W.D.N.C.: Legal Newsline v. Garlock Sealing Technology- Requirements for Confidentiality in Sealing of Pleadings and Hearings

Summary:

In the bankruptcy of Garlock Sealing Technology, allegations were raised that national counsel for mesothelioma victims had engaged in fraud, deceit, and other activities prohibited by the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961-1968, in settling their clients’ claims. After the bankruptcy judge ordered the hearing closed, Legal Newsline filed an emergency motion to keep the hearing at which these issues were raised open to the media and the public.

Following Media General Operations, Inc. v. Buchanan, 417 F.3d 424, 431 (4th Cir. 2005), the district court held that sealing the hearing and documents “shifted the presumption that favors open courts to a presumption favoring the closure of proceedings based on confidentiality designations by counsel, improvidently shifting the burden to the public and the press to disprove the contours of a need to seal which has also not been described.” In restricting public access to a hearing or documents, a court is required to “state the reasons for its decision to seal supported by specific findings, and the reasons for rejecting alternatives to sealing to provide this court with sufficient information for meaningful appellate review.” Media General Operations, Inc. v. Buchanan, 417 F.3d 424, 431 (4th Cir. 2005). Here the only basis for closing the hearing was the attorney seeking to ave matters sealed was that they were confidential. An assertion of confidentiality, however, is not the endpoint, but instead the bankruptcy court is “required to ‘show its work’ by providing sufficient information concerning the reasons such exceptional relief [is] merited….” (Emphasis added.) This requires both specific findings supporting sealing of documents and also consideration of less drastic alternatives.

Commentary:

The district court recognized that it was itself “complicit in the practice of entering lengthy protective orders”, but made clear that designation by the parties of confidential mattes does not by itself result in automatic sealing, but that the court “simply cannot delegate that responsibility to the litigants by giving deference to protective orders.” The district court then referenced its own Local Rule 6.1 as the appropriate means of address requests for sealing matters. Similar Local Rules exist for the Eastern and Middle District courts in North Carolina, but none of the three bankruptcy courts appear to currently have such requirements. As such, confidentiality becomes the rule, rather than the exception.

Additionally, while Legal Newsline asked the district court to determine the source of the right of access, either the common-law presumption which favors access to all judicial proceedings and filings or the First Amendment guarantee of access. While the district court remanded this question to the bankruptcy court, it seems that none of the parties have taken note of the additional requirements under 11 U.S.C. § 107 that protect trade secrets, confidential research & development, commercial information or scandalous or defamatory matters. This may displace or supplement the common-law presumption, but obviously not the First Amendment protections.

For a copy of the opinion, please see:

Legal Newsline v. Garlock Sealing Technology- Requirements for Confidentiality in Sealing of Pleadings and Hearings

About

1. Bachelor of Arts degree in English Literature from Washington University, 1993. 2. Juris Doctor degree from George Washington University, 1996. Admissions to Practice of Law: North Carolina Bar, 1996. Federal District Courts for the Eastern and Middle Districts of North Carolina. Specialty Certification: North Carolina State Bar: Certified as a Specialist in Consumer Bankruptcy. Areas of Practice: Practice limited to consumer and business debtor bankruptcy law, 1998 to present. Memberships: National Association of Consumer Bankruptcy Attorneys (NACBA). North Carolina Academy of Trial Lawyers (NCATL). North Carolina Bar Association, Bankruptcy Section. Lectures prepared and presented: North Carolina Academy of Trial Lawyers seminar on bankruptcy; Topic: Counseling the Consumer Debtor Prior to Court - C.Y.A. Forms to Help 'Gird They Loins'; 2001. Middle District Bankruptcy Seminar; Topic: Preparing Chapter 13 Plans; 2002. NACBA National Convention; Topic: Efficient Office Practices; 2003. NACBA National Convention; Topic: Chapter 7 vs. Chapter 13 Debates; 2004. Middle District Bankruptcy Seminar; Topic: Chapter 7 & 13 Hot Issues; 2004. Positions held: NACBA National Convention; Convention Chair; 2008. NACBA National Convention; Panel Moderator: Topic: Basic Bankruptcy Issues; 2008. NACBA National Convention; Panel Moderator; Topic: Chapter 13-Disposable Income and Other Issues; 2007. NACBA National Convention; Panel Moderator; Topic: Representing Members of the Military and Their Families; 2007. NACBA, Member of National Board of Directors, 2006 to present. NCATL, Chair of the Bankruptcy Section, 2003 to 2007. NACBA, Chair of the North Carolina Section, 2003 to 2007. NC Bar Association, Bankruptcy Section, Bankruptcy Council Member, 2004 to present.

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