In re Neal
| Decision Date | 29 August 2006 |
| Docket Number | No. 06-1878.,06-1878. |
| Citation | 461 F.3d 1048 |
| Parties | In re: Deborah Alice NEAL, Debtor, Deborah Alice Neal; Unnamed Creditor, No. 1; Unnamed Creditor, No. 2; Unnamed Creditor No. 3, Appellants, v. The Kansas City Star, Appellee. |
| Court | U.S. Court of Appeals — Eighth Circuit |
John S. Johnston, argued, Kansas City, Missouri, for appellant.
Alok Ahuja, argued, Kansas City, Missouri (Johathan R. Haden and Ryan Edward Shaw, on the brief), for appellee.
Before SMITH, HEANEY, and GRUENDER, Circuit Judges.
Deborah Alice Neal, former Municipal Judge in Kansas City, Missouri, filed for Chapter 7 bankruptcy in 2005. As part of her bankruptcy filings, she provided a complete list of her creditors, including attorney creditors ("Unnamed Creditors"), which was filed under seal. The Kansas City Star ("The Star"), Kansas City's largest newspaper, filed a motion to vacate the bankruptcy court's order sealing the names of Neal's creditors. The bankruptcy court denied The Star's motion. The Star appealed that decision in district court.1 The district court reversed the bankruptcy court's order and vacated the order sealing the list of Neal's creditors. Neal and the Unnamed Creditors appeal. For the reasons stated below, we reverse the judgment of the bankruptcy court.
The debtor in this case, Deborah Alice Neal, served as a Kansas City, Missouri, Municipal Judge from 1996 until she resigned in November 2004. In April 2004, Neal's gambling addiction became public after Neal was caught in an early morning raid on a Kansas City, Kansas, casino. Neal admitted her addiction to the Missouri Commission on Retirement, Removal and Discipline of Judges and also admitted that she had received loans from local attorneys. The Star heavily publicized Neal's circumstances. In particular, The Star reported on loans Neal received from attorneys, her investigation by the Missouri Judicial Commission, her resignation from the bench, and her hospitalization for mental care.
After an investigation, federal authorities charged Neal criminally, and she pleaded guilty to mail fraud for not disclosing the loans she received from numerous attorneys on mandatory financial disclosures sent to the State of Missouri. She was sentenced to 28 months' imprisonment. In her plea agreement, Neal acknowledged that she used her official position to obtain loans from local attorneys while serving as a municipal judge, but she maintained that she did not give favorable rulings in exchange for loans. However, the district court, the Assistant United States Attorney, and The Star all mentioned that Neal may have provided favorable treatment to some of the attorneys who made loans to her, including dismissing traffic citations issued to a defense lawyer who loaned her money.2
Neal provided the names of the attorneys who loaned her money to the United States Attorney and to the Missouri Office of Chief Disciplinary Counsel ("OCDC"). OCDC is the arm of the Missouri Supreme Court that investigates disciplinary matters involving licensed attorneys in the State of Missouri. Presumably, the OCDC is currently conducting an investigation into these attorneys' conduct. Neither the United States Attorney's Office nor the OCDC have released the names of the attorneys implicated.
As part of Neal's Chapter 7 bankruptcy filings, she provided a list of all of her creditors, including attorney creditors, to the bankruptcy court.3 In conjunction with Neal's bankruptcy filing, she filed a motion to file under seal the names of the attorney creditors pursuant to 11 U.S.C. § 107(b)(2), citing the "scandalous" and "defamatory" exceptions to public disclosure. The bankruptcy judge granted Neal's motion. However, the order was not final, and the bankruptcy judge reserved the right to revisit the issue.
The Star filed a motion to vacate the bankruptcy court's order sealing the names of Neal's creditors. The bankruptcy court denied The Star's motion and made its order sealing the list of Neal's creditors final. The Star then appealed the bankruptcy court's order in district court. The district court reversed the bankruptcy court, finding that there is nothing "scandalous" about the list of Neal's creditors itself and that the bankruptcy court improperly construed and applied § 107(b)(2) when it considered facts outside of the papers filed in the bankruptcy case in determining that the list was scandalous. The district court also held that the bankruptcy court improperly applied Federal Rule of Bankruptcy Procedure 9018. Consequently, the district court vacated the bankruptcy court's order sealing the list of Neal's creditors. Neal and the Unnamed Creditors appeal.
