SunEdison, Inc., et al.,

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
---------------------------------------- --------X
:
In re: 	: 	Case No. 16-10992 (SMB)
:
SUNEDISON, INC. et al.1 	: 	Chapter 11
:
Debtors. 	: 	(Jointly Administered)
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MEMORANDUM DECISION AND ORDER REGARDING
APPLICATION FOR A RULE 2004 EXAMINATION
A P P E A R A N C E S:
McCARTER & ENGLISH, LLP
Counsel for CSI Leasing, Inc. and CSI Leasing
Malaysia Sdn. Bhd.
245 Park Ave., 27th Floor
New York, New York 10167
Daniel R. Seaman, Esq.
Of Counsel
TOGUT, SEGAL & SEGAL LLP
Co-Counsel for the Debtors and
Debtors-in-Possession
One Penn Plaza, Suite 3335
New York, New York 10119
Frank A. Oswald, Esq.
Brian F. Moore, Esq.
Of Counsel
1 	The Debtors in these chapter 11 cases include SunEdison, Inc.; SunEdison DG, LLC; SUNE Wind
Holdings, Inc.; SUNE Hawaii Solar Holdings, LLC; First Wind Solar Portfolio, LLC; First Wind California
Holdings, LLC; SunEdison Holdings Corporation; SunEdison Utility Holdings, Inc.; SunEdison
International, Inc.; SUNE ML 1, LLC; MEMC Pasadena, Inc.; Solaicx; SunEdison Contracting, LLC; NVT,
LLC; NVT Licenses, LLC; Team-Solar, Inc.; SunEdison Canada, LLC; Enflex Corporation; Fotowatio
Renewable Ventures, Inc.; Silver Ridge Power Holdings, LLC; SunEdison International, LLC; Sun Edison
LLC; SunEdison Products Singapore Pte. Ltd.; SunEdison Residential Services, LLC; PVT Solar, Inc.; SEV
Merger Sub Inc.; Sunflower Renewable Holdings 1, LLC; Blue Sky West Capital, LLC; First Wind Oakfield
Portfolio, LLC; First Wind Panhandle Holdings III, LLC; DSP Renewables, LLC; Hancock Renewables
Holdings, LLC; EverStream Holdco Fund I, LLC; Buckthorn Renewables Holdings, LLC; Greenmountain
Wind Holdings, LLC; Rattlesnake Flat Holdings, LLC; Somerset Wind Holdings, LLC; SunE Waiawa
Holdings, LLC; SunE MN Development, LLC; SunE MN Development Holdings, LLC; SunE Minnesota
Holdings, LLC and TerraForm Private Holdings, LLC.
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STUART M. BERNSTEIN
United States Bankruptcy Judge:
Applicants CSI Leasing, Inc. (“CSILI”) and CSI Leasing Malaysia Sdn. Bhd.
(“CSIM” and, together with CSILI, “CSI”) seek authorization to examine the Debtors
pursuant to Rule 2004 of the Federal Rules of Bankruptcy Procedure (“Rule 2004”).
The proposed examination broadly relates to the sale of assets by a non-Debtor, who
owes money to CSI, and the upstreaming of the sales proceeds to the Debtors. The
Debtors opposed the application, and the Court held a hearing on November 17, 2016
and reserved decision. For the reasons that follow, the application is denied except to
the limited extent noted below.
BACKGROUND2
On June 7, 2011, SunEdison Kuching Sdn. Bhd. (“SEK”) — a non-Debtor wholly-
owned subsidiary of the Debtor SunEdison Products Singapore Pte. Ltd. (“SEPS”)
(Schedule A/B at 23 of 31 (ECF/SEPS Doc. # 5) — entered into an equipment lease with
CSIM, which incorporated an equipment schedule dated July 1, 2011 (the “Equipment
Lease”). (Application on Presentment of Creditor CSI Leasing, Inc. for Entry of an
Order Pursuant to Fed. R. Bankr. P. 2004 Authorizing and Directing the Examination
of the Debtors, dated Aug. 23, 2016 (“Application”), at ¶ 2 (ECF Doc. # 1048).) SEPS
guaranteed the Equipment Lease. (Application at ¶ 3.) SEPS is a direct subsidiary of
SunEdison International, Inc., which, in turn, is a direct subsidiary of SunEdison, Inc.
