I guess "they" (Bird) don't want the Trustee to see all their bank records...Hmmm, I wonder why...
Case 22-13166-PDR Doc 148 Filed 03/01/23 Page 1 of 6
EMERGENCY JOINT MOTION FOR ORDER QUASHING TRUSTEE’S SUBPOENA OR, IN THE ALTERNATIVE, FOR A PROTECTIVE ORDER
ARISING FROM TRUSTEE’S ISSUANCE AND SERVICE OF SUBPOENA FOR DOCUMENT PRODUCTION UNDER RULE 2004 [D.E. 137]
[Emergency Hearing Requested]
AVEM Medical, L.L.C. f/k/a MediSource Partners LLC (“Avem”) and Pantheon Medical--Foot & Ankle, LLC (“Pantheon”) (collectively, “Movants”) jointly move for entry of an order quashing a subpoena issued by the Trustee and served on Wells Fargo Bank or, in the alternative, a protective order prohibiting enforcement of the subpoena. The subpoena seeks the production of documents concerning accounts maintained by Movants at Wells Fargo Bank. The basis for this motion is set forth below.
STATEMENT OF NEED FOR EMERGENCY/EXPEDITED HEARING
The subpoena that is the subject of this motion has a return date of March 9, 2023. While Local Rule 2004(C) effectively stays enforcement of the subpoena upon filing of this motion until it is ruled upon, Movants have a concern that Wells Fargo Bank, the recipient of the subpoena requesting information on Movants’ bank accounts, may well comply with the subpoena on or before March 9, 2023 absent expedited emergency consideration. Alternatively, if the Trustee notifies Wells Fargo to suspend its compliance with the subject Subpoena pending disposition of this motion, that may alleviate the need for an emergency hearing prior to the March 9 return date.
I. BACKGROUND
1. Movants are creditors of the Debtor by virtue of a state court judgment entered in their favor on April 6, 2022.1 Movants were also petitioning creditors in connection with the involuntary bankruptcy filing against the Debtor. [D.E. 8] and moved for appointment of an interim trustee [D.E.10].
2. On February 10, 2023, the Trustee served a Notice of Intent to Serve Subpoena (“Notice”) [D.E. 137]. On its face, the Notice reflected that the forms of subpoenas attached to it would be served on Bank of America, JP Morgan Chase, RBC Royal Bank, Valley National Bank and Wells Fargo Bank.
3. With the exception of the subpoena to be served on Wells Fargo Bank, all other subpoenas indicated that they were seeking information on bank accounts that appear to have been maintained by the Debtor or by affiliates or insiders of the Debtor.
4. The Subpoena directed to Wells Fargo Bank sought the following information on accounts maintained by Movants (see D.E. 137 at pages 18-21):
II. ARGUMENT
Movants submit the Subpoena issued to Wells Fargo Bank is not within the scope permitted by Rule 2004 and should be quashed or its enforcement prohibited by a protective order.2 Movants understand that Rule 2004 generally permits the examination of a debtor or other entity, but only as to the “acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor’s estate or to the debtor’s right to a discharge.” Fed. R. Bankr. P. 2004. While this Rule affords the examining party a broad scope of examination, it does have limits. Specifically, Rule 2004 “cannot stray into matters which are not relevant to the basic inquiry.” In re No Rust Rebar, Inc., 2022 WL 17365180 at *2 (Bankr.S.D.Fla. Dec. 1, 2022). Furthermore, the party seeking the 2004 discovery bears the burden of proving good cause for it. Id.
While the local rules of this Court permit utilization of Rule 2004 without the need for filing of a motion, where a motion to quash is filed directed to the Rule 2004 subpoena, the party seeking to utilize Rule 2004 “bears the burden of proving that good cause exists for taking the requested discovery” and such party must “show some reasonable basis to examine the material sought to be discovered.” In re Wilcher, 56 B.R. 428, 434 (Bankr.N.D.Ill.1985). Moreover, Rule 2004 may not be used as a device to launch into a wholesale investigation of a non-debtor’s private affairs. Wilcher, at 434.
The court in In re SunEdison, Inc., 562 B.R. 243 (Bankr.S.D.N.Y. 2017) also explained the “cause” necessary to utilize Rule 2004:
A party seeking to conduct a Rule 2004 examination typically shows good cause by establishing that the proposed examination “ ‘is necessary to establish the claim of the party seeking the examination, or ... denial of such request would cause the examiner undue hardship or injustice.’ ” In re Metiom, Inc., 318 B.R. 263, 268 (S.D.N.Y. 2004) (quoting In re Dinubilo, 177 B.R. 932, 943 (E.D. Cal. 1993)); accord In re AOG Entm't, Inc., 558 B.R. 98, 109 (Bankr. S.D.N.Y. 2016); In re Drexel Burnham Lambert Grp., Inc., 123 B.R. 702, 712 (Bankr. S.D.N.Y. 1991). In evaluating a request to conduct a Rule 2004 examination, the Court must “balance the competing interests of the parties, weighing the relevance of and necessity of the information sought by examination. That documents meet the requirement of relevance does not alone demonstrate that there is good cause for requiring their production.” Drexel Burnham, 123 B.R. at 712; accord In re Coffee Cupboard, Inc., 128 B.R. 509, 514 (Bankr. E.D.N.Y. 1991); In re Fearn, 96 B.R. 135, 138 (Bankr. S.D. Ohio 1989) (“While the scope of Rule 2004 examination is very broad, it is not limitless. The examination should not be so broad as to be more disruptive and costly to the party sought to be examined than beneficial to the party seeking discovery.”)
