McKinstry et al v. Richard Holmes Enterprises, LLC
Filing
109
MEMORANDUM OPINION & ORDER: (1) RHE's motion to unseal the record, R. 106 , is GRANTED. Consistent with this opinion, Clerk shall wait for further orders before unsealing records. (2) Parties SHALL NOTIFY Court of any document tha t contains the A&M settlement amount by Thursday, August 25, 2016. (3) Parties SHALL FILE redacted versions of any document longer than two pages that contains A&M settlement amount by Thursday, September 1, 2016. (4) McKinstry a nd Dinsmore & Shohl SHALL RESPOND to RHE's motion for reconsideration, R. 104 , by Thursday, September 1, 2016. RHE will have until Thursday, September 8, 2016, to reply. Signed by Judge Amul R. Thapar on 8/18/2016. (TDA) cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
SOUTHERN DIVISION
PIKEVILLE
In re BLACK DIAMOND MINING
COMPANY, LLC, et al.
TAFT A. MCKINSTRY, Trustee of the
BD Unsecured Creditors Trust, and
DINSMORE & SHOHL LLP,
Appellants,
v.
RICHARD HOLMES ENTERPRISES,
LLC,
Appellee.
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Civil No. 15-96-ART
MEMORANDUM OPINION
AND ORDER
*** *** *** ***
Telling a group of rubberneckers that “there’s nothing to see here” might convince
them to move along. But telling a court something so vague will not convince the court to
seal its records. Because the public has a right to view those records, a party must give a
compelling reason why any specific part of the record should be kept under seal.
Many documents in this case have been sealed. Richard Holmes Enterprises (“RHE”)
now thinks the Court should unseal them. RHE’s opponents, Taft McKinstry and Dinsmore
& Shohl, LLP (collectively, “McKinstry”), disagree. The question presented is whether
McKinstry has offered a compelling reason to keep any specific document under seal.
I.
This case involves thousands of filings, most of which are available for the ambitious
reader to peruse. For the more time-constrained, the Court has previously summarized the
facts, and will highlight only the relevant ones here. See In re Black Diamond Mining Co.,
No. 7:15-cv-96-ART, 2016 WL 3448287, at *1–2 (E.D. Ky. June 16, 2016). When the
Black Diamond Mining Company went bankrupt, its assets were placed in a trust
administered by an attorney named Taft McKinstry. Id. at *1. Some of the trust’s largest
assets were claims against Alvarez & Marshal North America, LLC, and its officers
(collectively, “A&M”). Id. McKinstry sued A&M on behalf of the trust. Id. The parties
eventually settled, McKinstry disbursed funds to Black Diamond’s creditors, and the
bankruptcy court closed the case. Id.
One of the creditors, RHE, then moved to reopen the case. Id. at *2. The bankruptcy
court was poised to do so, but only on one condition: that RHE repay $500,000 into the
trust’s escrow account “to ensure that that [t]rust c[ould] honor its obligation[s]” to the
trustee and other creditors. Id. (internal quotation marks omitted). But RHE never paid, so
the bankruptcy court dismissed the case. Id. RHE appealed that decision, which this Court
upheld. Id. at *7.
RHE has since asked the Court to reconsider. R. 104. RHE also asked to file its
motion for reconsideration under seal, asserting that the motion “discusses confidential
settlement” matters. R. 103. Sealing court documents is an unusual measure, though not so
much in this case. Both RHE and McKinstry have repeatedly asked the Court to seal
documents containing information about the A&M settlement, since McKinstry and A&M
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agreed to keep that information confidential. See R. 107 at 2–6 (chronicling requests to seal).
The Court has granted those requests. But each time, the Court has provided an important
caveat: Should a member of the public want to read the sealed documents, the parties would
have the burden of showing why he should not. See, e.g., R. 24.
