Meridian Fin. Advisors, Ltd. v. Purchase (In re Shubh Hotels Pittsburgh, LLC)

Citation495 B.R. 274
Decision Date09 July 2013
Docket NumberAdversary No. 12–02353–JAD.,Bankruptcy No. 10–26337–JAD.
CourtUnited States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Western District of Pennsylvania
PartiesIn re SHUBH HOTELS PITTSBURGH, LLC, Debtor. Meridian Financial Advisors, Ltd, Trustee of the Shubh Hotel Creditor Trust, Plaintiff, v. Contract Purchase & Design, Inc. and C & M Installations, Inc., Defendants.

OPINION TEXT STARTS HERE

Crystal H. Thornton–Illar, Leech Tishman Fuscaldo & Lampl, LLC, Pittsburgh, PA, for Plaintiff.

Ronald B. Roteman, The Stonechipher Law Firm, Pittsburgh, PA, for Defendants.

MEMORANDUM OPINION

Jeffery A. Deller, Bankruptcy Judge.

The matters before the Court are a Motion to Intervene for the Limited Purpose of Filing a Motion for Stay and a Motion to Stay filed by proposed intervenor, Mr. Steve Lewis (“Mr. Lewis”). These matters are core proceedings over which the Court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 157(b)(2)(A) and 1334.

These motions concern a criminal defendant's assertion of his Fifth Amendment privilege against self-incrimination and the court's interest in “secur[ing] the just, speedy, and inexpensive determination of every action and proceeding.” SeeFed.R.Civ.P. 1.

It has been asserted that Mr. Lewis' role as the sole shareholder and president of the defendants, Contract Purchase & Design, Inc. and C & M Installations, Inc. (together, the Defendants), makes him a possible witness in this adversary proceeding (the “Adversary Proceeding”). Meanwhile, it has also been asserted that his indictment in a pending criminal action in the Northern District of Illinois implicates his privilege against self-incrimination under the Fifth Amendment. In essence, Mr. Lewis would like to use his privilege against self-incrimination as a shield preventing the prosecution of this civil adversary proceeding against his companies all the while he is under criminal indictment in the Northern District of Illinois. For the reasons set forth more fully below, the Court denies the motions filed by Mr. Lewis. As such, his intervention request will be denied, and the related motion to stay shall also be denied.

I.

The debtor, Shubh Hotels Pittsburgh, LLC (the “Debtor”), filed a voluntary petition under chapter 11 of the Bankruptcy Code on September 7, 2010 in case number 10–26337–JAD (the Lead Bankruptcy Case). The Debtor's amended chapter 11 plan filed April 6, 2011 (the “Plan”) was confirmed on May 20, 2011. ( See Case No. 10–26337–JAD, Doc. # 1390). Under the Plan, a creditor trust was to be formed pursuant to a separate trust agreement for the purpose of, among other things, prosecuting and settling avoidance actions. ( See Case No. 10–26337–JAD, Doc. # 927, § 1.1, p. 12). Pursuant to these provisions of the confirmed Plan, a creditor trust was created on or about June 9, 2011, to which plaintiff Meridian Financial Advisors, Ltd. was appointed as trustee (the “Creditor Trust”). ( See Case No. 12–02353–JAD, Doc. # 1, ¶¶ 9–10).1

On September 6, 2012, the Creditor Trust initiated the Adversary Proceeding by filing a complaint (the “Complaint”), claiming that the Debtor fraudulently transferred estate property to the Defendants in connection with proposed renovations to the Pittsburgh Hilton Hotel (the “Hotel”), which the Debtor operated prior to filing for bankruptcy. ( See Doc. # 1). In the Complaint, the Creditor Trust specifically avers that on or about May 19, 2006, the Debtor obtained a $42,700,000 loan from Column Financial, Inc. to fund renovations to and the purchase of the Hotel from Hilton Hotels Corporation. ( See id. at ¶ 18). The Creditor Trust further asserts that on or about May 2006, the Debtor contracted with the Defendants to provide goods and/or services related to the Hotel renovations ( see id. at ¶ 21), and between June 2006 and November 2007, Contract Purchase & Design, Inc. and/or C & M Installations, Inc. received either directly or indirectly over $13,000,000 for goods and services allegedly provided to the Debtor for renovations to the Hotel ( see id. at ¶ 22).

Subsequently, on or about August 17, 2007, the Debtor refinanced its loan with Column Financial, Inc., increasing the loan balance to $49,600,000, of which $4,800,000 was earmarked to fund a physical expansion of the Hotel (the “Expansion Reserve”). ( See id. at ¶¶ 23–24). On or about October 12, 2007, $2,464,109 from the Expansion Reserve was wire transferred directly to Contract Purchase 8b Design, Inc. and/or C & M Installations, Inc. (the Transfer). ( See id. at ¶ 26). The gravamen of the Creditor Trust's Complaint is that the Debtor received no goods or services of value from Contract Purchase & Design, Inc. and/or C & M Installations, Inc. in exchange for the Transfer. ( See id. at ¶ 28). The Creditor Trust alleges that the Defendants have been unjustly enriched, and seeks to avoid and recover the value of the Transfer pursuant to the Pennsylvania Uniform FraudulentTransfer Act, 12 Pa.C.S.A. §§ 5104(a)(1), 5104(a)(2), and 5105.

