American Tool & Mold, Inc.

UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
www.flmb.uscourts.gov
In re: 	Chapter 11
AMERICAN TOOL & MOLD,
INC, et al.1
Case No. 8:26-bk-04159
Jointly Administered
Debtors.
/
MEMORANDUM OPINION ON
EMERGENCY MOTION OF DEBTORS FOR PROTECTIVE ORDER
THIS CASE came on for hearing on June 23, 2026, and June 25, 2026 to
consider the Emergency Motion of Debtors for Protective Order (“the Motion
for Protective Order”) (Doc. No. 149) filed by American Tool & Mold, Inc, et
al. (the “Debtors”), and the Objection to Emergency Motion of Debtors for
1 The Debtors in these chapter 11 cases are as follows: American Tool & Mold, Inc., USA
Manufacturing Solutions, LLC (Case No. 8:26-bk-04149), ATM Investment Property
1700, LLC (Case No. 8:26-bk-04148), American Tool & Mold, LLC (Case No. 8:26-bk-
04147), American Technical Molding, Inc. (Case No. 8:26-bk-04146), and American Tech
Medical, Inc. (Case No. 8:26-bk-04161).
ORDERED.
Dated: July 07, 2026
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Protective Order and for Related Relief (Doc. No. 163) (the “Objection”) filed
by EverBank, N.A. (“EverBank”).
The Motion for Protective Order sought an order forbidding discovery
related to EverBank’s Emergency Motion for Appointment of a Chapter 11
Trustee (Doc. No. 18) (the “Motion to Appoint Trustee”) from the Debtors’
customers because “Demanding discovery from the Debtors’ customers is a
transparent attempt to sabotage and destroy Debtors’ business.”2 The Motion
for Protective Order also sought to “[l]imit the July 9, 2026 trial on the [Motion
to Appoint Trustee] to the issue of whether the CRO has operated the Debtors
in accordance with the Cash Flow budget.”3
EverBank argued the breadth of the inquiry under Section 1104(a)(2) of
the Bankruptcy Code4 – whether the appointment of a trustee is “in the
interests of creditors, any equity security holders, and other interests of the
estate” – requires it “be permitted to conduct full discovery—including into
prepetition events and customer, vendor, and employee relationships.”5
2 Doc. No. 149, at 2.
3 Id. at 3.
4 11 U.S.C. §§ 101 – 1532 (the “Bankruptcy Code” or the “Code”). Unless otherwise
indicated, all statutory references are to the Bankruptcy Code.
5 Doc. No. 163, at 2.
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The Court entered an order on June 29, 2026, granting the Motion for
Protective Order in part6 and issues this Memorandum Opinion setting forth
and supplementing the Court’s oral ruling.
FACTS AND PROCEDURAL HISTORY
A review of the Debtors’ background and the context of the discovery
requests is in order. The Court begins with the Debtor’s operations and reasons
for filing bankruptcy, discusses EverBank’s Motion to Appoint Trustee, and,
finally, addresses the related discovery dispute before the Court.
A. 	The Debtor’s operations and reasons for filing this case
The Debtors provide mold manufacturing and engineering services,
supplying tooling to clients worldwide.7 EverBank is a creditor of the Debtors
arising from two loans made in July 2025: a loan of $13,246,000.00 and a
working line of credit of $4,000,000.00, both secured by all the Debtors’ assets
(the “EverBank Collateral”).8
The Debtors defaulted on the loans right away and EverBank filed an
action against the Debtors in the Circuit Court of the Sixth Judicial Circuit in
and for Pinellas County, Florida,9 seeking to enforce its mortgage and security
6 Order Granting In Part Emergency Motion of Debtors for Protective Order (Doc. No. 185).
7 Doc. No. 10, at 1.
8 Id. at 3.
9 EverBank, N.A. vs. ATM Investment Property 1700 LLC, et al., Case Number 25-006757-CI.
(Filed Nov. 26, 2025).
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agreements.10 In short order, the State Court appointed a receiver over the
EverBank 	Collateral, 	effectively 	dispossessing 	the 	Debtors’ 	pre-petition
management.11
Right before the filing of these cases, the Debtors appointed Joseph
Baum as Chief Restructuring Officer (“CRO”).12 Then, on May 15, 2026, the
Debtors each filed voluntary petitions for relief under Chapter 11 of the
Bankruptcy 	Code.13 	The 	receiver 	thereafter 	returned 	possession 	of 	the
EverBank Collateral to the Debtors, and the Debtors manage and operate their
properties and businesses as debtors in possession.
