The parties’ desire for confidentiality does not justify sealing a settlement agreement, according to Chief Bankruptcy Judge Tracey N. Wise of Lexington, Ky.
Even though the settlement was “no seal, no deal,” Judge Wise still refused to seal the agreement in a March 1 opinion.
Husband and wife co-debtors in chapter 13 filed a class action adversary proceeding alleging that a telecommunications provider violated the automatic stay by attempting to collect pre-bankruptcy debts. The class was defined as customers of the provider who had filed chapter 13 petitions in the Eastern District of Kentucky.
Seven weeks later, the debtors filed a motion in the chapter 13 case to settle their own claims, not the class claims. Simultaneously, they filed a motion to seal the settlement agreement. They attached the settlement agreement for the judge’s in camera review.
The sealing motion told Judge Wise that the parties were unwilling to settle unless the settlement agreement were sealed. However, Judge Wise said that the confidentiality provision in the settlement agreement did not say that the settlement would be void if the agreement were not sealed.
Section 107(a) says that papers filed in bankruptcy court are “public records,” while Section 107(b) provides that the court “shall . . . protect an entity with respect to a trade secret or confidential . . . commercial information.” According to Judge Wise, the parties presented no “evidence” showing that sealing would be justified under Section 107(b).
Commercial information, Judge Wise said, is information that would give an “unfair advantage to competitors.” The parties, she said, offered no evidence to show that the settlement agreement contained protected commercial information.
In the Sixth Circuit, Judge Wise said the court must make a finding explaining why the interests in support of nondisclosure are compelling. Because the parties presented no evidence, as opposed to argument, the judge denied the sealing motion and directed the debtors to file an unredacted copy of the settlement agreement within seven days.