______________________________________

Kathryn R. Montgomery, AUST (VSB No. 42380) 

Shannon Pecoraro, Esq. (VSB No. 46864)

Jason B. Shorter, Esq. (VSB No. 80929)

Office of the United States Trustee

701 East Broad Street, Suite 4304

Richmond, VA 23219

Telephone: (804) 771-2310

Facsimile: (704) 771-2330

IN THE UNITED STATES BANKRUPTCY COURT 

FOR THE EASTERN DISTRICT OF VIRGINIA

Richmond Division

In re: 

LECLAIRRYAN PLLC, 

Debtor. 

Lynn L. Tavenner, as Chapter 7 Trustee, 

 Plaintiff. 

v. 

ULX Partners, LLC, UnitedLex Corporation, 

and ULX Managers, LLC, 

 Defendants.

Lynn L. Tavenner, as Chapter 7 Trustee, 

 Plaintiff. 

v. 

CVC Capital Partners, Daniel Reed, Nicholas 

Hinton, Josh Rosenfeld, P. Douglas Benson, 

 Defendants. 

Chapter 7 

 Case No. 19-34574 (KRH) 

 Adv. Proc. Nos. 20-03142 (KRH) 

 and 

 

 21-03095 (KRH) 

OBJECTION OF THE UNITED STATES TRUSTEE TO ULX PARTNERS, LLC, 

UNITEDLEX CORPORATION AND ULX MANAGERS, LLC’S 

MOTION TO SEAL SETTLEMENT AGREEMENT AND RELATED DOCUMENTS, 

INFORMATION, AND HEARINGS

John P. Fitzgerald, III, Acting United States Trustee for Region Four (the “United States 

Trustee”), by and through the undersigned counsel, files this Objection to ULX Partners, LLC’s, 

UnitedLex Corporation’s, and ULX Managers, LLC’s (collectively, the “Defendants”) Motion to 

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Seal Settlement Agreement, and Related Documents, Information, and Hearings (hereinafter the 

“Motion to Seal”) (Main Dkt. 1325 and Dkt. 207). 1 In support hereof, the United States Trustee 

respectfully states as follows: 

INTRODUCTION

There is a strong presumption and public policy in favor of public access to court records. 

See, e.g., Nixon v. Warner Communications, Inc., 435 U.S. 589, 597-98, 98 S. Ct. 1306, 55 L. Ed. 

2d 57 (1978); Neal v. The Kansas City Star (In re Neal), 461 F.3d 1048, 1053 (8th Cir. 2006); 

Gitto v. Worcester Telegram & Gazette Corp. (In re Gitto Global Corp.), 422 F.3d 1, 6 (1st Cir. 

2005); Miles v. Ruby Tuesday, Inc., 799 F. Supp. 2d 618 (E.D. Va. 2011). Such right is "rooted in 

the public's First Amendment right to know about the administration of justice." Video Software 

Dealers Ass'n v. Orion Pictures Corp. (In re Orion Pictures Corp.), 21 F.3d 24, 26 (2d Cir. 1994). 

The right of public access to papers filed in this Court is codified in 11 U.S.C. § 107(a). 

With limited exceptions, papers filed in a bankruptcy case “are public records and open to 

examination by an entity at reasonable times without charge.” 11 U.S.C. § 107(a). Similarly, the 

concept that all hearings be conducted in open court is woven into the bankruptcy system and 

governed by Bankruptcy Rule 5001. As one court eloquently emphasized, “[t]he public interest 

in openness of court proceedings is at its zenith when issues concerning the integrity and 

transparency of bankruptcy court proceedings are involved,” In re Food Management Group, LLC, 

359 B.R. 543 (Bankr. S.D.N.Y. 2007). 

In the Fourth Circuit, trial courts are guided by Virginia Dep't of State Police v. Washington 

Post, 386 F.3d 567, 575 (4th Cir. 2004), which provides that “the common law presumes a right 

1

 “Main Dkt.” refers to the docket in the main Bankruptcy Case. “Dkt.” refers to the docket in the United Lex 

Adversary Proceeding, while “Reed Dkt.” refers to the docket in the Reed Adversary Proceeding (both as 

herein)after defined, and, collectively, the “Adversary Proceedings”). 

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of the public to inspect and copy ‘all judicial records and documents.’” It further provides that a 

trial court "must . . . weigh the appropriate competing interests under the following procedure: it 

must give the public notice of the request to seal and a reasonable opportunity to challenge the 

request; it must consider less drastic alternatives to sealing; and if it decides to seal it must state 

the reasons (and specific supporting findings) for its decision and the reasons for rejecting 

alternatives to sealing.” Id. at 576.

The United States Trustee opposes the Defendants’ sweeping Motion to Seal, which seeks 

to seal the hearing on the Motion to Seal itself, the settlement agreement between the Defendants 

and the Chapter 7 Trustee concerning the Adversary Proceedings (the “Settlement”), the 9019 

Motion (as hereinafter defined) seeking the approval of such Settlement, all declarations to be filed 

in support of the 9019 Motion, this Court’s hearing to approve the 9019 Motion, the transcript of 

the April 19, 2022 hearing at which the settlement terms were set forth on the record, the 

Defendants’ motion for summary judgment and all exhibits thereto, the responsive pleadings to 

the motion for summary judgment, and the motion to amend complaint. (Collectively Dkt. 133,

137, 147, 149, 150, 152, 153, 156, 168, 169, 172, 173, 174, 175, 200, 211).

2 Defendants’ Motion 

to Seal fails to set forth facts or evidence sufficient to satisfy the requirements for sealing under 

both sections 105 and 107 of the Bankruptcy Code and Bankruptcy Rule 9018. Moreover, the 

Defendants participated in setting forth the material terms of the Settlement at an open hearing 

before this Court on April 19, 2022, and the news media thereafter widely published the Settlement 

terms. Thus, not only have the Defendants in essence waived their right to retroactively seek a 

protective order approximately a month after the terms of the Settlement were announced in open 

2 The amended complaint and summary judgment motions and exhibits have been filed under seal and are mooted 

by the Settlement. Defendants seek to keep these documents sealed in perpetuity, but offer no evidence or 

arguments in support. 

