Tygris Asset Fin., Inc. v. Michael Abboud Obgyn, P.C.
| Decision Date | 26 October 2012 |
| Docket Number | 10-mc-794 (CBA) |
| Court | U.S. District Court — Eastern District of New York |
| Parties | TYGRIS ASSET FINANCE, INC., Judgment-Creditor, v. MICHAEL ABBOUD OBGYN, P.C., et al, Judgment-Debtors. |
NOT FOR PUBLICATION
Judgment-creditor Tygris Asset Finance, Inc. ("judgment-creditor" or "Tygris") moves the Court pursuant to Fed. R. Civ. P. 65.1 to release to it a $10,000.00 bond posted in the above-captioned case. Although the Court directed Michael Abboud and Michael Abboud OBGYN, P.C. (collectively, "judgment-debtors") to file any response in opposition to this motion by November 29, 2011, they have not done so. Instead, judgment-debtors seek the protection of the automatic bankruptcy stay triggered under 11 U.S.C. § 362(a) upon filing petitions for Chapter 11 bankruptcy. For the reasons set forth below, judgment-creditor's motion is granted.
On March 22, 2010, default judgment was entered against judgment-debtors in the United States District Court for the Northern District of Illinois in the amount of $137,337.71. The above-captioned action was commenced on November 12, 2010, when judgment-creditor registered the default judgment in the United States District Court for the Eastern District of New York. On March 18, 2011, the Honorable Eric N. Vitaliano, upon an affidavit from judgment-debtors, ordered judgment-creditor to show cause why the default judgment entered in the Northern District of Illinois should not be granted.
This Court conducted a show cause hearing on March 22, 2011. The Court decided that any motion to vacate the default judgment should be made in the Northern District of Illinois. The judgment-debtors requested a stay of the enforcement of the default judgment, which was to be accomplished by a marshal's auction, in order to make that motion. This Court indicated that "the only grounds on which [it] would stay the sale is if there's some question about the entry of the default judgment or if there's a sufficient enough question about the entry of the default judgment." Mar. 22, 2011 Hr'g Tr. at 9-10. Counsel for judgment-debtors then averred that her client was never served with a complaint in the Northern District of Illinois action, that he was never served with a default judgment, and that he was provided no opportunity to litigate the action. Id. at 10, 13. Based upon this statement, which the Court assumed to be made in good faith, the Court agreed to stay the marshal's sale for 30 days. Id. at 29-30. The stay was granted on the condition that judgment-debtors turn over certain equipment to judgment-creditor, post a bond for $10,000.00, and move in the Northern District of Illinois to vacate the default judgment. Id. Although the Court did not say so explicitly at the show cause hearing, it is abundantly clear that the bond was ordered pursuant to Fed. R. Civ. P. 65(c) to secure Tygris against any damages that might result if judgment-debtors' representations to or tactics before this Court in its attempt to procure a stay proved to be in bad faith.
Judgment-debtors turned over the required equipment, and on March 24, 2011 counsel to judgment-debtors posted a $10,000.00 bond in the form of a cashier's check paid by non-party Irina D. Abboud.1 D.E. #5. Judgment-debtors also moved to vacate the default judgment in theNorthern District of Illinois. Just as judgment-debtors' counsel had done before this Court, she averred before the Honorable Amy J. St. Eve that her clients had not been served and that neither her clients nor she was aware of the Illinois action until mid-March 2011. In an opinion denying judgment-debtors' motion to vacate dated August 15, 2011, Judge St. Eve found, however, that "[t]he overwhelming, uncontested documentary evidence flatly contradicts this contention." Decision on Motion to Vacate, D.E. #16-1, at 9; N.D. Ill. Docket No. 10-cv-339, D.E. # 36 at 3. In addition, Judge St. Eve ordered counsel for judgment-debtors to show cause why she should not impose sanctions. Although judgment-debtors appealed this decision, the Seventh Circuit dismissed the appeal for lack of prosecution on February 6, 2012, citing counsel's representations that judgment-debtors had "completely failed to communicate with her since October 3, 2011." See U.S.C.A. Mandate, N.D. Ill. Docket No. 10-cv-339, D.E. # 57. On November 1, 2011, Judge St. Eve imposed sanctions, finding that counsel for judgment-debtors had "multiplied the proceeding through filing baseless pleadings and affidavits that flatly contradict documentary evidence." Decision on Sanctions, D.E. # 16-1, at 6; N.D. Ill. Docket No. 10-cv-339, D.E. # 48 at 5. Judge St. Eve held that the very representations that formed the explicit and sole basis for the stay were demonstrably false and made in bad faith.
