In re Motions for Access of Garlock Sealing Technologies LLC
Docket: Civ. No. 11-1130-LPS
Court: District Court, D. Delaware; March 15, 2013; Federal District Court
Access to materials submitted to the Clerk of the Bankruptcy Court was requested in the context of nine related bankruptcy proceedings, some closed and some ongoing, involving Garlock Sealing Technologies LLC, which filed for Chapter 11 bankruptcy on June 5, 2010, to create a trust for asbestos claims. The Bankruptcy Court initially denied access to the requested documents, prompting an appeal. The Court concluded that access should be granted with certain limitations. The nine Delaware Bankruptcy Cases, overseen by Judge Judith K. Fitzgerald, include both closed and open cases. Additionally, Garlock is involved in three related appeals in the Western District of Pennsylvania, overseen by Judge Nora Barry Fischer, who has stayed those appeals pending the outcome of the current case. The appeals stem from an October 7, 2011, order denying motions for access to Rule 2019 statements and related motions in the Delaware cases. The responding parties include law firms that submitted the Rule 2019 statements, asbestos claimants' committees from open bankruptcies, and reorganized debtors from closed cases.
Rule 2019 of the Federal Rules of Bankruptcy Procedure mandates that entities, excluding court-appointed committees, file a verified statement detailing specific information about creditors, claims, and the circumstances of employment. This includes the creditor's name and address, the nature and amount of claims, and pertinent facts concerning the entity's employment. In response to the complexities of mass tort asbestos bankruptcy cases, Judge Fitzgerald issued several orders (the “2019 Orders”) requiring all counsel representing multiple asbestos claimants to submit statements compliant with Rule 2019 to the Clerk of the Delaware Bankruptcy Court. These statements, referred to as “2019 Statements,” identified the filing law firm but lacked substantive disclosures and were submitted electronically.
The 2019 Orders mandated that supporting documents, or “2019 Exhibits,” be provided to the Clerk but not filed electronically on the public docket. Instead, these exhibits were to be maintained by the Clerk and made accessible only through a motion and court order. The orders specified that the docket entry for the 2019 Statements would indicate that the Exhibits were available upon court authorization. Each entity filing a 2019 Statement was required to submit the statement electronically without the exhibits and provide the exhibits on CDs for the Clerk's maintenance, thus ensuring controlled access to sensitive information.
The procedural framework requires adherence to Rule 2019, which necessitates that 2019 Statements be publicly accessible while 2019 Exhibits remain in the Clerk's possession and accessible only through a court motion. This framework has been upheld by multiple district courts and the Third Circuit, emphasizing a balance between public access and preventing misuse of the information. The Bankruptcy Court affirmed that access to the 2019 Exhibits requires a proper motion and court order. On January 10, 2011, Garlock filed motions in multiple bankruptcy cases seeking access to these exhibits. After a February 14, 2011 hearing, the Bankruptcy Court ruled that motions could not be filed for closed cases until reopened. Consequently, Garlock sought to reopen closed cases, intervene in the bankruptcies, and amend its motions for access. However, on October 7, 2011, Judge Fitzgerald denied all of Garlock's requests, citing a lack of standing to intervene given Garlock's limited prior participation in the proceedings. The court also noted that Garlock lacked Article III standing, as it was neither a party nor had claims in the cases, and found that Garlock's assertions of harm were based on imagined grievances, failing to establish prudential standing.
Granting Garlock’s request to reopen closed bankruptcy cases, some involving debtors from a decade prior, would lead to significant negative consequences. The Bankruptcy Court determined that Garlock was improperly attempting to use Rule 2019, which is intended to ensure that authorized representatives negotiate and vote on plans for real parties in interest, rather than as a discovery tool. The court clarified that Rule 2019 statements do not serve as proofs of claim or ballots. It expressed skepticism about the utility of the 2019 Exhibits, noting they are merely attorney statements of authority and do not constitute claims or affirmative statements from clients. The court emphasized the public's right to access judicial records, aiming to enhance trust in the judicial process and limit abuses, while acknowledging that restrictions on personal details do not conflict with this principle.
Garlock's appeals from the Bankruptcy Court's decisions were filed on November 16, 2011, and subsequently assigned to the District Judge. The appeals were consolidated for procedural purposes, and Garlock's requests for expedited proceedings and oral argument were granted. The court received a Judicial Notice Motion from Garlock, seeking to include proposed legislation in the appellate record, with oral arguments held on June 12, 2012. The Bankruptcy Court’s orders denying Garlock access to the 2019 Exhibits, as well as denials of motions to intervene and reopen cases, are appealable as final orders under 28 U.S.C. 158(a)(1) and 1334. The court reviews factual findings for clear error and legal conclusions de novo, while mixed questions are analyzed by separating factual and legal components. Discretionary decisions from the Bankruptcy Court are reviewed for abuse of discretion.
