In re Alterra Healthcare Corp.

• Decision Date: 16 October 2006
• Docket Number: No. 03-10254 (MFW).,03-10254 (MFW).
• Citation: 353 B.R. 66
• Parties: In re ALTERRA HEALTHCARE CORPORATION, Debtor.
• Court: U.S. Bankruptcy Court — District of Delaware

353 B.R. 66 In re ALTERRA HEALTHCARE CORPORATION, Debtor. No. 03-10254 (MFW). United States Bankruptcy Court, D. Delaware. October 16, 2006.

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COPYRIGHT MATERIAL OMITTED

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Joseph M. Barry, Robert S. Brady, Sean T. Greecher, Joseph A. Malfitano, Edmon

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L. Morton, James L. Patton, Young, Conaway, Stargatt & Taylor, Laurie Selber Silverstein, Potter Anderson & Corroon LLP, Karen V. Sullivan, Oberly, Jennings & Rhodunda, PA, Alfred Villoch, III, Buchanan Ingersoll PC, Wilmington, DE, Susan B. Morrison, Kevin P. O'Brien, Wilkes & McHugh P.A., Tampa, FL, for Debtor.

OPINION¹

MARY F. WALRATH, Bankruptcy Judge.

Before the Court is the Motion of the Philadelphia Newspapers, LLC (the "Newspaper") to Intervene for the Limited Purpose of Seeking Access to Judicial Records and Proceedings ("Motion to Intervene") and its related Motion for Access to Judicial Records and Proceedings ("Motion for Access") which asks the Court to vacate several Orders sealing records of settlements in this case. The Motions are opposed by the Reorganized Debtor. For the reasons set forth below, the Court will grant the Motions.

I. BACKGROUND

On January 22, 2003, Alterra Healthcare Corporation ("Alterra") filed a voluntary petition for reorganization under chapter 11 of the Bankruptcy Code. The Court approved Alterra's plan of reorganization on November 26, 2003. The reorganization plan required the Reorganized Debtor to submit for Court approval any claims settled in excess of $250,000.

On November 26, 2003, Alterra filed with the Court Motions to approve three agreements settling tort claims of the Estates of Delcia D. Lamphere, Pauline McReynolds, and Maudine Kemp. Two of the settlements were in excess of $250,000. None of the settlement agreements were sealed.

On March 24, 2005, the Reorganized Debtor, pursuant to section 107(b) of the. Bankruptcy Code, Med a Motion to File under Seal the Application to Approve Nine Settlements by and among the Debtor and Various Claimants (the "Seal Motion"). The nine settlement agreements involved tort claims which sought relief in excess of $250,000. There were no objections to the Seal Motion. Accordingly, on April 27, 2005, the Court granted the Seal Motion. The nine settlement agreements were then filed under seal on April 29, 2005, and approved by the Court on May 25, 2005. The Reorganized Debtor Med a second Motion to file settlement agreements under seal on July 7, 2005, which was not opposed. That motion to seal was granted by the Court on July 27, 2005.

In addition to the Motions to seal the settlements, the Reorganized Debtor filed a Motion to set a reserve for personal injury claims (the "Reserve Motion") and a Motion to file under seal the Exhibit to the Reserve Motion. The Motion to seal was not opposed, and on January 31, 2006, the Court granted it. On February 10, 2006, the Court granted the Reserve Motion and approved an aggregate reserve of $32 million for the unresolved tort claims.

The Newspaper filed its Motion to Intervene on June 30, 2006, and the corresponding Motion for Access on July 30, 2006. The Motion for Access asked the Court to vacate its Orders sealing the records relating to the settlements and reserves for personal injury claims. The Reorganized Debtor opposed the Motions. Oral argument was heard on the Motions on August

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7, 2006. Briefing is complete and the matter is ripe for decision.

II. JURISDICTION

This is a core proceeding over which the Court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 1334(b) & 157(b)(2)(A).

III. DISCUSSION

A. Standing

The Newspaper asserts that the public has a right to access the sealed documents under the First Amendment, federal common law, and section 107 of the Bankruptcy Code. Further, the Newspaper contends that it has an independent right separate from the public to gain access to the information. The Reorganized Debtor has not contested the Newspaper's standing to intervene as a third party seeking to challenge the Seal Orders and thus obtain access to the sealed information.

The Court concludes that the Newspaper does have standing. Although the Newspaper asserts "rights that may belong to a broad portion of the public at large," the Newspaper has standing because it asserts an actual injury to itself. United States v. Cianfrani, 573 F.2d 835, 845 (3d Cir.1978). To find standing, the Court must "only find that the Order ... being challenged presents an obstacle to the Newspapers' attempt to obtain access" and that a decision to unseal the agreements would remedy the injury. Pansy v. Borough of Stroudsburg, 23 F.3d 772, 777 (3d Cir.1994). In this case, the Newspaper has sufficiently established that the Seal Orders prevent it from obtaining access and that the vacation of those Orders will redress the alleged harm. Accordingly, the Court concludes that the Newspaper has standing in the present case to seek intervention.

