In re Reviss
| Decision Date | 06 May 2021 |
| Docket Number | Case No. 19-44155 |
| Citation | 628 B.R. 386 |
| Parties | IN RE: Vladimir REVISS, Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of New York |
Robert Nosek, Esq., Certilman Balin Adler & Hyman, LLP, 90 Merrick Avenue, East Meadow, NY 11554, Attorneys for Chapter 7 Trustee Richard J. McCord.
Raul J. Sloezen, Esq., Law Offices of Raul J. Sloezen, 18 Hasbrouck Avenue, Emerson, NJ 07630, Attorneys for Green Tree Case Funding, LLC.
The matter comes before this Court upon the motion of the Chapter 7 Trustee Richard J. McCord (the "Trustee") for several forms of relief arising from the settlement of a personal injury claim in the Chapter 7 bankruptcy case of Vladimir Reviss, including approval of the settlement under Bankruptcy Rule 9019 and authorization to disburse to Mr. Reviss his claimed exemption in the proceeds of a personal injury action in the amount of $39,040 (the "Exemption Motion"). ECF No. 33.
Only one aspect of the relief sought by the Trustee is contested – the request for authorization to pay Mr. Reviss his claimed exemption. That relief is opposed by Green Tree Case Funding, LLC ("Green Tree"), which filed a secured proof of claim in the amount of $49,560 based on a series of litigation finance agreements that it entered into with Mr. Reviss.
Green Tree argues that it, rather than Mr. Reviss, is entitled to receive the exempt funds based on a pre-petition agreement between it and Mr. Reviss in which, Green Tree asserts, Mr. Reviss assigned a portion of the future proceeds of his personal injury action to Green Tree in exchange for a series of payments by Green Tree to him of $2,500, $2,500, $7,500, and $7,500, totaling $20,000. Green Tree Opp. Mem., at 2-3, 5, ECF No. 40.
The Court held two hearings on the Trustee's Exemption Motion, at which the Trustee and Green Tree appeared and were heard, and Mr. Reviss did not appear. At the initial hearing on February 16, 2021, and without objection, the Court approved the personal injury settlement in the amount of $75,000, and on February 22, 2021, the Court entered an order to that effect. The Court also heard initial argument on Green Tree's objection, and set a schedule for Green Tree to file supplemental opposition. Separately, the Court heard the Trustee's motion for an award of attorneys' fees of $25,000 and expenses of $1,864.50 to the Trustee's personal injury counsel. ECF No. 34. Without objection, that motion was granted, and on February 22, 2021, the Court also entered an order to that effect.
No further opposition was filed, and on April 6, 2021, the Court held a continued hearing on the Trustee's Exemption Motion and Green Tree's objection. At the conclusion of the April 6 hearing, the Court rendered an oral decision overruling Green Tree's objection and authorizing the Trustee to disburse the full claimed exemption amount to Mr. Reviss. April 6, 2021 Tr. at 33:1-34:17, ECF No. 51. An order to that effect was entered on April 9, 2021. Order Authorizing the Trustee To Disburse the Debtor's Claimed Exemption in the Amount of $39,040.00 (the "April 9 Order"), ECF No. 53.
In light of the significance of the issues presented by the Trustee's Exemption Motion and Green Tree's objection, which lie at the intersection of fundamental principles of bankruptcy law and state law addressing litigation finance, the Court issues this memorandum decision to set forth and elaborate on the findings of fact and conclusions of law and reasoning that support its April 6, 2021 oral decision and April 9, 2021 Order. The Court's underlying rulings and order have not changed.
This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157(b)(2)(A), (B) and (O), and 1334(b), and the Standing Order of Reference dated August 28, 1986, as amended by the Order dated December 5, 2012, of the United States District Court for the Eastern District of New York. This is a core proceeding pursuant to 28 U.S.C. § 157(b), and venue is proper before this Court pursuant to 28 U.S.C. § 1409.
Based on the parties' filings and the entire record of this case, the following facts are not in dispute.
On or about January 23, 2019, prior to filing for bankruptcy relief, Mr. Reviss commenced a personal injury action in the New York State Supreme Court, Kings County. Beginning some two months earlier, before that action was filed, on November 20, 2018, December 3, 2018, and January 22, 2019, and once again some two months thereafter, on March 29, 2019, Mr. Reviss and Green Tree entered into a total of four "Case Investment Agreements" (the "Agreements").