Neal and the Unnamed Creditors raise the following arguments on appeal: (1) the bankruptcy court did not err in determining that the list of Neal's creditors is "scandalous" within the meaning of 11 U.S.C. § 107(b)(2); (2) the bankruptcy court did not err in considering matters outside of the bankruptcy filings, or the context of those filings, when evaluating whether the list was "scandalous;" and (3) the bankruptcy court did not abuse its discretion in ruling that Fed. R. Bank. P. 9018 gave it the authority to seal the list of Neal's creditors to protect governmental matters made confidential by statute or regulation.4
A. "Scandalous" Within the Meaning of 11 U.S.C. § 107(b)(2)
"[W]e review for clear error the bankruptcy court's factual findings, and we review de novo the bankruptcy court's legal conclusions, as well as its conclusions involving mixed questions of law and fact." DeBold v. Case, 452 F.3d 756, 761 (8th Cir.2006) (citing Darst-Webbe Tenant Ass'n Bd. v. St. Louis Housing Auth., 339 F.3d 702, 710-11 (8th Cir.2003)). The bankruptcy court's interpretation of § 107(b)(2), that it could consider the context of the material presented in a bankruptcy proceeding to determine whether the material is "scandalous," is a legal conclusion that we review de novo. In re Colsen, 446 F.3d 836, 839 (8th Cir.2006). However, whether Neal's creditor list is "scandalous" within the meaning of § 107(b)(2) presents a factual question reviewed for clear error.
The appellants posit that the bankruptcy court has broad discretion to determine if material falls under the protection of § 107(b)(2) and that it is widely accepted that courts can consider the context of material under § 107(b)(2). According to the appellants, the bankruptcy court may properly consider context, such as the purpose for which information is sought, the magnitude of harm, the availability of proper access through other means, and the environment in which the material will be released. Thus, the appellants claim that the district court erred in determining that the bankruptcy court's consideration of context was improper.
Further, the appellants contend that the district court erred in concluding that the list of Neal's creditors was not scandalous within the meaning of § 107(b)(2). The appellants assert that the bankruptcy court had ample evidence before it to support its finding that the release of the Unnamed Creditors' names would cause a reasonable person to alter his or her opinion of the attorneys' moral character. Moreover, because the list of Neal's creditors does not distinguish between attorneys who acted unethically and those who did not, the list will brand all listed attorney creditors as guilty of wrongdoing, ethical violations, and possible criminal behavior. Appellants also point out that attorneys who loaned money to Neal and were repaid are not on the list of Neal's creditors. For those reasons, the appellants contend that the bankruptcy court was correct in determining that Neal's list of creditors is "scandalous" within the meaning of § 107(b)(2).
For the reasons stated below, we find that the bankruptcy court did not err in considering the context of the filing of Neal's list of creditors to determine whether the material contained therein is "scandalous"; however, we reverse the bankruptcy court's finding that Neal's creditor list is "scandalous" within the meaning of § 107(b)(2).
Generally, "the courts of this country recognize a general right to inspect and copy public records and documents, including judicial records and documents." Nixon v. Warner Communications, Inc., 435 U.S. 589, 597, 98 S.Ct. 1306, 55 L.Ed.2d 570 (1978). However, "the right to inspect and copy judicial records is not absolute." Id. at 598, 98 S.Ct. 1306.
Every 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. For example, the common-law right of inspection has bowed before the power of a court to insure that its records are not used to gratify public spite or promote public scandal . . . . Similarly, courts have refused to permit their files to serve as reservoirs of libelous statements for press consumption.
Id. (internal citations and quotations omitted). Although the court is given this supervisory power, "only the most compelling reasons can justify non-disclosure of judicial records." In re Gitto Global Corp., 422 F.3d 1, 6 (1st Cir.2005) (internal brackets and quotations omitted).
"In the bankruptcy context, the right of public access is codified in a specific statutory provision, 11 U.S.C. § 107." Id. at 6-7. Section 107 states in relevant part:
(a) Except as provided in subsection (b) of this section, a paper filed in a case under this title and the dockets of a bankruptcy court are public records and open to examination by an entity at reasonable times without charge.
(b) On request of a party in interest, the bankruptcy court shall, and on the bankruptcy court's own motion, the bankruptcy court may —
(2) protect a person with respect to scandalous or defamatory matter contained in a paper filed in a case under this title.
"Section 107,...
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