In re Baron's Stores, Inc.

• Decision Date: 14 May 2008
• Docket Number: No. 97-25645-BKC-PGH.,97-25645-BKC-PGH.
• Parties: In re BARON'S STORES, INC., Debtor.
• Court: United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Southern District of Florida

390 B.R. 734

In re BARON'S STORES, INC., Debtor.

No. 97-25645-BKC-PGH.

United States Bankruptcy Court, S.D. Florida, West Palm Beach Division.

May 14, 2008.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Arthur J. Morburger, Miami, FL, for Debtor.

ORDER DENYING UNDERLYING RELIEF SOUGHT BY JOINT EMERGENCY MOTION TO REOPEN CASE AND PRO SE EMERGENCY MOTION TO REOPEN CASE

PAUL G. HYMAN, Chief Judge.

THIS MATTER came before the Court for pretrial conference on March 24, 2008 upon Baron's Stores, Inc. ("Baron's") and Norman Lansons's Joint Emergency Motion to Reopen Case for Consideration of Newly Discovered Evidence of Attorneys' Fraud on the Court and to Void Liquidation Plan ("Motion") (CP. # 586), and upon Meryl Lanson's (collectively with Baron's and Norman Lanson, "Movants") Pro Se Emergency Motion to Reopen Case for Consideration of Newly Discovered Evidence of Attorneys' Fraud on the Court ("Pro Se Motion")(C.P. # 587).¹ Marc Cooper, Esq., Cooper and Wolfe, P.A., Ronald C. Kopplow, Esq., Kopplow and Flynn, P.A., Sonya Salkin, and Malnik and Salkin, P.A. (collectively "the Attorneys") filed a Memorandum in Opposition (CP. # 599), a Notice of Intent to Rely Upon Document (CP. # 600), and a Surreply (CP. #607). Movants filed a Reply to Attorneys' Memorandum in Opposition (CP. # 602) and a Response to Surreply and Attorneys' Notice of Intent to Rely Upon Document (CP. # 616).

BACKGROUND AND PROCEDURAL POSTURE

On September 9, 1997, Baron's filed a voluntary petition under Chapter 11 of the Bankruptcy Code. On November 16, 1998, Baron's and the Official Committee of Unsecured Creditors' Joint Amended Chapter 11 Plan (the "Amended Plan") was confirmed by the Court ("Confirmation Order") (CP. # 263). On December 10, 1999, a Final Decree was entered and the case was closed.

On September 7, 1999, the Lansons filed a legal malpractice action against Kopplow and Cooper in the Circuit Court of the Eleventh Judicial Circuit in and for Dade County, Florida based upon their representation in an accounting malpractice action against Baron's former accountants (the "State Malpractice Action"). In November 2001, the Lansons amended the State Malpractice Action to include Salkin who had represented Baron's in its Chapter 11 case. The Lansons alleged in the State Malpractice Action that the Attorneys committed fraud in this Bankruptcy Court in connection with Motions to Employ Special Counsel and Orders Employing Special Counsel. The presiding judge in the State Malpractice Action advised the Lansons to resolve the fraud on the Bankruptcy Court allegations with the Bankruptcy Court. Consequently, on March 11, 2005, the Lansons filed an Emergency Motion to Reopen Case (CP. # 339), which was set for pretrial on April 4, 2005. On April 7, 2005, this Court entered an Order Granting the Emergency Motion to Reopen (CP. # 347) for the purpose of adjudicating the merits of the claim that the Attorneys perpetrated a fraud upon the Court. Following a three-day evidentiary hearing, conducted January 29-31, 2007, the Court entered a Memorandum Opinion Determining That Fraud Has Not Been Perpetrated Upon The Court ("Order") (CP. # 546). The Movants appealed the Court's Order. On January 7, 2008, United States District Court Judge Cecilia Altonaga entered an order affirming the Court's Order.

The Movants now ask the Court to reopen this case: 1) in order to consider "newly discovered" evidence as it relates to the credibility of the Attorneys' testimony at the fraud on the Court trial conducted January 29-31, 2007; 2) on the independent ground of a "newly discovered" fraud on the Court; and 3) on the independent ground that the Amended Plan is void for lack of consent by Baron's, which consequently deprived Baron's of due process. Motion at 9. The Court took this matter under advisement following the pretrial conference to determine whether it was appropriate to conduct an evidentiary hearing for the Movants to present "newly discovered" evidence of the Attorneys' alleged fraud upon the Court. Although the Movants asked the Court to reopen this case, the Court's review of the docket revealed that the case was not closed following the January 2007 trial. Thus on April 22, 2008, the Court entered an Order Denying as Moot Motion to Reopen and Pro Se Motion to Reopen and Extending Deadline for Submissions, wherein the Court denied as moot the request to reopen the case. The Court also granted the parties additional time to submit supplemental briefs and/or motions regarding the propriety of conducting an evidentiary hearing on the underlying relief sought by the Movants in the Motion to Reopen and the Pro Se Motion to Reopen. Supplemental briefs were filed by the Attorneys and Meryl Lanson pro se.

