In re Parr
| Decision Date | 31 August 1981 |
| Docket Number | CV-80-2528 and CV-80-3300.,No. CV-80-1619,CV-80-1619 |
| Citation | 13 BR 1010 |
| Parties | In re Ronald J. PARR, Bankrupt. FLUSHING SAVINGS BANK, Appellant, v. Ronald J. PARR, Appellee. |
| Court | U.S. District Court — Eastern District of New York |
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Skadden, Arps, Slate, Meagher & Flom by Michael L. Cook, New York City, for Flushing Savings Bank.
Davis, Polk & Wardwell, New York City, for International Telephone & Telegraph.
Finkel, Goldstein & Berzow, New York City, for Trustee in Bankruptcy.
Jules V. Speciner, Great Neck, N.Y., for Ronald J. Parr.
Three bankruptcy appeals which arise out of the financial collapse of Ronald J. Parr and Alfred R. Parr (the "Parrs") and their wholly owned corporation, Parr Meadows Racing Association, Inc. (the "Association") are now before this court. The saga of the Parrs and the creditors of the Parrs, including the Flushing Savings Bank (the "Bank"), has been told and retold before Bankruptcy Judge Hall for more than four years. Finally, ripe for examination by the district court are three discrete issues concerning this complex litigation.
Specifically, the issues presented include the following: (1) the Bank moves for an order pursuant to Fed.R.Bankr.P. 920 adjudging Ronald J. Parr guilty of civil contempt; (2) the Bank appeals from an order and decision of the bankruptcy court, dated August 4, 1980, that denied the Bank's motion to have Bankruptcy Judge Hall disqualify himself from the Parr bankruptcy litigation; and (3) the Bank appeals from the Bankruptcy Court's order dated October 28, 1980, denying the Bank's motion for an order requesting the United States Attorney to conduct a criminal investigation of Ronald J. Parr. For the reasons fully set forth below, this court finds Ronald J. Parr guilty of civil contempt, affirms the Bankruptcy Court's decision concerning disqualification and reverses the Bankruptcy Court's Decision concerning the power to request a criminal investigation. These issues will be discussed seriatim.
The Bank is a creditor of Ronald J. Parr and Alfred R. Parr, the above named bankrupts. On August 26, 1976, the Bank loaned $14 million to Parr Meadows Racing Association, Inc. (the "Association") to finance construction of a quarterhorse race track. As security for repayment of the loan, the Association granted to the Bank a first mortgage on the property. The Parr's are indebted to the Bank for an amount in excess of $14 million as a result of their unconditional guarantee of the loan to the Association. Parr filed a Chapter XI petition in June of 1979, shortly after the Association's Chapter XI case was dismissed by the bankruptcy court.
By order of June 19, 1979, the Bank was authorized pursuant to Fed.R.Bankr.P. 11-26 and 205 to "undertake and cause the examinations of persons, firms, corporations and other entities including, without limitation, Ronald J. Parr."
At depositions taken on August 29 and September 11, 1979, the Bank requested documents relating to Parr's expenses as a debtor-in-possession. Despite the June 19 order authorizing the Bank to examine Parr in his Chapter XI case, he refused to submit to a further examination scheduled by his counsel for October 5, 1979. On November 11, 1979, counsel for Parr informed the Bank's counsel that he would not produce the debtor voluntarily for examination despite the bankruptcy court's order of November 2, 1979, which further authorized the Bank to conduct Rule 205 examinations of Parr.
On December 5, 1979, counsel for Parr agreed to produce Parr for examination by the Bank on December 14, 1979, and to produce documents requested by the Bank. Counsel for the Bank agreed to supply Parr with a list of the requested documents which Parr had agreed to produce at the August 29 and September 11 depositions. This list was forwarded to Parr on December 7, 1979. On December 14, 1979, Parr appeared for the examination, but failed to produce a single document. At that examination, Parr claimed that he could not produce those documents requested by the Bank because of alleged objections to such action by the United States Attorney's Office. On December 18, 1979, a hearing was held in the bankruptcy court on Parr's failure to produce the requested documents. At that time, counsel for Parr admitted that the United States Attorney's Office had informed him of no objection to Parr's production of documents. Nevertheless, Parr failed to produce any of the documents on December 18.
