Tulis v. Gordos N. Rest. Corp. (In re Gordos Rest. Corp.)
| Decision Date | 04 August 2022 |
| Docket Number | Case No. 18-23862 (RDD),Adv. Pro. No. 19-08721 (RDD) |
| Citation | 643 B.R. 1 |
| Parties | IN RE: GORDOS RESTAURANT CORP., Debtor. Mark S. Tulis, as Chapter 7 Trustee of Gordos Restaurant Corp., Plaintiff v. Gordos North Restaurant Corp., Michael J. Schliman, Elizabeth Schliman, and Joanne Piazza, Defendants. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
LAMONICA HERBST & MANISCALCO, LLP, by David A. Blansky, Esq. for Plaintiff Mark S. Tulis, as chapter 7 trustee of Gordos Restaurant Corp.
LAW OFFICES OF FLOREK & COUNSEL LLC, by Stephen A. Florek III, Esq., for Defendant Gordos North Restaurant Corp.
LAW OFFICES OF SERRANO & ASSOCIATES, P.C., by Roselina Serrano, Esq., for Defendant Joanne Piazza.
Michael Schliman and Elizabeth "Lisa" Schliman, pro se.
This Memorandum of Decision explains the Court's reasons, after trial, for granting in part and denying in part the claims of the chapter 7 trustee (the "Trustee") of Gordos Restaurant Corp. ("Gordos" or the "Debtor") based on the Trustee's allegations that defendant Gordos North Restaurant Corp. ("Gordos North") wrongfully obtained and is using Gordos’ trade name and associated good will; that defendants Joanne Piazza and Lisa Schliman, the co-owners of Gordos North, improperly benefited from such transfer; and that defendant Michael Schliman breached his fiduciary duties as Gordos’ president and controlling shareholder in permitting the transfer to occur.
The Court has jurisdiction over this adversary proceeding under 28 U.S.C. §§ 157(a) - (b) and 1334(b). The Trustee's claim to avoid and recover the postpetition transfer of Gordos’ trade name and associated goodwill under 11 U.S.C. §§ 549 and 550 arises uniquely under the Bankruptcy Code and is a core proceeding that the Court can decide by a final judgment under 28 U.S.C. § 157(b)(2) and the United States Constitution. Jones v. Brand (In re Belmonte ), 551 B.R. 723, 726 (Bankr. E.D.N.Y. 2016) ; Deeba v. Superior Farm, LLC (In re Macco Props. ), 2016 Bankr. LEXIS 156, at *13 ); Coan v. MDC Corp. (In re Louis Gherlone Excavating, Inc. ), 2014 WL 7246146, at *1, 2014 Bankr. LEXIS 5105, at *2-3 (Bankr. D. Conn. Dec. 19, 2014) ; Butler v. Anderson ( ), 2013 Bankr. LEXIS 5692, at *34-35 (Bankr. D. Mass. Oct. 15, 2013).
The Trustee's other claims, under sections 43(a) and 43(c) of the Lanham Act, 15 U.S.C. § 1125(a) and (c) ; under sections 360-1 and 349 of the New York General Business Law ; for common law trademark infringement and unjust enrichment; for successor liability based on alter ego or de facto merger theories; and for breach of fiduciary duty are not core proceedings, but, rather, related to this bankruptcy case for purposes of 28 U.S.C. §§ 157(a) - (b)(1) and 1334(b). However, the Trustee and Ms. Piazza separately filed statements consenting to the Court's entry of a final judgment,1 and the Schlimans and Gordos North admitted in their answers that this is a core proceeding, which, in the light of Gordos North and the Schlimans not having complied with Fed. R. Bankr. P. 7012(b) by having failed to state in their answers or as required by paragraph 5 of the Court's pre-trial order dated April 12, 20212 whether they did or did not consent to entry of a final judgment by this Court, as well as their acquiescence in the Court's conduct of the trial, evinces their knowing and voluntary consent to the Court's entry of a final judgment on all the Trustee's claims. Wellness Int'l Network, Ltd. v. Sharif , 575 U.S. 665, 683-85, 135 S.Ct. 1932, 191 L.Ed.2d 911 (2015).3
Between 1972 and February 11, 2019, a "family friendly" bar and grill serving "American pub food" operated at 415 Commerce Street, Hawthorne, New York under the name "Gordo's," first as "Gordo's Colonial Tavern" and, since 1981, simply as "Gordo's."4 The original operators and owners, Gordon Krueger and Arthur Greason, sold the restaurant and related assets, specifically including the trade name "Gordo's," under a Share Purchase Agreement in October 2006 to Michael Schliman and a business partner.5 Mr. Schliman had worked at the restaurant since 1998 as a bartender, and his wife, Lisa also started working there soon after the acquisition6 and was working there when Gordos closed.7
The original owners retained title to the building when they sold the restaurant, and although they continued to lease it to Gordos on a month-to-month basis after the original lease expired in 2016, the terms for Mr. Schliman's purchase of the building were not implemented and a warrant of eviction was issued on November 26, 2018 that precipitated Gordos’ filing under chapter 11 of the Bankruptcy Code on December 5, 2018.8
