Leasing Consultants Inc., In re

• Decision Date: 25 January 1979
• Docket Number: No. 94,D,94
• Parties: , Bankr. L. Rep. P 67,040 In re LEASING CONSULTANTS INCORPORATED, Bankrupt. PODELL & PODELL, Claimant-Appellant-Appellee, v. George FELDMAN, as trustee in Bankruptcy of Leasing Consultants Incorporated, Respondent-Appellee-Appellant. ocket 78-5034.
• Court: U.S. Court of Appeals — Second Circuit

Page 103

592 F.2d 103

5 Bankr.Ct.Dec. 34, Bankr. L. Rep. P 67,040

In re LEASING CONSULTANTS INCORPORATED, Bankrupt.

PODELL & PODELL, Claimant-Appellant-Appellee, v. George FELDMAN, as trustee in Bankruptcy of Leasing

Consultants Incorporated, Respondent-Appellee-Appellant.

No. 94, Docket 78-5034.

United States Court of Appeals, Second Circuit.

Argued Oct. 6, 1978.

Decided Jan. 25, 1979.

Marshall C. Berger, New York City (George A. Hahn, Hahn, Hessen, Margolis & Ryan, New York City, of counsel), for respondent-appellee-appellant.

Daniel M. Shientag, New York City, for claimant-appellant-appellee.

Before MEDINA, MANSFIELD and MESKILL, Circuit Judges.

MESKILL, Circuit Judge:

This appeal is the latest of several judicial proceedings which have played a role in determining the various legal consequences of a misdeed which took place about ten years ago. The parties before the Court are appellant George Feldman, trustee in bankruptcy for Leasing Consultants Incorporated ("Leasing"), and appellee Podell & Podell, a now defunct New York law firm. The major participants in the transactions giving rise to this litigation were Martin Miller, the former president of Leasing, and Bertram Podell, a former Congressman and a former member of Podell & Podell. Because the interrelationship of the many proceedings preceding this appeal is crucial to our decision today, a rather detailed recital of what has gone before is necessary.

In July, 1973, Bertram Podell was indicted by a grand jury sitting in the Southern District of New York. The indictment charged Podell with conspiracy, solicitation and acceptance of bribes, criminal conflict of interest and perjury. At trial before Judge Robert L. Carter the government introduced evidence that in 1969, while Podell was a member of Congress, his law firm received $12,350 in "legal fees" from Leasing and his reelection committee received $29,000 as a campaign contribution from Leasing's president, Martin Miller. The government contended that these sums were received in return for Podell's advocating the interests of Florida Atlantic Airlines, a subsidiary of Leasing, before various government agencies. On the tenth day of the trial, in October of 1974, Podell pleaded guilty to one count of conspiracy to defraud the United States and to violate the conflict of interest statute, 18 U.S.C. § 371, and to one count of accepting compensation in violation of the conflict of interest statute, 18 U.S.C. § 203. ¹ Subsequently Meanwhile, across the river, Bankruptcy Judge William J. Rudin of the Eastern District of New York was presiding over Leasing's bankruptcy. Leasing, not having gotten what it paid for, began having financial difficulties and in August, 1970, a petition was filed under Chapter XI. In September of 1970 Podell & Podell filed a proof of claim for $16,000, representing the balance purportedly due to Podell & Podell for professional services rendered. In response, George Feldman, Leasing's trustee in bankruptcy ("trustee"), filed a counterclaim to recover the $12,350 in "legal fees" paid by Leasing to Podell & Podell in 1969.

this Court affirmed the trial court's denial of a post-conviction motion by Podell to withdraw his guilty plea and upheld the judgment of conviction. United States v. Podell, 519 F.2d 144 (2d Cir.), Cert. denied, 423 U.S. 926, 96 S.Ct. 270, 46 L.Ed.2d 252 (1975). ²

In March, 1977, after a trial of the claim and of the counterclaim, ³ Bankruptcy Judge Rudin made the following findings of fact. In 1968 Leasing had acquired Florida Atlantic Airlines, which flew between Florida and the Bahamas. Shortly after the purchase, Leasing learned that Florida Atlantic did not have the authority to land its planes in the Bahamas, and that unless authority could be obtained, the airline would have to cease all its operations. After being referred to Bertram Podell by Melvin Heiko, Leasing's attorney in the Florida Atlantic purchase, Martin Miller agreed to pay Podell for his services in obtaining landing rights. Leasing paid Podell & Podell $12,350 pursuant to this agreement. Heiko then suggested that Podell & Podell be retained at $1,000 per month to obtain business for Florida Atlantic. The $16,000 claim filed by Podell & Podell in the bankruptcy proceeding was based on this retainer agreement.