2 	The following conventions are used in citing to the record. “ECF Doc. # __” refers to documents
filed on the docket of the main chapter 11 case, In re SunEdison, Inc., et al., case no. 16-10992.
“ECF/SEPS Doc. # __” refers to documents filed in the chapter 11 case, In re SunEdison Products
Singapore PTE Ltd., case no. 16-11014. “# of #” refers to the page number and total number of pages
placed by the CM/ECF filing system at the top of every page of a filed document. “Tr.” refers to the
transcript of the hearing held in the main chapter 11 case on November 17, 2016 (ECF Doc. # 1646).
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(“SUNE”). (See Corporate Ownership Statement of SunEdison Products Singapore Pte
Ltd. at 7 of 18 (ECF/SEPS Doc. # 1).) SEK defaulted on the Equipment Lease, and SEPS
defaulted on the guarantee. (Application at ¶ 4.) As a result, each owes CSI
approximately $2.5 million. (Id.)
In March 2016, SEK entered into an asset purchase agreement (the “APA”) to sell
substantially all of its assets to XiAn LONGi (“LONGi”), a Chinese company, for
approximately $63 million. (Id. at ¶ 5.) There is no evidence that any Debtor was a
party to the APA. LONGi apparently paid all but $18 million (the “$18 Million
Holdback”) at the closing to SEK, with the balance to be paid in the future upon the
satisfaction of certain conditions. (Id.) In the meantime, SEK transferred the sale
proceeds paid at the closing to the Debtors (the “Upstream”), “namely SunEdison, Inc.,”
leaving little to no assets in SEK to pay its creditors. (Id. at ¶ 6.) CSI has expressed
concern that if SEK receives any part of the $18 Million Holdback, it will upstream those
sums (the “Future Upstreams”) as well. (Id. at ¶ 7.)
Most of the Debtors, including SEPS and SUNE, commenced chapter 11 cases on
April 21, 2016. In September 2016, CSI filed Proof of Claim No. 2879 against SEPS in
the amount of $2,496,611.09, and Proof of Claim No. 2234 against SUNE in the amount
of $51,144.47. The Debtors have reviewed the claims and determined that they should
be allowed. (Debtors’ Objection to the Application of CSI Leasing, Inc. for Entry of an
Order Pursuant to Fed. R. Bankr. P. 2004 Authorizing and Directing the Examination
of the Debtors, dated Nov. 10, 2016 (“Debtors’ Objection”), at ¶ 13 (ECF Doc. # 1577).)
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The actual value of CSI’s claims is, however, uncertain. During earlier
proceedings in connection with the Court’s motion relating to the appointment of an
official equity committee, the Court found that the Debtors owed $4.2 billion in pre-
petition secured and unsecured debt, and its contingent debt could exceed an additional
$1.2 billion. In re SunEdison, Inc., 556 B.R. 94, 101 (Bankr. S.D.N.Y. 2016).
Furthermore, the Debtors were authorized to borrow $300 million after the petition
date. Id. at 101 n.7. In contrast, the projected value of its assets was no more than $1.5
billion, net of the debtor-in-possession financing. Id. at 101. The Court concluded that
the Debtors appeared to be hopelessly insolvent, and declined to appoint an official
equity committee. Id. at 107. It looks like CSI’s potential distribution in the chapter 11
cases, if any, will be only a small percentage of the face amount of its claims.
One other point is the status of SEK. The Debtors have informed the Court that
SEK is currently the subject of a Malaysian insolvency proceeding, and a liquidator was
appointed on October 4, 2016. (Debtors’ Objection at 4.) According to CSI, it may be
the largest creditor in that proceeding. (See Memorandum of Law in Further Support
of the Application [Docket Document No. 1048] of Creditor CSI Leasing, Inc. for Entry
of an Order Pursuant to Fed. R. Bankr. P. 2004 Authorizing and Directing the
Examination of the Debtors, dated Nov. 14, 2016 (“Supplemental Memorandum”), at
¶ 5 (ECF Doc. # 1596).) The parties have not informed the Court whether the Malaysian
liquidator has standing and intends to pursue the transfer by SEK to the Debtors.