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court, but the Motion to Seal the same Settlement terms is now moot as they have now been 

publicly circulated through various media avenues. As such, the Motion to Seal should be denied.

JURISDICTION

1. This Court has jurisdiction of this proceeding pursuant to 28 U.S.C. §§157 and 

1334, and the delegation made by the United States District Court by Order dated August 15, 1984. 

2. The United States Trustee files this Objection in furtherance of his duties and 

responsibilities pursuant to 28 U.S.C. §586 and 11 U.S.C. § 307. 

FACTUAL BACKGROUND

3. On September 3, 2019 (the “Petition Date”), the Debtor filed for relief under 

Chapter 11 of Title 11 of the United States Code, 11 U.S.C. §§ 101-1532 (as thereafter amended, 

the “Bankruptcy Code”) in the United States Bankruptcy Court for the Eastern District of 

Virginia, Richmond Division (the “Bankruptcy Court”). 

4. On October 4, 2019, the Debtor’s Chapter 11 case was converted to a case under 

Chapter 7 of the Bankruptcy Code. (Main Dkt. 140). Lynn L. Tavenner was appointed Chapter 

7 Trustee (the “Chapter 7 Trustee”). 

5. On October 4, 2019, this Court entered an Order approving the retention of 

Tavenner & Beran PLC to represent the Chapter 7 Trustee on an hourly basis. (Main Dkt. 142 

(retention application), 152 (order)).

6. On February 10, 2020, the Court entered an Order approving the retention of the 

law firm of Foley & Lardner, LLP (“Foley”) as special counsel, pursuant to section 327(e) of the 

Bankruptcy Code, to represent the Chapter 7 Trustee in litigation matters. The Court ordered that

Foley be compensated on an hourly basis for legal services performed during the “Investigative 

Phase,” and that, pursuant to section 328(a), Foley be compensated on a 30% contingency fee basis 

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for legal services performed during the “Litigation Phase.” (Main Dkt. 300 (retention application), 

342 (order)).

7. Subsequently, on May 18, 2021, the Foley lawyers handling the representation of 

the estate, Erika L. Morabito and Brittany Nelson, moved their practice to the law firm of Quinn 

Emanuel Urquhart & Sullivan, LLP (“Quinn”).

8. On June 28, 2021, the Court entered an Order approving the retention of Quinn to 

represent the Chapter 7 Trustee in litigation matters pursuant to §§ 327(a), 327(e), and 328(a) of 

the Bankruptcy Code. The retention order approved a dual fee structure whereby Quinn would 

bill the estate (a) on a 35% contingency fee basis (an increase of 5% of the terms under which 

Foley was employed) for various categories of legal services ( and (b) on an hourly basis for 

other related matters. (Main Dkt. 937).

9. Thereafter, the Chapter 7 Trustee filed a Motion for an Order Establishing 

Procedures Regarding the Prosecution of Actions Involving Former Attorneys and Certain 

Others and Memorandum in Support Thereof (the “FAO Procedures Motion”) (Main Dkt. 457). 

The FAO Procedures Motion was approved by Order of this Court (Main Dkt. 533), as 

amended/supplemented by additional Orders of this Court (Main Dkt. 929 and 982) (collectively, 

the “FAO Order”). 

10. Among other things, the FAO Order provides that:

To the extent a particular FAO Defendant and/or the Trustee requires as a part of 

any Proposed FAO Settlement that the same be subject to a protective order of 

this Court, the Settlement Notice shall be (a) filed with this Court under seal . . . 

and (b) provided to any Person holding a claim against the Estate . . .

FAO Order (Main Dkt. 929 at ¶ 3). Notably, the FAO Order provides some limitations to 

the effect of the terms of the order on the ongoing litigation between the Chapter 7 

Trustee and the Defendants:

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Notwithstanding any of the foregoing stated herein, no term of the Motion or this 

Order shall preclude, limit, prohibit, or bar discovery of any kind whatsoever in 

the litigation pending between the Trustee, ULX Partners, LLC (“ULXP”), and 

United LexCorporation (“ULX”), currently captioned as Lynn L. Tavenner, as 

Chapter 7 Trustee v. ULX Partners, LLC and UnitedLex Corporation, Adv. Pro. 

No. 20-03142-KRH, in the United States Bankruptcy Court for the Eastern 

District of Virginia, and any iteration thereof (The “ULX/ULXP Adversary 

Proceeding”). 

Id. at ¶ 5.

11. On October 26, 2020, the Chapter 7 Trustee filed the current adversary 

proceeding against ULX Partners, LLC and UnitedLex Corporation (as amended, the 

“UnitedLex Adversary Proceeding”). 

12. On September 2, 2021, the Chapter 7 Trustee filed a separate adversary 

proceeding (No. 21-03095-KRH) (the “Reed Adversary Proceeding”) against CVC Capital 

Partners as well as UnitedLex Corporation’s Chief Executive Officers, Daniel Reed (“Mr. 

Reed”), and its Chief Financial Officer, Nicholas Hinton (“Mr. Hinton”). 

13. On January 28, 2022, the Defendants filed a Motion for Summary Judgment (Dkt.

133) (the “Motion for Summary Judgement”) and associated documents, seeking to dismiss 

certain claim. The Chapter 7 Trustee opposed the Motion for Summary Judgment (Dkt. 152)

(the “Opposition to Summary Judgment”). 

14. On February 4, 2022, at the joint request of the Chapter 7 Trustee and the 

Defendants, the Court entered an Order in the United Lex Adversary Proceeding (the “Mediation 

Order”) (Dkt. 142) appointing the Honorable Frank J. Santoro, the Chief Judge of the United 

States Bankruptcy Court for the Eastern District of Virginia, as the judicial mediator (the 

“Mediator”), to conduct a mediation (the “Mediation”) among the Chapter 7 Trustee, the ULX

Defendants, Mr. Reed and Mr. Hinton in their individual capacities, and insurance carriers for 

the Defendants or Messrs. Hinton or Reed.

