Comm. of Unsecured Creditors of Exeter Holding v. Haltman

• Decision Date: 29 May 2020
• Docket Number: 13-CV-5475(JS)(AKT)
• Parties: OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF EXETER HOLDING, LTD., Plaintiff, v. LINDA HALTMAN, et al., Defendants.
• Court: U.S. District Court — Eastern District of New York

OFFICIAL COMMITTEE OF UNSECURED CREDITORS

OF EXETER HOLDING, LTD., Plaintiff, v. LINDA HALTMAN, et al., Defendants.

13-CV-5475(JS)(AKT)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

May 29, 2020

MEMORANDUM & ORDER

APPEARANCES

For Plaintiff:

John D. Roesser, Esq.

Roesser PLLC

12 East 49th Street

New York, New York 10017

For Defendants:

Linda Haltman,

Michael Haltman, &

Samantha Haltman

Marc A. Pergament, Esq.

Marc J. Weingard, Esq.

Weinberg, Gross & Pergament, LLP

400 Garden City Plaza, Suite 403

Garden City, New York 11530

Larry Frank

Norma E. Ortiz, Esq.

Ortiz & Ortiz, L.L.P.

127 Livingston Street

Brooklyn, New York 11201

Bruce Frank

Bruce Frank, prose

1926 South Pearl Street

Denver, Colorado 80210

Kathleen Frank

Kathleen Frank, prose

1926 South Pearl Street

Denver, Colorado 80210

10295 Dowling Court

Highlands Ranch, Colorado 80126

Arnold & Sondra

Frank Irrevocable

Trust

Arnold & Sondra Frank, prose

10873 Northgreen Drive

Lake Worth, Florida 33449

SEYBERT, District Judge:

Upon referral from this Court (Oct. 8, 2019 Elec. Order), Magistrate Judge A. Kathleen Tomlinson recommends that the Court (1) DENY plaintiff The Official Committee of Unsecured Creditors of Exeter Holding, Ltd.'s ("Plaintiff") partial motion for summary judgment (Pl. Mot., D.E. 342) and (2) GRANT defendant Samantha Haltman's ("Samantha") motion for summary judgment (Def. Mot., D.E. 334). (Report and Recommendation ("R&R"), D.E. 358.) Plaintiff objects to the R&R in part. (Pl. Obj., D.E. 362). For the following reasons, Plaintiff's objections are OVERRULED and the R&R is ADOPTED in its entirety. Plaintiff's motion is DENIED and Samantha's motion is GRANTED.

I. Background and Proceedings

The Court assumes the parties' familiarity with the extensive procedural history of this case and will discuss the facts only as necessary for the pending motions. The Court directs the parties' attention to its Memorandum and Order concerning Defendants' Motion to Dismiss (Mar. 30, 2018 M&O, D.E. 278), along with Judge Tomlinson's R&R and previous R&Rs (D.E. 151, 152, 179, 252, 253, 301) for a full recitation of the facts and procedural history of this matter.

Plaintiff alleges that the various Defendants defrauded Exeter, their closely held family-run corporation, by transferring funds to themselves, to trusts, and to other entities inDefendants' control for their personal use. (See generally Compl., D.E. 3-9.) As relevant here, Plaintiff seeks summary judgment against defendants Linda Haltman, Michael Haltman, Bruce Frank, Kathleen Frank, Larry Frank, and the Arnold and Sondra Frank Irrevocable Trust with respect to: (1) Count IV (Constructive Fraudulent Transfer under Bankruptcy Code ("Bankr.") § 548(a)(1)(B)); (2) Count V (Constructive Fraudulent Conveyance under New York's Debtor and Creditor Law ("DCL") §§ 273, 274, 275); (3) Count VI (Set-Aside of Avoidable Preferences under Bankruptcy Code § 547); (4) Count VII (Breach of Fiduciary Duty of Care); (5) Count VIII (Breach of Fiduciary Duty of Loyalty); and (6) Count IX (Aiding and Abetting Breach of Fiduciary Duty). (Pl. Mot.; R&R at 3.) Plaintiff objects only to the portion of the R&R that this Court deny its motion as to its claims for breach of fiduciary duty and the aiding and abetting of the breach of fiduciary duty (Counts VII, VIII, and IX). (Pl. Obj. at 1-2, 17.)

Next, Samantha's motion seeks summary judgment in her favor on Count XII (Turnover) and Count XIII (Unjust Enrichment). (Def. Mot.; R&R at 3.). There are no objections to Judge Tomlinson's recommendation that the Court grant Samantha's motion for summary judgment.

II. Legal Standard

Rule 56(a) of the Federal Rules of Civil Procedure provides that a "court shall grant summary judgment if the movantshows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." To determine whether the moving party has satisfied this burden, the Court is required to view the evidence and all factual inferences arising from that evidence in the light most favorable to the non-moving party. Doro v. Sheet Metal Workers' Int'l Ass'n, 498 F.3d 152, 155 (2d Cir. 2007); Woodman v. WWOR-TV, Inc., 411 F.3d 69, 75 (2d Cir. 2005). In reviewing an R&R, this Court "may accept, reject, or modify the recommended disposition" and "must determine de novo any part of the magistrate judge's disposition that has been properly objected to." FED. R. CIV. P. 72. "When a party makes no objections, or where it makes only conclusory or general objections, courts will review the magistrate's findings for clear error." Pagan v. Brown, No. 07-CV-0453, 2011 WL 3235769, at *1 (E.D.N.Y. July 28, 2011), aff'd, 485 F. App'x 454 (2d Cir. 2012).