A. 	CSI’s Rule 2004 Application
After most of the Debtors, including SEPS and SUNE, had commenced chapter 11
cases, CSI filed the Application seeking Rule 2004 discovery. The Application included
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sixteen paragraphs requesting the production of “documents,” and in most cases
“communications” as well, relating to the subject matter of the specific request (the
“Requests”). 3 	I have renumbered the Requests and placed them into the following three
categories:
i. 	Documents and Communications relating to the Upstream and
Future Upstreams
1. 	All documents “that relate to the Upstream.”
2. 	All documents “that relate to the Future Upstream.”
3. 	“All documents and communications related to the Debtor’s
anticipated receipt of the Future Upstream.”
4. 	“All documents and communications related to the Debtor’s
intended uses of the Upstreamed Funds as part of the Debtor’s plan of
reorganization.”
5. 	“All documents and communications related to the Debtor’s
intended uses of the Future Upstreams as part of the Debtor’s plan of
reorganization.”
3 	The Requests include broad definitions of “documents and “communications.” “‘Document’ or
‘documents’ means any writing or record of any type or description, including but not limited to the
original, any non-identical copy or any draft, regardless of origin or location, of any paper, electronically-
stored file, book, pamphlet, computer printout, newspaper, magazine, periodical, letter, memorandum,
telegram, report, record, study, inter-office or intra-office communication, handwritten or other note,
diary, invoice, purchase order, bill of lading, computer print-out, transcript of telephone conversations
and any other retrievable data, working paper, chart, deed, survey, notes, map, graph, index, disc, data
sheet or data processing card, or any other written, recorded, transcribed, punched, taped, magnetically
recorded, filmed or graphic matter, however produced or reproduced to which You have, or have had,
access.” (Requests, Ex. A, Definitions and Instructions at ¶ 13.) ‘Communication’ means any transfer of
information, oral or written, be it in the form of facts, ideas, inquiries, opinions, or otherwise, by any
means, at any time or place, under any circumstances, and is not limited to transfers between persons, but
includes other transfers, such as records and memoranda to the file.” (Id. at ¶ 14.) I use the words
“documents’ and “communications” as a short hand to refer to all of the things in the definitions.
The Requests also impose certain onerous obligations with respect to the production of
documents. For example, the “Debtors have a duty to search for responsive documents and things in all
media and sources in their possession, custody or control where paper or electronic files are kept or
stored, including floppy disks, hard drives on or for personal computers, computer servers, mainframe
storage tapes or disks, archive facilities and backup facilities,” (id. at ¶ 7), they are deemed “to be in
control of a document if you have the right to secure the document or a copy thereof from another person
having actual possession thereof,” and “shall identify and provide the location of all responsive documents
of which you are aware but which are not in your custody, possession or control.” (Id. at ¶ 6.)
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6. 	“All documents and communications reflecting any opinion or
analysis that the Upstream or Future Upstreams did aid or will aid the
Debtors’ ability to reorganize.”
ii. 	Documents and Communications relating generally to the
Debtors’ Chapter 11 Cases
7. 	“All documents and communications related to the sources of funds
which the Debtor may use to fund the Debtor’s plan of reorganization.”
8. 	“All documents and communications related to the projected
income and expenses of the Debtors during this bankruptcy proceeding.”
9. 	“All documents and communications upon which the Debtors may
rely to argue that the interests of CSI are adequately protected.”
iii. 	Documents and Communications relating to SEK, the Malaysian
proceeding and CSI’s recovery in that proceeding
10. 	Documents “that relate to the APA."
11. 	“All documents related to why SEK did not seek bankruptcy
protection via the SunEdison Bankruptcy.”