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15. On February 11, 2022, the Chapter 7 Trustee filed a Motion for Leave to Amend 

the First Amended Complaint (Dkt. 147) (the “Second Motion to Amend”) and to place the 

associated documents under seal. The Defendants opposed the Motion to Amend (Dkt. 168) (the 

“Opposition to Second Motion to Amend”). 

16. Between March 5 and April 13, 2022, the parties engaged in Mediation to resolve 

the Adversary Proceedings. 

17. On April 11, 2022, the Mediator entered the Mediation Order Regarding 

Confidentiality (the “Confidentiality Order”). (Dkt. 195). The Confidentiality Order provided, 

in pertinent part:

All confidential documents produced or received by any Mediation Party and all 

communications made by and all submissions prepared by a Mediation Party in 

connection with the Mediation, including but not limited to: (a) discussions among any of 

the Mediation Parties during the course of the Mediation; (b) discussions with or in the 

presence of the Mediator; (c) mediation statements and any other documents or 

information provided to the Mediator and/or the Mediation Parties in the course of the 

Mediation; and (d) all correspondence, settlement, proposals, counterproposals, term 

sheets and offers of compromise produced or, as a result of, or in connection with the 

mediation ((a), (b), (c) and (d) collectively, the “Settlement Proposals”) shall remain 

confidential, shall not be made available to the public and, as applicable, shall be subject 

to the Protective Order; provided however, that (i) nothing in this Order shall operate to 

protect pre-existing documents, materials or information simply because it is shared with 

the Mediator or otherwise disclosed during the Mediation; and (ii) the Mediation Party 

making any such Settlement Proposal may agree to the disclosure of its own Settlement 

Proposal.

Dkt. 195 at ¶ 2. Nothing in the Confidentiality Order, however, expressly required that the final 

settlement agreement be under seal. 

18. At the April 19, 2022 hearing before this Court, the parties announced that the 

collective Settlement had been reached in the Adversary Proceedings. 

19. The material terms of the Settlement were set forth on the record with the 

participation of counsel for the Chapter 7 Trustee, counsel for the Defendants, including Special 

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Insurance Counsel for ULX Partners. The Settlement was presented as the Mediator’s proposal 

and relevant terms included payment of funds, mutual releases, and an additional payment of 

fees to Quinn from the proceeds of the Settlement. (Dkt. 197).

20. The terms of the Settlement announced at the April 19, 2022 hearing did not 

include confidentiality as a term of the Settlement. (Dkt. 197 (hearing), 200 (transcript filed)).

21. On May 11, 2022, Defendants filed the instant Motion to Seal. (Main Dkt. 1325 

and Dkt. 207).

22. On May 16, 2022, Richmond BizSense, a local business newspaper in Richmond, 

Virginia, and Reuters published news articles setting forth the terms of the Settlement as outlined 

on the record at the April 19, 2022 hearing. Subsequently, other national news media, including 

Bloomberg Law and Law 360, published articles detailing the terms of the Settlement.3

23. On May 18, 2022, almost a month after the April 19, 2022 hearing during which 

the Settlement terms were put on the record, the Defendants sought entry of a Bridge Order 

Restricting Public Access to the April 19, 2022 Transcript (Dkt. 210). 

24. Also on May 18, 2022, the Chapter 7 Trustee filed the Trustee’s Motion And 

Memorandum of Law For Entry Of An Order (I) Approving (A) Judicially Mediated Settlement 

and (B) Compensation To Counsel Including An Improvident Payment Under Section 328(A); 

and (II) Granting Related Relief (the “9019 Motion”) (Dkt. 211). A hearing on the 9019 Motion 

is scheduled for June 8, 2022.

3 https://richmondbizsense.com/2022/05/16/21m-settlement-pending-in-leclairryan-unitedlex-dispute/ ; 

https://www.reuters.com/legal/litigation/leclairryan-trustee-reaches-21-mln-settlement-unitedlex-case-2022-05-17/ ; 

https://news.bloomberglaw.com/business-and-practice/leclairryan-trustee-to-settle-unitedlex-case-for-21-million ; 

https://www.law360.com/tax/articles/1494079/last-of-leclairryan-s-partners-battle-opaque-tax-threat .

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LEGAL ARGUMENT

A. The Motion to Seal is Moot and the Defendants are Barred by Waiver 

25. The Defendants took no steps to attempt to seal the hearing on April 19, 2022 

before the terms of the Settlement were stated on the record.

26. Notably, the Defendants admit in the Motion to Seal that neither confidentiality 

nor an agreement to seal is a term of the Settlement. (Motion to Seal, ¶ 22).4 

27. Despite the clear language on the Court’s docket entry 200 dated April 22, 2022, 

which states “[t]he transcript may be viewed at the Bankruptcy Court Clerk’s Office,” the 

Defendants did not seek entry of a Bridge Order preventing access to the April 19, 2022 

Transcript until May 18, 2022 (Dkt. 210), almost a month after the Settlement terms were 

publicly announced in open Court. 

28. Even though the Defendants filed a Notice of Intent to Request Transcript 

Redaction, that request was not docketed until April 27, 2022 (Dkt. 204). The docket entry again 

clearly states “[p]ursuant to the new policy adopted by the Judicial Conference, transcripts are 

available for inspection only at the clerk’s office or may be purchased from the court transcriber 

for a 90 day period. 

29. In the meantime, the press was able to view a copy of the transcript; and the terms 

of the Settlement were published by Richmond BizSense and by Reuters on May 16, 2022, and 

thereafter by other national publications, including Bloomberg Law and Law 360. 

30. Retroactively redacting the April 19, 2022 Transcript and sealing the Settlement 

would be a fruitless exercise at this point. An internet search now reveals the details of the 

4 Specifically, paragraph 22 of the Motion to Seal provides that “[a]lthough the terms of the Omnibus Settlement 

Agreement do not include an agreement to seal the agreement or maintain its confidentiality, the confidentiality and 

sealing of the information requested in this Motion will help to facilitate the parties’ Settlement.” 

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Settlement, including the amount and timing of payments and the supplemental fee payment to 

Quinn. 

