June 18, 2018

Bankruptcy Courts Have Authority to Compel Debtor to Sign Consent Directives

Authored by Eric (Rick) Rein

 in International Asset Recovery

A consent directive is an authorization providing for release of information or documents by a third party located anywhere in the world.  The form does not abrogate Fifth Amendment rights because it does not acknowledge that an account is in existence or is controlled by the party to sign the authorization.

The U.S. Supreme Court gave its blessing to consent directives in Doe v. United States, 487 U.S. 201 (1988).  District courts rely on the All Writs Act, 28 U.S.C. § 1651, to issue consent directives. In criminal cases, the authority comes from 28 U.S.C. § 1826, governing grand jury witnesses.  Federal agencies obtain consent directives based on their powers to issue subpoenas to compel testimony of witnesses.  In civil contexts, consent directives are authorized based on the broad discretion to supervise discovery.

In a case we argued, the Ninth Circuit Bankruptcy Appellate Panel in James F. Rigby, Jr. v. Michael R. Mastro, 2018 Bankr. Lexis 1671, on June 5, 2018, was the first court to address a bankruptcy court's authority to authorize the issuance of consent directives.  The court focused on "the obligations and enforcement mechanism created by the Code and the investigatory tools available to the trustee."  Specifically, authority was founded in Section 704 (giving a trustee the statutory duty to collect estate property), Section 105 (vesting bankruptcy courts with broad residual power) and Bankruptcy Rule 2004 (proving broad discovery powers).

Thus, a bankruptcy court has the power to compel the debtor to sign directives at the request of the trustee to investigate a debtor's affairs throughout the world.

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