"[E]ven in a de novo review of a party's specific objections, the court will not consider 'arguments, case law and/or evidentiary material which could have been, but were not, presented to the magistrate judge in the first instance.'" Brown v. Smith, No. 09-CV-4522, 2012 WL 511581, at *1 (E.D.N.Y. Feb. 15, 2012) quoting Kennedy v. Adamo, No. 02-CV-1776, 2006 WL 3704784, at *1 (E.D.N.Y. Sept. 1, 2006)); see also Wesley v. Alexander, No. 99-CV-2168, 2005 WL 1352593, at *6 (S.D.N.Y. June 8, 2005) (because magistrates play a crucial role within the federal judicialframework by assuming "some of the burden imposed on the district courts by a burgeoning caseload," . . . "the law is clear that when a dispositive motion is heard before a magistrate judge, the [litigants] must make all . . . arguments then and there, and cannot later add new arguments at subsequent stages of the proceedings" without a compelling reason) (internal quotation marks and citations omitted).

III. Samantha's Motion

The R&R recommends that Samantha's motion for summary judgment as to Count XII (Turnover) and Count XIII (Unjust Enrichment) be granted. (R&R at 19-28.) No party objects to this recommendation. This Court previously dismissed Plaintiff's claim against Samantha for aiding and abetting breach of fiduciary duty (Count IX). (Mar. 30, 2018 M&O at 31-33.) Plaintiff withdrew its claims for fraud and fraudulent conveyance as against Samantha. (R&R at 4.) Accordingly, as all other claims against Samantha have been dismissed or withdrawn, only the subject turnover and unjust enrichment claims remain. "To accept the report and recommendation of a magistrate judge to which no specific, timely objection has been made, the district judge need only be satisfied that there is no clear error apparent on the face of the record." Condoleo v. Guangzhou Jindo Container Co., 427 F. Supp. 3d 316, 319 (E.D.N.Y. 2019) (citations omitted). In reviewing the R&R for clear error on these issues, the Court finds none, and it ADOPTSthe recommendation that Samantha be granted summary judgment on these two remaining claims. Samantha's motion (D.E. 334) is GRANTED. The Clerk of the Court is directed to TERMINATE Samantha Haltman as a defendant.

IV. Plaintiff's Motion

A. Counts IV, V, and VI are DISMISSED

Plaintiff does not object to the recommendation that this Court deny Plaintiff summary judgment on its constructive fraudulent transfer (R&R at 28-34) and avoidable preference (R&R at 35-38) claims. In reviewing these portions of the R&R for clear error, the Court finds none, and ADOPTS the R&R in this respect. Accordingly, Plaintiff's motion for summary judgment is DENIED as to Count IV (Constructive Fraudulent Transfer under Bankr. § 548(a)(1)(B)), Count V (Constructive Fraudulent Conveyance under DCL §§ 273, 274, 275), and Count VI (Set-Aside of Avoidable Preferences under Bankr. § 547).

B. Counts VII, VIII, and IX

The R&R further recommends that this Court deny Plaintiff's motion for summary judgment as to its breach of fiduciary duty (R&R at 38-46) and aiding and abetting a breach of fiduciary duty (R&R at 47) claims. Plaintiff objects, arguing that in applying de novo review, this Court should conclude that the facts demonstrating Linda Haltman's ("Linda") breach of her fiduciary duty to Exeter are "beyond dispute." (Pl. Obj. at 1.)Plaintiff further contends that once this Court finds Linda's breach, there is no factual dispute as to the aiding and abetting claim against Larry Frank ("Larry") and Bruce Frank ("Bruce"). (Pl. Obj. at 13-14.)

Plaintiff submits a declaration from Brian A. Serotta, a CPA who reviewed Exeter's books and records (Serotta Decl., D.E. 363), with its objections, and asks the Court to review it pursuant to FED. R. CIV. P. 72(b)(3) (in resolving objections, the District Judge may "receive further evidence"). According to Plaintiff, the declaration "does not present evidence that is new in substance or nature, but rather lends further support for evidence and points already presented." (Pl. Obj. at 1, n.1.) The Court confines itself to the evidence presented to Judge Tomlinson, as "[i]t is not in the interests of justice to allow a party to wait until the Report and Recommendation or Order has been issued and then submit evidence that the party had in its possession but chose not to submit. Doing so would allow parties to undertake trial runs of their motion, adding to the record in bits and pieces depending upon the rulings or recommendation they received." Hynes v. Squillace, 143 F.3d 653, 656 (2d Cir. 1998) (internal quotation marks and citation omitted). If, as Plaintiff states, the declaration merely "lends further support" to evidence before the magistrate, this Court need not consider it.

Counts VII and VIII of the Complaint allege that Linda and Arnold Frank¹ breached their fiduciary duties to Exeter. To prove a defendant breached his or her fiduciary duty, a plaintiff must demonstrate: "[1] the existence of a fiduciary duty; [2] a knowing breach of that duty; and [3] damages resulting therefrom." Johnson v. Nextel Commc'ns, Inc., 660 F. 3d 131, 138 (2d Cir. 2011) (citations omitted). Judge Tomlinson concluded that there were material facts in dispute regarding Linda's breach of her fiduciary duties, precluding summary judgment on...