In re Kalikow
| Decision Date | 08 April 2010 |
| Docket Number | Docket No. 08-5268-bk(L),08-5274-bk (CON). |
| Citation | 602 F.3d 82 |
| Parties | In re Peter S. KALIKOW and Kalikow Real Estate Co., Debtors. Sheldon H. Solow, Steven M. Cherniak, Evergence Capital Advisors, Inc., and Sheila M. Gowan, Chapter 11 Trustee of Dreier LLP, et al., Appellants, v. Peter S. Kalikow and Kalikow Real Estate Co., Appellees. |
| Court | U.S. Court of Appeals — Second Circuit |
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David M. Gossett, Richard Ben-Veniste, Mayer Brown LLP, Washington, DC, for Appellants.
Sheldon H. Solow and Steven M. Cherniak, Joan M. Secofsky, Howard D. Ressler, Diamond McCarthy LLP, New York, NY, for Appellants Evergence Capital Advisors, Inc., and Sheila M. Gowen, Chapter 11 Trustee of Dreier LLP.
Randy M. Mastro, Gibson Dunn & Crutcher LLP, New York, NY, for Appellees Peter S. Kalikow and Kalikow Real Estate Co.
Before: MINER, RAGGI, and HALL, Circuit Judges.
Appellants, Sheldon Solow ("Solow"), Steven Cherniak ("Cherniak"), Evergence Capital Advisors, Inc. ("Evergence"), the law firm of Dreier LLP,1 Marc S. Dreier, and Kosta Kovachev (collectively, the "Appellants"),2 appeal from a judgment entered on September 30, 2008, in the United States District Court for the Southern District of New York (Batts, J.), affirming orders entered on June 21, 2004, and October 14, 2004, in the United States Bankruptcy Court for the Southern District of New York (Lifland, B.J.). The Bankruptcy Court's order of June 21, 2004, granted (1) the motion of debtors-appellees, Peter S. Kalikow and Kalikow Real Estate Co. (together, "Kalikow"), to reopen Chapter 11 proceedings, pursuant to 11 U.S.C. § 350 (the "350 Motion"); and (2) the motion of Kalikow seeking an order, pursuant to 11 U.S.C. §§ 105, 524, 1141, as against Evergence and against its "controlling persons and agents," including the law firm of Dreier LLP, to enforce the release, discharge, and injunction provisions of Kalikow's plan of reorganization (the "Plan") set forth in the Bankruptcy Court's Confirmation Order of January 27, 1994 (the "Enforcement Motion"). The Bankruptcy Court's order of October 14, 2004, granted "costs and expenses, including, without limitation, attorneys' fees and expenses," incurred up to September 28, 2004, in connection with the Enforcement Motion. The total amount of the award set forth in the October 14, 2004 order was $334,583.12.
On appeal, the District Court affirmed the judgment and orders of the Bankruptcy Court, holding that: (1) the Bankruptcy Court correctly found that it had the authority to conduct the postconfirmation proceedings by motion, rather than by an adversary proceeding, because Kalikow sought to enforce the pre-existing injunction and provisions of the Plan and Confirmation Order, pursuant to 11 U.S.C. §§ 524(a)(2), 1141; (2) the Bankruptcy Court properly found that personal jurisdiction existed as to Solow and Cherniak because, although they were not initially named in Kalikow's motions, they had intentionally attempted to conceal their identities during the proceedings in the Bankruptcy Court; and (3) the Bankruptcy Court did not abuse its discretion in imposing sanctions against the Appellants because that court "possessed ample evidence of damages" and "clearly provided the basis for imposing sanctions against Appellants by specifically noting that the notices posted by them . . . violated the Confirmation Order . . . and that the Appellants had acted in bad faith, with no legitimate purpose for their conduct."
For the reasons that follow, we affirm the judgment of the District Court in all respects except its imposition of sanctions upon the Appellants, pursuant to 11 U.S.C. §§ 524(a)(2), 1141, for violating the injunction provisions of the Plan and Confirmation Order. We affirm the judgment of the District Court in all other respects.
