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<i>Photo: Arūnas Gabalis/Adobe Stock</i> Photo: Arūnas Gabalis/Adobe Stock

Federal Rule of Bankruptcy 2004 provides interested parties in a bankruptcy proceeding with the ability to obtain prelitigation discovery that is generally broader in scope than what the Federal Rules of Civil Procedure allow. The power to commence a Rule 2004 examination, commonly compared to a “fishing expedition,” is not unchecked. The principal limitation is the so-called pending proceeding rule, which prevents a party from using Rule 2004 to obtain discovery that would not be available under the Federal Rules of Civil Procedure. Recognizing this limitation at the outset of a case will enable all parties to strategize about how best to deploy Rule 2004 in the context of a bankruptcy case.

Unlike in traditional civil litigation, obtaining discovery in a bankruptcy proceeding does not require the existence of a dispute. Once a bankruptcy case is filed, any party in interest may file a motion asking the court to order a Rule 2004 examination to obtain information on the “acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor’s estate, or to the debtor’s right to a discharge.” Fed. R. Bankr. P. 2004(b). Although the rule does not specifically define who constitutes a “party in interest,” courts have interpreted the phrase liberally to include the trustee, creditors, the debtor and related entities, and other parties who have an interest in the administration of the estate. See, e.g., In re Hammond, 131 B.R. 78, 82 (Bankr. S.D. Ohio 1991); In re Ecam Pubs., 131 B.R. 556, 559 (Bankr. S.D.N.Y. 1991); In re Summit, 891 F.2d 1, 5 (1st Cir. 1989). Rule 2004 discovery can thus be preferable to discovery under the Federal Rules of Civil Procedure, which limits the scope of discovery to matters that are relevant to any party’s claim or defense and proportional to the needs of the case, and further balances the benefits of the proposed discovery against its burden and expense. Fed. R. Civ. P. 26(b). That said, the scope of discovery under Rule 2004 has its limitations.

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