1 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: : Chapter 11 : ALLIED SYSTEMS HOLDINGS, INC. : : : Bankruptcy No. 12-11564-CSS : Alleged Debtor, : : : ALLIED SYSTEMS, Ltd. : Bankruptcy No. 12-11565-CSS : Alleged Debtor, : Hearing Date: May 31, 2012 @ :30 p.m Objection Deadline: May 29, 2012 @ 2:00 p.m. UNITED STATES TRUSTEE=S OMNIBUS OBJECTION RE: PETITIONING CREDITORS’ MOTION TO FILE REDACTED VERSIONS OF CONFIDENTIAL PLEADINGS AND TO FILE CERTAIN EXHIBITS THERETO UNDER SEAL; MOTION TO FILE UNDER SEAL UNREDACTED VERSION OF ALLEGED DEBTOR’S RESPONSE TO PETITIONING CREDITORS’ MOTION PURSUANT TO DEL. BANKR. L.R. 9006-1(e) FOR AN ORDER SHORTENING TIME; ALLEGED DEBTOR’S MOTION TO FILE UNDER SEAL UNREDACTED VERSION OF THE MOTION OF ALLEGED DEBTORS TO TRANSFER VENUE OF THIS CASE TO THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF GEORGIA, ATLANTA DIVISION, UNDER SEAL (D.E. 10, 31, 32) Roberta A. DeAngelis, the United States Trustee for Region Three (“U. S. Trustee”), by and through her counsel, and files her Omnibus Objection to Petitioning Creditors‟ Motion To File Redacted Versions Of Confidential Pleadings And To File Certain Exhibits Thereto Under Seal; Motion To File Under Seal Unredacted Version Of Alleged Debtor‟s Response To Petitioning Creditors‟ Motion Pursuant To Del. Bankr. L.R. 9006-1(E) For An Order Shortening Time; Alleged Debtor‟s Motion To File Under Seal Unredacted Version Of The Motion Of Alleged Debtors To
1. IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF
DELAWAREIn re: : Chapter 11 :ALLIED SYSTEMS HOLDINGS, INC. : : :
Bankruptcy No. 12-11564-CSS : Alleged Debtor, : : : ALLIED SYSTEMS,
Ltd. : Bankruptcy No. 12-11565-CSS : Alleged Debtor, : Hearing
Date: May 31, 2012 @ :30 p.m Objection Deadline: May 29, 2012 @
2:00 p.m. UNITED STATES TRUSTEE=S OMNIBUS OBJECTION RE: PETITIONING
CREDITORS MOTION TO FILE REDACTED VERSIONS OF CONFIDENTIAL
PLEADINGS AND TO FILE CERTAIN EXHIBITS THERETO UNDER SEAL; MOTION
TO FILE UNDER SEAL UNREDACTED VERSION OF ALLEGEDDEBTORS RESPONSE TO
PETITIONING CREDITORS MOTION PURSUANT TO DEL. BANKR. L.R. 9006-1(e)
FOR AN ORDER SHORTENING TIME; ALLEGED DEBTORS MOTION TO FILE UNDER
SEAL UNREDACTED VERSION OF THEMOTION OF ALLEGED DEBTORS TO TRANSFER
VENUE OF THIS CASE TO THE UNITED STATES BANKRUPTCY COURT FOR THE
NORTHERN DISTRICT OF GEORGIA, ATLANTA DIVISION, UNDER SEAL (D.E.
