In re OPM Leasing Services, Inc., Bankruptcy No. 81 B 10533
| Decision Date | 05 February 1982 |
| Docket Number | Bankruptcy No. 81 B 10533,Adv. No. 81-5486A.,81 B 11203 |
| Citation | 16 BR 932 |
| Parties | In re O.P.M. LEASING SERVICES, INC., Debtor. In re CALI TRADING INTERNATIONAL, LTD., Debtor. James P. HASSETT, as Chapter 11 Trustee of O.P.M. Leasing Services, Inc., and James P. Hassett, as Chapter 11 Trustee of Cali Trading International, Ltd., Plaintiffs, v. Daniel McCOLLEY, as Chapter 7 Trustee of Myron S. Goodman, Albert F. Reisman, as Chapter 7 Trustee of Mordecai Weissman, Federal Deposit Insurance Corporation, Louisiana National Bank of Baton Rouge, Rhode Island Hospital Trust National Bank, the Lincoln National Life Insurance Company, Westdeutsche Landesbank Girozentrale, the First National Bank of St. Paul, the Paul Revere Life Insurance Company, the Paul Revere Variable Annuity Insurance Company, Avco Corporation Retirement Income Trust and the Paul Revere Protective Life Insurance Company, Defendants. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
Zalkin, Rodin & Goodman, New York City, for James P. Hassett, as Chapter 11 Trustee of O.P.M. Leasing Services, Inc., and James P. Hassett, as Chapter 11 Trustee of Cali Trading International, Ltd.; Henry L. Goodman, Nadine Liebhardt, Stephen Tick, New York City, of counsel.
Otterbourg, Steindler, Houston & Rosen, P.C., New York City, for Albert F. Reisman, as Chapter 7 Trustee of Mordecai Weissman; William M. Silverman, Scott L. Hazan, and Albert F. Reisman, Steven Soll, New York City, of counsel.
Garrity, Connolly, Lewis, Lowry & Grimes, New York City, for Daniel McColley, as Chapter 7 Trustee of Myron S. Goodman; William R. Grimes, New York City, of counsel.
DECISION ON MOTIONS TO REMOVE TRUSTEE AND HIS COUNSEL
Some features of these highly active, visible and litigious cases1 and their related civil proceedings may be likened to the structure of the major league baseball season. They too involve multiple players, teams, leagues, ballparks, and inter-intramural contests with the ultimate goal being a share or domination of the World Series spoils.
In the main, involved counsel and parties have demonstrated salutary professional skill, courtesy and efficiency in nearly every facet of these cases. However, it is not surprising that occasionally a team or player, at some point in time, possibly motivated by concern for mid-season standings or for psychological tactical advantage, diverts the focus from the mainstream of the litigating process to concerns that are not truly germane to the ultimate merits of the particular proceeding or contest at hand. This is one of those times.
Three trustees, consisting of a single trustee and his counsel that control five Chapter 11 Reorganization cases, and two trustees each with separate counsel presiding respectively over two Chapter 7 Liquidation cases, have labored in relative harmony in an arena where their interests predominantly coincide. One of the Chapter 7 trustees now instigates a challenge to the Chapter 11 trustee's eligibility to manage one of the reorganization cases and further seeks disqualification of the Chapter 11 trustee's counsel from further prosecution of a key adversary proceeding. That proceeding, since consolidated with others, is concerned with (a) title to and rights against control stock of a bank in derogation of the claimed rights of a multitude of claimants and (b) the ultimate repose of the bank stock interest in one or more of the bankruptcy estates.
Orderly case administration and management favor hearing the decisional considerations in the sequence just set forth. That is, to determine the rights of claimants under (a), then, if necessary, to determine (b), the ultimate rights among the respective estates. The reorganization trustee asserts that there is a unity of interest among the reorganization estates in juxtaposition to the rights of the individual trustees and other creditors; after that threshold issue is determined, a conflict (more imagined than real) may exist among the reorganization estates. The recusant trustee is of another view and would suspend the "games" in favor of a replay under more favorable conditions.
Turning to the motions at hand, the issues presented may be distilled as follows:
O.P.M. Leasing Services, Inc. ("OPM") was a large computer leasing and financing company with its principal office located in New York City. It serviced corporations throughout the United States and overseas and operations were in the hundreds of millions of dollars.
