Capsule Summary: Scientology wants the Fishman records sealed on
trade secret grounds, and on grounds that the OT documents are not relevant
evidence in the Fishman case. The judge refused to seal the records, so
Scientology filed an appeal. In the document below, the Appeals Court
reverses the judge's decision (this means it found his decision was not
adequately supported), and remanded the case back to him to determine
whether there the OT materials were in fact eligible for trade secret
status, and were relevant to the Fishman case. The Appeals Court expressed
its skepticism that OT levels I through III could qualify as trade secrets,
since they appear to have been widely circulated.
Appeal from the United States District Court
CHURCH OF SCIENTOLOGY INTERNATIONAL, )
a California Non-Profit Religions )
Plaintiff/Appellant, ) No. 94-55443
) DC No. CV-91-6426 HLH-T
STEVEN FISHMAN; UWE W. GEERTZ, )
Appeal from the United States District Court
for the Central District of California
Harry L. Hupp, District Judge, Presiding
Argued and Submitted August 2, 1994
Filed August 30, 1994
Before: BROWNING, FARRIS and LEAVY, Circuit Judges
This disposition is not appropriate for publication and may
not be cited to or by the courts of this circuit except as
provided by 9th Cir. R. 36-3.
The Church of Scientology International appeals the district court's
denial of its motion to seal or return certain documents in the district
court's case file. We have jurisdiction pursuant to 28 U.S.C. @ 1291. We
review for abuse of discretion. See Nixon v. Warner Communications, Inc.,
435 U.S. 589, 55 L. Ed. 2d 570, 98 S. Ct. 1306 (1978). We conclude that
resolution of the issue before the court requires that the district court
make factual findings regarding whether the disputed documents (1) contain
trade secrets or (2) were relevant to any defenses that defendants might
have raised, or were merely surplusage filed for motives not pertinent to
I. Public access to judicial records
We reject defendants' argument that the district court lacked authority to
seal or return the disputed documents. We have held that there is a "strong
presumption" in favor of the public's right of access to judicial records.
Valley Broadcasting Co. v. United States Dist. Ct., 798 F.2d 1289, 1294 (9th
Cir. 1986). However, that right is not absolute:
Every court has supervisory power over its own records and files, and
access has been denied where court files might have become a vehicle for
improper purposes. For example, the common-law right of inspection has
bowed before the power of a court to insure that its records are not "used
to gratify private spite or promote public scandal" through the
publication of "the painful and sometimes disgusting details of a divorce
case." Similarly, courts have refused to permit their files to serve as
reservoirs for libelous statements for press consumption, or as sources of
business information that might harm a litigant's competitive standing.
Nixon, 435 U.S. at 598 (citations omitted); see also Valley Broadcasting, 798
F.2d at 1294 (citing Nixon).
Defendants' reliance on Seattle Times Co. v. Rhinehart, 467 U.S. 20, 81 L.
Ed. 2d 17, 104 S. Ct. 2199 (1984) for the proposition that the First Amendment
prohibits a court from sealing any materials a party obtains from means other
than discovery is misplaced. In Seattle Times, the Court ruled that upon a
showing of good cause, courts could issue protective orders limiting a party's
right to disseminate information obtained through discovery so long as such
orders do "not restrict the dissemination of the information if gained from
other sources." Id. at 37. Thus, Seattle Times might prohibit the district court
from issuing an order preventing the defendants from disseminating the disputed
documents since those documents were not obtained through discovery.
Seattle Times does not, however, prevent the district court from sealing or
returning documents contained in its files.
For similar reasons, defendants' argument that sealing the documents would
constitute an impermissible prior restraint on speech is without merit. In
Rodgers v. United States Steel Corp., 536 F.2d 1001, 1005 n.8 (3d Cir. 1976),
the district court had ordered that "counsel for the Plaintiffs shall not
disclose or disseminate the content of any information or matters contained in"
a certain deposition. The Third Circuit held that because the protective order
prohibited plaintiffs' counsel from disclosing information obtained through
means other than discovery, it constituted a prior restraint on speech. Id. at
1007-1008. Here, Scientology has specifically represented to this court that it
is not seeking an order preventing defendants from disseminating information
which they obtained through means other than discovery. See Opening Brief at 19
("CSI has not requested any relief which is directed to the [defendants'] future
conduct with regard to the Advanced Technology materials.")
Thus, the district court had the authority to issue a protective order
sealing or returning the disputed documents.
II. The Establishment and Free Exercise Clauses
We also reject Scientology's argument that the district court's failure to
seal or return the documents violated the Establishment and Free Exercise
Clauses of the First Amendment. The district court did not "overrule"
Scientology's ecclesiastical judgment on a matter of faith and doctrine. Compare
Serbian Eastern Orthodox Diocese v. Milivojevich, 426 U.S. 696, 709, 49 L. Ed.
2d 151, 96 S. Ct. 2372 (1976). The district court did not in any way rely on or
interpret Scientology's religious doctrines. Scientology has pointed to no
record evidence that its religion played any role in the district court's
decision. Milivojevich and the other cases cited by Scientology are
Scientology's argument that the district court's denial of its motion to seal
constituted a non-neutral governmental action that impinged on the free exercise
of religion is also without merit. It relies on Church of Lukumi Babalu Aye v.
