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In re Bridge to Life

May 16, 2006

IN RE BRIDGE TO LIFE, INC. DEBTOR.
BRIDGE TO LIFE, INC., DEBTOR-APPELLANT,
v.
WILLIAM LUCADAMO, CREDITOR-APPELLEE.



The opinion of the court was delivered by: Sifton, Senior Judge.

Chapter 11

MEMORANDUM OPINION AND ORDER

This case is before the Court on appeal from an order of United States Bankruptcy Court for the Eastern District of New York. That decision denied Debtor-Appellant Bridge to Life's motion for reconsideration of a previous order dismissing its Chapter 11 bankruptcy case. For the reasons set forth below, the bankruptcy court's denial of Bridge to Life's motion for reconsideration is affirmed.

BACKGROUND

The facts of this case, which are undisputed, are more fully set forth in Bankruptcy Judge Jerome Feller's prior decision in this case. See In re The Bridge to Life, Inc., 330 B.R. 351 (Bankr. E.D.N.Y.2005). The facts pertinent to the present motion are summarized below.

Debtor-Appellant Bridge to Life, Inc. ("Bridge") is a notfor-profit corporation with its principal place of business in Queens, New York. Eleanor L. Ruder ("Ruder") is its founder and executive director. Appellee William Lucadamo ("Lucadamo") formerly served as a member of Bridge's board of directors and as its treasurer. Bridge provides assistance to pregnant women---such as counseling, clothing, and baby furnishings---in order to encourage them not to undergo abortion.

On January 15, 2002, Bridge opened a Residence Home for expectant women. Ruder believed the Residence Home to be a drain on the corporation's finances, and accordingly opposed its opening. On the other hand, Lucadamo, a major benefactor of Bridge, supported the Residence Home and its employees. Lucadamo also guaranteed the mortgage on Bridge's most valuable asset, a parcel of real property located in Fresh Meadows, New York (the "Fresh Meadows Property").

On June 6, 2002, Bridge held an election of board members, which, under Bridge's by-laws is by a majority vote of the existing board. The vote to re-elect Lucadamo to the board was tied 4-4 when Lucadamo exercised a proxy on behalf of an absent board member in his own favor. At another meeting, held on July 23, 2006, the board declared Lucadamo's re-election invalid and held a new vote. Lucadamo, maintaining that he was already re-elected at the June 6 meeting, declined to participate as a candidate. His vacancy was then filled by another.

On August 15, 2002, Lucadamo commenced a lawsuit against Bridge in the Supreme Court of the State of New York, County of Queens ("Lucadamo State Court Action"). The complaint contained three causes of action: (1) a demand that Bridge be directed to transfer $57,304.34 from its general accounts to its Residence Home's accounts, (2) an injunction prohibiting Bridge from closing the Residence Home, and (3) judicial confirmation that Lucadamo was properly re-elected to the board of directors on June 6, 2002. On October 1, 2002, Lucadamo and Bridge entered into a stipulation which was so ordered by Justice Janice A. Taylor (the "Stipulation"). The Stipulation provided, inter alia, that (1) the Lucadamo State Court Action would be referred to a referee to hear and to make a recommendation to Justice Taylor, (2) the Residence Home would remain open, and (3) the Residence Home employees would be paid.

In May 2003, Bridge ceased making salary payments to the Residence Home employees in violation of the Stipulation. Bridge challenged the validity of the Stipulation before Justice Taylor, but Justice Taylor rejected the challenge and held Bridge in contempt in October 2003.*fn1 Bridge was given 30 days to purge its contempt by paying the employees. When Bridge failed to do so, Justice Taylor awarded Lucadamo a judgment in the amount of $41,830.00 for his legal fees ("Lucadamo Sanctions Judgment"). The Residence Home employees commenced a separate action against Bridge ("Employees' State Court Action").

Bridge appealed the Lucadamo Sanctions Judgment to the Appellate Division, Second Department, but was unable to qualify for an appeal bond. A New York City Sheriff served Bridge with notice of execution of the Lucadamo Sanctions Judgment on May 7, 2004 seeking to satisfy the judgment by the sale of the Fresh Meadows Property.

On May 11, 2004, Ruder filed a Chapter 11 bankruptcy petition on behalf of Bridge ("First Chapter 11 Case"). Bridge removed the third cause of action in the Lucadamo State Court Action to the bankruptcy court and stated that it intended to challenge the Lucadamo Sanctions Judgment and the Residence Home employees' salary claims in the bankruptcy forum. Lucadamo moved to dismiss the First Chapter 11 Case on two grounds: (1) Ruder lacked the authority to file a Chapter 11 petition on behalf of Bridge, and (2) the Chapter 11 filing was a litigation tactic in a two-party dispute and was filed in bad faith. The bankruptcy court held a hearing on the motion to dismiss on November 4, 2004, and at the hearing, Bridge consented to dismissal of its First Chapter 11 Case with prejudice. On November 30, 2004, Bankruptcy Judge Feller entered an order dismissing the First Chapter 11 Case with prejudice ("First Dismissal Order").

On May 31, 2005, Justice Taylor adopted the referee's recommendation to dismiss the Lucadamo State Court Action in its entirety. In order to enforce payment of the Lucadamo Sanctions Judgment, a sheriff's sale of the Fresh Meadows Property was scheduled for June 8, 2005. On June 7, 2005, Bridge filed another Chapter 11 petition ("Second Chapter 11 Case") in violation of the First Dismissal Order. On June 10, 2005, Bankruptcy Judge Feller dismissed the Second Chapter 11 Case sua sponte as having been filed in "blatant violation" of the First Dismissal Order ("Second Dismissal Order").

Bridge did not file an appeal of the Second Dismissal Order with this court; rather, Bridge moved the Bankruptcy Court for reconsideration of that order or, in the alternative, for a stay pending appeal.*fn2 Bankruptcy Judge Feller denied both motions. In so ruling, Bankruptcy Judge Feller reasoned that the First Dismissal Order, which dismissed the First Chapter 11 Case "with prejudice" to refiling, operated as an injunction against filing subsequent bankruptcy petitions and Bridge could not file a subsequent bankruptcy petition without first obtaining permission from the bankruptcy court. Bankruptcy Judge Feller further reasoned that even if the First Dismissal Order had somehow expired, the Second Dismissal Order was warranted because Bridge filed the petition in bad faith. Finally, Bankruptcy Judge Feller denied the motion for stay pending appeal because apart from the caption of the motion, Bridge made no ...


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