On December 21, 1979, the bankruptcy court directed Parr to "commence production of documentary evidence requested by the Bank," and to "continue producing those documents requested . . . on a weekly basis pursuant to prior orders of this court. . . ." Parr failed to comply with this order despite further requests made in writing by the Bank on January 2, 1980, which specified those documents requested. As a result of Parr's failure to comply, the Bank moved on March 4, 1980, for an order under Fed.R.Bankr.P. 920 adjudging Parr guilty of civil contempt, or in the alternative, certifying to a District Judge the facts of Parr's conduct and directing Parr to appear before a District Court and show cause why he should not be held in contempt.
Hearings on the Bank's motion were held in the bankruptcy court on March 4, April 8 and May 1, 1980. During these hearings Parr took a series of inconsistent positions, stating on the one hand, that he could not find certain documents and "in the alternative" that he need not produce those documents because the Assistant United States Attorney had advised against it. At the April hearing, Parr admitted to the existence of many of the documents requested by the Bank and promised to produce them within one week. Production of the documents was not forthcoming and the May 1, 1980 hearing was held as a result of Parr's failure to fulfill his promise. At this hearing, Parr refused to produce those documents he had previously agreed under oath to produce at the April 8 hearing. In contradicting his April 8 testimony, Parr claimed that many of the documents were not in his possession and that certain documents in his possession could not be turned over as they represented records of a confidential meeting with the F.B.I. To date, there has been no showing that either the United States Attorney's Office or the F.B.I. has communicated any objection to Parr's production of the documents requested. The record in fact, as evidenced by the admission of Parr's counsel at the hearing on December 18, 1979, specifically indicates the contrary.
On June 2, 1980, the bankruptcy judge issued a certificate of facts showing the "willful and intentional contemptuous conduct on the part of respondent Parr," Certificate ¶ 27 at 9, and stated that such conduct warranted the imposition of appropriate punishment under Rule 920 of the Rules of Bankruptcy Procedure. Id. The bankruptcy court recommended that, pursuant to Rule 914 and 754(b) of the Rules of Bankruptcy Procedure, "such punishment should include a taxation of all costs, inclusive of reasonable attorneys' fees, incurred or to be incurred by the Bank in connection with the proceedings herein." Id. at 9-10. (Citing Fidelity Mortgage Investors v. Camelia Builders, Inc., 550 F.2d 47 (2d Cir. 1976), cert. denied, 429 U.S. 1093, 97 S.Ct. 1107, 51 L.Ed.2d 540 (1977).)
On June 30, 1980, the Bank was served with a supplemental affidavit by Parr in which he admitted that certain documents he had previously refused to produce were in fact available to him at all times and that he had inadvertently "neglected" to produce them. At this time Parr attached certain documents to the supplemental affidavit which purported to satisfy the Bank's requests for documents as itemized by the Bank on December 7, 1979 and January 2, 1980. Parr admitted that he might be in possession of other requested documents and would "renew his efforts to locate" them if the Bank would demonstrate that the documents were in his possession.
The record before this court clearly demonstrates a litany of non-compliance by Parr with the bankruptcy court's orders.1 His willful refusal to produce documents as directed by the court's order of December 21, 1979, constitutes contempt under section 41 of the Bankruptcy Act. 11 U.S.C. § 69. Specifically, Parr was ordered by the bankruptcy court to "commence production of documentary evidence requested by the Bank" and to continue to do so on a weekly basis. (See Bankruptcy Court Order, dated December 21, 1979.) Despite repeated requests by the Bank for specific documents and despite promises under oath by Parr that said documents did exist and would be forthcoming, he repeatedly failed to comply with the court's order. This court is cognizant of the bankruptcy court's certificate of facts, dated June 2, 1980, which detailed Parr's contempt and stated that the willful and intentional contemptuous conduct of Ronald Parr warrants the imposition of appropriate punishment under Rule 920 of the Rules of Bankruptcy Procedure. After reviewing the facts and the record, this court agrees with the bankruptcy court's conclusion that Parr's conduct constitutes contempt of an order of the bankruptcy court punishable under Fed.R.Bankr.P. 920.
Section 41 of the Bankruptcy Act, 11 U.S.C. § 69 provides that "a person shall not, in proceedings before a referee, (1) disobey or resist any lawful order, process, or writ; . . . (3) or neglect to produce, after having been ordered to do so, any pertinent document." 11 U.S.C. § 69(a) (1968). Violation of this section subjects the party to punishment "in the same manner and to the same extent as for a contempt committed before the judge." 11 U.S.C. § 69(b) (1968). Rule 920(a)(2) authorizes the sanction of civil contempt for a violation of Section 41 upon notice and hearing.2 See Fed.R.Bankr.P. 920.
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