In re Okla. Automatic Door, Co., 599 B.R. 167

Background

Oklahoma Automatic Door Co., Inc. (Debtor) filed Chapter 7; its president and sole shareholder is Matthew T. Parker, who signed the petition and schedules. Republic Bank & Trust (Bank) is Debtor's largest creditor under multiple promissory notes secured by mortgage and a commercial security agreement.
Automatic stay was modified/lifted; Bank filed a state-court suit (later amended to add Parker personally) alleging breach of guaranty, fraud, conversion, and unjust enrichment seeking over $1 million.
Bank moved for a Rule 2004 examination seeking Parker to appear as Debtor’s corporate representative and to produce corporate financial records (profit/loss, bank statements, ledgers, A/R, A/P, inventories) from Jan. 1, 2016 to present (date range shortened at hearing).
Debtor opposed, invoking the "pending proceeding rule": discovery should be obtained in the state-court action (where Parker is a defendant) under state law rather than by Rule 2004, arguing the Bank’s true aim is discovery for its state action.
Court recognized Rule 2004 is broad but limited by the pending proceeding rule when discovery would duplicate or improperly aid parallel litigation and deprive examinees of procedural protections.
Court nonetheless granted the Bank’s motion (as modified), reasoning that Parker, as the person most knowledgeable about Debtor, must be available for a 2004 exam as Debtor’s corporate representative despite his status as a defendant in state court; production ordered Jan. 1, 2016–present.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether a Rule 2004 exam of Parker (as Debtor’s corporate rep) may be ordered while a related state-court suit against Parker is pending	2004 exam is needed to investigate discrepancies in Debtor’s schedules and possible asset dissipation/fraud to aid administration of the estate	Pending state litigation means discovery should proceed under state law; Rule 2004 would be an end-run around state/federal discovery protections	Granted: Court allowed 2004 exam of Debtor through Parker despite pending state suit because creditor has right to examine debtor via its most knowledgeable representative
Whether the pending proceeding rule precludes all 2004 discovery when related litigation exists	Bank: 2004 discovery serves bankruptcy administration and is appropriate	Debtor: Pending state suit makes 2004 inappropriate where issues overlap	Denied as absolute bar: overlapping issues weigh against 2004, but not dispositive; court must balance whether discovery relates to administration or primarily to outside litigation
Whether Rule 2004 improperly circumvents procedural protections afforded a deponent in state/federal discovery	Bank: Exam is of corporate debtor; protections for Parker as individual defendant in state court are not dispositive	Debtor: 2004 deprives examinee of typical safeguards (limits on counsel, objections, cross-examination) and should be disallowed here	Court acknowledged procedural differences and concern but found they do not prohibit 2004 where the examinee is the corporation’s representative and examination serves estate administration
Scope and temporal range of production	Bank sought records from Jan. 1, 2017 to present	Debtor did not contest scope per se but opposed forum; parties negotiated timing	Court granted production as modified on record to Jan. 1, 2016 to present and ordered coordinates for time/place if parties cannot agree

Key Cases Cited

In re Enron Corp., 281 B.R. 836 (Bankr. S.D.N.Y. 2002) (Rule 2004 is discretionary but limited where discovery merely aids parallel litigation)
In re The Bennett Funding Group, Inc., 203 B.R. 24 (Bankr. N.D.N.Y. 1996) (Rule 2004 scope is broad but not unlimited; pending proceedings can restrict 2004 use)
In re Washington Mut. Inc., 408 B.R. 45 (Bankr. D. Del. 2009) (distinguishes discovery related to pending proceedings from unrelated 2004 inquiries)
In re Dinubilo, 177 B.R. 932 (E.D. Cal. 1993) (describing procedural protections not afforded under Rule 2004 examinations)
In re International Fibercom, Inc., 283 B.R. 290 (Bankr. D. Ariz. 2002) (application of pending proceeding rule to bar Rule 2004 where discovery could be obtained in other litigation)
Snyder v. Society Bank, 181 B.R. 40 (S.D. Tex. 1994) (using Rule 2004 to further non-bankruptcy litigation is improper)