JAMES L. GARRITY, JR., Bankruptcy Judge.
The matter before the Court is the Motion by Alan Nisselson, as the Chapter 7 Trustee (the
Although AMERRA has agreed to produce documents responsive to many of the Trustee's document requests, it objects to the production of the AMERRA Internal Communications and AMERRA External Communications (as those terms are defined herein). It also objects to the oral examination of Ms. Obler. To the extent set forth below, the Court directs the production of the AMERRA Internal Documents and the oral examination of Ms. Obler. Thus, the Court overrules those aspects of the AMERRA Objection. However, as explained below, the Court sustains AMERRA's objection to the production of the AMERRA External Communications. Accordingly, for the reasons set forth herein, the Court GRANTS the Motion in part, and DENIES the Motion in part.
The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334, and the Amended Standing Order of Referral of Cases to Bankruptcy Judges of the United States District Court for the Southern District of New York, No. M10-468, 12 Misc. 00032, dated January 31, 2012 (Preska, C.J.). This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A).
On December 31, 2016 (the
AMERRA was a trading partner of the Debtor and is also among its largest creditors. Ms. Obler is a Managing Director at AMERRA. On or about April 14, 2017, AMERRA filed a proof of claim (the
Transmar remained in possession and control of its business and assets as a debtor in possession until July 26, 2017, when, in response to the Agent's motion for such relief,
As of the Petition Date, Peter G. Johnson served as the Debtor's Chairman, President and Chief Executive Officer; his son, Peter B. Johnson, served as the Debtor's Vice-Chairman, Vice-President, and Chief Operating Officer, and was responsible for Euromar's operations; and Thomas Reich served as the Debtor's Treasurer (such parties, collectively, the
After his appointment, the Trustee received documents, including emails, from, among others, the Debtor, its counsel, and the Agent. See AMERRA Objection ¶¶ 3, 35. That includes materials that AMERRA voluntarily produced to the Agent in response to the Agent's Rule 2004 discovery in this case, consisting of: (i) documents evidencing 48 cocoa transactions between AMERRA and one or both of the Debtor and Euromar; and (ii) documents evidencing claims AMERRA has against the Debtor and certain of its affiliates, including Euromar.
In this Motion, the Trustee seeks an order from this Court pursuant to Bankruptcy Rule 2004 authorizing him to issue one or more subpoenas to the Respondents, substantially in the form of the subpoena attached as Exhibit B to the Motion (the
See Subpoena Part III ¶¶ a-g; see also Motion ¶ 27.
The Trustee says that he needs those materials in order to:
See Motion ¶ 32.
AMERRA does not object to the production of documents/communications that are responsive to the discovery requests in Subpoena Part III ¶¶ a.-c., e., and f (collectively, the
Under Rule 2004 of the Federal Rules of Bankruptcy Procedure, "the court may order the examination of any entity." Fed. R. Bankr. P. 2004(a). "The purpose of a Rule 2004 examination is to assist a party in interest in determining the nature and extent of the bankruptcy estate, revealing assets, examining transactions and assessing whether wrongdoing has occurred." In re Recoton Corp., 307 B.R. 751, 755 (Bankr. S.D.N.Y. 2004) (citing In re Bennett Funding Grp., Inc., 203 B.R. 24, 28 (Bankr. N.D.N.Y. 1996)). As relevant here, the Trustee's Rule 2004 examination "may relate only 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[.]" Fed. R. Bankr. P. 2004(b); see also In re Coffee Cupboard, Inc., 128 B.R. 509, 516 (Bankr. E.D.N.Y. 1991) ("The examination of a witness about matters having no relationship or no effect on the administration of an estate is improper." (citing Keene Corp. v. Johns-Manville Corp. (In re Johns-Manville, Corp.), 42 B.R. 362, 364 (S.D.N.Y 1984))). Third parties are subject to examination under this rule "if they possess knowledge of the debtor's acts, conduct, or financial affairs which relate to the bankruptcy proceedings." In re Bennett Funding Grp., Inc., 203 B.R. at 28 (citations omitted); see also In re Ecam Publications, Inc., 131 B.R. 556, 559 (Bankr. S.D.N.Y. 1991) ("Third parties are subject to examination pursuant to Rule 2004 if they have knowledge of the debtor's affairs.") (citation omitted).