B. 	EverBank’s Motion to Appoint a Chapter 11 Trustee
On May 18, 2026, EverBank filed its Emergency Motion for Appointment
of Chapter 11 Trustee (the “Motion to Appoint Trustee”) (Doc. No. 18), which
asserts cause exists to appoint a trustee, including gross mismanagement,
financial collapse, and loss of operational control.14 Section 1104(a) provides:
(a) 	At 	any 	time 	after 	the 	commencement 	of 	the 	case 	but 	before
confirmation of a plan, on request of a party in interest or the United
States trustee, and after notice and a hearing, the court shall order the
appointment of a trustee—
(1) for cause, including fraud, dishonesty, incompetence, or gross
mismanagement 	of 	the 	affairs 	of 	the 	debtor 	by 	current
management, either before or after the commencement of the
10 Id. at 1-2, 4.
11 Id. at 4.
12 See Verified Declaration of Joseph Baum (Doc. No. 58, at 16-29).
13 11 U.S.C. §§ 101 – 1532 (the “Bankruptcy Code” or the “Code”). Unless otherwise indicated,
all statutory references are to the Bankruptcy Code.
14 Doc. No. 18, at 3.
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case, or similar cause, but not including the number of holders of
securities of the debtor or the amount of assets or liabilities of the
debtor; or
(2) if such appointment is in the interests of creditors, any equity
security holders, and other interests of the estate, without regard
to the number of holders of securities of the debtor or the amount
of assets or liabilities of the debtor.
EverBank argues cause exists to order the appointment of a trustee under
Section 	1104(a)(1) 	because 	the 	Debtors 	have 	engaged 	in 	dishonesty,
concealment, and the improper diversion of estate cash prior to the petition
date, (2) the Debtors’ estate has been grossly mismanaged and lacks an ability
to 	operate 	absent 	extraordinary 	third-party 	intervention, 	(3) 	prior
management failed to discharge fiduciary duties resulting in the loss of
credibility and creditor confidence, and (4) the Debtors’ estate lacks operational
control and governance, and such uncertainty warrants a trustee to avoid a
functional vacuum of authority.15
EverBank also argues that the court should order the appointment of a
trustee under Section 1104(a)(2) as being in the best interest of creditors and
other parties in interest because “(1) the Debtors lack trustworthiness, (2) the
Debtors past and present performance hinders the prospect of rehabilitation,
(3) there is a lack of trustworthiness as to Ms. Giannakopoulos, and (4) the
15 Id. at 15-16.
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benefits derived by the appointment of a trustee weighs in favor of such an
appointment when balanced against the cost of the appointment.”16
The 	Debtors 	respond 	that, 	applying 	the 	plain 	language 	of
Section 1104(a), there is no basis for displacing current management.17 The
Debtors highlight that the CRO controls the Debtors’ postpetition operations.
And, relying on Judge McEwen’s decision in In re Blue Stone Real Est., Const.
& Dev. Corp.,18 there is no reason for the “extraordinary remedy” of appointing
a trustee because the alleged misconduct predates the appointment of the
CRO, and EverBank does not allege that the CRO has failed to perform his
duties.19
A trial on the Motion to Appoint Trustee is scheduled for July 8, 2026.
C. 	The Debtor’s Emergency Motion for Protective Order
The Debtors’ Emergency Motion for Protective Order seeks to forbid
discovery directed at any period prior to the filing of the petition or directed at
the 	Debtors’ 	customers.20 	The 	Debtors 	assert 	that 	events 	prior 	to 	the
bankruptcy filing are not relevant because they have been operating under the
management of a Court-approved CRO.21 The Debtors also argue EverBank
16 Id. at 19-20.
17 Doc. No. 151, at 4.
18 392 B.R. 897 (Bankr. M.D. Fla. 2008).
