johnson parents motion

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF OHIO

EASTERN DIVISION

In re: : Case No. 14-57104

John Joseph Louis Johnson, III, : Chapter 11

:

Debtor and Debtor in Possession : Judge John E. Hoffman, Jr.

MOTION OF JOHN JOSEPH LOUIS JOHNSON II AND KRISTINA JOHNSON

FOR PROTECTIVE ORDER

John Joseph Louis Johnson II and Kristina Johnson (the “Johnsons”) move the Court for

a protective order related to the upcoming depositions of the Johnsons scheduled for August 21,

2015 (the “Depositions”). The Depositions are to be held pursuant to subpoenas issued by Cobalt

Sports Capital, LLC; RFF Family Partnership, LP; Capital Holdings Enterprises, LLC; Capital

Financial Holdings, LLC; Rodney Blum; EOT Advisors, Inc.; and ProPlayer Funding, LLC

(collectively, the “Objecting Creditors”). Debtor John Joseph Louis Johnson, III (the “Debtor”),

has also indicated that his counsel will examine the Johnsons at the Depositions. The Johnsons

seek a protective order (1) defining and limiting the scope of the Depositions as related to the

contested matter before the Court; and (2) designating a representative among the Objecting

Creditors to conduct the Depositions, so as to ensure that the Depositions are not unduly

burdensome on the Johnsons through the questioning by eight different attorneys over the course

of potentially fourteen hours.

This motion is made pursuant to Federal Rules of Civil Procedure (the “Civil Rules”) 26

and 45; Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) 9014, 7026 and 9016;

and Rule 7016-1(b) of the Local Rules of Bankruptcy Procedure (the “Local Rules”). In

accordance with Civil Rule 26(c) and Local Rule 7026-1(b), this Motion is supported by the

affidavit of Richard K. Stovall (the “Stovall Affidavit”), which (1) certifies that the Johnsons

Case 2:14-bk-57104 Doc 351 Filed 08/17/15 Entered 08/17/15 16:00:19 Desc Main Document Page 1 of 15

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have in good faith conferred and attempted to resolve this dispute with the Objecting Creditors

without Court action, (2) describes the extrajudicial means that Johnsons used to resolve this

dispute, and (3) states that Mr. Stovall has discussed the issues with counsel for the Objecting

Creditors and counsel for the Debtor on the phone and over e-mail.

As a result of the Debtor seeking an expedited hearing on this matter, no twenty-one

day notice is attached and a separate certificate of service will be filed. The reasons for this

Motion are more fully explained in the accompanying Memorandum in Support.

Respectfully submitted,

/s/ Richard K. Stovall

Richard K. Stovall (0029978)

Rick L. Ashton (0077768)

James A. Coutinho (0082430)

Allen Kuehnle Stovall & Neuman LLP

17 South High Street, Suite 1220

Columbus, Ohio 43215

T: (614) 221-8500 F: (614) 221-5988

[email protected]; [email protected]


Attorneys for John Joseph Louis Johnson II and Kristina

Johnson


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MEMORANDUM IN SUPPORT

I. INTRODUCTION & BACKGROUND

1. The Johnsons are the parents of the Debtor and are not parties to this case. They

have not entered an appearance in this case, and have not filed a proof of claim. The Johnsons do

not reside within this judicial district.

2. The Debtor commenced this Chapter 11 bankruptcy proceeding on October 7,

2014 (the “Petition Date”). On March 5, 2015, the Debtor filed the Motion of Debtor and

Debtor-in-Possession for an Order Converting Debtor’s Chapter 11 Case to a Case Under

Chapter 7 and Granting Related Relief Nunc Pro Tunc (the “Conversion Motion”) [Doc. No.

169]. Through the Conversion Motion, the Debtor seeks to convert this proceeding to Chapter 7.

3. Each of the Objecting Creditors has filed an objection to the Conversion Motion.

Through Bankruptcy Rules 9014, 7026, and 9016, and pursuant to scheduling orders issued by

the Court, the Objecting Creditors and the Debtor are engaged in discovery related to the

Conversion Motion prior to a hearing on the matter.

