229 F. Supp. 3d 254
S.D.N.Y.2017Background
- Trustee Wayne Sigmon sued for a constructive fraudulent transfer arising from an alleged conveyance of the debtor’s LLC membership interest and/or right to receive distributions; the contract claim was dismissed leaving only the fraudulent transfer claim.
- Defendants sought expedited, limited discovery solely on whether any property was transferred to them (the “Property Transfer Issue”), arguing that dispositive summary judgment might follow if no transfer occurred.
- On October 27, 2016 the magistrate judge granted defendants’ request and stayed all other discovery, finding the Property Transfer Issue likely dispositive; the court offered limited reimbursement to mitigate potential prejudice to Sigmon.
- Sigmon moved for reconsideration, asking for discovery instead (or in addition) on the amount of debt the debtor owed the defendants (the “Debt Issue”), arguing significant debt might lead him to dismiss the suit.
- The court denied reconsideration, holding Sigmon failed to show the court overlooked controlling matters or that extraordinary circumstances justified relief; the court also found the Debt Issue request speculative and noted defendants could voluntarily provide nonburdensome debt information.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether discovery should be limited to the Property Transfer Issue | Sigmon argued discovery on the Debt Issue (or all issues) is needed because large debt might induce dismissal | Defendants argued limited discovery on the Property Transfer Issue could quickly resolve the case and is appropriate | Court upheld limitation to the Property Transfer Issue; denied reconsideration |
| Whether the court overlooked plaintiff’s prior April 29 letter requesting Debt Issue discovery | Sigmon said the April 29 letter sought debt discovery and was overlooked | Defendants pointed out the letter had been terminated when a stay was ordered and was not pending | Court found the letter was not pending at the time and not overlooked |
| Whether new or previously unargued facts warrant reconsideration | Sigmon advanced arguments about debt and prior discovery failures in bankruptcy court | Defendants opposed reopening discovery or reconsideration absent controlling overlooked law/evidence | Court held new arguments were speculative and insufficient for reconsideration |
| Whether limited disclosure of debt should be compelled | Sigmon sought debt discovery to evaluate settlement/dismissal | Defendants had incentive to provide non-burdensome debt info voluntarily | Court encouraged counsel to meet and confer; refused to order additional discovery now |
Key Cases Cited
- Fireman’s Fund Ins. Co. v. Great Am. Ins. Co. of N.Y., 10 F. Supp. 3d 460 (S.D.N.Y.) (reconsideration standards and precedent)
- Arnold v. Geary, 981 F. Supp. 2d 266 (S.D.N.Y.) (reconsideration/59(e) standards)
- Shrader v. CSX Transp., Inc., 70 F.3d 255 (2d Cir.) (abuse of discretion standard for reconsideration)
- Virgin Atlantic Airways, Ltd. v. National Mediation Board, 956 F.2d 1245 (2d Cir.) (grounds justifying reconsideration)
- Merced Irrigation Dist. v. Barclays Bank PLC, 178 F. Supp. 3d 181 (S.D.N.Y.) (narrow application of reconsideration rule to preserve finality)