In re GYPC, Inc.

Judge Humphrey

Chapter 7 Decision Granting Trustee's Motions for Rule 2004 Examinations of Brady Ware & Schoenfeld, Inc., CliftonLarsonAllen LLP, and Restructuring Advisors, LLC, with Conditions (docs. 294, 295, 310)

This contested matter is before the court on: a) the Motion for Rule 2004 Examination and Document Production of Brady Ware & Schoenfeld, Inc. (doc. 294), Motion for Rule 2004 Examination and Document Production of CliftonLarsonAllen, LLP (doc. 295), and Motion for Rule 2004 Examination and Document Production of Restructuring Advisors, LLC (doc. 310), all filed by the Trustee, Donald F. Harker, III (collectively, the "2004 Examination Motions"); b) the Omnibus Objection to the 2004 Examination Motions filed by Interested Parties Christopher F. Cummings and Eric Webb (doc. 313); c) the Reply to Objection filed by Interested Parties Christopher F. Cummings and Eric Webb (doc. 315); and d) the Sur-reply in Support of Christopher F. Cummings and Eric Webb's Omnibus Objection to Chapter 7 Trustee's Motions for Rule 2004 Examinations (doc. 319).

I. Procedural Background

On March 30, 2017 this case commenced when the debtor, GYPC, Inc. ("GYPC") filed a voluntary Chapter 11 petition. Doc. 1. It was filed by GYPC's prepetition counsel, Porter Wright Morris & Arthur LLP, with the petition signed by Christopher F. Cummings ("Cummings") as Chairman and CEO. Porter Wright sought to be appointed as counsel to the debtor in possession (the "DIP"), but that application was denied based upon the objection of the United States Trustee. Docs. 25 and 53. On October 10, 2017 the court granted an application retaining lawyers from the Law Offices of Ira H. Thomsen as counsel to the DIP. Docs. 69 and 71. At all relevant times, including at the time the petition was filed and during GYPC's operation as the DIP, the principals of GYPC were Cummings and Eric Webb ("Webb"). Cummings held a 91.4% equity interest. Webb was GYPC's President and he held an 8.06% equity interest. Statement of Financial Affairs, Doc. 19. GYPC operated as a Chapter 11 DIP until August 16, 2019 when the case was converted to Chapter 7. Doc. 219. On August 20, 2019 Donald F. Harker, III was appointed as the Chapter 7 Trustee (the "Trustee").

While the case was pending in Chapter 11, the DIP employed both CliftonLarsonAllen, LLP ("CliftonLarson") and Brady Ware & Schoenfeld, Inc. ("Brady Ware") as accountants for the bankruptcy estate. Docs. 58, 64, 98, 107, 132, and 135. Restructuring Advisors, LLC ("Restructuring Advisors") provided prepetition services to GYPC. See Statement of Financial Affairs, doc. 19, ¶11.1. CliftonLarson, Brady Ware, and Restructuring Advisors (collectively, the "Examinees").

One of the primary bases which precipitated the filing of the United States Trustee's Motion to Convert and the conversion of the case from Chapter 11 to Chapter 7 related to the filing of adversary proceedings by Patricia Friesinger and the Coolidge Wall law firm, as Special Counsel to the DIP ("Special Counsel"), against Cummings (Adv. Pro. 19-3046) and Webb (Adv. Pro. 19-3047) (the "Adversary Proceedings") and a dispute as to whether Special Counsel was authorized to file the Adversary Proceedings. See Motion of the United States Trustee to Convert Chapter 11 Bankruptcy Case to Chapter 7 (doc. 210). Cummings and Webb filed motions to dismiss the Adversary Proceedings on the basis, among others, that the proceedings were not authorized to have been filed by the DIP. The original motions to dismiss were denied, but the court required amended complaints from the Trustee. As of the time of the entry of this order, motions to dismiss the Trustee's amended complaints were pending in the Adversary Proceedings.

