In Re Marathe
ORDER ON MOTION FOR RECONSIDERATION OF COURT’S ORDER GRANTING TRUSTEE’S MOTION FOR A RULE 2004 EXAMINATION AND MOTION FOR A PROTECTIVE ORDER FOR KAVERI MARATHE
THIS CASE came before the Court for hearing to consider Kaveri Marathe’s Motion for Reconsideration of Court’s Order Granting Trustee’s Motion for a Rule 2004 Examination and Motion for a Protective Order.
On July 8, 2011, the Court entered an Order authorizing the Chapter 7 Trustee to conduct a 2004 examination of Kaveri Marathe (Kaveri) pursuant to the Federal Rules of Bankruptcy Procedure. In her Motion for Reconsideration of the Order, Kaveri primarily asserts that the proposed examination is impermissible because it violates her rights under the due process clause of the United States Constitution.
The Court finds that the Order authorizing the Trustee to conduct the examination was appropriate, and that the Trustee should be permitted to examine Kaveri in accordance with Rule 2004 and
Background
The Debtors, Shriram S. Marathe and Karen Rav-Marathe, filed a petition under Chapter 7 of the Bankruptcy Code on December 15, 2010. The petition was filed in the Bankruptcy Court for the Middle District of Florida.
On their schedule of assets filed with the petition, the Debtors listed the following interest in real property:
H & W hold a interest with daughter in cooperative apartment located at 26 Cornelia St., New York, N.Y. (JTWRS)
(the Apartment). The Debtors indicated in the schedules that the Apartment was not encumbered by any liens, and that the current value of their interest in the Apartment was unknown. The Debtors did not claim the Apartment as exempt on their schedule of exemptions.
On June 30, 2011, the Chapter 7 Trustee filed a Motion to conduct the examination
On July 8, 2011, the Court entered an Order granting the Trustee’s Motion for
On July 26, 2011, Kaveri filed the Motion for Reconsideration and for a Protective Order that is currently under consideration. (Doc. 86). In the Motion, Kaveri acknowledges that she has an ownership interest in the Apartment, and asserts that she “lives, resides and works in New York, is a nondebtor in the instant bankruptcy proceeding, and does not have the ‘minimum contacts’ with either the Federal Judicial District for the Middle District of Florida or with the State of Florida necessary, pursuant to the requirements of the Due Process Clause, for this Court to subject her to a
In response to Kaveri’s Motion for Reconsideration, the Trustee contends that the Debtors’ interest in the Apartment is an asset of the bankruptcy estate, and that the Trustee is entitled to examine Kaveri in Kaveri’s capacity as a co-owner of the Apartment. According to the Trustee, the examination had been scheduled for August 17, 2011, in New York City. The subpoena for the examination had been issued by an attorney in New York City who was employed as special counsel for the Trustee. (Doc. 88).
Discussion
The Court' finds that the Order authorizing the Trustee to conduct Kaveri’s examination was properly entered, and that the Trustee is entitled to examine Kaveri pursuant to
I. The Debtors’ interest in the Apartment is property of the bankruptcy estate.
The filing of a voluntary bankruptcy petition creates a bankruptcy estate consisting of all of the debtor’s property as of the commencement of the case. Section 541(a) of the Bankruptcy Code provides in part:
11 U.S.C. § 541 . Property of the estate
(a) The commencement of a case under section 301, 302, or 303 of this title creates an estate. Such estate is comprised of all the following property, wherever located and by whomever held:
(1) Except as provided in subsections (b) and (c)(2) of this section, all legal and equitable interests of the debtor in property as of the commencement of the case.
In this case, the Debtors listed an interest in the Apartment on their bankruptcy schedules, and did not claim the interest as exempt. The Debtors’ interest in the Apartment is property of the estate, even though the bankruptcy petition was filed in Florida, and the Apartment is located in New York.
II. The Bankruptcy Court has jurisdiction of the Apartment.
The jurisdiction of Bankruptcy Courts is set forth at
28 USC § 1334 . Bankruptcy cases and proceedings
(e) The district court in which a case under title 11 is commenced or is pending shall have exclusive jurisdiction—
(1) Of all the property, wherever located, of the debtor as of the commencement of such case, and of property of the estate; ...
By providing for bankruptcy court jurisdiction over all property of the estate “wherever located,” the statute is intended to have “global reach.”
