In re Air Safety Intern., L.C.
| Decision Date | 02 December 2005 |
| Docket Number | No. 05-80642-CIV.,05-80642-CIV. |
| Citation | 336 B.R. 843 |
| Parties | In re AIR SAFETY INTERNATIONAL, L.C. and Camber Flight Simulation, L.C. Debtors. GMGRSST, Ltd., Appellant, v. Deborah Menotte, Appellee. |
| Court | U.S. District Court — Southern District of Florida |
Appeal from the United States Bankruptcy Court for the Southern District of Florida, 326 B.R. 883.
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Craig P. Rieders, Esq., Miami, FL, for GMRSST, Ltd.
Michael Bakst, Esq., West Palm Beach, FL, for Deborah Menotte, Appellee.
Roger C. Hurd, Esq., Palm Beach Gardens, FL, for Joe G. Coykendall, Appellee.
Donald Wright, Esq., Birmingham, AL, for Camber Corporation, Appellee.
ORDER AFFIRMING MEMORANDUM OPINION IN PART/REVERSING MEMORANDUM OPINION IN PART
THIS CAUSE is before the Court upon the appeal filed by GMGRSST, Ltd. ("Appellant") on July 15, 2005, which seeks to reverse the Bankruptcy Court's Memorandum Opinion Granting Amended Motion To Approve Stipulation To Compromise Controversy Between Trustee And Equity Holders; And To Make Distribution Of Equity Holders And Denying GMGRSST Ltd.'s Motion To Compel Trustee To Distribute Surplus Assets To The Debtor Pursuant To 11 U.S.C. § 726(a)(6) (the "Memorandum Opinion") [DE 1]. On August 16, 2005, several parties filed opposition briefs, including the Trustee, Deborah Menotte, (the "Trustee"), Joe G. Coykendall ("Coykendall"), and Camber Corporation ("Camber") (Trustee, Coykendall, and Camber sometimes referred to collectively as "Appellees") [DE 6, 8, and 9, respectively]. On September 2, 2005, Appellant filed its reply brief [DE 16]. On November 4, 2005, I heard oral argument on the merits of the appeal. Based on the reasons explained below, I affirm the Memorandum Opinion issued by the Bankruptcy Court in part, and I reverse it in part.
On September 23, 1999, Air Safety International, L.C. ("Air Safety") filed a voluntary Chapter 11 petition for bankruptcy, Case Number 99-36290-BKC-SHF. While operational, Air Safety had been engaged in flight training activities, and Alan Madsen ("Madsen") was its chairman and manager, A. Patrick McSweeney ("McSweeney") was its president, and Coykendall was its chief financial officer.
On January 11, 2000, Camber Flight Simulation, L.C. ("CFS") filed a voluntary Chapter 11 petition for bankruptcy, Case Number 00-30087-BKC-SHF. On February 25, 2000, the Bankruptcy Court entered an Order to jointly administer both cases (the term "Debtor," where used, refers to Air Safety and CFS together).1 On March 21, 2000, the cases were converted to ones under Chapter 7. On March 24, 2000, the Bankruptcy Court appointed the Trustee to administer the joined cases.
The Debtor's estate had only one significant asset: a piece of litigation against Lockheed Martin Corporation ("Lockheed Martin"). The Trustee settled the litigation with Lockheed Martin for $10,000,000, and the Bankruptcy Court approved the settlement on February 14, 2002 (the "Lockheed Martin Settlement").
Following the Lockheed Martin Settlement, numerous parties filed requests for payment of administrative expenses for their efforts in helping the Trustee settle the Lockheed Martin litigation, including Alan and Becky Madsen,2 who moved to allow an administrative expense in the amount of $292,400, plus $7,283.34 for travel and related expenses. On April 29, 2002, the Bankruptcy Court issued an Order allowing reimbursement to the Madsens in the amount of their travel expenses only.
Around the same time, Coykendall asserted an entitlement to 3% of the Lockheed Martin Settlement amount. Coykendall alleged that he was hired by Richard Brown, one of the Debtor's engaged special counsel, to provide consulting services on behalf of Air Safety, and that Madsen himself had approved the arrangement for payment of his fees.
The Lockheed Martin Settlement had the welcome effect of supplying the estate with enough money to satisfy all of the Debtor's creditors. The Trustee began the process of analyzing claims for purposes of making distributions from the proceeds of the Lockheed Martin Settlement.
On May 21, 2002, the Trustee filed an amended objection to a claim by McSweeney for a ten percent ownership interest in the Debtor. The Trustee argued that the Debtor's books and records failed to indicate an equity interest for McSweeney. Moreover, the Trustee argued that McSweeney's own tax returns failed to mention the purported equity interest in the Debtor. Nearly two years later, on March 26, 2004, the Bankruptcy Court sustained the Trustee's objection (the "McSweeney Order").3 On March 30, 2004, McSweeney filed an Emergency Motion To Vacate The Bankruptcy Court's Order Sustaining Trustee's Amended Objection to his claim.
