In re Sugarloaf Ctr.
| Docket Number | 15-58442-WLH |
| Decision Date | 08 August 2022 |
| Parties | IN RE: SUGARLOAF CENTRE, LLC, Debtor, |
| Court | U.S. Bankruptcy Court — Northern District of Georgia |
ORDER ON MOTION TO VACATE, ALTER, OR AMEND THE ORDERS ON FINAL APPLICATIONS FOR COMPENSATION OF THE TRUSTEE AND HIS FINANCIAL ADVISOR AND CHITTRANJAN THAKKAR'S MOTION TO (1) REMOVE AND BAR THE CHAPTER 11 TRUSTEE; (2) DISQUALIFY AND BAR GLASSRATNER ADVISORY & CAPITAL GROUP, LLC, ACCOUNTANTS FOR THE TRUSTEE; (3) DISGORGE ANY FEES AND EXPENSES OF THE TRUSTEE AND THE TRUSTEE'S FINANCIAL ADVISOR
THIS MATTER is before the Court on the Response to Notice of Proposed Payments and Motion to Vacate, Alter or Amend the Orders on Final Applications for Compensation of Glass Ratner Advisory & Capital Group, LLC and Ronald L. Glass Chapter 11 Trustee (Doc. No. 296) and Chittranjan ("Chuck") Thakkar's Motion to (1) Remove and Bar the Chapter 11 Trustee (2) Disqualify and Bar GlassRatner Advisory & Capital Group, LLC, Accountants for the Trustee; (3) Disgorge any Fees and Expenses of the Trustee and The Trustee's Financial Advisor (Doc. No. 301) (the "Motions"). Ronald L. Glass, Chapter 11 Trustee ("Mr. Glass" or the "Trustee") and Glass Ratner Advisory & Capital Group, LLC ("GR") opposed the Motions. The Court held a hearing on the Motions on July 14, 2022 and a continued hearing on the Motions on July 28, 2022. Representatives for Chuck, Niloy, and Rohan Thakkar; Morris Manning, & Martin, LLP ("MMM"); Ron Glass; GR the United States Trustee; and Westmoore Lending Partners IV, LLC ("Westmoore") appeared. The Court's oral ruling at both hearings is incorporated herein.
Sugarloaf Centre, LLC ("Sugarloaf"), with Nilhan Developers, LLC ("Nilhan Developers"), NRCT, LLC ("NRCT"), Bay Circle Properties, LLC ("Bay Circle"), and DCT Systems Group, LLC ("DCT") (collectively the "Debtors"), each filed a petition for relief under Chapter 11 of the Bankruptcy Code on May 4, 2015. The cases were procedurally consolidated. The immediate reason the Debtors filed bankruptcy was their default on a series of loan agreements with Wells Fargo Bank, N.A. Over the long history of the bankruptcy cases, the cases were also impacted by litigation between Chuck Thakkar (the manager of each of the Debtors) and his family, on the one hand, and Good Gateway, LLC and SEG Gateway, LLC (collectively "Gateway"), on the other. Prior to the filing of the bankruptcy petitions, Gateway obtained judgments in the amounts of $2.5 million and $12 million against Mr. Thakkar and other non-debtor entities in a Florida state court.
On October 10, 2018, after learning about actions taken without Court approval in the Nilhan Developers case, the Court entered an order requiring the parties to show cause why a trustee should not be appointed. After a hearing on the show cause order, the Court appointed a trustee in all five cases. On December 11, 2018, the U.S. Trustee filed a Notice of Appointment of Chapter 11 Trustee and Setting of Bond (Case No. 15-58440 Doc. No. 920), and an Application for Approval of Appointment of Trustee (Case No. 15-58440 Doc. No. 921). That same day, the Court entered an order granting the Motion for the Appointment of a Chapter 11 Trustee (Case No. 15-58440 Doc. No. 919), and an order approving Mr. Glass as Trustee (Case No. 15-58440 Doc. No. 922).
On December 20, 2018, the Trustee filed an Application to Employ GR as Financial Advisor (Case No. 15-58440 Doc. No. 934). GR is a firm named for Mr. Glass and Ian Ratner ("Mr. Ratner"). It has provided services for many years in the Atlanta market and elsewhere, including forensic accounting, workout and restructuring services, and services as a trustee, receiver, and chief restructuring officer. The Court granted the application to employ GR on January 22, 2019 (Case No. 15-58440 Doc. No. 965).
Eventually, the Trustee moved forward in each case to bring matters to a posture to be decided by the Court. When it became clear the cases were all taking different paths to resolution, the cases were severed on May 5, 2020 (Case No. 15-58440 Doc. No. 1420).
In Sugarloaf, the Trustee sold real property and initially filed a Chapter 11 plan. After the secured lender filed a proof of claim that far exceeded the amount anticipated, the Trustee determined dismissal was in the best interest of all parties. The Trustee objected to and settled the lender's claim, and then moved to dismiss the case on August 5, 2020 (Case No. 15-58442 Doc. No. 147). The Court granted the Motion to Dismiss on August 28, 2020, subject to the final fee applications of Mr. Glass, GR, and his counsel (MMM) being approved (Case No. 15-58442 Doc. No. 164). On November 17, 2020, the Court approved the Final Application for Compensation for Mr. Glass (Doc. No. 200) and the Final Application for Compensation for GR (Doc. No. 202) (collectively the "Fee Orders"), with the Final Application for Compensation for MMM (Doc. No. 201). The Fee Orders, together with the order on MMM's final compensation, were appealed to the District Court and the Eleventh Circuit Court of Appeals.