19 Doc. No. 151, at 4.
20 Doc. No. 149, at 2-3.
21 Id. at 2.
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should be forbidden from taking discovery from their customers because the
customer relationships are vital to their business and there has been no
allegation of loss of customers or cancellation of orders since the CRO began
operating the Debtors’ business.22
Citing 	In 	re 	The 	1031 	Tax 	Grp., 	LLC,23 	EverBank 	responds 	that
discovery 	regarding 	past 	mismanagement 	is 	relevant 	to 	issue 	of 	the
appointment of a chapter 11 trustee because “the Court must be ‘satisfied that
the current management is free from the taint of prior management’” where,
as 	here, 	“the 	alleged 	misconduct 	concerns 	the 	same 	insider-controlled
governance 	structure 	that 	selected 	the 	CRO, 	funded 	the 	engagement,
commenced 	the 	cases, 	and 	continues 	to 	shape 	the 	debtor’s 	chapter 	11
strategy.”24 EverBank also argues that alleged commingling and diversion of
customer funds and deterioration of customer relationships make discovery
requests to customers necessary and directly relevant to the need to appoint a
trustee under Section 1104(a).25
The 	Court 	held 	an 	initial 	preliminary 	hearing 	on 	the 	Motion 	for
Protective Order on June 23, 2026, where the Court ruled discovery could be
had on the CRO and the Debtor for the period from January 1, 2024, to the
22 Id.
23 374 B.R. 78 (Bankr. S.D.N.Y. 2007).
24 Doc. No. 163, at 5 (quoting In re The 1031 Tax Grp., LLC, 374 B.R. at 86).
25 Id. at 8-9.
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present. 	The Court held a subsequent preliminary hearing on the Motion for
Protective Order on June 25, 2026, where the Court determined that, applying
Fed. R. Civ. P. 26(b)(1), the burden of the discovery requested outweighs the
likely benefits of the discovery. Thus, the Court granted in part the Motion for
Protective Order by limiting the temporal scope of the discovery and quashing
the discovery requests made to Debtors’ customers.
ANALYSIS
A. 	The General Scope of Discovery is Not Limited to Debtors’
Current Management
Rule 26(b)(1) of the Federal Rules of Civil Procedure, made applicable to
this contested matter pursuant to Rules 7026 and Rule 9014(c)(1), limits the
scope of discovery to—
any nonprivileged matter that is relevant to any party's claim or defense
and proportional to the needs of the case, considering the importance of
the issues at stake in the action, the amount in controversy, the parties’
relative access to relevant information, the parties’ resources, the
importance of the discovery in resolving the issues, and whether the
burden 	or 	expense 	of 	the 	proposed 	discovery 	outweighs 	its 	likely
benefit.26
Thus, the scope of the discovery is framed by the issues at stake in the action:
here, whether the Court should order the appointment of a trustee under either
Sections 1104(a)(1) or (a)(2).27
26 Fed. R. Civ. P. 26(b)(1).
27 See Fassett v. Sears Holdings Corp., 319 F.R.D. 143, 149 (M.D. Pa. 2017) (“To determine
the scope of discoverable information under Rule 26(b)(1), the Court looks initially to the
pleadings”).
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Under Section 	1104(a)(1), 	the appointment of a trustee 	rests on 	a
showing 	of 	“cause, 	including 	fraud, 	dishonesty, 	incompetence, 	or 	gross
mismanagement of the affairs of the debtor by current management, either
before 	or 	after 	the 	commencement 	of 	the 	case, 	or 	similar 	cause.”28 	In
determining whether cause exists, court evaluate many factors including:
(1) Materiality of the misconduct;
(2) 	Evenhandedness 	or lack 	of 	same in dealings 	with insiders 	or
affiliated entities vis-a-vis other creditors or customers;
(3) The existence of pre-petition voidable preferences or fraudulent
transfers;
(4) Unwillingness or inability of management to pursue estate causes of
action;
(5) Conflicts of interest on the part of management interfering with its
ability to fulfill fiduciary duties to the debtor;
(6) Self-dealings by management or waste or squandering of corporate
assets.29
The Court's inquiry is generally directed toward the conduct of “current
management.”30 But “the court may consider both pre-petition and post-
petition misconduct when deciding whether cause exists.”31 And, when the
allegedly dishonest or incompetent prior management selected the current
28 11 U.S.C. § 1104(a)(1).
29 In re Sundale, Ltd., 400 B.R. 890, 900 (Bankr. S.D. Fla. 2009).
30 In re Marshall, 653 B.R. 509, 517 (Bankr. N.D.N.Y. 2023) (noting “courts should not appoint
an 1104 trustee if the underlying cause can be attributed only to past management”). See
also In re The 1031 Tax Group, LLC, 374 B.R. 78, 86 (Bankr. S.D.N.Y. 2007) (“When
considering whether to appoint a trustee for cause, a court's focus is on the debtor's current
management, not the misdeeds of past management”).
