Miller v. Lim (In re Miller Parking Co.)

• Decision Date: 14 May 2014
• Docket Number: No. 13–14963.,13–14963.
• Citation: 510 B.R. 123
• Parties: In re MILLER PARKING COMPANY, LLC, Debtor. James N. Miller, Trustee, James N. Miller Revocable Trust, u/t/a November 19, 1998, Appellant, v. K. Jin Lim, Chapter 7 Trustee, Appellee.
• Court: U.S. District Court — Eastern District of Michigan

510 B.R. 123

In re MILLER PARKING COMPANY, LLC, Debtor.James N. Miller, Trustee, James N. Miller Revocable Trust, u/t/a November 19, 1998, Appellant,

v.K. Jin Lim, Chapter 7 Trustee, Appellee.

No. 13–14963.

United States District Court,

E.D. Michigan,

Southern Division.

Signed May 14, 2014.

Donna J. Lehl, Stuart A. Gold, Hannah Mufson McCollum, Gold, Lange & Majoros, P.C., Southfield, MI, for Appellant.

Kenneth M. Schneider, Schneider, Miller, Detroit, MI, for Appellee.

Robert A. Weisberg, Carson Fischer, Bloomfield Hills, MI, for Debtor.

OPINION AND ORDER AFFIRMING BANKRUPTCY COURT AND DISSOLVING STAY

DAVID M. LAWSON, District Judge.

The question presented by this appeal is whether the bankruptcy court abused its discretion when it approved a settlement among the Trustee, the estate's largest creditor, and non-parties to the bankruptcy proceeding. Appellant James N. Miller Trust, a creditor of the estate with a claim disputed by the Trustee, offers several reasons why the settlement should have been rejected by the court. But even without the deferential review standard that applies here, it is difficult to see how the bankruptcy court could have erred by approving the proposed settlement, which terminated complex and potentially lengthy litigation and provided the estate's largest creditor a substantial recovery. The order of the bankruptcy court will be affirmed.

I.

Debtor Miller Parking Company, LLC, which is sometimes referred to as Miller Parking Detroit, found itself on the wrong end of a $3 million judgment obtained in state court, and filed for bankruptcy protection. The judgment was obtained by CH Holding Company, Alan Ackerman, and CH/Brand Parking Associates (the Ackerman plaintiffs), who have filed claims in the bankruptcy. The judgment culminated a series of events that began in 2004 when Ackerman and his companies sued Bruce Miller and his companies over a business dispute. Ackerman is a minority shareholder in CH Holding (which owns three-quarters of plaintiff CH/Brand), and a former business partner of Bruce Miller, who owned Miller Parking Detroit. Bruce Miller's son, James Miller, owns Miller Parking Services, LLC (MPS). MPS allegedly acquired the assets of Miller Parking Detroit. James Miller also was the sole director of Miller Parking Company (Miller Parking Chicago), another Miller family parking business that operated in Chicago. The Weinstein and Stein parties are Bruce Miller's children and grandchildren, who together with James Miller's personal and family trusts owned all of the shares in Miller Parking Chicago.

Ackerman initiated the 2004 state court lawsuit following a breakdown in a prior business relationship between CH Holding and Miller Parking Detroit. In February 2009, while the Oakland County case was pending, an unaffiliated entity that held a long-term lease on Miller Parking Chicago's major capital asset, the Bismark parking deck in Chicago, exercised its option to buy the deck. That left Miller Parking Chicago with no ongoing operations or major assets other than cash from the sale. On June 30, 2009, Ackerman won his judgment in the Oakland County case for around $3 million. In September 2009, James Miller distributed $7 million in cash held by Miller Parking Chicago to its shareholders. Not long after, James dissolved the Chicago company. On October 7, 2009, Miller Parking Detroit filed for bankruptcy.

Two years later, on October 7, 2011, the Trustee in the present bankruptcy sued James Miller, Miller Parking Chicago, and its former shareholders, including the Weinstein and Stein parties. That case is pending presently in this Court. Lim v. Miller Parking, 11–14422. The Trustee alleges that James and Bruce Miller commingled the affairs of their two companies and carried out a fraudulent scheme to funnel assets from Miller Parking Detroit to Miller Parking Chicago, in order to evade creditor claims against Miller Parking Detroit. The Trustee's suit asserts claims for: (1) preference to recover “loan payments” made by the Detroit company to the Chicago company on a fake promissory note; (2) fraudulent transfers based on other unidentified inter-company payments; (3) fraudulent transfers for any payments made by the Detroit company to any defendant; (4) disgorgement; (5) substantive consolidation; (6) alter ego; and (7) breach of fiduciary duty by James Miller.