In re Globo Comunicacoes e Participacoes S.A.,
As shown above, the Debtors’ interest in the Apartment is property of their bankruptcy estate. Consequently, the Bankruptcy Court has jurisdiction over their interest in the Apartment pursuant to
III. Kaveri could be served with process in an adversary proceeding related to the Apartment.
Adversary proceedings in bankruptcy cases are governed by Part VII of the Federal Rules of Bankruptcy Procedure. Rule 7004 of the Rules relates to service of the summons and complaint in an adversary proceeding. Rule 7004 provides in part:
Rule 7004. Process; Service of Summons, Complaint
(d) NATIONWIDE SERVICE OF PROCESS. The summons and complaint and all other process except a subpoena may be served anywhere in the United States.
(f) PERSONAL JURISDICTION. If the exercise of jurisdiction is consistent with the Constitution and laws of the United States, serving a summons or filing a waiver of service in accordance with this rule or the subdivisions of Rule 4 F.R.Civ.P. made applicable by these rules is effective to establish personal jurisdiction over the person of any defendant with respect to a case under the Code or a civil proceeding arising under the Code, or arising in or related to a case under the Code.
In this case, for example, Kaveri could be served with a summons and complaint “anywhere in the United States.” In other words, she could be served with a complaint in an adversary proceeding in New York, even though her parents’ bankruptcy case was filed in Florida.
Additionally, an adversary proceeding against Kaveri would arise under or relate to her parents’ bankruptcy case, to the extent that the proceeding involved a determination of the relative rights of Kaveri and the Debtors in the Apartment. The Debtors’ interest in the Apartment is property of the estate, and the outcome of the proceeding could conceivably have an effect on the estate being administered in the bankruptcy case.
In re Texas Reds, Inc.,
Under
Because the “applicable rules of procedure permit nationwide service of process, many courts addressing the question of constitutional due process conclude that a minimum contacts inquiry with the state where the bankruptcy court is located is unnecessary; rather, the nationwide service of process authorized by
IV. A
In this case, of course, Kaveri is not a named defendant in any adversary proceeding. Instead, the Trustee filed a Motion to conduct a 2004 examination of Ka-veri, and the Court granted the Motion.
The purpose of
Rule 2004 . Examination
(a) Examination on motion
On motion of any party in interest, the court may order the examination of any entity.
(b) Scope of examination
The examination of an entity under this rule or of the debtor under § 343 of the Code may relate only to the acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor’s estate, or to the debtor’s right to a discharge....
(c) Compelling attendance and production of documents
The attendance of an entity for examination and for the production of documents, whether the examination is to be conducted within or without the district in which the case is pending, may be compelled as provided inRule 9016 for the attendance of a witness at a hearing or trial.
“The broad scope of a 2004 examination arises out of its purpose. Particularly in chapter 7 cases, such as the ones before the court, it is an investigatory device trustees can use in order to quickly gather the information they need in order to do their job properly.”
In re J & R Trucking, Inc.,
V. Attendance at a 2004 examination is compelled by a subpoena under Rule 45.
According to subsection (c) of
Rule 45 . Subpoena
(a) In General.
(1) Form and Contents.
(A) Requirements — In General. Every subpoena must:
(iii) command each person to whom it is directed to do the following at a specified time and place: attend and testify; produce designated documents, electronically stored information, or tangible things in that person’s possession, custody, or control; or permit the inspection of premises.
(2) Issued from Which Court. A subpoena must issue as follows:
(B) for attendance at a deposition, from the court for the district where the deposition is to be taken;
(b) Service.
(2) Service in the United States. Subject toRule 45(c)(3)(A)(ii) , a subpoena may be served at any place:
(A) within the district of the issuing court;
(c) Protecting a Person Subject to a Subpoena.
(3)Quashing or Modifying a Subpoena.
(A) When Required. On timely motion, the issuing court must quash or modify a subpoena that:
(ii) requires a person who is neither a party nor a party’s officer to travel more than 100 miles from where that person resides, is employed, or regularly transacts business in person — except that, subject toRule 45(c)(3)(B)(iii) , the person may be commanded to attend a trial by traveling from any such place within the state where the trial is held.
F.R.Civ.P. 45. The “primary and traditional function” of a subpoena is to “compel the attendance of witnesses and the production of documents to formal court proceedings during the pretrial stage of the civil case or at trial,” for the intended purpose of gathering all of the information necessary to determine the issues before the Court.
United States v. Santiago-Lugo,
A subpoena may be issued under
Rule 45 therefore implies that one wishing to take a deposition need only comply with the appropriate rules for noticing such depositions in order to obtain a subpoena from any of the districts within the country. This implication has been reduced to a general rule. “The scheme ofRule 45 therefore permits a litigant to obtain a deposition subpoena in any district court of the United States regardless of where the principal litigation is pending, a discovery opportunity well established and often alluded to in the opinions of the Federal Court.”In re Guthrie, 733 F.2d 634 (4th Cir.1984); see also, Ariel v. Jones,693 F.2d 1058 , 1060 n. 2 (11th Cir.1982).
