Picciotto v. Salem Suede, Inc. (In Re Salem Suede, Inc.)

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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