Opinion
Case No. 01-41593-293, Welsh Carson's Motion to examine Plan Administrator pursuant to Rule 2004, Motion No. 2193 1/24.
March 3, 2005
ORDER
This case is before the Court on the application of the various Welsh, Carson entities (collectively "Welsh Carson") to examine Plan Administrator pursuant to Bankr. R. 2004(a). The Court will deny Welsh Carson's motion.
Welsh Carson holds a significant general unsecured claim against Bridge's estate. Its request to examine Plan Administrator can be divided broadly into two categories. First, Welsh Carson asks for information relating to Plan Administrator's payment of fees to professionals. Second, Welsh Carson seeks information relating to Plan Administrator's collection of Bridge's assets and his prospective payment to Bridge's general unsecured creditors.
Plan Administrator has objected to Welsh Carson's request on two grounds. First, Plan Administrator contends that Welsh Carson is merely using the Rule 2004 motion to obtain information relating to a pending adversary proceeding between the two parties. Second, Plan Administrator maintains that Welsh Carson may not obtain the information it seeks from Plan Administrator pursuant to a post-confirmation Rule 2004 examination. The Court agrees with Plan Administrator's latter argument and will deny Welsh Carson's motion.
The Court agrees that Welsh Carson may not obtain information from Plan Administrator that relates to the pending adversary by a Rule 2004 examination, but rather must utilize the Federal Rules of Civil Procedure to procure such information. In re 2435 Plainfield Ave., Inc., 223 B.R. 440, 456-57 (Bankr. D.N.J. 1998). The Court, however, need not address whether the information Welsh Carson seeks is related to the pending adversary because it may not obtain the information in a postconfirmation Rule 2004 examination.
The proponent of a Rule 2004 examination must produce evidence that establishes that good cause exists to conduct the examination. In re Buick, 174 B.R. 299, 304 (Bankr. D. Col. 1994). Generally, the proponent must demonstrate either that the examination is necessary to establish a potential claim or that the denial of the examination would cause it undue hardship or delay to establish such good cause. In re Express One Int'l., 217 B.R. 215, 217 (Bankr. E.D. Tex. 1998). Here, the Court finds that Welsh Carson has failed to demonstrate good cause for its proposed examination of Plan Administrator.
Because of the court's limited post-confirmation jurisdiction over the reorganized debtor, any post-confirmation examination of the reorganized debtor under Rule 2004 must be limited to only those issues in which the bankruptcy court still retain jurisdiction. In re Cinderella Clothing Indus., 93 B.R. 373, 377 (Bankr. E.D. Pa. 1988). Generally, a bankruptcy court's jurisdiction over the reorganized debtor is limited to whether the reorganized debtor is complying with the terms of the plan of reorganization. See Id.; 11 U.S.C. §§ 1112(b)(7), (8) 1142. Accordingly, post-confirmation Rule 2004 examinations of the reorganized debtor are generally limited to whether it is complying with its obligations under the confirmed plan. Cinderella Clothing, 93 B.R. at 379.
Welsh Carson points to both the Plan Administrator Agreement (the "Agreement") and the Plan of Liquidation (the "Plan") in arguing that Plan Administrator must disclose the fees he has paid to professionals. Both the Plan and the Agreement, however, only require the Plan Administrator to disclose his fees. Section 6.04 of the Plan and Section 5.5 of the Agreement require the Plan Administrator to file an invoice of services performed. And both the Plan and the Agreement explain that the invoice must reflect the compensation that Plan Administrator himself has received. There is no requirement in either the Plan or the Agreement that requires Plan Administrator to disclose the fees he has remitted to professionals. Thus, Plan Administrator does not have an obligation to disclose the fees he has paid to professionals under either the Agreement or the Plan.
Welsh Carson also cites Bankr. R. 2016(b) in support of its argument that Plan Administrator has an obligation to disclose the fees he has paid to professionals. Once a plan is confirmed, however, unless the plan provides otherwise, the estate's property is vested into a new entity, the reorganized debtor. 11 U.S.C. § 1141(b). Accordingly, the disclosure requirements contained in Bankr. R. 2016(b) do not apply to post-confirmation activity unless the plan requires such disclosure or otherwise gives the bankruptcy court the power to review the reorganized debtor's professional fees. Halbert v. Yousif, 225 B.R. 336, 356 (E.D. Mich. 1998); In re Powers, 93 B.R. 513, 516-17 (Bankr. S.D. Tex. 1988).
Here, as indicated above, there is nothing in either the Plan or the Agreement that requires Plan Administrator to disclose the fees he has paid to professionals or that gives this Court the power to review those fees. Thus, the disclosure requirements contained in Rule 2016(b) are inapplicable to Plan Administrator's post-confirmation payment of professional fees.
Additionally, neither the Plan nor the Agreement assist Welsh Carson in its attempt to examine Plan Administrator with respect to Plan Administrator's distribution to Bridge's general unsecured creditors. Section 3.13 of the Agreement only requires Plan Administrator to file a report of his distribution to Bridge's general unsecured creditors thirty days after he makes such a distribution. There is simply nothing in the Plan or the Agreement that requires Plan Administrator to make a distribution to the unsecured creditors at any specific time.
Welsh Carson would have been entitled to examine Plan Administrator if either the Plan or the Agreement required Plan Administrator to make a distribution to Bridge's general unsecured creditors at a specific point in time. See Express One, 217 B.R. at 216.
In conclusion, Welsh Carson has failed to point to any provision in either the Plan or the Agreement that requires Plan Administrator to disclose the information it seeks to obtain by its Rule 2004 examination. Thus, Welsh Carson has not produced evidence that establishes that its proposed examination of Plan Administrator is either necessary to establish a potential claim or that it will suffer undue hardship or prejudice if the examination is not conducted. Therefore, Welsh Carson has failed to establish the existence of good cause to examine Plan Administrator under Rule 2004 at this point in the case. Accordingly,
IT IS HEREBY ORDERED that Welsh Carson's Application to examine Plan Administrator (Document No. 2193) is DENIED.