4. An issue that has been raised during the course of briefing the Conversion Motion

is whether the Debtor fully investigated claims of the bankruptcy estate, including any alleged

claims that the Debtor may hold against the Johnsons. See synopsis contained in Opinion and

Order Granting Motion for Entry of Protective Order Barring Depositions of Counsel (the

“Order”) [Doc. No. 327].

5. The Court has indicated that, in relation to the Conversion Motion, the “only

elements on which the Debtor has the burden of proof under § 1112(a) are that he is a debtor in

possession, that his case was not originally commenced as an involuntary case under Chapter 11

and that the case was not converted to Chapter 11 other than on his request.” Order at pg.4.


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However, the Court also stated that the Creditors have raised the Debtor’s alleged lack of good

faith as a basis for objecting to conversion, including whether the Debtor in good faith

investigated alleged claims of the bankruptcy estate against the Johnsons. Order at pg. 8.

6. The Objecting Creditors issued subpoenas to the Johnsons, indicating that they

would depose the Johnsons in relation to the Conversion Motion. See Notices of Issuance of

Subpoenas, Doc. Nos. 319 and 230, as amended and restated in Doc. No. 350, and copies of

subpoenas to the Johnsons attached as exhibits to Doc. Nos. 319 and 320 (the “Subpoenas”)1, 2.

7. According to the Subpoenas, the Depositions of the Johnsons are to occur on

August 21, 2015, starting at 10:00 a.m. The deposition of Mrs. Johnson will occur first, and the

deposition of Mr. Johnson will occur immediately after the end of the deposition of Mrs.

Johnson.

8. The Subpoenas are also accompanied by extensive requests for the Johnsons to

produce documents, communications and electronically stored information (the “Production

Demands”). A review of the Production Demands gives a view of the breadth of issues the

Objecting Creditors seek to review at the Depositions; that is, the Production Demands go well

beyond the subject matter of the Conversion Motion and focus almost exclusively on pre-petition

conduct of the Debtor and the Johnsons. Some example Production Demands include the

following:

a. All Documents, Communications and/or ESI relating to any funds or

monies advanced or transferred by each Objecting Creditor and which

form the basis for the claim of such Objecting Creditor in the Chapter 11

case. Subpoenas, Production Demand #1

1 The amended notice of the Depositions indicates that the Depositions were moved from August 17, 2015, to

August 21, 2015, consistent with an agreement of the parties. 2 Although the Notices of Issuance of Subpoena, Doc. Nos. 319 and 320, state that the Subpoenas have been issued

by all of the Objecting Creditors, there is no indication on the face of the Subpoenas served on the Johnsons that the

Depositions will be conducted by multiple parties. Only one attorney signed the Subpoenas and there is no listing of

the parties.


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b. All Documents, Communications and/or ESI relating to or evidencing the

disposition of any funds or monies advanced or transferred by each

Objecting Creditor to the Debtor, the Debtor’s Parents or anyone on the

Debtor’s behalf in connection with the loans (whether or not regarded as a

legitimate loan by the Debtor) to the Debtor evidenced by the claims of

the Objecting Creditors herein, including bank statements, cancelled

checks and/or wire transfer advances. Subpoenas, Production Demand #3.

c. All Documents, Communications and ESI between the Debtor and the

Debtor’s Parents. Subpoenas, Production Demand #7

d. All Documents, Communications and ESI between the Debtor and/or the

Debtor’s Parents on the one hand and any one or all of the Objecting

Creditors on the other hand. Subpoenas, Production Demand #9.

9. Consistent with Civil Rule 45, the Johnsons timely served their objections to the

Subpoenas on August 13, 2105.

10. As a result of the sheer number of Objecting Creditors and the Debtor’s intention

to participate, it is likely that there will be at least nine attorneys in attendance at the deposition,

including seven attorneys for the Objecting Creditors, counsel for the Debtor, and counsel for the

Johnsons.3

11. As a result of the scope of Depositions (as indicated by the Production Demands)

and the participation of many attorneys, the Johnsons understandably fear that each of the

Depositions will go well beyond the subject matter related to the Conversion Motion, and each

will stretch to the seven-hour limit set for depositions set forth in Civil Rule 30(d)(1). If both

Depositions take the full allotment of time, the Johnsons will be held until midnight.

