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Citizens & Northern Bank v. Pembrook Pines Mass Media

April 3, 2012


The opinion of the court was delivered by: Siragusa, J.



This case is before the Court on Pembrook Pines Mass Media, N.A., Corp.'s ("Pembrook") motion, Mar. 16, 2012, ECF No. 23-2, seeking, an Order confirming Pembrook's authority to file a chapter 11 bankruptcy petition with the United States Bankruptcy Court for the Western District of New York, or in the alternative, pursuant to Rule 59(e) of the Federal Rules of Civil Procedure and Local Rule 7(d)(3), for reconsideration of portions of the Court's Receiver Order entered on March 1, 2012.

Id. at 1--2. For the reasons stated below, Pembrook's application is denied.


Citizen's and Northern Bank ("the Bank") filed its complaint against Pembrook and Robert J. Pfuntner (collectively "Borrowers") on July 30, 2009. In the complaint, the Bank alleged facts supporting diversity jurisdiction and claimed that Pembrook and Pfuntner had defaulted on loans the Bank made to them. On March 15, 2010, the Clerk entered a default against the Borrowers. Subsequently, the Bank moved for a default judgment, July 29, 2010, ECF No. 5. In its moving papers, the Bank stated that it served the complaint and summonses on the Borrowers on October 6, 2009, and that neither appeared or answered within the time permitted under Federal Rule of Civil Procedure 12(a)(1)(A). The Court ordered the Clerk to enter judgment for the Bank against both defendants in the amount of $233,479.35, plus interest from March 12, 2010, through the date the judgment was entered, at a rate of $25.38 per day, Decision and Order, Sept. 7, 2010, ECF No. 6. The Clerk entered judgment on September 17, 2010, ECF No. 7. On July 20, 2011, the Bank and the Borrowers signed a Forbearance Agreement which, by its terms, terminated on January 31, 2012 or upon breach or default by the Borrowers, whichever occurred earlier.

In early January 2012, the Bank, in accordance with Federal Rule of Civil Procedure 69(a), sought the appointment of a Receiver pursuant to section 5228 of the New York Civil Procedure Law and Rules, Motion to Appoint Receiver, Jan. 4, 2011, ECF No. 9. In an affidavit filed in support of the Bank's motion, W illiam H. Baaki, Esq., stated that the Borrowers owned and operated radio stations and held licenses from the Federal Communications Commission ("FCC"), and that Pembrook was still generating revenue from its operation of the radio stations. Baaki Aff. ¶¶ 5--6. Further, Mr. Baaki stated that since the radio station licenses were unique properties, the execution of the judgment against the assets would not achieve as high a value as a private sale conducted by a Receiver, who was knowledgeable about the sale of FCC broadcast licenses and could ensure compliance with FCC rules pertaining to the sale of those licenses. Id. ¶ 11. In regard to the Bank's application for a Receiver, the Court issued an Order to Show Cause, which was personally served on Pembrook and on Pfuntner on February 11, 2011. At the Show Cause hearing on February 18, 2011, Mr. Baaki appeared for the Bank and no one appeared for either of the defendants. Consequently, on March 1, 2012, ECF No. 21, the Court appointed Richard A. Foreman as Receiver over Pembrook ("Receiver Order"). The appointing order also restrained anyone but Mr. Foreman from filing a bankruptcy petition on behalf of Pembrook ("the Bankruptcy Injunction").

On March 8, 2012, Pembrook filed a Chapter 11 voluntary petition in the Bankruptcy Court, W estern District of New York. In re Pembrook Pines Mass Media, N.A., Corp., No. 2-12-20379-PRW (Bk. W .D.N.Y. Mar. 8, 2012). The Bank moved to dismiss the petition based upon the terms of the Court's Order containing the Bankruptcy Injunction. On March 16, 2012, the Honorable Michael J. Kaplan suspended the proceedings in the Bankruptcy case, pursuant to Section 305(a) of the Bankruptcy Code, and relieved the Bank of the automatic stay, "in recognition of the Order Appointing Receiver." entered in this case. Order Granting in Part Motion of Citizens & Northern Bank for an Order (A) Dismissing the Chapter 11 Case, or, in the Alternative, (B) Providing Relief from the Automatic Stay, or, in the Alternative, (C) Providing Adequate Protection and Continuing the Receivership, In re Pembrook Pines Mass Media, N.A., Corp., No. 12-20379 (Bk. W .D.N.Y. Mar. 16, 2012).

In its pending application before this Court, Pembrook argues that the Receiver Order cannot abrogate its fundamental right to commence a Bankruptcy proceeding, and, therefore, asks the Court to reconsider the Bankruptcy Injunction contained in the Order. Following oral argument on March 22, 2012, the parties, at the Court's invitation, filed additional papers in support of, and opposition to, Pembrook's motion.


As the Fifth Circuit has recognized, "[t]here is no motion for 'reconsideration' in the Federal Rules of Civil Procedure. See Hamilton Plaintiffs v. Williams Plaintiffs, 147 F.3d 367, 371 n. 10 (5th Cir.1998). However, a motion for reconsideration filed within ten days of the district court's judgment is construed as a Rule 59(e) motion that suspends the time for filing a notice of appeal. See id." Bass v. U.S. Dept. of Agriculture, 211 F.3d 959, 962 (5th Cir. 2000). Since the Federal Rules of Civil Procedure do not expressly provide for motions for reconsideration, such a motion may be construed as a motion to alter or amend judgment under Rule 59(e) or Rule 60(b). See Osterneck v. Ernst & Whinney, 489 U.S. 169, 174 (1989)."The standard for granting such a motion is strict, and reconsideration will generally be denied unless the moving party can point to controlling decisions or data that the court overlooked-matters, in other words, that might reasonably be expected to alter the conclusion reached by the court." Shrader v. CSX Transp., Inc., 70 F.3d 255, 257 (2d Cir. 1995).


In support of its opposition to the Bankruptcy Injunction, Pembrook argues that since Congress bestowed the fundamental right to file a petition in Bankruptcy, only Congress may limit that right. Pembrook's Suppl. Mem. of Law at 2. Further, Pembrook maintains that a Federal court may only limit access to Bankruptcy, "when construing federal laws such as the federal securities and racketeering laws." Id. On this point, Pembrook contends that, since the Receivership was created by New York State law, the Court is without authority to limit Pembrook's access to Bankruptcy: "A District Court . may enjoin an entity or individual from filing a bankruptcy petition only when a federal agency receivership is in place and only under certain limited circumstances involving established fraud and/or the debtor's express written consent to receivership." Id. at 3. Additionally, Pembrook disputes that it consented to the receivership by failing to participate in the action until after the Receiver Order.

The Bank responds that Pembrook and Pfuntner*fn1 did consent to the entry of a Receiver Order, since each signed a Forbearance Agreement with the Bank on July 20, 2011, a copy of which the Bank has provided. Angela Z. Miller, Esq., letter to the Court (March 23, 2012), ECF ...

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