Party Discovery: UFCW & EMPLOYERS BENEFIT TRUST ON BEHALF OF VS. SUTTER HEALTH et al

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                                ELECTRONICALLY
                     1   REDGRAVE LLP
                         Jonathan M. Redgrave (Admitted pro hac vice)                                               F  I  L   E  D
                                                                                                                 Superior Court of California,
                     2   Gareth T. Evans (SBN 138992)                                                             County of San Francisco
                         Daniel J. Nichols (SBN 238367)
                     3   455 Market Street, Suite 1920                                                               07/29/2020
                                                                                                                 Clerk of the Court
                         San Francisco, CA       94105                                                             BY: JUDITH NUNEZ
                     4   Telephone:        415.471.2040                                                                       Deputy Clerk
                         Facsimile:        415.471.2016
                     5     Email:   jredgrave@redgravellp.com
                                    gevans@redgravellp.com
                     6              dnichols@redgravellp.com                            KEKER, VAN NEST & PETERS LLP
                                                                                        Christa M. Anderson (SBN 184325)
                      7   BARTKO ZANKEL BUNZEL & MILLER                                 633 Battery Street
                          Robert H. Bunzel (SBN 99395)                                  San Francisco, CA       94111-1809
                      8   Patrick M. Ryan (SBN 203215)                                  Telephone:        415.391.5400
                          Oliver Q. Dunlap (SBN 225566)                                 Facsimile:        415.956.1152
                      9   One Embarcadero Center, Suite 800                               Email:   SUTTKVO@keker.com
                          San Francisco, CA       94111
                    10    Telephone:        415.956.1900                                JONES DAY
                          Facsimile:        415.956.1152                                David C. Kiernan (SBN 215335)
                    11     Email:    rbunzel@bzbm.com                                   Brian G. Selden (SBN 261828)
                                                                                        Jeffrey A. Levee (SBN 125863)
                    12    Attorneys for Defendants                                      555 California Street, 26th Floor
                          SUTTER HEALTH, et al.                                         San Francisco, CA       94104
                    13                                                                  Telephone:        415.626.3939
                                                                                        Facsimile:        415.875.5700
                    14                                                                    Email:   sutterservice@jonesday.com

                    15                         SUPERIOR COURT OF THE STATE OF CALIFORNIA

                    16                            IN AND FOR THE COUNTY OF SAN FRANCISCO

                    17    UFCW & EMPLOYERS BENEFIT TRUST,                             Case No. CGC-14-538451
                          on behalf of itself and all others similarly                Consolidated with
                    18    situated,                                                   Case No. CGC-18-565398

                    19                     Plaintiffs,                                Assigned for all purposes to:
                                                                                      Hon. A. C. Massullo, Dept. 304
                    20            v.
                                                                                      MEMORANDUM OF POINTS AND
                    21    SUTTER HEALTH, et al.,                                      AUTHORITIES IN SUPPORT OF
                                                                                      SUTTER HEALTH DEFENDANTS’
                    22                     Defendants.                                MOTION TO SEAL DOCUMENTS

                    23                                                                Hearing Date:         August 27, 2020
                          PEOPLE OF THE STATE OF CALIFORNIA,                          Time:                 10:00 a.m.
                    24    ex rel. XAVIER BECERRA,                                     Department:           304

                    25                     Plaintiff,                                 Action Filed:       April 7, 2014
                                                                                      Trial Date:
                    26            v.
                    27    SUTTER HEALTH,
                    28                     Defendant.

                                                MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF
                                               SUTTER HEALTH DEFENDANTS’ MOTION TO SEAL DOCUMENTS
                     1                                                   Table of Contents

