Bankruptcy Litigation Committee

ABI Committee News

Gone Fishin’: Addressing the “Pending Proceeding” Limit on Examinations under Federal Rule of Bankruptcy Procedure 2004

Rarely is an official rule of court publicly acknowledged as a license for a “fishing expedition,” but that is the characterization often conferred by the courts on Fed. R. Bankr. P. 2004. E.g., In re French, 145 B.R. 991, 992 (Bankr. D. S.D. 1992). As with all fishing licenses, however, this one can be revoked if one tries to catch more than the limit. Specifically, courts frequently deny a request for a 2004 examination if another proceeding is pending, either in bankruptcy court, or in another federal or state court. In re Enron Corp., 281 B.R. 836 (Bankr. S.D.N.Y. 2002) (denying Rule 2004 examination in aid of pending federal securities case and discussing cases); In re French, 145 B.R. 991, 992 (pending bankruptcy court proceeding). Courts will not permit the use of Rule 2004 to subvert the more limited discovery procedures available in litigation, 2435 Plainfield Ave., Inc. v. Township of Scotch Plains (In re 2435 Plainfield Ave., Inc.), 223 B.R. 440, 445-47 (Bankr. D. N.J. 1998), nor will they impose duplicative or unduly burdensome procedures upon the target of the 2004 examination. In re Buick, 174 B.R. 299, 305 (Bankr. D. Colo. 1994). This note will provide some guidelines for dealing with the court-developed “pending proceeding” limitation on the otherwise expansive discovery available under Rule 2004. International Fibercom, Inc., 283 B.R. 290, 292 (Bankr. D. Ariz. 2002) (limitation is created by courts, not in text of rule).

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Direct Appeals in Bankruptcy to the Circuit Courts of Appeals

Over the past year, courts have begun addressing issues raised by revised 28 U.S.C. §158(d), and the Interim Bankruptcy Rules (8001 and 8003) adopted to implement them. Section 158(d) provides, under certain circumstances, for direct appeals from the bankruptcy courts to the circuit courts of appeal. This article examines these new provisions, but is not intended as an exhaustive guide.

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Cases Address the Standard for Confirmation Appeals in the Second Circuit

During one week in May, two appellate decisions came out of the district court of the Southern District of New York relating to mootness of appeals of confirmation orders. While the results of the two cases were opposite, the rationale was consistent.

The first case was In re Karta Corp., 342 B.R. 45 (S.D.N.Y. 2006). In this case, the debtors operated various industrial facilities. The businesses had originally been a family venture, but there had been a falling out, and serious insider disputes both preceded and enveloped the bankruptcy case. A plan was eventually confirmed, and the father, “Pat,” was the “insider” who was unhappy with the plan. Immediately after confirmation, the debtors sold substantial assets and turned over management of a large part of their businesses to third parties. The same day, Pat appealed the confirmation order. The confirmation order included releases of nondebtor parties. Debtors moved to dismiss the appeal on the grounds it was moot.

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Agenda for the 2006 Winter Leadership Conference

The Alternative Dispute Resolution and Bankruptcy Litigation committees will jointly present "Litigation Tactics: Strategic Uses of ADR after the Amendments" 9:30 - 11 a.m. on Saturday, Dec 2. Panelists will include Rudy J. Cerone as moderator (McGlinchey Stafford, PLLC; New Orleans), Hon. Barbara J. Houser (U.S. Bankruptcy Court, N.D. Texas; Dallas), Dillon E. Jackson (Foster Pepper PLLC; Seattle), Lester J. Levy (JAMS; San Francisco), Thomas J. Salerno (Squire, Sanders & Dempsey, LLP; Phoenix) and Hon. Barry Russell (U.S. Bankruptcy Court, C.D. Calif.; Los Angeles).