B. Motion to Intervene

1. Proper Procedure for Access

The Reorganized Debtor argues that the Newspaper's Motion to Intervene for the purpose of accessing the sealed agreements is an improper collateral attack on the Court's Seal Orders. Further, the Reorganized Debtor assumes that the Motion for Access was filed under Rule 60(b) of the Federal Rules of Civil Procedure but argues that a Rule 60(b) motion is not the proper procedural mechanism for challenging the Court's alleged legal error. Rather, the Reorganized Debtor argues that an appeal is the proper mechanism for seeking relief from the Court's Orders.

The Newspaper contends that the Motion to Intervene and the corresponding Motion for Access are the proper procedure. The Newspaper relies upon Third Circuit case law and Bankruptcy Rule 2018(a) as the authority for its Motions to Intervene and Access.

The Court agrees with the Newspaper. Under Rule 2018(a) of the Federal Rules of Bankruptcy Procedure, the Court may permit a party "to intervene generally or with respect to any specified matter" in a bankruptcy case "after hearing on such notice as the court directs and for cause shown." Rule 24(b) of the Federal Rules of Civil Procedure also provides for permissive intervention and is made applicable to bankruptcy proceedings by Rule 2018(a).² The Third Circuit has held that

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parties seeking to challenge an order sealing records must "meet the requirement of Fed.R.Civ.P. 24(b)(2) that their claim must have `a question of law or fact in common' with the main action." Id. at 778 (citations omitted) (concluding that "[we] agree with other courts that have held that the procedural device of permissive intervention is appropriately used to enable a litigant who was not an original party to an action to challenge protective or confidentiality orders entered in that action."). Accordingly, the Court concludes that the Motion to Intervene was the proper procedural mechanism to seek access to the sealed documents.

2. Timeliness

The Reorganized Debtor contends that the Newspaper's Motion to Intervene was untimely because it was filed over a year after the initial Seal Order. The Reorganized Debtor admits that Rule 2018(a) does not specify a time limit for interested parties seeking intervention. Nonetheless, it argues that the Court should consider passage of time and the resultant delay in administration of the estate when evaluating a motion to intervene. See 9 Collier on Bankruptcy ¶ 2018.08 (15th ed. Rev.2006); Prin Corp. v. Altman (In re Altman), 265 B.R. 652 (Bankr.D.Conn.2001).

The Court disagrees with the Reorganized Debtor's argument. The Altman case is inapplicable because it analyzed the timeliness of a creditor's motion to intervene in an adversary proceeding under Rule 7024. 265 B.R. at 654-55. In that case, the Court concluded that the motion was untimely because discovery had concluded. Id.

More compelling is the Third Circuit's decision in Pansy. In Pansy, the Third Circuit addressed an issue similar to the one at bar and concluded that challenges to "confidentiality orders may take place long after a case has been terminated." 23 F.3d at 779. The Pansy Court cited precedent that held a "court may properly consider a motion to intervene permissively for the limited purpose of modifying [or vacating] a [confidentiality] order even after the underlying dispute between the parties has long been settled." Leucadia, Inc. v. Applied Extrusion Techs., Inc., 998 F.2d 157, 161 n. 5 (3d Cir.1993). The issue of the validity of a "confidentiality order over a settlement agreement" is "a question ancillary to the underlying suit." Pansy, 23 F.3d at 780 n. 7. "[W]here an intervenor is litigating an ancillary issue, the potential for prejudice to the original parties due to the delay in intervention is minimized." Id. at 779 (citing Pub. Citizen v. Liggett Group, Inc., 858 F.2d 775 (1st Cir.1988)).

In addition, the Third Circuit noted that if courts did not allow third parties to intervene late in a suit (or even after the suit has ended) to challenge a confidentiality order, then some third parties would not "have their day in court." Id. at 780. The Court explained that

in cases dealing with access to information, the public and third parties may often have no way of knowing at the time a confidentiality order is granted what relevance the settling case has to their interests.

Therefore, to preclude third parties from challenging a confidentiality order once a case has been settled would often make it impossible for third parties to

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have their day in court to contest the scope or need for confidentiality.

Id.

Other Circuits have also allowed permissive intervention for the purpose of access to sealed records more than a year after the underlying lawsuit was settled. See Beckman Indus. v. Ina Ins. Co., 966 F.2d 473, 473 (9th Cir.1992) (approving motion to intervene approximately two years after dispute settled); United Nuclear Corp. v. Cranford Ins. Co., 935 F.2d 1424, 427...