Dymon Investments, Inc. v. Welch (In re Welch)

Dymon Investments, Inc. v. Welch (In re Welch), BAP No. NV-14-1079-HlPaJu (Jan. 5, 2015)
AFFIRMING the decision below, the Bankruptcy Appellate Panel of the Ninth Circuit held that the bankruptcy court did not abuse its discretion when it denied creditors' motion to reopen a closed chapter 7 case in order to conduct an examination under Federal Rule of Bankruptcy Procedure 2004. While there is no specified time period under section 350 of the Bankruptcy Code within which a motion to reopen must be filed, such a request must be made within a reasonable time, and what constitutes reasonableness is determined based on the totality of the circumstances. The longer a party waits to file a motion to reopen a closed bankruptcy case, the more compelling the reason to reopen must be. There was also nothing in the record to establish prima facie proof that the case was not fully administered, and reopening the case would have caused meaningful prejudice to debtors.
Procedural context:
Creditors moved to reopen debtors' closed chapter 7 case. The bankruptcy court denied the motion. This appeal ensued.
A complaint was filed in state court against Welch and others, asserting various causes of action, including fraud and breach of fiduciary duty based on defendants' alleged failure to contribute funds to certain companies, and for otherwise interfering with plaintiffs' efforts to refinance and sell certain real property owned by the companies. Debtors filed for chapter 7 relief on the eve of trial in that action. Two months after the case was closed, creditors filed a motion in the bankruptcy case for an order requiring debtors to appear for an examination under Rule 2004. Over five months later, creditors filed a motion to reopen the chapter 7 case. The record provided no explanation for the delay. In their motion to reopen, creditors alleged that there was cause to reopen the case to allow creditors to examine debtors under oath as to allegedly concealed assets that would be subject to liquidation and distribution to debtors' creditors. The bankruptcy court, finding that creditors had delayed in filing the motion to reopen and did not exercise other remedies, found lack of good cause to reopen the case and denied the motion.
HOULE, PAPPAS, and JURY, Bankruptcy Judges

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