The decision to grant or deny a request for discovery under Rule 2004 is within the sound discretion of the court. See In re SunEdison, Inc., 562 B.R. 243, 249 (Bankr. S.D.N.Y. 2017) ("[R]elief [under Rule 2004] lies within the sound discretion of the Bankruptcy Court.") (citations omitted); see also In re Bd. of Dirs. of Hopewell Int'l Ins., Ltd., 258 B.R. 580, 587 (Bankr. S.D.N.Y. 2001) ("Rule 2004 provides that the Court `may' order disclosure thereunder, giving the Court significant discretion."). However, "in granting a Rule 2004 request, the bankruptcy court is required to make a finding of good cause for the examination." In re Madison Williams and Co., LLC, No. 11-15896, 2014 WL 56070, at *4 (Bankr. S.D.N.Y. Jan. 7, 2014) (citation omitted). The party seeking discovery under Rule 2004 bears the burden of showing good cause for the examination it seeks. See SIPC v. BLMIS LLC (In re Madoff), Adv. Pro. No. 08-01789, 2014 WL 5486279, at *2 (Bankr. S.D.N.Y. Oct. 30, 2014). That burden will not be satisfied "merely by a showing that justice would not be impeded by production of the documents." In re Drexel Burnham Lambert Grp., Inc., 123 B.R. 702, 712 (Bankr. S.D.N.Y. 1991) (citation omitted). Rather, the party seeking Rule 2004 discovery must demonstrate either that the proposed examination is necessary to establish the claim of the party, or that the denial of discovery would cause the party undue hardship or injustice. See ePlus, Inc. v. Katz (In re Metiom, Inc.), 318 B.R. 263, 268 (S.D.N.Y. 2004) (noting that good cause for Rule 2004 discovery exists if the proposed examination "is necessary to establish the claim of the party, or if denial of such request would cause the examiner undue hardship or injustice." (quoting In re Dinubilo, 177 B.R. 932, 943 (E.D. Cal. 1993))); accord In re Gawker Media LLC, No. 16-11700, 2017 WL 2804870, at *5 (Bankr. S.D.N.Y. June 28, 2017) (same); In re AOG Entm't, Inc., 558 B.R. 98, 109 (Bankr. S.D.N.Y. 2016) (same). If the movant meets that burden, the bankruptcy court must then "balance the competing interests of the parties, weighing the relevance of and necessity of the information sought by examination." In re Drexel Burnham Lambert Grp., Inc., 123 B.R. at 712. Courts will not order Rule 2004 discovery when the burden on the producing party outweighs the benefits to the requesting party. See In re Texaco, Inc., 79 B.R. 551, 553 (Bankr. S.D.N.Y. 1987) ("[T]he examination should not be so broad as to be more disruptive and costly to the [producing party] than beneficial to the [requesting party]."); Bank One, Columbus, N.A. v. Hammond (In re Hammond), 140 B.R. 197, 201 (S.D. Ohio 1992) (stating that in evaluating a Rule 2004 examination, "the bankruptcy court must balance the examiner's interests against the debtor's interest in avoiding the cost and burden of disclosure."). See also In re SunEdison, Inc., 562 B.R. at 250 (analyzing the balance of burdens under Rule 2004 in light of the "spirit of the proportionality" underlying amended Fed. R. Civ. P. 26, which takes into account, among other things, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit).
