Section 363 of the Bankruptcy Code provides for a trustee or debtor-in-possession to sell property of the bankruptcy estate outside of the ordinary course of business. To facilitate such sales, § 363(f) of the Bankruptcy Code permits a trustee or debtor-in-possession to sell such property “free and clear of any interest in such property” under certain circumstances. Pursuant to § 363(f), bankruptcy courts throughout the country routinely enter orders approving sales of assets free and clear of interests, liens, claims and encumbrances. But buyer beware: There may be hidden discovery obligations that give rise to unexpected claims and potential liabilities and costs. One place to look for such hidden claims, liabilities and costs is in the electronic files, records and data a buyer may acquire out of a bankruptcy estate.

As with most discovery or investigative issues, cooperation and forward thinking can be fruitful in the bankruptcy context, especially when considering asset transfers. While it can be very difficult for a standard plaintiff and defendant to cooperate in discovery, it may be even harder in a bankruptcy proceeding, where the interests of debtors, trustees, creditors, affiliated entities, regulators and governmental entities and asset-purchasers vary significantly and where key facts and circumstances may be uncertain or unknown. Despite this, there are usually cooperative steps that can be taken regarding data that help move the bankruptcy to a close and facilitate management of ongoing and future discovery obligations and issues.

Bankruptcy courts are faced with increasing discovery disputes over electronic discovery. One increasingly prevalent topic of contention is the production and use of metadata, which can be used in a variety of ways in avoidance actions and other adversary proceedings. This article will outline what metadata actually means, how it is produced, and some of the issues that can arise both inside and outside of bankruptcy in the discovery and use of metadata.

The dictionary definition of metadata is, simply, “data about data.” In litigation discovery, metadata is best understood as information about a document other than the content of the document visible in a printed copy of the document.

The types and amounts of metadata available for a particular document being produced in discovery vary based on the original format of the document. For example, an electronic email file such as .msg file or .html file (as opposed to a printout of the same email) would include, among other metadata, date sent, time sent, to, from, cc and bcc. A Microsoft Word file, on the other hand, even if it was a memorandum sent to the same individuals as the email, would not include the sender and recipients as metadata, but might include other information such as the date created and date last modified.

Real estate debtor principals who guaranty a debtor’s debts often face uphill battles to obtain stays pursuant to § 105 of the Bankruptcy Court of guaranty actions against them by secured creditors of the debtor. The bankruptcy court in In re Chicora Life Center, LC recently issued such a stay. That court applied traditional § 105 analysis to a guarantor with very favorable facts, making Chicora Life Center unlikely to be a harbinger of real estate mortgage guarantors obtaining stays more readily.