An automatic stay is a powerful tool in a bankruptcy case.1 It is a temporary federal injunction that stops most collection efforts by creditors against debtors and their property, unless granted permission by the bankruptcy court.2 The automatic stay is one of the most beneficial features of bankruptcy, putting creditors on equal footing in regard to their claims and providing debtors temporary reprieve from aggressive collection activities as they seek to restore their financial standing.3 The automatic stay, however, is not without limits.
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Home Perspectives Delaware Court of Chancery requires parties to comply with their confidentiality obligations notwithstanding the parties filing for bankruptcy and the automatic stay being in place
In TA Dispatch LLC v. Celadon Trucking Services, Inc., et al., C.A. No. 2019-0960-SG (Del. Ch. Jan. 14, 2020), the Delaware Court of Chancery held the defendants were required to respond to a notice objecting to certain information filed under seal, despite the state court proceedings being automatically stayed due to the defendants filing bankruptcy. The Court of Chancery noted that the “[b]ankruptcy stay does overcome the necessity of responding to” a notice challenging certain confidentiality designations and redactions, explaining that the notice was “based in the public interest, not litigants’ interest.” The Court of Chancery’s order in TA Dispatch LLC directing the defendants to respond to a notice challenging confidential filings (and, if appropriate, provide proper designations and redactions for the pre-bankruptcy filings) demonstrates the court’s commitment to open, publicly accessible proceedings taking precedence over the justifications underlying the automatic bankruptcy stay.
Reed Smith partner Todd Kim joins U.S. Department of Energy as Deputy General Counsel
21 January 2021