                     2
                         I.            INTRODUCTION ........................................................................................................... 1
                     3   II.           LEGAL STANDARD ..................................................................................................... 3
                     4                    A.    The “Overriding Interest Standard” Under Rule 2.550 ....................................... 3
                                          B.    Application of Rule 2.550’s “Overriding Interest” Test
                     5                          Varies by Filing Type .......................................................................................... 4
                         III.          DISCUSSION ................................................................................................................. 7
                     6
                                          A.    An Overriding Interest to Protect Confidential Information Supports the
                     7                          Proposed Limited Sealing of Information ........................................................... 7
                                                1.   Category 1: Previously Sealed Information .................................................. 7
                     8
                                                2.   Category 2:    Confidential Rate and Pricing Information .............................. 8
                     9                          3.   Category 3:    Information Regarding Sutter’s Negotiating Strategies ......... 10
                                                4.   Category 4:    Information Reflecting Sutter’s Internal Strategic and
                    10                               Competitive Analyses ................................................................................. 12
                    11                          5.   Category 5:    Expert Reports ........................................................................ 14
                                                6.   Category 6:    Settlement Agreements and Arbitration Awards .................... 14
                    12
                                          B.    Sutter’s Sealing Requests Are Narrowly Tailored, and No Less Restrictive
                    13                          Means Exist to Protect Sutter’s Overriding Interests ........................................ 15
                         IV.           CONCLUSION ............................................................................................................. 15
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                                                                               ii
                                                MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF
                                               SUTTER HEALTH DEFENDANTS’ MOTION TO SEAL DOCUMENTS
                     1                                                  Table of Authorities
                                                                                                                                       Page(s)
                     2
                         Cases
                     3
                         Apple Inc. v. Samsung Elecs. Co., 727 F.3d 1214 (Fed. Cir. 2013) .................................................. 8
                     4
                         Beaver County Employees Retirement Fund v. Cyan, Inc., 2016 WL 9489286 (Cal. Super. Oct. 7,
                     5      2016)............................................................................................................................................ 10

                     6   Bestway (USA), Inc. v. Sgromo, 2018 WL 1411108 (N.D. Cal. Mar. 21, 2018) ............................ 15

                     7   Courtesy Temp. Serv., Inc. v. Camacho, 222 Cal. App. 3d 1278 (1990) ........................................ 11

                     8   Fed. Trade Comm’n v. Qualcomm Inc., 2019 WL 95922 (N.D. Cal. Jan. 3, 2019) ....................... 15

                     9   H.B Fuller Co. v. Doe, 151 Cal. App. 4th 879 (2007) ...................................................................... 9

                    10    In re Electronic Arts, Inc., 298 F. App’x 568 (9th Cir. 2008) .................................................. 13, 17

                    11    In re Providian Credit Card Cases, 96 Cal. App. 4th 292 (2002) ................................................ 6, 7

                    12    Keirsey v. eBay, Inc., 2013 WL 5609318 (N.D. Cal. Oct. 11, 2013) .............................................. 17

                    13    McGuan v. Endovascular Techs., Inc., 182 Cal. App. 4th 974 (2010) ........................................... 17

                    14    McGuan v. Endovascular Techs., Inc., 182 Cal. App. 4th 974 (2010) ............................................. 7

                    15    Mercury Interactive Corp. v. Klein, 158 Cal. App. 4th 60 (2007) ................................................ 8, 9

                    16    Mercury Interactive Corp. v. Klein, 158 Cal. App. 4th 60 (2007) .................................................... 6

                    17    NBC Subsidiary (KNBC-TV), Inc. v. Superior Court, 20 Cal. App. 4th 1178 (1999) .......... 6, 7, 8, 9

                    18    Overstock.com, Inc. v. Goldman Sachs Group, Inc., 231 Cal. App. 4th 471 (2014) .......... 6, 7, 8, 10

                    19    Philips v. Ford Motor Co., No. 14-cv-02989, 2016 WL 7374214 (N.D. Cal. Dec. 20, 2016) ....... 12

                    20    Rich v. Shrader, 2013 WL 6190895 (S.D. Cal. Nov. 26, 2013)...................................................... 17

                    21    Rodman v. Safeway Inc., 2014 WL 12787874 (N.D. Cal. Aug. 22, 2014) ............................... 12, 17

                    22    Savaglio v. Wal-Mart Stores, Inc., 149 Cal. App. 4th 588 (2007) .................................................... 8

                    23    Six4Three, LLC v. Facebook, Inc., 49 Cal. App. 5th 109 (April 24, 2020) ...................................... 6

                    24    Synchronoss Techs., Inc. v. Dropbox Inc., 2018 WL 6002319 (N.D. Cal. Nov. 15, 2018) ............ 15

                    25    Universal City Studios, Inc. v. Superior Court, 110 Cal. App. 4th 1273 (2003) ........................ 7, 13

                    26    Whyte v. Schlage Lock Co., 101 Cal. App. 4th 1443 (2002) ....................................................... 7, 11

                    27

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                                                                               iii
                                                MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF
                                               SUTTER HEALTH DEFENDANTS’ MOTION TO SEAL DOCUMENTS
                     1   Rules

