- Associated Press - Friday, January 22, 2016

DOVER, Del. (AP) - A federal judge on Friday agreed to narrow his order that required scores of people involved in a corporate bankruptcy to disclose under oath whether they had talked to reporters for the Bloomberg news service who were covering the case.

Following a hearing on Bloomberg’s challenge to the order, U.S. Bankruptcy Judge Christopher Sontchi agreed that the order involving the leaking of nonpublic information in mining company Molycorp Inc.’s Chapter 11 case was overly broad.

Bloomberg, supported by The Associated Press, the Reporters Committee for Freedom of the Press and other media organizations, had challenged the order as a threat to the First Amendment protections of journalists and their sources.

Sontchi issued the order last week at the request of attorneys in the case after Bloomberg published articles related to confidential mediation and the bidding process for Molycorp’s assets.

The order required 123 individuals to disclose any conversations with Bloomberg reporters about Molycorp within the past 60 days, and to disclose whether they knew the source of the leaks.

“If sources are afraid that nonpublic confidential communications may be required to be disclosed and cause them to be punished, that’s a significant chilling effect on the ability of reporters to report the news,” Bloomberg attorney Thomas Hentoff told the judge.

Sontchi said he was firmly convinced that he has both the authority and the responsibility to ensure the integrity of the bankruptcy process, including enforcing the confidentiality of both the mediation and sale process.

“At the same time, I acknowledge and agree that there is a countervailing interest that must be considered. … This court must balance the interests of the press and the protections of individuals under the First Amendment to speak on an anonymous basis with the interest I have in protecting the mediation and the bankruptcy process in general,” he said.

Sontchi concluded that the order should be more narrowly tailored to focus on specific confidentiality breaches and three specific Bloomberg articles about mediation and bidding in the Molycorp case.

The judge also noted that not every one of the 123 individuals who were ordered to submit disclosure declarations were personally involved in the bankruptcy negotiations or had consented to confidentiality and nondisclosure provisions.

“That’s a distinction that I think is important in the context of the “coerced speech” as described by Bloomberg,” said Sontchi, who ordered that the disclosures already submitted to the court under seal be destroyed.

The judge scheduled a status conference for next week, directing attorneys for Bloomberg and the bankruptcy parties to try to agree on a revised order for him to sign, or to submit competing orders if they cannot reach a consensual resolution.

“We are encouraged by today’s ruling - it goes a long way in allowing the press to do its job,” Bloomberg editor-in-chief John Micklethwait said in a prepared statement.

A spokeswoman for the Reporters Committee for Freedom of the Press also issued a statement saying the group was pleased with Sontchi’s ruling.

“The Reporters Committee opposes any attempt to seek a reporter’s sources, particularly when covering matters of significant public interest like the bankruptcy and asset sale of a rare earth mining company that some believe has national security implications,” the statement said.

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