Free Speech

Should Parties Get Complaint Sealed Because Defendant "Had Returned All of the Misappropriated Funds"?

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From a joint motion to seal filed yesterday in Shapeshift US, Inc. v. Mukhiddinov (D. Colo.); for some news coverage of the original Complaint, see, for instance, this article in CoinDesk (Danny Nelson):

  1. District of Colorado Local Civil Rule 7.2(c) provides that a court may restrict from public access and inspection any document in a case in circumstances in which the public right of access is outweighed by the potential for serious injury if access is not restricted. The Supreme Court has recognized that although there is a strong interest in the public right of access to judicial documents, that right "is not absolute." … "It is beyond question that this Court has discretionary power to control and seal, if necessary, records and files in its possession." …
  2. In exercising discretion to control and seal records, this Court may "seal documents if the public's right of access is outweighed by competing interests." Here, the unique circumstances of this case and the significant interests of both parties outweigh the presumption of public access to the Complaint.
  3. The Complaint in this case, which was filed on August 26, 2020, alleges that Mukhiddinov misappropriated funds from his employer, Plaintiff ShapeShift, and that Plaintiff suffered losses in investigating the theft and taking remedial actions. As set forth in the Complaint at paragraphs 38-51, prior to the filing of the Complaint, Mr. Mukhiddinov had returned all of the misappropriated funds. The Complaint sought damages only for the costs of investigation and remediation.
  4. As soon as Mr. Mukhiddinov was served with the Complaint, he retained counsel and began settlement negotiations. On October 12, 2020, the parties reached a settlement agreement, and on October 19, 2020, the parties filed a Stipulated Dismissal with Prejudice.
  5. Mukhiddinov has a significant interest in protecting his personal and professional reputation from the allegations contained in the Complaint. Mr. Mukhiddinov is 25 years old and, despite being a highly qualified software engineer, he has already been terminated from new employment, specifically because the employer discovered the existence of the Complaint in this case.
  6. ShapeShift has a corresponding interest in Mr. Mukhiddinov obtaining employment, so that he will be in a position to make payments relating to the settlement agreement reached by the parties.
  7. This case is unique in that many of the damages arising from Mr. Mukhiddinov's conduct had already been resolved prior to the Complaint even being filed. And, after Mr. Mukhiddinov received the Complaint in this case, he promptly retained counsel and reached a settlement, saving Plaintiff the cost of further litigation and conserving judicial resources. Effectively, this case was initiated and completed in just over a month. Further, both parties are in agreement that restricted access is appropriate.
  8. Under these circumstances, the common-law right to access to judicial records is outweighed by Mr. Mukhiddinov's compelling interest in pursuing his career as a talented young engineer to enable him to make the payments required by the parties' settlement agreement[.]
  9. C.Colo.LCivR 7.2(c) provides that the parties must demonstrate why no alternative to restriction will adequately protect the interest in question. To that end, Mr. Mukhiddinov proposes that if the Court does not believe restriction of the entire Complaint is appropriate, that it permit redaction of Mr. Mukhiddinov's identifying information.
  10. In the alternative, Mr. Mukhiddinov proposes redacting the portions of the Complaint describing his misappropriation of funds, which were repaid prior to the filing of the Complaint. See McPherson v. Bachus & Schanker, 2011 WL 2415003 (D. Colo. June 10, 2011) (granting motion to seal complaint, based on allegations portraying the Defendants "in a negative light … [damaging] their professional reputations," where the allegations were collateral to the claims at issue in the case). Here, the Complaint claims damages arising from discovery of the misappropriated funds and subsequent remediation, not from the misappropriation of the funds in the first instance. Thus, redacting the allegations relating to the misappropriation of the funds would be an alternative to sealing the Complaint in its entirety.

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  1. “Mukhiddinov has a significant interest in protecting his personal and professional reputation from the allegations contained in the Complaint”

    Why would his interest in protecting his reputation outweigh the interests of those who wish to make decisions based on information about the allegations?

    1. My question as well.

      1. Possibly the greater good of he being able to pay restitution?
        Not that I agree with that….

        1. None of it makes any sense. A potential employer has an interest in knowing about the allegations in order to make an informed hiring decision. Assuming that the result of the informed decision is to hire someone other than Mukhiddinov, then that someone has the same interest in having the information public as Mukhiddinov does in keeping it private. And when that person spends his salary, whoever he does business with has the same interest as ShapeShift in getting the money.

          All of that should outweigh the parties’ interests in keeping the record sealed, but the judge doesn’t appear to consider it.

          1. Why do you say that the judge didn’t consider it? From what I can tell, this is all just from the motion to seal. The judge hasn’t had an opportunity to consider it yet.

    2. It made me think that the crook had done his misdeed by mistake, spur of the moment, etc, and regretted it enough to make restitution and get the matter over with.

      But too bad. Someone that easily tempted could well be tempted again, and future employers would like to know that. Maybe they could restrict his employment so he would not be able to repeat his theft. Maybe he sold a company laptop, for instance, and reported it stolen; they would make him buy his own laptop, or make him work in the office not have a laptop. Whatever arrangement they could set up, no doubt he’d make less money and have less freedom, but them’s the breaks.

  2. Seems like an excellent illustration of why we don’t leave the sealing decision to the parties.

  3. ShapeShift has a corresponding interest in Mr. Mukhiddinov obtaining employment, so that he will be in a position to make payments relating to the settlement agreement reached by the parties.
    Seems like ShapeShift could meet both aims by re-hiring this guy. Unless of course they know something about his general trustworthiness which they are willing to bury in exchange for a stream of cash from Mr. Mukhiddinov.

    1. It does make you wonder. If he’s not trustworthy enough for them to rehire, why should he be foisted off on the general public with no warning?

      I posited above some possibilities how prospective employers could hire him safely, at reduced cost of course, and maybe this previous employer has no way for him to work under those conditions; maybe all their programmers have to work in the field, or they save money by having no office.

    2. I think ShapeShift should have considered its “interest in Mr. Mukhiddinov obtaining employment, so that he will be in a position to make payments relating to the settlement agreement” before filing the complaint. By the account in the motion, both parties agree that “after Mr. Mukhiddinov received the Complaint in this case, he promptly retained counsel and reached a settlement.”
      Since we don’t have the details, it’s possible that they threatened action and he didn’t think they were serious. Another possibility is that he returned the misappropriated funds and thought the matter was done, and then found out that Shapeshift didn’t consider the matter done when he received the complaint. If it’s the latter, Shapeshift doesn’t deserve to have the matter sealed in the interest of him gaining employment, because it’s their own fault that he might have trouble. If it’s the former, Mr. Mukhiddinov doesn’t deserve to have the matter sealed, because it’s his own fault (beyond the initial misappropriation) that he might have trouble.

  4. I googled Shapeshift US, Inc. v. Mukhiddinov and got 32,200 results in 0.38 seconds.

    Something about a cat and a bag.

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