12. 	“All documents related to SEK directors, officers, or employees who
went to work for (or consult for) LONGi after (or around the time that) the
APA was entered into.”
13. 	“All documents and communications reflecting any lawsuits,
proceedings, mediations, or actions that [the Debtors] are aware of
relating to SEK’s debts to creditors in Malaysia or elsewhere.”
14. 	“All documents and communications relating to any direction or
consultation the Debtors gave to SEK for the time period of the one-year
period prior to the APA up to the present.”
15. 	“All documents and communications reflecting any claims, demand
letters, lawsuits, proceedings, mediations, or actions that [the Debtors] are
aware of where it is asserted or referenced that the Upstream or Future
Upstreams damaged or will damage a creditor’s ability to recovery from
SEK or SEPS or any of the Debtors.”
16. 	“All documents and communications reflecting any lawsuits,
proceedings, mediations, or actions that [the Debtors] are aware of
relating to SEPS’s debts to creditors in Malaysia or elsewhere.”
(Requests, Ex. A, Documents Requested.)
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B. 	The Informal Discovery
After CSI filed the Application, the Debtors began providing responsive
information on a rolling basis and the parties agreed to adjourn the hearing on the
Application to a later date. (Debtors’ Objection at 3.) On September 29, 2016, the Court
entered an order further authorizing and directing the Debtors to produce to CSI “the
APA and certain related supply agreements, and the closing binder for the same.”
(Order Authorizing and Directing the Initial Production of Documents of the Debtors,
dated Sep. 29, 2016 (the “Initial Order”), Ex. A, at 5 (ECF Doc. # 1284).) The Initial
Order was entered without prejudice to CSI’s rights to seek additional relief demanded
in the Application, (Initial Order at 2), and the Application was subsequently set for
hearing on November 17, 2016. (Notice of Rescheduling of Application on Presentment
of Creditor CSI Leasing, Inc. for Entry of an Order Pursuant to Fed. R. Bankr. P. 2004
Authorizing and Directing the Examination of the Debtors, dated Oct. 13, 2016 (ECF
Doc. # 1385).)
C. 	Subsequent Proceedings Relating to CSI’s 2004 Application
The informal discovery efforts did not satisfy CSI. Consequently, the Debtors
filed a formal objection to the Application, characterizing it as premature, overly broad,
speculative and unduly burdensome. (Debtors’ Objection at 2, ¶¶ 8-9.) The Debtors
argue that they have agreed to allow CSI’s claims, and CSI does not need the
information to frame its claims. (Id. at ¶ 13.) In addition, authorizing discovery at this
point in these chapter 11 cases might set an unwieldy precedent and open the floodgates
for similar requests by other claimants. (Debtors’ Objection at ¶ 8.) Furthermore, CSI’s
requests exceeded the scope of Rule 2004, (id. at ¶ 10), CSI had not demonstrated good
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cause, (Debtors’ Objection at ¶¶ 12-13), the Debtors had already provided information
about the Malaysian proceeding and CSI should make any further requests in that
proceeding, (id, at ¶ 14), and CSI could get information relating to the Debtors’ financial
history by reviewing the Debtors’ publicly available Schedules of Assets and Liabilities,
Statement of Financial Affairs and Monthly Operating Reports. (Debtors’ Objection at
¶¶ 11, 15.)
CSI responded largely reiterating its arguments made in the Application. In
contrast to the Debtors’ characterization that the Request was overly broad and
speculative, CSI submitted that they were “narrowly tailored.” (Supplemental
Memorandum at ¶ 10 (footnote omitted).) CSI also acknowledged based upon its own
due diligence that the Future Upstreams would probably never be tendered, (id. at ¶ 6),
and characterized their requests simply as “directing the Debtors to provide oral
testimony and produce documents related to the Upstream.” (Id. at ¶ 8 (footnotes
omitted).) CSI further argued that its requests would not cause undue cost or disruption
to the Debtors because it was not seeking discovery of any documents that the Debtors
had already provided or documents that did not exist. (Id. at ¶ 10.) Furthermore, good
cause existed because the Rule 2004 examination was necessary to effectively enforce
their rights in the United States and in Malaysia. (Id. at ¶ 12.) Finally, CSI disputed the
Debtors’ claim that it should first seek the documents and communications from the
Malaysian liquidator. The Debtors had already admitted they had responsive
documents, and the possible existence of such documents elsewhere did not relieve the
Debtors of their obligations under Rule 2004. (Id. at ¶ 14.)
