In re Adell, 9:03-bk-23684-ALP.
| Decision Date | 22 March 2005 |
| Docket Number | No. 9:03-bk-23684-ALP.,9:03-bk-23684-ALP. |
| Parties | In re Kevin ADELL, Debtor. |
| Court | United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Middle District of Florida |
Ralph E. McDowell, Bodman, Longley & Dahling, LLP, Detroit, MI, Dawn A. Carapella, Trenam, Kemker, Scharf, Barkin, et al., Tampa, FL, Roberta A. Colton, Tampa, FL, Barbara A. Hart, Ruden McClosky, St. Petersburg, FL, Asher Rabinowitz, Ruden McClosky, Tampa, FL, for Debtor.
ORDER GRANTING DEBTOR'S MOTION FOR RECONSIDERATION OF ORDER DENYING CONFIRMATION; AND GRANTING MOTION FOR PERMISSION TO FILE AND FOR THE COURT'S CONSIDERATION OF SECOND PLAN MODIFICATION
THE MATTER under consideration in this Chapter 11 case of Kevin Adell (Debtor) is a Motion for Reconsideration or Order Denying Confirmation; Motion for Permission to File and for the Court's Consideration of Second Plan Modification. (Doc. No. 461). In his Motion, the Debtor seeks this Court's reconsideration of the October 27, 2004, Order on Confirmation of Fourth Amended Chapter 11 Plan of the Debtor and Corrected Modifications to the Same (Confirmation Order) (Doc. No. 455), and also seeks permission to file Debtor's Second Modification to the Plan. In its Confirmation Order, this Court denied confirmation of the Debtor's Fourth Amended Plan, as corrected and modified.
In the alternative, the Debtor requests that if this Court does not agree to reconsider the confirmation of the Plan and allow the proposed Second Modification, it requests that this Court dismiss this Chapter 11 case and delay the effectiveness of the Order denying confirmation and dismissing the case until the Debtor, together with Adell Broadcasting, Inc. and STN.com, Inc. (the Companies) have exhausted their efforts to seek approval of a stay or supersedeas bond that would shelter the Debtor and the Companies from John Richards Home Building Company, L.L.C.'s (JRH) collection activities.
Needless to say, JRH has vigorously challenged the Debtor's right to obtain reconsideration of the Order denying confirmation contending that the Order was correct and that the Plan was facially defective and cannot be confirmed as a matter of law. JRH further contends that, in light of several Orders entered by this Court in this Chapter 11 case which granted the Debtor only one opportunity to obtain confirmation, the Debtor should not be permitted to propose any further amendments to the Plan of Reorganization.
In order to place this Motion under consideration in proper focus of the turbulent and heavily litigated history of this Chapter 11 case which has so far 563 dockets entries and has spawned several appeals, all of which are still pending not only in this Court but also in the United States Bankruptcy Court for the Eastern District of Michigan (the Michigan Bankruptcy Court), a recap of the relevant events to the matter under consideration should be helpful.
The genesis of the major and the only battle between the Debtor and his sole antagonist, JRH, is an Involuntary Petition filed by the Debtor on June 24, 2002, against JRH pursuant to Section 303 of the Bankruptcy Code in the Michigan Bankruptcy Court.
On July 24, 2002, the Michigan Bankruptcy Court entered an Order and dismissed the Involuntary Petition. The Michigan Bankruptcy Court, in its Order of Dismissal provided that the Court would consider a request for imposition of sanctions against the Debtor pursuant to Section 303(i) of the Bankruptcy Code.
On April 25, 2003, after the conclusion of an evidentiary hearing on the Motion for Sanctions filed by JRH, the Michigan Bankruptcy Court issued its Memorandum Opinion (the Sanction Order). In the Sanction Order the Michigan Bankruptcy Court determined that "John Richards Home Building Co., L.L.C., shall recover from Kevin Adell compensatory damages in the amount of $4,100,000; punitive damages in the amount of $2,000,000; and attorney fees and costs in the amount of $313,230.68, plus interest at the statutory rate." The imposed sanctions in the amount of $6.4 million against the Debtor was based on the findings that the Involuntary Petition filed by the Debtor against JRH was filed in bad faith, thus, it was proper to impose sanctions against the Debtor for the bad faith filing, pursuant to Section 303(i) of the Bankruptcy Code.
JRH immediately commenced actions to enforce its Sanction Award and applied for an order determining that the Debtor's currently acquired residence in Naples, Florida, was not immune and could be subject to the satisfaction of the Sanction Order awarded to JRH.
On September 17, 2003, the Michigan Bankruptcy Court entered an Order (the Homestead Order) and concluded that Section 303(i) of the Bankruptcy Code trumps the constitutional provisions of the State of Florida, Article X, Section IV, or in the alternative, that the Debtor is not entitled to homestead exemption under applicable law because he was not a bona fide resident of the State of Florida. The Michigan Bankruptcy Court ordered the Debtor to sell his Naples, Florida, residence within 60 days.
