Stone v. Kettering Adventist Healthcare (In re Stone)

Citation: 587 B.R. 678Docket: Case No. 15-31896; Adversary Case No. 17-3012

Court: United States Bankruptcy Court, S.D. Ohio; May 31, 2018; Us Bankruptcy; United States Bankruptcy Court

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Beth A. Buchanan, U.S. Bankruptcy Judge, addressed the Joint Motion to Approve Procedures for a Miscellaneous Proceeding as required by a Settlement Agreement. A hearing on the motion occurred on May 9, 2018, resulting in the Court's oral decision to disapprove the proposed procedures and outline alternative methods for opening a miscellaneous proceeding to restrict and redact class action proofs of claim. This order elaborates on the Court's findings supporting its decision, with further detailed procedures to be issued separately.

The procedural background indicates that on October 13, 2017, a Settlement Agreement was reached between Plaintiff Mary A. Stone and Defendant Kettering Adventist Healthcare, which was approved by the Court on April 11, 2018. The Settlement mandates Kettering Health to initiate a miscellaneous proceeding to restrict access to proofs of claim that may include sensitive medical information. These proofs of claim, totaling 2,732 across 1,169 bankruptcy cases, were filed between February 8, 2013, and December 4, 2017.

On March 2, 2018, the parties submitted the Joint Motion for approval of a procedure allowing Kettering Health to permanently restrict access to these claims without substituting redacted copies in the claims registry. Instead, requests for redacted versions would be directed to Kettering Health's agent, Taft Service Solutions Corporation (TSS), who would handle redactions upon receiving requests. Public notification would be limited to a docket entry for each affected bankruptcy case. Kettering Health also sought to extend this procedure to additional claims filed between April 13, 2003, and February 7, 2013, bringing the total to over 14,000 claims in approximately 4,000 cases.

Kettering Health's request is grounded in the bankruptcy court’s authority under 11 U.S.C. § 105(a) for equitable relief, alongside the need to safeguard sensitive information under 11 U.S.C. § 107(c) and Federal Rule of Bankruptcy Procedure 9037. The proposal includes a $25,000 filing fee for the miscellaneous proceeding. The Court underscores the importance of public access to court records, which is supported by the First Amendment right to transparency in the justice system.

The integrity and transparency of bankruptcy court proceedings necessitate a strong public interest in open access to court records, as highlighted in case law such as Motors Liquidation Co. Avoidance Action Trust v. JP Morgan Chase Bank. This interest fosters creditor confidence in the fairness of the bankruptcy system. The general right to inspect and copy public judicial records is recognized, although not absolute. Courts maintain supervisory power over their records, and access may be restricted to prevent improper use. 

Under 11 U.S.C. § 107, court filings are public records, allowing reasonable access without charge, except in specific circumstances outlined in subsections (b) and (c). These provisions allow courts to protect confidential business information, scandalous material, and personal identification information to prevent identity theft or other harm. Access to such protected information may be granted to governmental entities upon demonstration of cause. The presumption of public access is subject to narrow exceptions, and in the absence of claims falling within these exceptions, the public retains a general right to access bankruptcy filings.

11 U.S.C. § 107(c) grants bankruptcy courts broad discretion to protect individuals under specific circumstances, differing from the more restrictive Section 107(b). This section is augmented by Federal Rule of Bankruptcy Procedure 9037, which mandates the redaction of certain identifying information and allows the court to seal or restrict access to documents as needed. However, limiting public access is considered an extraordinary measure, justified only in rare situations, as public oversight is vital for democratic accountability. Thus, while confidentiality is important, the policy favors public access to information, advocating for redaction over complete sealing of documents.

In the case at hand, Kettering Health proposed to restrict access to a significant number of proofs of claim in bankruptcy cases, including those not involved in a related class action. Notably, Kettering Health did not plan to notify additional debtors whose sensitive information might be disclosed, only providing a docket entry after restrictions were imposed, which is insufficient for due process. Consequently, the court denied the inclusion of these debtors in the current proceedings, requiring separate procedures for their claims.

For claims related to the class action, Kettering Health acknowledged potential sensitive medical or billing information, which may be protected under § 107(c) and Rule 9037. The court recognized its discretion to protect such information but emphasized the need to balance this against the public's right to access judicial records, which supports transparency in bankruptcy proceedings. The court reiterated that redacting documents to remove only protectable information is preferred over sealing them entirely.

The Court finds that Kettering Health's proposed procedures would significantly limit public access to court records, which is not justified solely by the administrative burden on Kettering Health to file motions to redact each case. It emphasizes that other creditors regularly comply with the established protocol of filing motions to redact sensitive information, which allows public access while protecting privacy. The Court cites a recent two-week period where approximately 245 motions to redact were filed, most concerning medical claims, demonstrating the effectiveness of the current system. Deviating from this protocol based on Kettering Health's claims of increased costs would likely encourage other creditors to seek similar restrictions, further diminishing transparency in the court's docket. 

The Court also critiques Kettering Health's cited cases for not adequately considering the balance between public access and the need to protect sensitive information. Specifically, in the In re Penny case, the order lacked a public policy analysis, while the In re Citi Replacement Filings case supports the necessity of providing redacted versions of claims. The Court concludes that maintaining the redaction process is preferable to a blanket restriction on access to court records.

The court considered whether to hold WakeMed Physician Practices in contempt for disclosing medical information in over 4,000 proofs of claim. The opinion briefly mentions that WakeMed incurred over $100,000 in fees to file motions to limit access and planned to submit redacted claims for ongoing cases. It emphasizes the necessity of filing redacted claims to safeguard debtors' sensitive information while balancing public access to court records. The court ultimately denied the Joint Motion to Approve Procedures related to the Settlement Agreement, stating it would establish its own procedures to protect sensitive medical and billing information, which will be documented separately. Additionally, Kettering Health's counsel indicated uncertainty about the number of claims containing sensitive information due to incomplete reviews.