Conn. Attorney Gen v. Taylor (In re Taylor)

• Decision Date: 10 September 2019
• Docket Number: Case No.: 15-31208 (AMN)
• Court: U.S. Bankruptcy Court — District of Connecticut
• Parties: In re: PRISCILLA B. TAYLOR, Debtor STATE OF CONNECTICUT ATTORNEY GENERAL, GEORGE JEPSEN ON BEHALF OF MICHAEL MOSCOWITZ AND THE LAW OFFICES OF MICHAEL MOSCOWITZ, LLC Movant v. PRISCILLA B. TAYLOR, Respondent KARA S. RESCIA, Trustee

In re: PRISCILLA B. TAYLOR, Debtor

STATE OF CONNECTICUT ATTORNEY GENERAL, GEORGE JEPSEN ON BEHALF OF MICHAEL MOSCOWITZ AND
THE LAW OFFICES OF MICHAEL MOSCOWITZ, LLC Movant
v.
PRISCILLA B. TAYLOR, Respondent
KARA S. RESCIA, Trustee

Case No.: 15-31208 (AMN)

UNITED STATES BANKRUPTCY COURT DISTRICT OF CONNECTICUT NEW HAVEN DIVISION

September 10, 2019

Chapter 7

Re: ECF Nos. 245, 247

MEMORANDUM OF DECISION AND ORDER GRANTING RECONSIDERATION AND DENYING REQUEST FOR SANCTIONS UPON RECONSIDERATION

Appearances

Robert M. Singer, Esq.
Law Offices of Robert M. Singer, LLC
2572 Whitney Avenue
Hamden, CT 06518

Counsel for the Debtor

Robert J. Deichert, Esq.
Assistant Attorney General
55 Elm Street
P.O. Box 120
Hartford, CT 06141-0120

Counsel for State of Connecticut
Attorney General, George Jespen on
behalf of Michael Moscowitz and the
Law Offices of Michael Moscowitz, LLC,
State Court Appointed Trustee

Before the Court is a motion to reconsider an order denying a motion for sanctions ("Motion for Reconsideration"). ECF No. 247. The State of Connecticut Attorney General on behalf of Michael Moscowitz and the Law Offices of Michael Moscowitz, LLC ("State

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Court Defendants") seek reconsideration of the Court's Memorandum and Order Denying the Motion to Compel Abandonment and Motion for Sanctions (the "Decision"), ECF No. 245, pursuant to Fed.R.Bankr.P. 7052, 9023, and 9024. ECF No. 247. The Motion for Reconsideration is granted, but the result remains unchanged.

I. RELEVANT PROCEDURAL HISTORY

The Court assumes familiarity with the procedural history set forth in the Decision. In relevant part, the State Court Defendants' underlying motion sought sanctions pursuant to 11 U.S.C. §§ 362(k) and 105(a) against the Debtor, Priscilla Taylor ("Ms. Taylor") and her counsel, Robert Singer, Esq. ("Attorney Singer"), for alleged violations of the automatic stay by the exercise of control over litigation pending before the Connecticut Superior Court entitled Priscilla B. Taylor v. Michael Moscowitz, case number NNH-CV-16-6061858-S ("State Court Litigation") at a point in time when only the Chapter 7 Trustee had authority to prosecute the litigation ("Motion for Sanctions"). ECF No. 220. Specifically, the State Court Defendants identified five filings in the State Court Litigation they allege violated the automatic stay, including state court docket entry numbers 113.00, 114.00, 117.00, 119.00, and 121.00. ECF No. 220, p. 2.

The Decision concluded that the State Court Defendants were not entitled to sanctions against Ms. Taylor or Attorney Singer because 1) their request was moot, and more importantly, 2) they lacked prudential standing to seek sanctions pursuant to § 362(k). ECF No. 245.