The Debtor immediately challenged the Sanction Order by filing a Notice of Appeal and also challenged the Homestead Order and sought a stay pending appeal first in the Michigan Bankruptcy Court, which was promptly denied, and thereafter in the Michigan District Court.
The Sixth Circuit Court of Appeals (Court of Appeals) declined to consider the Emergency Motion for Stay Pending Appeal filed by the appellant, Kevin Adell. The Court of Appeals concluded that the same "... motion was pending before the district court, a court that is in a better position to first address the issue of an appropriate bond" and, therefore, there was no need for an immediate ruling by the Court of Appeals.
Eventually, the District Court entered its Order denying the Debtor's Emergency Motion for Stay Pending Appeal. The District Court also denied the Debtor's Approval of Form of Supersedeas Bond. Having been aggrieved by the decision of the District Court, the Debtor filed an Emergency Motion for Stay Pending Appeal in the United States Court of Appeals for the Sixth Circuit.
The Debtor having failed to obtain a stay of the Homestead Order and being faced by the real possibility of losing his home in Naples, Florida, filed his Petition for Relief in this Court on November 14, 2003. Of course, JRH wasted no time and challenged the Debtor's right to seek relief under Chapter 11 and filed a Motion to Dismiss the Chapter 11 case for cause, pursuant to Section 1112(b) of the Bankruptcy Code, contending that the Petition was filed in bad faith. After extensive oral arguments and voluminous submissions post hearing in support of and in opposition of the Motion to Dismiss, on May 28, 2004, this Court entered its Order Denying the Motion to Dismiss. (Doc. No. 287).
In the Order Denying the Motion to Dismiss, this Court found that (1) the primary, if not the only, reason that the Debtor filed his Chapter 11 case was to prevent the enforcement of the Homestead Order entered by the Michigan Bankruptcy Court; (2) that he had no difficulty paying his debts as they became due with the exception of the Sanction Award; (3) that he could have prevented the sale of his residence in Naples, Florida, by obtaining a stay pending appeal, by posting a bond required by the District Court in the amount of $2.8 million; and (4) he had sufficient funds to procure a surety bond but opted to keep litigating the issues on appeal. Nevertheless, this Court concluded that considering the policy aim of Chapter 11 as enacted, it would be appropriate to give the Debtor one chance to obtain confirmation of a Plan of Reorganization. The Order further provided that the Plan proposed by the Debtor could be amended only at the confirmation hearing through an order of confirmation and the confirmation hearing would not be rescheduled to allow the Debtor to file a Fourth Amended Plan.
On June 30, 2004, this Court entered its Order Overruling Objection to Debtor's Disclosure Statement; Approving Disclosure Statement; and Setting Confirmation. (Doc. No. 313). In its Order, this Court held that while it is appropriate to dismiss a Chapter 11 case for "cause," it would be inappropriate and premature to dismiss this Chapter 11 case based on the inadequacies of the Disclosure Statement as a matter of law as urged by JRH. This Court rejected the suggestion of JRH and held that confirmation issues should be considered at the confirmation hearing and not the hearing on Disclosure Statement. Thus, this Court set the hearing for confirmation for August 18, 2004.
On August 12, 2004, the Debtor filed a Notice of Filing Modification to Fourth Amended Chapter 11 Plan of the Debtor. At the confirmation hearing the Court heard extensive testimony of witnesses in support of and in opposition to confirmation of the Fourth Amended Plan, as modified, and considered all relevant portions of the record of this Chapter 11 case together with documentary evidence offered and admitted into evidence.
On October 27, 2004, this Court entered its Order on Confirmation of the Fourth Amended Chapter 11 Plan of the Debtor and Corrected Modifications to the Same. (Doc. No. 455). In the Order, the Court denied confirmation of the Debtor's Plan because (1) the Court found the Plan, as modified, was not "fair and equitable," thus, violated Section 1129(b) of the Bankruptcy Code; (2) the classification of the unsecured claim of JRH was improper; and (3) the Fourth Amended Plan, as modified, was not "feasible" as required by Section 1129(a)(11) of the Bankruptcy Code.
The primary thrust of the denial of this Plan of Reorganization was directed at the Plan's treatment of the claim of JRH. The Court found that, under the provisions of the Plan offered for confirmation, JRH would not receive any funds whatsoever for possibly as long as ten years, while the other unsecured creditors would receive...
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In re John Richards Homes Bldg. Co.
...(avoiding JRH's lien on Adell's home because it impaired his homestead exemption under Florida law). 12. In re Adell, 325 B.R. 883 (Bankr.M.D.Fla.2005) (granting Adell's motion for reconsideration of the order of May 28, 2004, and allowing a further opportunity to file another amended plan)......