The Third Circuit recently clarified that the unsealing of confidential documents subject to protective order in bankruptcy cases is governed by § 107 of the Bankruptcy Code, rather than the common law.
In In re: Essar Steel Minnesota LLC and ESML Holdings, the Third Circuit considered the Bankruptcy Court for the District of Delaware’s decision in an adversary proceeding that the common law right to access sealed records was the appropriate standard by which to determine whether to unseal judicial records. In this case, the Appellee Debtor had petitioned the Bankruptcy Court to unseal certain confidential records produced by Appellant in an adversarial bankruptcy proceeding for use in a related case before the Minnesota State Court of Appeals.
The Bankruptcy Court applied reasoning from another Third Circuit decision in holding that the common law prevented the Appellant from keeping the records at issue under seal, but stayed the decision for thirty days to allow the Circuit Court to consider the question.
On appeal, the Third Circuit clarified that the more stringent requirements and heavier burden of § 107 should be the applicable standard when considering whether to unseal confidential judicial records.
The Circuit Court also specifically noted that, while they agreed with Appellant that § 107 was the appropriate standard, the Court “emphatically” rejected Appellants’ claim that § 107 permits sealing of records even where disclosure would result in no harm, finding that such an argument would undercut the purpose and intent of § 107’s limitation to trade secrets and other information where disclosure would cause competitive injury.
The Circuit Court returned the decision to the Bankruptcy Court to determine whether the records should be unsealed under the appropriate statutory standard.
The Third Circuit vacated a Delaware bankruptcy judge's order to unseal records a successor of Essar Steel's U.S. unit is seeking to bolster its antitrust claims against Cleveland-Cliffs, ruling Wednesday that the Chapter 11 judge used the wrong standard.