As set forth in the Agreements, Green Tree advanced Mr. Reviss a total of $20,000 in exchange for his promise to repay Green Tree, at the conclusion of the personal injury action, the amount that was advanced, plus origination and underwriting fees of $4,780, and interest at a rate of 3.5 percent per month, compounded monthly, on the advanced sum and fees. Proof of Claim No. 10, Parts 3-6 (Agreements) ¶ 4. As also set forth in the Agreements, repayment was contingent upon Mr. Reviss's success in the personal injury action. That is, if he did not recover, he would owe nothing to Green Tree – but if he did recover, he would be required to pay Green Tree in full before he would receive any of the proceeds from the action.
The parties to the Agreements expressly acknowledged that the transactions were not assignments of part of Mr. Reviss's personal injury claim, but rather assignments of a portion of the proceeds of that claim. In particular, the Agreements each state that "[the Debtor] and [Green Tree] acknowledge and agree that this transaction is not to be constructed as an assignment of part of a cause of action but rather only as assignment of a portion of the proceeds of the [personal injury] Claim." Proof of Claim No. 10, Parts 3-6 (Agreements) ¶ 11.
The Agreements also include a representation by Mr. Reviss that he did not intend to file for bankruptcy at any time in the future, and that if he did, he would describe the assigned proceeds as an asset of Green Tree and not as his debt or obligation to Green Tree. Specifically, the Agreements state:
In the event [the Debtor] commences or has commenced ... any case or other proceeding pursuant to any bankruptcy, insolvency, or similar law, [Mr. Reviss] shall cause the interest of [Green Tree] in the contingent proceeds of the Claim to be described as an asset of [Green Tree] in any oral or written communication, including, but not limited to, any schedule or other document, made or filed in connection with any such case or proceeding. In no event [shall Mr. Reviss] permit the interest of [Green Tree] in the proceeds of the Claim to be described as a debt or obligation of [Mr. Reviss] to [Green Tree] in any such communication.
Proof of Claim No. 10, Parts 3-6 (Agreements) ¶ 20(b). In addition, the Agreements state that "[Mr. Reviss] is not now subject to any bankruptcy proceeding" and "does not intend to file for bankruptcy at any time in the future." Proof of Claim No. 10, Parts 3-6 (Agreements) ¶ 20(a). And finally, in the Agreements, Mr. Reviss granted "a security interest" in the assigned proceeds and signed four "Claimant Lien in Favor of Green Tree Case Funding, LLC and Attorney Acknowledgement" (the "Lien Agreements"). Proof of Claim No. 10, Parts 3-6 (Agreements) pp. 8-9.1
On July 8, 2019, just over three months after entering into the fourth Agreement with Green Tree, Mr. Reviss filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. He scheduled his personal injury claim on Schedule A/B of his bankruptcy petition. And he claimed the federal personal injury and "wild card" exemptions, totaling $39,040, on Schedule C of his bankruptcy petition, pursuant to Bankruptcy Code Sections 522(d)(11)(D) and 522(d)(5) (the "Exemption"). Sched. C at 2, ECF No 1. Finally, on Schedule E/F, Mr. Reviss listed Green Tree as a holder of an unsecured claim in the amount of $20,000, and indicated that the claim was not contingent, liquidated, and undisputed. Sched. E/F at 2, ECF No. 1. Mr. Reviss did not specify the nature of the claim, nor did he indicate that Green Tree held an interest in any of his present or future property.
On February 18, 2020, Green Tree filed a proof of claim in the total amount of $49,560 (the "Claim") based on the "[a]ssignment of proceeds of personal injury case." Proof of Claim No. 10. Green Tree stated that the Claim had a fixed annual interest rate of 51.11 percent and was secured by "Personal Injury Proceeds" based on an "Attorney Acknowledgement." Id . In support of the claimed amount and the claim status, Green Tree attached the four Agreements and Lien Agreements, as well as a document titled "Contract Calculator" breaking down the amount owed. Id .2
On November 12, 2020, this Court authorized the Trustee to retain Certilman Balin Adler & Hyman, LLP as his counsel and the Law Office of Yuriy Prakhin, P.C. as his personal injury counsel in connection with Mr. Reviss's pending personal injury action. Some five weeks later, on December 21, 2020, the Trustee filed this motion seeking permission to settle the personal injury action for $75,000 and to disburse funds equal to the claimed Exemption to Mr. Reviss.
On the same day, the Trustee also filed an application to reclassify Green Tree's Claim from a secured claim to an unsecured one (the "Reclassification Application"). In that application, the Trustee argued that Green Tree's cash advances to Mr. Reviss did not become claims secured by liens until after Mr. Reviss filed his bankruptcy petition. The...
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2021-2022 Commercial Law Developments
...was unaffected by the parties' forbearance agreement, and therefore the bank was entitled to the proceeds of the settlement.In re Reviss, 628 B.R. 386 (Bankr. E.D.N.Y. 2021)—Because New York law does not permit assignment of a cause of action for personal injury, even though it does permit ......