Congregants of Mosdos Chofetz Chaim Inc. v. Mosdos Chofetz Chaim Inc.

• Decision Date: 17 November 2021
• Docket Number: 21-CV-05654 (PMH)
• Parties: CONGREGANTS OF MOSDOS CHOFETZ CHAIM INC. a/k/a KIRYAS RADIN, Plaintiffs, v. MOSDOS CHOFETZ CHAIM INC., et al., Defendants.
• Court: U.S. District Court — Southern District of New York

CONGREGANTS OF MOSDOS CHOFETZ CHAIM INC. a/k/a KIRYAS RADIN, Plaintiffs,
v.
MOSDOS CHOFETZ CHAIM INC., et al., Defendants.

No. 21-CV-05654 (PMH)

United States District Court, S.D. New York

November 17, 2021

MEMORANDUM OPINION AND ORDER

PHILIP M. HALPERN, United States District Judge:

On April 22, 2021, the underlying adversary proceeding captioned In re Mosdos Chofetz Chaim Inc., No. 21-07023 (Bankr. S.D.N.Y. 2021) (“Adv. Proc.”) was commenced before Judge Robert D. Drain of the United States Bankruptcy Court for the Southern District of New York (“Bankruptcy Court”). Rabbi Mayer Zaks (“Appellant”) has since filed appeals from several orders issued by the Bankruptcy Court in the underlying adversary proceeding and in other adversary proceedings, which are currently pending before this Court.^[1] This particular appeal concerns the May 25, 2021 order (“Injunctive Order”) issued by Judge Drain in the underlying adversary proceeding, which enjoins Appellant from, inter alia: (1) entering or remaining on the real property owned by Congregation Radin Development, Inc. (“CRDI”), located at 1-50 Kiryas Radin Drive, Spring Valley, New York 10977 (the “Property”), including, without limitation, the yeshiva

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building located on the Property; and (2) disrupting, conducting, or interfering with any religious service or study taking place on the Property. (Adv. Proc., Doc. 24). Appellant also appealed from a prior, but substantively identical, version of the Injunctive Order on May 25, 2021.^[2]

On June 16, 2021, the Court heard oral argument from the parties and, inter alia, denied a temporary restraining order to Appellant, and granted Appellant permission to proceed by Order to Show Cause for a preliminary injunction. (In re Mosdos Chofetz Chaim Inc., No. 21-CV-04688, Doc. 13). During oral argument, Appellant stated that he “seeks injunctive relief on two, and only two, bases: (1) whether the bankruptcy court has subject matter jurisdiction to entertain the adversary proceeding which formed the basis for the bankruptcy court's May 24, 2021 injunction; and (2) whether Rabbi Mayer Zaks is subject to the bankruptcy court's May 24, 2021 injunction because of failure of service and/or notice of the proceeding.” (Id.). The Court, following the oral argument and based upon Appellant's stated limitations, directed that “[n]o other applications or arguments will be considered by the Court in connection with Appellant's preliminary injunction application.” (Id.). Appellant filed his papers in support of his motion for a stay pending appeal on June 25, 2021. (Id.; Docs. 14-16; Doc. 17, “App't Br.”). Mosdos Chofetz Chaim Inc. (“Mosdos”), Chofetz Chaim Inc., CRDI, and Rabbi Aryeh Zaks (collectively, “Appellees”) filed their joint opposition brief and exhibits annexed thereto on July 6, 2021. (Doc. 26, “Opp. Br.”).

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The Court assumes the parties' familiarity with the underlying facts associated with the inability of two brothers, each a rabbi, to get along, and the rest of the procedural history of this action.

