Bankruptcy Behind Closed Doors

There has been a perceptible increase in the number of bankruptcy transactions taking place with the underlying arrangements being placed under seal. In other instances, the debtor indicates in its motion seeking approval of the transaction that it will not be providing the underlying agreement on which the transaction is based except to the major parties in the case (typically the judge, the creditors' committee, the DIP lenders and the United States Trustee). The burden then shifts to parties in interest to seek to obtain the information if they desire to review it.

For example, the court overseeing the Chapter 11 cases of UAL Corporation and its affiliates entered an order authorizing UAL to file section 1110(b) stipulations and aircraft financing modification agreements under seal. Similarly, the court overseeing the reorganization of WorldCom, Inc. (now MCI) has authorized the sealing of settlement agreements, fee applications, and certain of WorldCom's bankruptcy schedules. These efforts have not been met without protest. Numerous parties objected to UAL's efforts to keep the terms of the section 1110(b) stipulations and aircraft financing modification terms confidential. See BA Leasing Parties, et al. v. UAL Corp., 2003 WL 22176068 at *1 (N.D. Ill., Sept. 15, 2003). Whether there has been an actual increase in the number of documents sealed or matters handled in this manner, or whether the high profile nature of these cases has simply highlighted the issue, we believe it is useful to review the applicable standards in this area and to discuss what bankruptcy courts will and will not allow when a debtor seeks to keep information away from public view.