IN THE UNITED STATES BANKRUPTCY COURT

FOR THE WESTERN DISTRICT OF PENNSYLVANIA

In re:

CAESARS ENTERTAINMENT

OPERATING COMPANY, INC.,

et al., 

 Debtors. 

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OFFICIAL COMMITTEE OF 

SECOND PRIORITY 

NOTEHOLDERS, 

 Movant, 

v.

FRED J. KLEISNER, 

 Respondent.

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Chapter 11

Action pending in the United 

States Bankruptcy Court for the 

Northern District of Illinois (Case 

No. 15-01145 (ABG))

Miscellaneous No.: 16-206-JAD

Doc. No. 

Related to Document Nos. 2 -19

MEMORANDUM OPINION

On September 21, 2016, the Court conducted a hearing on the following 

matters: the Motion to Compel Respondent Fred Kleisner to Produce Documents

and Information in Response to the Subpoena (the “Motion to Compel”), the 

movant’s Expedited Motion for and Order Transferring the Motion to Compel to the 

United States Bankruptcy Court for the Northern District of Illinois (the “Motion to 

Transfer”), and the Non-Party Fred J. Kleisner’s Objection and Response in 

Opposition to Noteholders’ Expedited Motion for an Order Transferring the Noteholder 

Committee’s Motion to Compel (“Objection”).

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Upon due consideration of Motion to Transfer and the Objection thereto, the 

affidavits and other documents of record submitted by the parties in connection 

therewith, the arguments made by counsel at the hearing, and for the reasons set 

forth below, the Court shall enter an order that transfers the Motion to Compel 

to the United States Bankruptcy Court for the Northern District of Illinois at Case 

No. 15-01145 (ABG)) (the “Issuing Court”).

I.

The subpoena at issue is directed to Mr. Fred. J. Kleisner (the “Kleisner 

Subpoena”), who served as an independent director of Caesars Entertainment 

Corporation (“CEC”). According to the Motion to Compel, Mr. Kleisner is an 

alleged co-defendant in what is described by the movant as “a nearly 200-page 

adversary complaint alleging multiple claims ... [against the] core group of 

individuals who sat on the boards of CEC and/or [Caesars Entertainment 

Operating Company (“CEOC”)].” See Motion to Compel at para. 9.

The Motion to Compel avers that the lawsuit, which was filed in the Issuing 

Court at Adversary Proceeding No. 16-00522 (the Adversary Proceeding”), alleges 

claims against Mr. Kleisner sounding in breach of fiduciary duty. Id. The Motion 

to Compel further avers the Adversary Proceeding was filed after a bankruptcy 

examiner filed a report with the Issuing Court identifying potential claims against 

CEOC’s directors and CEC, and concluded that the potential aggregate damages 

could range from $3.6 billion to $5.1 billion. Id. at para. 8 and n.4. The movant 

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avers further in the Motion to Compel that the range of damages may be higher

than what was estimated by the examiner. Id.

Naturally, Mr. Kleisner disputes the allegations made in the Adversary 

Proceeding. According to the Objection, Mr. Kleisner is not an officer, director 

or employee of CEOC. In addition, counsel to Mr. Kleisner points out in their 

Objection that not one page of the examiner’s report contains a “finding that the 

CEOC estate has any claim against Kleisner personally.” See Objection at para. 

8. Indeed, Mr. Kleisner further avers that the examiner “found that Kleisner 

acted in good faith and that his statements [to the examiner] were credible.” Id.

The lawsuit described above is germane to the bankruptcy case pending 

in the Issuing Court because the Debtors have filed in that court a proposed 

Second Amended Plan of Reorganization (the “Plan”) which provides for a release 

of claims and causes of action asserted in the Adversary Proceeding.

