)(1).) The moving party bears the burden of presenting information sufficient to identify the nature of the harm threatened by disclosure of the record at issue. (H.B. Fuller Co. v. Doe (2007) 151 Cal.App.4th 879, 894 (H.B. Fuller).)

Noted above, in the MSA Minute Order, the court denied the separately filed motions of the other defendants for summary adjudication re interest expense and re the number of occurrences as improper. Notwithstanding the denial of these motions on procedural grounds, the court will consider the motion to seal evidence submitted in support of these motions.

The parties assert that the documents described above have been identified by plaintiff as containing confidential and sensitive financial information of plaintiff, Four Seasons, and HTW, L.L.C., (HTW). The parties contend that there exists a strong interest in protecting what the parties describe as financial, trade, and private information appearing in these documents.

The parties further contend that public access to these records would prejudice plaintiff, HTW, and Four Seasons, and weaken their competitive advantage by revealing to their competitors the inner workings of plaintiff, including its financial agreements, financial holdings, debts, loans, and operations, and the manner in which plaintiff, HTW, and Four Seasons operate their businesses. The parties also assert that information contained in these documents would violate the privacy interests of unspecified non-parties to this action.

“A record must not be filed under seal without a court order. The court must not permit a record to be filed under seal based solely on the agreement or stipulation of the parties.” (Cal. Rules of Court, rule 2.551(a).) The protective order also provides that in circumstances where “any Confidential Information is included in any motion or other proceeding governed by California Rules of Court, Rules 2.550 and 2.551, those rules shall be followed.” (Deutsch Decl., Exh. A [protective order], ¶ 16.) For these reasons, to the extent the motion to seal is based solely on plaintiff’s designation of the documents described above as confidential pursuant to the terms of the protective order, the parties have failed to show facts sufficient to permit the court to enter an order sealing these documents.

As to the Polash Report submitted as exhibit C in support of the motion for summary adjudication re interest expense, the parties have also failed to meet their burden to show why the entirety, or any specific portion, of the Polash Report implicates an overriding interest that would overcome the public’s right to access this record for all reasons discussed below.

By way of example, the Polash Report includes an introduction stating the purpose for which William A. Polash (Polash), the author of that report, was engaged by plaintiff. (Dec. 9, 2024, Lodgment of Evidence ISO MSA Re Interest 2 of 3, Exh. C at p. 1.) The Polash Report also sets forth the qualifications of Polash and “background” facts giving rise to the claims alleged by plaintiff in this action which are to some extent also effectively set forth or disclosed in the FAC. (Id. at pp. 1-2.) The Polash Report also sets forth the analysis and findings of Polash with respect to the damages claimed by plaintiff in this action, including matters which, to some extent, are also effectively disclosed in the FAC. (Id. at p. 3.)

Apart from the general and conclusory arguments described above, the parties offer insufficient reasoned factual or legal argument, with specific references to the record, showing why all of the information appearing in the Polash Report implicates an overriding interest that overcome the public’s right to access the record, including with respect to matters which already exist in the public domain. (See Overstock, supra, 231 Cal.App.4th at pp. 487, 505.)

In addition, to the extent a party contends that specific information appearing in the Polash Report implicates an overriding interest, the motion to seal fails to include any reasoned argument showing, on a line-by-line or item-by-item basis with specific references to the record, the existence of an overriding interest in this information in a manner sufficient to permit the court to make the required factual findings. (See Cal. Rules of Court, rule 2.550; H.B. Fuller, supra, 151 Cal.App.4th at pp. 888-889.) For these and all reasons further discussed above, the court will deny the motion to seal as to the entirety of the Polash Report.

Regarding the transcript of the Cerf deposition submitted in support of the other defendants’ motion for summary adjudication re interest expense as exhibit E, portions of the testimony reflected in this transcript relates to the claims asserted by plaintiff in this action, and repairs made to the property at issue. The same reasoning and analysis apply. For reasons discussed above, the parties have failed to explain why there exists an overriding interest in all of the testimony reflected in exhibit E to the motion for summary adjudication re interest expense that overcomes the public’s right to access this record, including with respect to matters which already exist in the public domain. For this reason, the court will also deny the motion to seal the entirety of the Cerf deposition transcript submitted as exhibit E to the other defendants’ motion for summary adjudication re interest expense.

