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Prosser Wins One in Bankruptcy Court

Jan. 21, 2008 — After a long series of defeats in bankruptcy court, Jeffrey Prosser, former owner of Innovative Telephone, recently won a round.
The issue: Would the court "place under seal" — i.e. make secret — a list filed with the court Jan. 11 of jewels and pieces of art?
Bankruptcy Judge Judith K. Fitzgerald ruled in Prosser's favor last week from her courtroom in Pittsburgh, and the formerly public inventory was wiped off the electronic record of the trial. Had an avid follower of these trials been alert, he or she could have obtained the document during the few days that it was a matter of public record — but no more.
Neither Prosser in his filing, nor the judge in her ruling, had very much to say about the reasoning for their respective positions.
Robert Craig, Prosser's lawyer, cited a portion of the federal law that said a judge could make such a ruling "To protect the estate or any entity in respect of … confidential … commercial information …." He spoke of the "sensitive nature of the information contained in the inventories."
The judge, writing that "this court having fully considered the record before it and after due deliberation thereon; and good and sufficient cause appearing therefore …" ruled in Prosser's favor.
The day after the ruling, the lawyer for Stan Springel, the Chapter 11 trustee in these proceedings, objected to Prosser's motion, saying the inventories were "but court-ordered details to support the mere generic statements contained in the debtor's schedules (i.e., prior reports). As the court is aware, the schedules are required to be filed by every debtor, and not under seal."
Springel's lawyer, Daniel Stewart of the Dallas firm Vinson & Elkins, said "the inventories do not contain … (a) trade secrets or confidential research, (b) development or commercial information, or (c) scandalous or defamatory information" as specified as matters to be protected by the bankruptcy law."
In his filing, Stewart used Fitzgerald's own words to make his case, quoting from a Jan. 3 order by the judge that the inventory be provided: "So, no matter how you shake it out in this case, you're going to have to identify what is entireties property, what is Mr. Prosser's property and what is Mrs. Prosser's property, because otherwise when we get down to these turnover actions, or Mr. Prosser's claims of exemption, we're not going to have all the information that everybody needs in order to figure out who's who in the zoo. So it doesn't have to be listed in the bankruptcy schedules, but it's going to have to be listed somewhere."
That somewhere is no longer for public consumption.
An inventory of easily portable valuables might be helpful to a potential burglar, but neither Prosser, the judge, nor any of the lawyers made that point in writing.
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