The Trustee is a fiduciary of the estate "whose principal duty is to administer estate property so as to maximize distribution to unsecured creditors, whether priority or general unsecured." In re All Island Truck Leasing, 546 B.R. 522, 532 (Bankr. E.D.N.Y. 2016) (citations omitted); see also In re Balco Equities, Ltd., Inc., 323 B.R. 85, 97 (Bankr. S.D.N.Y. 2005) ("As an officer of the Court and as a representative of the Debtor's creditors, the Trustee has a duty to realize the maximum return for the estate for further distribution to the Debtor's creditors.") (citation omitted). To that end, without limitation, he is duty bound to investigate the affairs of the Debtor. See 11 U.S.C. § 704(a)(4) ("The trustee shall . . . investigate the financial affairs of the debtor."); see also In re Vantage Petroleum Corp., 34 B.R. 650, 651 (Bankr. E.D.N.Y. 1983) ("A trustee in bankruptcy is under an affirmative duty to investigate the debtor's affairs in order to discover and recover assets for the benefit of creditors of the debtor."). Moreover, he is the proper party in interest to prosecute prepetition causes of action that become estate assets. See, e.g., In re Merrill Lynch & Co., Inc. Research Reports Sec. Litig., 375 B.R. 719, 725 (S.D.N.Y. 2007) ("[C]ourts have consistently held that only the trustee and not a debtor has standing to pursue causes of action that belong to the bankruptcy estate." (quoting Hopkins v. Foothill Mt. Inc. (In re Hopkins), 346 B.R. 294, 304 (Bankr. E.D.N.Y. 2006))); see also In re Arana, 456 B.R. 161, 170 (Bankr. E.D.N.Y. 2011) ("Only the Chapter 7 trustee may administer property of the estate, including bringing actions on behalf of the estate.") (citations omitted).
In opposing the Motion, and as a preliminary matter, AMERRA contends that the Court should deny the Trustee access to the communications responsive to the Disputed Requests because the Trustee has identified AMERRA as a litigation target and seeks to use the Rule 2004 discovery for the improper purpose of identifying causes of action to assert against it. See AMERRA Objection ¶¶ 42-45. It maintains that if the Trustee wants discovery beyond what AMERRA has agreed to produce, he should commence an adversary proceeding or contested matter against AMERRA, and seek discovery under the Federal Rules of Civil Procedure. Courts routinely deny requests for Rule 2004 discovery when the matters at issue among the parties are the subject of an adversary proceeding or contested matter. See In re Recoton Corp., 307 B.R. 751, 755 (Bankr. S.D.N.Y. 2004) ("Rule 2004 examinations are also not generally permitted once an adversary proceeding has been filed, as the greater protections of the Bankruptcy Rules 7026 through 7037, which are modeled on Fed. R. Civ. P. 26-37, then apply.") (citation omitted); In re Bennett Funding Grp., Inc., 203 B.R. at 28 (noting that "once an adversary proceeding or contested matter has been commenced, discovery is made pursuant to the Fed. R. Bankr. P. 7026 et. seq., rather than by a Fed. R. Bankr. P. 2004 examination.") (citations omitted). Cf. In re Washington Mut., Inc., 408 B.R. 45, 51 (Bankr. D. Del. 2009) (noting that where the Rule 2004 discovery sought is unrelated to the pending proceeding or entities in the pending proceeding, it should be allowed) (citations omitted). To be sure, resort to Rule 2004 discovery of a third party like AMERRA may be improper if the Trustee has identified it as a litigation target and is using Rule 2004 to skirt the more stringent discovery rules applicable to state and federal court litigation. See In re Valley Forge Plaza Assocs., 109 B.R. 669, 675 (Bankr. E.D. Pa. 1990) ("Many courts have expressed distaste for efforts of parties to utilize [Rule] 2004 to circumvent the restrictions of the [Federal Rules of Civil Procedure] in the context of adversary proceedings or contested matters."); see also SIPC v. BLMIS LLC (In re Madoff), Adv. Pro. No. 08-01789, 2014 WL 5486279, at *2 (Bankr. S.D.N.Y. Oct. 30, 2014) (observing that the scope of discovery under Rule 2004 "is `very broad' and can encompass broader discovery than is available under the Federal Rules of Civil Procedure.").