                     2   California Rules of Court 2.550 ............................................................................................... passim
                     3   California Rules of Court 2.551 .................................................................................................. 4,6,7
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                                                                               iv
                                                MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF
                                               SUTTER HEALTH DEFENDANTS’ MOTION TO SEAL DOCUMENTS
                     1                            MEMORANDUM OF POINTS AND AUTHORITIES

                     2   I.       INTRODUCTION

                     3            Pursuant to California Rules of Court 2.550 and 2.551, and consistent with the Court’s

                     4   prior Orders, Defendant Sutter Health (“Sutter”) moves to seal confidential information in certain

                     5   documents previously submitted conditionally under seal in connection with various motions and

                     6   proceedings.     The proposed redactions are reflected in the Delta Documents lodged with the

                     7   Court. 1  Public disclosure of this confidential information would present a substantial probability

                     8   of prejudice to Sutter, interfering with Sutter’s ability to effectively compete in the marketplace.

                     9   The healthcare market is highly competitive, and Sutter’s ability to compete depends on keeping
                    10    its proprietary and competitively sensitive information secret.            This motion seeks limited
                    11    redactions to protect highly sensitive information from disclosure.             Sutter has relied on the Court’s
                    12    prior rulings in this matter, aligning its proposed redactions with the Court’s guidance.
                    13            To simplify the Court’s consideration of this motion, Sutter has organized the Delta
                    14    Documents into the following six categories:
                    15            (1)      Documents Containing Previously Sealed Information.                    The Court previously
                    16    reviewed and approved the sealing of certain information in these documents.                  The Court has
                    17    previously stated that these already ordered redactions will remain in effect.
                    18            (2)      Documents Containing Confidential Rate and Pricing Information.                        These
                    19    documents include highly sensitive rate and pricing information that Sutter seeks to seal,
                    20    consistent with the Court’s previous approval of such information.               The documents are primarily
                    21

                    22
                         1
                           To reduce the burden on the Court’s review of the Delta Documents, Sutter is lodging only the
                    23     first page and pages with proposed redactions.           Additionally, the Parties have agreed to limit the
                    24     documents and, in some cases, the pages within documents that are subject to the sealing motion
                           process.   Documents and portions of documents conditionally filed under seal but falling outside
                    25     of the sealing process may be sealed pursuant to the Parties’ agreement.                Where blackout
                           redactions appear on a Delta Document, it is either because the Parties agreed to exclude that
                    26     portion of the page from the sealing motion process or the redaction appeared in the document as
                           originally filed.   Finally, where duplicate documents were conditionally filed under seal, Sutter
                    27     has submitted only one copy of the document here rather than all copies.                 The Court’s ruling can
                    28     be implemented on all copies when the parties apply the Court’s sealing rulings in the “clean-up”
                           phase of sealing.
                                                                               1
                                                MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF
                                               SUTTER HEALTH DEFENDANTS’ MOTION TO SEAL DOCUMENTS
                     1   agreements with health plans and other payors, but also include other documents such as

                     2   depositions, declarations, talking points, and reports.          The information Sutter proposes to seal

                     3   consists mostly of specific dollar amounts and percentages.

                     4            (3)      Documents Containing Confidential Sutter Negotiation Positions or Strategies.

                     5   These documents contain information reflecting Sutter’s confidential negotiating positions or

                     6   strategies in competitively sensitive contract negotiations with insurers.              Sutter proposes to seal

                     7   only the portions of the documents that would disclose Sutter’s negotiating strategies.

                     8            (4)      Documents Containing Confidential Sutter Internal Strategic and Competitive