Decisions regarding the protection of judicial records from public disclosure, as well as denials of access to these records, are reviewed for abuse of discretion. The same standard applies to interventions and the reopening of closed bankruptcy cases. In the appeal, Garlock contends that the Bankruptcy Court did not apply the established standards for public access to federal court documents, claiming that it has standing to seek access to the 2019 Exhibits based on Third Circuit law. Garlock argues that the burden should have been on the objecting parties to prove the impropriety of its intentions, emphasizing that its purpose of using the exhibits in its bankruptcy cases is legitimate. Additionally, Garlock maintains that reopening closed cases is unnecessary for accessing the exhibits and that formal intervention is not required. In its reply brief, Garlock asserts that its appeals are not precluded by collateral estoppel or res judicata.
In contrast, the Certain Law Firm Appellees argue that collateral estoppel and res judicata prevent Garlock from accessing the exhibits due to a prior unsuccessful attempt related to the Pittsburgh Corning bankruptcy. They support the affirmation of Judge Fitzgerald’s decisions, asserting that reopening closed cases is inappropriate and that Garlock lacks standing due to insufficient injury. They also argue that the 2019 Exhibits were not filed with the Bankruptcy Court, thus not qualifying for public access, and claim that Garlock's intended use of the exhibits is improper, aiming to demonstrate fraud in the tort system, which they dispute as being relevant or admissible evidence.
The Law Firms advocate for upholding the Bankruptcy Court's decision, criticizing Garlock for failing to recognize that asbestos victim counsel, bound by Rule 2019, may need to include potential creditors in their disclosures without prior access to discovery against a bankrupt asbestos defendant. They argue that the 2019 Exhibits are primarily relevant to representation issues in the Bankruptcy Cases and that Judge Fitzgerald effectively balanced the need for agency verification against the privacy of potential claimants, justifying the denial of Garlock’s request for public access to these confidential documents. Additionally, they contend that Garlock's attempts are barred by collateral estoppel and res judicata, labeling the request as an extensive and ineffective effort across major mass tort bankruptcies.
The ACC Appellees similarly assert that Garlock's request is prevented by collateral estoppel and res judicata, and they support Judge Fitzgerald’s balancing framework in his orders. They argue that Garlock's intended use of the information is speculative and irrelevant, asserting that the 2019 Exhibits do not constitute public records under Bankruptcy Code § 107(a) since they were not part of any adjudicatory proceedings or filed on the docket. Furthermore, they raise concerns about the risk of identity theft posed by disclosing the 2019 Exhibits.
Armstrong supports the Bankruptcy Court’s decision, stating that Garlock can pursue discovery in its own case and informally communicate with asbestos creditor attorneys. Armstrong views Garlock's request as a discovery dispute lacking a close connection to their bankruptcy case, questioning the subject matter jurisdiction of the Delaware Bankruptcy Court. They argue against reopening closed cases due to the associated burdens. Owens remains neutral on Garlock's access to the 2019 Exhibits but opposes reopening closed cases unless it can be done without harming the reorganized debtor. ACandS and USMP also do not take a stance on the merits of Garlock’s appeals but request indemnification from Garlock should their closed cases be reopened.
The United States Trustee (UST) neither supports nor opposes Garlock's access to the 2019 Exhibits and the reopening of six closed cases. The UST emphasizes that if the cases are reopened, the payment of Quarterly Fees is mandatory under 28 U.S.C. 1930(a)(6), and these fees and reporting requirements cannot be waived.
Garlock argues that the Bankruptcy Court misapplied the standard for determining its standing to access the 2019 Exhibits, citing Pansy v. Borough of Stroudsburg. Garlock believes it has standing due to an "obstacle" created by the Bankruptcy Court’s Orders. In contrast, the appellees argue that the 2019 Exhibits are not judicial records and that Garlock must prove constitutional standing under Article III. The Court finds in favor of Garlock, noting that third parties generally have standing to challenge protective or confidentiality orders to gain access to judicial information, even after a case has concluded. Thus, as a member of the public facing obstacles in accessing the 2019 Exhibits, Garlock has standing.
Regarding appellate standing, some appellees contend that Garlock lacks it, relying on a prudential standing requirement that limits appeals to those directly and adversely affected financially by a bankruptcy order. The Court disagrees, asserting that the same interests that provided Garlock with standing in the Bankruptcy Court apply here as well. Garlock remains aggrieved by the Bankruptcy Court Orders that limit its access to the 2019 Exhibits, thus maintaining its standing to appeal.
