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$400,000 in Sanctions Upheld for Violation of a Confidentiality Order

A large sanction was civil, not criminal, because it was designed for deterrence.


A district judge in New Orleans upheld Bankruptcy Judge Meredith S. Grabill and the $400,000 in sanctions that she imposed on a lawyer for violating a confidentiality order.

District Judge Greg Gerard Guidry said that the lawyer “knew he was bound by the [confidentiality order] and deliberately chose to violate it. What is worse, [the lawyer] continues to suggest that he did not violate the [confidentiality order].”

Calling the lawyer’s position “inexplicable,” Judge Guidry ruled in his March 27 opinion that the $400,000 sanction was civil, not criminal. The decision in that regard is significant because Judge Grabill on her own could not have imposed a criminal sanction. In other words, the size of a sanction is not pivotal in differentiating between a civil and a criminal sanction.

The Archdiocese Bankruptcy

The Archdiocese of New Orleans is in chapter 11 to deal with sexual abuse claims. Judge Grabill entered an elaborate confidentiality order covering information and documents concerning sexual abuse claims. Defining “protected material,” the order prohibited disclosure except to authorized persons and only for authorized purposes. If someone wished to make disclosure not permitted by the order, it prescribed procedures for obtaining permission to disclose.

The lawyer who found himself in trouble represented four abuse victims who sat on the official creditors’ committee. The lawyer was not counsel for the committee.

In his capacity representing the four committee members, the lawyer was privy to protected information about a particular priest, the allegations made against him, the identity of the individual who made the allegations and the resolution after an investigation by the archdiocese. The information also identified the high school where the priest worked.

The lawyer allegedly disclosed the information to a news reporter and to a relative of his who was the principal at the school where the priest worked. After the allegations appeared in the press, the debtor notified the court about the disclosure of confidential information. Directed by Judge Grabill, the U.S. Trustee conducted an investigation and identified the lawyer as the source of the leak.

First, Judge Grabill removed the four committee members and replaced them. Her order was upheld on appeal in district court. To read ABI’s report, click here. The order meant that no one has a right to service on a committee.

Second, Judge Grabill entered an order directing the lawyer to show cause why he should not be sanctioned for disclosure of confidential information.

At the ensuing hearing, the lawyer admitted that he had made the disclosures but was “adamant” that he had not violated the confidentiality order and claimed he did so for “legitimate compelling reasons — to protect minors,” Judge Grabill said.

Judge Grabill did not buy the defenses. She found a willful violation of the confidentiality order and imposed a $400,000 sanction, representing approximately half of the attorneys’ fees incurred by the debtor and the committee in ferreting out the leak. In re Roman Catholic Church of the Archdiocese of New Orleans, 20-10846, 2022 BL 363965 (Bankr. E.D. La. Oct. 11, 2022). To read ABI’s report, click here.

The lawyer appealed, but Judge Guidry affirmed.

Judge Guidry found “without hesitation” that the lawyer was deprived of no due process rights and was “in fact” given “many opportunities” to be heard in the two hearings before Judge Grabill.

Next, the lawyer contended that Judge Grabill lost jurisdiction to impose sanctions because he had appealed the first decision finding a breach of the confidentiality order and scheduling a further hearing. Again, Judge Guidry saw no error.

The lawyer claimed that Judge Grabill abused her discretion in imposing sanctions without a finding of bad faith or willfulness. Again, Judge Guidry saw a “more than sufficient basis” for Judge Grabill’s findings about knowing and willful actions. Indeed, he said that the lawyer “knowingly subverted” the court approval process required for disclosure of confidential material.

Finally, Judge Guidry said that the $400,000 sanction was “reasonable and justified.” Judge Grabill had studied the time records and employed the lodestar method, satisfying herself that the fees were reasonable given that $400,000 was about half of what the debtor and the committee had expended on the matter.

Judge Guidry also lauded Judge Grabill for “going to great lengths” to emphasize how the sanctions were designed to be a deterrent if anyone were tempted to violate the confidentiality order.

Judge Guidry affirmed.

Opinion Link

Case Details

Case Citation

In re Roman Catholic Church of the Archdiocese of New Orleans, 22-1740 (E.D. La. March 27, 2023)

Case Name

In re Roman Catholic Church of the Archdiocese of New Orleans

Case Type