The amended complaints filed against Cummings and Webb in the Adversary Proceedings seek recovery from them for alleged preferential transfers and fraudulent conveyances arising out of payments made by Mindstream Media LLC, through its parent company Eastport Holdings, LLC, relating to a sale of assets by GYPC, payments made by GYPC to Alostar Bank which were guaranteed by Cummings and Webb, potential tax liability arising out of the conversion or attempted conversion of GYPC from a Subchapter S corporation to C corporation for tax purposes, and other known and unknown preferential and fraudulent transfers. In addition, the amended complaints object to any claims filed by Cummings and Webb.

The Trustee filed the 2004 Examination Motions generally seeking all documents, information, data, and materials in the Examinees' possession or under their control relating to the services provided by the Examinees to GYPC and its affiliates or predecessors, U.S. Motivation, Inc., General Yellow Pages Consultants, Inc., and the Marquette Group, for the period of January 1, 2015 through the present for CliftonLarson and Restructuring Advisors and January 1, 2016 through the present for Brady Ware. The Motions also request approval of oral examinations of a representative of each of the Examinees. As noted, Cummings and Webb have objected to the 2004 Examination Motions, arguing that: a) the Trustee is attempting through the Motions an end run around conducting appropriate discovery in the Adversary Proceedings pursuant to the Federal Rules of Civil Procedure; and b) discovery related to the Adversary Proceedings should not proceed unless and until their motions to dismiss the amended complaints are denied.

II. Statement of the Law

A. Duties of a Chapter 7 Trustee

Section 704 describes the duties of trustee. Subsection a provides, in pertinent part, as follows:

(a) The trustee shall—

(1) collect and reduce to money the property of the estate for which such trustee serves, and close such estate as expeditiously as is compatible with the best interests of parties in interest;

(2) be accountable for all property received;

* * *

(4) investigate the financial affairs of the debtor;

(5) if a purpose would be served, examine proofs of claims and object to the allowance of any claim that is improper;

* * *

(7) unless the court orders otherwise, furnish such information concerning the estate and the estate's administration as is requested by a party in interest;

* * *

(9) make a final report and file a final account of the administration of the estate with the court and with the United States trustee[.]

11 U.S.C. § 704(a).

B. Chapter 7 Trustee as the Successor in Interest to the Debtor and Debtor in Possession

A Chapter 7 trustee succeeds to the interests of a Chapter 11 debtor in possession:

The bankruptcy estate comes into being at the filing of the bankruptcy petition. 11 U.S.C. § 541. While his case was in Chapter 11, Collins served as Debtor-in-Possession and exercised control over the bankruptcy estate. 11 U.S.C. § 1107. Upon conversion to Chapter 7, a trustee was appointed, and he succeeded to Debtor-in-Possession's interest in the bankruptcy estate. The trustee is the "successor in interest to the debtor in possession", and "as the successor, the trustee is bound by all authorized acts of the debtor in

possession." Nicholas v. U. S., 384 U.S.678, 692-93, 86 S. Ct. 1674, 16 L. Ed. 2d 853 and n. 27 (1966) (holding Trustee responsible for paying taxes the debtor-in-possession allowed to accrue); Pollack v. FDIC (In re Monument Record Corp.), 71 B.R. 853, 862 (Bankr. M.D. Tenn. 1987) ("conclud[ing] that the trustee is a successor to the debtor in possession."); see also Albert v. Chesapeake Bank & Trust Co. (In re Linton Props., LLC), 410 B.R. 1, 12 (Bankr. D.D.C. 2009) (denying Trustee's challenge of garnishment lien because the court found he was bound by debtors-in-possession's agreement not to challenge the garnishment lien).

