United States District Court, E.D. New York
Appellants are represented by Schuyler Glenn Carroll of
Perkins Coie LLP.
Appellee is represented by Nicholas Tuffarelli of Weinberg
Gross & Pergament LLP
MEMORANDUM AND ORDER
F. BIANCO UNITED STATES DISTRICT JUDGE.
before the Court is a motion for leave to appeal filed by
Ernest Barbella (“Barbella”) and Gourmet Select
Foods, Corp. (“Gourmet Select, ” and,
collectively, “appellants”) in connection with
the April 14, 2016 Order (the “Bankruptcy Order”)
of the Honorable Robert E. Grossman, United States Bankruptcy
Judge (the “Bankruptcy Court”). (ECF No. 1-10.)
By that Order, the Bankruptcy Court denied appellants'
motion to dismiss the complaint pursuant to Federal Rule of
Civil Procedure 12(b)(6). Appellants raise two issues in
their motion: whether the Bankruptcy Court committed legal
error in its application of the legal standards concerning
(1) equitable tolling, and (2) the propriety of pleading
causes of action entirely upon information and belief.
(Appellants' Mem. Supp. Mot. Leave Appeal (“Appeal
Br.”), ECF No. 1.) Appellee Marc A. Pergament
(“the trustee”) opposes the motion on the
following grounds: (1) defendants have failed to show the
exceptional circumstances required for an interlocutory
appeal; (2) the Bankruptcy Order concerns issues of fact, not
simply “pure” legal questions; and (3) defendants
have failed to show that a “substantial ground for
difference of opinion” exists with respect to the issue
they seek to appeal. (Appellee's Mem. Supp. Opp'n
Mot. Leave Appeal (“Opp'n Br.”), ECF No. 2.)
reasons set forth below, the Court denies the motion for
leave to appeal.
following factual allegations and procedural history are
relevant to the instant appeal.
Food Brands, Inc. (“QFB”), a wholly owned
subsidiary of PHS Group, Inc. (“PHS”), was
engaged in the manufacture and distribution of baking mixes,
spices, and other food products throughout the United States.
(Opp'n Br. 3.) Mair Faibish (“Faibish”) was
PHS's Chief Executive Officer and controlled QFB's
operations and finances. (Id.) Faibish, along with
several others, allegedly orchestrated a check-kiting scheme
that utilized the bank accounts of several United States and
Canadian companies, including PHS, QFB, and Gourmet Select.
(Id.) In furtherance of the scheme, Faibish and his
co-conspirators allegedly circulated checks that were not
backed by sufficient funds between PHS, QFB, and many other
companies that were controlled by either Faibish or Barbella.
(Id. at 4.) In March 2014, Faibish was convicted of
bank and securities fraud. (Id.)
April 5, 2011, QFB filed a petition for bankruptcy. (Appeal
Br. 2.) Shortly thereafter, the trustee made discovery
requests, as did several of QFB's creditors.
(Id.) In response to those discovery requests,
Barbella provided certain documents. (Id. at 2-3.)
At the request of several of QFB's creditors, Barbella
was deposed in July 2012. At the deposition, Barbella
asserted the Fifth Amendment and refused to answer any
questions. (Id.) Neither the trustee nor his counsel
requested the deposition, nor did either appear on the record
of the deposition. (Id.) After the deposition, the
trustee did not seek to depose Barbella or to compel him to
comply with the creditors' request for a deposition.
to the trustee, Barbella separately and voluntarily requested
to meet with the trustee so that he could ensure the trustee
had the “full story” concerning his
investigation. (Id.) At that meeting, Barbella
informed the trustee that he would willingly cooperate with
the trustee's efforts, he presented materials that
explained his work with PHS and QFB, and he disclosed his
ownership interest in Gourmet Select. (Id.; Decl.
Schuyler G. Carroll (“Carroll Decl.”), ECF No.
1-1, Ex. 1.) Afterwards, the trustee did not further inquire
about Barbella's interests in Gourmet Select or about
Gourmet Select. (Appeal Br. 4.)
point prior to January 12, 2016, counsel for one of QFB's
largest creditors provided the trustee with statements from
two of Gourmet Select's banking accounts. (Opp'n Br.
4.) The statements allegedly show that the accounts were
utilized in furtherance of the check-kiting scheme, and that
Barbella signed the majority of the checks issued by Gourmet
Select to PHS in the course of the scheme. (Id.)
January 2016, the trustee filed a complaint in the Bankruptcy
Court against Barbella and Gourmet Select, alleging that
Barbella participated in, and failed to report, a
check-kiting scheme that victimized QFB, and that Gourmet
Select received fraudulently conveyed funds from QFB.
(Carroll Decl., Ex. 2 ¶¶ 1-2.) Appellants note that
the portions of that complaint dealing with Barbella and
Gourmet Select “are, with very few exceptions[, ] pled
entirely on information and belief.” (Appeal Br. 4.)
March 2016, appellants moved to dismiss the complaint,
arguing it was time-barred. (Carroll Decl., Ex. 4, ECF No.
1-6.) In the trustee's opposition to the motion to
dismiss, he maintained that the applicable statutes of
limitation should be equitably tolled due to the actions and
conduct of Barbella and the extraordinary circumstances
surrounding this case. (Opp'n Br. 5.) In particular, the
trustee argued that he had been severely limited in obtaining
information from QFB, Barbella, and Gourmet Select in the
course of his investigation due to Barbella's and
Faibish's conduct. (Id.) ...