Defamatory and Scandalous Material as Grounds to Seal Record

 In bankruptcy court, the presumption in favor of public access to judicial records can be overcome if "scandalous or defamatory matter" is contained in a paper filed therein. (See 11 U.S.C. Section 107). Curiously, there is an absolute judicial privilege for statements made in connection with and relevant to a judicial proceeding, so normally one wouldn't expect to find "defamatory matter" in a court filing. Still, there is a relevance requirement to be entitled to the privilege, and there's always a possibility that potentially defamatory or scandalous statements will be made in a court filing that have nothing to do with the underlying merits. And that's exactly what happened in the recent case of Robbins v. Tripp [an enhanced version of this opinion is available to lexis.com subscribers].

Attorney John W. Tripp was handling a case in bankruptcy court when certain issues arose relating to perceived problems with his practice. The court ordered him to prepare and file a report containing details relating to his organization of files, supervision of staff, communication with clients, and related matters. The bankruptcy court instructed that the report be written "candidly and not as an advocate for any party to this matter." Mr. Tripp moved for leave to file the report under seal, based in part on Section 107's "scandalous or defamatory" provision. The motion was granted, and the trustee appealed.

The district court noted that the Fourth Circuit has not yet spoken on the proper interpretation of this language, and observed further that there is a split of authority among other circuits on the issue. Some focus on the word "scandalous" and apply its dictionary definition, sealing material found to be disgraceful, offensive, or shameful. Others have focused on the defamation prong and held that "material that would cause a reasonable person to alter his opinion of an interested party triggers the protections of § 107(b)(2) based on a showing that either (1) the material is untrue, or (2) the material is potentially untrue and irrelevant or included within a bankruptcy filing for an improper end." (See In re Gitto Global Corp., 422 F.3d 1 (1st Cir. 2005) [enhanced version]).

The court found that the report at issue qualified for Section 107 protection under either of these tests. Observing that the report was not directly related to the underlying bankruptcy matter and that it contained information about Mr. Tripp's representation of all his clients, and not just the particular debtor in the case, the court found that it was proper to seal the report from public scrutiny because (a) a reasonable person could change their opinion of Mr. Tripp based on the report; (b) the Report was potentially untrue or irrelevant; and (c) unsealing the report could harm Mr. Tripp's professional reputation.

 Read the rest of the article at the Virginia Business Litigation Lawyer Blog.

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