In re American Bridge Products, Inc.
| Decision Date | 08 January 2009 |
| Docket Number | Adv. Proc. No. 00-1142.,Civil Action No. 06-10016-GAO.,Bankruptcy No. 96-16620. |
| Citation | 398 B.R. 724 |
| Court | U.S. District Court — District of Massachusetts |
| Parties | In re AMERICAN BRIDGE PRODUCTS, INC., Debtor. Lynne F. Riley, Chapter 7 Trustee of American Bridge Products, Inc., Plaintiff-Appellee v. Nicholas J. Decoulos, Esq. and Decoulos & Decoulos, Defendants-Appellants. |
O'TOOLE, District Judge.
Nicholas J. Decoulos, Esq. appeals from a decision of the bankruptcy court in favor of Lynne F. Riley, Chapter 7 Trustee of debtor American Bridge Products, Inc. ("ABP" or the "debtor"). The Trustee brought an adversary proceeding against Decoulos, formerly a state court-appointed receiver for ABP, seeking damages on behalf of the estate for Decoulos' misfeasance. The complaint in the adversary proceeding contained ten counts. The first two counts were directed at Decoulos as receiver. The remainder of the counts were directed either at him as attorney or at his law firm. After a bench trial, the bankruptcy judge, in a lengthy and detailed memorandum, found Decoulos, as receiver, liable for negligence (under Count I) and breach of fiduciary duty (under Count II) and ordered him to pay the lesser of (1) the sum needed to pay all creditors and administrative claimants of the estate of ABP in full; or (2) $379,173.78. The judge found for Decoulos as to the claims against him as attorney. Two counts (Counts VI and VII) directed at Decoulos' law firm were bifurcated and not tried to the judge because of her prior conclusion that the firm, unlike Decoulos personally, was entitled to a jury trial.
The bankruptcy judge also denied Decoulos' motion for compensation from the estate for his services as receiver of ABP.
Decoulos makes a number of claims of error on this appeal. All but one are meritless, but that one is significant. As explained below, this Court concludes that the bankruptcy judge erred in ruling that the claims against Decoulos as receiver set forth in Counts I and II were not barred by the applicable statute of limitations. For the same reasons that she found the other claims against him were time-barred, the claims against him as receiver are also barred.
The bankruptcy judge's memorandum of decision sets forth in careful detail the facts concerning the financial distress of ABP and the ensuing litigation, and it is not necessary here to repeat the full story. In re Am. Bridge Prods., 328 B.R. 274, 278-322 (Bankr.D.Mass.2005). A brief summary of facts pertinent to the issues raised in this appeal will suffice.
In 1990, several men—William Mahoney, Francis Kilroy, Cesar Martinez, Robert Conti, and later Satyendra Agarwal— agreed to combine efforts to form and operate ABP. The company, based in Lynn, Massachusetts, would fabricate and sell products to be used in the rebuilding or refurbishment of bridges.
Relations among the various participants soon deteriorated. On August 25, 1993, at the instance of Kilroy and Agarwal, ABP commenced an action against Conti and some of his associates in the Massachusetts Superior Court for Essex County ("Essex action"). The complaint alleged that Conti and his associates had conspired to seize control of ABP and its assets and defraud its creditors, and further that the Everett Savings Bank had breached its contractual relationship with ABP by allowing Conti to divert ABP assets even though he was not an authorized signatory as to ABP's accounts maintained at the bank. On September 22, 1993, a judge of the Superior Court appointed Decoulos, an attorney with an office in Peabody, Massachusetts, to serve as receiver of ABP for purposes of the Essex action.
The bankruptcy judge found that "Agarwal and Kilroy became disenchanted with Decoulos's performance as Receiver of ABP within months, if not weeks, of his appointment." Id. at 294. They filed a Chapter 11 bankruptcy petition on behalf of the company, but it was dismissed on motion of the United States Trustee. In January 1994, they also filed a complaint against Decoulos with the Massachusetts Board of Bar Overseers, but the Board took no action. They hired their own lawyer, G. Shepard Bingham, to keep an eye on Decoulos' performance as ABP's receiver. In June 1994, Bingham formally objected to Decoulos's report to the Superior Court and his application for authority to pay certain expenses, including his own fee, without success. The court allowed the application, but admonished Decoulos to be more aggressive in discharging his duties as receiver.
