Appeal from the United States District Court for the District of Oregon Ann L. Aiken, Chief District Judge, Presiding D.C. No. 6:09-cv-01396-AA
The opinion of the court was delivered by: Ikuta, Circuit Judge:
Argued and Submitted May 4, 2011-Portland, Oregon
Before: Alex Kozinski, Chief Judge, Carlos T. Bea and Sandra S. Ikuta, Circuit Judges.
Documents produced in discovery and filed in the bankruptcy court contained allegations that Fathers M and D, two priests who were not parties to the Portland Archdiocese's bankruptcy case, had sexually abused children. The bankruptcy court held that the discovery documents at issue could be disclosed to the public, because the public's interest in disclosure of these discovery documents outweighed the priests' privacy interests under Rule 26(c) of the Federal Rules of Civil Procedure. It also held that the documents filed in court could be disclosed to the public because they did not contain "scandalous" allegations for purposes of 11 U.S.C § 107(b). The district court affirmed. We affirm in part and reverse in part.
The Portland Archdiocese was the subject of multiple lawsuits seeking millions of dollars in compensatory and punitive damages for sexual abuse of children by specific clergy members of the Archdiocese. In July 2004, while the tort claimants' lawsuits were pending, the Archdiocese filed for Chapter 11 bankruptcy protection. The bankruptcy case thus became the forum for many of the proceedings relating to the tort claims.*fn1 The appellees (referred to here as Appellee Claimants) are a small subset of the many tort claimants who were parties to the bankruptcy case.*fn2
After the Chapter 11 filing, the bankruptcy court scheduled mediation to give the tort claimants and the Archdiocese an opportunity to settle the tort claims. Before mediation commenced, the tort claimants sought discovery regarding their claims pursuant to Rule 26 of the Federal Rules of Civil Procedure (which is made applicable to bankruptcy proceedings by Federal Rule of Bankruptcy Procedure 7026). In order to prove that the Archdiocese had engaged in a pattern and prac-tice of misconduct, the tort claimants sought discovery regarding, among other things, all reports of sexual abuse by priests within the Archdiocese, not just reports regarding the priests who were the defendants in the tort suits.
The bankruptcy court entered two orders governing pre-mediation discovery, both dated January 14, 2005. The first order directed the Archdiocese to produce the personnel files of 37 accused priests identified by the Archdiocese for the "John Jay Study," a national study of clergy abuse commissioned by the United States Conference of Catholic Bishops, and to make available four officials for deposition. Second, the court entered a stipulated protective order, which had been negotiated between the Archdiocese and the tort claimants. Relevant here, paragraph 7 of the protective order provided as follows:
In the event that tort claimants wish to remove from the restrictions of this order any document designated as "Confidential" by Debtor pursuant to this order, tort claimants shall provide prior written notice to Debtor's counsel and counsel for the priest whose file is at issue, if any. Counsel shall then have seven (7) days to file a motion with the court seeking an order preventing the disclosure of such document. The document or documents shall remain subject to this order unless the court rules otherwise following the filing of counsel's motion.
The protective order allowed the Archdiocese to designate "any and all documents produced pursuant to the [first discovery] order" as confidential.
Among the documents disclosed pursuant to the bankruptcy court's discovery order were the personnel files of Father M and Father D. The Archdiocese produced these files only because their names were included in the John Jay Study; neither had been sued by the tort claimants. Father M, 72 years old, had left Portland in 2000 or 2001, and Father D, 88 years old, had retired in 1989. Neither was notified about the parties' negotiation of the discovery order, nor that their files had been disclosed. Their personnel files, along with the others, were filed under seal in the bankruptcy case.
During 2007, the Archdiocese and the tort claimants engaged in negotiations regarding both the damage claims and the scope of disclosure of documents produced in the bankruptcy filing.
In connection with the negotiations to settle the damage claims, the Appellee Claimants filed a memorandum on March 6, 2007, which "summarize[d] the pattern and practice evidence and the punitive damages evidence in support of the estimation" of five unresolved tort claims. The memorandum included, as attachments, the clergy personnel files of 27 priests (including Father M and Father D), plus deposition excerpts and other documents. These documents were filed under seal pursuant to the court's protective order. The tort claimants (including the Appellee Claimants) settled most of the claims against the Archdiocese.
While these settlement talks were underway, the parties also negotiated the scope of release of bankruptcy documents. Counsel for several tort claimants (but not Appellee Claimants) invoked paragraph 7 of the protective order, notifying the Archdiocese of their intent to release some 1,760 pages of material that were produced by the Archdiocese in discovery as well as deposition transcripts. As was their right under the protective order, the Archdiocese and nine individual priests moved the bankruptcy court to prevent the release of the discovery material. The parties entered into a new round of negotiations regarding which sealed documents would be made public. Fathers M and D were not part of these negotiations. On May 24, 2007, counsel for the tort claimants informed the bankruptcy court that the parties had agreed to a resolution. As a result of this agreement, the Archdiocese released over 2,000 documents and posted them to a public website. This resolution did not bind Appellee Claimants.
On September 28, 2007, the bankruptcy court closed the Archdiocese's Chapter 11 case, retaining jurisdiction over any pending adversary proceedings. The conclusion of the Archdiocese's bankruptcy proceedings did not, however, resolve whether there would be public disclosure of documents designated as confidential or filed under seal. As noted above, Appellee Claimants were not bound by the May 24, 2007 mediation agreement, and they filed a motion to unseal the punitive damage estimation memorandum and exhibits filed as part of the successful negotiations to settle the tort claims. Appellee Claimants also notified the Archdiocese that they intended to release all personnel records from the clergy files that were produced in discovery. The Archdiocese opposed the Appellee Claimants' motion to unseal the court documents and also sought an order preventing the disclosure of the discovery documents. A number of priests whose files stood to be released, including Fathers M and D, filed similar motions.
After a hearing in which counsel for Fathers M and D participated, the bankruptcy court ruled in favor of the Appellee Claimants. The court first considered the personnel records produced in discovery. Applying Rule 26(c),*fn3 the court con-cluded that the Archdiocese had not demonstrated "good cause" sufficient to overcome the presumption of public access to the names of and allegations against the accused clergy, although there was good cause to redact the addresses, social security numbers, financial information, and family information of those priests. This ruling applied with equal force to the personnel files of Fathers M and D. The bankruptcy court also considered the Appellee Claimants' motion to make public certain deposition transcripts and attached exhibits, and held that even if these documents were covered by the protective order, no party had opposed the Appellee Claimants' motion or shown good cause to continue any protection. Accordingly, the court also permitted their release.
Second, the court considered whether 11 U.S.C. § 107*fn4 precluded the release of attachments to the Appellee Claimants' punitive damage estimation memorandum that had been filed with the court. The priests argued that the personnel files attached to the memorandum contained "scandalous" materials, and thus qualified for the exception to disclosure in § 107(b). The bankruptcy court rejected this argument. It defined the word "scandalous" to mean a document that "im-properly casts a derogatory light on someone," and determined ...