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IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION In re: PEREGRINE FINANCIAL GROUP, INC. Debtor. ) ) ) ) ) )

Chapter 7 Case No. 12-27488 (CAD) Hon. Carol A. Doyle

LIMITED OBJECTION OF JPMORGAN CHASE BANK, N.A. TO THE TRUSTEES ROUTINE MOTION TO AUTHORIZE EXAMINATION OF FINANCIAL INSTITUTIONS PURSUANT TO FEDERAL RULE OF BANKRUPTCY PROCEDURE 2004 AND LOCAL RULE 9013-9(A)(10) JPMorgan Chase Bank, N.A. (JPMC), by and through its undersigned attorneys, hereby submits this limited objection (the Objection) to the Trustees Routine Motion to Authorize Examination of Financial Institutions Pursuant to Federal Rule of Bankruptcy Procedure 2004 and Local Rule 9013-9(A)(10) (the Motion) [Dkt. No. 59]. opposition to the Motion, JPMC respectfully states as follows: 1. On July 31, 2012, Ira Bodenstein, not individually but solely as Chapter 7 trustee In limited

(the Trustee) for the estate of Peregrine Financial Group, Inc. (the Debtor), filed the Motion, in which he generally seeks authority to issue subpoenas pursuant to Federal Rule of Bankruptcy Procedure 2004 (Rule 2004) to various financial institutions, including JPMC, for documents and potential oral examination. 2. JPMC does not object to the Trustees being granted general authority to issue

subpoenas pursuant to Rule 2004 upon JPMC. However, although styled as a routine motion under this Courts Local Rules, certain of the proposed terms and conditions upon which the Trustee seeks to conduct the proposed examinations are anything but routine. Most notably, the Trustees proposed order that would prohibit subpoena respondents from recouping any fees and costs incurred therewith is an exceptional, and impermissible, departure from the Federal

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Rules and the Debtors own contractual undertakings.

In addition, the Motion appears to

contemplate subpoenas relating to non-debtor accounts, which JPMC reserves the right to seek to modify or quash to the extent such subpoena is unduly burdensome or beyond the scope of Rule 2004. Finally, the Motion seeks authority to serve the respective Chief Executive Officers of each institution, which JPMC views as inefficient and unnecessary. authorized its counsel in this matter to accept service. I. The Rule 2004 Motion Seeks to Impermissibly Modify JPMCs Existing, Enforceable Contractual Right to Indemnification for Certain Fees & Expenses That May be Incurred by JPMC in Responding to the Trustees Subpoena(s) Prior to the Petition Date, the Debtor (as well as certain of its subsidiaries and/or Instead, JPMC has

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affiliates), maintained various accounts with JPMC. The rights and obligations of both the Debtor and JPMC with respect to these accounts were expressly governed by various account agreements and related terms and conditions, which have express contractual provisions requiring that the account customer (i.e., the Debtor) indemnify JPMC for all costs and expenses (including legal fees and expenses) that JPMC may incur as a result of disputes or claims related thereto. 4. As a threshold matter, it is black-letter law that a contractual provision providing

for a partys recovery of costs, expenses and attorneys fees that is otherwise enforceable under applicable state law is allowable under Section 502 of the Bankruptcy Code. See, e.g., In re Travelers Cas. & Sur. Co. of Amer. v. Pacific Gas & Elec. Co., 549 U.S. 443, 451 (2007); In re Sokolik, 635 F.3d 261, 267 (7th Cir. 2011) (citing Travelers and affirming recovery of costs and fees against debtor under promissory note and holding that [s]ince the promissory note was an enforceable contract, the fees were separately recoverable under the substantive law of contracts.). 2

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5.