The State Court Defendants now seek reconsideration on the following points:

(1) that the Court, without explanation, applied the nunc pro tunc doctrine to hold State Court Defendants' request for sanctions moot and the Court should reconsider its application by balancing the equities of the case; and,

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(2) that the Court failed to address the State Court Defendants' argument that the Court should exercise its discretion pursuant to § 105(a) to impose sanctions against Attorney Singer.

ECF No. 247.

The State Court Defendants do not seek reconsideration of the denial of sanctions against Ms. Taylor, but only the denial of sanctions as against Attorney Singer. ECF No. 247-1, p. 1, fn. 1. Additionally, the State Court Defendants do not request reconsideration of the conclusion that the State Court Defendants lacked prudential standing under § 362(k). ECF No. 247-1, P. 17, fn. 10. Attorney Singer objected to the Motion for Reconsideration and the State Court Defendants responded to his objection. See ECF Nos. 254, 256.

II. GOVERNING LAW

Standard for Reconsideration

Fed.R.Bankr.P. 9023 makes Fed.R.Civ.P. 59 applicable to bankruptcy proceedings while Fed.R.Bankr.P. 9024 makes Fed.R.Civ.P. 60 applicable to bankruptcy proceedings. Fed.R.Civ.P. 52 permits a court to amend its finding or make additional findings and to amend its judgment accordingly upon motion by a party.¹ The determination of whether a motion for reconsideration should be granted is within the "sound discretion of the court." Chorches v. Trinity Lutheran Church (In re Peburn), Docket Nos. 06-30835 (ASD), 10-03022, 76, 2013 Bankr. LEXIS 1394, at *3 (Bankr. D. Conn. Apr. 5, 2013)(citing Mendell ex rel. Viacom, Inc. v. Gollust, 909 F.2d 724, 731 (2d Cir. 1990)).

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While Fed.R.Civ.P. 59 does not provide specific grounds for amending or reconsidering a judgment, it is well settled that the grounds for granting a motion for reconsideration in the Second Circuit are: (1) an intervening change of controlling law; (2) the availability of new evidence; or (3) the need to correct a clear error or prevent manifest injustice. Kolel Beth Yechiel Mechil of Tartikov, Inc. v. YLL Irrevocable Tr., 729 F.3d 99, 104 (2d Cir. 2013)(citing Virgin Atl. Airways, Ltd. v. Nat'l Mediation Bd., 956 F.2d 1245, 1255 (2d Cir. 1992). "Rule 59 is not a vehicle for relitigating old issues, presenting the case under new theories, securing a rehearing on the merits, or otherwise taking a 'second bite at the apple'...." Analytical Surveys, Inc. v. Tonga Partners, L.P., 684 F.3d 36, 52 (2d Cir. 2012), as amended (July 13, 2012)(citing Sequa Corp. v. GBJ Corp., 156 F.3d 136, 144 (2d Cir. 1998)). "The standard for granting [a Rule 59 motion for reconsideration] is strict, and reconsideration will generally be denied unless the moving party can point to controlling decisions or data that the court overlooked." Shrader v. CSX Transp., Inc., 70 F.3d 255, 257 (2d Cir. 1995).

To the extent the Motion for Reconsideration seeks relief pursuant to Fed.R.Bankr.P. 9024, the State Court Defendants failed to state whether they are claiming relief under Fed.R.Civ.P. 60(a), for a clerical mistake, or if they are claiming relief under Fed.R.Civ.P. 60(b), for relief from a final judgment, order, or proceeding.²

