209 B.R. 678 (Bkrtcy.D.Md. 1997), 96-504, In re Symington

Docket NºBankruptcy No. 96-504-JS.
Citation209 B.R. 678
Party NameIn re J. FIFE SYMINGTON, III, Debtor.
Case DateJune 10, 1997
CourtUnited States Bankruptcy Courts, Fourth Circuit

Page 678

209 B.R. 678 (Bkrtcy.D.Md. 1997)

In re J. FIFE SYMINGTON, III, Debtor.

Bankruptcy No. 96-504-JS.

United States Bankruptcy Court, D. Maryland.

June 10, 1997

Page 679

[Copyrighted Material Omitted]

Page 680

[Copyrighted Material Omitted]

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Robert A. Shull, William Novotny, Mariscal Weeks, McIntyre & Friedlander, P.A., Phoenix, AX, for debtor.

JAMES F. SCHNEIDER, Bankruptcy Judge.

MEMORANDUM OPINION GRANTING MOTIONS OF PHOENIX NEWSPAPERS, INC., AND KTVK-TV TO INTERVENE, TO SUBSTITUTE PERSONAL REPRESENTATIVE, AND TO STRIKE CONSENSUAL PROTECTIVE ORDER

The question presented in this case is whether this Court should have entered a consensual protective order pursuant to Federal Rule of Civil Procedure 26 preserving the confidentiality of private financial documents of the debtor's mother that were subpoenaed pursuant to Federal Rule of Bankruptcy Procedure 2004. Representatives of the news media moved to intervene to dissolve the protective order as an overbroad prior restraint. While this opinion was being written, the debtor's mother died, and the news media filed a motion to substitute her personal representative, which he opposed. To date, no documents have been produced. The parties contend that the controversy is not moot and have requested this Court to issue a decision.

The motion to intervene will be granted because the press has standing to petition for access to materials closed to public view by a protective order. The decedent's personal representative will be substituted in her place so that a party respondent may be subject to this Court's order to turn over the requested documents.

The consensual protective order will be dissolved because it was not entered for good cause shown. In the opinion of this Court,the protective order should not have been entered because the press and the public should have access to the non-privileged financial information of the debtor's mother, alleged to conceal assets of bankruptcy estate of the debtor.

This opinion holds that the press and public are entitled to attend Rule 2004 examinations because such examinations were historically public proceedings and because public access plays significant role in the bankruptcy process. In also holding that:

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the news media has a right to view the fruits of a document production pursuant to Rule 2004, the Court concludes that "the overriding public interest" in learning the facts about criminal misconduct allegedly committed by a debtor while currently serving as the Governor of Arizona, constitutes such "extraordinary circumstances" that outweigh the interests of the debtor and his mother in preserving the confidentiality of her personal financial records.

FINDINGS OF FACT

On September 20, 1995, the debtor, J. Fife Symington, III, filed a voluntary Chapter 7 bankruptcy petition in the U.S. Bankruptcy Court for the District of Arizona (Case No. 95-08397-PHX-GBN). Mr. Symington is the Governor of the State of Arizona. On January 10, 1996, the Bank of Arizona, as custodian of various pension funds, filed a motion in the debtor's bankruptcy case against Martha F. Symington, the debtor's mother, for the production of documents pursuant to Federal Rule of Bankruptcy Procedure 2004. 1 On February 6, 1996, the U.S. Bankruptcy Court for the District of Arizona [George B. Nielsen, Jr., B.J.] entered an order granting the motion. On February 8, 1996, the Bank of Arizona obtained a subpoena from the U.S. Bankruptcy Court for the District of Maryland directing the debtor's mother, Martha F. Symington, a Maryland resident, to produce certain designated categories of documents. The enumerated documents demanded by the subpoena are set forth in Appendix I.

Mrs. Symington advised the Bank that she believed that the documents that were responsive to the subpoena contained certain confidential information regarding her personal financial affairs and the private affairs between herself and the debtor. On May 22, 1996, the Bank of Arizona and Mrs. Symington filed a joint motion to approve a stipulation and protective order [P. 1] in the U.S. Bankruptcy Court for the District of Maryland at Baltimore. The order represented a negotiated agreement between the parties that provided for the confidentiality of Mrs. Symington's private papers while assuring the Bank access to information it needed relative to the debtor's bankruptcy case. The order also provided the opportunity to modify the order if the Bank should later conclude that the protective order was too broad. On May 23, 1996, this Court executed

Page 683

the stipulation and protective order [P. 3], which is set forth in its entirety as Appendix II.