Id., at 249.
In this case, Movants did business with the Debtor, however, those business dealings failed resulting in Movants and Dr. Travis Bird, the sole manager of both Movants, filing suit against the Debtor (and others) in the Broward County Circuit Court on September 23, 2020. After months of litigation, and following the withdrawal of Debtor’s counsel and its failure to obtain new counsel within the time ordered, the state court struck Debtor’s pleadings on April 4, 2022. On April 6, 2022, the state court entered judgments in favor of each of the Movants against the Debtor (now evidenced by Movants’ proofs of claim).
At this juncture, the burden is on the Trustee to establish cause for issuance of his subpoena to Wells Fargo Bank and, in particular, to establish a factual and legal basis to require Wells Fargo to produce all bank records relating to Movants’ accounts at the bank between January 1, 2018 through the proposed return date of March 9, 2023. As presented, the Subpoena is nothing more than the prohibited “wholesale investigation of a non-debtor’s private affairs” and, for that reason alone, it should be quashed.
Insomuch as Movants literally have no information from the Trustee to support or challenge whatever “cause” he claims support his subpoena, it is impossible for them to substantively respond to whatever factual or legal arguments he might assert in support of such cause. Accordingly, Movants reserve the right to present additional argument to the Court to support the relief requested in this motion.3
WHEREFORE, Movants request the entry of an order (i) granting this Motion; (ii) entering an order quashing the Trustee’s subpoena or, as applicable, a protective order prohibiting enforcement of the Trustee’s subpoena; and (iii) granting such other and further relief as the Court deems just and proper.
Date: March 1, 2023 Respectfully Submitted,
SHUMAKER, LOOP & KENDRICK, LLP
Post Office Box 49948
Sarasota, Florida 34230-6948
941-364-2747 / 941-364-3999 facsimile
Attorneys for Creditors
Case 22-13166-PDR Doc 148 Filed 03/01/23 Page 1 of 6
EMERGENCY JOINT MOTION FOR ORDER QUASHING TRUSTEE’S SUBPOENA OR, IN THE ALTERNATIVE, FOR A PROTECTIVE ORDER
ARISING FROM TRUSTEE’S ISSUANCE AND SERVICE OF SUBPOENA FOR DOCUMENT PRODUCTION UNDER RULE 2004 [D.E. 137]
[Emergency Hearing Requested]
AVEM Medical, L.L.C. f/k/a MediSource Partners LLC (“Avem”) and Pantheon Medical--Foot & Ankle, LLC (“Pantheon”) (collectively, “Movants”) jointly move for entry of an order quashing a subpoena issued by the Trustee and served on Wells Fargo Bank or, in the alternative, a protective order prohibiting enforcement of the subpoena. The subpoena seeks the production of documents concerning accounts maintained by Movants at Wells Fargo Bank. The basis for this motion is set forth below.
STATEMENT OF NEED FOR EMERGENCY/EXPEDITED HEARING
The subpoena that is the subject of this motion has a return date of March 9, 2023. While Local Rule 2004(C) effectively stays enforcement of the subpoena upon filing of this motion until it is ruled upon, Movants have a concern that Wells Fargo Bank, the recipient of the subpoena requesting information on Movants’ bank accounts, may well comply with the subpoena on or before March 9, 2023 absent expedited emergency consideration. Alternatively, if the Trustee notifies Wells Fargo to suspend its compliance with the subject Subpoena pending disposition of this motion, that may alleviate the need for an emergency hearing prior to the March 9 return date.
I. BACKGROUND
1. Movants are creditors of the Debtor by virtue of a state court judgment entered in their favor on April 6, 2022.1 Movants were also petitioning creditors in connection with the involuntary bankruptcy filing against the Debtor. [D.E. 8] and moved for appointment of an interim trustee [D.E.10].
2. On February 10, 2023, the Trustee served a Notice of Intent to Serve Subpoena (“Notice”) [D.E. 137]. On its face, the Notice reflected that the forms of subpoenas attached to it would be served on Bank of America, JP Morgan Chase, RBC Royal Bank, Valley National Bank and Wells Fargo Bank.
3. With the exception of the subpoena to be served on Wells Fargo Bank, all other subpoenas indicated that they were seeking information on bank accounts that appear to have been maintained by the Debtor or by affiliates or insiders of the Debtor.
