In re Consulting Actuarial Partners, Ltd.

• Decision Date: 22 April 1987
• Docket Number: Bankruptcy No. 87 B 20128,87 ADV. 6026.
• Citation: 72 BR 821
• Parties: In re CONSULTING ACTUARIAL PARTNERS, LIMITED PARTNERSHIP, Debtor. CONSULTING ACTUARIAL PARTNERS, LIMITED PARTNERSHIP, Plaintiff, v. DESCAP PLANNING, INC., (On Its Own Behalf and As Limited Partner of Consulting Actuarial Partners, Limited Partnership), Defendant.
• Court: U.S. Bankruptcy Court — Southern District of New York

72 B.R. 821 (1987)

In re CONSULTING ACTUARIAL PARTNERS, LIMITED PARTNERSHIP, Debtor CONSULTING ACTUARIAL PARTNERS, LIMITED PARTNERSHIP, Plaintiff, v. DESCAP PLANNING, INC., (On Its Own Behalf and As Limited Partner of Consulting Actuarial Partners, Limited Partnership), Defendant.

Bankruptcy No. 87 B 20128, 87 ADV. 6026.

United States Bankruptcy Court, S.D. New York.

April 22, 1987.

Reich and Reich, White Plains, N.Y., for plaintiff; Lawrence R. Reich, and John Philbin, of counsel.

Charles H. Weintraub and Ruskin, Schlissel, Moscou, Evans and Faltischek, P.C., New York City, for Descap Planning, Inc., et al.; Charles H. Weintraub, and David Lazer, of counsel.

DECISION ON MOTION FOR PRELIMINARY INJUNCTION AND CROSS-MOTION TO DISMISS FOR LACK OF GOOD FAITH OR ABSTENTION

HOWARD SCHWARTZBERG, Bankruptcy Judge.

The debtor, Consulting Actuarial Partners, Limited Partnership, filed with this court its petition for relief under Chapter 11 of the Bankruptcy Code on March 31, 1987. The debtor is a limited partnership consisting of one general partner, American Actuarial Associates ("AAA") and one limited partner, Descap Planning, Inc. ("Descap"). A preliminary injunction is sought by the debtor pursuant to Fed.R. Civ.P. 65 and Bankruptcy Rule 7065 against its limited partner, Descap, in connection with an adversary proceeding brought by the debtor against Descap. In the adversary proceeding, the debtor seeks an order directing the following relief:

1. Requiring the Defendant to turn over all partnership property in its possession, custody or control and render an account of its receipt and disposition of all partnership property;

2. Enjoining the Defendant from interfering with those business and account relationships of the Plaintiff previously assigned to the Plaintiff; and

3. Compelling the Defendant to turn over to the partnership immediately upon receipt all future assets of the Plaintiff which it may possess or have in its custody or control....

The preliminary injunctive relief which the debtor now seeks relates to Descap's alleged withholding or diverting of commissions, business, fees and funds which the debtor claims as property of the estate within the meaning of 11 U.S.C. § 541. The specific conduct attributable to Descap which the debtor contends should be preliminarily enjoined is delineated in the debtor's application as follows:

1. Referral of CONSULTING ACTUARIAL PARTNERS, LIMITED PARTNERSHIP ("CAP") business to competitors;

2. Diversion of insurance sales from CAP to insurance companies with which Defendant DESCAP is affiliated;

3. Withholding or diverting commissions or other insurance compensation;

4. Withholding or diverting any investment commissions or other compensation from CAP;

5. Any further, withholding or diversion from the partnership of fees;

6. Any further unauthorized discussions with clients regarding fee reductions and waivers; and

7. Directing all funds held and received in the future which are claimed by the General Partner to be Partnership funds....

As the defendant in the adversary proceeding, Descap countered with an order to show cause seeking a dismissal of the debtor's Chapter 11 case pursuant to 11 U.S.C. § 1112(b) and § 305(a) because of an alleged bad faith filing, or in the alternative, for an order abstaining from hearing the adversary proceeding in accordance with 28 U.S.C. § 1334(c)(1) and (2).

FACTS

1. Prior to the filing of its Chapter 11 petition on March 31, 1987, the debtor engaged in the design, administration and servicing of welfare, pension and other deferred compensation plans and the sale of insurance and investment products in conjunction with such compensation plans.

2. The debtor is a limited partnership formed pursuant to the laws of the State of New York and the Uniform Limited Partnership Act. The limited partnership agreement was signed on April 1, 1986 by Craig A. Miller, as president of American Actuarial Associates, Inc. ("AAA"), the general partner, and Michael Cammarata, as president of Descap Planning, Inc. ("Descap"), the limited partner.