In the same spirit, the Court granted RHE’s latest request to seal, but ordered RHE to
file a redacted version of its motion for public view. R. 105. Specifically, RHE was to
redact only the settlement information that the parties have labeled as confidential throughout
the case. Id. Before uncapping its black marker, however, RHE apparently had a change of
heart. Rather than comply with the Court’s order, RHE has now moved to unseal the entire
record in this appeal. R. 106. McKinstry, on the other hand, would rather keep the record
the way it is—sealed. R. 107.
II.
A.
Now that someone has requested to open the record, as the Court thought someone
might, it is finally time to consider whether there is any good reason to keep the record
closed. But the time has not come quite yet—McKinstry has raised a jurisdictional argument
that the Court must consider first.
McKinstry argues that the Court cannot hear RHE’s request because RHE has skipped
a procedural step. R. 107 at 7. According to McKinstry, RHE’s current motion is really just
a latent attempt to appeal past bankruptcy-court orders—specifically, the orders in which that
court sealed parts of its record. Id. And as McKinstry points out, RHE has missed the first
step of such an appeal: filing a notice of appeal. See Fed. R. Bankr. P. 8003(a)(1).
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But RHE has not filed a notice of appeal because RHE is not appealing a past order.
It is requesting a new one—specifically, an order unsealing the record “in this Appeal.”
R. 106 at 1–2. In other words, RHE requests an order unsealing the record in this Court.
And RHE has followed the steps of that request. A court that has sealed part of a
record can always unseal it later. Fed. R. Civ. P. 5.2(d). To break this seal, then, all RHE
needed to do was ask. See, e.g., Meyer Goldberg, Inc., of Lorain v. Fisher Foods, Inc., 823
F.2d 159, 161 (6th Cir. 1987) (“A request to lift or modify an order sealing documents or
records is . . . ‘left to the sound discretion of the trial court’” (quoting Krause v. Rhodes, 671
F.2d 212, 219 (6th Cir. 1982))). And ask it has. True, RHE once thought that some filings
were best kept sealed. But no rule prevents RHE from changing its mind or from seeking to
open those filings now. The Court therefore may hear RHE’s request.
B.
That request appears to have the law on its side. There is a “‘strong presumption in
favor of openness’ as to court records.” Shane Grp., Inc. v. Blue Cross Blue Shield of Mich.,
No. 15-1544, 2016 WL 3163073, at *3 (6th Cir. June 7, 2016) (quoting Brown & Williamson
Tobacco Corp. v. FTC, 710 F.2d 1165, 1180 (6th Cir. 1983)). That is because the public has
a right to see the evidence that the Court relies on in reaching its decisions. Id. at 3. The
party seeking to seal court documents—or, here, to keep them sealed—bears the burden of
overcoming the strong presumption against doing so. Id. And that burden is a heavy one.
Id. A court will seal its records “[o]nly [for] the most compelling reasons.” In re Knoxville
News–Sentinel Co., 723 F.2d 470, 476 (6th Cir. 1983).
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Even if a party offers a compelling-enough reason to seal, the seal itself must still be
“narrowly tailored” to fit the reason. Press-Enter. Co. v. Superior Court of Cal., Riverside
Cnty., 464 U.S. 501, 509–11 (1984). Thus, if a party files a thousand documents, but only a
part of one contains confidential information, the Court will seal the part of the one, not all of
the thousand. That party therefore must go “document by document,” providing the Court
with “reasons and legal citations” as to why any given part of the record should stay secret.
Shane, 2016 WL 3163073, at *3 (quoting Baxter Int’l, Inc. v. Abbott Labs., 297 F.3d 544,
548 (7th Cir. 2002)) (internal quotation marked omitted).
Here, McKinstry argues that the parts of the record currently under seal must remain
that way because they relate to the A&M settlement. R. 107 at 3. Generally speaking, that
argument gives two compelling reasons to seal a document. First, as the Sixth Circuit “has
always recognized,” the settlement process requires secrecy so that parties can horse trade
freely. Goodyear Tire & Rubber Co. v. Chiles Power Supply, Inc., 332 F.3d 976, 980 (6th
Cir. 2003). Thus, settlement amounts can be—and often are—sealed. See, e.g., Gambale v.