Drake v. Sea Island Bank (In re Collins), 489 B.R. 917, 923 (Bankr. S.D. Ga. 2012). See also In re Eddy, 304 B.R. 591, 599 (Bankr. D. Mass. 2004) ("If a Chapter 11 case is converted to [a] Chapter 7 case, the appointed Chapter 7 trustee is essentially a successor estate representative."). Once a trustee has been appointed, the trustee assumes all responsibility for matters formerly handled by the debtor's management. Parker v. Frazier (In re Freedom Solar Center, Inc.), 776 F.2d 14, 17 (1st Cir. 1985). The trustee even controls the attorney-client privilege formerly held by the debtor. Commodity Futures Trading Comm. v. Weintraub, 471 U.S. 343, 352-53 (1985). See also Osherow v. Vann (In re Hardwood P-G, Inc.), 403 B.R. 445, 455 (Bankr. W.D. Tex. 2009) ("[W]hen a company declares bankruptcy, all of the corporation's property transfers to an estate managed by a trustee (or by a debtor-in-possession, as the case may be."). The bankruptcy trustee effectively becomes the bankrupt's management and the power of the company's pre-bankruptcy managers is severely restricted.").

C. Scope of 2004 Examinations

Bankruptcy Rule 2004 provides for examination of entities to obtain information pertaining to the bankruptcy debtor. That Rule provides, in part, that:

(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[.]

(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 in Rule 9016 for the attendance of a witness at a hearing or trial.

Fed. R. Bankr. P. 2004.

The purpose of Rule 2004 is to provide a tool to parties to a bankruptcy, particularly trustees, to obtain information concerning "the acts, conduct, or property" of the debtor, "the liabilities and financial condition of the debtor," "any matter which may affect the administration of the debtor's estate, or to the debtor's right to a discharge," and in a Chapter 11, 12, or 13 case, "the operation of any business and the desirability of its continuance, the source of any money or property acquired or to be acquired by the debtor for purposes of consummating a plan and the consideration given or offered therefor, and any other matter relevant to the case or to the formulation of a plan." Fed. R. Bankr. P. 2004(b); See also In re Express One Int'l, Inc., 217 B.R. 215, 216 (Bankr. E.D. Tex. 1998) (The general purpose of a 2004 examination is to review the estate's condition for the benefit of the rights of creditors.).

Bankruptcy courts have discretion in determining whether to order a 2004 examination. Bank One, Columbus NA v. Hammond (In re Hammond), 140 B.R. 197, 201 (S.D. Ohio 1992); In re Drexel Burnham Lambert Group, Inc., 123 B.R. 702, 708-09 (Bankr. S.D.N.Y. 1991); In re Fearn, 96 B.R. 135 (Bankr. S.D. Ohio 1989). As Judge Cole noted in Fearn, a 2004 examination's scope is very broad:

It is well-established that the scope of a Rule 2004 examination is very broad and great latitude of inquiry is ordinarily permitted. The scope of examination permitted pursuant to Rule 2004 is wider than that allowed under Federal Rules of Civil Procedure and can legitimately be in the nature of a "fishing expedition". Although the primary purpose of a Rule 2004 examination is to permit a party in interest to quickly ascertain the extent and location of the estate's assets, such examination is not limited to the debtor or his agents, but may properly extend to creditors and third parties who have had dealings with the debtor.

Id. at 137-38 (citations omitted). However, Judge Cole also wrote that, while broad, the scope of Rule 2004 examinations "is not limitless." Id. at 138. "The examination should not be so broad as to be more disruptive and costly to the party sought to be examined than beneficial to the party seeking discovery." Id. "Moreover, an examination cannot be used for purposes of abuse or harassment." Id. at 138.