The movant herein is a creditor-group contesting the Plan arguing, among 

other things, that the Plan’s releases are not fair and equitable. Factors that a 

bankruptcy court uses to determine whether a settlement is reasonable include

(but are not limited to) the complexity of the case at issue, the likelihood of 

success in the underlying litigation, and the possible difficulties of collecting on 

any judgment which might be obtained. See Protective Committee for 

Independent Stockholders of TMT Trailer Ferry, Inc. v. Andersen, 390 U.S. 414, 

424 (1967). Because the Kleisner Subpoena seeks documents sufficient to show 

Mr. Kleisner’s net worth, the movant avers that it is the “difficulties of collection” 

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prong of TMT Trailer that is the subject of the Kleisner Subpoena. See Motion to 

Compel at para. 10-11.

II.

The Kleisner Subpoena was issued out of the Issuing Court. The Kleisner 

Subpoena was served on counsel to the Respondent in Pittsburgh, Pennsylvania, 

who accepted service albeit with some reservations. As such, the merits Kleisner 

Subpoena is generally required to be heard in this judicial district because this 

Court is the “compliance court” for purposes of Rule 45. See, e.g., Cadence 

Pharms., Inc. v. Multisorb Techs., Inc., 16MC22G, 2016 U.S. Dist. LEXIS 107769 

at *5 (W.D.N.Y. Aug. 15, 2016).

The movant, however, seeks a transfer of the Motion to Compel to the 

Issuing Court pursuant to Fed.R.Civ.P. 45(f) which is incorporated into 

bankruptcy matters by operation of Fed.R.Bankr.P. 9016.

Subdivision (f) is a recent addition to Rule 45. The Advisory Committee 

Notes state that courts considering a transfer of compliance related motions

under Rule 45(f) should be primarily concerned with “avoiding burdens on local 

nonparties subject to subpoenas, and it should not be assumed that the issuing 

court is in a superior position to resolve subpoena-related motions.” See

Fed.R.Civ.P. 45(f) advisory committee notes to 2013 amendment.

Nonetheless, the Advisory Committee Notes further state that a “transfer 

may be warranted in order to avoid disrupting the issuing court’s management 

of the underlying litigation, as when that court has already ruled on issues 

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presented by the motion or the same issues are likely to arise in discovery in 

many districts.” Id.

Ultimately, according to the Advisory Committee Notes, “the proponent of 

transfer bears the burden of showing that” exceptional circumstances are 

present that warrant a transfer. Id. 

III.

This Court concludes that the movant has demonstrated exceptional 

circumstances that warrant transferring the Motion to Compel to the Issuing 

Court—namely the need for efficiency, uniformity and orderliness to the 

discovery process attendant to the Plan confirmation proceeding that is pending 

in the Issuing Court.

In this regard, the movant alleges without much dispute that the Kleisner 

Subpoena is one of “ten identical Subpoenas served [upon] officers and directors 

of Caesars Entertainment Corporation and/or Caesars Entertainment Operating 

Company.” Motion to Compel at 3. Furthermore, it is undisputed by the parties 

that the Bankruptcy Court sitting in the Southern District of New York has 

already transferred six of the ten subpoenas back to the Issuing Court, and the 

Issuing Court has ruled on the breath and scope thereof. Id., at par. 3-5. In light 

of the fact that the Issuing Court has already examined a significant number of 

the issues concerning similar subpoenas, it seems more appropriate for that

court (who has the first-hand knowledge of the parties and their respective

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circumstances) to rule on the compliance issues raised by the Kleisner 

Subpoena. 

The interests of justice further convince this Court to transfer the Motion 

to Compel because the Issuing Court is more than able to act swiftly to insure 

that discovery attendant to the litigation pending there is managed in a way that 

comports with the deadlines already established by the Issuing Court. Parks, 

LLC v. Tyson Foods, Inc., Misc. Action No. 15-634, 2015 WL 5008255 at *2 (W.D. 

Pa. Aug. 20, 2015). This Court’s conclusion is particularly acute in light of the 

September 26, 2016 deadline imposed by the Issuing Court for serving 

deposition notices as well as its October 31, 2016 deadline for completing all fact 

discovery.

IV.