3 For example, at the July 27, 2015, deposition of the Debtor, there were eight attorneys present for the Objecting

Creditors, five in-person and three appearing by phone.


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12. Recognizing the undue burden that the Depositions would have on the Johnsons

and the efficiencies of the depositions themselves, Marc Kessler, counsel for the Debtor

circulated an e-mail that was forwarded to counsel for all Objecting Creditors and Mr. Stovall

setting forth his client’s concerns for the Depositions. Id. at ¶5. The e-mail invited all counsel for

the Objecting Creditors and counsel for the Johnsons to a call to discuss the issues on the

afternoon of Friday, August 14, 2015. Id. Only one of the Objecting Creditors’ attorneys

responded and participated in the call: Jeffrey Levinson, counsel for RFF Family Partnership,

LP. Id. at ¶6.

13. During the call with Mr. Levinson and Mr. Kessler, Mr. Stovall expressed his

clients’ concerns about the breadth of the Depositions as well as the likelihood that the

Depositions would stretch until midnight if all attorneys were permitted to conduct unrestricted

questioning of the Johnsons. Id. at ¶7. However, Mr. Stovall’s concerns were not well-taken, as

Mr. Levinson stated that the Objecting Creditors would not designate one attorney to question

the Johnsons, did not agree with a limitation of the scope of the Depositions, and would, if

necessary, utilize the entirety of the seven-hour limit under the applicable Rules for each of the

deponents. Id.

II. JURISDICTION AND VENUE

As non-parties to this bankruptcy case, the Johnsons invoke the jurisdiction of this Court

solely for the purposes set forth in this motion pursuant to Civil Rule 26(c)(1). Nothing in this

motion should be considered a waiver by the Johnsons of any arguments related to the

jurisdiction of this Court, nor does the filing of this motion constitute consent of the Johnsons to

this Court issuing a final judgments in matters other than this motion.


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III. LAW & ARGUMENT

The Depositions sought by the Objecting Creditors will result in an undue burden on the

Johnsons. For the reasons set forth below, the Johnsons seek a protective order (1) defining and

limiting the scope of the Depositions to those matters related to the Conversion Motion; and (2)

designating a representative among the Objecting Creditors to conduct the Depositions.4

A. Standards for Issuance of a Protective Order.

Civil Rule 26 applies in contested matters such as the proceedings related to the

Conversion Motion. Fed.R.Bankr.P. 7026. Rule 26 provides, in relevant part, as follows:

(c) Protective Orders.

(1) In General. A party or any person from whom discovery is sought may

move for a protective order in the court where the action is pending—or as

an alternative on matters relating to a deposition, in the court for the

district where the deposition will be taken. The motion must include a

certification that the movant has in good faith conferred or attempted to

confer with other affected parties in an effort to resolve the dispute

without court action. The court may, for good cause, issue an order to

protect a party or person from annoyance, embarrassment, oppression, or

undue burden or expense, including one or more of the following:

(A) forbidding the disclosure or discovery;

(B) specifying terms, including time and place or the allocation of

expenses, for the disclosure or discovery;

(C) prescribing a discovery method other than the one selected by

the party seeking discovery;

(D) forbidding inquiry into certain matters, or limiting the scope of

disclosure or discovery to certain matters;

Fed.R.Civ.P. 26(c)(1)(A)-(D).

Civil Rule 45 also cautions attorneys to take reasonable steps to avoid undue burden

when issuing a subpoena. Fed.R.Civ.P. 45(d)(1) (“A party or attorney responsible for issuing and

4 Counsel for the Johnsons understands that the Objecting Creditors agreed to designate a single examiner for

purposes of questioning the Debtor during his deposition taken by the Objecting Creditors on July 27, 2015.


