Summary:
In this adversary proceeding, the debtor-plaintiff, Havanna Jane Grissom, brought claims against mortgage servicer Fay Servicing, LLC for alleged RESPA violations, automatic stay violations, and an NC UDTPA claim (later dismissed). After litigating through the early part of 2025, the parties reached a settlement under which Fay agreed to pay Ms. Grissom $16,000 in exchange for a full release of all claims relating to the servicing of her mortgage. The settlement also included a mutual agreement to bear their own legal costs and a strict confidentiality provision barring public discussion of the case and settlement terms.
The parties jointly requested that the Bankruptcy Court seal the settlement agreement to protect “private financial information” and avoid “negative publicity.” Judge Kahn denied the motion to seal, ruling that neither concern rose to the level necessary to override the presumption of public access under 11 U.S.C. § 107(a). The court emphasized that none of the statutory exceptions—such as trade secrets or scandalous content—applied, and that mere reputational harm or standard confidentiality terms were not compelling grounds for secrecy.
Commentary:
Judge Kahn’s denial of the sealing request is a pointed reaffirmation of the public’s right to know what happens in bankruptcy courts. While parties may agree to confidentiality between themselves, they cannot cloak court-sanctioned settlements in secrecy without meeting the high bar set by § 107(b) and Local Rule 9018-1. “Damage to reputation” and generic privacy concerns do not cut it—especially when the case involves alleged misconduct in servicing a residential mortgage under bankruptcy protection. (If Fay Servicing didn't want to damage its reputation, perhaps it should either have successfully defended itself or have done a better job as a mortgage servicer.)
And let’s not kid ourselves: if a mortgage servicer wants to sweep its misdeeds under the rug, it can’t expect the court to hold the broom for free. As this case makes plain, “Silence is golden... so give some gold for our silence.” Fay paid $16,000 for the settlement, but wanted the public record to pretend it never happened. That bargain won't fly in bankruptcy court—at least not without showing real justification.
Consumer attorneys should be wary of confidentiality clauses that presume sealing. If the creditor wants that kind of secrecy, demand a premium for it—both in settlement dollars and in a clause that shifts legal fees for the motion to seal (especially when it’s doomed to fail). Full and honest disclosure is essential to the functioning of the bankruptcy system, and as Judge Kahn notes, when you ask for Rule 9019 approval, you ask for the court’s public imprimatur. No secrecy without scrutiny.
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