In the meantime, the parties began to engage in settlement discussions in the hopes of resolving all remaining disputes between them. In addition to the administrative claims sought by Madsen and Coykendall, a number of other parties asserted unsecured claims. For instance, GMGRSST d/b/a ABM Investment ("ABM") and Madsen Automotive Group ("MAG") asserted joint claims in the amount of $1.1 million.4 Camber asserted claims in excess of $1.3 million, plus an equity interest in Air Safety. Robert King ("King"), either individually or through MSR, Inc., filed a proof of claim in the amount of $888,000, plus an equity interest in Air Safety.
On April 25, 2002, and July 10, 2002, the Debtor, the Trustee, the Madsens, Appellant, MAG, Coykendall, MSR, King, Camber, and their respective legal representatives engaged in settlement discussions, and by July 17, 2002, all of the above parties had signed a Stipulation for Settlement (the "Stipulation") that resolved all of the remaining issues in the case.5 The Stipulation acknowledged the fact that each of the claims represented therein was or would have been the subject of objections from other Parties to the Stipulation.
The Parties agreed that the purpose of their concerted efforts was to resolve their disputes, including those relating to equity interests. Stipulation, p. 2, ¶ 6. They also agreed to a dual-faceted approach to distributing money from the Debtor's estate. First, they agreed to support an order from the Bankruptcy Court awarding general unsecured claims in the following amounts: $617,000 to Camber, $138,000 to MSR, $901,000 to ABM, $199,000 to MAG, and $65,000 to King (this portion of the Stipulation to be referred to as "Phase One Distributions"). Stipulation, p. 3, ¶ 8. Second, they agreed to support an order of the Bankruptcy Court that said the following:
after payment of all other allowed claims against this Estate in full, the first $2,280,000 of the remaining funds shall be distributed by the Trustee to the following Parties based upon the following percentages: the Madsens shall receive 53.48%; Camber shall receive 13.13%; King shall receive 26.75%; and Coykendall shall receive 6.57%. All sums greater than the first $2,280,000 shall be distributed by the Trustee to the following Parties based upon the following percentages: Madsens shall receive 79.4155%; Camber shall receive 14.0145%; King shall receive 0%; and Coykendall shall receive 6.57%. It is also agreed that the Madsens shall be entitled to an assignment from the Trustee, at the close of the case, of the remaining assets of the Debtors, including the right to use the names of the Debtors, exclusive of Camber Flight, the goodwill, and any remaining unadministered intellectual property. Such assignment shall be only of the Trustee's right, title and interest, without warranties or representations of any type, `as is, where is'.
(This portion of the Stipulation to be referred to as "Phase Two Distributions"). Id., pp. 3-4, ¶ 10. The Parties further agreed that they would cooperate with the Trustee in closing the cases, and that they understood the agreement was "contingent upon the Trustee's objection to the equity claim of Patrick McSweeney being sustained whereby the Court would find that Patrick McSweeney does not hold any equity interest within the Debtors." Id., p. 4, ¶ 11. Finally, the Parties acknowledged that the Stipulation was the "entire understanding and agreement of the Parties, and [that] there are no prior or contemporaneous promises, representations, agreements, warranties, or undertakings by any Party to the other, either oral or written of any character or nature, except as set forth in this Stipulation." Id., ¶ 12.
On May 27, 2004, the Parties filed a Joint Motion To Approve Compromise And Settlement Of Certain Unsecured Claims; Joint Motion To Commence Immediate Interim Distribution regarding the Phase One Distributions (the "Joint Motion"). In it, the movants sought an order allowing the Phase One Distributions. The parties attached the Stipulation to their Joint Motion, noting that they were "not seeking any distribution to equity nor any determination by the Court as to the possible respective equity interest of the Joint Movant claimants" because McSweeney's claim remained pending.
Sometime thereafter, the Trustee settled with McSweeney for $50,000. On August 2, 2004, the Bankruptcy Court entered an Order granting the Joint Motion; it allowed the Phase One Distributions in their entirety. On August 6, 2004, the Trustee moved to approve the settlement with McSweeney. On October 5, 2004, the Bankruptcy Court entered an Order that authorized the Trustee to make the Phase One Distributions, and a payment of $50,000 to McSweeney.
Everything had proceeded according to the terms of the Stipulation until November 8, 2004, when Appellant filed a Motion to Compel Trustee To Distribute Surplus Assets to The Debtor Pursuant to 11 U.S.C. § 726(a)(6) (the "Motion to Compel"). In it, Appellant asked the Bankruptcy Court to return the remaining assets in the...
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