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In re Terrestar Corp.

United States District Court, S.D. New York

March 15, 2017

In re TERRESTAR CORPORATION, et al., Debtor.
v.
TERRESTAR CORPORATION, et al., Defendants-Appellee. ALDO ISMAEL PEREZ, Plaintiff-Appellant,

          OPINION AND ORDER

          Edgardo Ramos, U.S.D.J.

         Aldo Ismael Perez (“Appellant”), acting pro se, appeals from a January 15, 2016 order of the United States Bankruptcy Court for the Southern District of New York (the “January Order”). (No. 13-01334 (SHL) Adversary Proceeding (“Adv. Proc.”), Doc. 45). The January 15, 2016 Order denied Appellant's Motion for Reconsideration of the bankruptcy court's order entered on September 29, 2015, which dismissed the Appellant's action (the “September Order”). (Adv. Proc., Doc. 40). TerreStar Corporation (“TSC”) and its affiliated debtors[1](collectively, “Appellees”) moved in response to the appeal.

         For the reasons set for below, the Appellant's appeal is DISMISSED and the bankruptcy court's decision is AFFIRMED.

         I. Background[2]

         A. The Bankruptcy Court Proceedings

         TSC held equity interests in several companies that operated a terrestrial satellite network and provided two-way mobile and Internet communications services. September Order at 1. One such company was TerreStar Networks Inc (“TSN”), which, along with certain of its affiliates, filed a Chapter 11 bankruptcy on October 19, 2010. In re TerreStar Networks Inc., et al. Case No. 10-15446 (SHL). On February 16, 2011, TSC and certain of its affiliates also filed a voluntary petition for Chapter 11 bankruptcy in the Southern District of New York. September Order at 1. At the time of TSC's bankruptcy filing, its only asset was the 1.4 GHz spectrum. Sec. Am. Compl. (“SAC”) at ¶ 99.

         As of February 16, 2011, Appellant owned approximately 220, 000 shares of TSC's common stock. September Order at 1. Based on this equity interest, Appellant filed numerous motions and objections throughout Appellees' bankruptcy proceedings. For example, he requested appointment of an equity committee and/or an examiner, filed numerous objections to the Appellees' second amended disclosure statement, and requested a stay of the order approving that disclosure statement pending appeal. Id. at 1-2. All of these requests were denied by the bankruptcy court. Id.

         On June 27, 2012, Appellees filed the third iteration of its plan of reorganization (the “Plan”). Id. at 2. Appellant filed multiple objections to the Plan including, among others, objections to the failure to auction off certain of the Debtors' assets, questions regarding Debtors' assert valuation and feasibility of the Plan, and objections to the third-party releases in the Plan. Id. The bankruptcy court conducted a hearing on the confirmation of the Plan on October 10, 2012 during which Appellant appeared and argued against confirmation. Id. The bankruptcy court overruled Appellant's objections. Id. On October 24, 2012, the bankruptcy court entered an order confirming the Plan (the “Confirmation Order”), and the Plan subsequently became effective on March 7, 2013. Id. at 2-3.

         B. Appeals

         Appellant has appealed two other orders of the bankruptcy court to the Southern District of New York prior to the instant appeal. On December 29, 2011, Appellant appealed the bankruptcy court's denial of an appointment of an examiner. In re TerreStar Corp., No. 12 Civ. 857 (RA), 2013 WL 1767068, at *3 (S.D.N.Y. Apr. 24, 2013) (“TerreStar I”). On April 24, 2013, Judge Abrams dismissed the appeal as equitably moot. Id. at *1. On January 25, 2013, Appellant appealed the bankruptcy court's Confirmation Order. In re TerreStar Corp., No. 13 Civ. 562 (GBD), 2013 WL 4477037, at *2 (S.D.N.Y. Aug. 16, 2013) (“TerreStar II”). Judge Daniels also dismissed the appeal as equitably moot on August 16, 2013. Id. at *1.

         The instant appeal arises from Appellant's adversary complaint that was originally filed on April 22, 2013, the 180th day after the Confirmation Order was entered, seeking to revoke the Confirmation Order pursuant to Section 1144 of the Bankruptcy Code. September Order at 3. On May 15, 2014, Appellant filed a Second Amended Complaint which alleges that Appellees fabricated and/or concealed certain facts, such as their principal place of business and valuation of assets during the bankruptcy, the truth of which would have affected confirmation of the Plan. (Adv. Proc., Doc. 18-03). On August 7, 2014, Appellees filed a motion to dismiss the SAC, arguing that it was equitably moot, that Appellant was collaterally estopped from raising allegations that had already been addressed in earlier proceedings, and that he had failed to adequately plead that the Confirmation Plan was procured by fraud under Section 1144. (Adv. Proc., Doc. 21). The bankruptcy court dismissed the SAC on September 29, 2015, finding that it was equitably moot, did not satisfy Section 1144 requirements, and was barred by res judicata. (Adv. Proc., Doc. 40).