However, the record is clear that the Trustee has not determined to bring claims against AMERRA. See Reply at 9. Rather, he is the preliminary stages of his review and analysis of the estate's claims, if any, against AMERRA. See Motion ¶ 25. As such, his use of Rule 2004 discovery at this time to identify or evaluate possible claims against AMERRA fits squarely within the scope of Rule 2004. See, e.g., In re Gawker Media LLC, No. 16-11700, 2017 WL 2804870, at *6 (Bankr. S.D.N.Y. June 28, 2017) (granting trustee's Rule 2004 discovery where stated purpose of request was to determine whether trustee should commence litigation against the examinees); In re Hughes, 281 B.R. 224, 226 (Bankr. S.D.N.Y. 2002) ("[T]he investigation of potential claims on behalf of a debtor is not an improper use of Rule 2004 discovery." (citing In re Brierley, 145 B.R. 151, 170 (Bankr. S.D.N.Y. 1992))); see also In re Drexel Burnham Lambert Grp., Inc., 123 B.R. 702, 708 (Bankr. S.D.N.Y. 1991) ("A trustee in bankruptcy, under the Act and the Code, is under a duty to maximize the realization of estate liquidation. To that end a trustee must marshal the estate's assets and, if necessary to achieve that end, institute all necessary litigation."). Indeed, "[l]egitimate goals of Rule 2004 examinations include `discovering assets, examining transactions, and determining whether wrongdoing has occurred.'" In re Millennium Lab Holdings II, LLC, 562 B.R. 614, 626 (Bankr. D. Del. 2016) (citation omitted); see also In re Ecam Publications, Inc., 131 B.R. 556, 560 (Bankr. S.D.N.Y. 1991) (rejecting argument by witnesses that trustee is improperly using Rule 2004 to take discovery in preparation for asserting claims against them and noting that Rule 2004's intended use is to "determine whether there are grounds to bring an action to recover property of the estate."). Accordingly, the Court finds no merit to this aspect of AMERRA's objection.
The Court now considers whether the Trustee has met his burden of demonstrating good cause for obtaining production of the communications he is seeking in the Disputed Requests. A contention of the Trustee in support of both requests is that where, as here, the Debtor has engaged in misconduct, when weighing the relevance and necessity of the requested discovery for purposes of Rule 2004, the bankruptcy court should grant him greater latitude to investigate the Debtor's financial affairs. See Reply at 4-5.
In support of his request to obtain the AMERRA Internal Communications, the Trustee contends, in part, that to date, his investigation of the Debtor's business and affairs has revealed that AMERRA, and Obler in particular, provided advice to the Debtor and its principals concerning, among other things, the Debtor's operations and management, its relationship and communications with the Prepetition Lenders, and the transactions between the Debtor and its affiliate, Euromar. See Motion ¶¶ 36a. & 42. He says that Obler often strategized with the Debtor, Euromar, and their affiliates regarding their efforts to restructure their assets and businesses, including transactions among the Debtor, Euromar, and their affiliates. See id. He maintains that based upon AMERRA's close access to the Debtor and Euromar during the relevant time period, an examination of AMERRA, generally, and Obler, in particular, is crucial to the discovery of assets and claims. Id. ¶ 43. To the end, the Trustee says that AMERRA's internal communications may: (i) provide additional evidence relating to the substance and nature of the guidance and strategic advice that Ms. Obler provided to the Debtor or Euromar; (ii) shed light on the legitimacy of AMERRA's claim and whether the claims is subject to equitable defenses, avoidance actions, or equitable subordination; and (iii) assist him in determining which transactions involving the Debtor, Euromar and their numerous affiliates may have been legitimate and which transactions may be avoidable by the Trustee.
