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In re Emmons-Sheepshead Bay Development LLC

United States District Court, E.D. New York

September 23, 2014


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For Metropolitan Estates, Inc., Emmons Ave. LLC, (in a derivative capacity on behalf of minority members Metropolitan Estates, Inc., Albert Wilk and Alex Dikman), Albert Wilk, Alex Dikman, Appellants: Karamvir Dahiya, LEAD ATTORNEY, Dahiya Law Offices LLC, New York, NY.

For Emmons-Sheepshead Bay Development, LLC, Appellee, Debtor: Lori A. Schwartz, LEAD ATTORNEY, Robinson Brog Leinwand Greene Genovese & Gluck, New York, NY.

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ROSLYNN R. MAUSKOPF, United States District Judge.

This is an appeal arising from the confirmation of a plan of reorganization under Chapter 11 of the Bankruptcy Code. Appellant-Creditors Albert Wilk, Alex Dikman, and Metropolitan Estates, Inc., as well as Emmons Ave, LLC in a derivative capacity (collectively, " Metropolitan" ), appeal from an August 28, 2013 order of the United States Bankruptcy Court for the Eastern District of New York (Elizabeth S. Stong, J.). That order denied Metropolitan's motion denying reconsideration of the bankruptcy court's order, dated July 3, 2013, confirming the plan of Appellee-Debtor Emmons-Sheepshead Bay Development, LLC (" the debtor" ). For the reasons below, the appeal is DENIED.


The factual and procedural history underlying this appeal is somewhat lengthy, and the parties' familiarity with it is presumed. The crux of the dispute can be stated succinctly. Metropolitan is an investor in a Brooklyn condominium development that filed for bankruptcy protection under Chapter 11. As a creditor and interested party, Metropolitan aggressively participated in the bankruptcy proceedings throughout. Directly relevant to this appeal, Metropolitan filed a single, limited objection to the debtor's proposed plan of reorganization, claiming that the plan should not be confirmed because it failed to meet the requirement, under 11 U.S.C. § 1129(a)(3), of having been " proposed in good faith." Metropolitan was granted certain discovery in connection with its objection. On June 27, 2013, the bankruptcy court held an evidentiary hearing on the debtor's application for confirmation of the plan. Through counsel, Metropolitan raised concerns regarding outstanding discovery issues, but the bankruptcy judge pressed ahead with the confirmation hearing. Metropolitan's counsel fully participated by cross-examining the debtor's principal, calling its own witness, and arguing its case. The bankruptcy court overruled Metropolitan's objection, finding good faith, and confirmed the plan. A written order settling the hearing and confirming the plan was filed on July 3, 2013 and entered on July 8, 2013. Metropolitan did not appeal the confirmation order.

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Instead, on July 17, 2013, Metropolitan, newly represented by its third attorney, moved pursuant to Rules 9023 and 9024 to vacate the confirmation order. In their motion, Metropolitan did not raise its good faith objection as pressed during the confirmation hearing. Rather, on reconsideration, Metropolitan raised for the first time two new arguments: first, that it had been deprived of procedural due process at the confirmation hearing, and second, that the confirmation was unlawful because the condominium was not, in actuality, property of the bankruptcy estate but rather property that was held or should be held in a constructive trust, an issue that was the subject of pending litigation in state court. On August 15, 2013, the bankruptcy court held a hearing on Metropolitan's reconsideration motion, which the court denied orally at the hearing, and subsequently issued a written summary order to that effect on August 28, 2013.

On September 3, 2013, Metropolitan filed a notice of appeal from the bankruptcy court's denial of its motion for reconsideration. That appeal -- in which Metropolitan revisits the due process and constructive trust arguments that it raised for the first time in seeking reconsideration -- is now before this Court. For the reasons set forth below, the Court finds that those arguments are procedurally and substantively meritless. Accordingly, the order of the bankruptcy court denying Metropolitan's motion for reconsideration is hereby AFFIRMED.

The Record on Appeal

As an initial matter, the Court finds the record on appeal woefully incomplete, as it does not contain the transcript of the bankruptcy court's August 15, 2013 hearing and oral ruling on Metropolitan's motion for reconsideration. Federal Rule of Bankruptcy Procedure (" Bankruptcy Rule" ) 8006 requires an appellant (here, Metropolitan), within fourteen days of filing a notice of appeal, to file with the bankruptcy court and serve on the appellee a " designation of the items to be included in the record on appeal and a statement of the issues to be presented." Bankruptcy Rule 8006. Within fourteen days after the service of the appellant's designation and statement, the appellee " may file and serve on the appellant a designation of additional items to be included in the record on appeal." Id.

In addition to the items designated by the parties, the record " shall" contain " the judgment, order, or decree appealed from, and any opinion, findings of fact, and conclusions of law of the [bankruptcy court]." Id. Bankruptcy Rule 8006 directs an appellant to (1) " provide to the [bankruptcy court] clerk a copy of the items designated," and (2) to arrange for any transcripts to be delivered to the clerk. Id. Specifically, an appellant must " file with the [bankruptcy court] clerk a written request for the transcript and make satisfactory arrangements for payment of its cost." Id. The Rule also instructs all parties to " take any other action necessary to enable the [bankruptcy court] clerk to assemble and transmit the record." Id.

