The Rule 2019 Decisions. As I reported in a post earlier this week, after first ruling that members of an Ad Hoc Committee of Equity Security Holders were required to disclose detailed information about the claims or stock they own and the amounts they paid for them, on March 9, 2007, the Bankruptcy Court in the Northwest Airlines case issued a second decision holding that this Rule 2019 information must be filed publicly.

The Motion for Reconsideration. Three hedge funds that are members of the Ad Hoc Committee filed a motion for reconsideration of the Bankruptcy Court’s first decision. In addition, the Loan Syndications and Trading Association (LSTA) and the Securities Industry and Financial Markets Association (SIFMA) filed an amicus curiae brief in support of the motion for reconsideration, arguing as follows:

LSTA and SIFMA are very concerned that the Rule 2019 Decision will have a serious detrimental impact on the willingness and ability of many stakeholders to participate in future chapter 11 cases. Although the Debtors and certain equity holders are at odds in these cases, there are countless examples in other cases where groups of stakeholders have cooperated, many times in the guise of ‘ad hoc’ committees to create imaginative and strikingly successful solutions. The Rule 2019 Decision, by requiring the disclosure of proprietary and highly confidential information, will in all likelihood erect a substantial obstacle to the participation of many stakeholders – in particular, those sophisticated stakeholders that are the most likely to have the means and the experience to make a positive contribution toward reorganization.

The Court Rules On The Motion For Reconsideration. The hearing on the motion for reconsideration took place on March 15, 2007. As reported by the Associated Press here, the Bankruptcy Court denied the reconsideration motion, describing it as "totally frivolous" and observing that it did not advance any new arguments.

Motion for Leave To Appeal. Given that the Ad Hoc Committee had filed a notice of appeal of the Bankruptcy Court’s decision on March 14, 2007, at the March 15, 2007 hearing the Bankruptcy Court apparently agreed to stay its ruling for ten days. The stay is designed to permit the Ad Hoc Committee the opportunity to pursue a motion for leave to appeal, which it had also filed on March 14, 2007, in the United States District Court for the Southern District of New York. The motion seeks leave to appeal on the following basis:

[T]he bankruptcy court ordered the Ad Hoc Committee to disclose to the world detailed trading data, including all individual purchases and sales of any interest in the Debtors (whether it be stock, bonds, claims or any other interest), including purchase and sales prices. The Ad Hoc Committee hereby seeks to appeal the decision refusing to allow the filing to be made under seal. As an initial matter, the order at issue is a final order within the meaning of 28 U.S.C. § 158(a)(1). Likewise, the order satisfies the collateral order doctrine also making the decision appealable now. Nevertheless, the cases vacillate between characterizing such an appeal under the collateral order doctrine as one of right or one requiring leave. Accordingly, and so as to avoid any doubt as to the validity of the appeal, the Ad Hoc Committee also seeks leave in addition to having filed its notice of appeal as of right.

More Action Ahead. With Bankruptcy Judge Gropper’s latest decision and the motion for leave to appeal, it looks like the disclosure issue will now shift to the District Court. The Bankruptcy Court reportedly has also deferred decision on the Ad Hoc Committee’s motion for appointment of an examiner, apparently until the Rule 2019 statement is filed or the appeal is resolved. I’ll plan to provide additional updates as developments warrant.