United States Court of Appeals
For the First Circuit
No. 00-1375
IN RE SALEM SUEDE, INC.,
Debtor,
STEFANO PICCIOTTO, JUDITH PICCIOTTO, MELITA PICCIOTTO,
ATHENA PICCIOTTO, FOREIGN CAR CENTER AND JUAN NUNEZ,
Appellants,
v.
SALEM SUEDE, INC. AND TRAVELERS INDEMNITY COMPANY,
Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Robert E. Keeton, U.S. District Judge]
Before
Boudin, Chief Judge,
Cyr, Senior Circuit Judge,
and Lipez, Circuit Judge.
Dana E. Casher, with whom Krulewich, Casher was on brief for
appellants.
Eric B. Hermanson, with whom John A. Nadas, Robert A. Kole,
and Choate, Hall & Stewart were on brief for appellees.
October 18, 2001
CYR, Senior Circuit Judge. After disallowing
appellants’ motion to release the sealed transcript of a hearing
during which references were made to a confidential settlement
agreement, the bankruptcy court denied their motion for
reconsideration as well. The district court affirmed on
intermediate review. See In re Salem Suede, Inc. (Foreign Car
Ctr., Inc. v. The Travelers Indem. Co.), 241 B.R. 780 (D. Mass.
1999).
Prior to oral argument, we were informed by counsel to
The Travelers Indemnity Company (“Travelers” or “appellee”) that
the sealed transcript recently had been released by the
bankruptcy court, notwithstanding the sealing order, in response
to a Freedom of Information Act (“FOIA”) request by appellants’
counsel. Accordingly, we directed that counsel address at oral
argument whether the intervening release of the sealed
transcript effectively mooted the instant appeal, see U.S.
Bancorp Mortgage Co. v. Bonner Mall P’ship, 513 U.S. 18, 21-22
(1994), and, if so, whether the judgments entered below should
be set aside. We now remand to the bankruptcy court for further
proceedings consistent with this opinion.
I
BACKGROUND
These chapter 11 reorganization proceedings were
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commenced by Salem Suede on April 30, 1996, in the aftermath of
the regulatory and financial difficulties brought about by
environmental contamination at its leather processing plant and
tannery in Peabody, Massachusetts. After the chapter 11
proceedings, Travelers commenced an action for interpleader in
Massachusetts Superior Court to determine the rightful
recipients of the Travelers insurance proceeds payable in
connection with the aforementioned environmental contamination.
Its complaint joined not only the judgment creditors (viz.,
appellants), but their respective counsel who had filed attorney
liens against the Travelers insurance proceeds. These attorney-
lien claims thus posed a barrier to disbursement of the
Travelers insurance proceeds.
At oral argument, counsel expressed agreement that the
present appeal has not been rendered moot by the release of the
sealed transcript in response to the FOIA request. 1 For its
part, Travelers urged that we affirm the denial of the motion to
1
Prior to oral argument in this court, appellants
circuitously obtained the sealed transcript through their FOIA
request to the bankruptcy court clerk's office, see 5 U.S.C. §
552, where an administrative employee apparently released the
transcript without realizing that it was under seal.
Consequently, even though appellants now possess the transcript,
their appeal is not moot, in that their subsequent use (as well
as any future use) of the transcript in the state-court
interpleader action arguably violated the extant sealing order
and contravened the judgments presently on appeal. See Cruz v.
Farquharson, 252 F.3d 530, 534 (1st Cir. 2001).
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release the transcript, particularly since appellants' counsel
had already submitted the sealed transcript in the related
state-court interpleader action in apparent disregard of the
sealing order. For their part, appellants correctly contended,
as they had below, that the subject transcript was excluded from
the scope of their motion to seal by the following language in
the Confidentiality Agreement:
10. Confidentiality. Except as required by
law or to effectuate the necessary
judicial approvals, to gain releases of
attorneys’ liens, for submission by
Travelers to its insurers, reinsurers
or auditors, or to enforce the terms of
this Agreement, the Parties will use
best efforts to maintain the
confidentiality of the settlement
amount, the settlement agreement, this
term sheet and the settlement amount,
including but not limited to, jointly
seeking approval of [sic] Bankruptcy
Court to place under seal all
settlement agreements and materials
involving the parties who are
signatories below.
(Emphasis added.) Thus, the consistent thrust of appellants’
position from the outset has been that the Confidentiality
Agreement expressly provides that the sealed transcript was to
remain available for their use in securing “the necessary
judicial approvals[] [and] to gain releases of attorneys’ liens,
for submission by Travelers to its insurers, reinsurers or
auditors, or to enforce the terms of the[ir] [Security]
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Agreement.”
