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In re Club Ventures Investments LLC

United States District Court, S.D. New York

March 31, 2014


Page 92

Mark Berkowitz, Appellant, Pro se.

For Club Ventures Investments LLC, Appellee: Jonathan Laurence Flaxer, Golenbock Eiseman Assor Bell & Peskoe LLP, New York, NY.


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ANDREW L. CARTER, JR., United States District Judge.

I. Introduction

This action is an appeal from the United States Bankruptcy Court for the Southern District of New York (Gropper, B.J.) permitting Appellees to serve their statement of the issues and counter-designations of the record for a prior bankruptcy appeal on Appellant in one of several specified manners to which Appellant could elect. Appellant, proceeding pro se, argues the order violated his due process rights because the methods of service contained therein are not proscribed by the Federal Rules of Bankruptcy Procedure. Additionally, Appellant claims he did not receive the documents in a timely fashion, such that he could meaningfully prosecute his appeal, which was subsequently dismissed by the United States District Court for the Southern District of New York (Castel, J.). Appellees contend the order from the Bankruptcy Court was necessitated by Appellant's own conduct, including his refusal to provide an address where he could be served and to accept service by any recognized means under the Rules.

II. Background

Appellees Club Ventures Investments LLC and seventeen subsidiaries (or " Debtors" ) filed a petition under chapter eleven of the United States Bankruptcy Code on March 2, 2011. Appellant Mark Berkowitz, who previously served as the Chief Financial Officer for the Debtors from November 2005 to June 2007, filed a state court action in connection with his termination on November 30, 2007. Berkowitz's state court action was automatically stayed against the Debtors when they filed for bankruptcy. Subsequently, Berkowitz became involved in the bankruptcy proceedings upon filing a proof claim with the Bankruptcy Court on June 15, 2011, as an unsecured creditor in the amount of $10,149,531. (Flaxer Decl. Ex. 2.)

On his proof of claim form, also known as Form B10, in response to the inquiry " Name and address where notices should be sent:" Berkowitz listed an email address " with hard copy to: Mark Berkowitz; c/o Mr. Tibor Nagy and Mr. Seth Ard; Susman Godfrey LLP; 560 Lexington Avenue, 15th Floor; New York, N.Y. 10022, U.S.A." (Id.) On June 25, 2013, Berkowitz

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filed an amended proof of claim form that listed new contact information:

Mark Berkowitz. Creditor has no current permanent physical address, travels, and may be outside the U.S. Call 208-450-5024 to ask where to send for a particular date. E-mail may go to (not accepted for official service of notices). Creditor cannot access PACER and does not always have computer internet access. Previous address is not valid and does not forward.

(Flaxer Decl. Ex. 3.) Appellees state, however, the amended proof of claim was not reflected on the claims register maintained by the Bankruptcy Court until May 22, 2013.

The Debtors filed the Second Amended Joint Plan of Reorganization (" Plan" ) on September 20, 2011 (No. 11-10891, Dkt. No. 168), and on September 23, 2011, the Bankruptcy Court conducted a hearing on the Plan. Berkowitz did not file written objections but appeared at the hearing to oppose the Plan. The Bankruptcy Court overruled his objections and confirmed the Plan, which became effective on November 23, 2011. (No. 11-10891, Dkt. No. 180.) No appeal was taken from the confirmation order and no stay of the consummation of the Plan was requested by Appellant.

In September of 2011, the Debtors sought to disallow, subordinate, or reclassify Berkowitz's claim on various grounds. (No. 11-10891, Dkt. No. 161.) The Bankruptcy Court denied the motion and lifted the stay with respect to Berkowitz's state court action, allowing him to proceed with those claims. (No. 11-10891, Dkt. No. 230.) The Court also noted the Debtors could move to estimate the claim " if . . . the length of time needed to obtain a State Court determination is unfairly prejudicing other creditors by delaying a distribution to them or requiring the instant chapter 11 case to remain open . . ." under 11 U.S.C. § 502(c). (Id.) The Debtors moved pursuant to § 502(c) to estimate the claim, and motion practice and a hearing on the issue followed.

By order dated December 11, 2012, the Bankruptcy Court issued a Memorandum of Decision and Order estimating Berkowitz's claim at $184,693.06. (Flaxer Decl. Ex. 6.) On January 18, 2013, the Debtors attempted to make a final distribution under the Plan to all unsecured creditors, including to Berkowitz in the amount of $9,614.35. (Zarlengo Decl. ¶ 2 Ex. 1.) The check was sent to the address for Susman Godfrey listed on Berkowitz's original proof of claim form. (Id.) By letter dated February 14, 2013, Appellees' counsel alerted Berkowitz he was in possession of the check, and he would forward the check to Berkowitz upon notification of an appropriate address. (Flaxer Decl. Ex. 11.) He also warned Berkowitz that if the check was not claimed within a certain period, Berkowitz would be barred from receiving a distribution. (Id.) The check was never claimed, and the distribution was forfeited.

Berkowitz timely filed a notice of appeal of the December 11 order estimating his claim at $184,693.06 on December 26, 2012, which was docketed in the District Court as case no. 13-cv-1522 and assigned to Judge Castel. Berkowitz filed his statement of the issues and designations of the record in the Bankruptcy Court for the appeal before Judge Castel on January 9, 2013. The Debtors filed their counter-statement and counter-designations on January 23, 2013, serving them on Berkowitz by email and at the Susman Godfrey address. (Flaxer Decl. Ex. 12.) Berkowitz objected to this manner of service and filed a motion in the Bankruptcy Court on January 30, 2013 to compel the Debtors to serve their counter-designations

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on him in-person and provide hard copies of all documents designated in the record. (Flaxer Decl. Ex. 14.)

The Bankruptcy Court issued an order dated February 1, 2013 in response to Berkowitz's January 30, 2013 motion. The order stated, in pertinent part:

1. The Debtors or their counsel shall make available to Berkowitz on or before February 8, 2013 (i) their Designation of Additional Items to Be Included in the Record on Appeal and Counter-Statement of Issues to Be Presented on Appeal and (ii) a copy of each ...

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