31 Marshall, 653 B.R. at 515. See also The 1031 Tax Group, 374 B.R. at 86 (“A court may
consider both the pre-and postpetition misconduct of the current management when making
the determination that “cause” exists for the appointment of a trustee”).
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management, the court should apply heightened scrutiny to ensure the new
management is “free from the taint of prior management.” 32
Under Section 1104(a)(2), a court must order the appointment of a
trustee “if such appointment is in the interests of creditors, any equity security
holders, and other interests of the estate.”33 “Unlike § 1104(a)(1), § 1104(a)(2)
does not require a finding of fault; the court may appoint a trustee even if no
‘cause’ exists.”34 Instead, when considering whether the appointment of a
trustee is in the interest of creditors, any equity security holders, and other
interests of the estate, a court is to evaluate –
(1) the trustworthiness of the debtor;
(2) 	the 	debtor 	in 	possession’s 	past 	and 	present 	performance 	and
prospects for the debtor's rehabilitation;
(3) the confidence—or lack thereof—of the business community and of
creditors in present management; and
(4) the benefits derived by the appointment of a trustee, balanced
against the cost of the appointment.”35
Here, EverBank argues “Cause exists under § 1104(a)(1), including gross
mismanagement, 	financial 	collapse, 	and 	loss 	of 	operational 	control, 	as
demonstrated by the need for immediate third-party intervention to meet
payroll, the lapse of critical insurance, and the improper handling of estate
32 The 1031 Tax Group, 374 B.R. at 86. See also Marshall, 653 B.R. at 520 (noting that on a
motion to appoint trustee a court may be called upon to consider whether current
management is “free from the taint of prior management”).
33 11 U.S.C. § 1104(a)(2).
34 Sundale, 400 B.R. at 901.
35 In re 942 Penn RR, LLC, 642 B.R. 89, 93 (Bankr. S.D. Fla. 2022). See also In re Sundale,
Ltd., 400 B.R. 890, 899–901 (Bankr. S.D. Fla. 2009).
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cash 	and 	collateral.”36 	To 	do 	so, 	EverBank 	relies 	principally 	on 	the
observations and conclusions of the State Court receiver, Mark Healy.37 But
that is not all. Since the appointment of Mr. Baum as CRO, EverBank has
asserted it is necessary to ensure “the current management is free from the
taint of prior management.”38
EverBank also asserts the appointment of a trustee is required under
Section 	1104(a)(2) 	because 	“the 	totality 	of 	the 	circumstances 	shows 	that
creditors, employees, and counterparties lack confidence in prior management,
rehabilitation cannot proceed under existing control, and the cost of a trustee
is far outweighed by the risk of operational collapse absent independent
oversight.”39
In this context, the Court is satisfied that a creditor who seeks the
appointment of a trustee under both Sections 1104(a)(1) and (2) has the right
to broad discovery into both pre- and post-petition events, even when a CRO
has been appointed. The focus of the Court’s inquiry when considering whether
to appoint a trustee for cause is “the debtor's current management, not the
misdeeds 	of 	past 	management.”40 	And 	a 	debtor’ 	appointment 	of 	outside
36 Doc. No. 18, at 3.
37 See, e.g., Id. at 18 (“Upon assuming control, the Receiver found the Debtors in a state of
insolvency and operational distress”).
38 See, e.g., Doc. No. 163, at 4 (quoting The 1031 Tax Group, 374 B.R. at 86).
39 Id. at 3.
40 The 1031 Tax Group, 374 B.R. at 86.
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professionals to help manage its affairs may be evidence of the debtor acting
responsibly.41 But where, like here, a debtor’s past management remains
involved in operations, or the extent of the CRO’s authority or independence is
in 	question, 	the 	movant 	must 	be 	allowed 	a 	reasonable 	opportunity 	to
investigate whether the current management is free from the taint of past
management.
Here, EverBank has brought into question whether, despite there being
no evidence of fraud, dishonesty, incompetence, or gross mismanagement by
the CRO, the CRO is still tainted by his association with, or selection by, the
Debtors’ past manager, Emilia Giannakopoulos. Thus, despite her self-imposed
removal from the 	management of the Debtors, at least 	for the scope of
discovery, Ms. Giannakopoulos’ pre-petition conduct remains highly relevant
to whether the Court should direct the appointment of a trustee in this case.
Accordingly, it is appropriate to deny the Debtors’ request to limit discovery in
connection with the Motion to Appoint Trustee to “the issue of whether the
CRO has operated the Debtors in accordance with the Cash Flow budget.”