In April 2013, attorneys for the Weinstein and Stein parties advised the Court that they had reached a settlement in principle with the Trustee (also the plaintiff in Lim v. Miller Parking, 11–14422) and the Ackerman creditors. The terms of the “triangular” settlement would resolve all claims against the Weinstein and Stein parties in the Trustee's action pending in this Court ( Lim v. Miller Parking ). The agreement to resolve the claims against the defendants in the Lim case is conditioned on (1) the execution of a settlement between the Ackerman plaintiffs and the Weinstein and Stein defendants that would result in the dismissal of all claims against those defendants in the federal litigation; (2) payment by the Weinstein and Stein defendants of $250,000 to the bankruptcy estate; and (3) conveyance by Doris Miller (mother and grandmother of the individual defendants in Lim ) to the Ackerman plaintiffs of her 10% interest in the Center Parking Associates Limited Partnership, which derives income from certain parking facilities in Detroit. The parties to the settlement assert that the Center Parking interest would be valued at $1 million.

The bankruptcy Trustee asserts that the claims filed in the bankruptcy estate amount to (1) $4 million in claims by CH Holding, which comprises no less than two-thirds of all claims filed by all creditors; (2) a claim for $2 million filed by James N. Miller and his various family trusts (the Miller defendants); and (3) $62,000 in uncontested claims. The bankruptcy Trustee contends that the Miller claim for $2 million is invalid because it is based on a promissory note executed by Miller Detroit in favor of Miller Chicago, for which Miller Detroit received no substantial consideration in return. According to the Trustee, this promissory note merely served as an accounting smokescreen for the fraudulent sacking of assets from Miller Detroit, as part of Bruce Miller's and James Miller's schemes to shelter Miller Detroit's assets from its largest creditor, CH Holding. Under the terms of the settlement agreement, the holders of the uncontested claims would receive a 16.6% immediate interim distribution from the funds paid into the estate, which would transform into 25% if the James Miller claim in the bankruptcy estate is denied. If the James Miller claim is sustained, then the settlement agreement requires CH Holding to indemnify the bankruptcy estate against the James Miller claim, to the extent of the assumed $1 million value of the Center Parking interest that it would receive.

Finally, the Trustee also would be authorized under the settlement agreement to make a request for trustee compensation on a “constructive disbursement of $1 million,” subject to a hearing and approval by the bankruptcy court.

Appellant James N. Miller Trust objected to the settlement. On October 22, 2013, the bankruptcy court held a hearing on the Trustee's motion to authorize the compromise and an interim distribution. The bankruptcy court found that the proposed settlement was fair and equitable and in the best interests of the estate, and it therefore granted the motion to authorize the settlement and interim distribution. The bankruptcy court noted in particular that (1) the litigation was complex and the outcome of the Trustee's claims against the Weinstein and Stein defendants was uncertain, due to the complexity of the accounting and business relationships between all of the involved parties; (2) it would be difficult to establish the proper amount owed by the Weinstein and Stein defendants, due to the lack of documentation of many of the financial dealings between the Miller companies; (3) the $250,000 paid to the estate and the $1 million to its largest creditor, CH Holding, was a significant recovery on their claims; (4) the largest creditor of the estate was in favor of the settlement (a fact that the bankruptcy court found “compelling”); and (4) the interim distribution would allow for a substantial immediate payment to all creditors other than the James Miller entities, which otherwise might be delayed by years of litigation in a case that already had been pending since 2009. (Hr'g Tr. 17–20, Pg ID 145–48, Oct. 22, 2013.)

Appellant James N. Miller Trust appealed the order approving the settlement.

II.

District courts have jurisdiction to hear appeals from final judgments, orders, and decrees of bankruptcy courts. 28 U.S.C. § 158(a)(1); Central States, Se. & Sw. Areas Pension Fund v. U.S. Truck Co. Holdings, Inc. (In re U.S. Truck Co. Holdings), 341 B.R. 596, 599 (E.D.Mich.2006). The Sixth Circuit has held that “finality ‘is considered in a more pragmatic and less technical way in bankruptcy cases than in other situations.’ ” In re Cyberco Holdings, Inc., 734 F.3d 432, 437 (6th Cir.2013) (quoting Lindsey v. O'Brien, Tanski, Tanzer & Young Health Care Providers of Conn. (In re Dow Corning), 86 F.3d 482, 488 (6th Cir.1996)). “Therefore, where an order in a bankruptcy case finally dispose[s] of discrete disputes within the larger case, it may be appealed immediately.” Ibid. (internal quotation marks omitted); see also Morton v. Morton (In re Morton), 298 B.R. 301, 303 (6th Cir. BAP 2003) (noting that a bankruptcy court's order overruling a Chapter 13 debtor's objection to claims was a final order because it ended litigation on the merits and left nothing for the court but the execution of judgment). The order approving the settlement disposed of claims by the largest creditors of the estate, and therefore was final and immediately appealable.

III.

The appellant argues that the...