Although statements filed under Bankruptcy Rule 2019 are documents presumptively subject to public access under Section 107, they can only be used to investigate fraud and cannot be used for lobbying, according to a Nov. 8 decision by Bankruptcy Judge Kevin Gross in Delaware.
The dispute arose in several Delaware-based chapter 11 cases dealing with asbestos liability. Two nonbankrupt manufacturers facing asbestos claims asked Judge Gross for unfettered access to Rule 2019 statements including the names and medical records of asbestos claimants. One of the manufacturers, obligated to fund an asbestos trust set up under a chapter 11 plan, wanted access to “ferret out” fraudulent claims.
Both manufacturers candidly admitted that they also intended to use the information in lobbying, claiming they had a right to unlimited access to the statements as publicly available documents under Section 107.
Fleshing out the requirements of Rule 2019 in complex asbestos cases and recognizing the confidentiality concerns of individual claimants, courts in Delaware previously had ruled that the statements themselves would be publicly available to disclose the identity of lawyers representing asbestos claimants. However, the Delaware courts precluded public disclosure of exhibits to the Rule 2019 statements. Those exhibits would include the identity of individual asbestos claimants, the retention agreements, and medical records.
The two manufacturers wanted Judge Gross to modify prior orders by giving them access to the exhibits that were designated as confidential and not publicly available.
Judge Gross said there are “limits to access” to Rule 2019 exhibits, relying principally on a 2013 decision in the Garlock chapter 11 case, where a Delaware district court gave the debtor access to the exhibits for use in claim estimation proceedings. In that case, however, Garlock could use the exhibits only in the estimation proceedings, could not disclose the information to anyone else, and was directed to destroy the information after conclusion of the estimation proceedings.
The Garlock decision, Judge Gross said, requires the court to balance factors “for and against access” in deciding how to exercise discretion in calling for disclosure. Therefore, he said, the first inquiry requires deciding if there is a “proper purpose.”
Judge Gross said there was “no precedent” for allowing use “outside judicial proceedings,” such as in lobbying. He therefore gave access to “investigate fraud in the claims process” and allowed the manufacturers to share the information “in an aggregate format” with the trust that would pay the claims.
In other words, Judge Gross prohibited them from disclosing the identity of the claimants to the trust. He gave them three months to complete their work and directed them to destroy the information at conclusion. He did not allow access to retention agreements.