In re Dzierzawski
| Decision Date | 10 April 2015 |
| Docket Number | Case No. 13–47986 |
| Citation | 528 B.R. 397 |
| Parties | In re: Randy K. Dzierzawski, Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of Michigan |
Stuart A. Gold, Jason Patrick Smalarz, Gold, Lange & Majoros P.C., Southfield, MI, for Debtor.
Todd J. Ohlms, Ryan W. Blackney, Freeborn & Peters LLP, Chicago, Illinois, for Vulpina, LLC.
Daniel M. Katlein, Allard & Fish, P.C., Detroit, Michigan, for Chapter 7 Trustee.
This case is before the Court on the motion by the Debtor to voluntarily dismiss this Chapter 7 bankruptcy case, filed roughly 18 months after the Debtor voluntarily commenced the case. (Docket # 196, the “Motion”). The Motion is based on 11 U.S.C. §§ 707(a) (dismissal “for cause”) and 305(a)(1) ().
The Chapter 7 Trustee filed a “limited objection” to the Motion, which the Debtor and the Trustee have since settled, subject to certain terms, discussed below.1 The Debtor's largest creditor, Vulpina, LLC (“Vulpina”), also filed an objection.2 No other creditor objected. The Court held a hearing on the Motion, and ordered further briefing on a specific issue, which the Debtor and Vulpina have completed.3
For the reasons stated below, the Court will deny the Motion.
This Court has subject matter jurisdiction over this contested matter under 28 U.S.C. §§ 1334(b), 157(a) and 157(b)(1), and L.R. 83.50(a)(E.D.Mich.). This is a core proceeding under 28 U.S.C. §§ 157(b)(2)(A) and 157(b)(2)(O ).
This proceeding also is “core” because it falls within the definition of a proceeding “arising under title 11” and of a proceeding “arising in” a case under title 11, within the meaning of 28 U.S.C. § 1334(b). Matters falling within either of these categories in § 1334(b) are deemed to be core proceedings. See Allard v. Coenen (In re Trans–Industries, Inc. ), 419 B.R. 21, 27 (Bankr.E.D.Mich.2009). This is a proceeding “arising under title 11” because it is “created or determined by a statutory provision of title 11,” id. namely, Bankruptcy Code §§ 707(a) and 305(a), discussed below. And this matter is a proceeding “arising in” a case under title 11, because it is a proceeding that “by [its] very nature, could arise only in bankruptcy cases.” Id.
The Debtor began this bankruptcy case by filing a voluntary Chapter 7 petition on April 19, 2013. Vulpina is a judgment creditor of the Debtor, holding an unsecured, non-priority claim as of the bankruptcy petition date of just over $1 million ($1,060,258.69).4 Vulpina holds, by dollar amount, over 99% of the liquidated, allowed claims in this bankruptcy case, excluding administrative expenses. The deadline for creditors to file claims in this case was March 13, 2014.5 In addition to Vulpina, the following creditors have filed timely claims in this case, in the following amounts:
| 1. Marlin Business Bank | $850.37 |
| 2. American Express Centurion Bank | $5,733.96 |
| 3. Continental Vineyards LLC | “unliquidated” with a pending lawsuit in the United States District Court for the Northern District of Illinois |
| 4. Indeck–Paso Robles LLC | “unliquidated” with a pending lawsuit in the United States District Court for the Northern District of Illinois |
In addition to these claims, a claim was filed by CRE Venture, LLC, in the amount of $435,785.53 on March 5, 2014, but that claim was withdrawn by the creditor on May 22, 2014. The claims of Continental Vineyard LLC and Indeck–Paso Robles LLC are the subject of an action pending in the United States District Court for the Northern District of Illinois, against Vinifera Wine Co., LLC, and the Debtor Dzierzawski. These two creditors have common ownership with Vulpina, and are represented by the same counsel that represents Vulpina in this bankruptcy case.
Proceedings to date in this case have been substantial. During the nearly two years that this bankruptcy case has now been pending, Vulpina has pursued its rights as a creditor very aggressively. And the Debtor, and sometimes other parties related to or affiliated with the Debtor, have resisted Vulpina's efforts at many turns. In a nutshell, Vulpina vigorously contends that the Debtor has been dishonest in this bankruptcy case and has failed to disclose all of his assets, income, and material pre-bankruptcy financial transactions.
