Judge sides with Legal Newsline, overturns sealing of fraud evidence against asbestos attorneys

By Heather Isringhausen Gvillo | Jul 24, 2014

CHARLOTTE, N.C. (Legal Newsline) - Nearly one year after Legal Newsline filed a motion to keep the bankruptcy estimation trial of Garlock Sealing Technologies open to the public, a federal judge has ruled that evidence that alleged fraud on the part of asbestos attorneys should not have been sealed.

U.S. District Judge Max O. Cogburn, Jr., a President Barack Obama-appointee who took the bench in 2011, ruled that sealing documents and witness testimony is the exception, not the rule, to handling alleged "confidential" information. As a result, he reversed U.S. Bankruptcy Judge George Hodges' denial of the motions seeking access to evidence admitted under seal and remanded the proceedings back to the bankruptcy court with instructions on how to handle the unsealing process.

"As a gatekeeper, a judge must consider sealing as the exception to the rule, give the public notice of its intent to seal, require counsel to provide valid reasons for such extraordinary relief, and then explain that decision as well as the reason why less drastic alternatives were not employed," Cogburn wrote.

Cogburn's order, filed Wednesday in the United States District Court for the Western District of North Carolina, concluded that the burden should be placed on those who hope to keep information confidential.

His ruling comes after a July 15 hearing addressed consolidated appeals from Legal Newsline, solvent asbestos defendants and other interested parties.

Legal Newsline's first appeal came prior to the Garlock estimation trial on July 31, 2013, in response to Hodges' decision to close portions of the trial and documents associated with it. It then filed an additional appeal seeking access to sealed trial transcripts.

After Hodges' ruling, several interested parties filed similar motions requesting access to sealed Rule 2019 filings.

Cogburn agreed that the proceedings were improperly closed, and, therefore, reversed the closure and the denial of Legal Newsline's motion.

The action arises out of Hodges' Jan. 10 ruling in favor of Garlock that ordered the gasket manufacturer to put $125 million in an asbestos trust - roughly $1 billion less than what plaintiffs' representatives felt was proper - to satisfy its anticipated liability to current and future asbestos claimants. In his decision, Hodges cited evidence that he said showed asbestos attorneys were withholding evidence while pursuing claims against Garlock.

The evidence of alleged misconduct by plaintiffs' attorneys led Garlock to file lawsuits claiming it had been victimized by fraud, deceit and racketeering when settling asbestos plaintiffs' claims with Garlock.

Hodges ruled that the amount of previous awards and settlements paid by the company in the civil justice system were not reliable because plaintiffs attorneys had withheld exposure evidence in order to maximize recovery against Garlock.

"This occurrence was a result of the effort by some plaintiffs and their lawyers to withhold evidence of exposure to other asbestos products and to delay filing claims against bankrupt defendants' asbestos trusts until after obtaining recoveries from Garlock," Hodges wrote.

Garlock brought evidence to the bankruptcy hearing demonstrating that the last 10 years of its participation in the asbestos litigation system "was infected by the manipulation of exposure evidence by plaintiffs and their lawyers."

"It appears certain that more extensive discovery would show more extensive abuse," Hodges continued. "But that is not necessary because the startling pattern of misrepresentation that has been shown is sufficiently persuasive."

Cogburn wrote that while RICO claims are common in federal civil litigation and don't typically attract attention, the Garlock allegations were of interest to the public, press and solvent asbestos defendants that were subjected to other asbestos-related claims and have dealt with the attorneys allegedly practicing fraud and deceit.

Cogburn further explained that the public right of access "protects the public's ability to oversee and monitor the workings of the federal courts and promotes the institutional integrity of the judiciary."

He noted that the U.S. Court of Appeals for the Fourth Circuit concluded that "the rights of the news media ... are coextensive with and do not exceed those rights of members of the public in general."

As a result, those who seek and are denied access to judicial records sustain an injury.