                     9   Analyses.     These documents contain confidential information regarding proprietary internal
                    10    strategic and competitive analyses that Sutter expended significant time and resources to develop.
                    11    Sutter proposes sealing only the information competitors could unfairly exploit.
                    12            (5)      Expert Report Documents.            Expert reports in the case often include various
                    13    categories of sealable information, for example rates and pricing information, Sutter negotiation
                    14    information, and internal strategic and competitive analysis.
                    15            (6)      Documents Consisting of Settlement Agreements and Arbitration Awards.
                    16    These documents consist of agreements to settle disputes between Sutter and others, usually health
                    17    plans or other payors, and arbitration awards settling such disputes.             The settlement agreements
                    18    contain highly confidential information regarding the terms upon which Sutter is willing to resolve
                    19    disputes.   The arbitration award documents often contain information regarding rates and
                    20    negotiations between Sutter and health plans.
                    21            For each category, Sutter has endeavored to adhere to the Court’s guidance in connection
                    22    with rulings on the prior motions to seal.        To facilitate the Court’s consideration of the documents
                    23    at issue, Sutter has included an Index, attached as Exhibit (“Ex.”) A to the Declaration of Gareth
                    24    Evans (“Evans Decl.”), setting forth the Delta Document Tab No. for each document, the reasons
                    25    why the information should be sealed, the motion or other submission in connection with which
                    26    the document was filed conditionally under seal, and the sealing standard that Sutter contends
                    27    should apply.    As set forth below and in Evans Decl. Ex. A, the information subject to the Motion
                    28
                                                                               2
                                                MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF
                                               SUTTER HEALTH DEFENDANTS’ MOTION TO SEAL DOCUMENTS
                     1   to Seal fits well within the bounds of protection provided by California Rules of Court 2.550 and

                     2   2.551 and, where applicable, the default good cause standard. 2

                     3   II.      LEGAL STANDARD

                     4            The public’s right of access to court records is not absolute, and there is no generalized

                     5   presumption of access to all court-filed documents.            Overstock.com, Inc. v. Goldman Sachs Group,

                     6   Inc., 231 Cal. App. 4th 471, 485 (2014); Mercury Interactive Corp. v. Klein, 158 Cal. App. 4th 60,

                     7   96, 100 (2007); NBC Subsidiary (KNBC-TV), Inc. v. Superior Court, 20 Cal. App. 4th 1178, 1222

                     8   (1999); Cal. Rules of Court, Rule 2.550 et seq.           Documents containing proprietary and/or trade

                     9   secret information may properly be sealed from public disclosure.                In re Providian Credit Card
                    10    Cases, 96 Cal. App. 4th 292, 298-299 (2002); see also Cal. Rule of Court 2.550(d). 3
                    11            A.       The “Overriding Interest Standard” Under Rule 2.550

                    12            Consistent with these protections, under California Rules of Court 2.550, a court should

                    13    grant a motion to seal when it finds:

                    14            (1)  An overriding interest exceeds the right of public access;

                    15            (2)  The overriding interest supports sealing the record;

                    16            (3)  There is a substantial probability of prejudice absent sealing;

                    17            (4)  The proposed sealing is narrowly tailored; and

                    18            (5)  No less restrictive means exist to achieve the overriding interest.

                    19    Cal. Rule of Court 2.550 ; Overstock.com, supra, 231 Cal. App. 4th at 487; NBC Subsidiary,

                    20    supra, 20 Cal.4th at 1217-1218.        Sutter’s limited requests to seal information within each of the

                    21    above categories meets each of these requirements.

                    22

                    23   2
                           Regardless of which standard applies (i.e., overriding interest under Rule 2.550 or good cause),
                           Sutter is confident the Court will conclude that all of the information Sutter has designated for
                    24     sealing satisfies the higher standard..
                         3
                    25     Because Plaintiffs already have access to unredacted copies of the documents that Sutter seeks to
                           seal, Plaintiffs do not have standing to oppose Sutter’s motion.             See Six4Three, LLC v. Facebook,
                    26     Inc., 49 Cal. App. 5th 109, 115-116 (April 24, 2020), as modified on denial of reh’g (May 18,
                           2020), review filed (June 23, 2020) (appeal dismissed as party to the action lacked standing)
                    27     (holding that “the [sealing] order may be appealed only by a party aggrieved by the order;” a
                           party “lacks standing to raise issues affecting another person’s interests”).
                    28
                                                                               3
                                                MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF
                                               SUTTER HEALTH DEFENDANTS’ MOTION TO SEAL DOCUMENTS
                     1            California courts recognize an overriding interest in protecting trade secrets and highly

                     2   sensitive competitive information from public disclosure. “[I]n weighing the public’s right to

                     3   access against the [party’s] right to maintain the confidentiality of its trade secrets, the right to

                     4   privacy clearly outweighs the public’s right.”          McGuan v. Endovascular Techs., Inc., 182 Cal.

