778 F.3d 1172 (11th Cir. 2015), 12-15595, In re Fisher Island Investments, Inc.
|Docket Nº:||12-15595, 13-15256, 13-15259, 14-11700, 14-11771|
|Citation:||778 F.3d 1172, 25 Fla.L.Weekly Fed. C 914|
|Opinion Judge:||HULL, Circuit Judge:|
|Party Name:||In re: FISHER ISLAND INVESTMENTS, INC., LITTLE REST TWELVE, INC., Debtors. JWL ENTERTAINMENT GROUP, INC., et al., Plaintiffs, FISHER ISLAND LIMITED, GROSVENOR TRADING HOUSE LIMITED, AREAL GROUP, Plaintiff-Appellants, v. SOLBY+WESTBRAE PARTNERS, 19 SHC, CORP., AJNA BRANDS, INC., 601/1700 NBC LLC, AXAFINA, INC., OXANA ADLER LLM, Petitioning Creditors|
|Judge Panel:||Before HULL, JULIE CARNES, and WALKER,[*] Circuit Judges.|
|Case Date:||February 20, 2015|
|Court:||United States Courts of Appeals, Court of Appeals for the Eleventh Circuit|
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Appeals from the United States District Court for the Southern District of Florida. D.C. Docket Nos. 1:12-cv-20939-KMW, 11-17047-AJC, D.C. Docket Nos. 1:12-cv-20018-PCH, 11-bkc-17047-AJC, D.C. Docket Nos. 1:12-cv-20939-KMW, 11-bkc-17047-AJC, D.C. Docket Nos. 1:12-cv-20018-PCH, 11-bkc-17047-AJC, D.C. Docket Nos. 1:12-cv-20018-PCH, 11-bkc-17047-AJC.
These consolidated bankruptcy appeals arise out of a dispute between two competing groups--appellee the Redmond Group and appellant the Zeltser Group1--over ownership of, and control over, three involuntary
debtors: Fisher Island Investments, Inc. (" Fisher Island" ), Little Rest Twelve, Inc. (" Little Rest" ), and Mutual Benefits Offshore Fund, Ltd. (" Mutual Benefits" ) (collectively, the " Alleged Debtors" ).2 We refer to this dispute as the " ownership issue."
Litigation of the ownership issue in three bankruptcy cases has yielded five consolidated appeals of four orders: (1) the district court's order denying the Zeltser Group's motion to withdraw reference of the ownership issue; (2) the district court's affirmance of the bankruptcy court's summary judgment order in favor of the Redmond Group in the Fisher Island and Little Rest cases; (3) the district court's order dismissing, for lack of standing, certain non-party appeals from the bankruptcy court's summary judgment order; and (4) the district court's affirmance of the bankruptcy court's final judgment in favor of the Redmond Group in the Mutual Benefits case.
After careful review of the record and the parties' briefs, and with the benefit of oral argument, we affirm all orders on appeal.
These bankruptcy proceedings are but a small part of global litigation that began with the unexpected death of Arkadi (" Badri" ) Patarkatsishvili in February 2008. Badri was an extremely wealthy businessman and one-time presidential candidate from the Republic of Georgia. The resulting contest between two factions over the ownership and control of Badri's assets, purportedly worth billions of dollars, has spawned litigation in the Republic of Georgia, the United Kingdom, Liechtenstein, the British territory of Gibraltar, and both state and federal courts in the United States. On one side of this protracted legal battle is the Redmond Group, consisting of Badri's immediate family and led by Badri's widow, Inna Gudavadze. The other side--the Zeltser Group--is led by Joseph Kay, Badri's distant relative and former employee.
Though complicated by " an ever-shifting labyrinth of corporations, trusts, partnerships, holding companies, and interested individuals," the parties' competing positions on the ownership issue are essentially as follows. According to the Redmond Group, Fisher Island and Little Rest are owned by the Valmore Trust and Mutual Benefits is owned by the Test Trust--both Gibraltar trusts that were set up for the benefit of Badri and his family. According to the Zeltser Group, Imedinvest Partners (" Imedinvest" ), a partnership formed in the Republic of Georgia, owns Fisher Island, Little Rest, and Mutual Benefits.
