In re Gitto Global Corp.
| Decision Date | 31 August 2005 |
| Docket Number | No. 05-1658.,No. 05-1666.,05-1658.,05-1666. |
| Citation | 422 F.3d 1 |
| Parties | In re GITTO GLOBAL CORP., Debtor. Garry Gitto and Charles Gitto, Appellants, v. Worcester Telegram & Gazette Corp.; Medianews Group, Inc.; Charles L. Glerum, Examiner; and Phoebe Morse, United States Trustee, Appellees. |
| Court | U.S. Court of Appeals — First Circuit |
Max Stern, with whom Lillian Hirales and Stern, Shapiro, Weissberg & Garin, LLP were on brief, for appellant Gary Gitto.
Juiliane Balliro, with whom Paul Leoni, Christine M. Griffin, and Perkins, Smith & Cohen LLP were on brief, for appellant Charles Gitto.
Jonathan M. Albano, with whom Aaron Wais, Bingham McCutchen LLP, David McCraw, and The New York Times Co. were on brief, for appellee Worcester Telegram & Gazette Corp.
Peter J. Caruso, with whom Peter J. Caruso II and Caruso & Caruso LLP were on brief, for appellee MediaNews Group, Inc.
Robert M. Buchanan, Jr., with whom Charles L. Glerum, Joseph M. Downes III, and Choate, Hall & Stewart LLP were on brief, for appellee Charles Glerum, Examiner.
Before TORRUELLA and LIPEZ, Circuit Judges, and BARBADORO,* U.S. District Judge.
This case presents a matter of first impression in our circuit, requiring us to interpret 11 U.S.C. § 107(b)(2), which provides an exception to the rule of public access to papers filed in a bankruptcy case for material that is "scandalous or defamatory." Appellants Charles and Gary Gitto (collectively, "the Gittos"), who were formerly associated with a company that has since filed for bankruptcy protection, assert that an investigative report ("Report") compiled by a court-appointed bankruptcy examiner ("Examiner") falls within the § 107(b)(2) exception and that it must therefore be redacted or sealed. The bankruptcy court rejected this contention, finding that the appellants had not demonstrated that the material at issue was scandalous or defamatory and that it therefore must be publicly available under 11 U.S.C. § 107(a). The district court affirmed, although it applied a different interpretation of § 107(b)(2) than the one adopted by the bankruptcy court.
On appeal, the Gittos advance a reading of § 107(b)(2) that is broader than the one used by either the bankruptcy court or the district court, and assert that they are entitled to protection under that exception. The appellees, two media organizations — Worcester Telegram & Gazette Corp. ("WT & G") and MediaNews Group, Inc. ("MediaNews") — and the Examiner, urge us to reject the Gittos' interpretation of § 107(b)(2) and to find that the public has a right of access to the Report.
Although we modify somewhat the interpretation of § 107(b)(2)set forth by the district court, we affirm its decision that the public has a right of access to the Report.1
Gitto Global Corp. ("Gitto Global"), a plastics manufacturer in Lunenberg, Massachusetts, filed for Chapter 11 bankruptcy on September 24, 2004 amid allegations of financial distress and accounting irregularities. Shortly thereafter, the bankruptcy court appointed an Examiner to "begin an investigation into the existence of any pre[-]petition fraud, dishonesty, incompetence, misconduct, mismanagement, or irregularity in the management and business affairs of the Debtor." The Examiner was also instructed to "file a statement with the Court ... reporting the preliminary or final findings of the Examiner, along with any recommendations of the Examiner for further investigation." The purpose of the investigation and the Report was to develop information for use in potential proceedings against Gitto Global.
On December 8, 2004, the Examiner filed a motion requesting that the court authorize him to submit the Report (which had not yet been filed) under seal and have it impounded pending a further order of the court. In an order dated December 9, 2004, the court allowed the motion, subject to a requirement that any party in interest be allowed to file a motion seeking release of the Report. On January 5, 2005, after receiving several motions seeking access to the Report upon its filing, the court modified its December 9 order to require that within ten days of filing the Report, the Examiner "provide each person named in the report ... with a copy of only that portion or portions of the report that relate to the individual." The modified order also invited motions from individuals seeking to seal or redact the report, as well as objections to motions to seal or redact. The Examiner filed his Report under seal on January 7, 2004 and served redacted copies on approximately 120 individuals pursuant to the court's January 5 order.