Bankruptcy Judge Rudin concluded, however, that "(n)o services of any kind, nature or description were ever rendered for and on behalf of the debtor by the firm of Podell & Podell to earn the ($16,000) claimed (under the retainer agreement) or any (part) thereof." In addition, he concluded that the $12,350 already paid to Podell & Podell by Leasing was "illegally paid and accepted." ⁴ Judgment was entered striking the $16,000 claim of Podell & Podell and awarding the trustee recovery against Podell & Podell on the counterclaim in the amount of $12,350, with interest.

Podell & Podell appealed Bankruptcy Judge Rudin's decision. Judge Jack B. Weinstein of the Eastern District, in an oral opinion, rejected the firm's argument that there was no substantial basis in the evidence to support the bankruptcy court's determination that the $12,350 at issue had been paid pursuant to the illegal conspiracy admitted by Podell's guilty plea in the criminal case. Nevertheless, Judge Weinstein remanded the case to the bankruptcy judge for reconsideration of the judgment on the counterclaim in light of a decision, by Judge Kevin Thomas Duffy, entered in the Southern District of New York after Bankruptcy In the Southern District proceedings before Judge Duffy, commenced in January of 1976, the government had sought to recover, in a civil action, the $41,350 allegedly paid by Leasing and Miller to Podell and his law firm in violation of 18 U.S.C. § 203. ⁵ The government proceeded on the theory that Podell had received this money in violation of the fiduciary duty he owed to the government and that under equitable principles he should therefore be held accountable by means of a constructive trust. In an opinion and order filed May 31, 1977, Judge Duffy granted the government's motion for summary judgment, noting that "courts have not been reluctant to recognize and remedy the misuse of a confidential relationship with the United States by employees or officials serving inconsistent interests for their own gain." The summary judgment in favor of the government, like the earlier criminal conviction, was appealed to and upheld by this Court. United States v. Podell, 572 F.2d 31 (2d Cir. 1978).

Judge Rudin's order had been filed in the Eastern District but before Judge Weinstein heard the appeal.

Shortly after Judge Duffy rendered his decision, Podell moved that Judge Duffy reopen the proceedings, for the first time calling to Judge Duffy's attention the bankruptcy proceedings pending in the Eastern District in which the trustee in bankruptcy for Leasing had recently been awarded a $12,350 judgment against Podell & Podell. In an order adhering to his original decision Judge Duffy wrote:

Of (Bankruptcy Judge Rudin's) award, $11,000 appears to be the subject matter of my May 31, 1977 order, as well. Bankruptcy Judge Rudin's award is presently on appeal (to the Eastern District).

The fact of these (bankruptcy) proceedings (was) never made known to me by the parties, particularly defendant and his counsel, who now appears incredulous that "although (a) matte(r) of public record" these proceedings did not "appear to have been considered" by me. . . . What appears incredible to me is that defendant's counsel merely represents that the (Leasing) Trustee was awarded judgment during the pendency of the motion before this Court, while ignoring the fact that Bankruptcy Judge Rudin's opinion on the award was dated March 25, 1977 eleven days prior to defendant's filing any papers in opposition to the summary judgment motion. It would thus appear that plaintiff and/or his counsel deemed that award to be irrelevant to my consideration of the summary judgment motion at that time. Instead, more than 30 days after the rendering of my opinion and order, during the pendency of the appeal from Bankruptcy Judge Rudin's award to another court, this matter is suddenly deemed crucial to my determination. Yet defendant has not even attempted to explain the basis for his present supposition. His counsel merely points out that "(p)atently, it would be unfair and inequitable to require the defendant to pay twice." . . . However, Bankruptcy Judge Rudin's award presently lacks finality; defendant might never be the subject of conflicting judgments. In any event, defendant is free to raise his argument on appeal in the Eastern District.

Back in the Eastern District, when the bankruptcy claim and counterclaim were reconsidered on remand, Bankruptcy Judge Rudin, like Judge Duffy, adhered to his original decision. ⁶ Rejecting the claim that This Court has no jurisdiction over the proceedings pending in the Southern District of New York. In fact, for reasons best known to defendant, knowledge of its institution and pendency was not brought to this Court's attention. It is noted that the opinion and order made by District Judge Duffy in the Southern District granting summary judgment to the government is dated May 31, 1977, while this Court's decision is dated March 25, 1977. Some 30 days after Judge Duffy rendered his opinion, defendant moved to reargue or reopen the proceedings to seek credit for whatever amount he may be required to pay here and that application was denied by an opinion dated July 28, 1977.

it would not be equitable to require Podell to pay the same sum twice, Bankruptcy Judge Rudin wrote:

The defendant put himself in the position from which he seeks relief. If he could have had succor from Judge Duffy, he foreclosed himself by not bringing his problem to the Judge's attention at the time of the motion for summary judgment.

Bankruptcy Judge Rudin's decision was again appealed to Judge Weinstein....