However, in the Motion, the Trustee requests that the Court override any valid

and enforceable contractual rights and, instead, affirmatively prohibit financial institutions from charging the Trustee with any fees for any time that any representative of the financial institution may expend in investigating the existence of responsive documents and preparing any responsive documents for production to the Trustee. Motion, 9 (emphasis added). The Trustee provides no authority supporting this requested denial of costs and expenses that are otherwise contractually recoverable by JPMC against the Debtor, nor could he; as the Supreme Court made clear in Travelers, claims enforceable under applicable state law will be allowed in bankruptcy unless they are expressly disallowed. Travelers, 549 U.S. at 452. 6. Accordingly, in light of such well-established precedent and the existing, valid

and enforceable pre-petition contractual right to indemnification governing JPMCs account relationships with the Debtor this Court should deny the Trustees request for a blanket prohibition on JPMCs ability to recoup any fees and expenses. 7. It is important to underscore that JPMC is not seeking via this Limited Objection

the prospective allowance of any of its fees and expenses to be incurred by it in responding to any Rule 2004 discovery promulgated upon it by the Trustee or to limit the Trustees ability to assert any appropriate objection to any such fees and expenses the allowance of which JPMC may subsequently seek. Indeed, until it is served with a subpoena, JPMC cannot determine whether it will incur fees and expenses for which it might seek reimbursement. JPMC only seeks in this Limited Objection to prevent its contractual rights from being preemptively and inappropriately taken away by requesting that the Court strike Paragraph 4 from the Trustees Proposed Order in its entirety.

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II.

The Proposed Examination Related to Accounts Held by the Debtors Affiliates and/or Subsidiaries May Exceed the Allowable Scope of Rule 2004 In addition to seeking documents related to accounts in the name of the Debtor,

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the Motion suggests that the Trustee also intends to seek production of documents relating to accounts held by the Debtors affiliates or wholly owned subsidiaries. Motion, 8. Although the scope of requests relating to any non-debtor entities will not be known until the Trustee has served any subpoena on JPMC, JPMC reserves and preserves all of its rights to object to any subpoena served under the authority of the Motion, including with respect to the scope or breadth of any document request therein. In particular, JPMC notes that document requests relating to non-debtor entities are often found to be unduly burdensome or otherwise exceed the allowable scope of Rule 2004. See, e.g., In re Wilcher, 56 B.R. 428, 434 (N.D. Ill. 1985) ([i]t is clear that Rule 2004 may not be used as a device to launch into a wholesale investigation of a non-debtors private business affairs.); In re DeShelter, 453 B.R. 295, (Bankr. S.D. Ohio 2011) (stating that a Rule 2004 examination should not be so broad as to be more disruptive and costly to the party sought to be examined than beneficial to the party seeking discovery). III. The Trustees Request to Serve Chief Executive Officers of Financial Institutions is Inefficient and Likely to Cause Unnecessary Delay As a final matter, the Motion requests that the Court permit the Trustee to serve

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subpoenas on each financial institution by delivery either to their registered agent at their principal place of business or to their respective Chief Executive Officers. For purposes of efficiency and the avoidance of delay, JPMC respectfully requests that the Court instead direct the Trustee to serve any subpoena to JPMC arising from the Motion to its undersigned attorneys whom JPMC has authorized to accept service thereof.

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WHEREFORE, JPMC respectfully requests that the Court (i) deny the Trustees request to prohibit the recovery of otherwise allowable claims for costs and expenses by striking Paragraph 4 from the Proposed Order in its entirety; (ii) direct the Trustee to serve any subpoena to JPMC arising from the Motion upon its undersigned attorneys, at the address set forth below; and (iii) grant such other relief as is just and equitable under the circumstances.

Dated: August 6, 2012

Respectfully submitted, JPMorgan Chase Bank, N.A. By: /s/ Thomas S. Kiriakos One of its Attorneys

Thomas S. Kiriakos Sean T. Scott Joshua M. Grenard Mayer Brown LLP 71 South Wacker Drive Chicago, Illinois 60606-4637 Telephone: (312) 782-0600 Facsimile: (312) 701-7711 Counsel to JPMorgan Chase Bank, N.A.