3. The limited partnership agreement states that the office of the partnership shall be at 200 Motor Parkway, Hauppauge, New York. The agreement provides that the debtor partnership may maintain additional offices. When the debtor filed its Chapter 11 petition it listed its business office as 720 White Plains Road, Scarsdale, New York.

4. Prior to the formation of the debtor partnership in April of 1986, the limited partner, Descap, had been engaged in the business of financial planning, which included financial counseling and planning, estate planning and management, pension plan servicing and administration. Descap's business office was located at 200 Motor Parkway Hauppauge, New York, the same address which was listed for the debtor in the limited partnership agreement.

5. Before the debtor was formed as a limited partnership, its general partner, AAA, was engaged in the primary business of servicing and administering Welfare, pension and other deferred compensation plans. The office address for AAA, as stated in the limited partnership agreement, is 720 White Plains Road, Suite 300, Scarsdale, New York.

6. During 1985, Descap contracted out its pension plan administration and management functions to the actuarial firm of Miller & Miller. Craig A. Miller, the president of AAA was one of the partners and his brother was the other. Thereafter, negotiations ensued between Descap and Miller & Miller for the purpose of forming a partnership to engage in the design, administration and servicing of welfare, pension, and other deferred compensation plans and the sale of insurance and investment products in conjunction with such plans.

7. During the course of such negotiations, Miller & Miller expressed their intention that AAA would be established to perform the work required of the general partner instead of Miller & Miller. It was agreed that AAA would be the general partner of the debtor and Descap would be the limited partner. The name of the partnership was to be Consulting Actuarial Partners.

8. In accordance with the limited partnership agreement, AAA, as the general partner, and Descap, as the limited partner, each contributed $5000 to the capital of the partnership. In addition, Descap contributed to the partnership its clientele of pension plans for administration by the limited partnership.

9. Pursuant to the terms of the limited partnership agreement, AAA and Descap agreed to share all of the net income generated by the pension income on a 50-50 basis. It was contemplated that the income to be derived by the debtor would include the various fees and commissions earned by Descap for placement of insurance and other products in conjunction with the pension plans to be serviced by the debtor. The limited partnership agreement also provides that Descap is to be paid $135,000 in fixed monthly payments as a sales expense allowance.

10. Subsequent to the formation of the debtor partnership in April of 1986, a dispute arose between the general partner, AAA, and the limited partner, Descap with respect to the activities of each in furtherance of the partnership business. By letter dated February 9, 1987, AAA offered to purchase Descap's interests in the debtor partnership for $600,000. In accordance with the limited partnership agreement, the offeree is required within sixty days either to accept that offer or make a counter-offer which exceeds the value of the offer by at least ten percent.

11. On February 25, 1987, the principals of AAA and Descap had a meeting in the debtor's office at 200 Motor Parkway, Hauppauge, New York, at which time, according to Craig Miller, the president of the general partner, AAA, Descap evicted the debtor from the Hauppauge office. Mr. Miller said that only some of the partnership files and property could be removed by the end of the business day and that Descap seized and still has control of the bulk of the partnership property and files.

12. On February 25, 1987, the same day as the meeting in the Hauppauge office, the general partner, AAA, caused a summons and complaint to be issued in an action commenced in the Supreme Court of the State of New York, County of Westchester, entitled:

AMERICAN ACTUARIAL ASSOCIATES, INC., on its own behalf and as General Partner of Consulting Actuarial Partners, Ltd., Plaintiff,

against

DESCAP PLANNING INC., on its own behalf and as Limited Partner of Consulting Actuarial Partners, Ltd., Defendant.

13. In the Westchester County action, the general partner, AAA, sought the following relief:

1. That Defendant be enjoined from interfering with the business and account relationships of the CAP Partnership agreement; and,

2. That a Temporary Receiver be appointed to collect, discover and pay over the sums received, to be received, and to disburse to the CAP Partnership the sums in DESCAP\'s possession or received by DESCAP and due to CAP in accordance with the CAP Partnership agreement; and,

3. That an accounting be ordered of Defendant DESCAP in aid of the Receivership to determine the whereabouts of the sums due to the CAP Partnership from the confidential accounts and the whereabouts of the diverted business accounts of the CAP Partnership; and,

4. That an assessment be levied on DESCAP for the sums due to the CAP Partnership.

14. Pursuant to a verified complaint dated March 30, 1987, Descap commenced an action in the Supreme Court of the State of New York, County of Suffolk, against the general partner, AAA, and the debtor limited partnership, seeking a declaratory judgment that the offer of AAA to purchase the interest of Descap in the limited partnership is a nullity and of no force and effect.

15. The debtor does not have any employees of its own. Some of the personnel who participated in the debtor's business are employed by the limited partner, Descap. The other personnel, other than Craig Miller, were...