Bingham continued to press Decoulos to be diligent on behalf of ABP. On September 6, 1994, Decoulos filed with the Superior Court an application for an order of notice to Conti and others to show cause why they had not surrendered certain property to him as ABP's receiver. Bingham moved on behalf of ABP to amend Decoulos' application to protect any property that might be surrendered and further to compel the Everett Savings Bank to account for all moneys belonging to ABP that the bank had wrongfully permitted to be deposited in Conti-controlled accounts. The court allowed Decoulos' application, but took no action on Bingham's proposed amendment.
Through correspondence, Bingham continued to press Decoulos to take various protective actions on behalf of ABP. He monitored Decoulos' filings with the Superior Court, and at least once more he moved, on behalf of ABP, to amend one of Decoulos' applications to add provisions beneficial to ABP. Over Decoulos' objection, Bingham also sought to be appointed special counsel to the receiver, again without success.
The bankruptcy judge found, "Throughout the spring of 1995, Bingham continued to correspond with Decoulos, urging him to take forceful action." Id. at 301. In April, he wrote to Decoulos urging him to take action on behalf of ABP and threatening "to file a Motion seeking an immediate accounting as well as your removal as Receiver." Id. at 302. This apparently spurred Decoulos into taking some steps to institute legal proceedings against various parties to identify and preserve assets properly belonging to ABP.
In July 1995, Bingham moved on behalf of ABP to have Decoulos removed as receiver in the Essex action. The motion asserted that Decoulos "by his acts of omission and/or commission, all as set forth more particularly in the attached Affidavit, failed to gather and preserve the assets of ABP; he has allowed the same to be stolen and/or otherwise wrongfully converted and/or dissipated by the Defendants." Id. at 305. The court denied the motion to remove Decoulos and approved his application for payment of fees.
Trial of the Essex action was scheduled for early January 1996. Bingham insisted that Decoulos had responsibility for trying the case; Decoulos insisted Bingham had that responsibility. The trial did not go forward as scheduled. Instead, with some supervision by the court, Decoulos undertook, through the first half of 1996, to try to resolve the claims in the case short of trial. Another trial date was set for September 11, 1996. However, the involuntary bankruptcy petition against ABP in this case was filed August 30, 1996. Joseph Braunstein, Esq. was appointed to serve as Chapter 7 Trustee on October 23, 1996.1 Decoulos cooperated with the Trustee to wind up the receivership estate by turning over all funds, files, and information in his possession regarding ABP's property. Decoulos, however, neglected to file a formal accounting regarding ABP's property or his administration with the bankruptcy court as required by 11 U.S.C. § 543(b) and Federal Rule of Bankruptcy Procedure 6002.
On November 20, 1996, Decoulos filed an application in the bankruptcy case for payment of compensation earned as pre-bankruptcy receiver for the debtor.
The Trustee was substituted for ABP as plaintiff in the Essex action in January 1997. Later, pursuant to an agreement, a bank creditor of ABP took over prosecution of the action. A settlement was ultimately reached among the parties to the Essex action, which was approved by the bankruptcy judge on July 21, 1998.
The Essex action was dismissed in accordance with the settlement, but Decoulos never filed a final statement of account with the Superior Court as apparently required by Massachusetts Rule of Civil Procedure 66(e), and the Superior Court never entered an order formally discharging Decoulos as receiver.
The present Trustee initiated the adversary proceeding at issue here against Decoulos and his law firm on March 9, 2000.
Before turning to the question of the statute of limitations, it is necessary to determine whether the bankruptcy judge had the authority to adjudicate on the merits the claims raised in the adversary proceeding against Decoulos. That question turns on whether the adversary proceeding is considered a "core" or a "non-core" proceeding.
Decoulos argues that because the claims against him arise only under state law and refer to pre-petition events, they are "non-core" and thus outside the bankruptcy court's jurisdiction under 28 U.S.C. § 157(b). He is correct that the claims in the adversary complaint by themselves would ordinarily be characterized as non-core. See In re Spookyworld, Inc., 266 B.R. 1, 8 (Bankr.D.Mass.2001) () (internal quotation omitted). However, courts routinely deem state law claims in the nature of...
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