Pu v. Grubin (In re Food Mgmt. Grp., LLC)

• Decision Date: 19 December 2012
• Docket Number: No. 10–CV–4815 (KMK).,10–CV–4815 (KMK).
• Citation: 484 B.R. 574
• Parties: In re FOOD MANAGEMENT GROUP, LLC, et al. Richard PU, Appellant, v. Janice B. Grubin, as Chapter 11 Trustee, Appellee.
• Court: U.S. District Court — Southern District of New York

484 B.R. 574

In re FOOD MANAGEMENT GROUP, LLC, et al.Richard PU, Appellant,

v.Janice B. Grubin, as Chapter 11 Trustee, Appellee.

No. 10–CV–4815 (KMK).

United States District Court, S.D. New York.

Dec. 19, 2012.

Richard Pu, Richard Pu, PC., New York, NY, Pro se.

Janice Beth Grubin, Todtman, Nachamie, Spizz & Johns, P.C., New York, NY, for Appellee.

Warren T. Pratt, Drinker Biddle and Reath LLP, Wilmington, Delaware, for Appellee.

OPINION AND ORDER

KENNETH M. KARAS, District Judge.

In the instant notice of appeal (“the Notice”), Appellant challenges an order of the bankruptcy court, which reduced his asserted secured claim for $489,448.81 against the debtors' joint estate to an unsecured claim for $84,454.77. The Court is impressed by Appellant's gumption, but not by his arguments and, for the reasons stated herein, affirms the order of the bankruptcy court.

I. Background

The bankruptcy court provided a detailed summary of the factual and procedural history of this dispute in the challenged order below. See Food Mgmt. Grp. v. Pu ( In re Food Mgmt. Grp., LLC ), Nos. 04–22880, 04–22890, 04–22891, 04–22892, 04–20312, 06–08470A, 2008 WL 2788738 (Bankr.S.D.N.Y. July 16, 2008). As will be discussed at greater length, this Court must accept the bankruptcy court's factual findings, unless they are clearly erroneous. The Court will therefore presume familiarity with the underlying circumstances and provide merely a cursory review of the facts relevant for deciding this appeal.

Over the course of several years, Anastasio Gianopoulos (“Tom”) and Constantine Gianopoulos (“Gus”) owned multiple companies in the Westchester area. See id. at *1. Among Tom's and Gus's many companies were several shops and at least one bakery that were used to sell donuts pursuant to franchise agreements with Dunkin' Donuts and its corporate partners (“Dunkin' Donuts”).¹See id. Following an unrelated dispute, Dunkin' Donuts, Tom, Gus, and Tom's and Gus's companies entered into a settlement agreement in 2002, according to which the Dunkin' Donuts franchise agreements held by Tom's and Gus' companies were to be transferred to new corporate entities—KMA I, II, III, and the Bronx Donut Bakery, all but one of the debtors herein—to be owned and controlled by Tom and or Gus. See id. Apparently, however, only some Dunkin' Donuts franchise agreements were transferred to the new entities, and Tom's and Gus's various companies retained assets, including several Dunkin' Donuts franchises.

In 2003, Questech Financial (“Questech”) brought actions in New York state court against Tom, Gus, several other individuals, and several of Tom's and Gus's companies, seeking to foreclose “upon substantially all of the assets of those companies based on a default under seventeen notes and security agreements that encumbered” those assets. Id. Appellant, an attorney, represented the defendants in that action (“the state Questech litigation”). Through Appellant, the defendants represented to Questech that they no longer possessed the collateral, and Tom separately represented that he had “found” the “abandoned” collateral and was using it to operate donut shops. See id. Appellant subsequently informed Questech that Tom operated the shops through a company called Food Management Group. See id.

Questech then brought suit against FMG in federal district court (“the federal Questech litigation”). In that proceeding, Appellant and Tom again claimed that Tom had found the abandoned assets, and that FMG held the franchise agreements from Dunkin' Donuts. See id. at *2. “This assertion was patently false.... [I]t was the KMA entities and the Bronx Donut Bakery that held the franchise agreements and other collateral and were operating the donut shops using the” encumbered collateral that Questech sought to recover. Id. Magistrate Judge Mark D. Fox, who was overseeing the federal Questech litigation, sanctioned Tom and Appellant for affirmatively misleading Questech and the court in a bad-faith attempt to delay Questech's recovery. The district judge in the federal Questech litigation was the Honorable Colleen M. McMahon. She affirmed Magistrate Judge Fox's finding of Appellant's misconduct but vacated and remanded the amount of sanctions. See id. at *12 n. 18. In a subsequent disciplinary hearing in federal court, Appellant entered into a stipulation with the Grievance Committee of this district, in which stipulation he admitted to violating the Disciplinary Rules. See id. at *12. “Pursuant to the stipulation [Appellant] was suspended from the practice of law in the Southern District of New York for a period of six months. [He] was also suspended from the practice of law in the New York State courts for one year as a result of his misconduct.” Id. at *12.