On June 4, 1996, KTVK-TV, NewsChannel 3, a Phoenix, Arizona television station, and Phoenix Newspapers, Inc., the publisher of The Arizona Republic and The Phoenix Gazette, filed the instant motion to intervene to overturn the stipulated protective order [P. 5]. Mrs. Symington filed an opposition to the motion, and a hearing was held on July 8, 1996. Meanwhile, on June 13, 1996, a Federal grand jury in Phoenix indicted the debtor, J. Fife Symington, III, on charges of extortion, making false statements and bankruptcy fraud, while holding office as Governor of Arizona. On July 12, 1996, Wells Fargo Bank, successor custodian to the Bank of Arizona, filed a complaint against the debtor in the U.S. Bankruptcy Court for the District of Arizona to determine the dischargeability of a debt based upon the debtor's conversion of certain pension funds.

During the preparation of this opinion, the Court was informed that Martha F. Symington died on November 26, 1996. To date, there has been no production of documents pursuant to the Rule 2004 order or the protective order at issue. On April 29, 1997, Phoenix Newspaper, Inc., and KTVK-TV NewsChannel 3 filed a motion [P. 13] to substitute Thomas D. Washburne, Mrs. Symington's personal representative, in her place. Mr. Washburne objected to the substitution, arguing that "the subject dispute between Movant and Respondent does not constitute a contested matter for purposes of Rule 9014 ... because this dispute exists solely between two non-debtor-non-creditor parties, not involving the administration of the bankruptcy estate." ¶ 6 Answer of Personal Representative [P. 14].

CONCLUSIONS OF LAW

HISTORY AND NATURE OF BANKRUPTCY EXAMINATIONS

"The sweeping general examination" of debtors and others to recover assets and uncover fraudulent conduct is a traditional feature of bankruptcy jurisprudence that is traceable to the first bankruptcy statute enacted by the English Parliament more than 450 years ago. 2 5Remington on Bankruptcy § 1979 (1953 ed.). The current provision that authorizes a general examination bankruptcy is set forth in Federal Rule of Bankruptcy Procedure 2004, pursuant to which the Bank of Arizona sought the production of documents from Mrs. Symington. The rule provides in pertinent part as follows:

(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 Documentary Evidence. The attendance of an entity for examination and the production of documentary evidence may be compelled in the manner provided in Rule 9016 for the attendance of witnesses at a hearing or trial.

Fed. R. Bankr.P. 2004(a), (b) and (c).

PURPOSE AND SCOPE OF EXAMINATIONS PURSUANT TO FEDERAL RULE BANKRUPTCY PROCEDURE 2004

Rule 2004 has been termed "the basic discovery device used bankruptcy cases," permitting the examination of any party without the requirement of a pending adversary proceeding or contested matter. In re French, 145 B.R. 991, 992 (Bankr.D.S.D.1992). Rule 2004 necessarily permits a broad investigation

Page 684

into the financial affairs of debtors to assure the proper administration of bankruptcy estates. In re GHR Energy Corp., 33 B.R. 451 (Bankr.D.Mass.1983); Bank One, Columbus, N.A. v. Hammond (In re Hammond), 140 B.R. 197 (S.D.Ohio 1992). Its obvious purposes are the discovery of assets of the estate and the exposure of fraudulent conduct. In re Foerst; 93 F. 190 (S.D.N.Y.1899).

BANKRUPTCY EXAMINATIONS PREDATED DISCOVERY UNDER THE FEDERAL RULES

The Federal Rules of Civil Procedure became effective on September 16, 1938. The rules revolutionized Federal civil trial practice by making pretrial discovery an essential part of litigation in the U.S. district courts. 3

DIFFERENCES BETWEEN RULE 2004 EXAMINATIONS AND PRETRIAL DISCOVERY UNDER THE FEDERAL RULES OF CIVIL PROCEDURE

A Rule 2004 examination is a bankruptcy proceeding, undertaken upon the express authorization of a bankruptcy court. It represents a threshold inquiry into the assets and conduct of debtors bankruptcy. As an investigatory tool, its nature is inquisitory rather than accusatory, although information discovered by its employment may presage litigation.

The most significant difference is timing. A Rule 2004 examination is undertaken prelitigation, that is, before the filing of a lawsuit or motion, whereas discovery in the context of the Federal Rules of Civil Procedure is pretrial, that is, after the filing of a complaint or motion, but before a hearing on dispositive motions or trial on the merits. A Rule 2004 examination may even be conducted in the absence of a pending adversary proceeding or contested matter, although it obviously requires the...