The dispute over ownership and control did not begin in the bankruptcy court. In a lawsuit filed by the then-trustee of the Valmore Trust, the Supreme Court of Gibraltar considered whether Badri or Kay was the beneficiary of the Valmore Trust. In 2009, after a nearly two-year proceeding, the Gibraltar Court concluded that the vast majority of the assets in the Valmore Trust were funded by Badri and held for the benefit of Badri's immediate family. After Kay abandoned his appeal of that judgment, the Gibraltar Court declared that Kay had no interest in the assets of the Valmore Trust, which belonged solely to Badri. The Gibraltar Court's decision
entailed an implicit finding that the Valmore Trust was valid.
Before the filing of the involuntary petitions in March 2011, the Zeltser Group advanced its theory of ownership in state courts in New York and Florida. In the New York action, attorney Emanuel Zeltser claimed, on behalf of Imedinvest and Joseph Kay, that the Valmore Trust was a " sham" and that Imedinvest, of which Kay was allegedly the managing partner, was the owner of Little Rest. On July 22, 2011, the New York court issued a decision rejecting the sham trust argument on multiple grounds, determining that Zeltser had no authority to represent Little Rest, and substituting attorneys for the Redmond Group as counsel for Little Rest. See Little Rest Twelve, Inc. v. Visan, No. 600676/2007 (N.Y. S.Ct. N.Y. Cnty. July 22, 2011) (order substituting counsel). Similarly, attorney Darin DiBello represented Kay in litigating the ownership and representation of Fisher Island in the Florida action. See Motion to Strike Complaint, Fisher Island Invs., Inc. v. Baker, No. 10-14866 (11th Jud. Cir. of Miami-Dade Cnty., Fla. Mar. 15, 2010).
II. BANKRUPTCY COURT PROCEEDINGS
A. Involuntary Petitions
On March 17, 2011, a group of six individuals and entities--Solby+Westbrae Partners; 19 SHC, Corp.; Ajna Brands, Inc.; 601/1700 NBC, LLC; Axafina, Inc.; and Oxana Adler (collectively, the " Petitioning Creditors" )--filed three separate involuntary Chapter 11 bankruptcy petitions in the U.S. Bankruptcy Court for the Southern District of Florida against Fisher Island, Little Rest, and Mutual Benefits. The involuntary petitions were filed as the parties anticipated key rulings on the ownership issue in the New York and Florida litigations.
The involuntary petitions asserted claims against the Alleged Debtors for approximately $32.4 million, $28.5 million of which was based on a promissory note (the " Note" ) purportedly executed by the Alleged Debtors and assigned to three of the Petitioning Creditors by a non-party, Areal Plus Group. The Petitioning Creditors, asserting that the Alleged Debtors were " affiliates," moved the bankruptcy court to jointly administer the three cases and to appoint a trustee to take control and possession of the Alleged Debtors' assets.
B. Ownership Issue
Two sets of attorneys--representing the Zeltser Group and the Redmond Group, respectively--entered appearances of record in the bankruptcy court, both purporting to act on behalf of the Alleged Debtors. On March 21, 2011, four days after the involuntary petitions were filed, the Zeltser Group, through attorney DiBello, filed answers on behalf of the Alleged Debtors, immediately admitting to the allegations in the involuntary petitions against the Alleged Debtors and consenting to the relief requested by the Petitioning Creditors.
The next day, the Redmond Group, through attorney Redmond, filed an emergency motion to strike the Zeltser Group's answers. The Redmond Group, claiming to be the actual authorized representatives of the Alleged Debtors, alleged that the involuntary petitions were improperly filed in an attempt to stay the state court litigation in Florida and New York. To adjudicate the underlying debt, the bankruptcy court had to decide who owned the Alleged Debtors, and thus who had the authority to retain counsel.
In response to the motion to strike, the Zeltser Group asked the bankruptcy court to deny the relief sought therein until resolving the question of who had the authority to act on behalf of the Alleged
Debtors. Notably, the Zeltser Group stated in its response that " the issues of proper ownership and control over the Alleged Debtor[s] should be litigated in due course before this Court."
Faced with these contradictory claims, the...
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