EverBank may conduct full discovery from the Debtors — including into
prepetition events and customer, vendor, and employee relationships.
41 See In re BR Festivals LLC, No. 14-10175, 2014 Bankr. LEXIS 1276, at *2 (Bankr. N.D.
Cal. Mar. 28, 2014) (noting that act of seeking a CRO may be evidence of acting responsibly).
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B. 	Everbank’s Discovery Requests to Debtors’ Customers Are
Nevertheless Unduly Burdensome
Still, 	the 	Court’s 	conclusion 	that 	Ms. 	Giannakopoulos’ 	pre-petition
conduct remains highly relevant to whether the Court should direct the
appointment of a trustee in this case does not end the inquiry. Here, the Motion
for Protective Order also seeks to “[p]rohibit EverBank from demanding any
discovery from any of Debtors’ customers.”42 Thus, despite having determined
the relationship between past management and the Debtors’ customers may
be relevant to the appointment of a chapter 11 trustee, the Court must still
assess whether the issuance of subpoenas to the Debtors’ customers would
impose an undue burden on the Debtors.43
Relevant information, which is otherwise discoverable, may be limited to
avoid undue burden or expense.44 Again, Rule 26 expressly provides that
Parties may obtain discovery regarding any nonprivileged matter that
is relevant to any party's claim or defense and proportional to the needs
of the case, considering . . . whether the burden or expense of the
proposed discovery outweighs its likely benefit.45
Whether a subpoena imposes an undue burden or expense depends on the
specific facts of a case, and the interests served by demanding compliance must
42 Doc. No. 149, at 2.
43 BuzzFeed, Inc. v. U.S. Dep't of Just., 318 F. Supp. 3d 347, 358 (D.D.C. 2018) (“Because the
court finds that the requested testimony is relevant, the court must next assess whether
compliance would impose an undue burden”).
44 See Fassett v. Sears Holdings Corp., 319 F.R.D. 143, 157 (M.D. Pa. 2017) (noting “the task
of the trial court is to balance the clear relevance of the information against the burden on
the defendant”).
45 Fed. R. Civ. P. 26(b)(1).
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be 	balanced 	against 	the 	interests 	furthered 	by 	quashing 	it.46 	Factors
considered in determining whether there is an undue burden include:
(1) 	whether 	the 	discovery 	sought 	is 	“unreasonably 	cumulative 	or
duplicative;”
(2) whether the discovery sought “can be obtained from some other
source that is more convenient, less burdensome, or less expensive;” and
(3) whether the discovery sought is “proportional to the needs of the
case,” taking into account “the importance of the issues at stake in the
action, the amount in controversy, the parties' relative access to relevant
information, the parties' resources, the importance of the discovery in
resolving the issues, and whether the burden or expense of the proposed
discovery outweighs its likely benefit.” 47
Here, the Motion to Appoint Trustee alleges “commingling and diversion
of customer funds intended for specific tooling and refurbishment projects,
deterioration of customer relationships, and the risk that customers would
react adversely if prior management regained control.”48 Correspondingly,
EverBank seeks discovery from the Debtors’ customers, including Acadiana
Plastics Molding, Inc. and Procter & Gamble, related to customer orders,
payments and deposits, and the Debtors’ performance.49 EverBank argues
46 See In re Non-Party Subpoena to Ctr. for Study of Soc. Pol'y, 659 F. Supp. 3d 54, 58 (D.D.C.
2023) (“Courts must balance the interests served by demanding compliance with the
subpoena against the interests furthered by quashing it”); Dell Inc. v. DeCosta, 233 F. Supp.
3d 1, 3 (D.D.C. 2017) (“Whether a subpoena imposes an ‘undue burden’ depends on the
specific facts of the case and courts must balance the interests served by demanding
compliance with the subpoena against the interests furthered by quashing it”).
47 See BuzzFeed, Inc. v. U.S. Dep't of Just., 318 F. Supp. 3d 347, 358 (D.D.C. 2018) (quoting
Fed. R. Civ. P. 26(b)(1) & (2)(C).