10, 31, 32) Roberta A. DeAngelis, the United States Trustee for
Region Three (U. S. Trustee), by andthrough her counsel, and files
her Omnibus Objection to Petitioning Creditors Motion To
FileRedacted Versions Of Confidential Pleadings And To File Certain
Exhibits Thereto Under Seal;Motion To File Under Seal Unredacted
Version Of Alleged Debtors Response To PetitioningCreditors Motion
Pursuant To Del. Bankr. L.R. 9006-1(E) For An Order Shortening
Time; AllegedDebtors Motion To File Under Seal Unredacted Version
Of The Motion Of Alleged Debtors To 1
2. Transfer Venue Of This Case To The United States Bankruptcy
Court For The Northern District OfGeorgia, Atlanta Division, Under
Seal (D.E. 10, 31, 32, Motions)1 as follows: 1. This Court has
jurisdiction to hear this Response. 2. Pursuant to 28 U.S.C. 586,
the UST is charged with overseeing the administrationof Chapter 11
cases filed in this judicial district. This duty is part of the
UST=s overarchingresponsibility to enforce the bankruptcy laws as
written by Congress and interpreted by the courts.See United States
Trustee v. Columbia Gas Sys., Inc. (In re Columbia Gas Sys., Inc.),
33 F.3d 294,295-96 (3d Cir. 1994) (noting that UST has public
interest standing under 11 U.S.C. 307, whichgoes beyond mere
pecuniary interest); Morgenstern v. Revco D.S., Inc. (In re Revco
D.S., Inc.), 898F.2d 498, 500 (6th Cir. 1990) (describing the UST
as a watchdog). 3. The UST has standing to be heard with regard on
this Response. 11 U.S.C. 307. STATEMENT OF FACTS 4. These cases
were commenced by the filing of involuntary petitions for relief on
May17, 2012 by The Petitioning Creditors. Filed concurrently with
the Petition was a Statement ofPetitioning Creditors in Support of
the Involuntary Chapter 11 Petitions Filed Against AlliedSystems
Holdings, Inc. and Allied Systems, Ltd (D.E. 9, Statement of
Petitioning Creditors); and,Expedited Motion of Petitioning
Creditors for the Appointment of a Trustee (D. E. 13,
TrusteeMotion). Each of these two docket entries was publicly filed
containing numerous redactions. ThePetitioning Creditors filed
their Motion to File Redacted Versions of Confidential Pleadings
and toFile Certain Exhibits Thereto Under Seal (D. E. 10,
Petitioning Creditors Seal Motion).1 Terms shall have the same
meaning as ascribed to them in the Motions. 2
3. 5. On May 21, 2012, the Alleged Debtors filed their Motion
To File Under SealUnredacted Version Of Alleged Debtors Response To
Petitioning Creditors Motion Pursuant ToDel. Bankr. L.R. 9006-1(E)
For An Order Shortening Time; and, Motion To File Under
SealUnredacted Version Of The Motion Of Alleged Debtors To Transfer
Venue Of This Case To TheUnited States Bankruptcy Court For The
Northern District Of Georgia, Atlanta Division, Under Seal(D.E.
32). Collectively, these two motions are referred to herein as
Alleged Debtors SealMotions. Each of these motions was publicly
filed with numerous redactions. The Alleged Debtoris a non-public
company. 6. Pursuant to 11 U. S. C. 107(c), the U. S. Trustee has
been provided with completecopies of the various pleadings which
the parties hereto seek to seal. Most of the redacted
materialcontains routine financial information typically found in a
First Day Affidavit filed in voluntarychapter 11 cases filed in
this District. 7. The United States Trustee does not oppose the
entry of the orders sought pending theentry of an order for relief.
However, any orders entered should expire of their own terms upon
theentry of an order for relief since this case will no longer be
proceeding as a contested involuntarycase between the Petitioning
Creditors and Alleged Debtors, but as a debtor in public
bankruptcyproceedings before the court. At this time, the alleged
confidential information should no longer besealed since it is
information that will be germane to creditors and parties in
interest. 3
4. I. Sealing Facts Required to be Disclosed Violates the
Public Policy of Full Disclosure; 11 U.S.C. Section 107(b) and FRBP
9018 Do not Apply 8. The Supreme Court stated in Nixon v. Warner
Communications, Inc., 435 U.S. 589,591 (1978): It is clear that the
courts of this country recognize a general right to inspect and
copypublic records and documents, including judicial records and
documents. Unanimity in the caselaw demonstrates that there is a
common law right of access to judicial proceedings and to
inspectjudicial records in civil matters. In Orion Pictures Corp.
v. Video Software Dealers Assoc., 21 F.3d24 (Cir. 2 1994), the
Court stated the general rule as: ...a strong presumption of public
access tocourt records...This preference for public access is
rooted in the public=s first amendment right toknow about the
administration of justice. It helps safeguard the >integrity,
quality, and respect in ourjudicial system. 21 F. 3d 24, 26
(citations omitted). See also, In re Continental Airlines, 150
B.R.334 (D. De. 1993), where the court noted ...the strong
presumption in favor of public access tojudicial records and
papers.... Accord, In re Foundation for New Era Philanthropy, 1995
WL478841 (E.D. Pa. 1995); In re Barney=s Inc., 201 B.R. 703 (Bankr.
S.D.N.Y. 1996). This commonlaw has been codified in Section 107(a)
of the Bankruptcy Code. 9. In the bankruptcy context, limited
exceptions to the general rule are contained in theCode and Rules.
