561 B.R. 36
Bankr. S.D.N.Y.2016Background
- Motors Liquidation Co. adversary proceedings involve parties required by Fed. R. Bankr. P. 7007.1 to disclose entities owning 10%+ equity. Two non-debtor groups sought to redact those disclosures: the Moving Term Loan Lenders and the BlackRock Funds.
- The Moving Term Loan Lenders’ unopposed request to file redacted Rule 7007.1 statements was denied (Sept. 1 Order). The BlackRock Funds’ similar unopposed request was granted (Feb. 16 Order).
- The Moving Term Loan Lenders moved for reconsideration of their denial, highlighting the inconsistent treatment. The Court granted reconsideration and issued an order to show cause why the BlackRock Funds’ sealing order should not be vacated.
- Movants argued the investor identities are "confidential commercial information" under 11 U.S.C. § 107(b)(1) and sought sealing without submitting evidentiary declarations; they relied largely on prior uncontested sealing orders in other cases.
- The U.S. Trustee opposed sealing, arguing nondisclosure alone does not satisfy § 107(b) and noting lack of evidentiary support identifying competitive harm.
- The Court concluded (1) public access to Rule 7007.1 disclosures is strongly favored, (2) § 107(b) is a narrow exception requiring evidentiary showing of commercial harm, and (3) the Movants failed to meet that burden; it vacated the BlackRock Funds’ prior sealing order and denied sealing for both Movants, ordering unredacted filings within 14 days.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether identities of 10%+ owners in Rule 7007.1 statements may be filed under seal | Movants: identities are confidential commercial information under §107(b) and should be filed under seal | Trustee: nondisclosure alone insufficient; movants must show competitive harm with evidence | Denied: movants failed to meet heavy evidentiary burden; public filing required |
| Whether courts have discretion to balance public access against sealing requests under §107(b) | Movants: sealing permissible where judge can still review conflicts in camera | Trustee: §107(b) is a narrow statutory exception; court cannot simply balance interests without statutory fit | Court: §107(b) prescribes protection if information fits its categories; otherwise public access prevails; court cannot freely balance beyond statute |
| Whether prior uncontested sealing orders justify sealing now | Movants: cited prior district orders allowing similar redactions | Trustee: unpublished/unexplained orders lacking record do not establish precedent | Court: prior uncontested orders unpersuasive; not binding precedents |
| Applicability of debtor-focused Rule 1007 authority (Northstar) to non-debtor Rule 7007.1 filings | Movants: rely on Northstar and Rule 1007 analogies permitting sealed investor lists | Trustee: Rule 1007(j) applies to debtors, not non-debtors in adversary proceedings; different standards | Court: Northstar inapplicable; Rule 7007.1 governed by §107(b) with its heavier evidentiary requirement |
Key Cases Cited
- In re FiberMark, Inc., 330 B.R. 480 (Bankr. D. Vt. 2005) (public access to court records requires compelling reasons to seal)
- In re Food Mgmt. Grp., LLC, 359 B.R. 543 (Bankr. S.D.N.Y. 2007) (strong presumption of public access; §107(b) exception is narrow)
- Video Software Dealers Ass’n v. Orion Pictures Corp., 21 F.3d 24 (2d Cir. 1994) (if information fits §107(b) categories, court must protect it)
- In re Dreier LLP, 485 B.R. 821 (Bankr. S.D.N.Y. 2013) (movant bears burden and must submit evidence; conclusory statements insufficient)
- In re Borders Grp., Inc., 462 B.R. 42 (Bankr. S.D.N.Y. 2011) (commercial-information exception requires showing disclosure would unfairly benefit competitors)
- Gitto v. Worcester Telegram & Gazette Corp., 422 F.3d 1 (1st Cir. 2005) (public access to judicial records is especially important in bankruptcy)