                     5   App. 4th 974, 988 (2010); see also In re Providian Credit Card Cases, 96 Cal. App. 4th 292, 300

                     6   (2002) (recognizing that the “protection of trade secrets” “may be a valid reason for restricting

                     7   access.”).   Trade secrets are defined as any “information, including a formula, pattern,

                     8   compilation, program, device, method, technique, or process” that derives “independent economic

                     9   value” for its owner from not being generally known to the public, or to some other person who
                    10    can obtain economic value from its disclosure or use.            Cal. Civ. Code, § 3426.1(d).        “The test for
                    11    trade secrets is whether the matter sought to be protected is information (1) which is valuable
                    12    because it is unknown to others and (2) which the owner has attempted to keep secret.”                    Whyte v.
                    13    Schlage Lock Co., 101 Cal. App. 4th 1443, 1454-55 (2002).
                    14            In addition to trade secrets, confidential business information may be sealed where the
                    15    information is competitively sensitive and public disclosure “would interfere with [the litigant’s]
                    16    ability to effectively compete in the marketplace” and thus cause tangible harm.                 See Universal
                    17    City Studios, Inc. v. Superior Court, 110 Cal. App. 4th 1273, 1286 (2003).
                    18            B.       Application of Rule 2.550’s “Overriding Interest” Test Varies by Filing Type

                    19            Rule 2.550 and its five-factor “overriding interest” test do not apply to discovery motions

                    20    or proceedings, or to ancillary, preliminary or other non-substantive motions that do not involve

                    21    adjudication of the claims in the case and, therefore, would not ordinarily be submitted to a jury

                    22    for determination.     Instead, for documents within the Rules’ scope, Rules 2.550 and 2.551 are

                    23    intended to “provide a standard and procedures for courts to use when a request is made to seal a

                    24    record.” Advisory Committee Comment to Rule 2.550.                 Discovery materials that are not subject to

                    25    Rule 2.550’s five-factor “overriding interest” test can be sealed for good cause.               In Overstock, the

                    26    court held that the exhibits not under the Rule “should have been struck and either removed from

                    27    the record or sealed for good cause.”         Overstock.com, Inc., 231 Cal. App. 4th at 506 (emphasis

                    28    added), citing Apple Inc. v. Samsung Elecs. Co., 727 F.3d 1214, 1226-1228 (Fed. Cir. 2013).
                                                                               4
                                                MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF
                                               SUTTER HEALTH DEFENDANTS’ MOTION TO SEAL DOCUMENTS
                     1            In particular, subsection (a)(3) of Rule of Court 2.550 expressly provides that the rule—

                     2   and its five-factor, “overriding interest” test—does not apply to “discovery motions” and related

                     3   “records.”    See Cal. Rule of Court 2.550(a)(3) (“These rules do not apply to discovery motions and

                     4   records filed or lodged in connection with discovery motions or proceedings.”)                  Subsection (a)(3)

                     5   further provides that “discovery materials” (documents obtained in discovery) are subject to the

                     6   Rule’s requirements for sealing, including the five-factor test, when they are “used at trial” or

                     7   “submitted as a basis for adjudication” of other matters.            See id.

                     8            The California Courts of Appeal have repeatedly interpreted Rule 2.550 and its five-factor

                     9   “overriding interest” test as being limited to materials submitted for the adjudication of
                    10    “substantive” matters.      In Overstock.com, Inc. v. Goldman Sachs Group, Inc., 231 Cal. App. 4th
                    11    471 (2014), for example, the court concluded that the language “submitted as a basis for
                    12    adjudication” in subsection (a)(3) “embraces discovery materials submitted in support of and in
                    13    opposition to substantive pretrial motions[.]”         Id. at 497 (emphasis added).        See also Savaglio v.
                    14    Wal-Mart Stores, Inc., 149 Cal. App. 4th 588, 597 n.6 (2007) (“The provisions pertaining to
                    15    sealed records do not apply . . . unless the discovery materials are used at trial or submitted as a
                    16    basis for adjudication of substantive matters.)” (emphasis added); Mercury Interactive Corp. v.
                    17    Klein, 158 Cal. App. 4th 60, 91 (2007) (the “First Amendment right of access to documents filed
                    18    in a civil case [applies] where they were submitted to the trial court for its consideration in
                    19    deciding a substantive matter in that action.”) (emphasis added).
                    20            In Mercury Interactive, the court held that documents attached to a complaint were not
                    21    submitted as a basis for adjudication of a substantive matter because “pleadings, including
                    22    complaints, are not typically evidentiary matters that are submitted to a jury in adjudicating a
                    23    controversy.”    Id., 158 Cal. App. 4th at 103.       The court emphasized the substantive nature of
                    24    materials entitled to First Amended access, pointing out that the California Supreme Court
                    25    concluded in NBC Subsidiary (KNBC-TV), Inc. v. Superior Court, 20 Cal. 4th 1178 (1999), that “it
                    26    is clear today that substantive courtroom proceedings in ordinary civil cases are ‘presumptively
                    27    open’…”     Mercury Interactive, 158 Cal. App. 4th at 103, quoting NBC, 20 Cal. 4th at 1217.                   In
                    28
                                                                               5
                                                MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF
                                               SUTTER HEALTH DEFENDANTS’ MOTION TO SEAL DOCUMENTS
                     1   determining which filings were substantive, the court in Mercury Interactive considered the

