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Public Policy and Asbestos Trust Secrecy – Why Not Go Back and Undo Prior Bankruptcy Court Pla

Yesterday’s post decried secrecy regarding claims submitted to asbestos bankruptcy trusts. One obvious question, then, is whether courts can and should go back and undo prior secrecy orders.

On that subject, there is a fairly analogous recent decision from a California appellate court that was asked to review a case involving one judge revisiting secrecy orders imposed by another judge. The In Re Nicholas opinion is here, and was brought to my attention by this recent article by Kate Moser from the Recorder.

Obviously bankrutpcy courts are not following California law, but the stated principles seem so sensible, one hopes they could be applied in bankruptcy. On that score, note especially the last line in the quotes below. The last line includes the court’s reiteration of the rule that secrecy should not be allowed simply because it was agreed to by the parties, as is so often the case in bankruptcy proceedings.

The opinion’s key excerpts state:

"We reject Nicholas‟s efforts to treat sealing orders as if they sealed caskets rather than presumptively open court records, “stamp[ing] upon our jurisprudence the unchangeableness attributed to the laws of the Medes and Persians.” (Hurtado v. State of California (1884) 110 U.S. 516, 529.)

Nicholas‟s arguments fail for three reasons. First, Nicholas‟s jurisdictional box runs afoul of constitutional principles, California Supreme Court decisions, and judicial rules concerning the sealing and unsealing of court records. A strong presumption exists in favor of public access to court records in ordinary civil trials. (NBC Subsidiary, supra, 20 Cal.4th at p. 1212.) That is because “the public has an interest, in all civil cases, in observing and assessing the performance of its public judicial system, and that interest strongly supports a general right of access in ordinary civil cases.” (Id. at p. 1210.)

Since the First Amendment guarantee of public access to the courts is at stake, family law departments may close their courtrooms and seal their court records only in limited circumstances, and only when they expressly identify the particular facts that support the existence of NBC Subsidiary’s constitutional standards. (Burkle, supra, 135 Cal.App.4th at p. 1052; see NBC Subsidiary, supra, 20 Cal.4th at pp. 1217-1218; Cal. Rules of Court, rules 2.550(d), 2.550(e).)

Open court records safeguard against unbridled judicial power, thereby fostering community respect for the rule of law. “If public court business is conducted in private, it becomes impossible to expose corruption, incompetence, inefficiency, prejudice, and favoritism. For this reason traditional Anglo-American jurisprudence distrusts secrecy in judicial proceedings and favors a policy of maximum public access to proceedings and records of judicial tribunals.” (Estate of Hearst (1977) 67 Cal.App.3d 777, 784 (Estate of Hearst).)

Since orders to seal court records implicate the public‟s right of access under the First Amendment, they inherently are subject to ongoing judicial scrutiny, including at the trial court level. “Due to its temporary nature and its infringement upon the public right to know, a sealing order in a civil case is always subject to continuing review and modification, if not termination, upon changed circumstances.” (Copley Press, Inc. v. Superior Court (1998) 63 Cal.App.4th 367, 374 (Copley Press) [issuing writ of mandate to compel trial court to grant newspaper‟s motion to unseal court file relating to settlement of school sexual assault case].)

In Estate of Hearst, supra, 67 Cal.App.3d 777, a probate court struggled over public access to periodic accountings and other material dealing with the testamentary trust of publishing magnate William Randolph Hearst, given terrorist threats to family members, including the kidnapping of granddaughter Patricia Hearst. On appeal, the Estate of Hearst court stressed the public‟s “legitimate interest in access to public records, such as court documents” (id. at p. 784), an interest that was best served by “temporary” limits on access, with a “continuing burden” on the party seeking to seal court records to “periodically show” the need for restricted access (id. at p. 785).

In this regard, sealing orders are akin to interim provisional orders like temporary restraining orders or preliminary injunctions, which are appealable. (Code Civ. Proc., §§ 904.1, subd. (a)(6); 904.2, subd. (g).) Nonetheless, unless the action is stayed pending appeal, trial judges retain the inherent power to modify a preliminary injunction “which is of a continuing or executory nature.” (City of San Marcos v. Coast Waste Management, Inc. (1996) 47 Cal.App.4th 320, 328.) “The fact that a preventive injunction purports to be „permanent‟ or „preliminary‟ in form is not significant. Unforeseeable circumstances necessitating modification or dissolution of the injunction may occur in either case. When the decree is continuing in nature, directed at future events, it must be subject to adaptation as events may shape the need.” (Union Interchange, Inc. v. Savage (1959) 52 Cal.2d 601, 604.)

Thus, the fifth sealing order was a way station, not a final destination. Acting in response to the Times‟s intervention, Judge Sarmiento set in place a process which would essentially outsource yet-to-be-made determinations regarding the sealing or unsealing of court records to the special master. Yet, as the Times points out, the fifth sealing order itself neither sealed nor unsealed a single document, and did not expressly identify the particular facts necessary to satisfy the constitutional standards for sealing court records, as detailed in rule 2.550 of the California Rules of Court. Instead, the fifth sealing order, like the fourth sealing order it purported to vacate, merely incorporated by reference the same rote recitation of the listed criteria that Judge Sarmiento incorporated in the fourth sealing order and the second sealing order. Such “findings” are not the same as facts supporting those findings. Indeed, Judge Sarmiento did not himself describe the fifth sealing order as a “final” collateral order. Neither do we.

