"New York Bankruptcy Court Requires Full Public Disclosure of Trading Records of Ad Hoc Committee Acting in Chapter 11 Case; Refuses to Permit Filing Under Seal"

In large, complex Chapter 11 cases, Ad Hoc Committees have become increasingly frequent, visible and important.  They provide a vehicle for a single constituency to be heard on points of interest in a case, with the ability to hire professionals to speak for groups of participants that may be large in number, but perhaps not otherwise adequately represented in the case.

In a recent U.S. Bankruptcy Court (S.D.N.Y) ruling in the Chapter 11 case of Northwest Airlines Corporation, the Court halted the prevailing current disclosure practices of debt and equity holders that form Ad Hoc Committees to participate in Chapter 11 cases, by requiring that they disclose with specificity their positions and holdings in the capital structure, and the economic cost they incurred to take those positions.

This Stroock Special Bulletin explores the dispute over disclosure in Northwest and how the ruling may affect future Chapter 11 cases.