         On October 13, 2015, Appellant filed a Motion to Reconsider the September Order. (Adv. Proc., Doc. 41). The bankruptcy court denied that motion on January 15, 2016, finding that Appellant failed to satisfy the standard for relief under either Federal Rules of Civil Procedure 59(e) or 60(b). (Adv. Proc., Doc. 45). On February 24, 2016, Appellant filed a Notice of Appeal of the January Order to this Court, (Doc. 1), and filed his appeal brief on July 21, 2016, (Doc. 10). The Appellees filed their response on August 22, 2016, which asserts that the bankruptcy court correctly found equitable mootness, and that Appellant fails to meet the statutory requirements of Section 1144. (Doc. 11). On November 1, 2016, Appellant filed his reply. (Doc. 15).

         II. Standard of Review

         This Court has jurisdiction to hear appeals from decisions of a bankruptcy court pursuant to 28 U.S.C. § 158(a), which provides in relevant part that “[t]he district courts of the United States shall have jurisdiction to hear appeals . . . from final judgments, orders, and decrees; . . . [and, ] with leave of the court, from other interlocutory orders and decrees . . . of bankruptcy judges.” 28 U.S.C. § 158(a)(1), (3). A district court reviews a bankruptcy court's conclusions of law de novo and its findings of fact for clear error. See, e.g., In re Ionosphere Clubs, Inc., 922 F.2d 984, 98 (2d Cir. 1990). A bankruptcy court's discretionary decisions are reviewed for abuse of discretion. See, e.g., In re Boodrow, 126 F.3d 43, 47 (2d Cir.1997).

         In reviewing a decision of a bankruptcy court, the district court “may affirm on any ground that finds support in the record, and need not limit its review to the bases raised or relied upon in the decision [ ] below.” Freeman v. Journal Register Co., 452 B.R. 367, 369 (S.D.N.Y. 2010). But the district court may not consider evidence outside the record. See In re Bear Stearns High-Grade Structured Credit Strategies Master Fund, Ltd., 389 B.R. 325, 339 (S.D.N.Y. 2008). Any arguments not raised in the bankruptcy court are considered waived; unless such a waiver results in manifest injustice, the new arguments will not be considered on appeal. See In re Lionel Corp., 29 F.3d 88, 92 (2d Cir. 1994); see also, e.g., In re Barquet Grp., Inc., 486 B.R. 68, 73 n. 3 (S.D.N.Y. 2012) (citing In re Enron Corp., 419 F.3d 115, 126 (2d Cir. 2005).

         III. Discussion

         A. Equitable Mootness

         Appellant argues that the bankruptcy court erred in finding on a motion to dismiss that his action to revoke the Confirmation Plan under Section 1144 was equitably moot. He argues that whether a claim is equitably moot is a question for summary judgment, not for a motion to dismiss. Appellant's Br. at 36. He also asserts that the equitable mootness doctrine was improperly applied by the bankruptcy court to an action seeking revocation of a confirmation order under Section 1144 because it is primarily a doctrine for a district court to dismiss bankruptcy appeals. Id. at 36-37. Regardless of whether the bankruptcy court had erred in applying the equitable mootness doctrine, it is undisputed that this Court is able to dismiss the instant appeal on that basis.

         Equitable mootness is a prudential doctrine under which a district court may dismiss a bankruptcy appeal “when, even though effective relief could conceivably be fashioned, implementation of that relief would be inequitable.” In re Chateaugay Corp., 988 F.2d 322, 325 (2d Cir. 1993) (citations omitted). Equitable mootness is a “pragmatic” doctrine that is “grounded in the notion that, with the passage of time after a judgment in equity and implementation of that judgment, effective relief on appeal becomes impractical, imprudent, and therefore inequitable.” In re Metromedia Fiber Network, Inc., 416 F.3d 136, 144 (2d Cir. 2005) (quoting MAC Panel Co. v. Va. Panel Corp., 283 F.3d 622, 625 (4th Cir. 2002)). The doctrine “requires the district court to carefully balance the importance of finality in bankruptcy proceedings against the appellant's right to review and relief.” In re Charter Commc'ns, Inc., ...


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