Judge Firmat, the supervising judge of the family law department, confirmed the provisional nature of Judge Sarmiento‟s sealing orders when he transferred the Nicholas divorce proceedings from Judge Sarmiento to Judge Waltz. In stating that Judge Waltz‟s judicial responsibilities included the sealing or unsealing of court records, Judge Firmat specifically mentioned the Times‟s pending motion to unseal.

Second, we reject Nicholas‟s jurisdictional argument because it would eliminate the court‟s express authority to unseal records. California Rules of Court, rule 2.551(h), authorizes trial judges to issue orders to unseal records that previously have been sealed by prior court orders. Indeed, any person, not just litigants, can move, apply or petition to unseal any court record. In determining whether to unseal a record, the court is required to consider the elements outlined in rule 2.550(c)-(e). (Cal. Rules of Court, rule 2.551(h)(4).) No showing of changed circumstances is necessary on a motion to unseal. (Copley Press, supra, 63 Cal.App.4th at pp. 374-375.) Unsealing orders accomplish precisely what Nicholas contends judges should be barred from doing — revisiting preexisting sealing orders.

As the Copley Press court emphasized, the power to unseal is a critical safeguard for the public‟s right to know. “The public has a legitimate interest in access to court documents because „[i]f public court business is conducted in private, it becomes impossible to expose corruption, incompetence, inefficiency, prejudice, and favoritism.‟ [Citation.]” (Copley Press, supra, 63 Cal.App.4th at p. 373.)

Third and last, Nicholas‟s argument that Judge Waltz was powerless to modify sealing orders issued by Judge Sarmiento, his predecessor in the same dissolution proceeding, ignores an (albeit lamentable) “culture of rotation” in urban family law departments (see Alan S. v. Superior Court (2009) 172 Cal.App.4th 238, 247, fn. 10), as well as the express authority of successor judges to control their own case files and to alter or amend orders issued by their predecessors in the same case. (Le Francois v. Goel (2005) 35 Cal.4th 1094, 1097 (Le Francois); see also New Tech Developments v. Bank of Nova Scotia (1987) 191 Cal.App.3d 1065, 1069-1070 [second judge may dissolve injunction issued by first judge, who was unavailable].) Here, Judge Waltz inherited the case, and the attendant responsibilities to run an open and accessible courtroom. On his own motion, he initiated a hearing on the indecipherable and unmanageable recordkeeping process.

Given the judiciary‟s “core power to decide controversies between parties,‟” a trial court retains the authority to alter or amend its own rulings in the same case, whether made by the same judge or by his or her predecessor. Any other restriction “would directly and materially impair and defeat the court‟s most basic functions, exercising its discretion to rule upon controversies between the parties and ensuring the orderly administration of justice.” (Le Francois, supra, 35 Cal.4th at p. 1104.) “A court could not operate successfully under the requirement of infallibility in its interim rulings. Miscarriage of justice results where a court is unable to correct its own perceived legal errors. . . .”‟ [Citation.]” (Id. at pp. 1104-1105.)

Judge Waltz acted properly in issuing the seventh sealing order to revisit previous sealing orders, including the fifth sealing order, that impaired public access and hampered his ability to supervise the case. Plainly, the power to issue sealing and unsealing orders underscores the provisional nature of sealing remedies. A court is — or should be — “master of its own files.” (H.B. Fuller, supra, 151 Cal.App.4th at p. 889.)

Nicholas relies upon Church of Scientology v. Armstrong (1991) 232 Cal.App.3d 1060 (Scientology) to deprive Judge Waltz of any power to conduct what Nicholas contends amounts to an “appellate review” of Judge Sarmiento‟s fifth sealing order of December 2007. According to Nicholas, “Scientology — whatever the merits of its holding regarding the standards for issuance of an order to seal court records — establishes that one trial judge may not revisit and „overturn‟ the final orders of a prior trial court judge . . . .”

We lack Nicholas‟s faith in Scientology. There, a church and a former member settled their dispute at the end of the case-in-chief by stipulating that all court records would be returned to the church and the court files sealed from public view. Following the settlement, a litigant in another case against the church convinced the trial judge‟s successor to unseal the records. On the church‟s appeal, the Court of Appeal reversed, holding that too much time had passed “and the parties had the right to rely on the sealing order.” (Scientology, supra, 232 Cal.App.3d at pp. 1069-1070.)

The Scientology court‟s stated rationale cannot stand in the face of subsequent decisional and statutory law. Scientology predates the California Supreme Court‟s landmark decision in NBC Subsidiary that precluded trial courts from sealing the records of civil proceedings absent noticed hearings and findings to justify such restrictions. (NBC Subsidiary, supra, 20 Cal.4th at pp. 1181-1182.) Parties no longer can stipulate, as in Scientology, to seal certain records from public view. (H.B. Fuller Co., supra, 151 Cal.App.4th at p. 891 [sealing order must be based on facts, as found by the trial court, not stipulation by the parties]; see Cal. Rules of Court, rule 2.551(a) [a “court must not permit a record to be filed under seal based solely on the agreement or stipulation of the parties”].)"

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About Kirk

Since becoming a lawyer in 1983, Kirk’s over 30 years of practice have focused on advising a wide range of corporations, associations, and individuals (as both plaintiffs and defendants) on both tort and commercial law issues centered around “mass torts.”

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