Fetman v. Musso
| Decision Date | 25 February 2021 |
| Docket Number | 20-CV-1101 (MKB) |
| Parties | JACOB FETMAN, Appellant, v. ROBERT MUSSO as Trustee, Appellee. |
| Court | U.S. District Court — Eastern District of New York |
Appellant Jacob Fetman, proceeding pro se, filed this appeal on February 28, 2020, arising from a bankruptcy proceeding in the United States Bankruptcy Court for the Eastern District of New York (the "Bankruptcy Court"), under Chapter 7 of the United States Bankruptcy Code, 11 U.S.C. § 101 et seq. (Notice of Appeal, Docket Entry No. 1.) An involuntary Chapter 7 bankruptcy petition was filed against Appellant on August 11, 2015 (the "Bankruptcy Proceeding"), (see Involuntary Petition, In re Fetman, No. 15-43716 (Bankr. E.D.N.Y. Aug. 11, 2015), Docket Entry No. 1),1 and on October 28, 2015, Appellee was appointed as the trustee, (Notice of Appointment of Trustee, In re Fetman, No. 15-43716 (Bankr.E.D.N.Y. Oct. 28, 2015), Docket Entry No. 16). During the Bankruptcy Proceeding, on May 28, 2019, Appellant commenced an adversary proceeding against Appellee (the "Adversary Proceeding"), alleging self-dealing, self-enrichment, and "gross misconduct." (See Complaint, Fetman v. Musso (In re Fetman), No. 19-1067 (Bankr. E.D.N.Y. Feb. 14, 2020), Docket Entry No. 1.)
Appellant appeals from the Bankruptcy Court's February 14, 2020 order in the Adversary Proceeding granting Appellee's motion to dismiss the Adversary Proceeding. (Notice of Appeal 1.) For the reasons set forth below, the Court dismisses the appeal.
Appellant's underlying bankruptcy stems from a $20 million arbitration award obtained against him by Aish Hatorah New York ("Aish"), Appellant's former employer, and confirmed by the New York Supreme Court, Kings County. Aish Hatorah N.Y., Inc. v. Fetman, 998 N.Y.S.2d 305, 2014 WL 4816212, at *14 (Sup. Ct. 2014) (unpublished table decision), adhered to on reargument, 20 N.Y.S.3d 291 (Sup. Ct. 2015). The New York Supreme Court, Kings County, converted the arbitration award into a judgment against Fetman for $21.4 million (the "Arbitration Judgment"). (J., annexed to Declaration of Benjamin M. Oxenburg, Esq. in Support of Trustee's FRCP 12(b)(6) Motion to Dismiss Plaintiff's Complaint ("Oxenburg Decl.") as Ex. D, Fetman, No. 19-1067, Docket Entry No. 10-4.)
On August 11, 2015, Appellant's father filed an involuntary Chapter 7 bankruptcy petition against Appellant. (Involuntary Petition, In re Fetman, No. 15-43716.) On October 28, 2015, Appellee was appointed interim trustee. (Notice of Appointment of Trustee, In re Fetman, No. 15-43716.) On January 30, 2016, the Bankruptcy Court so-ordered a stipulation betweenAppellant, Aish, and the Appellee, which modified the automatic stay2 to permit Appellant to prosecute his appeals relating to the Arbitration Judgment in the New York Supreme Court Appellate Division, Second Department (the "Appellate Division"), (Stipulation Granting Partial Relief from Automatic Stay, In re Fetman, No. 15-43716 (E.D.N.Y. Jan. 30, 2016), Docket Entry No. 65), and on August 18, 2016, the Bankruptcy Court issued an order clarifying that Appellant could only prosecute four state court appeals, (see Order Clarifying Stipulation & Order, In re Fetman, No. 15-43716 (E.D.N.Y. Aug. 18, 2016), Docket Entry No. 124).
In June of 2017, after extensive litigation pertaining to enforcement of the Arbitration Judgment and sale by Appellee of two of Appellant's properties located at 4301 Tenth Avenue, Brooklyn, New York, and 4305 Tenth Avenue, Brooklyn, New York (the "Tenth Avenue Properties"), Appellant, Appellee, and Aish began settlement discussions. (See Letter dated June 23, 2017, In re Fetman, No. 15-43716 (E.D.N.Y. June 23, 2017), Docket Entry No. 215; Status Letter, In re Fetman, No. 15-43716 (E.D.N.Y. June 23, 2017), Docket Entry No. 216.) On November 17, 2017, the parties reached a basic agreement (the "Global Settlement").3 On April 6, 2018, Appellee filed a motion for the Bankruptcy Court's approval of the Global Settlement, and Appellant, Appellee, and Aish, as well as several other parties in interest and counsel for each party, were all signatories to the Global Settlement. The Global Settlement provided, inter alia, that Appellant would pay Aish $2.5 million on or before April 23, 2018, to satisfy its judgment and stated that:
The parties to the appeal of the Judgment in the New York Appellate Division, Second Department shall consent to Aish's motion to extend its time to file its opposition to the appeal. In the event that there is a default under this Settlement Agreement and the terms of this agreement are not fully effectuated, the parties to the appeal shall consent to extend the time of the appeal so that Aish shall have at least one month after the time to cure such default has expired to file its opposition papers in the appeal.