Furthermore, this Court finds that a transfer to the Issuing Court will not

significantly burden Mr. Kleisner. The record reflects that at least on one 

occasion after service of the Kleisner Subpoena, counsel for Mr. Kleisner advised 

the movants that Mr. Kleisner consented to the transfer of the Motion to Compel 

to the Issuing Court. While there may be a dispute as to whether this consent 

was effectively retracted, the existence of this proposed consent is indicia as to 

Mr. Kleisner’s willingness to litigate the issues surrounding the Kleisner 

Subpoena before the Issuing Court.

In addition, the alleged location of Mr. Kleisner further demonstrates that 

he suffers no meaningful burden by the transfer. The record reflects that he 

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argues that he is neither a resident of Pennsylvania, nor is he employed or 

regularly transacts business within 100 miles of Pittsburgh, Pennsylvania. 

Declaration of Kleisner, Dkt. No. 19, Ex. A. Rather, at the hearing held on this 

matter it was contended that his residence, domicile and place of business is in 

the state of Washington. Without this Court making any affirmative finding that 

Mr. Kleisner’s residence, domicile or place of business is the state of Washington, 

these allegations are, at a minimum, an admission that Mr. Kleisner is currently 

located in the state of Washington. It would therefore appear that Mr. Kleisner 

concedes that when compared to the Western District of Pennsylvania, the 

Northern District of Illinois is a place that is not demonstrably inconvenient for 

Mr. Kleisner to appear and defend his interests. In fact, the Issuing Court is 

geographically closer to Mr. Kleisner’s alleged current location than is the 

Western District of Pennsylvania. In addition, the Court takes judicial notice

that the law firm representing him also has an office in the Northern District of 

Illinois. As such, this Court concludes that Mr. Kleisner is not made any worse 

off by the transfer of the Motion to Compel to the Issuing Court.

V.

Even if Mr. Kleisner suffers some modicum of inconvenience by the 

transfer, any possible burden placed on Mr. Kleisner is outweighed by the risk 

that proceedings in this Court will disrupt the Issuing Court’s management of 

the underlying litigation. The modicum of burden to Mr. Kleisner is also 

outweighed by the risk that the litigation of matters here may result in decisions 

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inconsistent with the Issuing Court’s rulings on the same or similar issues. As 

stated above, the Issuing Court is not only generally familiar with the facts and 

circumstances of the underlying case, it has already adjudicated challenges 

made by parties to similar subpoenas. This Court therefore believes the Issuing 

Court is specifically familiar with the precise discovery dispute that is contained 

in Kleisner’s Responses and Objections to the Kleisner Subpoena. The Issuing 

Court’s familiarity, when combined with the risk that this Court will either reach 

an inconsistent ruling or delay the proceedings in the Issuing Court, is an 

exceptional circumstance that warrants the immediate transfer of the Motion to 

Compel to the Issuing Court. See Parks, LLC v. Tyson Foods, Inc., Misc. Action 

No. 15-634, 2015 WL 5008255 at *2 (W.D. Pa. Aug. 20, 2015). 

VI.

Finally, for the sake of clarity, this Court is not ruling on any service of 

process issues, jurisdictional issues, or any other substantive or procedural 

issues that concern or relate to the Kleisner Subpoena. Those disputes, if any, 

are reserved for the Issuing Court to decide to the extent those sorts of issues

are subsumed in the Motion to Compel and the Objection thereto.

[Remainder of Page Intentionally Left Blank]

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As such, for the reasons stated on the record and as stated herein, the 

Court shall enter an order that provides for the transfer the Motion to Compel 

and Objection thereto, together with all papers filed at Miscellaneous 16-206-

JAD, to the United States Bankruptcy Court for the Northern District of Illinois 

at Case No. 15-01145 (ABG)).

Dated: September 21, 2016 ____________________________________

Jeffery A. Deller, Chief Judge

United States Bankruptcy Court 

cc: Ira Karoll, Esq., counsel to the movant

Roy W. Arnold, Esq., counsel to the respondent

FILED

CLERK

U.S. BANKRUPTCY

COURT - WDPA 9/21/16 9:39 am

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