31. Furthermore, the waiver doctrine should bar the Defendants’ Motion to Seal.

In the case of Benedict v. Hankook Tire Co., 323 F. Supp 3d 747, 760-61 (E.D.Va. 2018), Judge 

Payne analyzed the concept of waiver in the context of sealing trial transcripts, trial exhibits 

presented openly at trial, and jury instruction post-trial stating “if no effort is made to prevent 

dissemination of confidential information at trial, the right to claim that trial materials containing 

that information should be sealed is waived.” 

32. “[T]he release of information in open trial is a publication of that information and, 

if no effort is made to limit its disclosure, operates as a waiver of any rights a party had to restrict 

its further use. Level 3, 611 F. Supp 2d at 583.

33. As Judge Payne in the Benedict case, “the fact that Defendants filed their motion 

soon after receiving the transcript and before it became public does not change that Defendants 

took no measures to limit the dissemination of the information contained in the transcripts during 

the public trial” and “release of information in open trial is a publication of that information and, 

if no effort is made to limit its disclosure, operates as a waiver of any rights a party had to restrict 

its further use.” Benedict, 323 F. Supp. 3d at 762. 

34. The Defendants did not take steps to raise confidentiality of the Settlement at the 

hearing on April 19, 2022 and took no real steps to prevent public dissemination of the transcript 

until May 18, 2022.

35. Accordingly, the Defendants’ inaction should be deemed a waiver to their 

requests in the Motion to Seal the Settlement and redact the April 19, 2022 Transcript. 

Moreover, additionally, because the contents of the Settlement are now publicly available in 

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numerous articles, the Defendants’ request to seal the Settlement and to redact the April 19, 2022 

Transcript is essentially moot and should be denied. 

B. Fees of Chapter 7 Trustee’s Counsel Should Not Be Sealed

36. Pursuant to 11 U.S.C. § 323, the trustee is the representative of the bankruptcy 

estate. A chapter 7 trustee’s duties include "the duties of loyalty, distribution maximization, 

diligence, due care, accountability, competence, claims review, information disclosure, candor, 

civility, proper litigation preparation and conduct, impartiality and its appearance, enforcement, 

supervision, compliance, and good faith and fair dealing." Steven Rhodes, "The Fiduciary and 

Institutional Obligations of a Chapter 7 Bankruptcy Trustee," 80 Am. Bankr. L.J. 147, 187-189 

(2006). A trustee is vested with significant powers to aid in carrying out his or her fiduciary 

obligations to the bankruptcy estate and may employ professionals to assist in this endeavor. 

Commodity Futures Trading Com’n v. Weintraub, 471 U.S. 343, 352 (1985). 

37. A term of the Settlement is that the Chapter 7 Trustee’s counsel, Quinn, will 

receive an additional fee payment. The United States Trustee is unaware of any other settlement 

reached in this case that contains such a term. Moreover, the additional fee payment is outside of 

the parameters set forth in Quinn’s publicly filed retention application. 

38. Due to the unusual facts here, the Chapter 7 Trustee should not be put in a 

position whereby she cannot publicly set forth the evidentiary and legal support for the additional 

fee payment to her counsel. 

39. If the Chapter 7 Trustee cannot avail herself of the transparency of an open 

proceeding with publicly available filings, the Settlement could undermine the public’s 

confidence in the bankruptcy system. This is especially true since the material terms of the 

Settlement have already been widely published in the media. 

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40. The United States Trustee can find no published precedent in this jurisdiction for 

a Bankruptcy Court sealing a request or order for a fee enhancement, substantial contribution 

payment, or increased compensation to professionals under section 328(a), and the Defendants 

have not cited any such authority. 

41. In Computer Learning Ctrs., Inc., 272 B.R. 897, 907, fn. 8 (Bankr. E.D.Va. 

2001), the Court ordered that a fee application for the chapter 7 trustee’s professional be 

unsealed and filed on the public record, stating that “[t]he document filed under seal was wholly 

insufficient to support the fee application. Moreover, filing it under seal deprived interested 

creditors from any meaningful review of the fee application. They, of course, are the very ones 

who are, effectively, paying [the professional fees].”5

42. The Court in In re Anthracite Capital, Inc. further expanded upon this concept by 

stating it was not persuaded by the notion that “‘settlements of civil lawsuits are private 

arrangements between . . . parties’ and a court ‘plays no role whatever, standing 'indifferent' to 

the terms the parties have agreed to . . . the notion that the court plays no role in settlements 

agreements is especially untrue when a trustee is seeking to settle a claim on behalf of the 

estate.” In re Anthracite Capital, Inc., 492 B.R. 162, 172 (Bankr. S.D.N.Y. 2012), (quotation 

omitted), citing In re Oldco M. Corp., 466 B.R. 234, 238 (Bankr. S.D.N.Y. 2012) ("[W]hen a 

trustee seeks to settle a claim on behalf of a bankruptcy estate, the public policy of open access 

5 While the FAO Procedures do provide for a mechanism for certain parties to request copies of the Settlement, the 

United States Trustee notes that the notice of the Settlement with instructions on how to request the pleadings, only 

goes to certain limited parties listed in the Case Management Order (Main Dkt.38), not every creditor in the case. 

Chapter 7 Trustee’s fiduciary duties are not only to those limited parties who receive notice pursuant to a case 

management order, but to all creditors.

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to court records comes fully into play, and a searching judicial inquiry is required before 

approving the settlement.")

43. For the reasons stated, this Settlement is not a typical settlement in terms of this 

specific case or even generally in bankruptcy. Transparency best protects the integrity of the 

system and allows the Chapter 7 Trustee to fulfil her fiduciary duties in the light of day. 

C. The Settlement is Beyond the Scope of the FAO Procedures Order 

44. Defendants seek to seal this Settlement consistent with the settlements of former 

LeClairRyan attorneys and other parties under this Court’s FAO Procedures Order. (Main Dkt. 

533, as modified, 929). However, this Settlement is unlike any other settlement in this case and, 

as such, it is beyond the scope of the FAO Procedures. 