AMERRA acknowledges that "in the final months before bankruptcy, [it] communicated with the Debtor and its creditors frequently in the hope of securing a strategy that would turn Transmar and Euromar around[.]" AMERRA Objection ¶ 31. It contends that the Court should deny the Trustee access to Ms. Obler's internal communications related to that guidance and strategic advice because the Trustee already has documents which reveal the guidance that Ms. Obler provided to the Debtor, and has not identified particular gaps in the Debtor's records that he believes he can fill by AMERRA's internal communications. See id. ¶ 36. Further, AMERRA maintains that there is nothing remarkable about its prepetition interactions with the Debtor; and that it is common for creditors and trading partners of a potential debtor to engage in those communications. Id. ¶ 31. That may be true. Still, the role that Ms. Obler (and any other AMERRA representative) played in advising the Debtor on restructuring strategies is plainly relevant to Trustee's examination into the Debtor's operations and affairs, and whether the estate holds claims against AMERRA. At a minimum, those communications may assist the Trustee in ascertaining the depth of AMERRA's relationship with the Debtor and its principals, and in putting AMERRA's guidance and strategic advice in context, especially with regard to how AMERRA was managing its relationship with the Debtor and how the Debtor was managing its relationship with the Prepetition Lenders. The Trustee cannot get that information from the documents that AMERRA has produced to date, and will be unduly harmed and prejudiced if he is denied access to those communications because AMERRA is the sole source of those communications. Thus, the Court finds that the Trustee has established good cause for obtaining the AMERRA Internal Communications, as they relate to the guidance and strategic advice that Ms. Obler and/or any other AMERRA personnel provided to the Debtor and its principals concerning the Debtor's operations and management, the restructuring of Debtor's assets and businesses, the Debtor's relationship and communications with the Prepetition Lenders, and AMERRA's transactions with the Debtor and Euromar. See, e.g., In re Gawker Media LLC, No. 16-11700, 2017 WL 2804870, at *6 (Bankr. S.D.N.Y. June 28, 2017) (finding that plan administrator established good cause for Rule 2004 request against third-party Thiel, where discovery was needed to determine whether potential causes of action exist, and if they do, whether to prosecute them); see also In re Millennium Lab Holdings II, LLC, 562 B.R. 614, 627-28 (Bankr. D. Del. 2016) (holding that "the Trustee has demonstrated good cause warranting granting of the Trustee's Rule 2004 Motion on behalf of the Corporate Trust" where he "has testified that the examinations are necessary to `enable the Plan Trusts to determine the scope of viable claims that may exist on behalf of the Plan trusts against potential third parties[.]'"). But that is the full extent to which the Court will grant the Trustee access to the AMERRA Internal Communications, as he has not established cause for granting him further access to those communications. Although AMERRA complains that it will be required "to spend hundreds of thousands of dollars and devote its internal resources and the time of its personnel" in responding to the document request, it has not demonstrated that the burden it will bear in responding to the document requests outweighs the benefits to the Trustee in getting those documents. See In re Musicland Holding Corp., 424 B.R. 95, 100 (Bankr. S.D.N.Y. 2010) ("The party resisting discovery bears the burden of demonstrating that discovery of otherwise relevant evidence should be limited." (citing 8 Charles Alan Wright et al., FEDERAL PRACTICE AND PROCEDURE § 2008.1 (2d ed. 1994 & Supp. 2009))). Moreover, the Court directs the parties to "meet and confer" in an effort to minimize the burden and expense to AMERRA in responding to this document request.
Cocoa Origins Africa (
To be sure, the documents and communications relating to the circular transactions that the Trustee is seeking from AMERRA are relevant to the Trustee's examination of the Debtor's affairs, including the merits of claims that the Trustee may assert against third parties. However, as previously noted, "[r]elevance alone is not sufficient to justify a Rule 2004 request." In re Gawker Media LLC, No. 16-11700, 2017 WL 2804870, at *5 (Bankr. S.D.N.Y. June 28, 2017) (citing In re Drexel Burnham Lambert Grp. Inc., 123 B.R. 702, 712 (Bankr. S.D.N.Y. 1991). Neither is the fact that the Debtor engaged in misconduct pre-petition and that its certain of its principals have pleaded guilty to crimes charged in the Indictment. The Trustee still must establish "good cause" for granting him the requested discovery. In assessing whether the Trustee has done so, the Court notes that the Trustee is in possession of at least 5,942 documents containing the phrase "Cocoa Origins Africa" that he obtained from parties other than AMERRA. AMERRA Objection ¶ 35, n.7. He has not demonstrated, or even attempted to demonstrate, that his examination of the circular transactions and events surrounding those transactions will be prejudiced if he is denied discovery of the AMERRA Internal Communications, if any, relating to COA and it African affiliates, or the AMERRA External Communications. In short, he has failed to establish "good cause" for the Court to grant him that portion of his Rule 2004 discovery request. See, e.g., ePlus, Inc. v. Katz (In re Metiom, Inc.), 318 B.R. 263, 268 (S.D.N.Y. 2004) (noting that good cause for Rule 2004 discovery can be shown by demonstrating that the examination `is necessary to establish the claim of the party, or if denial of such request would cause the examiner undue hardship or injustice." (quoting In re Dinubilo, 177 B.R. 932, 943 (E.D. Cal. 1993))).