                     2   principles and policies underpinning public access to court records.

                     3            Public   access  to  a discovery    document     that is not  considered    or relied  on  by  the
                                  court in adjudicating any substantive controversy does nothing to (1) establish the
                     4            fairness of the proceedings, (2) increase public confidence in the judicial process,
                                  (3) provide useful scrutiny of the performance of judicial functions, or (4) improve
                     5
                                  the quality of the truth finding process.
                     6   Mercury Interactive, 158 Cal. App. 4th at 96–97.             Accordingly, the court considered the nature of
                     7   the filing and the public interest in accessing the filing.         The court reasoned, “public access to
                     8   discovery materials that are not part of trial proceedings or filed in connection with a motion on a
                     9   substantive issue ‘is favored neither by tradition nor by functional analysis.’”              Mercury, 158 Cal.
                    10    App. 4th at 100, quoting H.B Fuller Co. v. Doe, 151 Cal. App. 4th 879, 893 (2007).
                    11            The court in Mercury Interactive noted that “dispositive motions,” such as summary
                    12    judgment motions and motions to terminate claims, would ordinarily be considered substantive
                    13    motions, and the public would have a First Amendment right of access.                  Id., 158 Cal. App. 4th at
                    14    89-92.   By contrast, “pleadings, including complaints, are not typically evidentiary matters that are
                    15    submitted to a jury in adjudicating a controversy.”           Id., 158 Cal. App. 4th 60, 103.       Likewise, in
                    16    H.B Fuller Co. v. Doe, 151 Cal. App. 4th 879 (2007), the court distinguished between matters that
                    17    are “ancillary or preliminary” and matters that are “the whole end and purpose of the case[.]”                   Id.,
                    18    151 Cal. App. 4th at 893.
                    19            In short, Rule 2.550 does not apply to ancillary, preliminary or other non-substantive
                    20    motions not involving issues that are “the whole end and purpose of the case” and that therefore
                    21    would not be submitted to a jury for determination.            As Sutter argued in its Motion re
                    22    Applicability of CRC 2.550, which the Court denied without prejudice as premature, materials
                    23    attached to motions for discovery sanctions, 4 motions to exclude expert reports and
                    24

                    25
                         4
                           The parties’ motions for discovery sanctions against each other fall squarely within the discovery
                    26     motion exception set forth in subsection (a)(3) of Rule 2.550.             Even were the Court not to
                           consider these materials as being filed in connection with a “discovery motion or proceeding,”
                    27
                           they are in any event not substantive and are ancillary and did not involve or result in
                    28     adjudication of the merits of the claims in the case.
                                                                               6
                                                MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF
                                               SUTTER HEALTH DEFENDANTS’ MOTION TO SEAL DOCUMENTS
                     1   testimony, 5 and motions in limine 6 should be subject to a lesser “good cause” standard.                  See

                     2   Overstock.com, Inc., 231 Cal. App. 4th at 506 (information not falling under Rule 2.550 “should

                     3   have been struck and either removed from the record or sealed for good cause.”).                   In its Index,

                     4   attached as Ex. A to the Evans Decl., Sutter has identified the motion or other submission with

                     5   which each document at issue was filed and the applicable standard that Sutter contends should

                     6   apply.   Regardless of which standard applies (i.e., overriding interest under Rule 2.550 or good

                     7   cause), Sutter is confident the Court will conclude that all of the information Sutter has designated

                     8   for sealing satisfies the higher standard.

                     9   III.     DISCUSSION
                    10            A.       An Overriding Interest to Protect Confidential Information Supports the
                    11                     Proposed Limited Sealing of Information

                    12            As to each of the categories at issue here, an overriding interest to protect proprietary and

                    13    confidential trade secret information exceeds the right of public access and supports sealing the

                    14    designated information as set forth in the Index (Evans Decl. Ex. A) submitted herewith.                   Stated

                    15    simply, there is a substantial probability of prejudice absent sealing of this information, and public

                    16    disclosure of information would interfere with Sutter’s ability to compete in the marketplace.