48 Doc. No. 163, at 12.
49 See Doc. Nos. 142 & 143.
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“[d]iscovery from customers concerning these specific issues is directly relevant
to both section 1104(a)(1) and (a)(2).”50
The 	Debtors 	contend 	“[d]emanding 	discovery 	from 	the 	Debtors’
customers is a transparent attempt to sabotage and destroy Debtors’ business,”
and “[i]t is absolutely vital to Debtors’ business, Chapter 11 and reorganization
that all of Debtors’ customers be protected from any and all discovery.”51
On the facts of this case, and in chapter 11 reorganization, the Court
concludes discovery upon the Debtors’ customers imposes an undue burden or
expense that outweighs its likely benefit. Discovery as to alleged incidents of
commingling and diversion of customer funds is highly probative to whether a
court should direct the appointment of a chapter 11 trustee.52 But much of the
discovery that could be had of customers is probably cumulative or duplicative
of discovery that could be – and likely already has been – had from the Debtors
or the receiver.53 And the requested discovery can probably be obtained less
burdensomely from the Debtors or the receiver.54
50 Doc. No. 163, at 12.
51 Doc. No. 149, at 2.
52 See In re 942 Penn RR, LLC, 642 B.R. 89, 93 (Bankr. S.D. Fla. 2022) (identifying the
trustworthiness 	of 	the 	debtor 	and 	the 	confidence—or 	lack 	thereof—of 	the 	business
community and of creditors in the debtor as factors weighing on whether the appointment of
a trustee is in the interest of creditors, any equity security holders, and other interests of the
estate).
53 See Fed. R. Civ. P. 26(b)(2)(C)(i) (requiring courts limit the extent of otherwise allowable
discovery if “the discovery sought is unreasonably cumulative or duplicative, or can be
obtained from some other source that is more convenient, less burdensome, or less
expensive”).
54 Id.
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More, the Court is convinced that – on this record – discovery from the
Debtors’ customers is disproportionate to the needs of the case and the burden
or expense of the proposed discovery outweighs its likely benefit. Creditor
confidence is a factor that courts consider in determining whether to appoint a
trustee under Section 1104(a)(2).55 But lack of creditor confidence is not enough
on its own to justify the appointment of a chapter 11 trustee.56
In stark contrast is what the Supreme Court once described as “the
fundamental purpose of reorganization” – “to prevent a debtor from going into
liquidation, with an attendant loss of jobs and possible misuse of economic
resources.”57 Here, permitting discovery from customers risks undermining
customer relationships with and confidence in the Debtors. This could affect
the success of the reorganization, the ultimate distribution to creditors, and
the viability of dozens of jobs. Under these circumstances, the potential
prejudice to the Debtors’ prospects of reorganization outweighs the likely
benefit of discovery from the Debtors’ customers, especially since the discovery
is 	probably 	cumulative 	and 	duplicative. 	Further 	mitigating 	against 	the
55 See In re Eletson Holdings Inc., 659 B.R. 426, 458 (Bankr. S.D.N.Y. 2024) (noting creditor
confidence in present management is a factor courts consider in determining whether to
appoint a chapter 11 trustee).
56 Id. at 458-59 (rejecting the argument that a chapter 11 trustee should be appointed simply
because most creditors want one).
57 N.L.R.B. v. Bildisco & Bildisco, 465 U.S. 513, 528 (1984) (citing H.R. Rep. No. 95-595, at
220 (1977)). See also In re Colortex Indus., Inc., 19 F.3d 1371, 1377 (11th Cir. 1994) (noting
“the ultimate goal of Chapter 11 is to marshal those resources to provide the best possible
opportunity for a successful rehabilitation which will ultimately redound to the benefit of all
creditors”).
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discovery is that the Debtors have installed a CRO charged with preventing a
reoccurrence of the alleged commingling and diversion of customer funds.
Thus, the evidence of alleged commingling and diversion of customer funds is
less valuable in proving the need to appoint a trustee.
EverBank has not shown that the Debtors’ records are insufficient to
prove its allegations that the Debtors misused customer funds prior to the
bankruptcy filing or that they have done so after filing. Nor has EverBank
shown that the need for discovery from the Debtors’ customers is proportional
to the issues at stake in the action. This is especially true when the prepetition
operational dysfunction alleged has been addressed by installation of a CRO
and any operational harm caused by the discovery will ultimately be borne by
creditors. So, without more, a protective order is appropriate here. EverBank
may not seek discovery from the Debtor’s customers without first showing the
information sought cannot be obtained from the Debtor’s records.
Stuart J. Levine is directed to serve a copy of this Order on interested parties
who do not receive service by CM/ECF and to file a proof of service within three
days of entry of this Order.
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