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serving a subpoena must take reasonable steps to avoid imposing undue burden or expense on a

person subject to the subpoena. The court for the district where compliance is required must

enforce this duty and impose an appropriate sanction—which may include lost earnings and

reasonable attorney's fees—on a party or attorney who fails to comply.”).

Under this backdrop, the Court must consider whether the Subpoenas seeking the

Depositions of the Johnsons create an undue burden on the Johnsons. In so doing, the Court

should recognize that the Johnsons are nonparties, and courts have long recognized that

discovery from nonparties is more limited than discovery from parties. See Ross v. Santa Clara

Cnty. Sheriff's Dep't, 2015 WL 4511341, at *2 (N.D. Cal. July 23, 2015) (“The rule is thus well

established that nonparties to litigation enjoy greater protection from discovery than normal

parties.”) (quoting Laxalt v. McClatchy, 116 F.R.D. 455, 458 (D.Nev.1986)); see also Am. Elec.

Power Co. v. United States, 191 F.R.D. 132, 136 (S.D. Ohio 1999).

“Whether a subpoena imposes an ‘undue burden’ upon a witness is a case specific inquiry

that turns on ‘such factors as relevance, the need of the party for the documents, the breadth of

the document request, the time period covered by it, the particularity with which the documents

are described and the burden imposed.’” Am. Elec. Power Co. 191 F.R.D. at 136 (quoting

Concord Boat Corp. v. Brunswick Corp., 169 F.R.D. 44, 53 (S.D.N.Y.1996)). This balancing

inquiry looks at the need for discovery against the burden imposed on the person subject to the

subpoena. Id. (citing Katz v. Batavia Marine & Sporting Supplies, 984 F.2d 422, 424

(Fed.Cir.1993); and Echostar Communications Corp. v. The News Corporation Ltd., 180 F.R.D.

391, 394 (D.Colo.1998)). “Demonstrating relevance is the burden of the party seeking

discovery.” Id.


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B. The Court should limit the scope of the Depositions to those matters relevant

to the Conversion Motion.

The issue presented to the Court in the Conversion Motion is a discrete issue, and the

Depositions should be limited to exploring that issue. In the Order, the Court referenced and

quoted the various objections of the Objecting Creditors, and indicated that “the [Objecting

Creditors] have argued that the Debtor may not be a debtor under Chapter 7 because he has

exhibited a lack of good faith since the Petition Date.” Order, pg. 6 (emphasis added). In

particular, the Objecting Creditors claim that the Debtor did not in good faith investigate alleged

claims against the Johnsons. That issue is all that needs to be examined at the Depositions.

The scope of the Depositions—set forth in the Subpoenas and as demonstrated by the

breadth of the Production Demands—goes well beyond the actions of the Debtor since the

Petition Date. They are not focused to address the Debtor’s good faith, or any of the elements for

conversion as required for the Conversion Motion to be granted. Instead, the Objecting Creditors

are improperly seeking information that goes to the core of their various claims against the

bankruptcy estate, and are asking for information that goes back through the entire relationship

of the Debtor, the Johnsons and each of the Objecting Creditors. It is clear that the intent of the

Objecting Creditors is not simply to depose the Johnsons in order to elicit facts that are related to

the burden of the Objecting Creditors in opposing the Conversion Motion—the alleged bad faith

of the Debtor since the Petition Date. Rather, the Objecting Creditors are seeking to use the

Depositions as a way to improperly gather information to validate their claims against the

bankruptcy estate in general.

The real issues related to the Debtor’s good faith as to potential claims against the

Johnsons are two-fold. First, did the Debtor conduct an investigation into any such potential

claims of the bankruptcy estate against the Johnsons? There is little that a deposition of the


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Johnsons can do to shed light on that question. What the Debtor did or did not do with respect to

his due diligence as a fiduciary of the estate would have appropriately been discovered from the

Debtor, not his parents. Second, was (or is) there any benefit to the bankruptcy estate in pursuing

any such alleged claims that may exist against the Johnsons? As to this issue, the Debtor has

indicated that he made a thorough investigation of the claims of the estate and determined that it

would be a waste of estate assets to pursue potential claims against the Johnsons. Specifically,

the Debtor stated that he “has not pursued claims against his parents because Debtor has no

reason to believe that his parents have any assets or any meaningful income from which to

satisfy claims that may exist.” Reply Memorandum Of Fact And Law In Support Of Motion Of

Debtor And Debtor-In-Possession For An Order Converting Debtor’s Chapter 11 Case To A

Case Under Chapter 7 And Granting Related Relief And Omnibus Response To Objections Re

Same at 27 [Doc. No. 197].