Deutsche Bank AG, 377 F.3d 133, 143 (2d Cir. 2004) (noting multiple courts that have kept
settlement amounts sealed to help “facilitate settlement”); Osborn v. Griffin, 50 F. Supp. 3d
772, 786 (E.D. Ky. 2014) (noting a settlement agreement filed under seal). Second, sealing
is appropriate to protect the privacy of third parties, like A&M, who are not involved in the
litigation and who therefore would not expect to see their finances aired in public. See, e.g.,
In re Knoxville News-Sentinel Co., 723 F.2d at 477.
The problem, however, is that McKinstry has not shown, “document by document,”
where in this record those reasons apply. Shane, 2016 WL 3163073, at *3 (internal quotation
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marks omitted).
Rather, McKinstry speaks of a general “need to protect confidential
information.” R. 107 at 10. That claim is too “perfunctory” to satisfy the heavy burden that
McKinstry bears. Shane, 2016 WL 3163073, at *4. Against the public’s “strong interest” in
knowing what goes on in court, McKinstry offers no compelling reason to keep any specific
part of this record sealed. Id. at *3 (quoting Brown & Williamson, 710 F.2d at 1180).
McKinstry responds in a number of ways, none of which make her argument more
compelling. First, McKinstry argues that Shane—the latest Sixth Circuit opinion to extol the
importance of an open court—is distinguishable. R. 107 at 10–11. Quite the opposite.
There, the plaintiffs’ “entire justification” for sealing certain documents was that those
documents “include[d] quotations, information, and references” to materials “designated as
confidential” by third parties. Shane, 2016 WL 3163073, at *4. That is the same—and the
entire—justification that McKinstry asserts here. And according to Shane, that justification
can be “rejected out of hand.” Id.; see also Baxter, 297 F.3d at 546. McKinstry nevertheless
argues that this case is unlike Shane because, here, the sealed information is not “at issue,”
and thus the public has little interest in seeing it. R. 107 at 11. But Shane does not hold that
the public is interested in any document “at issue.” Shane holds that the public is interested
in any document filed in court. 2016 WL 3163073, at *4. That holding controls this case.
Second, McKinstry argues that her reasons for sealing the record are better than
perfunctory because she has repeated them so many times before. See R. 107 at 11. Indeed,
every time McKinstry moved to seal a document, she gave a reason. And so, McKinstry
seems to argue, she does not need to give her reasons all over again. Whenever McKinstry
(or, for that matter, RHE) moved to seal a document, however, their reasons for doing so
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were just as general as the one McKinstry gives now. See, e.g., R. 25 at 1 (“[T]he [motion]
relates to certain confidential settlement agreements . . . between the [t]rustee and third
parties that should not be disclosed to the public.”). That is why the Court consistently
advised that, if anyone should request to unseal those documents later on, the party seeking
to keep them sealed would need to explain “what portions” of those documents, “if any,”
should stay that way. See, e.g., R. 24 at 1 (emphasis added); R. 28 at 1. RHE now makes
such a request. And McKinstry has failed to explain what portions of the record—if any—
should stay sealed. Thus, McKinstry has not borne her burden.
Third, McKinstry says that “even if the Settlement amount remains sealed,” unsealing
other “Settlement-related” information “might still be a breach of the A&M Settlement.”
R. 107 at 8. And so, McKinstry argues, the existing patchwork of seals must remain intact to
prevent any of that information from leaking out. But a “confidentiality agreement between
the parties does not bind the [C]ourt in any way.” Brown & Williamson, 710 F.2d at 1180.
Agreement or no agreement, the Court must guard the public’s rights “as in any other civil
case.” Id. Although McKinstry worries that the settlement-related information in the record
might help someone “reverse engineer” the settlement amount, R. 107 at 5, the parties chose
to live with that risk when they put such information in the record and discussed it in open
court. The existence of a confidentiality agreement is not, by itself, a reason to keep this
record sealed, just as it was not in Shane. See 2016 WL 3163073, at *4.
