Bankruptcy Judge Craig T. Goldblatt of Delaware wrote an opinion where he seems to suggest that the Third Circuit should limit the breadth of one of its decisions regarding the presumption of public access to judicial records.
When a party to a litigation files a motion to unseal judicial records to benefit itself in a lawsuit elsewhere, and the motion was not made by a news organization or a member of the public, Judge Goldblatt wants the Third Circuit to consider making an exception barring public disclosure when the party seeking disclosure previously agreed to confidentiality.
Feeling compelled to grant the motion to unseal but wishing to preserve the issue for appeal, Judge Goldblatt certified a direct appeal to the Third Circuit and stayed his order for 30 days, giving the Third Circuit time to consider a motion for a stay pending appeal.
The Prior Confidentiality Order
Early in the corporate debtor’s chapter 11 case, the debtor agreed to a confidentiality order covering documents produced in discovery by a competitor. The confidentiality order required sealing any documents designated as confidential. The order also required redacting portions of briefs and motions referring to confidential documents.
After agreeing to the confidentiality order, the debtor appealed a decision by a Minnesota state court in a lawsuit involving the debtor, the state and the competitor. In the publicly filed record in state appeal, the debtor wanted to include 35 documents that the competitor had produced and that had been designated as confidential in bankruptcy court.
Relying on the presumption of public access to court records underpinning the Third Circuit’s decision in In re Avandia Mktg., Sales Practices & Prods. Liab. Litig., 924 F.3d 662 (3d Cir. 2019), the debtor filed a motion asking Judge Goldblatt to unseal the 35 documents to permit inclusion in the publicly filed record on appeal. The competitor resisted the motion, contending that unsealing the documents would be embarrassing to the competitor or would be used by the debtor to create leverage over the competitor in state court.
With evident reluctance, Judge Goldblatt granted the motion to unseal in his opinion on September 22, saying that “Avandia provides the applicable standard.” Judge Goldblatt said it would be “unduly presumptuous” of him “to distinguish [Avandia] away based on facts that were equally applicable in Avandia.”
In Avandia, a protective order in a nonbankruptcy case provided that confidential documents produced in discovery could not be disclosed to third parties. Some confidential documents were filed under seal in connection with a summary judgment motion. The district court granted the defendant’s motion for summary judgment, and the plaintiff appealed.
In a joint appendix to be publicly filed, the plaintiff sought to include confidential documents that had been filed under seal. The district court denied the motion to unseal, but the Third Circuit reversed.
Judge Goldblatt explained how the Third Circuit distinguished between the standard in Federal Rule 26(c) for treating documents as confidential “and the common law right of access to judicial records.” While “generalized allegations” of harm are sufficient under Rule 26(c) to support a protective order, he read Avandia to mean that “a more demanding standard is applied to documents that have become ‘judicial records’ and are therefore subject to a presumptive right of public access.”
What Did Avandia Consider?
Opposing the motion to unseal, the competitor that had produced the confidential documents contended that the debtor “should not be permitted to evade the terms of the order to which it expressly agreed.”
Judge Goldblatt rejected the competitor’s contention that the debtor was estopped from moving to unseal, because it was “very difficult to see” how the debtor had benefitted from stipulating to the confidentiality order.
Still, Judge Goldblatt said he was “not unsympathetic” to making a distinction between (1) situations where a member of the public seeks access to confidential information “through the common law right of access” and (2) cases where a party to litigation, who had agreed to confidentiality, invoked the common law right of access “for the purpose of freeing itself of those strictures such that it could distribute an otherwise confidential document to the public.”
Because the debtor already had access to the confidential documents, Judge Goldblatt said that “invocation of the common law right of access can certainly be viewed as an improper effort to conduct an end run around the terms of a protective order” when the purpose of unsealing is to make the documents public.
Judge Goldblatt said he was “candidly concerned that the straightforward application of the principles set forth in Avandia to the circumstances of this case render the protections contemplated by Rule 26(c) wholly illusory.” However, he said that the facts in the case before him “all appear to have been equally present in Avandia itself.”
Given his “obligation to adhere to Third Circuit precedent,” Judge Goldblatt believed it “would be unduly presumptuous of [him] to distinguish away [Avandia] based on factual circumstances that in no way actually distinguish the circumstances here from those confronted by the Third Circuit.”
Nonetheless, Judge Goldblatt found “nothing” in Avandia to “suggest” that “the defendant argued [in the Third Circuit] that the plaintiffs should not be permitted to invoke the public right of access as an end run around a protective order.”
In sum, Judge Goldblatt deduced that the stated principle in Avandia being relied upon by the debtor was not an issue actually litigated in the Third Circuit. However, the question before Judge Goldblatt involved the binding nature of precedent, not issue preclusion, a/k/a collateral estoppel. Indeed, Judge Goldblatt did not go so far as to say that the statement in Avandia was dicta.
Judge Goldblatt decided that “the more appropriate course is . . . to follow the binding precedent as it now exists” and “decline the invitation” to read Avandia “narrowly.” He therefore granted the motion to unseal.
To preserve the issue for appeal, Judge Goldblatt certified a direct appeal to the Third Circuit and imposed a 30-day stay, allowing the competitor to seek a stay pending appeal from the Court of Appeals.
Bankruptcy Judge Craig T. Goldblatt of Delaware wrote an opinion where he seems to suggest that the Third Circuit should limit the breadth of one of its decisions regarding the presumption of public access to judicial records.
When a party to a litigation files a motion to unseal judicial records to benefit itself in a lawsuit elsewhere, and the motion was not made by a news organization or a member of the public, Judge Goldblatt wants the Third Circuit to consider making an exception barring public disclosure when the party seeking disclosure previously agreed to confidentiality.
Feeling compelled to grant the motion to unseal but wishing to preserve the issue for appeal, Judge Goldblatt certified a direct appeal to the Third Circuit and stayed his order for 30 days, giving the Third Circuit time to consider a motion for a stay pending appeal.