On March 11, 1981, OPM filed a voluntary petition in bankruptcy, 11 U.S.C. § 301, seeking reorganization relief under Chapter 11 of the Bankruptcy Reform Act of 1978,2 and initially was continued in the operation and management of its business as a debtor in possession. 11 U.S.C. §§ 1101(1) and 1107(a). Soon after, on March 24, 1981, upon the application of certain creditors who charged OPM with fraud, and with the consent of the debtor, no opposition being heard, the Court ordered the appointment of a trustee, 11 U.S.C. § 151104(a), to operate the debtor's business, 11 U.S.C. § 1108. The United States Trustee for the Southern District of New York appointed James P. Hassett ("Hassett") as reorganization trustee on March 27, 1981.3 The Court approved the appointment.
OPM continues to operate under the stewardship of Hassett, who is imbued with all of the powers and duties pertaining to a trustee under 11 U.S.C. § 1106(a), employing some seventy persons and having a biweekly payroll of approximately $70,000. In re O.P.M. Leasing Services, Inc., 13 B.R. 64, 65, 4 C.B.C.2d 1150, 1151, 7 B.C.D. 1307, 1308, Bankr.L.Rep. (CCH) par. 68, 273 (S.D.N.Y.1981) (affirming 13 B.R. 54, 4 C.B.C.2d 913, 7 B.C.D. 1031, Bank.L.Rep. (CCH) par. 68, 073 (Bkrtcy.S.D.N.Y.1981)) aff'd Weissman and Goodman v. Hassett, 670 F.2d 383 (2d Cir. 1982).
The allegations of fraud that led to Hassett's trustee appointment also led the United States Attorney for the Southern District of New York to convene a grand jury to investigate the activities of OPM and its principals, Mordecai Weissman ("Weissman") and Myron Goodman ("Goodman"). Weissman was the president of OPM and Goodman was its vice president, and each was a director (positions they have since resigned). In re O.P.M. Leasing Services, supra. A recent three count information (mail fraud, wire fraud, and false statements to banks) charged certain officers of OPM with a scheme to defraud nineteen lending institutions of an aggregate of over $190,000,000 by fraudulently inducing the lending institutions to purchase notes secured by fictitious and falsified leases and related financing documents. Weissman and Goodman were identified as "co-schemers". The officers, all vice presidents, pled guilty to the information.
OPM is a wholly owned subsidiary of Cali Trading International, Ltd. ("Cali"). However, OPM was the operating company within a group of Cali controlled interests. In fact, Cali had no employees or management of its own and maintained its "place of business" in the offices of OPM. Cali is a closely held corporation owned 100% by Weissman and Goodman on a 50-50 basis.
Both Weissman and Goodman filed voluntary petitions for liquidation under Chapter 7 of the Bankruptcy Code on March 27, 1981 (Nos. 81 B 10673 and 81 B 10681 respectively). Weissman and Goodman v. Hassett, supra, at 933. Each individual's estate has had its mandatory interim trustee, 11 U.S.C. § 701(a), supplanted by a trustee elected pursuant to 11 U.S.C. § 702(b): Albert F. Reisman* ("Reisman") for Weissman and Daniel McColley ("McColley") for Goodman.
On June 15, 1981, Hassett, in his capacity as trustee of OPM, filed an involuntary petition, 11 U.S.C. § 303(b), under Chapter 11 against Cali that went uncontroverted resulting in the entry of an order for relief by the Court, 11 U.S.C. § 303(h), on June 26, 1981. OPM claims Cali is indebted to it for $134,153.98. Hassett, as a party in interest, 11 U.S.C. § 1109(b), also moved for the appointment of a trustee for Cali, which was ordered on July 1, 1981 over opposition by the Weissman and Goodman interim trustees to the appointment of a trustee in the Cali case (they preferred debtor-in-possession status). Five days later, the United States Trustee, in a Notice of Appointment of Trustee, accompanied by a Report of Selection for Appointment as Trustee, appointed Hassett.
The Notice and Report made clear that the U.S. Trustee's selection followed consultations with, among others, parties in interest in the Cali case and the related cases of OPM, Weissman, and Goodman. Recognizing the potential for conflict, but subduing the concern because of other overriding considerations, the U.S. Trustee concluded that should an actual conflict develop, the issue could be dealt with at that later time. It was evident that the U.S. Trustee engaged in a considered and "careful screening of (the) candidate prior to his selection."4 On July 6, 1981, the Court signed an order approving Hassett's selection. The order was not appealed. As in the OPM case, Hassett, as trustee of Cali, retained Zalkin, Rodin & Goodman, Esqs., as his counsel, and the Court approved the retention in an order, dated July 13, 1981. Both the application of Hassett and the affidavit of coun...
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