In an 11 page opinion published May 27, 2011, Judge Walsh granted a motion under F.R.C.P. 56(d) and quoted another opinion which says “where the facts are in possession of the moving party a continuance of a motion for summary judgment for purposes of discovery should be granted almost as a matter of course.” Judge Walsh’s opinion is available here (the “Opinion”).
This case stems from DBSI’s bankruptcy and subsequent transition to a chapter 11 liquidation. The Trustee alleged that DBSI was operated in order to siphon money from investors to DBSI insiders, who are the defendants in the adversary action in which this opinion was issued. Opinion at *3-4. Wavetronix, the LLC that is one of the defendants in this adversary action, is indirectly majority-owned by DBSI insiders. Opinion at *4.
DBSI transferred sums of at least $23,198,268 to Wavetronix between 2001 and 2006. The Trustee alleged that these transfers were loans evidenced by annual promissory notes, and moved for summary judgment that the promissory notes are enforceable and were breached by Wavetronix. Opinion at *5. Wavetronix responded by filing a motion under Rule 56(d) to defer a ruling on the Trustees motion until discovery has been made.
Judge Walsh’s Opinion
Judge Walsh began his discussion of Wavetronix's motion by analyzing Federal Rule of Civil Procedure 56(d), made applicable to bankruptcy proceedings pursuant to Federal Rule of Bankruptcy Procedure 7056. Judge Walsh quoted Costlow v. United States, 552 F.2d 560, 563-64 (3d Cir. 1977), for the proposition that "where the facts are in possession of the moving party a continuance of a motion for summary judgment for purposes of discovery should be granted almost as a matter of course." Opinion at *8.
In the Opinion, Judge Walsh determined that Wavetronix identified information within the Trustee's control which is essential to Wavetronix's opposition of the Trustee's motion for summary judgment. Opinion at *10. It is for that reason that Judge Walsh granted Wavetronix's motion to defer consideration of the Trustee's motion for summary judgment.
In this case, the local precedent regarding Rule 56(d) created a strong presumption that Wavetronix's motion would be granted. However, had Wavetronix failed to precisely follow the guidelines given by the Rule and the precedent within the Third Circuit, its motion could have been denied. The Opinion is worded such that it provides an excellent reminder that following proper procedure allows a party in litigation to take full advantage of protections provided by statutes or precedent..