Obtaining Discovery Despite Bankruptcy

If there are multiple defendants in a case and one files bankruptcy, does the automatic stay bar all litigation concerning the debtor?  Stated another way, “does the automatic stay protect a debtor from complying with discovery requests in a multi-defendant case where the debtor is a defendant, but where those discovery requests are framed as discovery pertaining only to the claims against the other non-debtor defendants?”[1]  Yes and no.

If there are multiple defendants and one is bankrupt, the remaining parties may still obtain discovery from the debtor, and still comply with the automatic stay, if the information sought pertains only to claims against a non-debtor party or parties.  The automatic stay “does not preclude generation of information regarding claims by or against a non-debtor party, even where that information could eventually adversely affect the Debtor.”[2]  Applying the automatic stay more broadly would mean

a debtor could never be called as a witness (even in actions where the debtor is not a party) without relief from the stay. Such an interpretation of section 362(a) defies common sense and the spirit of the Code. Information is information, and we believe the discovery of it as part of the development of a case against non-debtor parties is permissible, even if that information could later be used against the party protected by the automatic stay.[3]

Discovery to the debtor is permissible, but “it is of utmost importance that the party requesting discovery state with specificity how such discovery is relevant to claims asserted against a non-debtor party. The more specific the requesting party is, the clearer the distinction between the claim as it pertains to a non-debtor party versus a debtor party,” making it more likely the discovery will be permitted.[4]

[1] In re Miller, 262 B.R. 499, 504 (B.A.P. 9th Cir. 2001).

[2] Id. at 505.

[3] Id.

[4] Bartech Sys. Int’l v. Mobile Simple Sols., No. 2:15-cv-02422, 2018 U.S. Dist. LEXIS 19397 (D. Nev. Jan. 4, 2018).