To the extent that the evaluation of the estate’s claims against the Johnsons need to be

tested, the scope of the Depositions should be limited to the same sort of financial analysis that

the Debtor conducted: is there any benefit to the bankruptcy estate in pursing claims against the

Johnsons? The Depositions should be limited to testing the Debtor’s statement that he “has no

reason to believe that his parents have any assets or any meaningful income from which to

satisfy claims that may exist.” Id.

Instead, the Johnsons are being forced to recollect related to transactions with seven

different creditors spanning many years pre-petition. The information that pertains to the pre-

petition conduct of the Debtor and the Johnsons is simply irrelevant as it relates to the criteria to

be used by this Court to judge the Conversion Motion. As demonstrated by the Production


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Demands, the intended scope of the Depositions is also overbroad, having no temporal or

subject-matter limits.5

Asking the Johnsons, non-parties to the bankruptcy proceeding and to sit through

extensive depositions dealing with irrelevant issues, is unduly burdensome.

In the event that the Objecting Creditors need additional testimony from the Johnsons in

relation to their claims, or in the event that an eventual Chapter 7 Trustee pursues the Johnsons,

there will be other opportunities for the facts related to the extensive pre-petition history to be

discovered. But for now, the scope of the Depositions should be limited to the issues pertaining

to the Conversion Motion and the Debtor’s alleged bad faith post-petition.

C. The Court should require the Objecting Creditors to select a single

representative to ask questions, and should limit the length of the

Depositions.

Without limitations set by the Court, it is very likely that the Johnsons are going to be

subjected to fourteen hours of depositions which will last until midnight.6 The experience of the

Johnsons’ counsel is that when multiple attorneys are permitted to ask questions at a deposition,

the length of the deposition increases dramatically. Attorneys feed off of each other. Each

attorney makes note of the questions that were not asked or issues that were not properly

covered, using their question period to revisit subjects over and over. And with the sought-after

broad scope of the Depositions, the Objecting Creditors have indicated that each will be going

into detail about their particular claims, dating many years prior to the filing of the case. Because

of these inefficiencies, it is extremely likely that the maximum time limit will be reached.

5 For example, Production Demand No. 3, seeks all communications between the Debtor and the Johnsons. This

demand would conceivably include such innocuous communications as a text message from Mrs. Johnson

congratulating the Debtor on a great win during a recent hockey game. 6 The seven-hour limit on depositions set forth in the Civil Rules is only for time on the record. If one accounts for

breaks and meals, the actual duration could be beyond fourteen hours.


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The individualized facts and circumstances of each of the Objecting Creditors’ claims are

irrelevant to the issues before the Court on the Conversion Motion. Whether the Debtor exhibited

good faith is a question common to all creditors. There is no reason that the Objecting Creditors

must go through each of their respective claims or each have a separate opportunity to ask about

the Debtor’s post-petition actions to investigate any alleged claims against the Johnsons. One

representative examiner will suffice.

It is unduly burdensome to the Johnsons to subject them to questioning by eight attorneys

over fourteen hours in relation to the Conversion Motion. The fact that the Depositions could last

that long is evidence that the Depositions will move beyond the discrete scope of the Conversion

Motion. The Objecting Creditors have refused to limit the questioning or timeframe, and what is

sure to result will be a physically, mentally, and emotionally draining day that is simply

unnecessary for these non-parties. Moreover, the potential of the Depositions going until

midnight makes travel for the Johnsons dangerous; they will either have to drive home in the

middle of the night while completely exhausted, or they will be forced to outlay additional funds

to purchase a hotel room.7 On top of it all, given the allegations surrounding their involvement

with the Debtor’s historical finances, this is unlikely to be the only time that the Johnsons are

going to be subject to depositions. There may be future contested matters or adversary

proceedings where that their testimony is sought. Taken altogether, the Depositions and

Production Demands are unduly burdensome on the Johnsons.

