In Re Youk-See
450 B.R. 312
Bankr. D. Mass.2011Background
- Debtor Kelvin Youk-See filed a voluntary Chapter 13 petition and schedules identifying BAC as undersecured first mortgagee on 395 Washington Street, Somerville, MA (claim around $342,804 secured, $31,944 unsecured).
- Debtor proposed a Chapter 13 plan including arrears payment to BAC and a later Motion to Determine Value undersecured status and reduce BAC’s principal to $250,000.
- Court sustained BAC’s Objection to Confirmation on 6/16/2010 due to lack of response, requiring further amended plan.
- Loan modification was approved by the Court on 10/7/2010; Debtor later sought a signed copy and BAC allegedly continued sending pre-modification statements.
- Debtor’s motions and BAC’s responses led to the UST’s February 10, 2011 Motion for Entry of Order Authorizing Rule 2004 Examination and production of documents; UST sought to examine BAC regarding loan modification procedures and related practices.
- Court granted the UST’s motion but limited subpoenas to avoid requiring witnesses to travel more than 100 miles from their employment location.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the UST has standing to pursue Rule 2004 discovery. | UST has standing under 11 U.S.C. § 307 and 28 U.S.C. § 586/a to oversee bankruptcy administration. | BAC contends UST lacks party-in-interest status and authority to conduct 2004 examinations. | UST has standing and authority to conduct Rule 2004 examination, subject to travel-distance limitation. |
| Whether good cause supports the Rule 2004 examination and document production. | Discovery is tailored to BAC’s loan modification procedures affecting the Debtor and the estate; protects estate integrity. | Requests are overly broad, intrusive, and unrelated to the Debtor’s loan modification; burdens BAC. | Good cause established under a sliding-scale approach; discovery focused on relations with the Debtor and the Property is permissible. |
| Whether the scope of examination is unduly intrusive or abusive. | Scope is limited to procedures and communications with Debtor and Debtor’s counsel. | Examination on general procedures is intrusive and broad; risks abuse. | Scope deemed acceptable; however, quashed to limit witnesses required to travel over 100 miles from Boston. |
| Whether the subpoena must be quashed for travel-distance under Rule 45/9016. | N/A (UST’s burden to justify travel) | Witness travel >100 miles burden and Rule 9016 restrictions apply. | Quashed to exclude any Boston-area witnesses who would travel more than 100 miles from their place of employment. |
Key Cases Cited
- In re GHR Energy Corp., 33 B.R. 451 (Bankr. D. Mass. 1983) (scope of Rule 2004 examination is broad; fishing expedition invites inquiry)
- In re N. Plaza LLC, 395 B.R. 113 (S.D. Cal. 2008) (broad scope of Rule 2004; limits when abusive)
- In re Texaco Inc., 79 B.R. 551 (Bankr. S.D.N.Y. 1987) (Rule 2004 affords wide discovery in debtor’s financial affairs)
- In re Countrywide Home Loans, Inc., 384 B.R. 373 (Bankr. W.D. Pa. 2008) (sliding-scale good-cause test for 2004 examinations; intrusiveness matters)
- In re Wilson, 413 B.R. 330 (Bankr. E.D. La. 2009) (UST standing to seek 2004 examinations)
- In re A-1 Trash Pickup, Inc., 802 F.2d 775 (4th Cir. 1986) (UST standing to oversee administration of bankruptcy proceedings)
- U.S. Trustee v. Price Waterhouse, 19 F.3d 138 (3d Cir. 1994) (UST standing to be heard as watchdog in bankruptcy)