The Court now considers AMERRA's objection to the oral examination of Ms. Obler. It is well settled that the scope of a Rule 2004 examination can be very broad. See, e.g., In re Vantage Petroleum Corp., 34 B.R. 650, 651 (Bankr. E.D.N.Y. 1983) ("Under Rule 2004 and its precursors, it has been well-established that the scope of such an investigation is broad. The exploration can be in the nature of a fishing expedition.") (citations omitted). Nonetheless, courts may "limit, condition or even forbid the use of Rule 2004" where it is used to "abuse or harass[ ]. . . ." Martin v. Schaap Moving Sys., Inc., No. 97-5042, 1998 WL 405966, at *3 (2d Cir. April 20, 1998) (quoting In re Mittco, Inc., 44 B.R. 35, 36 (Bankr. E.D. Wisc. 1984)). To that end, the "[e]xamination of a witness as to matters having no relationship to the bankrupt's affairs or the administration of his estate . . . is improper." Keene Corp. v. Johns-Manville Corp. (In re Johns-Manville, Corp.), 42 B.R. 362, 364 (Bankr. S.D.N.Y. 1984). In contrast, courts routinely permit the examination of "witnesses having knowledge of the debtor's acts, conduct, liabilities, assets, etc.[.]" Id. There is no dispute that Ms. Obler is the AMERRA representative who is most familiar with AMERRA's relationship with the Debtor, Euromar and COA. Moreover, AMERRA does not contend that the subject matter of the discovery that the Trustee is seeking from Ms. Obler is beyond the bounds of permitted discovery under Rule 2004. That is plainly not the case, as the Trustee is focusing on matters relating to documents that AMERRA has or will produce to the Trustee, the strategic advice that Ms. Obler provided to the Debtor and Euromar, and AMERRA's alleged involvement with the Debtor and COA in the circular transactions. Rather, AMERRA focuses on the burdens it will bear if the Court grants the Trustee leave to examine Ms. Obler. AMERRA asserts that the Court should deny the Trustee that opportunity because neither Ms. Obler nor AMERRA's counsel is up to speed on many of the thousands of documents the Trustee has access to and on which he might question her. See AMERRA Objection ¶ 48. It maintains that its relationship with the Debtor and Euromar is "long and extensive" and that because it does not know what documents the Trustee has or may rely on in examining Ms. Obler, it will be extremely expensive and time consuming to get "Ms. Obler and [AMERRA's] counsel fully up to speed[.]" Id. It says that if the Court is inclined to authorize the oral examination of Ms. Obler (which it opposes), the Court should either: (i) limit the scope of the examination to the subject matter of the of the documents that are to be, or have been, produced by AMERRA; or (ii) if the scope of the examination is not so limited, bar any further oral examination or deposition of her in this case, including in any adversary proceeding he may commence. Id. As to the latter, AMERRA explains that it is concerned that the Trustee's purpose in conducting wide ranging Rule 2004 discovery is to ambush Ms. Obler by questioning her on matters that she cannot possibly be prepared for and then use that deposition transcript against her in a subsequent deposition.