The use of a 2004 examination is not permitted for matters not related to the financial condition of a debtor or a debtor's estate. Upon a creditor objection, the examiner must establish "good cause," taking into consideration the totality of the circumstances, including the importance of the information to the examiner and the costs and burdens on the creditor. In re Countrywide Home Loans, 384 B.R. 373, 393 (Bankr. W.D. Pa. 2008). The level of good cause required to be established varies depending on the potential intrusiveness. Id. (citing Fearn, 96 B.R. at 138); See also Official Cmte. Of Unsecured Creditors v. Eagle-Pitcher Indus., Inc. (In re Eagle-Pitcher Indus., Inc.), 169 B.R. 130, 134 (Bankr. S.D. Ohio 1994) (citation omitted) ("examination should not be so broad as to be more disruptive and costly" to the party to be examined than beneficial to the party seeking discovery); Hammond, 140 B.R. at 201 (similar).

D. The Pending Proceeding Rule

The "pending proceeding" rule states "that once an adversary proceeding or contested matter has been commenced, discovery is made pursuant to [Federal Rules of Bankruptcy Procedure 7026-7037], rather than by a [Rule] 2004 examination." In re Bennett Funding Group, Inc., 203 B.R. 24, 28 (Bankr. N.D.N.Y. 1996). See also In re Enron Corp., 281 B.R. 836, 840 (Bankr. S.D.N.Y. 2002) (2004 examination cannot be used to bypass the discovery rules in a pending adversary proceeding); 2435 Plainfield Avenue, Inc. v. Township of Scotch Plains (In re 2435 Plainfield Ave., Inc.), 223 B.R. 440, 455-56 (Bankr. D.N.J. 1998) (collecting cases on the pending proceeding rule); Intercontinental Enters., Inc. v. Keller (In re Blinder, Robinson & Co., Inc.), 127 B.R. 267, 274 (D. Colo. 1991) (similar). In addition to restricting the use of Rule 2004 examinations when proceedings are pending against the examinee in the bankruptcy court, courts have also recognized that Rule 2004 examinations may be inappropriate "where the party requesting the Rule 2004 examination could benefit their pending litigation outside of the bankruptcy court against the proposed Rule 2004 examinee." Enron, 281 B.R. at 842. See also Snyder v. Soc'y Bank, 181 B.R. 40, 42 (S.D. Tex. 1994), aff'd 52 F.3d 1067, 1995 WL 231797 (5th Cir. 1995) (table decision) (characterizing the use of Rule 2004 to further a state court action as an abuse of Rule 2004 and stating that the bankruptcy court did not abuse its discretion by denying production under a subpoena issued under Rule 2004, when appellant's primary motivation was to use those materials in a state court action against the examinee). In re Washington Mut., Inc., 408 B.R. 45, 50 (Bankr. D. Del. 2009) (Rule 2004 not to be used for litigation outside the bankruptcy court). See also Sec. Investor Protection Corp. v. Continental Capital Inv. Svcs. (In re Continental Capital Inv. Svcs.), No. 03-3370, 2009 WL 1604703, at *4-5 (Bankr. N.D. Ohio March 6, 2009) (2004 examination was overbroad when law firm challenging the 2004 examination was subject to a SIPA adversary action).

However, the "pending proceeding rule" generally does not apply when the examinee is not a party to the pending litigation. As one court has stated:

[T]his limitation on Rule 2004 examinations only applies to entities affected by the adversary proceeding. As stated in Blinder, Robinson, "entities not affected by the adversary proceeding do not require the greater protections afforded under the Federal Rules, and the trustee should be permitted to examine them under Rule 2004." Id., at 275. Thus, even after the trustee has commenced adversary proceeding(s), the trustee may conduct Rule 2004 examinations of entities which are not parties to or are not affected by the pending adversary proceeding(s).