Denial of Garlock's request for access to the 2019 Exhibits for evidence development related to its bankruptcy case does not constitute an insufficient interest to pursue an appeal. Collateral estoppel does not apply, as the issue of Garlock's public right to access the 2019 Exhibits was not previously adjudicated or litigated; prior cases did not resolve access issues nor deprive any party of such access. In the Pittsburgh Corning bankruptcy, insurance companies contested the 2019 Orders under Rule 2019, claiming violations of public access rights, but their appeal was dismissed due to lack of standing and the bankruptcy court's failure to address access rights at that time. Garlock's attempts to access Rule 2019 information were also denied, but it did not invoke the public access doctrine in its motions, which means the applicability of this doctrine was not at issue. Consequently, appellees did not substantiate that Garlock's access requests were barred by collateral estoppel or res judicata, which prevents re-litigation of claims already determined on the merits by a competent court.
Garlock participated in the Pittsburgh Coming bankruptcy case but did not receive a plan confirmation order, rendering res judicata inapplicable to other bankruptcy cases. The 2019 Exhibits are classified as judicial records, as they were required to be filed with the Bankruptcy Court under the 2019 Orders. These Orders mandate that any entity involved in the bankruptcy must submit a verified 2019 Statement, which includes the Exhibits. Although access to these documents is limited due to concerns over personal information, they were made available to parties to ensure the integrity of the plan confirmation voting process. The bankruptcy court emphasized that while access issues would be resolved upon proper motion, the 2019 Statements were essential for verifying the identities of voting entities. Given their filing status, there is a presumptive right of public access to the 2019 Exhibits, as established by the Third Circuit. Public access is crucial for fostering trust in the judicial system and ensuring transparency.
Judges are expected to perform their duties honestly and with proper information, supported by the presumption of public access to judicial records. To overcome this presumption, parties must demonstrate that the information warrants protection and that disclosure would cause a clearly defined, serious injury. In this case, the presumption of access remains intact, as the appellees' arguments against disclosure do not sufficiently show that secrecy is more important than public access. Concerns about identity theft from potential asbestos claimants' information are acknowledged but lack evidence of serious harm, especially with the restrictions the court will enforce regarding Garlock's use of the requested exhibits.
While some appellees argue that Garlock could obtain the same information through its bankruptcy discovery process, this does not lessen Garlock's right to pursue access in court. Claims that access was intended solely for monitoring voting processes lack support in the record. Additionally, although Rule 2019 has been amended to relax disclosure requirements, the court must adhere to the version in effect when the 2019 Orders were issued. The validity of the 2019 Orders is affirmed and cannot be challenged in this appeal. Finally, the evidentiary value of the 2019 Exhibits is disputed, but public access rights are not judged by evidentiary standards, and Garlock's status as a non-press entity does not negate its right to access judicial records.
All individuals, regardless of their motives, have equal rights to access and copy judicial records, meaning the press does not have superior access compared to the general public. Additionally, an intervenor involved in related litigation retains the same rights to access public documents for personal benefit. The district court has discretion to balance the factors for and against granting access to records, as established in legal precedent. In this case, the court determined that the public's presumptive right to access the 2019 Exhibits has not been rebutted, leading to the decision to grant Garlock access.
Even if the 2019 Exhibits are not classified as judicial records, the court would still allow Garlock access due to demonstrated good cause for modifying existing confidentiality orders. The court possesses supervisory authority over its records and can seal documents when necessary, provided the requestor shows that the need for secrecy outweighs the public's right to access. The 2019 Orders imply a justified sealing of these exhibits.
Garlock’s request necessitates a balancing of interests, including those of the original parties to the confidentiality order, to ascertain whether good cause persists for maintaining the order. After evaluating these factors, the court concluded that there is sufficient reason to modify the 2019 Order to grant Garlock access. Garlock's purpose for seeking access—to enable its expert to assess or counter claims regarding its aggregate liability for asbestos in its bankruptcy case—is deemed appropriate. Specifically, the 2019 Statements and Exhibits may contain relevant admissions about exposure to other products that could influence the assessment of Garlock's asbestos liability, allowing for the possibility to demonstrate that other parties share fault. The court recognizes this intended use as legitimate, negating the need to evaluate Garlock’s other potential motivations, including the pursuit of a RICO claim.
Garlock seeks access to the 2019 Exhibits related to asbestos plaintiffs, arguing that sharing such information may enhance fairness and efficiency in estimating its liability in the North Carolina Bankruptcy Court. The court acknowledges that the public interest in mass tort liabilities favors granting access. However, privacy concerns for individuals identified in the Exhibits pose significant risks, including identity theft. Each individual listed had contacted counsel regarding potential claims, which mitigates some privacy concerns, as the information disclosed parallels what would be required in asbestos litigation.