"Clearly, the only basis relied on by the bankruptcy court other than judicial efficiency in its sealing determinations was the existence of protective orders and the representations by interested counsel that such documents were confidential," Cogburn wrote.

"While designation of a document as 'confidential' may well be the impetus for attorney requesting a court to seal a document, it is by no means an endpoint. Instead, the bankruptcy court was required to 'show its work' by providing sufficient information concerning the reasons such exceptional relief was merited, which would have provided a basis for meaningful appellate review..."

In Legal Newsline's first appeal, it asked whether the bankruptcy court's closure of the courtroom and denial of Legal Newsline's motion violated the substantive and procedural protections associated with the First Amendment right to attend court proceedings.

Legal Newsline's second appeal also raised the issue whether its right of access to judicial documents requires disclosure of the evidence upon which the bankruptcy court relied in reaching its decision.

"Legal Newsline argued that the public and the press had a right to review for itself the evidence that supported the court's conclusion," Cogburn wrote.

"As to both challenged determinations, the court finds that, although done with the best judicial intentions of providing for the efficient administration of justice, Judge Hodges' decision to seal the estimation hearing and maintain the seal as to judicial filings and the transcript of those proceedings after his estimation order was contrary to the requirements of prevailing case law.".

He explained that when documents are sealed, the court is required to "state the reasons for its decision to seal supported by specific findings, and the reasons for rejecting alternatives to sealing to provide this court with sufficient information for meaningful appellate review."

However, Cogburn added that other than judicial efficiency, Hodges only relied upon protective orders and the representations by interested counsel that such documents were confidential when determining to seal the information.

"While designation of a document as 'confidential' may well be the impetus for attorney requesting a court to seal a document, it is by no means an endpoint," Cogburn wrote.

Rather, the bankruptcy court was required to provide sufficient information regarding its determination that such "exceptional" relief was merited. Such information would have at least provided a basis for meaningful appellate review according to the Fourth Circuit's decision in Media General Operations.

Hodges should have included specific findings that supported his reason for sealing as well as reasons for rejecting less drastic alternatives, Cogburn explained.

He added that the confidentiality order relied upon by the district court erroneously shifted the presumption favoring open courts to a presumption favoring the closure of proceedings based on confidentiality designations by the counsel. It, therefore, shifted the burden to the public and the press to disprove the contours of a need to seal.

"Put another way, an order providing that materials submitted to the court would be initially entered under seal and the courtroom closed to the public, subject to a challenge from the public or press, does not satisfy the requirements of Media General and its progeny," Cogburn continued.

Rather than automatically extending confidentiality afforded under a protective order, a party is required to seek an order sealing or redacting a confidential document, he said.

"The reason is simple," Cogburn continued, "the public and the press have a co-extensive right to view and consider documents tendered a judge and/or jury when a dispute in brought in the ultimate public forum, a courtroom."

If necessary, parties may redact information deemed confidential and then file an unredacted version under seal, he wrote.

Cogburn explained that the parties appear to agree that remand is appropriate and have submitted various proposals to remedy the sealing issue.

Garlock proposed specific instructions regarding what procedure should be employed by the bankruptcy court on remand when determining what to unseal as well as time frames for the parties to file objections.

On the other hand, Legal Newsline argued that the court should remand the case and direct the bankruptcy court to immediately lift the seal as the press and public have compelling First Amendment and common law interests in reviewing those materials.

Cogburn found that both suggestions were 'reasonable solutions,' but held that the appropriate instructions "fall somewhere between the two proposals."

In accordance with the Fourth Circuit's Stone decision, Cogburn instructed the court to determine in the first instance the source of the right of access with respect to each document or the testimony of any witnesses as to which any party proposes or has proposed be sealed.

Also, it should give the public notice of any such request to seal and a reasonable opportunity to challenge it and consider any reasonable alternatives to sealing, he wrote.

From Legal Newsline: Reach Heather Isringhausen Gvillo at asbestos@legalnewsline.com

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