For the reasons set forth below, the Court concludes that the relief from final orders sought by the Movants is unavailable as a matter of law, and that an evidentiary hearing is unnecessary.

MOVANT'S ARGUMENTS AND THE "NEWLY DISCOVERED" EVIDENCE

The gravamen of the Motion is that the Attorneys committed fraud by deleting an exculpation clause from the Amended Plan that had been included in the original Plan ("Plan") as Article XVI (the "Exculpation Clause"). The Movants maintain they did not discover that the Exculpation Clause had been deleted from the Amended Plan until approximately February 4, 2008, when the Attorneys filed a Motion for Summary Judgment with a copy of the Amended Plan attached as an exhibit in the State Malpractice Action. The Movants point out that the footer code on page 23 of the Amended Plan indicates that this signature page was printed on September 3, 1998, while the footer codes on pages 1-22 indicate that the rest of the Amended Plan was printed on September 4, 1998. (Movants' Ex. 10). Similarly, the footer codes on signature pages 24 and 25 of the Amended Disclosure Statement indicate that these pages were printed on September 3, 1998, while the footer codes on pages 1-25 indicate that the rest of the Amended Disclosure Statement was printed on September 4, 1998. (Movants' Ex. 11). In addition, signature pages 24 and 25 of the Amended Disclosure Statement are not consecutively paginated such that two different pages immediately preceding the signature pages are also assigned page numbers 24 and 25.

The Movants argue that the footer print date codes of the documents and the irregular pagination of the Amended Disclosure Statement, evidence that Salkin, perhaps with the knowledge and consent of Cooper and Kopplow, deliberately and surreptitiously deleted the Exculpation Clause from the Amended Plan in an attempt to avoid liability for their alleged malpractice. The Movants contend that the deleted Exculpation Clause reserved rights to Baron's to prosecute claims for legal malpractice against the Attorneys. Furthermore, the Movants maintain that Baron's never consented to deletion of the Exculpation Clause. The Pro Se Motion additionally states that the Attorneys filed "bogus pleadings" (the Amended Plan and the Amended Disclosure Statement) in the Bankruptcy Court "which were altered and changed from the original document [sic] signed by Norman Lanson". Pro Se Motion at 1.

Based upon this "newly discovered" evidence of the Attorneys' alleged fraud, the Movants seek to "void" the Amended Plan for lack of consent by Baron's, to have the Court set aside the Order finding that the Attorneys had not committed fraud on the Court², and to determine that there has been a fraud perpetrated on the Court independent of the previously alleged fraud on the Court regarding alleged nondisclosure of connections by the Attorneys.

CONCLUSIONS OF LAW

I. JURISDICTION

The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334. This is a core proceeding pursuant to 11 U.S.C. § 157(b)(2)(A).

II. DELETION OF THE EXCULPATION CLAUSE

The core of all of the Movants' arguments involves the deletion of the Exculpation Clause. The Exculpation Clause which was included in the original Plan but deleted from the Amended Plan states:

ARTICLE XVI

EXCULPATIONS

The Debtor, the Creditors Committee and each of their respective members, ex-officio members and any of their respective officers, directors, employees, agents, attorneys, accountants and other professionals in such capacities shall neither have nor incur any liability to the Debtor or to any holder of a Claim or Interest for any act or omission in connection with, or arising out of, the Debtor's bankruptcy case, the Plan, including without limitation, the. negotiation, formulation, preparation, confirmation, or consummation of the Plan, the Disclosure Statement, any sale of assets pursuant to the Plan, or any contract, instrument, release or other agreement, document, or election made, created or entered into in connection with the Debtor's bankruptcy case, the Plan, any sale of assets pursuant to the Plan or the funds to be distributed under the Plan, and/or the administration of the Debtor's bankruptcy case except, in such case on account of willful misconduct or gross negligence on the part of a specific person sought to, be held so liable or cases of action commenced prior the Effective Date.

Plan at p. 24 (Movants Ex. # 2)(emphasis added).

The central theme of the Movants's arguments is that the underlined portion of the Exculpation Clause is a reservation of rights clause, the removal of which caused the Movants harm. However, the Movants have not identified any cause of action that was released by deletion of the Exculpation Clause. A plain reading of the entire Exculpation Clause indicates that its deletion did not harm, restrict or release any claims. Indeed, the deletion of the Exculpation Clause has the opposite effect. The Exculpation Clause operates as a waiver and release for all but willful and intentional acts. In contrast, deletion of the Exculpation Clause from the Amended Plan means all claims are not released. Thus, deletion of the...