There is nothing in the record that validates AMERRA's concerns about the Trustee's intent to "ambush" Ms. Obler, and the Court finds that the Trustee has established good cause for conducting an examination of Ms. Obler. However, the Court, in its discretion, will limit that examination to the following: (i) the matters relating to/underlying the documents that AMERRA will or has produced (directly or indirectly) to the Trustee as requested in the Undisputed Requests, including the contents of those documents; (ii) the matters relating to/underlying the AMERRA Internal Communications that the Court has directed AMERRA to produce to the Trustee, and the contents of those communications; (iii) AMERRA's relationship with COA, including the documents referenced by AMERRA in the AMERRA Letter; and (iv) the transactions involving payments to or from AMERRA that the Trustee maintains are "circular transactions." As to the latter, the Trustee shall identify and produce copies of any documents he intends to use in his examination of Ms. Obler in advance of that examination. The Trustee and AMERRA shall agree upon a reasonable schedule for the production of those documents and the conduct of Ms. Obler's examination.
Based on the foregoing, the Court GRANTS the Motion in part and DENIES the Motion in part.
IT IS SO ORDERED.
See ABN's Second 2004 Request at 18-19 of 22.
AMERRA again objected to ABN's requested discovery. See ECF Nos. 273, 293. This time, the parties could not resolve the objection. Following a hearing on ABN's Second 2004 Request, and pursuant to a ruling from the bench, the Court denied the motion. See Order Denying ABN AMRO Capital USA LLC's Request Pursuant to Rule 2004 of the Federal Rules of Bankruptcy Procedure Authorizing it to Issue a Subpoena for the Further Production of Documents and the Oral Examination of AMERRA Capital Management, LLC, by Nancy Obler [ECF No. 362]; see also transcript of June 13, 2017 hearing [ECF No. 367] (
In In re Vantage Petroleum Corp., 34 B.R. 650 (Bankr. E.D.N.Y. 1983), the chapter 7 trustee in bankruptcy was examining the debtor's dealings with a non-debtor third party (
COA is governed by an Amended and Restated Operating Agreement dated as of December 2, 2013, and amended by Amendment No. 1 to the Amended and Restated Operating Agreement dated as of March 4, 2014 (as so amended, the
COA was formed to engage in the cocoa trading business. However, during the years 2015 and 2016 (the
Among other things, the COA Operating Agreement reflects that (i) the Transmar Member made an initial capital contribution of $890,329; and (ii) that amount was treated as a "Preferred Liquidation Payment." Id. at 2. That preferential treatment entitles the Transmar Member to receive distributions under the COA Operating Agreement after amounts required to pay financing arrangements, including financing provided by AMERRA (discussed below). The Preferred Liquidation Payment amount was increased to $1,660,329 in Amendment No. 1 to the Operating Agreement. See id.
During the Operative Period, COA also was partially funded with debt from AMERRA. Pursuant to a Senior Secured Credit Agreement, dated December 12, 2013, as amended, AMERRA, as agent for itself and certain lenders, loaned $11,640,000 to COA. AMERRA also provided $1,660,329 in unsecured debt to COA pursuant to a Subordinated Note, dated December 12, 2013, as amended. AMERRA was also granted a "profit participation," pursuant to which Available Cash is divided between AMERRA and the Transmar Member. See id. The Available Cash is net of (i) required payments of debt, (ii) the Transmar Member's Preferred Liquidation Payment, and (iii) payments to employees whose compensation includes a sharing of Available Cash. AMERRA never received any payments on account of its profit participation. The COA Operating Agreement restricts the Transmar Member's (or any of its affiliates') ability to enter into joint ventures (but not other business relationships or investments) that operate in the same or similar industries as COA, without first providing AMERRA with a right of first refusal. See id.
Id. The Court declines that invitation. When he filed the Motion and his Reply to the AMERRA Objection, the Trustee was in possession of all of the documents and information that he now seeks leave to submit in support of the Motion. He failed to do so. Moreover, at the outset of the hearing on the Motion, the Court asked the Trustee and AMERRA whether either wished to submit evidence in support of their respective positions on the Motion. Both parties advised the Court that they did not wish to do so. Finally, at the close of the hearing, the Trustee did not seek leave of the Court to supplement the record of the Motion. To the extent that the letter can be construed to include a request for leave to supplement the record, the request is denied.