After the filing of the Complaint, the parties filed a Stipulation to Extend Time for Defendants to File an Answer to the Complaint on October 9, 2012, and a second stipulation to further extend the time on November 7, 2012. ( See Doc. 6, 8). The Defendants then filed a Motion to Extend Time for Filing a Response to the Complaint on November 29, 2012. ( See Doc. # 9). On the same day, Mr. Lewis filed a Motion to Intervene and Motion to Stay Adversary Proceedings ( see Doc. # 10), which he re-filed at the Court's request to correctly file as a two-part motion on December 6, 2012 ( see Doc. # 13). The Court granted the Defendant's Motion to Extend Time for Filing a Complaint on December 4, 2012, extending the deadline to file a response for a period of thirty days following the determination on the Motion to Intervene and the Motion to Stay the Adversary. ( See Doc. # 12).

In Mr. Lewis' Motion to Intervene and Motion to Stay the Adversary filed on December 6, 2012, Mr. Lewis asserts that his indictment in a pending criminal matter necessitates his intervention in the Adversary Proceeding. Mr. Lewis' request to intervene is made pursuant to 11 U.S.C. § 1109(a) and Fed.R.Civ.P. 24 (made applicable to the Adversary Proceeding by Fed. R. Bankr.P. 7024), and his stay request is made pursuant to the Fifth Amendment of the United States Constitution and Fed.R.Civ.P. 26 (made applicable to the Adversary Proceeding through Fed. R. Bankr.P. 7026). ( See Doc. # 13, ¶ 4).

On or about October 9, 2012, Mr. Lewis and Mr. Atul Bisaria (“Mr. Bisaria”) 2 were indicted in the United States District Court for the Northern District of Illinois at Case No. 12–CR–791 (the Criminal Proceeding). ( See Doc. # 13, Exhibit C, hereinafter the “Indictment”). The Indictment includes ten counts against Mr. Lewis and Mr. Bisaria and a forfeiture allegation for wire fraud and bank fraud in violation of 18 U.S.C. §§ 1343, 1014, and 2. Specifically, the indictment alleges that Mr. Lewis and Mr. Bisaria participated in a scheme to defraud Broadway Bank of Chicago, Illinois and Mutual Bank of Harvey, Illinois by falsely representing that loan proceeds from those banks were to be used to pay for renovations at the Ramada Plaza Hotel in Cincinnati, Ohio and the Doubletree Guest Suites in Boca Raton, Florida, when in fact the funds were diverted for other purposes. ( See Indictment, ¶ 3, 11, 15, 17, 22, 26, and 33–35). Mr. Lewis asserts that his intervening in and staying of the Adversary Proceeding is necessary because the Criminal Proceeding involves issues “substantiality related to the claims and defenses in this [A]dversary [P]roceeding,” and as such, “will each require Lewis' presence and participation, and involve many of the same documents, issues, claims and defenses.” ( See Doc. # 13, ¶ 1).

The Creditor Trust filed an Objection to the motions on January 22, 2013. ( See Doc. # 20). The Defendants filed a Supplemental Response and Joinder to Mr. Lewis' Motion to Intervene on the same day. ( See Doc. # 21). A hearing was held January 29, 2013. Parties filed Post–Trial Briefs on February 12, 2013, and Replies on February 19, 2013. ( See Doc. 24, 25, 27, 28). 3 The matter is now ripe for decision.

II.

As a preliminary matter, the Court will address the Creditor Trust's argument that Mr. Lewis failed to attach a pleading and assert a claim or defense, thereby failing to comply with the requirements of Fed.R.Civ.P. 24(c). Pursuant to Rule 24(c), [a] motion to intervene ... must state the grounds for intervention and be accompanied by a pleading that sets out the claim or defense for which intervention is sought.” It is undisputed that Mr. Lewis did not attach a pleading to his motion. Because Mr. Lewis did not attach pleading, and also because he has not articulated any claim or defense that relates to the underlying substance of the Complaint, the Court denies Mr. Lewis' Motion to Intervene as procedurally deficient.

Failure to comply with the requirements of Rule 24(c) will generally result in the denial of a motion to intervene. See Township of S. Fayette v. Allegheny County Housing Authority, 183 F.R.D. 451 (W.D.Pa.1998), affirmed 185 F.3d 863 (3d Cir.1999) (motion to intervene dismissed when movants did not submit the requisite proposed pleading); School Dist. Of Philadelphia v. Pennsylvania Milk Marketing Bd., 160 F.R.D. 66 (E.D.Pa.1995) (motion to intervene denied for failure to attach a pleading setting forth the claim or defense for which intervention was sought). However, courts have not required strict compliance with Rule 24(c) in certain circumstances. See, e.g., William v. Taylor, 465 F.Supp.2d 1267, 1273 n. 3 (N.D.Ga.2000) (motion to intervene granted despite failure to attach complaint where intervenor's claims were identical to plaintiffs', intervention would not unduly delay or prejudice rights of original parties, and the intervenor attached proposed complaint with explanation of the claims to a reply brief); McCausland v. Shareholders Management...

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