45. The Chapter 7 Trustee’s stated reasons for approval of the FAO Procedures, in 

pertinent part, are as follows: (a) serve judicial economy; (b) speed the time within which the 

matters will be resolved; (c) reduce unnecessary litigation costs for the parties, (d) reduce the 

burden on the parties and Court, *(e) minimize cost and expense, and (f) enhance her ability to 

collect amounts and maximize the recovery for the Estate. (Main Dkt. 457). The Chapter 7 

Trustee further asserted that the FAO Procedures satisfied due process requirements.6 (Main Dkt. 

457, ¶17). 

46. The FAO Procedures were later modified on request of the Chapter 7 Trustee to 

close a loophole and an unintended result that allowed parties engaged in active litigation to 

obtain copies of settlements, which information could be used in connection with litigation 

6 Pursuant to the language of the Chapter 7 Trustee’s motion to approve the revised FAO Procedures, the procedures 

“satisfy due process requirements” and “allow for all requisite Persons to determine if he/she/it believe a proposed 

settlement is fair and equitable and in the best interest of the Estate without providing confidential and sensitive 

information to Persons engaged in active litigation against the Estate.” (Main Dkt. 852, ¶¶16 & 19).

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against the Estate. The Court approved the modified FAO Procedures over the objection of the 

Defendants. (Main Dkt. 852, 929). 

47. Interestingly, the Defendants objected to revised FAO Procedures that they now 

seek to avail themselves of, stating that the “Trustee’s Motions share common themes of secrecy 

that are contrary to the bankruptcy process and fundamental fairness underlying discovery and 

trial....the settlement documents and communications do not contain the type of information 

intended to be protected from disclosure by Section 107 of the Bankruptcy Code or Bankruptcy 

Rule 9018, and ... would eviscerate the oversight protections established in connection with 

settlements under the Bankruptcy Rules and the close eye of creditors...” (Main Dkt. 891).

48. The United States Trustee understands the reasons the Chapter 7 Trustee sought 

approval of the FAO Procedures and modified FAO Procedures; however, the Chapter 7 

Trustee’s reasons for seeking the FAO Procedures are absent in the matter at hand. 

49. First, any judicial economy that might have been gained through the FAO 

Procedures was lost on the instant case after years of motions practice and discovery. Second, 

the estate’s largest claim has always been against Defendants, who are in no way similarlysituated to the dozens of former LeClairRyan lawyers against whom the Chapter 7 Trustee has 

sought recovery for the Estate.

50. The most striking difference between the instant Settlement and the settlements 

consummated under seal pursuant to the FAO Procedures is that none of those settlements 

contained an award of a fee award for the Chapter 7 Trustee’s counsel above the contingency fee 

agreed to and approved by the Court in the retention order.

51. Defendants cannot use the FAO Protocol to cloak the Settlement of this case 

when the facts, circumstances, material terms, and parties to this Settlement are vastly different 

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and distinguishable from the Chapter 7 Trustee’s previous settlements with former LeClairRyan 

lawyers.

D. The Requirements of Section 107(b) Are Not Met

52. The right to public access to papers in bankruptcy is so imperative that it has been 

codified in the Bankruptcy Code, evidencing Congress’ strong desire to preserve the public’s right 

of access to judicial records in bankruptcy proceedings. See 11 U.S.C. Section 107; In re Dreier, 

485 B.R. 821, 822 (Bankr. S.D.N.Y. 2013) citing In re Orion Pictures Corp., 21 F.3d 24, 26 (2d 

Cir. 1994); accord Borders Grp., Inc., 462 B.R. at 46 (“[t]here is a strong presumption and public 

policy in favor of public access to court records”); In re Food Mgmt. Grp. 359 B.R. 543, 553-55 

(Bankr. S.D.N.Y. 2007) (Section 107 reflects Congress’ intent to favor public access to papers 

filed with the Bankruptcy Court); In re Gitto Global Corp., 422 F.3d at 7 (“This governmental 

interest is of special importance in the bankruptcy arena, as unrestricted access to judicial records 

fosters confidence among creditors regarding the fairness of the bankruptcy system”); In re Bell 

& Beckwith, 44 B.R. 661, 664 (Bankr. N.D. Ohio 1984) (“This policy of open inspection, 

established in the Bankruptcy Code itself, is fundamental to the operation of the bankruptcy system 

and is the best means of avoiding any suggestion of impropriety that might or could be raised.”

53. Sealing documents filed in a bankruptcy court, though left to the discretion of the 

court, should “be the exception rather than the rule.” In re Nunn, 49 B.R. 963, 964 (Bankr. E.D. 

Va. 1985). “It is a highly unusual and extraordinary remedy for the Court to seal the records in 

any case because of the generally-recognized rule of law that the public has a right to know.” In 

re Epic Associates V, 54 B.R. 445, 448 (Bankr. E.D. Va. 1985). “Under In re Nunn, the 

Bankruptcy Court should only seal a paper if no less drastic remedy exists.” Robbins v. Tripp, 

510 B.R. 61, 69 (E.D. Va. 2014). 

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54. Specifically, section 107(b) of the Bankruptcy Code states 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

(2) protect a person with respect to scandalous or 

defamatory matter contained in a paper filed in a case

under this title.

11 U.S.C. § 107(b) (emphasis added). 

55. Except as provided in section 107(b), a paper filed in a case under this title and 

the dockets of a bankruptcy court are public records and open to examination. The plain text of 

section 107 “limits the discretion of courts regarding public access to papers filed in a 

bankruptcy case . . . unless material contained therein falls within one of the statutory 

exceptions.” In re Gitto Global Corp., 422 F.3d 1, 11 (1st Cir. 2005); 

56. As observed by one bankruptcy court:

Congress has articulated and codified those public policies that it 

believes override the public's general right to access court 

documents, namely confidential commercial information and 

scandalous material. Congress has mandated through Section

107(a) that any papers filed with this Court that do not fall within 

the stated exceptions of § 107(b) “are public records and open to 

examination....” 11 U.S.C. § 107. By enacting § 107, Congress has 

balanced the harms for the bankruptcy courts. Any other public 

policy concerns that may or may not arise in the context of a 

motion under § 107 has been determined by Congress to be less 

important than the public's right to access. See 11 U.S.C. § 107.