In re Buick, 174 B.R. 299, 305 (Bankr. D. Colo. 1994); In re Martelli, Case Nos. 16-20983, 16-20316, 16-20968, 2017 Bankr. LEXIS 2015, at *12-13 (Bankr. W.D.N.Y. July 20, 2017) (similar). Nevertheless, a Rule 2004 examination may not be used to obtain discovery of evidence for any pending adversary proceeding or other litigation even if it is through an examination of an entity which is not a party to or affected by the pending litigation. Under those circumstances, the discovery provisions of the Federal Rules of Civil Procedure are to be used. In re Wash. Mut., Inc., 408 B.R. 45, 51 (Bankr. D. Del. 2009); Sweetland v. Szadkowski (In re Szadkowski), 198 B.R. 140, 142 (Bankr. D. Md. 1996). When there is pending litigation, Rule 2004 examinations may not be used to circumvent the discovery rules provided in the Federal Rules of Civil Procedure.

E. Federal Rule of Bankruptcy Procedure 1001 and Local Bankruptcy Rule 7026-1

The Federal Rules of Bankruptcy Procedure "shall be construed, administered, and employed by the court and the parties to secure the just, speedy, and inexpensive determination of every case and proceeding." Fed. R. Bankr. P. 1001. In an early bankruptcy case applying the Federal Rules of Bankruptcy Procedure, the court rejected the argument that the Federal Rules of Civil Procedure should govern non-core matters and that the Bankruptcy Rules of Procedure should govern core matters. The court stated:

[T]echnically it can be argued that the Federal Rules of Civil Procedure should govern "non-core" related proceedings and the Bankruptcy Rules should govern only "core" bankruptcy matters. Adherence to this technical argument would result in upheaval of the current system. A cumbersome dual procedural process would take its place whereby every time an adversary proceeding is commenced, the plaintiff would have to determine whether the underlying cause of action is a "core" or "non-core" proceeding and follow the applicable set of procedural rules. Such a result is counter to the fundamental principle of bankruptcy law that procedure in bankruptcy cases should be efficient and expeditious.

Windsor Communications Group, Inc. v. Grant, 75 B.R. 713, 732 (E.D. Pa. 1985). See also William M. Condrey, P.C. v. Endeavour Highrise, L.P. (In re Endeavour Highrise L.P.), 425 B.R. 402, 417 (Bankr. S.D. Tex. 2010) (citations omitted) ("[O]ne of the chief goals of the Code is to allow the bankruptcy court to fairly and expeditiously administer the bankruptcy estate so that claims can be paid in a timely manner . . . ."). The Bankruptcy Code and the Federal Rules of Bankruptcy Procedure then emphasize that the rules should be applied to promote the speedy and inexpensive determination of cases and proceedings.

Further, Local Bankruptcy Rule 7026-1 provides that discovery shall proceed promptly and that parties shall cooperate and consult with each other in providing discovery. Specifically, that Rule provides in pertinent part:

Discovery proceedings shall be promptly commenced. All attorneys and any party appearing pro se are required to cooperate and consult with each other in a courteous manner in all matters related to discovery and shall freely exchange discoverable information and documents upon informal written request, whether or not a pretrial conference has been scheduled or held in a proceeding.

In furtherance of the national rules' emphasis on the speedy and inexpensive resolution of cases and proceedings, the Southern District of Ohio requires that discovery matters for bankruptcy adversary proceedings and contested matters be promptly commenced and that parties and counsel cooperate in proceeding with discovery on an informal basis. The purposes behind this rule are at least three-fold: 1) to promote the expeditious resolution of disputes and bankruptcy matters and cases; 2) to minimize the costs and time to all affected parties; and 3) to minimize judicial involvement in the discovery process.

III. Findings of Fact and Conclusions of Law

Cummings and Webb argue that the "pending proceeding rule" prohibits the Trustee's use of Bankruptcy Rule 2004 to obtain information from the Examinees. The pending proceeding rule is only applicable to the extent that there is overlap between any claims against Cummings and Webb asserted in the Adversary Proceedings, including those related to the conversion or the attempt to convert GYPC from a Subchapter S corporation to a C corporation. Here, the 2004 examinees are not Cummings and Webb and there is no pending litigation inside or outside the bankruptcy court against the Examinees. Further, CliftonLarson and Brady Ware are estate professionals. A trustee's use of a Rule 2004 examination to obtain information from the estate's own professionals is a novel and unusual situation. Presumably, since they are estate professionals, the Trustee should have full and unfettered access to all books, records, data, and other information in their possession or under their control relating to GYPC.