The case has been consistently contentious. It has involved numerous contested motions, many of which the Court decided in favor of Vulpina and against the Debtor or other related parties. These litigated matters have included (1) two motions by Vulpina seeking discovery under Fed.R.Bankr.P.2004, including extensive document requests to the Debtor and numerous third parties, which the Debtor and others opposed, but which the Court granted on September 19, 2013;6 (2) the Debtor's motion seeking, under 11 U.S.C. § 305(a), a suspension of the Chapter 7 bankruptcy case due to the Debtor's federal criminal indictment, which Vulpina opposed and the Court denied on September 19, 2013;7 (3) Vulpina's objections to the Debtor's claimed exemptions, which required two hearings, and which the Court sustained in part and which were withdrawn in part, on October 2, 2013 and December 11, 2013;8 (4) the Debtor's motion to quash numerous subpoenas issued by Vulpina under Fed.R.Bankr.P.2004, joined by numerous third parties, which the Court denied on October 23, 2013;9 (5) at least four motions filed by Vulpina to extend the deadline for filing objections to discharge and/or an action to determine dischargeability under § 523, the first two of which the Debtor agreed to, but the last two of which the Debtor objected to;10 (6) a November 20, 2013 motion for Rule 2004 examination, objected to by the Debtor, but granted by the Court on December 18, 2013;11 (7) a motion by Vulpina to compel the Debtor to comply with a subpoena, filed November 29, 2013, which the Debtor opposed and the Court denied;12 (8) the April 22, 2014 motion by Vulpina to compel the Debtor to answer certain deposition questions, which the Debtor opposed, and the Court granted in part.13
In addition to the many contested matters, Vulpina has filed two adversary proceedings against the Debtor. First, Vulpina filed an adversary proceeding objecting to the Debtor's discharge under numerous provisions of 11 U.S.C. § 727(a), and which remains pending.14
Second, Vulpina filed a motion asking the Court to grant it derivative standing to file, on behalf of the bankruptcy estate, a fraudulent transfer action against the Debtor's wife, Kimberly Dzierzawski. Vulpina filed that motion on August 14, 2014. The Debtor and his wife each opposed the motion, and after holding a hearing, the Court granted the motion on September 26, 2014.15 The Court's derivative standing order authorized Vulpina to file and prosecute, on behalf of the bankruptcy estate, an action very much like the one Vulpina filed in the United States District Court before the Debtor filed this bankruptcy case. The action alleges that the Debtor fraudulently transferred to his wife, Kimberly Dzierzawski, 99% of his then-existing 100% interest in Vinifera Wine Co., LLC. In that district court action, Vulpina sought avoidance of the transfer based on Michigan's version of the Uniform Fraudulent Transfer Act, Mich. Comp. Laws §§ 566.34 and 566.35.16 Vulpina filed the adversary proceeding on November 14, 2014, and it remains pending.17 The Debtor and his wife each filed a motion to withdraw the reference in that adversary proceeding to the United States District Court, on December 5, 2014, and December 15, 2014.18 Those motions remain pending in the district court.
In addition to the numerous discovery disputes in the main bankruptcy case, including those referred to above, Vulpina's § 727 adversary proceeding against the Debtor has involved substantial discovery disputes. On September 17, October 1, and October 15, 2014, the Court held lengthy hearings on a total of five discovery-related motions,19 and made oral rulings on all of them. Orders formalizing the Court's rulings were filed regarding three of these motions, on September 17, October 1, and November 7, 2014.20 A dispute arose between the parties about the form and content of the orders to be entered for the Court's rulings on the other two motions,21 and the hearing on that dispute has been adjourned to await the Court's ruling on the Debtor's motion to dismiss his bankruptcy case.22
Under the Court's oral rulings on the two discovery motions that have not yet been formalized in a written order, the Debtor will be required to produce additional documents, including electronically stored information, and then may be required to undergo further deposition by Vulpina. The burden of this further discovery may be substantial for both parties.
The Debtor characterizes his motion to dismiss this bankruptcy case, in substance, as the Debtor giving up any effort to obtain a bankruptcy discharge of any of his debts, so that his creditors, including Vulpina, can pursue collection of his debts outside of bankruptcy. The Debtor portrays the dismissal as one that would not prejudice any creditors, and that would pay all outstanding administrative expenses of his bankruptcy case. Specifically, the Motion proposed a dismissal of this case on the following terms.
To resolve the Chapter 7 Trustee's limited...
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