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DISCUSSION
Rule 2004 provides in relevant part that the Court may authorize the
examination of any entity relating “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.” F ED. R. B ANKR. P. 2004(b). In chapter 11 cases,
the examination may extend to matters relating “to 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.” Id. The party seeking Rule 2004 discovery has the burden to show good
cause for the examination it seeks, and relief lies within the sound discretion of the
Bankruptcy Court. Picard v. Marshall (In re Bernard L. Madoff Inv. Secs. LLC), Adv.
Pro. No. 08-01789, 2014 WL 5486279, at *2 (Bankr. S.D.N.Y. Oct. 30, 2014); see In re
Bd. of Dirs. of Hopewell Int’l Ins. Ltd., 258 B.R. 580, 587 (Bankr. S.D.N.Y. 2001) (Rule
2004 gives the Court “significant” discretion).
A party seeking to conduct a Rule 2004 examination typically shows good cause
by establishing that the proposed examination “‘is necessary to establish the claim of the
party seeking the examination, or . . . denial of such request would cause the examiner
undue hardship or injustice.’” In re Metiom, Inc., 318 B.R. 263, 268 (S.D.N.Y. 2004)
(quoting In re Dinubilo, 177 B.R. 932, 943 (E.D. Cal. 1993)); accord In re AOG Entm’t,
Inc., 558 B.R. 98, 109 (Bankr. S.D.N.Y. 2016); In re Drexel Burnham Lambert Grp.,
Inc., 123 B.R. 702, 712 (Bankr. S.D.N.Y. 1991). In evaluating a request to conduct a Rule
2004 examination, the Court must “balance the competing interests of the parties,
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weighing the relevance of and necessity of the information sought by examination. That
documents meet the requirement of relevance does not alone demonstrate that there is
good cause for requiring their production.” Drexel Burnham, 123 B.R. at 712; accord In
re Coffee Cupboard, Inc., 128 B.R. 509, 514 (Bankr. E.D.N.Y. 1991); In re Fearn, 96 B.R.
135, 138 (Bankr. S.D. Ohio 1989) (“While the scope of Rule 2004 examination is very
broad, it is not limitless. 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.”)
In the past, courts have referred to the expansive reading of Rule 2004
comparing it to a “fishing expedition,” Drexel Burnham Lambert Grp., Inc., 123 B.R. at
711, a concept generally attributed to an old case that described the examination of the
bankrupt as a “fishing examination.” In re Foerst, 93 F. 190, 190 (S.D.N.Y. 1899). But
the cost of compliance has increased substantially since then. The era of paper
discovery in relatively small cases has given way to the discovery not only of paper but
also of vast amounts of electronically stored information (“ESI”), possibly stored on
outdated systems, on numerous personal computers and servers located throughout the
world. S HIRA A. S CHEINDLIN, MOORE’S F EDERAL PRACTICE, E-D ISCOVERY: T HE NEWLY
AMENDED F EDERAL RULES OF CIVIL PROCEDURE 3 (2006). Discovery has become an
increasingly expensive aspect of civil litigation.
The proliferation of information and the costs associated with retrieving,
reviewing and producing discovery in civil litigation have led to the 2015 amendments to
the Federal Rules of Civil Procedure which emphasize the concept of proportionality.
Under Rule 26, the scope of discovery extends to any matter relevant to a party’s claim
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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.” FED. R. CIV. P. 26(b)(1). In addition, a party need not provide discovery
of ESI from sources “that the party identifies as not reasonably accessible because of
undue burden or cost,” but the party from whom discovery is sought has the burden of
showing “that the information is not reasonably accessible because of undue burden or
cost,” and even it meets that burden, “the court may nonetheless order discovery from
such sources if the requesting party shows good cause.” Fed. R. Civ. P. 26(b)(2)(B).