This appeal arises from Chapter 11 bankruptcy proceedings commenced by Kalikow on August 21, 1991, in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"). On December 21, 1993, Kalikow filed a plan of reorganization. The Plan vested Kalikow with the property of the estate, free from creditors' interests, and discharged Kalikow from "any Claim and any `debt' . . . that arose before the Effective Date." In particular, "every holder of a discharged Claim" was "precluded from asserting against Kalikow . . . any further Claim based on any document, instrument or act, omission, transaction or other activity of any kind or nature that occurred prior to the Effective Date."
The Bankruptcy Court confirmed the Plan pursuant to a Confirmation Order dated January 27, 1994. The Confirmation Order:
The Confirmation Order also preserved creditors' claims for liability created by the express terms of any agreement or other document executed and delivered by Kalikow in connection with implementation of the Plan.
As part of the Plan, Kalikow was required to submit to the Bankruptcy Court a representation letter (the "Representation Letter") that would provide unsecured creditors assurance that Kalikow had made a full disclosure of their assets. Kalikow submitted such a letter on February 17, 1994. The Representation Letter reserved to the Plan Administrator an enforcement mechanism in the event of a breach by Kalikow. It authorized the Plan's Administrator, on behalf of creditors, to pursue a post-confirmation claim "as a result of a misrepresentation or breach of the representations and warranties set forth in the Representation Letter" up to ten years from the Plan's effective date—i.e., until February 17, 2004. This provision of the Representation Letter was incorporated into section 4.6 of the Plan Administrator Agreement, which stated that "except as expressly provided. . . in this Section 4.6 of the Plan Administrator Agreement, no person other than the Plan Administrator shall have authority to commence any legal action or otherwise pursue any right or remedy with respect to any misrepresentation or breach of warranty under the Kalikow Representation Letter." Should the Plan Administrator decline to pursue such a claim, section 4.6 of the Plan Administrator Agreement authorized an unsecured creditor to seek the court's permission to pursue a post-confirmation claim as described in the Representation Letter.3
In February 1994, a few weeks after the Confirmation Order had issued, Solow provided Kalikow with a $7 million loan and received in exchange an option to buy an interest in Kalikow's reorganized business. Kalikow repaid that loan in June 1994— more than five years earlier than it was due. Kalikow then repurchased the purchase-option from Solow for $2 million in 1995. The rapid repayment of the loan and repurchase of the option caused Solow to speculate that Kalikow had concealed a portion of their assets from creditors. Solow never produced any evidence to support that speculation. In 1997, Solow moved in the Bankruptcy Court for the appointment of an examiner to investigate Kalikow's representations. By this time, the bankruptcy cases were closed. The Plan Administrator had been discharged on December 26, 1995. Kalikow opposed the motion, arguing that Solow lacked standing to bring it as "a post-confirmation lender who has been paid in full." The motion was denied.
Approximately seven years after Solow's motion was denied, as the ten-year period for postconfirmation claims was about to expire, Solow and Cherniak4 consulted Dreier LLP with respect to the approaching claims deadline of February 17, 2004. At that time, Marc Dreier ("Dreier") of Dreier LLP contacted Evergence, a defunct Florida Corporation, and Kovachev, Evergence's owner, to front as the contact for notices (the "Notices") apprising unsecured creditors "under the 1994 Chapter 11 Plan of Reorganization of Debtors Peter S. Kalikow and Kalikow Real Estate Co" of possible claims. The Notices contained a list of creditors of the estates, some listed with the amounts of their claims, followed by the statement: The Notices bore the name of Evergence, and provided phone and fax numbers; however, these numbers were associated with a telephone and fax machine on the premises of Dreier LLP. After the publication of the Notices on February 9 and 12, 2004, in The New York Times and the New York Post,5 a number of listed creditors attempted to contact Evergence, either individually or by counsel. In response to the Notices, there were eighteen letters (from former creditors or their counsel) faxed to the fax number provided, and there were sixty-five telephone calls (from fifty-nine separate numbers) made to the number provided. The law firm of Bingham McCutchen prepared for its client, 1001 Fifth Avenue Owners, Inc, and faxed to the number provided, a proof of claim for submission to the Bankruptcy...
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