4. The Subpoena directed to Wells Fargo Bank sought the following information on accounts maintained by Movants (see D.E. 137 at pages 18-21):
II. ARGUMENT
Movants submit the Subpoena issued to Wells Fargo Bank is not within the scope permitted by Rule 2004 and should be quashed or its enforcement prohibited by a protective order.2 Movants understand that Rule 2004 generally permits the examination of a debtor or other entity, but only as to the “acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor’s estate or to the debtor’s right to a discharge.” Fed. R. Bankr. P. 2004. While this Rule affords the examining party a broad scope of examination, it does have limits. Specifically, Rule 2004 “cannot stray into matters which are not relevant to the basic inquiry.” In re No Rust Rebar, Inc., 2022 WL 17365180 at *2 (Bankr.S.D.Fla. Dec. 1, 2022). Furthermore, the party seeking the 2004 discovery bears the burden of proving good cause for it. Id.
While the local rules of this Court permit utilization of Rule 2004 without the need for filing of a motion, where a motion to quash is filed directed to the Rule 2004 subpoena, the party seeking to utilize Rule 2004 “bears the burden of proving that good cause exists for taking the requested discovery” and such party must “show some reasonable basis to examine the material sought to be discovered.” In re Wilcher, 56 B.R. 428, 434 (Bankr.N.D.Ill.1985). Moreover, Rule 2004 may not be used as a device to launch into a wholesale investigation of a non-debtor’s private affairs. Wilcher, at 434.
The court in In re SunEdison, Inc., 562 B.R. 243 (Bankr.S.D.N.Y. 2017) also explained the “cause” necessary to utilize Rule 2004:
A party seeking to conduct a Rule 2004 examination typically shows good cause by establishing that the proposed examination “ ‘is necessary to establish the claim of the party seeking the examination, or ... denial of such request would cause the examiner undue hardship or injustice.’ ” In re Metiom, Inc., 318 B.R. 263, 268 (S.D.N.Y. 2004) (quoting In re Dinubilo, 177 B.R. 932, 943 (E.D. Cal. 1993)); accord In re AOG Entm't, Inc., 558 B.R. 98, 109 (Bankr. S.D.N.Y. 2016); In re Drexel Burnham Lambert Grp., Inc., 123 B.R. 702, 712 (Bankr. S.D.N.Y. 1991). In evaluating a request to conduct a Rule 2004 examination, the Court must “balance the competing interests of the parties, weighing the relevance of and necessity of the information sought by examination. That documents meet the requirement of relevance does not alone demonstrate that there is good cause for requiring their production.” Drexel Burnham, 123 B.R. at 712; accord In re Coffee Cupboard, Inc., 128 B.R. 509, 514 (Bankr. E.D.N.Y. 1991); In re Fearn, 96 B.R. 135, 138 (Bankr. S.D. Ohio 1989) (“While the scope of Rule 2004 examination is very broad, it is not limitless. The examination should not be so broad as to be more disruptive and costly to the party sought to be examined than beneficial to the party seeking discovery.”)
Id., at 249.
In this case, Movants did business with the Debtor, however, those business dealings failed resulting in Movants and Dr. Travis Bird, the sole manager of both Movants, filing suit against the Debtor (and others) in the Broward County Circuit Court on September 23, 2020. After months of litigation, and following the withdrawal of Debtor’s counsel and its failure to obtain new counsel within the time ordered, the state court struck Debtor’s pleadings on April 4, 2022. On April 6, 2022, the state court entered judgments in favor of each of the Movants against the Debtor (now evidenced by Movants’ proofs of claim).
At this juncture, the burden is on the Trustee to establish cause for issuance of his subpoena to Wells Fargo Bank and, in particular, to establish a factual and legal basis to require Wells Fargo to produce all bank records relating to Movants’ accounts at the bank between January 1, 2018 through the proposed return date of March 9, 2023. As presented, the Subpoena is nothing more than the prohibited “wholesale investigation of a non-debtor’s private affairs” and, for that reason alone, it should be quashed.
Insomuch as Movants literally have no information from the Trustee to support or challenge whatever “cause” he claims support his subpoena, it is impossible for them to substantively respond to whatever factual or legal arguments he might assert in support of such cause. Accordingly, Movants reserve the right to present additional argument to the Court to support the relief requested in this motion.3
WHEREFORE, Movants request the entry of an order (i) granting this Motion; (ii) entering an order quashing the Trustee’s subpoena or, as applicable, a protective order prohibiting enforcement of the Trustee’s subpoena; and (iii) granting such other and further relief as the Court deems just and proper.
Date: March 1, 2023 Respectfully Submitted,
SHUMAKER, LOOP & KENDRICK, LLP
Post Office Box 49948
Sarasota, Florida 34230-6948
941-364-2747 / 941-364-3999 facsimile
Attorneys for Creditors
1