Regarding the Second Amended Loan Agreement submitted as exhibit J to the other defendants’ motion for summary adjudication re interest expense, apart from the general and conclusory arguments noted above, the parties fail to explain why this existence of this document, alone, implicates any overriding interest or privacy rights sufficient to justify sealing the entirety of this record. (See Hecht, Solberg, Robinson, Goldberg & Bagley LLP v. Superior Court (2006) 137 Cal.App.4th 579, 593-594 [constitutional right to privacy in the disclosure of financial information does not apply to corporations].)

Further, to the extent a party contends that there exists an overriding interest in specific information appearing within the Second Amended Loan Agreement, including with respect to any competitive advantage of plaintiff or privacy rights of a particular person, wholly absent from the motion to seal is any reasoned argument showing, on a line-by-line or item-by-item basis with specific references to the record, the existence of an overriding interest in any such information. For these reasons, the court is unable to make the factual findings required under California Rules of Court, rule 2.550(d). Therefore, and for all reasons discussed above, the court will deny the motion to seal as to the entirety of the Second Amended Loan Agreement.

The same reasoning and analysis apply with respect to the Account Statements submitted as exhibit K to the other defendants’ motion for summary adjudication re interest expense, and the BOA Loan Agreement submitted as exhibit L to that motion. For all reasons further discussed above, the court will also deny the motion to seal as to these documents.

As to the transcripts of the Cerf deposition submitted as, respectively, exhibit J and W to the other defendants’ motions for summary adjudication re number of occurrences and summary judgment, and as exhibit G to Liberty Mutual’s motion for summary judgment, the same reasoning and analysis apply. The parties fail to explain why there exists an overriding interest in the entirety of these transcripts, which include information regarding Cerf’s job responsibilities, communications with other employees, involvement with or understanding of the claims for property damage alleged or noticed by plaintiff in this action, knowledge of dates on which repairs were completed, and knowledge of commercial property insurance policy terms, or why all of the information within these transcripts implicates any competitive advantage of plaintiff, or any right to privacy of Cerf. (See Dec. 9, 2024, Notices of Lodgment ISO MSA Re Number Of Occurrences & MSJ, Exhs. J & W; Dec. 11, 2024, Index ISO Liberty Mutual MSJ, Exh. G.)

Further, to the extent the parties contend that there exists an overriding interest as to any specific information within the Cerf transcripts which overcomes the public’s right to access this record, the parties’ failure to explain, on a line-by-line or item-by-item basis with supporting reasoned argument and references to the record, why there exists an overriding interest in any such information prevents the court from making the required factual findings for reasons further discussed above.

The Wire Transfer Approvals, the January Correspondence, and the Management Agreement each appear in exhibit D to the Deutsch declaration submitted in support of the PMQ Motion. These records constitute discovery materials filed in connection with the PMQ Motion. For this reason, and subject to exception to the extent these records “are used at trial or submitted as a basis for adjudication of matters other than discovery motions or proceedings”, the court rules governing sealed records do not apply to the Wire Transfer Approvals, the January Correspondence, or the Management Agreement. (Cal. Rules of Court, rule 2.550(a)(3).) Therefore, as there is no evidence or information in the present record to show or suggest that the Wire Transfer Approvals, the January Correspondence, or the Management Agreement were submitted as a basis for adjudication of matters other than the PMQ Motion, the court will grant the motion to seal, in part, as to these records only.

As there is no mechanism by which the court can redact or excise the Wire Transfer Approvals, the January Correspondence, or the Management Agreement from the Deutsch declaration filed in support of the PMQ Motion, the court will order the clerk to lodge that declaration under seal. Further, the court will order the other defendants to re-file a public version of the Deutsch declaration submitted in support of the PMQ Motion which redacts the Wire Transfer Approvals, the January Correspondence, and the Management Agreement from exhibit D to that declaration. To the extent the other defendants fail to file a public redacted version of the Deutsch declaration as required or within the time prescribed herein, the court will direct the clerk to return the lodged Deutsch declaration to the public file.

As to the remaining documents other than the Wire Transfer Approvals, the January Correspondence, and the Management Agreement and further described above, a party requesting an order sealing a court record must appropriately focus and limit their motion to seal the record and may not simply “dump [the] … material … into the lap of the trial court.” (Overstock, supra, 231 Cal.App.4th at p. 511.) For all reasons discussed above, the parties have failed to meet their burden to present factual information sufficient to show the existence of an overriding interest in the entirety of the remaining records which are the subject of the motion to seal, or the nature of the harm threatened by the disclosure of these materials, which would overcome the public’s right to access these records. Therefore, for these and all reasons discussed herein, the court will deny the motion to seal as to the other documents described above other than the Wire Transfer Approvals, the January Correspondence, and the Management Agreement.