On January 8, 2021, while the Sugarloaf Fee Orders were on appeal, motions were filed in the Nilhan Developers and NRCT cases to (1) Remove the Chapter 11 Trustee; (2) Disqualify GR, Accountants for the Trustee; (3) Disgorge Any Fees and Expenses of the Trustee; and (4) Disgorge Any Fees and Expenses of the Accountants for the Trustee (Case No. 15-58443 Doc. No. 238 & Case No. 15-58444 Doc. No. 178). The Court held an evidentiary hearing on the motions on February 22, 2021. On April 19, 2021, the Court issued an order removing Mr. Glass as Plan Agent in both the NRCT and Nilhan Developers cases, removing GR as a professional to the Plan Agent and barring it from being employed by any subsequent plan agent, and disallowing fees otherwise allowable to GR and Mr. Glass through April 26, 2019 (Case No. 15-58444 Doc. No. 230; Case No. 15-584443 Doc. No. 300) (the "Removal Order"). The Court incorporates the Removal Order herein and will discuss it more below.
After the removal of Mr. Glass and GR, and while the Sugarloaf Fee Orders were still on appeal, Chuck, Niloy, and Rohan Thakkar filed a Motion in the Sugarloaf case to (1) Remove the Chapter 11 Trustee; (2) Disqualify GR; (3) Disgorge Any Fees and Expenses of the Trustee; and (4) Disgorge Any Fees and Expenses of the Accountants for the Trustee (Docs. Nos. 245 & 248). Chuck Thakkar also filed a motion pursuant to Bankruptcy Rule 8008(a)(3) requesting an order (i) Removing Chapter 11 Trustee; (ii) Removing GR; (iii) Disgorging Fees and Expenses of Trustee and GR; and (iv) Determining the Involvement or Lack Thereof of MMM (Doc. No. 249) (the "Rule 8008 Motion"). The Court denied the request under Rule 8008 and deferred consideration of any request to require disgorgement of fees, removal of the Trustee or financial advisor to the Trustee, and/or the standing of Chuck Thakkar until the resolution of the appeals of the Fee Orders.
The Eleventh Circuit Court of Appeals ultimately dismissed the appeal of the Sugarloaf Fee Orders on March 4, 2022. On June 27, 2022, Mr. Glass, as Trustee, filed a Notice of Proposed Final Distribution (Doc. No. 294). Mr. Glass proposed to pay GR fees and expenses of $8,343.90 and himself, as Trustee, $92,268.38 based on the prior approved fee applications. In response, Chuck Thakkar and NRCT filed a motion opposing the Trustee's proposed final distribution and requested the Court to modify the orders approving final fees and expenses awarded to Mr. Glass and GR (Docs. Nos. 296 & 297). They contended the bases on which RG and GR were disqualified in the NRCT and Nilhan Developers cases were even more applicable in the Sugarloaf case. They also sought disgorgement from GR of the fees previously paid for the period of December 11, 2018 through April 26, 2019 and requested the Trustee's fees be based on an hourly rate and time billed, rather than on commission, and to be reduced accordingly. Mr. Glass and GR filed a response in opposition (Doc. No. 298). Mr. Thakkar then filed his own motion seeking reconsideration of the Fee Orders. More specifically, Mr. Thakkar seeks to remove Mr. Glass, to disqualify and bar GR from serving as a professional to the Trustee, and to deny and require disgorgement all of Mr. Glass and GR's fees and expenses (Doc. No. 301).
Federal Rule of Civil Procedure 59, made applicable by Bankruptcy Rule 9023, permits bankruptcy courts to alter or amend an order or judgment. Fed.R.Civ.P. 59(e), Fed.R.Bankr.P. 9023. As explained by the Supreme Court, the rule "may not be used to re-litigate old matters or to raise arguments or present evidence that could have been raised prior to the entry of judgment." Exxon Shipping Co. v Baker, 554 U.S. 471, 486, n.5 (2008) (citing 11 C. Wright & A. Miller, Fed. Prac. & Proc. § 2810.1, pp. 127-128 (2nd ed. 1995)). Accordingly, to prevail on a motion for reconsideration, the movant must present either newly discovered evidence or establish a manifest error of law or fact. In re Kellogg, 197 F.3d 1116, 1119 (11th Cir. 1999).
Another ground for setting aside an order of this Court exists under Fed.R.Bankr.P. 9024 and Fed.R.Civ.P. 60. This rule permits relief from a final judgment, order, or proceeding in certain circumstances. A final fee award is like any other final order in that it remains subject to modification under Rule 60. In re Rockaway Bedding, Inc., 454 B.R. 592, 597 (Bankr. D.N.J. 2011). The decision to alter or amend a judgment is highly discretionary. Am. Home Assurance Co v. Glenn Estess & Assocs., 763 F.2d 1237, 1238-39 (11th Cir. 1985). Rule 60(b) lists six categories of reasons or...
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