Judgment-creditor now returns to request that this Court release the $10,000.00 bond posted on behalf of judgment-debtors. The Court directed judgment-debtors to file any response in opposition to this motion by November 29, 2011, but judgment-debtors failed to do so. On June 5, 2012, upon learning that both judgment-debtors filed voluntary bankruptcy petitions in the United States Bankruptcy Court for the Eastern District of New York, see Case Nos. 12- 41906 (Michael Abboud, filed March 16, 2012); 11-49072 (Michael Abboud OBGYN, P.C.,filed October 26, 2011), this Court issued an order to show cause why the Court could take the action requested by judgment-creditor. On June 29, 2012, judgment-creditor filed an affirmation in response to the order to show cause, arguing primarily that the $10,000.00 bond is not property of either bankruptcy estate and therefore not subject to the automatic bankruptcy stay. D.E. # 16. In its June 29 affirmation, judgment-creditor also attests that it suffered damages in excess of $10,000.00 as a result of this Court's decision to stay the marshal's sale and allow judgment-debtors to seek to vacate the default judgment in the Northern District of Illinois. Id. ¶ 41. On July 6, 2012, judgment-debtors filed an affirmation in opposition, asserting that the determination of whether the $10,000.00 injunction bond constitutes "property of the estate" for purposes of the automatic stay under 11 U.S.C. § 362(a) must be determined by the United States Bankruptcy Court. On July 16, 2012, judgment-creditor filed a response.
Pursuant to 28 U.S.C. § 157(a) and standing Administrative Order No. 264 (E.D.N.Y. Aug. 28, 1986) (Weinstein, C.J.), all cases or proceedings brought pursuant to Title 11 or relating to Title 11 in the Eastern District of New York are referred to the United States Bankruptcy Court for the Eastern District of New York. Nevertheless, the Second Circuit has expressly held that a district court presiding over a pre-petition action has concurrent jurisdiction with the bankruptcy court to determine whether the automatic bankruptcy stay applies to the pending non-bankruptcy action. Erti v. Paine Webber Jackson & Curtis, Inc. (In re Baldwin-United Corp. Litig.), 765 F.2d 343, 347 (2d Cir. 1985); F.T.C. v. Consumer Health Benefts Ass'n, No. 10-cv-3551 (ILG), 2011 WL 2341097, at *1 n. 3 (E.D.N.Y. Jun. 8, 2011); In re Pitts, No. 808-74860, 2009 WL 4807615, at *4 (Bankr. E.D.N.Y. Dec. 8, 2009).
Whether the district court should exercise its inherent jurisdiction to decide the applicability of the automatic stay is a separate question. See Baldwin-United, 765 F.2d at 347. Although this is a pre-petition motion already pending before this Court, judgment-creditor correctly notes that 28 U.S.C. § 157(d) gives district courts discretion to "withdraw, in whole or in part, any case or proceeding referred under [Section 157], on its own motion or on timely motion of any party, for cause shown." The analysis used under Section 157(d) is helpful in deciding whether this court should exercise jurisdiction. The statute does not define the term "cause," but courts in this Circuit consider several factors, including "(1) whether the claim is core or non-core, (2) what is the most efficient use of judicial resources, (3) what is the delay and what are the costs to the parties, (4) what will promote uniformity of bankruptcy administration, (5) what will prevent forum shopping, and (6) other related factors." In re Burger Boys, Inc., 94 F.3d 755 (2d Cir. 1996) .
Although the first and most important factor is whether the claim is within the bankruptcy court's core jurisdiction, "any factor may have substantial importance in a given case, and none is dispositive." DeWitt Rehab. & Nursing Center, Inc. v. Columbia Cas. Co., 464 B.R. 587, 590 (S.D.N.Y. 2012) (citing In re Burger Boys, 94 F.3d at 762; In re Orion Pictures Corp., 4 F.3d at 1101). Even assuming that this is a core bankruptcy proceeding,2 concerns of judicial economycounsel in favor of deciding whether the bankruptcy stay applies, and if not, the merits of the instant motion. This Court ordered both the injunction and the injunction bond at issue, and is intimately familiar with the long history of this case. The parties have already submitted multiple papers on this motion. It would therefore generate undue delay, expense, and waste of judicial resources to direct judgment-creditor to bring its motion again before the Bankruptcy Court, and so the Court chooses to invoke its jurisdiction.
In its June 29 affirmation in response to the Court's order to show cause, judgment-creditor asserts that the $10,000.00 injunction bond is not the property of either judgment-debtors' estate as defined in 11 U.S.C. § 541 because it was posted by non-party Irina Abboud. D.E. # 16, ¶ 3-4. Judgment-creditor argues...
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