557 B.R. 240
Bankr. S.D. Florida2016Background
- This is a Chapter 15 ancillary proceeding in the S.D. Fla. Bankruptcy Court assisting insolvency proceedings in Sao Paulo, Brazil concerning Transbrasil S.A., whose estate has an estimated shortfall of about $292 million.
- The Fontana Estate is Transbrasil’s majority shareholder and filed a motion to dismiss, arguing Transbrasil lacks property in the U.S. and thus is not a "debtor" under 11 U.S.C. § 109(a).
- The Fontana Estate served multiple Rule 2004 subpoenas seeking documents and examinations from trustees, third parties (including Bank of America), and affiliates; trustees sought protective orders limiting discovery.
- The Court previously entered a First Protective Order allowing Fontana Estate limited documentary discovery only as to the motion to dismiss, and a Second Protective Order refusing the trustees’ response to a prior Third Rule 2004 Notice on grounds Fontana lacks a pecuniary interest and the requests were not relevant to the motion to dismiss.
- Fontana sought Bank of America records (a subpoena duplicative of one earlier issued by the trustees) purportedly to investigate and rebut trustees’ unasserted allegations against affiliates; trustees moved for protective order applying the Second Protective Order logic to that subpoena.
- The Court granted the trustees’ motion: Bank of America need not respond, and Fontana Estate is prohibited from issuing further Rule 2004 subpoenas without leave of court.
Issues
| Issue | Plaintiff's Argument (Fontana Estate) | Defendant's Argument (Trustees) | Held |
|---|---|---|---|
| Standing/party-in-interest to take Rule 2004 discovery | As majority shareholder, has standing under Brazilian law to assert and defend Transbrasil’s rights and thus to conduct discovery | Fontana lacks pecuniary interest (no expected distribution) and thus is not a Rule 2004 "party in interest" | Held: Fontana is not a party in interest for Rule 2004; U.S. procedural law controls and requires a pecuniary interest |
| Relevance of requested discovery to pending motion to dismiss | Subpoenaed discovery will permit Fontana to disprove trustees’ allegations and defend the motion to dismiss | Discovery is not relevant to the motion to dismiss and duplicates prior requests already protected | Held: Requests not shown to be relevant to motion to dismiss; protection appropriate |
| Effect of Brazilian law or foreign rights on standing in U.S. bankruptcy court | Brazilian law allegedly recognizes shareholder investigative rights; thus Fontana may participate | U.S. bankruptcy procedure governs; even if Brazilian law recognized it, that does not create Rule 2004 standing | Held: U.S. law/procedure controls; Brazilian law does not change Rule 2004 party-in-interest analysis |
| Waiver / prior non-objection to other subpoenas | Trustees previously did not object to some subpoenas so they waived right to object now | Trustees retain right to object; waiver requires voluntary, intentional relinquishment of known right | Held: No waiver; trustees did not voluntarily relinquish objection rights |
Key Cases Cited
- In re Interpictures, 86 B.R. 24 (Bankr. E.D.N.Y. 1988) (defines "party in interest" for Rule 2004 as those with direct pecuniary interest)
- Glass v. United of Omaha Life Ins. Co., 33 F.3d 1341 (11th Cir. 1994) (explains standard for waiver as intentional relinquishment of a known right)
- Pitts v. American Security Life Ins. Co., 931 F.2d 351 (5th Cir. 1991) (court discussion cited for waiver principles)