II
DISCUSSION
Notwithstanding the intermediate appeal to the district
court, we directly review the bankruptcy court rulings which
disallowed appellants’ motions to define the scope of the
sealing order as it pertains to the subject transcript. See
Stoehr v. Mohamed, 244 F.3d 206, 208 (1st Cir. 2001). Absent
either a mistake of law or an abuse of discretion, the
bankruptcy court ruling must stand. See Siedle v. Putnam Invs.,
Inc., 147 F.3d 7, 10 (1st Cir. 1998). A bankruptcy court “may
abuse its discretion by ignoring a material factor that deserves
significant weight, relying on an improper factor, or, even if
it [considered] only the proper mix of factors, by making a
serious mistake in judgment.” Id.
As the sealing order was granted by endorsement,
without elaboration, its intent and scope must be gleaned from
the motion to seal, in which appellants requested that the
bankruptcy court seal —
[a]ll documents referring either directly or
indirectly to any of the terms and
conditions of the settlement agreement
entered into by the parties on January 6,
1999 (the “Settlement Agreement”)[,]
including but not limited to the settlement
amount, in accordance with the
Confidentiality Provision . . . of the
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Settlement Agreement.
(Emphasis added).2 The Confidentiality Provision in the
Settlement Agreement stated:
Except as required by law or to effectuate
the necessary judicial approvals, to gain
releases of attorneys’ liens, for submission
by Travelers to its insurers, reinsurers or
auditors, or to enforce the terms of this
Agreement, the Parties will use best efforts
to maintain the confidentiality of the
settlement amount, the settlement agreement,
. . . the settlement terms, including but
not limited to, jointly seeking approval of
[the] Bankruptcy Court to place under seal
all settlement agreements and materials
involving the parties who are signatories
below.
(Emphasis added.)
Appellants accordingly contend, as they did below, that
all “documents” needed “to gain releases of attorneys’ liens,
for submission by Travelers to its insurers, reinsurers or
auditors,” were outside the scope of the sealing order. Thus,
appellants correctly insist that the bankruptcy court abused its
discretion by denying them permission to use the transcript in
2Since the motion to seal plainly reflects that the subject
transcript was to have been excepted from the scope of the
sealing order, as agreed by the parties, see supra, we simply
assume arguendo, without deciding, that the hearing transcript
is a “document.” See, e.g., United States v. Antar, 38 F.3d
1348, 1360 (3d Cir. 1994) (“Furthermore, at the most basic
level, the transcript at issue is a public judicial document,
covered by a presumptive right of access.”) (emphasis added);
see generally Random House Dictionary of English Language, at
578 (2d ed. unabridged) (“a legal or official paper”).
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their efforts to secure releases of the various attorneys’
liens, absent which compliance with an essential term of the
Settlement Agreement was impracticable.
We shall assume arguendo that the courts below were
entitled to make their own assessments as to whether appellants
needed the transcript in the state-court proceeding. Even so,
at the hearing before the bankruptcy judge the appellants did
provide a fairly straightforward (if summary) statement of their
need; namely, to counter allegedly mistaken representations
being made in the state court about what had occurred in the
bankruptcy proceedings. Not only was there no direct counter to
appellants' explanation at the hearing, but in denying their
request for the transcript the bankruptcy judge simply stated
that appellants had joined in the original agreement to seal.
Although the bankruptcy court thereafter entered its
margin order on the motion for reconsideration, stating that the
need had not been adequately explained, it provided no
explanation for its determination. Given the appellants'
representation of need, their explanation, and the lack of a
direct counter, it was an abuse of discretion not to permit
appellants to use the transcript as contemplated by the
confidentiality agreement.
Moreover, there is a strong common law presumption
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favoring public access to judicial proceedings and records. FTC
v. Standard Fin. Mgmt. Corp., 830 F.2d 404, 410 (1st Cir. 1987);
Siedle, 147 F.3d at 9-10. Accordingly, there may also be some
question as to whether the blanket sealing order was granted
without adequate consideration of the public interest in such
access, regardless whether the parties to the settlement
agreement mutually supported the sealing order. However, given
the confidentiality provision already discussed, it is
unnecessary to pursue the public interest issue further in this
case. Rather, we mention it in order to flag the matter for
consideration in future cases.
III
CONCLUSION
The case is remanded to the bankruptcy court with
directions to release the subject transcript to appellants for
use in the state-court proceedings pursuant to the
confidentiality agreement.
SO ORDERED. Appellee is to bear all costs.
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