Bloomberg Wins Time to Fight Molycorp Disclosure Order
January 20 2016 - 4:50PM
Dow Jones News
The federal judge who ordered a group of bankruptcy
professionals to report conversations with Bloomberg LP reporters
involving troubled rare-earths mining company Molycorp Inc. changed
his mind Wednesday and granted the news organization more time to
mount a legal challenge.
Judge Christopher Sontchi of the U.S. Bankruptcy Court in
Wilmington, Del., said he may have erred in denying Bloomberg a
chance to challenge the order he issued last week. That order
required some 120 professionals involved in Molycorp's chapter 11
case to file sworn statements about any conversation they had with
Bloomberg reporters concerning the mining company in recent
months.
Wednesday's reversal sets the stage for a full-scale court fight
over a bankruptcy ruling that Bloomberg, the Reporters Committee
for Freedom of the Press and other news organizations view as a
threat to their ability to gather news. The dispute over contacts
with reporters erupted amid heated battles between senior lender
Oaktree Capital Management and junior creditors over Molycorp's
fate.
Bloomberg asked Judge Sontchi on Tuesday to suspend his order
and schedule an emergency hearing so it could challenge a court
order that it believes has First Amendment implications. The judge
turned Bloomberg down, but said Wednesday he "made a mistake in
denying the motion to shorten time and depriving Bloomberg of an
opportunity to address the court in regard to the substance" of the
order.
The statements concerning contacts with Bloomberg reporters were
filed, presumably, by Molycorp's financial and legal advisers and
by the professionals working for creditors in the bankruptcy case.
The documents have been kept under seal. Judge Sontchi said he
hasn't looked at them, and issued an order that they are not to be
disseminated until the dispute over whether the order was proper is
decided.
Bloomberg has been reporting on Molycorp's contentious
bankruptcy case, which is headed either to an auction or a
reorganization. Battling creditors have been pushed into a
mediation and concern seems to have arisen that information was
leaking out of the mediation into Bloomberg stories.
Molycorp, its creditors and Oaktree haven't said in court papers
what justifies the broad-ranging disclosure order, which doesn't
specify what information may have leaked. In court Tuesday, Luc
Despins, a lawyer for Molycorp's creditors, said the people ordered
to report on their conversations with reporters were represented by
lawyers and consented to the order.
Bloomberg argues that court action should be narrowly tailored,
but the Molycorp court order requires people working on Molycorp's
case to file "a sworn declaration regarding communications about
Molycorp that they may have had, or known about others having, with
reporters from Bloomberg in the last 60 days."
Bloomberg raced to federal court on Tuesday after Judge Sontchi
denied its appeal of a ruling that the news organization says poses
a direct threat to its First Amendment right to gather the news,
pleading for an emergency hearing to block the order.
Falling commodity prices sent Molycorp to chapter 11 protection
last year, looking for a way out of an overload of debt. Molycorp
piled on bond debt when prices for rare earths soared, then piled
on more debt in the form of loans from Oaktree when prices fell and
it ran into financial trouble. Oaktree and junior creditors have
been engaged in a pitched battle over the dwindling value in the
company.
Write to Peg Brickley at peg.brickley@wsj.com
(END) Dow Jones Newswires
January 20, 2016 16:35 ET (21:35 GMT)
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