The court finds it difficult to comprehend that Cummings and Webb, former principals of the Chapter 11 DIP, now the Chapter 7 debtor, who owed fiduciary obligations to the bankruptcy estate — are seeking to prohibit the Trustee, as successor in interest to the DIP, from obtaining information which the Trustee is entitled to and should have regardless of the pending litigation against them. Presumably due to the Adversary Proceedings, the Trustee took an above-the-board approach to obtaining information from the former accountants for the DIP in seeking that information through the 2004 Examination Motions. However, regardless of the pending Adversary Proceedings against Cummings and Webb, the Trustee is entitled to all documents, information, data, emails, and other communications and transmissions held by the accountants, as professionals to the bankruptcy estate. It was the bankruptcy estate, as the DIP, who retained and has paid for the services of the accountants. CliftonLarson and Brady Ware owe obligations to the bankruptcy estate, not Cummings and Webb. Ironically, from the court's perspective, Cummings and Webb's attempt to prevent the Trustee from obtaining information from the former accountants to the bankruptcy estate only serves to strengthen the potential importance and significance of the Trustee's obtaining that information from CliftonLarson and Brady Ware.

Restricting this information from the Trustee also clashes with the principle that bankruptcy is intended to be and premised upon the bankruptcy process taking place in a "fish bowl." As stated in In re Alterra Healthcare Corp., 353 B.R. 66, 73-74 (Bankr. Del. 2006):

There is a strong presumption in favor of public access to bankruptcy proceedings and records. During a chapter 11 reorganization, a debtor's affairs are an open book and the debtor operates in a fish bowl. See Brad B. Erens & Kelly M. Neff, Confidentiality in Chapter 11, 22 Emory Bankr. Dev. J. 47, 49 (2005) ("The proposition that a chapter 11 reorganization proceeding be an open book process, however, is heavily ingrained in bankruptcy jurisprudence. As a result, it is not likely that there will be any effort to modify the openness of such a proceeding anytime in the near future."); Jeff J. Friedman & Merritt A. Pardini, Bankruptcy Behind Closed Doors (Part I), 21 No. 12 Bankr. Strategist 1 (2004) ("One of the burdens of a bankruptcy filing is that, to a degree, the debtor's affairs become an open book. This openness has been accurately described as operating in a 'fishbowl'."); Mark D. Bloom, David M. Olenczuk, & Richard L. Wynne, Reorganizing in a Fish Bowl: Public Access v. Protecting Confidential Information, 73 Bankr. Dev. L.J. 775 (1999) (detailing the public's right of access in bankruptcy cases).

In fact, Congress has codified the historical practice of open access in bankruptcy. See 11 U.S.C. § 107(a) (2006). See also In re Northstar Energy, Inc., 315 B.R. 425, 428 (Bankr. E.D. Tex. 2004) (stating "[Section] 107(a)'s directive for open access flows from the nature of the bankruptcy process - which is heavily dependent upon creditor participation, and which requires full financial disclosure of debtor's affairs."); In re Muma Servs., Inc., 279 B.R. 478, 484 (Bankr. D. Del. 2002) (noting section 107(a)'s prescription for public accessibility in bankruptcy cases); In re Epic Assocs. V, 54 B.R. 445, 447 (Bankr. E.D. Va. 1985) (concluding that "[s]ection 107(a) creates a presumption in favor of public access to court records filed in bankruptcy cases").

