Tabas v. Global Automotive Group, LLC (In re MMH Automotive Group, LLC)

346 B.R. 229, 19 Fla. L. Weekly Fed. B 363, 2006 Bankr. LEXIS 1326
CourtUnited States Bankruptcy Court, S.D. Florida.
DecidedJune 20, 2006
DocketBankruptcy No. 05-40913-BKC-LMI; Adversary No. 05-06196-BKC-LMI
StatusPublished
Cited by1 cases

This text of 346 B.R. 229 (Tabas v. Global Automotive Group, LLC (In re MMH Automotive Group, LLC)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, S.D. Florida. primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Tabas v. Global Automotive Group, LLC (In re MMH Automotive Group, LLC), 346 B.R. 229, 19 Fla. L. Weekly Fed. B 363, 2006 Bankr. LEXIS 1326 (Fla. 2006).

Opinion

ORDER DENYING MOTION FOR PROTECTIVE ORDER AS TO EXAMINATION OF UNIVERSAL FLEET, INC.

This matter came before the Court on May 1, 2006 on Amended Motion for Protective Order as to Rule 7030 Examination Duces Tecus of Universal Fleet, Inc. (CP # 72), and the Court having reviewed the Amended Motion, the Memorandum in Opposition filed by the Trustee, Joel Tabas (CP # 75), the Response thereto (CP # 76), the Memorandum of Law in Support of Amended Motion (CP # 94) and the Memorandum of Law in Response to the Memorandum of Law in Support (CP # 100), and the Court having considered all other matters the Court deems relevant to the decisions herein made, the Motion is DENIED for the reasons set forth below.1

Background

On September 26, 2005, MMH Automotive Group, LLC (“Debtor”) filed a voluntary petition under Chapter 7 of the United States Bankruptcy Code. Joel Tabas was appointed the Chapter 7 Trustee (“Trustee” or “Plaintiff’). On December 29, 2005, Plaintiff initiated this adversary proceeding, seeking recovery of certain alleged fraudulent conveyances from defendants, Global Automotive Group, LLC and G.A.G. Realty, Inc.

On March 28, 2006, the Plaintiff served a Notice of Rule 2004 Examination Duces Tecum (the “2004 Notice”) on Universal Fleet Lease, Inc. (“Universal”) in the main bankruptcy case. On that same date the Plaintiff served a Cross-Notice of Rule 7030 Examination Duces Tecum of Universal Fleet Lease, Inc. in this adversary proceeding.

On April 14, 2006, Universal and Mark Hessein, the brother of the principal of the Debtor, and the apparent principal of Universal (“Hessein”), filed an Amended Motion for Protective Order in the bankruptcy case and in this adversary proceeding (collectively the “Amended Motions”), seeking cancellation of the scheduled deposition and production because the scheduled date for examination was a Muslim holiday and because Hessein is involved in a criminal proceeding brought by the State [231]*231of Florida, pending in the Circuit Court of Broward County.2

Stay of Discovery is Not Appropriate

There appears to be no dispute that Hessein is the subject of the criminal proceeding. However, the party against whom discovery is sought is Universal. Universal and Hessein argue that since Hessein is the corporate representative for Universal — “Mr. Hessein is the appropriate party to appear ...” the stay is appropriate even though Hessein, not Universal, is the subject of the criminal proceeding.

Hessein and Universal accurately cite cases that recognize that a court has the ability to enter a stay of civil discovery pending the outcome of a concurrent criminal proceeding. See United States v. Kordel, 897 U.S. 1, 90 S.Ct. 763, 25 L.Ed.2d 1 (1970); SEC v. Dresser Indus. Inc., 628 F.2d 1368 (D.C.Cir.1980). However, such decision rests solely in the court’s discretion, is granted in very limited circumstances, and with great reluctance. See Carroll v. Unicom AP Chemical Corp. (In re MGL Corp.), 262 B.R. 324 (Bankr.E.D.Pa.2001); SEC v. Incendy, 936 F.Supp. 952 (S.D.Fla.1996).

Hessein and Universal rely primarily on AWS Mgmt, LLC. v. United States, 2006 WL 824506, 2006 U.S. Dist. LEXIS 24894 and Bridgeport Harbour Place I, LLC v. Ganim, 269 F.Supp.2d 6 (D.Conn.2002), where, in each case, the court employed a balancing test to determine whether stay of civil discovery was appropriate, weighing several factors which Universal and Hessein have correctly summarized as “(1) the extent to which a defendant’s Fifth Amendment rights are implicated; (2) the interests of the plaintiff in an expeditious resolution and the prejudice to the plaintiff in not proceeding; (3) the interests of and burdens on the defendants; (4) the convenience to the court in the management of its docket and in the efficient use of judicial resources; (5) the interest of other persons not parties to the civil litigation; and (6) the interest of the public in the pending civil and criminal actions.”

However, in each of the cases cited by Hessein and Universal, the government was a party in both the civil and criminal matter, the civil and criminal matters un-disputedly arose out of the same facts and circumstances, and in all cases other than AWS (in which .both sides agreed a stay was appropriate), the party against whom discovery was sought was a party to the criminal proceeding.

In the instant case, the State of Florida is not a party to the adversary proceeding.3 Universal is not a party to the crim[232]*232inal action and Hessein and Universal have only alleged in the Amended Motion that Hessein “believes the areas of inquiry and the documents requested in the Notice are directly relevant to those criminal proceedings.” However, Hessein provides no concrete example of how the discovery is “directly relevant” nor has he otherwise explained the basis for such belief.4 There is no evidence, nor has Hessein alleged, that this proceeding overlaps, or is parallel to, the criminal proceeding.

The Court must determine whether Hessein can use his position as corporate designee of Universal in discovery related to the adversary proceeding and in discovery allowed under Fed. R. Bankr.P.2004, to seek a stay of such discovery against the corporation that has been alleged might be connected with a criminal proceeding against Hessein individually. The answer is “no”.

There is no issue that a corporation does not enjoy the constitutional protections of the Fifth Amendment. Braswell v. United States, 487 U.S. 99, 108 S.Ct. 2284, 101 L.Ed.2d 98 (1988); In re Cotillion Investments, Inc., 04-41606-BKC-RAM, 2006 WL 1599217 (Bankr.S.D.Fla. May 25, 2006); Kozyak v. Poindexter (In re Financial Federated Title & Trust, Inc.), 252 B.R. 834 (Bankr.S.D.Fla.2000). Universal cannot create that constitutional protection indirectly by designating a corporate representative who is the subject of a criminal proceeding. As the Supreme Court noted in Kordel:

[A] corporation could not satisfy its obligation under Rule 33 simply by pointing to an agent about to invoke his constitutional privilege. It would indeed be incongruous to permit a corporation to select an individual to verify the corporation’s answers, who, because he fears self-incrimination may thus secure for the corporation the benefits of a privilege it does not have.

397 U.S. at 8, 90 S.Ct. 763 (citations omitted). See also Braswell, 487 U.S. 99, 117, 108 S.Ct. 2284, 101 L.Ed.2d 98 (The sole shareholder of a corporation refused to produce books and records subpoenaed from such corporation, arguing that such an act would incriminate him individually. The Supreme Court rejected this argument noting that “a corporate custodian is not entitled to resist a subpoena on the ground that his act of production will be personally incriminating....”)

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346 B.R. 229, 19 Fla. L. Weekly Fed. B 363, 2006 Bankr. LEXIS 1326, Counsel Stack Legal Research, https://law.counselstack.com/opinion/tabas-v-global-automotive-group-llc-in-re-mmh-automotive-group-llc-flsb-2006.