Bankruptcy Code 107(b) provides as follows: On request of a party
in interest, the bankruptcy court shall, and on the bankruptcy
court=s own motion, the bankruptcy court may- (1) protect an
entity; with respect to a trade secret or confidential research,
development, or commercial information; or 4
5. (2) protect a person with respect to scandalous or
defamatory matter contained in a paper filed in a case under this
title.FRBP 9018 essentially incorporates the substance of Section
107(b), and adds to the type of matterssubject to seal, the
protection of ...governmental matters that are made confidential by
statute orregulation. This item is not applicable in the present
case as there is no allegation thatgovernmental matters are
implicated. 10. As exceptions to the common law rule, the burden is
on the moving party to show thata request to place documents under
seal falls within the parameters of Bankruptcy Code Section107(b)
and FRBP 9018 by demonstrating that: ...that the interest in
secrecy outweighs thepresumption in favor of access. See In re
Continental Airlines, 150 B.R. 334 (D. De. 1993).The inquiry then
is whether or not the matter sought to be placed under seal fits
within any of thecategories included within either of Section
107(b) or FRBP 9018. 11. In Orion, supra, Court defined commercial
information as: ...information whichwould cause an >unfair
advantage to competitors by providing them information as to the
commercialoperations of the debtor. (21 F. 3d 24, 27 (citations
omitted). The Court determined that Section107(b) applied to a
promotional agreement between the debtor and McDonald=s, because
theinformation in the agreement, if disclosed, could adversely
impact the debtor=s ability to negotiatefuture promotion
agreements, thus giving competitors an unfair advantage. In re
Alterra HealthcareCorp., 353 B.R. 66 (Bankr. D. Del. 2006), adopted
the Orion definition of protectable confidentialor commercial
information. 12. The identity of a proposed investor and the terms
of a Preliminary Proposal Letterseeking a due diligence advance of
$1 million from the debtor was not subject to Section 107(b) 5
6. protection. In re Barney=s, Inc., 201 B.R. 703 (Bankr.
S.D.N.Y. 1996). The debtor claimed that thisinformation was
commercial information. The Court rejected this contention,
restating the definitionfrom Orion, supra, and adding the inclusion
of information related to the trading of securities. TheBarney=s
Court found that neither the potential investor=s identity nor the
terms of the PreliminaryProposal Letter were subject to protection
by either Section 107(b) or FRBP 9018: The PotentialInvestor=s
desire to avoid the professional embarrassment associated with the
unsuccessful pursuit ofa deal is no basis to grant this motion. 13.
An attempt to place the report of a fee examiner under seal
pursuant to Section 107(b)or FRBP 9018 was rejected by the Court in
In re Continental Airlines, 150 B.R. 334 (D. De. 1993).In this
case, the District Court found that the Bankruptcy Court had abused
its discretion in orderingthe report placed under seal and reversed
the lower court. The Court rejected any claim of
potentialscandalous or defamatory possibilities, stating: If such
legal recommendations and assertions, required to be rendered by
statutory and case law authority, were sealed, based on nothing
more than the mere possibility that they contain defamatory
assertions, the judicial system would be thwarted in its mandated
responsibility to supervise litigation expenses...clearly the
public=s interest in seeing that the judicial mandate to control
litigation expenses far outweighs any private interest in
secrecy... 150 B.R. 334, 341. The Court then quoted directly from
the United States brief: [It] is disingenuous...for [appellees] and
[their] lawyers to argue that they...should be the sole guardians
of the only prejudicial, independent analysis of their
attorneys=...conduct. Indeed, it follows without any thought
whatsoever that the Court=s truth-finding process (not to mention
the efficient administration of the Bankruptcy Code) can only be
enhanced by the wide dissemination of the [fee reviewer=s]
reports... 150 B.R. 334, 341. 6
7. 14. There was no basis to seal the fee examiner=s report
from public view in ContinentalAirlines, supra. Likewise here,
...the Court=s truth-finding process (not to mention the
efficientadministration of the Bankruptcy Code)... (150 B.R. 334,
341) requires full disclosure. 15. Although the Third Circuit has
not addressed Section 107(b) or FRBP 9018, it hasexamined the
common law right of public access in the context of confidential
settlementagreements. In Pansy v. Borough of Stroudsburg, 23 F. 3d
772 (3 Cir. 1994), the news media soughtan order challenging the
sealing of a settlement agreement in a civil rights case between
Stroudsburgand its former police chief. The court reaffirmed the
common law rule: We have previouslyrecognized a right of access to
judicial proceedings and judicial records, and this right of access
isbeyond dispute. (23 F. 3d 772, 780-781). In the absence of
provisions or rules like BankruptcyCode Section 107(b) or FRBP
9018, the Third Circuit adopted a balancing test between the need
forconfidentiality or privacy and the right to know, concluding: If
a settlement agreement involvesissues or parties of a public
nature, and involves matters of legitimate public concern, that
should bea factor weighing against entering or maintaining an order
of confidentiality. (23 F.3d 772, 788). 16. In each of the above
cases in which the moving party sought to seal documents
tootherwise escape the disclosure requirements of various
Bankruptcy Code sections or rules, such asFRBP 1007 in New Era,
supra, or the fee examiner=s report in Continental Airlines, supra,
the Courtrejected the requests. As a pending involuntary petition
this case is presently a lawsuit in which thePetitioning Creditors
are seeking for judgment the entry of an order for relief. 17. Any
relief granted should be narrowly tailored. See In re Lomas
FinancialCorporation, 1991 WL 21231, at *2 (S.D.N.Y. 1991). Only
those portions of the pleadings that 7
8. comport with the requirements of either Bankruptcy Code
Section 107 or FRBP 9018 should beredacted and sealed. The balance
should become part of the public record. 18. Because the Alleged
Debtors here are private, pending the entry of an order for
relief,the U.S. Trustee does not oppose the granting of the relief
sought by the various parties. However,if an order for relief
should be entered in this case, the material which the parties
currently seek toseal is the sort of basic and germane information
typically contained in first day affidavits filed inthis Court.