As laid out in § 704, the Trustee has significant responsibilities to investigate all financial matters pertaining to the bankruptcy estate and to do so expeditiously. These matters include attendance to the tax matters pertaining to the bankruptcy estate, and a myriad of other matters. CliftonLarson and Brady Ware were hired by the bankruptcy estate to assist the DIP in carrying out those responsibilities prior to the conversion of the case from Chapter 11 to Chapter 7. See 11 U.S.C. § 1107 providing that "a debtor in possession shall have all the rights . . . and powers, and shall perform all the functions and duties . . . of a trustee serving in a case under this chapter. Further, a Chapter 11 trustee shall perform the duties of a trustee under § 704(a)(2), (5), (7), (8), (9), (10), (11), and (12). 11 U.S.C. § 1106(a)(1). Specifically, the application to retain CliftonLarson provided:

By this Application, the Debtor seeks to employ and retain CLA as its general accounting firm. In particular, the Debtor needs to complete the preparation of its 2016 tax returns of the Debtor, complete and respond to the 2014 Audit, and complete a final audit of its 401k plan.

Doc. 64, ¶17. And the application to retain Brady Ware provided:

Applicant states that the employment of Accountant as accountants are necessary to perform the accounting services normally associated with a Chapter 11 Debtor-in-Possession, including, but not limited to, reconciling accounts, adjusting entries, preparing tax returns and consultation regarding any and all other accounting matters of the Debtor.

Doc. 132, ¶3.

As the successor-in-interest to the DIP, the Trustee succeeds to all of the assets, property, records, instruments, financial information, data, and other items pertaining to the debtor, GYPC, and the DIP. Thus, the Trustee now controls the relationships with CliftonLarson and Brady Ware and all records, financial information, data, and other records or information of any nature pertaining to GYPC.

The Trustee is entitled to the information related to the estate administration, regardless of whether the Trustee seeks it through a 2004 examination, or simply a telephone call or an email to the accountants. Not only is the Trustee entitled to that information, the Trustee would likely be derelict in his duties not to review the information assembled by the accountants for the DIP, including tax information and the books and records created and maintained for the DIP. Further, not having access to that information, the Trustee cannot know what, if any, time-sensitive information may be held in CliftonLarson's and Brady Ware's GYPC records. The Trustee is entitled to any information relating to GYPC in the possession of or under the control of professionals to GYPC's bankruptcy estate, without qualification, whether that information was assembled or created by the accountants prepetition, pre-conversion, or post-conversion.

The 2004 Examination Motion addressed to Restructuring Advisors entails a somewhat different analysis than the Motions addressed to CliftonLarson and Brady Ware since Restructuring Advisors was never employed as a professional to GYPC's bankruptcy estate. Rather, Restructuring Advisors was only employed by GYPC prior to the filing of the bankruptcy petition. Nevertheless, the court also concludes that the 2004 examination of Restructuring Advisors should proceed to allow the Trustee to explore all issues pertaining to the conversion of GYPC from a Subchapter S corporation to a C corporation so that the Trustee may attempt to timely protect any interests of the bankruptcy estate relating to that transaction and for any other purpose provided for by Rule 2004. While CliftonLarson and Brady Ware were estate professionals and Restructuring Advisors was not, Restructuring Advisors was still employed by GYPC and, stepping into the shoes of the managers of GYPC, the Trustee is entitled to explore all aspects of that transaction and GYPC's tax status to protect the interests of the bankruptcy estate. Again, without having access to that information, the Trustee cannot even make a determination of whether there are matters requiring prompt action relating to the information which Restructuring Advisors may have.