                    17                     1.       Category 1: Previously Sealed Information

                    18            The first category of information that Sutter seeks to seal consists entirely of information

                    19    the Court has already ordered sealed in connection with previous motions to seal.                  The Court has

                    20    previously stated that information previously ordered sealed will be sealed for purposes of this

                    21    sealing motion and not revisited.       Sutter does not seek to make any different or additional

                    22

                    23
                         5
                           Motions to exclude expert reports and testimony are preliminary, non-substantive motions as
                    24     they involve a determination of what evidence may be introduced and submitted to the jury for
                           adjudication of the merits, rather than an adjudication of the merits themselves.                Accordingly,
                    25
                           Judge Karnow of this Court held in Beaver County Employees Retirement Fund v. Cyan, Inc.,
                    26     2016 WL 9489286, at *1 (Cal. Super. Oct. 7, 2016), that pursuant to Rule 2.550(a)(3) the sealing
                           rules did not apply to a motion to exclude an expert report.
                    27   6
                           Motions in limine involve a determination of whether evidence may be submitted to the jury and
                    28     do not constitute evidence actually submitted to the jury for adjudication.              Thus, for the same
                           reasons as motions to exclude expert reports and testimony, Rule 2.550 does not apply to them.
                                                                               7
                                                MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF
                                               SUTTER HEALTH DEFENDANTS’ MOTION TO SEAL DOCUMENTS
                     1   redactions to Category 1 documents.           The redactions Sutter proposes in this category are limited to

                     2   those the Court has already allowed.

                     3                     2.       Category 2:      Confidential Rate and Pricing Information

                     4            Rate and pricing information are not publicly known, they are held in confidence, and they

                     5   are secured by strict confidentiality agreements that insurance companies require to prevent the

                     6   information from becoming known by other insurance companies.                    (Declaration of James Smith

                     7   (“Smith Decl.”) at ¶¶ 5-13, 20-22.)         As this Court has previously recognized on many occasions,

                     8   confidential pricing terms and rates reflect the type of information routinely subject to protection

                     9   as a trade secret or competitively sensitive information.           See, e.g., Nov. 9, 2017 Order at 2:1-5.        In
                    10    addition, courts “have recognized that information related to cost and pricing can be trade
                    11    secret[s],” because information such as “pricing, profit margins, costs of production, pricing
                    12    concessions, promotional discounts, advertising allowances, volume rebates, marketing
                    13    concessions, payment terms and rebate incentives” all “has independent economic value because
                    14    [such] pricing policies would be valuable to a competitor to set prices which meet or undercut” the
                    15    prices of the subject party.     Whyte v. Schlage Lock Co., supra, 101 Cal.App.4th at pp. 1454-1455.
                    16            Confidential pricing terms and rates are “sophisticated information, irrefutably of
                    17    commercial value and not readily ascertainable to other competitors,” and thus qualify as trade
                    18    secrets.  Courtesy Temp. Serv., Inc. v. Camacho, 222 Cal.App.3d 1278, 1288 (1990).                     Similar to
                    19    the pricing and rate information Sutter seeks to seal, California courts regularly seal price-related
                    20    information that would reveal confidential business methods and processes. 7
                    21            Sutter negotiates agreements, including SWAs, with insurers, insurance companies, or

                    22    insurance carriers (“insurers”).      (Smith Decl., ¶ 14.)     Rates and rate-related terms are generally the

                    23    focus of negotiations between Sutter and insurers, including the specific discounted rates that

                    24    Sutter will offer for individual services and at specific hospitals.          (Smith Decl., ¶ 5.)     For example,

                    25

                    26   7
                           See Rodman v. Safeway Inc., 2014 WL 12787874, at *2 (N.D. Cal. Aug. 22, 2014) (granting
                           motions to seal “information discussing Safeway’s pricing strategy, business decisionmaking,
                    27     and financial records”); Philips v. Ford Motor Co., No. 14-cv-02989, 2016 WL 7374214, at *4
                    28     (N.D. Cal. Dec. 20, 2016) (recognizing that “need to avoid competitive disadvantage in contract
                           negotiations and undercutting by competitors is a compelling reason that justifies sealing.”)
                                                                               8
                                                MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF
                                               SUTTER HEALTH DEFENDANTS’ MOTION TO SEAL DOCUMENTS
                     1   they will often exchange proposals on rates, and discuss the various reasons behind their requests.