The Johnsons believe that the appropriate relief is to limit the timeframe of the

Depositions and for the Objecting Creditors to designate one party to question the Johnsons. The

Johnsons believe that a total of eight (8) hours for the combined Depositions should be more than

sufficient for the Objecting Creditors to explore the limited facts required for the Conversion

7 The Johnsons will have an approximate one-hour drive both to and from the deposition.


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Motion. If that time limit were set, accounting for lunch and other breaks, the Depositions would

conclude between 6:00 and 7:00 p.m.

The designation of one party among the Objecting Creditors to question the Johnsons will

serve to ensure that the relevant facts can be covered in the allotted time, and will further serve to

control the tenor of the Depositions.8 Given the fact that there are no individualized facts and

circumstances of the Objecting Creditors claims that are relevant to the Conversion Motion, there

should be no prejudice to the Objecting Creditors ordering a designated representative.9

IV. CONCLUSION

For the foregoing reason. the Court should issue a protective order:

1. defining and limiting the scope of the Depositions to those matters related to the

Conversion Motion;

2. designating a representative among the Objecting Creditors to conduct the

Depositions; and

3. granting such other relief as is appropriate.

Respectfully submitted,

/s/ Richard K. Stovall

Richard K. Stovall (0029978)

Rick L. Ashton (0077768)

James A. Coutinho (0082430)

Allen Kuehnle Stovall & Neuman LLP

17 South High Street, Suite 1220

Columbus, Ohio 43215

T: (614) 221-8500 F: (614) 221-5988



Attorneys for John Joseph Louis Johnson II and Kristina

Johnson

8 The Johnsons note that the Objecting Creditors designated one party to complete the questioning of the Debtor

during his deposition. 9 There are a number of highly skilled and competent attorneys representing the Objecting Creditors, all of whom

have been intensely involved in matters pertaining to the Conversion Motion. It would be possible for the Objecting

Creditors to choose one attorney to be a competent representative of the group.


coutinho

Typewritten Text

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF OHIO

EASTERN DIVISION

In re: : Case No. 14-57104

John Joseph Louis Johnson, III, : Chapter 11

:

Debtor and Debtor in Possession : Judge John E. Hoffman, Jr.

AFFIDAVIT OF RICHARD K. STOVALL Richard K. Stovall, being duly cautioned and sworn, deposes and states that:

1. I am over the age of eighteen and have personal knowledge of all the facts

testified to herein.

2. I represent John Joseph Louis Johnson II and Kristina Johnson (the “Johnsons”),

the parents of Debtor John Joseph Louis Johnson, III (“Debtor”), in connection with the

subpoenas (“Subpoenas”) that had been served on the Johnsons by Cobalt Sports Capital, LLC,

RFF Family Partnership, LP, Capital Holdings Enterprises, LLC, Capital Financial Holdings,

LLC, Rodney Blum, EOT Advisors, Inc., and ProPlayer Funding, LLC (“Objecting Creditors”).

3. The Subpoenas demand that the Johnsons travel to Bloomfield Hills, Michigan on

August 21, 2015 for their depositions (the “Depositions”). The Subpoenas further demand that

the Johnsons produce certain documents.

4. Pursuant to Federal Rule of Civil Procedure 26(c) and Local Rule 7026-1(b), I

hereby certify that the Johnsons have in good faith conferred and attempted to resolve their

dispute over the Depositions with the Objecting Creditors without Court action. As discussed

below, I have discussed or attempted to discuss the issues relevant to the Subpoenas with

various attorneys for the Objecting Creditors, and have taken other extrajudicial steps that are

also detailed below.


coutinho

Typewritten Text

EXHIBIT A