The court understands Cummings' and Webb's concerns with the potential for the use of Rule 2004 to usurp the strictures of discovery under the Federal Rules of Civil Procedure. While 2004 examinations are similar in ways to depositions under Federal Rule of Civil Procedure 30, they are not the same. The scope of a Rule 2004 examination is very broad and provides little safeguards to the examinees which would otherwise be available to deponents under the Federal Rules of Civil Procedure. St. Clair v. Cadles of Grassy Meadows II, L.L.C., 550 B.R. 655, 668 (E.D.N.Y. 2016); In re Orion Healthcorp, Inc., 596 B.R. 228, 233-36 (Bankr. E.D.N.Y. 2019) (similar). The court recognizes that there may be some overlap between the information which the Trustee needs to appropriately administer GYPC's bankruptcy estate, including to address any tax issues pertaining to the estate, and issues related to the pending Adversary Proceedings. This court may, however, issue conditions, limitations, and restrictions on any 2004 examination to protect persons who may be affected by the 2004 examinations. See Orion at 239; In re M4 Enterprises, 190 B.R. 471, 476 (Bankr. N.D. Ga. 1995); In re Symington, 209 B.R. 678, 688 (Bankr. D. Md. 1997) ("Examinations under Federal Rule of Bankruptcy Procedure 2004 may be subject to limitation by Federal Rules of Civil Procedure 26(c) and 45(c). Federal Rule 26(c) provides limits upon discovery that have traditionally been applied in the issuance of protective orders limiting Rule 2004 examinations 'for good cause shown.'") (citation and footnote omitted).

Accordingly, since the Examinees are not parties to pending litigation in or outside the bankruptcy court and since the information held by the Examinees may be necessary to the Trustee's expeditious administration of the bankruptcy estate and to exercise the Trustee's duties under § 704(a) to protect the estate's interests, including any such information which may be time-sensitive; to allow for the timely pursuit of discovery under Local Bankruptcy Rule 7026-1 relating to the Adversary Proceedings; and to protect Cummings and Webb with respect to their positions in the Adversary Proceedings, the 2004 Examination Motions are granted with the following conditions:

1. The Trustee shall either (at the Trustee's option): a) provide Cummings and Webb, through their legal counsel, copies of any documents, records, data, communications, and other materials provided to the Trustee by the Examinees in response to the 2004 Examination Motions; or b) provide Cummings and Webb's counsel with reasonable access to and inspection of any such documents, records, data, communications, or other materials received or obtained from the Examinees pursuant to the 2004 Examination Motions within 30 days of receipt of those documents, records, and materials by the Trustee, but no later than 5 business days prior to the oral examination of any representative of the Examinee to which the documents, records, and materials relate; and

2. Any oral examinations of any representative of the Examinees shall only be conducted upon reasonable notice provided to counsel for Cummings and Webb as to the date, time, and location of the oral examination. Cummings and Webb shall be entitled to attend the 2004 examinations with or through counsel and their

counsel may be entitled to note an objection for the record to any question posed and may be entitled to question the representative upon completion of the examination by counsel for the Trustee.

IV. Conclusion

For the foregoing reasons, the Omnibus Objection is overruled and the 2004 Examination Motions are granted with the conditions stated in this decision. The court will enter an order consistent with this decision.

This document has been electronically entered in the records of the United States Bankruptcy Court for the Southern District of Ohio. IT IS SO ORDERED.

/s/ _________

Guy R. Humphrey

United States Bankruptcy Judge Dated: June 24, 2020 Copies to: Default List W. Timothy Miller
Michael L. Meyer
Casey M. Cantrell Swartz

(Counsel for Christopher F. Cummings and Eric Webb) Brady Ware & Schoenfeld, Attn. Brian P. Carr, 3601 Rigby Road, Suite 400, Dayton, OH 45342 CliftonLarsonAllen LLP, Attn. Mark M. Dalbey, 301 SW Adams Street, Suite 1000, Peroria, IL 61602 Restructuring Advisors, LLC, 720 Brixworth Blvd., Suite 200, Knoxville, TN 37934-4773

See also In re 1031 Tax Group, LLC, Case No. 07-22448, 2007 Bankr. LEXIS 2221, at *5 (Bankr. S.D.N.Y. June 22, 2007) (presumption in favor of public access to court records). If the Trustee cannot obtain information concerning the financial affairs of GYPC, the Trustee cannot provide that information to the creditors, parties in interest, and the public.