(Id. ¶ 8.) On April 6, 2018, Appellee filed a motion pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure requesting that the Bankruptcy Court approve of the Global Settlement. (Motion to Approve Stipulation, In re Fetman, No. 15-43716 (E.D.N.Y. Apr. 6, 2018), Docket Entry No. 276.) On May 9, 2018, after a hearing on the motion, at which counsel for Appellant, Appellee, and Aish were present, the Honorable Nancy H. Lord granted Appellee's motion and issued an order approving the Global Settlement. In re Fetman, No. 15-43716
On March 26, 2018, Appellee filed an interim fee application seeking (1) an order approving his counsel's attorneys' fees and expenses and (2) authorization for Appellee to pay those attorneys' fees and expenses awarded by the Bankruptcy Court. (Application for Compensation, In re Fetman, No. 15-43716 (E.D.N.Y. Mar. 21, 2018), Docket Entry No. 272.) On May 9, 2018, after a hearing at which counsel for Appellant, Appellee, and Aish were present, the Bankruptcy Court noted that there was "no opposition" filed to Appellee's interim fee application and approved the application. In re Fetman, No. 15-43716
On June 12, 2018, Appellant's then-counsel executed two stipulations agreeing to withdraw and discontinue with prejudice all of Appellant's pending appeals in the Appellate Division as well as pending litigation in the Supreme Court, Kings County. (Stipulation of Discontinuance with Prejudice, annexed to Oxenburg Decl. as Ex. H, Fetman, No. 19-1067, Docket Entry No. 10-8.) On August 2, 2018, the Appellate Division issued two orders granting the parties' stipulation and withdrawing all pending appeals. (Decision & Order on Application, annexed to Oxenburg Decl. as Ex. I, Fetman, No. 19-1067, Docket Entry No. 10-9.)
On March 21, 2019, Appellant, proceeding pro se, filed a motion to reduce interest owed under the Global Settlement, alleging that he owed Aish $550,000 less than the amount provided for in the Global Settlement. (Motion for Emergency Hearing, In re Fetman, No. 15-43716 (E.D.N.Y. Mar. 21, 2019), Docket Entry No. 319.) After a hearing at which Appellant, Appellee, and Aish appeared, on June 6, 2019, the Court ordered that Aish pay Appellant $3,333.34 and otherwise denied Appellant's motion to reduce interest. (Order Resolving Debtor's Motion, In re Fetman, No. 15-43716 (E.D.N.Y. June 6, 2019), Docket Entry No. 324.)
On May 28, 2019, Appellant commenced the Adversary Proceeding against Appellee. (Compl., Fetman, No. 19-1067.) Appellant argued that Appellee was engaged in "self-dealing[], self-enrichment[,] and gross misconduct in handling the case," and that Appellee acted in a "self-serving manner, counter to the basic and minimal fiduciary duty he has for the estate of the debtor." (Id. at 1.) In support, Appellant argued that Appellee: (1) "used every opportunity to stall and derail the appeal," (id. at 4), (2) "wanted to generate more legal bills and commissions from the sale" of one of Appellant's properties, (id. at 7), (3) caused an "inaccurate tax filing" relating to the sale of one of Appellant's properties which resulted in an overpayment of $52,000to Appellee, (id.), and (4) permitted Aish's attorney to draft the Global Settlement while Appellant was away during Passover "without any way of communication with attorneys or a way to go over the documents" and did not ensure that Appellant received and understood the full Global Settlement, (id. at 9).
On July 12, 2019, Appellee moved to dismiss the Adversary Proceeding pursuant to Rule 7012 of the Federal Rules of Bankruptcy Procedure and Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim upon which relief can be granted. (See Notice of Motion to Dismiss Adversary Proceeding, Fetman, No. 19-1067, Docket Entry No. 9.) Appellee argued that dismissal was appropriate because (1) Appellee was entitled to quasi-judicial immunity as his actions on behalf of the estate were taken pursuant to a court order, and (2) Appellee was protected under the business-judgment rule. (Memorandum of Law in Support of Motion to Dismiss Adversary Proceeding by Defendant Robert Musso, as Trustee, Fetman, No. 19-1067, Docket Entry No. 11.)
Appellant opposed the motion to dismiss, arguing that Appellee acted in his own interest, "shamelessly navigated th[e] case as to earn the most fees that he could get . . . with complete disregard to the statutory and general duties" required of him, and therefore should not "enjoy[] blanket immunity for his negligence and intentional malfeasance." (Reply in Opposition to Trustee's Motion to Dismiss 1, 3, Fetman, No. 19-1067, Docket Entry No. 14.)
On November 19, 2019,...
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