In re Anthracite Capital, Inc., 492 B.R. 162, 182–83 (Bankr. S.D.N.Y. 2013).

i. Defendants Have The Burden of Proof

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57. Sealing documents in bankruptcy is a “highly unusual and extraordinary remedy.” 

In re Orion Pictures Corp., 21 F.3d at 27. The party seeking to seal documents must show a 

“compelling need” for protection and “extraordinary circumstances.” Id. 

58. The burden is on a movant to demonstrate that the interest in secrecy outweighs 

the presumption in favor of access. Bank of America Nat’l Trust & Savings Assoc. v. Hotel 

Rittenhouse Associates, 800 F.2d 339, 344 (3d Cir. 1986); In re Continental Airlines, 150 B.R. 

334, 340 (D. Del. 1993). “Evidence—not just argument—is required to support the 

extraordinary remedy of sealing.” In re Motors Liquidation Company, 561 B.R. 36, 43 (Bankr. 

S.D.N.Y. 2016 (citing In re Dreier LLP, 485 B.R. at 823 (finding that “conclusory statements in 

[a declaration] are not probative”)). 

59. “Inherent in the language of section 107(b) is the requirement that the party 

requesting the extraordinary relief provide the court with specific factual and legal authority 

demonstrating that a particular document at issue is properly classified as “confidential” or 

“scandalous.” In re Anthracite Capital, Inc., 492 B.R. at 171 (citing, United States v. Continental 

Airlines, Inc. (In re Continental Airlines, Inc.)), 150 B.R. 334, 340–41 (D.Del.1993) (refusing to 

seal documents based on “nothing more than the mere possibility” that they contained 

defamatory information).

60. In the Motion to Seal, the Defendants make no attempt to provide any evidentiary 

support for the expansive request to seal. Far from showing a “sufficient threat of irreparable 

harm” by pointing to specific characteristics of the information to be sealed and concrete 

examples of irreparable harm, the Defendants offer bald assertions of potential harm. Publicker 

Industries, Inc. v. Cohen, 733 F.2d 1059, 1071 (citing Stamicarbon, N.V. v. Am. Cyamid Co., 506 

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F.2d 532, 539-42 (2d Cir. 1974)); In re Itel Corp., 17 B.R. 942, 944 (B.A.P. 9th Cir. 1981) 

(Harm that is only speculative cannot support a sealing order). 

61. The Motion to Seal contains no declarations in support of the motion from any 

parties. Instead, the Defendants state that they “are willing to provide additional information and 

argument with respect to [the] Motion to Seal, either in a sealed hearing or in camera, to further 

inform the Court on these issues.” Motion to Seal, ¶ 30 (emphasis added). 

62. This shroud of secrecy over this Court and the tenets on which it is based would 

undermine the public’s confidence in the bankruptcy system.

ii. The Settlement Does Not Involve Commercial Information

63. Defendants’ primary argument is that the Settlement should be sealed to protect 

Defendants’ commercial information. Defendants, however, do not articulate what particular 

commercial information would be impacted. Instead, Defendants merely state that the 

Settlement “has the potential to be harmful to Defendants’ ability to engage in future business 

dealings.” As previously stated, the Defendants further offer to advise this Court in camera or at 

a sealed hearing their “business reasons for a settlement.” (Motion to Seal, ¶ 30). 

64. “Commercial information has been defined as information which would cause ‘an 

unfair advantage to competitors by providing them information as to the commercial operations 

of the debtor.’” In re Orion Pictures Corp., 21 F.3d 24, 27 (2d Cir. 1994) (citing In re Itel Corp., 

17 B.R. 942, 944 (9th Cir. BAP 1982)). 

65. Examples of the types of information protected under the confidential commercial 

information would include: (a) the terms of a licensing agreement that would have impaired a 

party’s ability to conduct contract negotiations, In re Orion Pictures Corp., 21 F.3d at 28; (b) a 

copy of a confidential customer list that the debtor previously sold to a creditor, In re A.G. Fin. 

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Serv. Ctr., 395 F.3d 410, 415-16 (7th Cir. 2005); and (c) documents that detailed a hedge fund’s 

investment strategy. In re Dreier LLP, 485 B.R. 821, 823 (Bankr. S.D.N.Y. 2013). 

66. Absent establishing the existence of actual confidential commercial information 

contained in the Settlement, nothing about a settlement per se qualifies it as confidential 

commercial information. See In re Analytical Sys., Inc., 83 B.R. 833, 835 (Bankr. N.D. Ga. 

1987) (finding that settlement agreement “does not contain trade secrets or confidential research, 

development, or commercial information nor scandalous or defamatory matters within the 

meaning of 11 U.S.C. section 107 and Bankruptcy Rule 9018.”). In rejecting the notion that a 

settlement agreement constitutes confidential secret information, a bankruptcy court has 

observed:

But the terms of the instant settlement have to do only with the instant litigation, 

and have nothing to do with the competitive business operations of the debtor or 

of Andersen, in any normal sense of the words. If the Trustee's definition were 

accepted, then not only would any paper filed by Andersen in the course of 

litigation likely constitute secret “commercial information,” but secrecy under this 

exception would also extend to any of countless cases involving a business entity 

actively defending civil suits for damages.

Geltzer v. Andersen Worldwide, S.C., 2007 WL 273526, at *3 (S.D.N.Y. 2007). 

67. The policy of encouraging settlement of disputes does not trump the right of 

public access to judicial records.7

 See In re N. Bay Gen. Hosp., Inc., 404 B.R. 429, 441 (Bankr. 

S.D. Tex. 2009) (granting motion to unseal because presumption of public access codified in 

section 107(a) was never rebutted); Ramirez v. Gen. Motors Corp., 1999 WL 1336087, at *2 

7 Bankruptcy courts routinely deny motions to seal settlement agreements. See In re Jason Corey Bornman, 2016 

WL 4468069, at *2 (Bankr. E.D.N.C. 2016); In re Anthracite Capital, Inc., 492 B.R. 162, 174 (Bankr. S.D.N.Y. 