To prevent further abuse and manipulation, Judge McMahon appointed a receiver over the encumbered collateral. See id. at *2. Almost immediately thereafter, on June 1 and 2, 2004, the KMA companies and FMG filed voluntary petitions for Chapter 11 bankruptcy. See id. Judge Hardin, to whom the bankruptcy case was originally assigned, ordered the bankruptcy petitions “procedurally consolidated for the purposes of joint administration.” Id. In bankruptcy, the debtors initially sought to settle the controversy with Questech, but during the negotiations it became clear that the subset of Tom's and Gus's companies that had possessed Dunkin' Donuts franchise agreements had not transferred all of their assets and liabilities to the KMA companies. See id. To facilitate settlement, Questech and that subset of companies “entered into a stipulation whereby all of the latter's assets and liabilities ... were transferred to the debtors' estate.” Id. at *3. An examiner was appointed in 2004, and Appellee, the bankruptcy trustee, was appointed in 2005, “following revelations of a continuing series of misconduct by Tom as owner and principal of the debtors.” Id. at *2.

Appellant filed a proof of claim with each of the debtors' estates, seeking to recover $489,448.81 in legal fees. See id. at *1. He subsequently filed an amended proof of claim, asserting that the majority of his claim was secured pursuant to an agreement he had entered into with FMG through Tom and Gus. See id. at *3. In her capacity as trustee, Appellee filed a separate adversarial proceeding against Appellant to recover what she believed to be fraudulent transfers and/or impermissible preferences. See id. at *1. She later filed objections to Appellant's proof of claim in the bankruptcy case proper, denying his claim entirely and asserting that his claim, to the extent it was allowable, was only unsecured. See id. at *1 n. 1, *3. The bankruptcy court consolidated Appellee's attacks on Appellant's claim into a single adversarial proceeding, received multiple rounds of briefing, and heard arguments on the various issues. See id. at *1 n. 1.² By an order dated July 16, 2008, the bankruptcy court “reduced” Appellant's claim to an unsecured claim for $84,454.77. See id. at *18.

Appellant filed a motion for reargument in the main bankruptcy case, challenging Judge Hardin's order. See Pu v. Grubin ( In re Food Mgmt. Grp., LLC ), 428 B.R. 576, 577 (S.D.N.Y.2009). Appellant simultaneously sought review of Judge Hardin's order before this Court by filing his first notice of appeal. See id. This Court held that it lacked jurisdiction, pending the resolution of Appellant's motion for reargument. See id. Judge Robert D. Drain, who assumed responsibility for the case, denied the reconsideration motion, and Appellant filed the instant Notice, seeking this Court's review of Judge Hardin's order.

II. Discussion

A. Jurisdiction

Appellee initially argued in her brief that the Court lacked appellate jurisdiction. At oral argument, Appellee walked this argument back—for good reason.

As noted, the bankruptcy case encompassed multiple companies' consolidated bankruptcy petitions. See In re Food Mgmt. Grp., LLC, 2008 WL 2788738, at *2. Consequently, any document filed in the bankruptcy case was filed under multiple dockets: 04–22880, 04–22890, 04–22891, 04–22892, and 04–20312, and 06–08470A. See id. at *1. Appellant “filed an identical proof of claim [, and an amended proof of claim,] in each of the debtors' respective cases” for the same amount. Id. at *3. Appellee responded, first, by filing an adversarial proceeding against Appellant, which proceeding was docketed separately under number 06–8470A, see id. at *1, and then by filing claim objections within the main bankruptcy case, see id. at *1 n. 1, *3. The bankruptcy court then consolidated Appellee's claim objections and adversarial proceeding into a single adversarial proceeding. Appellant seeks review of the bankruptcy court's holding in the adversarial proceeding. It was there that Judge Hardin granted in part and denied in part Appellee's objection to Appellant's proof of claim and ruled that Appellant's claim was limited to an unsecured claim. See id. at *18.

The caption for Appellant's Notice of Appeal lists all of the dockets for the main bankruptcy case, not the docket for the adversarial proceeding. (Dkt. No. 1 (10–4815 Dkt.).) In the Notice, Appellant informed the Court that he was appealing from “the order of the above-captioned court, per the Hon. Adlai Hardin ... grant[ing] in part [Appellee's] objection to [Appellant's] claim.” ( Id.) Appellee initially argued that Appellant's appeal from the main bankruptcy case did not establish the Court's jurisdiction to review the challenged order from the adversarial proceeding. Her argument was based on two propositions. First, “[i]t is an elementary principle that a notice of appeal ... must specify a particular order or judgment and must be filed within the four corners of the case in which that order or judgment was entered.” Gray v. Evercore Restructuring, L.L.C. ( In re High Voltage Eng'g Corp.), 544 F.3d 315, 318 (1st Cir.2008). Second, courts traditionally treat adversarial...