Among those who received redacted copies of the Report were appellant Gary Gitto, part-owner and former CEO of Gitto Global, and appellant Charles Gitto, who held himself out as chairman of Gitto Global and is Gary Gitto's father. The Gittos filed motions requesting that the Report remain under seal, as did approximately twenty-four other individuals. In their motions, the Gittos argued that there was no right of public access to the Report under either the common law or the First Amendment. Gary Gitto further argued that the Report contained scandalous and defamatory material within the meaning of 11 U.S.C. § 107(b)(2), and therefore that the usual presumption of public access under § 107(a) did not apply. Appellees WT & G and MediaNews, both news organizations, opposed the motions to seal. The appellees argued that there is a right of public access to the Report under the First Amendment, the common law, and § 107(a), and that the appellants had not demonstrated that the Report contained defamatory matter for purposes of § 107(b)(2).
On February 9, 2005, after a hearing on the various motions, the bankruptcy court concluded in a memorandum that there was nothing scandalous or defamatory in the Report. It ruled that the entire Report (with specific bank account numbers redacted pursuant to the 11 U.S.C. § 107(b)(1) exception to public access for confidential information) should be made publicly available pursuant to § 107(a) and the common law presumption of access. In light of its ruling on the statutory and common law claims, the bankruptcy court found it unnecessary to decide whether there was also a First Amendment right of public access to the Report.
Gary and Charles Gitto appealed the bankruptcy court's decision to the United States District Court for the District of Massachusetts.2 The district court affirmed. Despite adopting a broader definition of the term "defamatory" than the bankruptcy court had used, the district court agreed that there was no basis to seal or redact the Report under § 107(b)(2) and therefore that § 107(a) dictated public access. The court also concluded that a common law analysis would lead to the same result and, like the bankruptcy court, found it unnecessary to reach the appellees' claim of a First Amendment right of access. This appeal followed.
The primary issue on appeal is the definition of "defamatory" as that term is used in 11 U.S.C. § 107(b)(2). Before turning to that difficult question, however, we must describe the common law presumption of access to court filings.
Under the common law, there is a long-standing presumption of public access to judicial records. See Nixon v. Warner Communications, Inc., 435 U.S. 589, 597, 98 S.Ct. 1306, 55 L.Ed.2d 570 (1978); see also In re Boston Herald, Inc., 321 F.3d 174, 189 (1st Cir.2003).3 This presumption of access "helps safeguard the integrity, quality, and respect in our judicial system, and permits the public to keep a watchful eye on the workings of public agencies." In re Orion Pictures Corp., 21 F.3d 24, 26 (2d Cir.1994) (internal quotation marks and citations omitted). Despite these important interests advanced by public access to judicial records, the right of access is not absolute. As the Supreme Court has recognized, "[e]very court has supervisory power over its own records and files, and access has been denied where court files might have become a vehicle for improper purposes." Nixon, 435 U.S. at 598, 98 S.Ct. 1306. Courts have exercised their discretion under the common law to abrogate the right of public access where doing so was necessary to prevent judicial records from being "`used to gratify private spite or promote public scandal[,]'" id. (quoting In re Caswell, 18 R.I. 835, 29 A. 259 (1893)), or to prevent their records from becoming "reservoirs of libelous statements for press consumption or ... sources of business information that might harm a litigant's competitive standing." Id. (citations omitted). Although these examples demonstrate that it is within a court's discretion to curtail the common law presumption of public access, "[o]nly the most compelling reasons can justify non-disclosure of judicial records." FTC v. Standard Fin. Mgmt. Corp., 830 F.2d 404, 410 (1st Cir.1987) (internal quotation marks omitted).
In the bankruptcy context, the right of public access is codified in a specific statutory provision, 11 U.S.C. § 107. Section 107, which Congress enacted in 1978, establishes a broad right of public access, subject only to limited exceptions set forth in the statute, to all papers filed in a bankruptcy case. Specifically, 11 U.S.C. § 107(a) provides
Except as provided in subsection (b) of this section, a paper filed in a case under [the Bankruptcy Code] and the dockets of a bankruptcy court are public records and open to examination by an entity at reasonable times without charge.
As one of our sister circuits has explained,
[s]ection 107(a) is rooted in the right of public access to judicial proceedings, a principle long-recognized in the common law and buttressed by the First Amendment. This governmental interest is of special importance in the bankruptcy arena, as unrestricted access...
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