Despite the potential for embarrassment, the court deems this factor as having minimal impact due to imposed restrictions intended to safeguard privacy. The absence of public health implications and lack of involvement from public entities further weigh against granting access. The court also considers the reliance interests of those who depended on the 2019 Orders, noting that while these orders restricted access, they did not entirely eliminate the possibility of disclosure. The mechanism for seeking access was anticipated within the 2019 Orders, indicating that complete reliance on them for preventing access was not reasonable. The court's careful tailoring of Rule 2019 to the complexities of the case was acknowledged by all parties involved, and the current motion reflects a possible outcome contemplated from the outset.
The Court evaluated the Pansy factors and determined that Garlock has shown good cause to modify the 2019 Orders to access the 2019 Exhibits, subject to specific restrictions. It concluded that reopening closed cases or granting Garlock intervenor status is unnecessary, as the Bankruptcy Court has supervisory authority over its records. The Bankruptcy Court will allow Garlock access to the 2019 Exhibits, and Garlock’s motion for judicial notice of proposed legislation at state and federal levels was granted, recognizing the relevance of these proposals to issues in the appeal.
The Court imposed limitations on Garlock's access and use of the 2019 Exhibits, allowing access solely for estimation proceedings related to its bankruptcy case. Garlock is prohibited from publicly disclosing information from the exhibits except in aggregate form that does not reveal individual identities. Any disclosure must be preceded by a proposed protective order submitted to the North Carolina Bankruptcy Court. Furthermore, Garlock is not permitted to access retention agreements between lawyers and potential claimants, addressing concerns regarding identity theft and other potential harms anticipated by the Bankruptcy Court.
The Court ordered the parties to submit a proposed form of order that will restrict Garlock's access and use of certain materials in accordance with the Court's Opinion. The Bankruptcy Court had previously exercised discretion to facilitate the filing of 2019 Statements, delaying decisions on access. However, upon Garlock's later request, the Bankruptcy Court erred in granting access, leading to the reversal of its prior Orders and Opinions regarding Garlock's access to the 2019 Exhibits. The specific Orders from nine asbestos-related Delaware Bankruptcy Cases were reversed. The Judicial Notice Motion was granted, and parties are required to meet and submit a proposed order within seven days, addressing Garlock's access to the 2019 Exhibits as outlined in the Opinion. They must also include any requested modifications regarding the identification of involved parties and attorneys. The document lists the nine bankruptcy cases, their corresponding docket numbers, and details the comprehensive efforts made by the Court to identify all relevant parties and counsel involved in the appeals.
In re USG Corp. and W.R. Grace are referenced along with several other bankruptcy cases, indicating ongoing litigation involving multiple parties and law firms. The document notes that various issues have been raised on appeal, including questions of collateral estoppel, res judicata, and the status of certain exhibits as judicial records. The court generally adheres to the principle that new arguments not presented at the bankruptcy level will not be entertained on appeal, as established in precedent cases. However, the court has chosen to address the new arguments in this instance, citing adequate record support and the need for judicial economy. The court emphasizes that for a party to invoke the court's authority, they must demonstrate a personal injury traceable to the defendant's actions, which Garlock has done. Consequently, Garlock's interest in the 2019 Exhibits is deemed sufficient to allow its intervention in the bankruptcy cases.
In a bankruptcy case, the court may allow any interested entity to intervene for cause after a hearing, according to Bankruptcy Rule 2018(a). The court has discretion to grant permissive intervention, and it maintains jurisdiction to modify its orders without needing an independent jurisdictional basis. The court discussed the possibility of determining if certain exhibits (2019 Exhibits) are judicial records but ultimately chose not to remand for that issue. Under 11 U.S.C. § 107(a), papers filed in bankruptcy cases and court dockets are public records, open for examination. The court has granted Garlock access to the 2019 Exhibits, negating the need to evaluate a narrower request for access or to consider First Amendment implications. The court refrains from commenting on how the North Carolina Bankruptcy Court should allow Garlock to use the information from those exhibits, as issues of evidence admissibility and expert disclosure are for that court to determine. Garlock's reliance on the Affidavit of Paul Grant, a litigation consultant, is deemed appropriate for context rather than for truth, showing Garlock's justification for needing access. The court does not address fee and reporting issues raised by the United States Trustee and clarifies that Garlock will not have access to any confidential information as defined under 11 U.S.C. § 107(b)(1). The court does not intend to limit any additional restrictions that the North Carolina Bankruptcy Court may impose.