Thus, " [w]hile [Bankruptcy] Rule [8006] does not expressly require that the 'record on appeal' include all transcripts of the proceedings below, its provisions make clear that those documents which include 'findings of act' or 'conclusions of law of the court' are deemed part of the record, including any transcripts, for which the Rule makes express cost provisions." In re Harris, 464 F.3d 263, 269 (2d Cir. 2006); see In re McCarthy, 230 B.R. 414, 417 (B.A.P. 9th Cir. 1999) (" Whenever findings of fact and conclusions of law are rendered orally on the record, it is mandatory that an appellant designate the transcript under Rule 8006. There is no other way for

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an appellate court to be able to fathom the trial court's action" ).

The bankruptcy court specifically advised the parties of these procedural rules in a document entitled, " Notice to Parties Concerning Appeal." That notice expressly called the parties' attention to Bankruptcy Rule 8006, admonishing them that it was their duty " to insure that the record on appeal is complete," and that an " incomplete record will otherwise be transmitted, for disposal as the District Court shall determine." (No. 12-BK-46321, Doc. No. 145.)[1]

Metropolitan has failed to comply with Bankruptcy Rule 8006.[2] Metropolitan did not ensure the preparation of the bankruptcy court's August 15, 2013 hearing on its motion for reconsideration. To be sure, the record on appeal includes the bankruptcy court's written order, dated August 28, 2013, denying Metropolitan's motion for reconsideration. ( See Doc. No. 1 (Notice of Appeal); id. (Att. 57 (8/28/13 Order)).) But that August 28th order states nothing more than the fact that Judge Stong held a hearing on August 15, 2013 to consider Metropolitan's motion, and was denying that motion " in accordance with the determination by this Court and record of the hearing held" on August 15th. ( Id.) By not providing the transcript of that August 15th hearing, the Court is left to wonder what issues were raised and resolved at the hearing on reconsideration, the nature and scope of Judge Stong's oral ruling, and the reasons underlying the court's conclusions. Under these circumstances, the Court does " not have a complete record to review the bankruptcy court's findings." Harris, 464 F.3d at 269.

The question becomes how best to address the incompleteness of this record, given the issues raised on appeal. Bankruptcy Rule 8001 endows the Court with discretion to dismiss an appeal without reaching the merits when the appellant fails to perform a necessary step in completing the record. See In re Hawkins, 295 F.App'x 452, 453 (2d Cir. 2008) (" The rule makes clear that a district court enjoys discretion to dismiss an appeal in all cases except where the debtor does not file a timely notice of appeal, in which case the court has no choice but to dismiss the case" ) (quoting Harris, 464 F.3d at 270). Dismissal can be appropriate when, as here, the order appealed from does not disclose the factual or legal basis of the bankruptcy judge's decision, and the appellant has failed to provide the Court with a key transcript. See, e.g., In re Corio, 2008 WL 4372781, at *7 (D. N.J. Sept. 22, 2008) (dismissing portion of appeal as to which the appellants failed to provide an " appropriate record to allow the Court to conduct an informed, substantive appellate

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review," without prejudice to moving to reinstate once proper record provided). Alternatively, faced with the absence of the specific content of Judge Stong's legal conclusions underlying her denial of the reconsideration motion, the Court could simply affirm the order. See In re Dockal, 2005 WL 3337774, at *3 (W.D. Tex. Sept. 6, 2005) (" Accordingly, based on the record and in the absence of a properly designated and submitted transcript or relevant portion thereof, this Court declines to conclude that the decision of the Bankruptcy Judge is clearly erroneous. The Final Judgment is affirmed" ); see also Hall v. Galie, 354 F.App'x 715, 716 (3d Cir. 2009) (affirming where the appellant failed to provide transcript of trial, which included oral rulings on motions, and where the appellant's brief summarily argued that the defendants should be liable and did not identify the court's alleged errors); McGinnis v. Gustafson, 978 F.2d 1199, 1201 (10th Cir. 1992) (affirming where the appellant's failure to provide transcript of oral ruling " raises an effective barrier to informed, substantive appellate review" ).

However, courts have also resolved appeals when the record, although incomplete, is sufficient to enable an informed review of the parties' arguments. See, e.g., Kyle v. Dye, 317 B.R. 390, 393-94 (B.A.P. 9th Cir. 2004) (distinguishing between records that are " impossibly incomplete" or " merely incomplete" : " The 'merely incomplete' record appeared to us then (and now) to be sufficient for us to obtain a complete understanding of the issues so that we could engage in informed review. Hence, we exercised our discretion to resolve the appeal on the merits." ); In re McCarthy, 230 B.R. at 417 (" The appellant's failure to provide the one document that would directly identify the manner in which the bankruptcy court exercised its discretion entitles us to dismiss this appeal. . . . Here, we will exercise our discretion to examine what record has been provided. In doing so, we look for any plausible basis upon which the bankruptcy court might have exercised its discretion to do what it did. If we find any such basis, then we must affirm" ); In re Corio, 2008 WL ...

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