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New York State Teamsters Conference Pension and Retirement Fund v. Comac Builders Supply Corp.

January 14, 2008


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



Currently before the Court is Magistrate Judge Lowe's October 3, 2007 Report-Recommendation to which the parties filed no objections. In his Report-Recommendation, Magistrate Judge Lowe recommended that, despite the fact that Defendant, a corporation, was not represented by counsel, the Court should grant the parties' joint request for judicial approval of their proposed Consent Judgment and Order.


Plaintiff filed its original complaint in this action on February 15, 2006, and filed an amended complaint on March 8, 2006. See Dkt. Nos. 1, 3. Both complaints contain similar allegations, all of which arise under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq., and the Labor Management Relations Act, 29 U.S.C. § 141 et seq.

After the Court granted it several extensions, Defendant filed its answer to Plaintiff's amended complaint on October 9, 2006. See Dkt. No. 16. At that time, Defendant was represented by counsel. However, on June 7, 2007, defense counsel moved to withdraw, filing several exhibits under seal to support that application. See Dkt. Nos. 22-25. On June 19, 2007, Magistrate Judge Lowe conducted a telephone conference with defense counsel and Mr. Steven R. Bagnashi, the president and sole owner of Defendant, to address defense counsel's motion. At the close of that conference, Magistrate Judge Lowe granted the motion.

Thereafter, on June 25, 2007, Magistrate Judge Lowe conducted a telephone conference with Plaintiff's counsel and Mr. Bagnashi to discuss a schedule for proceeding with this litigation. Mr. Bagnashi stated that Defendant planned to continue to proceed pro se because it did not have the funds to retain another attorney. Plaintiff's counsel proposed that Plaintiff and Defendant enter into a stipulated settlement, with Mr. Bagnashi filing a confession of judgment. Mr. Bagnashi assented to that proposal.

On August 24, 2007, the parties jointly filed a proposed Consent Judgment and Order and requested that the Court approve that disposition of the action. See Dkt. No. 29. In reviewing the proposed Consent Judgment and Order, Magistrate Judge Lowe noted that "[t]he only issue presented by this rather routine request is . . . the fact that . . . Defendant, a corporation, is proceeding pro se." See Report-Recommendation at 1. He began his analysis of this issue by reiterating the well-established principle that "'[i]t has been the law for the better part of two centuries . . . that a corporation may appear in the federal courts only through licensed counsel.'" See id. at 4 (quoting Rowland v. California Men's Colony, 506 U.S. 194, 201-02 (1993)) (other citations omitted). However, he also explained that "courts have recognized certain limited exceptions to this general rule." See id. (citing cases). Specifically, Magistrate Judge Lowe noted that, "in a case factually analogous to [this one], the Eastern District of New York permitted a small and impecunious corporation to be represented by its sole shareholder in a federal bankruptcy proceeding." See id. at 4-5 (citing In the Matter of Holliday's Tax Servs., Inc., 417 F. Supp. 182 (E.D.N.Y. 1976), aff'd without opinion sub nom. Holliday's Tax Servs., Inc. v. Hauptman, 614 F.2d 1287 (2d Cir. 1979)). Relying on the reasoning in Holliday, Magistrate Judge Lowe found that the circumstances in this case "warrant granting an exception to the general rule that corporations must appear by counsel in federal court." See id. at 5.*fn1*fn2 Based upon this reasoning, Magistrate Judge Lowe recommended that this Court grant the parties' request for judicial approval of their proposed Consent Judgment and Order. See id. at 6.


Although the parties did not file any objections to Magistrate Judge Lowe's recommendation, the Court, after reviewing his reasoning and the cases upon which he based his decision, rejects that recommendation for the following reasons. First and foremost, the Court finds that the cases upon which Magistrate Judge Lowe relied are distinguishable and have not been followed by other courts that have addressed this issue.

In Holliday, which Magistrate Judge Lowe found "factually analogous," the court, although acknowledging the "virtually unbroken line of state and federal cases . . . approv[ing] the rule that a corporation can appear in court only by an attorney," nevertheless, concluded that, at least in the bankruptcy setting, "[t]o require this corporation to appear by a lawyer is effectively to exclude it and its sole shareholder from the courts." Holliday, 417 F. Supp. at 183 (citations omitted). The court also acknowledged, however, that, "[s]ince Mr. Holliday 'chose to accept the advantages of incorporation,' such as limited liability, it would be neither shocking nor a violation of due process to require him to now 'bear the burden of that incorporation,' such as increased costs of court appearances." Id. at 184 (citation omitted). Nonetheless, despite these well-established legal principles, the court determined that "[m]odifying the absolute rule of corporate representation in bankruptcy cases . . . rests on the inherent power of a court to supervise the proper administration of justice." Id. (citation omitted).

It is clear that the court in Holliday relied upon policy considerations rather than legal principles to conclude that an exception to the well-established and long-standing rule that an attorney must represent a corporation was warranted in that case. Moreover, it appears that the Holliday court may have found it significant that the case involved a bankruptcy proceeding and, therefore, may have intended to limit its holding to that type of situation. Finally, the Court concludes that, in light of the long line of well-reasoned opinions to the contrary, Holliday provides an insufficient basis upon which to find that an exception is warranted in this case.

In particular, the Court finds that the Supreme Court's decision in Rowland v. California Men's Colony Unit II Men's Advisory Council, 506 U.S. 194 (1993), supports its decision not to rely upon Holliday. In that case, the Supreme Court noted that

[t]wo federal cases cited by respondent are the only two, of which we are aware, to hold that artificial entities may be represented by persons who are not licensed attorneys: United States v. Reeves, 431 F.2d 1187 (CA9 1970) (per curiam) (partner can appear on behalf of a partnership), and In re Holliday's Tax Services, Inc., 417 F. Supp. 182 (EDNY 1976) (sole shareholder can appear for a closely held corporation), affirmance order sub nom. Holliday's Tax Services, Inc. v. Hauptman, 614 F.2d 1287 (Table (CA2 1979). These cases neither follow federal precedent, nor have themselves been followed. See, e.g., Eagle Associates v. Bank of Montreal, 926 F.2d 1305, 1309-1310 (CA2 1991) (criticizing and refusing to ...

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