Upon the entry of an order for relief, the underlying policies of
Sections 107 and FRBP9018, as enumerated above, compel a finding
that any order sealing confidential information at thisstage of the
proceedings expire of its own terms upon the entry of an order for
relief. Theinformation presently sought to be sealed will now have
to be publicly disclosed in among otherplaces, the Debtors
Statement of Financial Affairs and Schedules of Assets and
Liabilities. Conclusion 19. The U.S. Trustee does not oppose the
relief sought pending the entry of an order forrelief in this case.
However, the information sought to be sealed is information of a
type that wouldnecessarily be disclosed promptly upon the entry of
an order for relief. Accordingly, the U. S.Trustee submits that any
orders entered expire of their own terms upon the entry of an order
forrelief. 20. The United States Trustee leaves the moving parties
to their burden on proof, andreserves all discovery rights. 8
9. WHEREFORE, the UST respectfully prays this Honorable Court
to deny the Motions and forsuch other relief at law and in equity
as this Honorable Court may deem proper. Respectfully submitted,
Roberta A. DeAngelis UNITED STATES TRUSTEE REGION THREEDATED: May
29, 2012 BY: /s/ David L. Buchbinder, Esquire Trial Attorney Office
of the United States Trustee J. Caleb Boggs Federal Building 844
King Street, Suite 2207 Wilmington, DE 19801 (302) 573-6491 (302)
573-6497 (Fax) 9
10. IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF
DELAWAREIn re: : Chapter 11 :ALLIED SYSTEMS HOLDINGS, INC. : : :
Bankruptcy No. 12-11564-CSS : Alleged Debtor, : : : ALLIED SYSTEMS,
Ltd. : Bankruptcy No. 12-11565-CSS : Alleged Debtor, : CERTIFICATE
OF SERVICE I certify that, on May 29, 2012, I caused to be served a
copy of the United States TrusteesOmnibus Objection to Petitioning
Creditors Motion To File Redacted Versions Of ConfidentialPleadings
And To File Certain Exhibits Thereto Under Seal; Motion To File
Under SealUnredacted Version Of Alleged Debtors Response To
Petitioning Creditors Motion PursuantTo Del. Bankr. L.R. 9006-1(E)
For An Order Shortening Time; Alleged Debtors Motion To FileUnder
Seal Unredacted Version Of The Motion Of Alleged Debtors To
Transfer Venue Of ThisCase To The United States Bankruptcy Court
For The Northern District Of Georgia, AtlantaDivision, Under Seal
(D.E. 10, 31, 32, Motions) upon the following persons by First
ClassUnited States Mail:Adam G. Landis Mark D. CollinsKerri K.
Mumford Christopher M. SamisJeffry Drobish Richards, Layton &
Finger, P.A.Landis Rath & Cobb LLP One Rodney Square919 Market
Street, Ste. 1800 920 North King StreetWilmington, DE 19801
Wilmington, DE 19801Adam C. Harris Jeffrey W. KellyRobert J. Ward
Ezra H. CohenVictoria A. Lepore Troutman Sanders LLPSchulte Roth
& Zabel LLP 660 Peachtree Street, Ste. 5200919 Third Avenue
Atlanta, GA 30308-2216New York, New York 10022 /s/ David L.
Buchbinder, Esq.