Rule 2004 has not been similarly amended but the spirit of proportionality is
consistent with the historic concerns regarding the burden on the producing party and is
relevant to the determination of cause. The Requests provide a good illustration. CSI’s
claims, while significant in face value, are small when viewed in the context of chapter 11
cases involving over $5 billion in debt with little prospect of anything more than a small
recovery for unsecured creditors. By the November 17, 2016 hearing, the Debtors had
already produced over 1,200 pages of information responsive to Requests as well as
supplemental requests not included in the Application. (Debtors’ Objection at 3-4.)
These documents covered, among other things, the APA, (id. at 4; Initial Order),
information showing the flow of funds, (Tr. at 56:6-13), and the Malaysian insolvency
proceeding. (Debtors’ Objection at ¶ 14.) CSI wants more, but the cost of retrieving,
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reviewing and producing “all documents and communications” relating to 4 each of the
sixteen specific requests may exceed CSI’s distribution in the Debtors’ cases, and some
of the requests could be made by every creditor and equity interest holder in these cases.
Moreover, the Debtors have determined to allow CSI’s two claims, and the additional
discovery does not appear to be necessary to resolve any material issues in these chapter
11 cases between CSI and the Debtors.
Turning to the Requests, CSI has not established cause for most of the
information it seeks. The cause it is required to demonstrate must relate to these cases.
Although many of the requests are ostensibly relevant to the subject matter of the
Debtors’ cases, the primary focus of the Application is the need for information to use in
the Malaysian insolvency proceeding.
CSI makes no secret of this purpose. CSI has implied that the Upstream was a
fraudulent transfer by SEK. The Application argued that the Upstream left “little to no
assets and little to no money to pay the just claims of SEK’s creditors,” (Application at
¶ 6), and the Debtors have information and knowledge regarding the Upstream, the $18
Million Holdback, and “other potential future expectant interests from SEK and/or
LONGi.” (Id. at ¶ 7.) Most telling, CSI argued that it needed the Rule 2004 discovery
immediately to support its request for relief in the Malaysian insolvency proceeding:
It also appears the Debtors are pursuing certain courses that are
calculated, at least in part, to circumvent existing obligations and defeat
Malaysian creditors (including but not limited to CSI) that may have rights
to proceeds under the APA or otherwise. With possible legal actions that
4 	“The term ‘relating to’ (including any variant thereof), includes referring to, alluding to,
responding to, pertaining to, concerning, connected with, commenting on or in respect of, analyzing,
touching upon, constituting and being, and is not limited to contemporaneous events, actions,
communications or documents. (Requests, Ex. A, Definitions and Instructions at ¶ 15.)
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CSI could take in Malaysia (including, but not limited to, injunctive
relief), and with three months having transpired since CSI’s Application
was filed with this Court, it is imperative that CSI immediately obtain the
information it has requested in the Application and without further delay
so that it may effectively enforce its rights here and in Malaysia.
(Supplemental Memorandum at ¶ 12 (emphasis added).)
CSI confirmed the reason why it needed the information at oral argument. In
response to the Court’s question on that point, CSI’s counsel stated “[w]e need discovery
because of the related claims that exist in this case related to our Malaysian enterprise.”
(Tr. at 49:1-3.) He also stated that the Upstream “directly affects our claims and rights
in Malaysia,” (Tr. at 49:24-50:1), and “a debtor was used as a conduit to commit the
overall transaction, which denied all the Malaysian creditors any recovery from SEK
nondebtor and SPS debtor.” (Tr. at 53:13-16.) I do not mean to minimize the possible
grievance of or the potential remedies available to SEK’s creditors and/or the Malaysian
liquidator as a result of the Upstream, although I draw no conclusions. Nevertheless,
the party seeking Rule 2004 discovery must show a need or undue hardship relating to
the bankruptcy case in which the information is sought, not in some other, foreign
proceeding.