                     2   (Smith Decl., ¶ 5.)     During the negotiations, they also will exchange proposals concerning rate-

                     3   related terms, such as payment methods or structure.             (Smith Decl., ¶ 5.)    These proposals, like the

                     4   rates themselves, are extremely sensitive because they provide direct insight into the valuation

                     5   Sutter or an insurer ascribes to a particular service at a particular hospital.           (Smith Decl., ¶ 5.)

                     6            By its very nature, the information relating to confidential and proprietary rate and pricing

                     7   information is competitively sensitive.         (Smith Decl., ¶ 6.)     Sutter has spent considerable time and

                     8   resources over many years developing the rate structures and negotiating the contract rates and

                     9   terms that are unique to each insurer’s relationship with Sutter.            (Smith Decl., ¶ 6.)     Indeed, Sutter
                    10    has an entire staff dedicated to creating proprietary analytics used to develop Sutter’s commercial
                    11    rates and terms with respect to each insurer and to shape Sutter’s short- and long-term negotiating
                    12    positions on pricing.     (Smith Decl., ¶ 6.)
                    13            Each contract reflects confidential and proprietary pricing information, and the rates and
                    14    the contract terms governing rates are the most confidential part of the contract between Sutter and
                    15    an insurer.   (Smith Decl., ¶ 7.)     These rates and the contract terms governing rates include insurer-
                    16    specific, negotiated discounts for each service Sutter provides, which may vary by insurer,
                    17    product, service, year, location, or many other factors.          (Smith Decl., ¶ 7.)     For example, Sutter
                    18    and the insurers negotiate rate-related terms, such as provisions governing whether a particular
                    19    rate applies to one or more groups of payers for that particular insurer.             (Smith Decl., ¶ 7.) 8
                    20            Public disclosure of contract terms and rates, including the limited phrases or specific rates

                    21    that Sutter seeks to seal, as well as information pertaining to pricing methodology, would

                    22    inherently place Sutter at a substantial disadvantage against all others, including Sutter’s

                    23    competitors, whose pricing methodology, contract terms, and rates would remain confidential.

                    24

                    25
                         8
                           Both Sutter and the insurers have gone to great lengths to protect sensitive and proprietary
                    26     information that they share with each other.          (Smith Decl., ¶ 21.)     Contract negotiation
                           documents and the resulting contracts with insurers are considered in the industry, and
                    27
                           specifically considered by Sutter, as sensitive and proprietary business information.                 (Smith
                    28     Decl., ¶¶ 20-22.)
                                                                               9
                                                MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF
                                               SUTTER HEALTH DEFENDANTS’ MOTION TO SEAL DOCUMENTS
                     1   (Smith Decl., ¶ 12.)     Specifically within the healthcare marketplace, Sutter would be harmed by

                     2   disclosure of its pricing methodology, rates, and the other key portions of its contract terms

                     3   because a competing hospital, insurer, or other healthcare contracting entity could use this

                     4   information to leverage concessions in their hospital service agreements. 9               (Smith Decl., ¶ 12.)

                     5   Such public disclosure would “interfere with [Sutter’s] ability to effectively compete in the

                     6   marketplace.”     Universal City, 110 Cal.App.4th at p. 1286; (Smith Decl., ¶ 24.)               As such, the

                     7   sealing of Sutter’s rates and prices is justified to prevent judicial documents from being used “as

                     8   sources of business information that might harm [Sutter]’s competitive standing.”                   In re Electronic

                     9   Arts, Inc., 298 F. App’x 568, 569 (9th Cir. 2008).
                    10            In line with the Court’s guidance in its July 5, 2017 Order (explaining that redactions for
                    11    “prices as dollar amounts and as percentages of rates or charges” are justified with adequate
                    12    factual support), and using the approved redactions from the Court’s Nov. 9, 2017 Order as an
                    13    additional guide, the information in Category 3 that Sutter seeks to seal is likely to cause harm if
                    14    made public.     Sutter has provided detailed factual support for sealing these portions of documents
                    15    in the Smith Declaration.
                    16                     3.       Category 3:      Information Regarding Sutter’s Negotiating Strategies

                    17            Sutter moves to seal