Although the counsel believed he had good reason for disclosing confidential information in a chapter 11 case involving sexual abuse, Bankruptcy Judge Meredith S. Grabill of New Orleans socked the lawyer with $400,000 in sanctions.
The Archdiocese of New Orleans filed a chapter 11 petition to deal with sexual abuse claims. There are two official committees, one representing trade creditors and another for sexual abuse tort claimants.
Judge Grabill entered an elaborate confidentiality order dealing with information and documents concerning sexual abuse claims. The order defined “protected material” and prohibited disclosure except to authorized persons and only for authorized purposes. The order also prohibited disclosure outside of the procedure methods prescribed in the order.
The protected material included information about a particular priest, the allegations made against him, the identity of the individual who lodged the allegations and the resolution after an investigation by the archdiocese. The information also identified the high school where the priest worked.
A lawyer, not counsel for the official tort committee, was representing four of the claimants on the committee in their individual capacities. Privy to the confidential information, he allegedly disclosed the information to a relative of his who was the principal at the school and also to a news reporter.
By motion, the debtor notified the court about the disclosure of confidential information. Investigations ensued by the debtor, the tort committee and, ultimately, by the U.S. Trustee on order of Judge Grabill.
The report from the investigations alleged that the lawyer for the four claimants had made the disclosure and had contravened the confidentiality order. Judge Grabill removed the four committee members and replaced them. Her order removing the committee members was upheld on appeal in district court. To read ABI’s report, click here.
Alongside removal of the committee members, Judge Grabill entered an order directing the lawyer to show cause why he should not be sanctioned for disclosure of confidential information.
As reported by Judge Grabill in her October 11 opinion, the lawyer admitted that he had made the disclosures. She quoted the lawyer for saying that he made the disclosures for “legitimate compelling reasons — to protect minors” and to ensure that the priest would not be allowed to return to work at the school. (The priest had been on medical leave.)
Judge Grabill said that the lawyer was “adamant” in his belief that his actions did not violate the confidentiality order. She described the lawyer as contending that the allegations against him were “contrived” by the debtor in retribution for bringing lawsuits that forced the church into bankruptcy.
Judge Grabill found “clear and convincing evidence that, even though a Protective Order was in place . . . , [the lawyer] nevertheless took confidential information he received through his affiliation with the Committee and used it for his own purposes — not one for which it was intended or protected.” She also found that the disclosures “created waste,” disrupted progress in the case and “delayed resolution of this particular matter for months.”
In addition, Judge Grabill found that the lawyer’s “evasion” and failure to provide timely information to the committee constituted “bad-faith actions” causing the debtor and the committee to “expend resources unnecessarily to uncover information that [the lawyer] had all along.”
Judge Grabill found sanctioning power under Federal Rule 37, Section 105(a) and the court’s inherent power. She noted that severe sanctions under Rule 37 require a finding of bad faith or willful misconduct, and that sanctions under Section 105(a) and the court’s inherent authority demand a specific finding of bad faith.
Judge Grabill had counsel for the debtor and the committees submit time records showing they spent an aggregate of $760,000 in time on the matter involving the disclosures. She imposed a sanction of $400,000 on the attorney, saying that it represented “approximately 53% of $760,884.73, the total amount of attorneys’ fees and costs that were incurred by professionals of the Debtor and the Committee in responding to the Motion To Compel and investigating the breach of the Protective Order.”
Judge Grabill said that the sanction “will serve the desired purpose of deterring [the lawyer] and others from engaging in similar misconduct.”
Although the counsel believed he had good reason for disclosing confidential information in a chapter 11 case involving sexual abuse, Bankruptcy Judge Meredith S. Grabill of New Orleans socked the lawyer with $400,000 in sanctions.
The Archdiocese of New Orleans filed a chapter 11 petition to deal with sexual abuse claims. There are two official committees, one representing trade creditors and another for sexual abuse tort claimants.
Judge Grabill entered an elaborate confidentiality order dealing with information and documents concerning sexual abuse claims. The order defined “protected material” and prohibited disclosure except to authorized persons and only for authorized purposes. The order also prohibited disclosure outside of the procedure methods prescribed in the order.