While the Upstream may be germane to these cases because it arguably stripped
SEPS of assets to pay CSI’s claim in that case, 5 the extent of the discovery that CSI
demands pertaining to the Upstream and other requests within the scope of Rule 2004
is disproportionate. Part of the problem may be CSI’s misperception of its own
5 	On the other hand, CSI implies that the sale proceeds were fraudulently transferred and should be
recovered for the benefit of SEK’s creditors. This is inconsistent with the argument that the proceeds
could or should be used to satisfy CSI’s claims in these cases.
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Requests. It has described the Requests as “narrowly tailored,” (Supplemental
Memorandum at ¶ 10), and “surgical,” (Tr. at 54:24), but they are quite the opposite.
First, CSI has not placed reasonable limits on the sources or types of information that
the Debtors must search for and retrieve. The Requests generally ask for “all documents
and communications” that “relate to” the subject matter of the specific request. The
Court has noted the breadth of these terms. CSI will accept nothing less. It placed only
two limits on the Debtors’ duty to disclose that are meaningless: the Debtors do not
have to produce any documents and communications they have already produced, and
they don’t have to produce any documents and communications that don’t exist, at least
while they don’t exist. (Supplemental Memorandum at ¶ 10.) But for these limits, CSI
insists that the Debtors must produce everything.
CSI has not articulated a rationale for compelling the production of all documents
and communications relating to the Upstream. The Debtors have not disputed the
Upstream, and it should be sufficient for CSI if the Debtors produce information
showing how the money moved from SEK to SEPS and beyond. The Debtors should not
be required to search every document, email and byte of data located on the servers and
computers of its far-flung affiliates. 6
Second, other requests are premature, unnecessary or overly broad. For
example, CSI has acknowledged that Future Upstreams are unlikely. Nevertheless, it
insists on compliance with three separate requests devoted entirely to Future Upstreams
and a fourth request that includes both Upstreams and Future Upstreams. CSI also
6 	Nothing herein relieves the Debtors of the duty to produce the APA-related documents that were
the subject of the earlier order described above.
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seeks discovery of all “documents and communications” related to (1) the possible
sources of plan funding, (2) the Debtors’ projected income and expenses and (3)
documents and communications the Debtors “may” use “to argue that the interests of
CSI are adequately protected.” Given the broad duty to produce documents and
communications “relating to” possible sources of plan funding and the Debtors’
projected income and expenses, these two requests could conceivably cover every
document and communication that exists. Moreover, the request for plan funding
documents is premature; there is no plan and, as far as I can tell, no funding. In any
event, this is the type of information that would be disclosed in a disclosure statement.
The request relating to the adequate protection of CSI’s interests is the most
perplexing. To begin with, CSI has not requested adequate protection. More
importantly, it is not entitled to adequate protection. Adequate protection must be
provided to protect against the decline in value to a non-debtor’s interest in property of
the estate resulting from the imposition of the automatic stay, 11 U.S.C. § 362(d)(1), the
use, sale or lease of that property, 11 U.S.C. 363(e), or the granting of a priming lien on
that property to secure post-petition financing. 11 U.S.C. § 364(d)(1)(B); see also 11
U.S.C. § 361; In re Garland Corp., 6 B.R. 456, 462 (B.A.P. 1st Cir. 1980) (Cyr, J.)
Unsecured creditors like CSI do not have an interest in property of the estate that merits
adequate protection, and there is no express statutory requirement that unsecured
creditors receive adequate protection. Garland Corp., 6 B.R. at 462; In re R.F.
Cunningham & Co., 355 B.R. 408, 412 (Bankr. E.D.N.Y. 2006) (“There is no statutory
requirement that unsecured creditors receive adequate protection, and the lack of
adequate protection does not entitle an unsecured creditor to relief from the stay.”).
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Accordingly, the Application is denied except to the extent that the Debtors are
directed to provide sufficient information to identify the flow of funds that comprise the
Upstream.
So ordered.
Dated: New York, New York
January 18, 2017
/s/ Stuart M. Bernstein
STUART M. BERNSTEIN
United States Bankruptcy Judge
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