Fourth, McKinstry argues that RHE has offered no “[l]egitimate [r]eason” to unseal
any part of the record. R. 107 at 8. That argument mistakes the burden bearer. A party must
convince a court not that the public should have access to court records, but rather that the
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public should not. See Shane, 2016 WL 3163073, at *3. As explained above, McKinstry has
failed to convince the Court, with the requisite particularity, that the public should not enjoy
its usual access here.
Fifth, McKinstry argues that RHE uses the footnotes of its current motion to sneak in,
Trojan-horse-like, new arguments on the merits of its motion for reconsideration. R. 107 at
11–12. But this Order concerns RHE’s arguments for unsealing, not for reconsidering.
RHE’s arguments as to the former are correct. Its arguments as to the latter are, for the time
being, irrelevant.
And finally, McKinstry says that RHE “gives [a] misimpression” about the amount of
sealing that has gone on here. R. 107 at 6. According to McKinstry, rather than being
“sealed in their entirety,” the relevant documents were merely redacted “to safeguard
references to confidential information.” Id. Those documents apparently include “a very
small percentage of [the] briefs and other papers in this appeal”—five to ten percent, by
McKinstry’s count. Id. Even if that is true, the public might be just as interested in the five
to ten percent that isn’t available as in the ninety to ninety-five percent that is. McKinstry
does not satisfy its burden by showing that only a small part of the record is sealed; rather, it
must show why that small part should be sealed.
Plus, as far as the Court can tell McKinstry lowballs the number of sealed documents.
Whole filings remain under seal, even though most (if not all) of their pages seem to show no
trace of the A&M settlement. See R. 26; R. 29; R. 35; R. 49; R. 53; R. 55; R. 59; R. 61;
R. 66; R. 73; R. 76; R. 80; R. 86; R. 89; R. 91; R. 98. By contrast, only some filings are
redacted in the manner McKinstry suggests. See R. 32; R. 36; R. 58; R. 74; R. 77; R. 85;
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R. 93; R. 97.1 If anything, this amount of sealing makes McKinstry’s burden heavier, not
lighter. With that many documents unavailable to the public, it is that much more important
to make sure that they really should be.
III.
Seeing no compelling reason to the contrary, the Court will grant RHE’s request and
order the record unsealed. The Court recognizes, however, that some filings might mention
the amount of the A&M settlement, which, as discussed, may properly remain under seal.
The parties will therefore have one week to notify the Court about any documents that
contain the settlement amount. The Court will order the Clerk to keep those documents
under seal. If any of those documents is longer than two pages, the party who wants to keep
it sealed must file a redacted version for the public within two weeks. In two weeks, the
Court will order that the rest of the record be unsealed.
While litigating this dispute, it appears that both McKinstry and Dinsmore & Shohl
have neglected to respond to RHE’s motion for reconsideration. R. 104. Before ruling on
that motion, the Court would appreciate hearing from all sides. The Court will therefore give
McKinstry and Dinsmore & Shohl more time to respond, and will order that they do so. The
Court will also give RHE more time to reply.
The Court recognizes that McKinstry has been the one to file these redacted versions, and appreciates McKinstry’s
diligence in making most of those filings available to the public.
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Accordingly, it is ORDERED as follows:
(1)
RHE’s motion to unseal the record, R. 106, is GRANTED. Consistent with
this opinion, the Clerk shall wait for further orders of the Court before
unsealing the records discussed herein.
(2)
The parties SHALL NOTIFY the Court of any document that contains the
A&M settlement amount by Thursday, August 25, 2016.
(3)
The parties SHALL FILE redacted versions of any document longer than two
pages that contains the A&M settlement amount by Thursday, September 1,
2016.
(4)
McKinstry and Dinsmore & Shohl SHALL RESPOND to RHE’s motion for
reconsideration, R. 104, by Thursday, September 1, 2016. RHE will have
until Thursday, September 8, 2016, to reply.
This is the 18th day of August, 2016.
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