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35 practice notes
  • In re Art & Architecture Books of 21st Century, 120619 CACBC, 2:13-bk-14135-RK
    • United States
    • Federal Cases United States Bankruptcy Courts Ninth Circuit
    • December 6, 2019
    ...reasonable" and "may not be used to annoy, embarrass or oppress the party being examined." In re Symington, 209 B.R. 678, 685 (Bankr. D.Md.1997) (citations "In evaluating a request to conduct a Rule 2004 examination, the court must 'balance the c......
  • In re Comdisco, Inc., 081406 ILNDC, 06 C 1535
    • United States
    • Federal Cases United States District Courts 7th Circuit United States District Court (Northern District of Illinois)
    • August 14, 2006
    ...Inc. , 203 B.R. 24, 28 (Bankr. N.D.N.Y. 1996). Rule 2004 examinations focus on the debtor's financial affairs. See In re Symington , 209 B.R. 678, 684 (Bankr. D. Md. 1997) (Rule 2004 examination "represents a threshold inquiry into the assets and conduct of debtors bankruptcy."). ......
  • 459 B.R. 850 (Bkrtcy.M.D.Fla. 2011), 3:10-bk-10758-PMG, In re Marathe
    • United States
    • Federal Cases United States Bankruptcy Courts Eleventh Circuit
    • November 10, 2011
    ...Metiom, Inc., 318 B.R. 263, 268 (S.D.N.Y.2004) (quoting In re Wilcher, 56 B.R. 428, 434 (Bankr.N.D.Ill.1985)). See also In re Symington, 209 B.R. 678, 689 (Bankr.D.Md.1997) (" Rule 2004 motions are generally granted ex parte, as was the case here, without the advance notice required to......
  • 392 B.R. 860 (W.D.Wash. 2007), 05-30432, In re Thow
    • United States
    • Federal Cases United States District Courts 9th Circuit United States District Court (Western District of Washington)
    • December 14, 2007
    ...otherwise a party, including a bankruptcy case, to move for access to court records or to dissolve a protective order. In re Symington, 209 B.R. 678, 690 (Bankr.D.Md.1997); In re Apex Oil Co., 101 B.R. 92, 95-96 (Bankr.E.D.Mo.1989); In re Ionosphere Clubs, Inc., 156 B.R. 414, 431 n. 6 (S.D.......
  • Request a trial to view additional results
35 cases
  • In re Comdisco, Inc., 081406 ILNDC, 06 C 1535
    • United States
    • Federal Cases United States District Courts 7th Circuit United States District Court (Northern District of Illinois)
    • August 14, 2006
    ...Inc. , 203 B.R. 24, 28 (Bankr. N.D.N.Y. 1996). Rule 2004 examinations focus on the debtor's financial affairs. See In re Symington , 209 B.R. 678, 684 (Bankr. D. Md. 1997) (Rule 2004 examination "represents a threshold inquiry into the assets and conduct of debtors bankruptcy."). ......
  • In re Art & Architecture Books of 21st Century, 120619 CACBC, 2:13-bk-14135-RK
    • United States
    • Federal Cases United States Bankruptcy Courts Ninth Circuit
    • December 6, 2019
    ...reasonable" and "may not be used to annoy, embarrass or oppress the party being examined." In re Symington, 209 B.R. 678, 685 (Bankr. D.Md.1997) (citations "In evaluating a request to conduct a Rule 2004 examination, the court must 'balance the c......
  • 459 B.R. 850 (Bkrtcy.M.D.Fla. 2011), 3:10-bk-10758-PMG, In re Marathe
    • United States
    • Federal Cases United States Bankruptcy Courts Eleventh Circuit
    • November 10, 2011
    ...Metiom, Inc., 318 B.R. 263, 268 (S.D.N.Y.2004) (quoting In re Wilcher, 56 B.R. 428, 434 (Bankr.N.D.Ill.1985)). See also In re Symington, 209 B.R. 678, 689 (Bankr.D.Md.1997) (" Rule 2004 motions are generally granted ex parte, as was the case here, without the advance notice required to......
  • 392 B.R. 860 (W.D.Wash. 2007), 05-30432, In re Thow
    • United States
    • Federal Cases United States District Courts 9th Circuit United States District Court (Western District of Washington)
    • December 14, 2007
    ...otherwise a party, including a bankruptcy case, to move for access to court records or to dissolve a protective order. In re Symington, 209 B.R. 678, 690 (Bankr.D.Md.1997); In re Apex Oil Co., 101 B.R. 92, 95-96 (Bankr.E.D.Mo.1989); In re Ionosphere Clubs, Inc., 156 B.R. 414, 431 n. 6 (S.D.......
  • Request a trial to view additional results

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