STANDARD OF REVIEW

“The district court may entertain an application to stay an order of the bankruptcy court pending an appeal pursuant to Federal Rule of Bankruptcy Procedure 8007(b).” In re 461 7th Ave. Mkt., Inc., 623 B.R. 681, 688 (S.D.N.Y. 2020). “The request for a stay ‘requires application of the familiar four-factor test' laid out by the Supreme Court.” Id. (quoting In re Platinum Partners Value Arbitrage Fund L.P., No. 18-CV-05176, 2018 WL 3207119, at *3 (S.D.N.Y. June 29. 2018)). Those four factors are:

(1) whether the stay applicant has made a strong showing that [it] is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies

Nken v. Holder, 556 U.S. 418, 434 (2009) (quoting Hilton v. Braunskill, 481 U.S. 770, 776 (1987)). While “[t]he first two factors are the most critical, ” New York v. U.S. Dep't of Homeland Sec., 974 F.3d 210, 214 (2d Cir. 2020), “[t]he Second Circuit has held that these criteria should be applied ‘somewhat like a sliding scale . . . more of one excuses less of the other.'” In re Platinum Partners, 2018 WL 3207119, at *3 (quoting Thapa v. Gonzales, 460 F.3d 323, 334 (2d Cir. 2006)). “[A] stay is not a matter of right . . . rather, a stay is an exercise of judicial discretion, and [t]he party requesting a stay bears the burden of showing that the circumstances justify an exercise of discretion.” U.S. Dep't of Homeland Sec., 974 F.3d at 214 (internal quotation marks omitted).

ANALYSIS

I. Likelihood of Success on the Merits

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A. Subject Matter Jurisdiction

The first issue raised by Appellant's motion for a stay pending appeal is whether the Bankruptcy Court had subject matter jurisdiction over the underlying adversary proceeding.

“Bankruptcy jurisdiction is governed by 28 U.S.C. § 1334.” In re LightSquared, Inc., 539 B.R. 232, 240 (S.D.N.Y. 2015). “Section 1334 vests original jurisdiction in the district courts of ‘all civil proceedings arising under title 11, or arising in or related to cases under title 11.'” Id. (citing 28 U.S.C. § 1334(b)); see also In re Chateaugay Corp., 213 B.R. 633, 638 (S.D.N.Y. 1997). “The Southern District of New York has, by standing order, delegated its authority in this regard to the Bankruptcy Court.” In re LightSquared, Inc., 539 B.R. at 240 (citing In re Standing Order of Reference Re: Title 11, 12 Misc. 00032 (S.D.N.Y. Feb. 1, 2012)). “The Bankruptcy Court thus has what is commonly referred to as ‘related to' jurisdiction.” Id. “Related to” jurisdiction is broad, Celotex Corp. v. Edwards, 514 U.S. 300, 307-08 (1995), encompassing any proceedings that “might have any ‘conceivable effect' on the bankruptcy estate.” In re Cuyahoga Equip. Corp., 980 F.2d 110, 114 (2d Cir. 1992). A case has a “conceivable effect” on the bankruptcy estate “‘if the outcome could alter the debtor's rights, liabilities, options, or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankrupt estate.'” Bond Street Assocs., Ltd. v. Ames Dep't Stores, Inc., 174 B.R. 28, 32 (S.D.N.Y. 1994) (quoting Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984)). Moreover, “[a] bankruptcy court retains post-confirmation jurisdiction to interpret and enforce its own orders.” In re Petrie Retail, Inc., 304 F.3d 223, 230 (2d Cir. 2002). “Bankruptcy courts have been expressly granted jurisdiction to enter injunctive orders that are ‘necessary for the consummation of the [reorganization] plan.'” In re LightSquared, Inc., 539 B.R. at 241 (quoting 11 U.S.C. § 1142(b)) (alteration in original)).

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Here, while it is undisputed that the Bankruptcy Court had “related to” jurisdiction over the underlying adversary proceeding, Appellant attacks the extent of the Bankruptcy Court's postconfirmation jurisdiction. To that end, Appellant contends that the Bankruptcy Court lacked sufficient post-confirmation jurisdiction to issue the Injunctive Order, thereby rendering the Injunctive Order ultra vires. For the following reasons, however, Appellant's likelihood of success on this issue is nil.

It is well-settled that “once confirmation occurs, the bankruptcy court's jurisdiction shrinks.” In re Gen. Media, Inc., 335 B.R. 66, 73 (Bankr. S.D.N.Y. 2005). Consequently, for a bankruptcy court to exercise post-confirmation jurisdiction, two requirements must be satisfied. “First, the matter must have a close nexus to the bankruptcy plan or proceeding, as when a matter affects the interpretation, implementation, consummation, execution, or...