In re D.T. Industries, Inc.,
VI. Kaveri may be compelled to attend the 2004 examination.
In this case, the Debtors disclosed on their schedules that they owned a one-half interest in the Apartment as of the commencement of the bankruptcy case. According to the Debtors, the Apartment was not encumbered by any liens, was of unknown value, and was not claimed as exempt. The Debtors’ interest in the Apartment is property of the bankruptcy estate under
In the Motion for 2004 examination, the Trustee asserted that New York’s public records reflect that the Apartment is jointly owned by the Debtors and Kaveri, and Kaveri concedes that she has an ownership interest in the Apartment. (Doc. 76, ¶ 7; Doc. 86, ¶ 1).
The Trustee therefore requested permission to conduct a 2004 examination of Kaveri, so that she could assess the extent and value of the estate’s interest in the Apartment. The Trustee’s duty to evaluate the estate’s interest in the Apartment is a valid purpose for the examination, as supported by the schedules and record, and Kaveri has not shown that the examination was intended to abuse or harass her. See
In re Youk-See,
Kaveri asserts, however, that she “lives, resides and works in New York, is a non-debtor in the instant bankruptcy proceeding, and does not have the ‘minimum contacts’ with either the Federal Judicial District for the Middle District of Florida or with the State of Florida necessary, pursuant to the requirements of the Due Process Clause, for this Court to subject her to a
The Court finds that Kaveri may be compelled to attend the 2004 examination in New York City. The Trustee had scheduled the 2004 examination for August 17, 2011, in New York City, and the subpoena to compel Kaveri’s attendance at the examination was issued by an attorney in New York City who was employed as special counsel for the Trustee. (Doc. 88).
First, the Court finds that the Trustee may conduct the examination in New York, even though Kaveri is not a debtor in any bankruptcy proceeding.
Additionally, the Court finds that requiring Kaveri to attend the examination will not violate her due process rights under the United States Constitution, because Kaveri has knowledge of property of the bankruptcy estate, and because attending the examination in her own district does not amount to an undue burden or a “constitutionally significant inconvenience.”
In re Texas Reds, Inc.,
A. The Trustee may examine nondebtors.
The Court must begin by reiterating a dispositive point: it has abundant legal authority to order the retrieval of information concerning a debtor and his estate from persons and entities who are not parties in a bankruptcy case, i.e., persons or entities who have neither filed a voluntary petition under11 U.S.C. § 301 nor filed a proof of claim or interest under § 501. See11 U.S.C. § 542(e) ;Fed. R. Bankr.Pro.2004(a) -(c) & 9016;Fed. R.Civ.P. 45(a) -(b).
In re Teknek, LLC,
The Trustee in this case may conduct a
B. Kaveri has knowledge of property of the estate.
It is clear that
Kaveri’s constitutional objections to the examination should be overruled. First, as shown above,
Second, the due process clause of the United States Constitution does not require a non-party witness to have “minimum contacts” with the district in which a federal action is pending. Instead, where a non-party witness has been subpoenaed for a deposition in a federal case, the appropriate inquiry is whether the witness has “a nexus to the activities being investigated in the underlying legal proceeding.”
In re Teknek, LLC,
In this case, Kaveri is the Debtors’ daughter. She co-purchased and is a co-owner of the Apartment with the Debtors. The Debtors’ interest in the Apartment is property of the estate, and Kaveri is in possession of the Apartment.
Kaveri’s contacts with the Debtors and with property of the estate provide a sufficient nexus with the bankruptcy case to satisfy the due process clause of the Constitution. Compelling Kaveri to attend an examination regarding her interest in the Apartment does not violate “traditional notions of fair play and substantial justice.”
In re DBSI, Inc.,
C. Kaveri’s examination in New York City is not an unconstitutional burden.
Finally, requiring Kaveri to attend an examination in New York City does not represent a “constitutionally significant inconvenience.”
In re Texas Reds, Inc.,
A subpoena to compel a person to attend a 2004 examination is issued and served in accordance with
Conclusion
On July 8, 2011, the Court entered an Order authorizing the Chapter 7 Trustee to conduct a 2004 examination of Kaveri Marathe. The Court finds that the Order was properly entered, and that the Trustee should be permitted to examine Kaveri Marathe pursuant to
Accordingly:
IT IS ORDERED that Kaveri Mar-athe’s Motion for Reconsideration of Court’s Order Granting Trustee’s Motion for a