Krueger and the decedent's estate of Mr. Greason moved for an order under 11 U.S.C. § 362(b)(10) declaring that because of the prepetition termination of the lease by the expiration of its stated term (and the issuance of the warrant of eviction), the automatic stay under 11 U.S.C. § 362(a) did not apply to their interest in the premises,9 and the Court granted that relief.10 Having continued to operate postpetition through February 11, 2019 on the landlord's conditional consent, on February 12, 2019 Gordos ceased business and turned over the premises to the landlord.11
Gordos moved to dismiss its chapter 11 case on February 20, 2019,12 but after a hearing on March 22, 2019 where the possibility of available assets to administer was credibly raised,13 the Court entered an order converting the case to one under chapter 7 of the Bankruptcy Code,14 which, among other things, resulted in the Trustee's appointment.
An on-line article by the Examiner News about Gordos’ last day noted that Mr. Schliman 15 And on February 21, 2019, ten days after Gordos closed and one day after Gordos moved to dismiss its chapter 11 case, Ms. Schliman and Ms. Piazza incorporated Gordos North as 50/50 shareholders under section 402 of the New York Business Corporation Law.16 The new corporation was aptly named: the certificate of incorporation listed its address as 1006 Broadway, Thornwood, NY, which is approximately 1.5 miles, or a five minute drive, due north from Gordos.17 That is where Gordos North eventually opened its own family friendly American-style bar and restaurant, under the name "Gordos North" on September 15, 2019,18 after obtaining a liquor license and completing a buildout/remodeling, under the motto, which appeared on its menu, "A New Dining Experience with Old Friends."19
One reasonably infers that, consistent with the statement attributed by the Examiner News to Mr. Schliman on Gordos’ last day, the Schlimans and the Piazzas were at that time focusing on Gordos North opening nearby. This is corroborated by Mr. Piazza's testimony that he had been looking for a location for Gordos North in his town, Mount Pleasant. Trial Tr. at 71. (Mount Pleasant, New York includes the hamlets of Hawthorne and Thornwood.)20
Both Mr. and Ms. Schliman went to work at the new restaurant full time,21 as did several of Gordos’ former employees, including the cook,22 and the restaurant's menu included many of Gordos’ former dishes.23 Neither of the Schlimans had contributed any monetary capital to the new corporation.24 No payment was offered to the Trustee on behalf of the Debtor's chapter 11 estate for the use of Gordos’ name or any associated goodwill.
Apparently the Trustee learned of Gordos North's existence through Mr. Krueger, who saw online customer reviews of the restaurant starting in November 2019 and articles about it in the Lewisboro Daily Voice and Westchester Magazine on November 30, 2019 and December 9, 2019, respectively.25 In addition to the facts stated above and, as discussed below, the material gross income that Gordos North generated from the month that it opened, these two articles and online reviews are the Trustee's primary evidence that Gordos North is liable for taking without paying any consideration a valuable trade name and associated goodwill from Gordos.
It is clear from the online reviews and articles comprising Exhibits M, N, P, and Q that customers and the local press viewed Gordos North as a return of Gordos, albeit with some design and menu upgrades. Online comments on Gordos North's Facebook page state, and "Lisa and Mike always welcome us with a smile."26 Online Yelp reviews for Gordos North from September 2019 through November 2019 state, "We had often been to the original Gordos and was [sic] excited to welcome back an old friend, now Gordos North;" "fast forward through the original Gordos relocating to Town Center ... my parents took my brother and I [sic] to THIS Gordo's just last week;" "Lunch was nice, a great Gordos burger perfectly cooked with Swiss and special mayo, and good fries;" "Definitely completely updated compared to the previous Gordo's;" "Should update their website as searches bring up the former Hawthorne location;" "familiar to all that you loved at the original Gordos -- and more;" and "this is not the old gordo's. first appetizer was to [sic] too salty to...
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