585 B.R. 587
9th Cir. BAP2018Background
- Michael R. Mastro (debtor) fled to France with assets and did not cooperate with the Chapter 7 trustee; extradition efforts failed.
- Trustee filed a Rule 2004 motion (and invoked 11 U.S.C. §§ 521(a)(3),(4) and § 704) seeking an order compelling Mastro to execute a “consent directive” to obtain disclosures from foreign financial institutions.
- The bankruptcy court denied the motion, reasoning it lacked authority to compel execution of a consent directive, and also denied reconsideration.
- Trustee appealed the denial; this Panel treated the Rule 2004 denial as an appealable interlocutory order and granted leave to appeal.
- The Panel concluded the bankruptcy court erred as a matter of law in ruling it lacked authority to compel a debtor to sign a consent directive, but remanded for the court to exercise its discretion on whether and how to issue such an order.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a bankruptcy court may compel a debtor to sign a consent directive | Trustee: § 105(a) and Rule 2004 (with debtor duties under §§ 521 and 704) authorize compelling execution of a consent directive to investigate and collect estate assets | Mastro: Compelling signature implicates the Fifth Amendment and the court lacks authority under Rule 2004 alone | Court: Bankruptcy courts have authority—§ 105(a) in conjunction with Code duties (§§ 521, 704) and Rule 2004 permits compelling a debtor to sign a consent directive; reversed and remanded for discretionary consideration |
| Whether a consent directive violates the Fifth Amendment | Trustee: Consent directive is non‑testimonial under Doe and thus not protected | Mastro: Recent act‑of‑production developments undermine Doe and make compulsion testimonial | Court: Bound by Doe v. United States; consent directives are non‑testimonial and do not violate the Fifth Amendment |
| Proper statutory/procedural basis for a consent directive | Trustee: Relied on Rule 2004, § 521, § 704, and in reconsideration § 105 | Mastro: Argued Rule 2004/civil discovery rules do not authorize such an order | Court: § 105(a) plus Rule 2004 and the Code’s disclosure/cooperation duties furnish a proper basis; Civil Rule 26 is not the primary basis |
| Whether the bankruptcy court abused discretion in denying reconsideration | Trustee: Bankruptcy court misapplied Civil Rule 59(e) and treated an interlocutory order as final | Mastro: Court applied appropriate rule | Court: Bankruptcy court erred in denying reconsideration by applying Rule 59(e) to an interlocutory Rule 2004 order; remanded |
Key Cases Cited
- Doe v. United States, 487 U.S. 201 (1988) (consent directives are non‑testimonial under the Fifth Amendment)
- United States v. Ghidoni, 732 F.2d 814 (11th Cir. 1984) (district court compelled signature on consent directive; Fifth Amendment analysis)
- In re Grand Jury Proceedings (Shams), 873 F.2d 238 (9th Cir. 1989) (recalcitrant witness statute supports court authority to enforce consent directives)
- Hong Kong & Shanghai Banking Corp. v. Simon (In re Simon), 153 F.3d 991 (9th Cir. 1998) (foreign bank accounts are property of the estate)
- United States v. Kao, 81 F.3d 114 (9th Cir. 1996) (limits on IRS use of consent directives to avoid statutory protections for domestic third‑party record summons)
- Law v. Siegel, 134 S. Ct. 1188 (2014) (§ 105 cannot be used to contravene specific Code provisions)