2013); In re Oldco M Corp., 466 B.R. 234, 238 (Bankr. S.D.N.Y. 2012); Geltzer v. Andersen Worldwide, S.C., 2007 

WL 273526, at *3 (S.D.N.Y. 2007); In re Alterra Healthcare Corp., 353 B.R. 66, 77 (Bankr. D. Del. 2006); In re 

Analytical Sys., Inc., 83 B.R. 833, 835 (Bankr. N.D. Ga. 1987). 

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(S.D. Tex. 1999) (denying motion to strike actual amount of settlement and noting that the 

availability of information about settlement of cases could equally well be argued to facilitate 

settlement of similar cases in the future). “[C]ourts have repeatedly stated that ‘injury or 

potential injury to reputation is not enough to deny public access to court documents.” In re N. 

Bay Gen Hosp., Inc, 404 B.R. at 442 (2009) (citing In re Neal, 461 F.3d 1048, 1054 (8th Cir. 

2006).

68. Defendants’ claims of commercial information are hollow. Other than the 

unsupported statement that the Settlement “has the potential to be harmful to Defendants’ ability 

to engage in future business dealings,” Defendants offer no basis to support their claim of 

commercial information. The existence of a settlement alone is not commercial information that 

may be protected under section 107 of the Bankruptcy Code.

iii. The Settlement Does Not Involve Scandalous or Defamatory Information

69. The Defendants claim that public disclosure of the Settlement “or other sensitive 

information, including allegations in the litigation that Defendants contend are defamatory, has 

the potential to be harmful to Defendants’ ability to engage in future business dealings.” (Motion 

to Seal, ¶ 29). 

70. Although it is not clear whether the Defendants are asserting grounds to seal 

under section 107(b)(2), the Defendants do not meet their burden under this provision any more 

than they do under section 107(b)(1).

71. In fact, nowhere in the Motion to Seal do the Defendants specify what 

“allegations in the litigation” they contend are defamatory or where these allegations may be 

found. The Complaint (Dkt. 4) and Amended Complaint (Dkt. 86) have been public for months 

and contain among other things, various allegations of fraudulent transfers, conspiracy, 

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conversion, unjust enrichment, and breach of fiduciary duty, by the Defendants. To the extent 

Defendants assert the Chapter 7 Trustee’s allegations are defamatory, the horse has been out of 

the barn for quite some time. Sealing the Settlement would do nothing to change this. 

72. Additionally, the Motion to Seal states that the Settlement will state that “no party 

has admitted liability in any case and the parties have exercised their business judgment in 

determining a settlement is appropriate. Each of the parties entered into the Omnibus Settlement 

Agreement without admitting the truth or falsity of any allegations, claims, or other potential 

claims, or any fault, wrongdoing, or liability by any party.” (Motion to Seal, ¶ 16). This 

language seems the opposite of defamatory. 

73. In contrast to the facts of the case at bar, in Robbins v. Tripp, Judge Morgan found 

that sealing was appropriate under section 107(b) in an unusual bankruptcy case involving 

attorney underperformance. In Robbins v. Tripp, 510 B.R. 61 (E.D.Va. 2014), the Bankruptcy 

Court directed counsel for a consumer lawyer, Mr. Tripp, to file a report with the Bankruptcy 

Court detailing the problems with Mr. Tripp’s practice and recommending solutions to these 

problems. The Bankruptcy Court instructed that the report be written “candidly and not as an 

advocate to any party to this matter.” Id. at 64. Counsel filed the report and Mr. Tripp moved to

seal the report, which the Bankruptcy Court granted. In upholding the Bankruptcy Court, the 

District Court found that the material contained within the report could be considered 

scandalous. The District Court explained: 

Under In re Nunn, the Bankruptcy Court should only seal a paper if no less drastic 

remedy exists. In re Nunn, 49 B.R. at 964. Here, the Report if unsealed would 

serve no useful purpose other than to embarrass the Appellee. This is not a typical 

bankruptcy case; it is more akin to a disciplinary proceeding in which the 

Bankruptcy Court found that no sanction was appropriate. The Appellee did not 

have an opportunity to rebut the allegations contained in the Report. Furthermore, 

it would make public information that normally would be protected by the 

attorney-client privilege. See United States v. Jones, 696 F.2d 1069, 1072 (4th 

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Cir. 1982) (setting for the test for the application of the privilege) (quoting United 

States v. United Shoe Mach. Corp., 89 F. Supp. 357, 358-59 (D. Mass. 1950)). 

Appellee's counsel filed the Report to protect his client's interests, and the 

Bankruptcy Court acted to ensure to the public that a member of its bar was 

performing at an appropriate level. Thus, sealing the Report was a proper action.

Id. at 17-18 (emphasis added). 

74. The material sealed in Tripp was specifically prepared by an attorney at the 

direction of the Bankruptcy Court for the purpose of candidly setting forth Mr. Tripp’s problems 

with his law practice and solutions for remediation. The District Court compared this exercise to 

an attorney disciplinary proceeding, which in Virginia, portions of which are unavailable to the 

public. Id. at 17; See also Rules of the Supreme Court of Virginia, Part 6, Section IV, Paragraph 

13-30, Procedure for Disciplining, Suspending, and Disbarring Attorneys, Confidentiality of 

Disciplinary Records and Proceedings.

75. Unlike Tripp, the case at bar is not atypical in a Chapter 7 asset bankruptcy case. 

The Debtor and the Defendants here are corporations. The counts involve claims of fraud, alter 

ego, and fraudulent conveyances—not atypical counts in an adversary proceeding to recover 

assets for a bankruptcy estate. The Settlement in this case, the terms of which involve a sum of 

money, mutual releases, and a supplemental fee payment to Quinn, is not comparable to Tripp’s 

candid report detailing an attorney’s underperformance and proposing solutions for 

improvement. 

76. This Court should decline to find that the Defendants have met their burden to 

prove the Settlement contains scandalous or defamatory matter that should be sealed from public 

view.

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E. The Court Hearing Should Not Be Sealed

77. Bankruptcy Rule 5001(b) provides in part: “All trials and hearings shall be 

conducted in open court and so far as convenient in a regular court room.” Fed. R. Bankr. P. 