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Despite the failure to identify one of the six enumerated criteria set forth in Fed.R.Civ.P. 60(b), the Court interprets the Motion for Reconsideration as seeking relief under Fed.R.Civ.P. 60(b)(1) and, to the extent it may apply, 60(b)(1)(6). "A motion for relief from judgment is generally not favored and is properly granted only upon a showing of exceptional circumstances." McInnis v. Town of Weston, 458 F. Supp. 2d 7, 11 (D. Conn. 2006)(citing United States v. Int'l Broth. of Teamsters, 247 F.3d 370, 391 (2d Cir. 2001)(discussing Rule 60(b)). Under Rule 60, "[t]he burden of proof is on the party seeking relief." Int'l Broth. of Teamsters, 247 F.3d at 391. "[W]hether to grant a party's Rule 60(b) motion is committed to the 'sound discretion' of the [] court." Stevens v. Miller, 676 F.3d 62, 67 (2d Cir. 2012)(citing Montco, Inv. v. Barr (In re Emergency Beacon Corp.), 666 F.2d 754, 760 (2d Cir.1981)). "A bankruptcy court abuses its discretion if its decision is based on an error of law or clearly erroneous factual findings, or 'cannot be located within the range of permissible decisions.'" In re Sapphire Development, LLC, 523 B.R. 1, 5 (D. Conn. 2014)(quoting Zervos v. Verizon New York, Inc., 252 F.3d 163, 169 (2d Cir. 2001)).

Nunc Pro Tunc Doctrine & Abandonment by a Chapter 7 Trustee

The first issue raised by the Motion for Reconsideration is the application of the nunc pro tunc doctrine in connection with a Chapter 7 Trustee's abandonment. Generally, "[n]unc pro tunc, Latin for 'now for then,' refers to a court's inherent power to enter an order having retroactive effect." In re World Trade Ctr. Lower Manhattan Disaster Site Litig., 758 F.3d 202, 214 (2d Cir. 2014)(citing Iouri v. Ashcroft, 487 F.3d 76, 87 (2d Cir. 2007)).

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The application of the nunc pro tunc doctrine to a bankruptcy trustee's abandonment of property is not novel and Justice Cardozo explained the genesis of the concept in Brown v. O'Keefe, 300 U.S. 598 (1937):

Whatever title or inchoate interest may have passed to the trustee was extinguished by relation as of the filing of the petition when the trustee informed the court that the shares were burdensome assets, and was directed by the court to abandon and disclaim them. In such case "the title stands as if no assignment had been made." A precise analogy is found in the law of gifts and legacies. Acceptance is presumed, but rejection leaves the title by relation as if the gift had not been made.
Brown, 300 U.S. at 602 (citations omitted); see also Sessions v. Romadka, 145 U.S. 29 (1892); Sparhawk v. Yerkes, 142 U.S. 1 (1891).

Similarly, the Second Circuit has held that:

When the trustee in bankruptcy abandons an asset, he is to be treated as having never had title to it; the abandonment is said to relate back, so that "the title stands as if no assignment had been made."
Rosenblum v. Dingfelder, 111 F.2d 406, 409 (2d Cir. 1940)(citing Brown, 300 U.S. at 602).

Thus, "[u]pon a trustee's abandonment, the abandoned property reverts to the debtor and the debtor's rights to the property are treated as if no bankruptcy petition was filed." 5-554 Collier on Bankruptcy ¶ 554.02 (citing In re Dewsnup, 908 F.2d 588, 590 (10th Cir. 1990), aff'd, 502 U.S. 410 (1992)). In other words, "[w]hen property of the bankrupt is abandoned, the title reverts to the bankrupt, nunc pro tunc, so that he is treated as having owned it continuously." Moses v. Howard Univ. Hosp., 606 F.3d 789, 795 (D.C. Cir. 2010)(internal quotation marks and citations omitted); see also Wallace v. Lawrence Warehouse Co., 338 F.2d 392, 395, n.1 (9th Cir. 1964)("[t]he ordinary rule is that, when a trustee abandons property of the bankrupt, title reverts to the bankrupt, nunc pro tunc."). Nunc pro tunc reversion, "is a fiction, and a fiction is but a convenient device, invented by courts to aid them in achieving a just result. It is not a categorical imperative,

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to be blindly followed to a result that is unjust." Wallace, 338 F.2d at 395 n.1; see also In...