Hialeah, 124 L. Ed. 2d 472, 113 S. Ct. 2217 (1993). In Hialeah, the
Court overturned an ordinance prohibiting animal sacrifices because (1) the
purpose of the ordinance was to suppress elements of the Santeria worship
service and (2) it was not justified by a compelling state interest. Like
Hialeah, Scientology argues that the district court's action was non-neutral
because the district court's "revelation" of upper level materials affects only
one group: the Church of Scientology and its parishioners. The district court
did not "reveal" upper level materials to anyone. Further, Scientology has
pointed to no evidence indicating that the district court's actions were
motivated by its desire to affect the exercise of the Scientology religion.
Compare Hialeah, 113 S. Ct. at 2227 ("The record in this case compels the
conclusion that suppression of the central element of the Santeria worship
service was the object of the ordinances.").
III. Failure to Make Factual Findings
Scientology urges that the disputed documents be sealed or returned to the
defendants because they contain trade secrets and are irrelevant to any defenses
that might have been raised in the underlying libel suit. In
determining whether to grant or deny the protective order sought, district
courts must balance the parties' and the public's respective interests. See
Brown Bag Software v. Symantec Corp., 960 F.2d 1465, 1470 (9th Cir.), cert.
denied, 121 L. Ed. 2d 141, 113 S. Ct. 198 (1992); Valley Broadcasting, 798 F.2d
at 1294; see also Federal Open Mkt. Comm. of Fed. Reserve Sys. v. Merrill, 443
U.S. 340, 363, 61 L. Ed. 2d 587, 99 S. Ct. 2800 (1979). The absence of factual
findings regarding whether the disputed documents contained trade secrets or
were relevant to any potential defenses precludes proper balancing.
IV. Considerations on Remand
A. Trade Secrets
On remand the district court should first consider whether the disputed
documents contain trade secrets of the Church of Scientology. Under California
law, a trade secret is defined as
information . . . that: (1) Derives independent economic value, actual or
potential, from not being generally known to the public or to other
persons who can obtain economic value from its disclosure or use; and (2)
Is the subject of efforts that are reasonable under the circumstances to
maintain its secrecy.
Cal. Civ. Code @ 3426.1(d).
Contrary to defendants' assertion, we have not held that upper level
materials can never be entitled to trade secret protection. In Religious
Technology Center v. Scott, 869 F.2d 1306, 1309-10 (9th Cir. 1989), we held that
Scientology's upper level materials might be protectable as trade secrets if
Scientology could prove it obtained "actual economic advantage over competitors"
(in addition to the other elements of a trade secret) through the use of the
upper level materials. Since our decision in Scott, at least one court has held
that the upper level materials constitute trade secrets. Bridge Publications,
Inc. v. Vien, 827 F. Supp. 629 (S.D.Cal. 1993).
The district court may conduct whatever additional inquiry is necessary to
determine whether the disputed documents contain trade secrets. It may wish to
take into consideration some of the observations we have made while reviewing
the record. Many of the documents Scientology seeks to seal contain specific
information regarding upper levels OT-I through OT-VIII. Defendants
filed the declarations of Matthew D. Berger and Gordon J. Calhoun in the
district court (C.R. 717 and 603) to support their argument that Scientology
upper level materials are widely publicized and therefore not entitled to trade
secret protection. Our review of those declarations indicates that materials for
upper levels OT-I, OT-II and OT-III have been widely publicized. However, only
one of the approximately one-hundred press articles in those declarations
(Exhibit 10 of the Berger Declaration) contains any specific information about
upper levels OT-IV, OT-V and OT-VI, and this information is very limited. None
of the exhibits contain specific information about upper levels OT-VII and
B. Relevance of disputed documents to possible defendants
Defendants have failed to explain how the inclusion of the upper level
materials as exhibits to various court filings could have helped them in their
defense to the underlying libel suit. On remand, the district court should
consider and make findings regarding whether the upper level materials were
relevant to any defenses defendants might have raised. Fed. R. Civ. P. 12(f).
C. Circumstances Warranting a Protective Order
The district court should order that the documents be sealed or returned to
the defendants if, on remand, Scientology can establish that the disputed
documents (1) contain trade secrets and (2) are irrelevant to any defenses. In
such case, the failure to issue a protective order would allow the defendants to
use the district court's files as a "vehicle for an improper purpose," i.e.
misappropriation of trade secrets.
If the district court determines that the disputed documents contain trade
secrets, but were relevant to potential defenses, then the district court should
weigh Scientology's "claim to privacy against the need for disclosure." Merrill,
443 U.S. at 362. We note, however, that unlike most cases involving requests for
protective orders, the alleged trade secrets are in the possession of the party
seeking their disclosure, i.e. the defendants. Their interest in disclosure is
therefore minimal. Thus, the district court should balance Scientology's
interest in keeping trade secrets confidential only against the public's
interest in obtaining access to judicial records.
The district court may, of course, order the documents sealed or
returned if it determines that the defendants were intentionally abusing the
We remand for the district court to make factual findings regarding the
trade secret status and relevance f the disputed documents. The district
court's review should be limited to the documents listed in the excerpts of
record filed wiht this court at pages 358-362. To assist the district
court in locating those documents, Scientology is ordered to provide the
district court with the docket entry number of each document.
Our review of the voluminous record convinces us that both parties have
filed numerous frivolous motions and documents with the district court. On
remand, the parties should limit their court filings to the narrow issue
now before the court. If either party continues to file frivolous
materials relating to this or any other issue, the district court, of
course, recognizes its broad discretion to impose sanctions
REVERSED and REMANDED