5001(b).

78. Bankruptcy Rule 9018 does permit a court to “make any order which justice 

requires (1) to protect the estate or any entity in respect of a trade secret or other confidential 

research, development, or commercial information.” Fed. R. Bankr. P. 9018.

79. Bankruptcy courts have sought to harmonize the principals embodied in section 

107(a) and Bankruptcy Rule 5001(b) – public access – with the principals embodied in sections 

107(b) and (c) and Bankruptcy Rule 9018 – protecting confidential information. 

80. Some courts have acknowledged that Bankruptcy Rule 9018 can be applied to 

seal a hearing, despite Rule the general presumption of openness and Rule 5001(b). “[I]n 

appropriate cases, [Bankruptcy Rule 9018] trumps [Bankruptcy Rule 5001(b)].” In re Global 

Crossing Ltd., 295 B.R. 720, 724 (Bankr. S.D.N.Y. 2003). 

81. That said, courts require that limits on public access to a hearing “should [be 

done] as narrowly as possible.” See Global Crossing, 295 B.R. at 724. “Proceedings should be 

held in camera only to the extent required to protect the particular interest. For a hearing to be 

held in camera, the party seeking protection should demonstrate good cause by evidencing that 

disclosure will result in a clearly defined, serious injury.” Id. (quoting 9 Collier on Bankruptcy ¶ 

5001.03[2] (15th ed. Rev. 2003)). See also Farmland Industries, 209 B.R. at 369-370 (requiring 

open hearing on DIP financing motion that called for sale of assets prior to closing the courtroom 

to all but a limited number of parties to hear evidence on two narrow factual issues). 

82. As set forth above, the allegations against the Defendants have been public for 

months and the Settlement terms have been widely publicized by the news media. Sealing any 

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hearings on this Settlement is inconsistent with the Bankruptcy Code and would undermine the 

integrity of the system.

F. Redaction of April 19, 2022 Hearing Transcript is Not Warranted

83. In addition to the broad requests to seal numerous documents in this case, the 

Defendants also seek to redact the transcript from the April 19, 2022 hearing, during which time 

material terms of the Settlement were placed on the record (Dkt. 200) (the “April 19th

Transcript”).

84. The Defendants attached a proposed redacted version of the April 19th Transcript 

to their Motion to Seal, which included sweeping requests for redactions.

85. As previously stated in this pleading and by the Defendants’ own admission, 

confidentiality and sealing were not a provision of the Settlement. 

86. Additionally, the Defendants’ failure to assert confidentiality at the hearing or to 

take steps to prevent dissemination of the Settlement act as a waiver of their ability to seek 

retroactive redaction now. 

87. The terms of the Settlement have already been made public by various news 

organizations. 

88. Even if the Defendants’ inaction and admissions are not sufficient for this Court 

to find that the redaction of the April 19th Transcript is unwarranted, the sough redactions go 

beyond the Judicial Conference Policy of Privacy and Public Access to Electronic Case Files 

(“Policy”), which provides that official transcripts may be redacted of personal data identifiers 

upon notice and request of a party that personal data identifiers be redacted. The Policy provides 

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that data identifiers are “Social Security numbers, names of minor children, financial account 

numbers, dates of birth, and, in criminal cases, home addresses.”8

89. The requested redactions to the April 19th Transcript go well beyond seeking to 

redact any personal data identifiers. In fact, they go well beyond even the terms of the 

Settlement they now seek to seal. 

90. A review of the Defendants’ proposed redactions suggests that the Defendants 

seek to redact any statement they do not like, including comments by this Court and the United 

States Trustee.

91. Even if this Court were to allow for redaction at this point, this broad and overly 

expansive attempt should not be allowed. 

92. Redacting documents to remove only protectable information is preferable to 

wholesale sealing. The policy favoring public access supports making public as much 

information as possible while still preserving confidentiality of protectable information." In re 

Williams, 2017 Bankr. LEXIS 4183 (Bankr. W.D. Va. 2017) (quoting In re Borders Group, Inc., 462 B.R. 

42, 47 (Bankr. S.D.N.Y. 2011)) (emphasis added).

93. The District Court for the Southern District of Texas refused to seal a hearing 

transcript where the movant had not identified which particular portions of the transcript were 

“potential fodder for improper use.” Alam v. Fannie Mae, 2007 WL 101803, at *2 (S.D.Tex. 

Jan.5, 2007). 

94. For these reasons, the United States Trustee asserts that the Defendants do not 

have a valid basis to seek redaction of the April 19, 2022 Transcript. 

8 The Policy may be found at https://www.uscourts.gov/rules-policies/judiciary-policies/privacy-policy-electroniccase-files 

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CONCLUSION

The Bankruptcy Code and Rules place narrow limits upon sealing documents. The 

requirements of the Bankruptcy Code and Rules express the necessary public interest in this 

matter requiring full disclosure.

WHEREFORE, the United States Trustee requests that the Court deny the Motion To Seal

and grant such other and further relief as the Court deems appropriate. 

 

Respectfully Submitted,

Dated: May 23, 2022 JOHN P. FITZGERALD, III

Acting United States Trustee Region 4

 By: /s/ Kathryn R. Montgomery 

 Kathryn R. Montgomery (VSB 42380) 

 Assistant United States Trustee

Office of the United States Trustee

701 E. Broad St., Ste. 4304 

Richmond, VA 23219 

Ph: (804) 771-2310 

Fax: (804) 771-2330 

Kathryn.Montgomery@usdoj.gov 

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CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on this 23rd day of May, 2022, a true and correct copy of the 

foregoing document was served via first class mail and/or electronic mail upon: (i) all parties and 

counsel requesting service via the Court’s ECF system, (ii) the Defendants, (iii) the 20 largest 

unsecured creditors as listed on the Debtor’s schedules, (iv) the Service List as defined by the 

governing Case Management Order, (v) Foley & Lardner, (vi) all Persons identified in paragraph 

4 of the FAO Procedures Order, and (vii) counsel for the Chapter 7 Trustee. 

By: /s/ Kathryn R. Montgomery 

 Kathryn R. Montgomery, Esq. 

 

 

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