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In re Friedberg

United States District Court, D. Connecticut

January 9, 2019




         Richard H. Friedberg (“Appellant”), pro se, appeals two orders of the United States Bankruptcy Court (“Bankruptcy Court”), Notice of Appeal, ECF No. 1.

         Mr. Friedberg seeks reversal of the denial of his motions: (1) to compel bankruptcy trustee Melissa Zelen Neier (“Trustee Neier”) and the law firm at which she serves as partner, Ivey, Barnum & O'Mara, LLC, to return fees collected for the trusteeship of Mr. Friedberg's 2008 bankruptcy on account of the “financial genocide” of Mr. Friedberg by Trustee Neier, her firm, and the Bankruptcy Court, and (2) to compel bankruptcy Trustee Neier to turn over all books, records, emails, telephone logs, and tax returns associated with his 2008 bankruptcy, id. at 10-11; Appellant Reply Brief, ECF No. 10, at 3.

         For the reasons set forth below, the Court AFFIRMS the Bankruptcy Court's orders.


         In the late 1980s, Appellant was served with an involuntary petition for Chapter 7 bankruptcy in the United States Bankruptcy Court for the District of South Carolina. In re Friedberg, 87 B.R. 3, 5 (S.D.N.Y. 1988); see also In re Friedberg, 106 B.R. 50, 51 (Bankr. S.D.N.Y. 1989), rev'd, 131 B.R. 6 (S.D.N.Y. 1991); In re Friedberg, 119 B.R. 433 (S.D.N.Y. 1990); In re Friedberg, No. 91 CIV. 7490 (JFK), 1991 WL 259038, at *1 (S.D.N.Y. Nov. 25, 1991); In re Friedberg, 131 B.R. 6 (S.D.N.Y. 1991). The case was transferred to the United States Bankruptcy Court for the Southern District of New York, with the Honorable Cornelius Blackshear presiding. In re Friedberg, 87-bk-10819 (CB); In re Friedberg, 106 B.R. 50, 52.

         Appellant “responded to [the Chapter 7] petition by voluntarily filing a Chapter 11 petition for reorganization.” In re Friedberg, 87 B.R. 3, 4. This permitted Appellant to remain as the debtor-in-possession. Id. After “efforts to create a reorganization plan failed, ” In re Friedberg, No. 94 CIV. 1569 (JFK), 1995 WL 733636, at *1 (S.D.N.Y. Dec. 12, 1995), Judge Blackshear appointed Joel Lewittes, a former United States Bankruptcy Judge, as bankruptcy trustee. Id. Trustee Lewittes negotiated a reorganization plan that largely met with Appellant's approval. Id. Appellant objected to the plan's standard of care provision, however, and argued that Trustee Lewittes had “violated his fiduciary duty as bankruptcy trustee . . . .” in creating the provision. Id. at 2. Judge Blackshear found no such violation, Id. at 1, and a district court affirmed Judge Blackshear's ruling. Id. at 4.

         In 2008, Appellant filed for Chapter 11 bankruptcy. In re Friedberg, 08-bk-51245 (JAM), Dkt. 1, 4; see also, In re Friedberg, No. 08-51245AHWS, 2009 WL 1292273, at *1 (Bankr. D. Conn. May 8, 2009). Appellant's Voluntary Petition for Bankruptcy listed approximately $11, 000, 000 in unsecured claims owed to various law firms[1], Georgia Capital, the State of New York Department of Revenue Collection, and the Internal Revenue Service. Id., Dkt. 1. Shortly after Appellant's filing, Georgia Capital moved for an examination duces tecum under Federal Rule of Bankruptcy Procedure 2004 of Appellant's financial assets and income. Fed.R.Bankr.P. 2004. Mot. for Ex Parte Order Directing 2004 Examination Duces Tecum, Id., Dkt. 53. Georgia Capital alleged that Appellant owned or controlled nine limited liability corporations, and received roughly $22, 000 in monthly social security income and oil royalties, but nevertheless claimed that he had “little or no personal funds with which to pay living expenses.” Id., Dkt. 53 at 2. Georgia Capital argued that “[i]t is unclear from Debtor's schedules and statements whether Debtor can demonstrate a reasonable likelihood of rehabilitation or propose, confirm and fund a feasible plan of reorganization.” Id., Dkt. 53 at 2. On February 23, 2009, the Bankruptcy Court granted Georgia Capital's motion. Id., Dkt. 59.

         On April 3, 2009, Georgia Capital moved the Bankruptcy Court to convert the case from a Chapter 11 to a Chapter 7 liquidation bankruptcy. Id., Dkt. 75. Georgia Capital alleged that the Estate was suffering losses and diminishing, that Appellant had failed to file required reports or explain which of his LLCs were funding his monthly expenses, and that Appellant was unlikely to confirm or effectively participate in a plan of reorganization. Id., Dkt. 75 at 3-4.[2] In the event that the Court did not convert the case to a Chapter 7 bankruptcy, Georgia Capital moved the court to appoint a Chapter 11 trustee. Id., Dkt. 75 at 10.

         On February 17, 2010, the Internal Revenue Service moved to convert the case to a Chapter 7 liquidation bankruptcy. Id., Dkt. 358. The Bankruptcy Court held a hearing on the issue on March 23, 2010. Id., Dkt. On April 28, 2010, the Bankruptcy Court denied the motion to convert the case to a Chapter 7 liquidation, but ordered the United States Trustee to appoint a Chapter 11 trustee. Id., Dkt. 413. That day, Diana Adams, [3] United States Bankruptcy Trustee for the region, appointed Trustee Neier as the trustee for Mr. Friedberg's Chapter 11 bankruptcy case and notified Trustee Neier that she “must obtain a bond in the amount of $50, 000 pursuant to 11 U.S.C. § 322.” Notice of Appointment of Trustee, id., Dkt. 414.

         From April 28, 2010 to November 8, 2016, Trustee Neier served as the Chapter 11, and then Chapter 7, [4] bankruptcy trustee for the case. See Chapter 7 Trustee's Final Account and Distribution Report, id., Dkt. 1798. Her name appears more than 1, 400 times on the docket. Id. Ms. Neier alleges that she spent more than 1, 300 hours on the case. Id., Dkt. 908, 1261. She waived her right to collect an individual trustee fee. Id., Dkt. 1359 at 4, 20 (showing an alleged entitlement to $81, 838.38 under 11 U.S.C. §326(a) and a proposed distribution of $0.00); Dkt. 1798 at 4 (showing an actual payment of $0.00). Trustee Neier's firm, Ivey, Barnum & O'Mara, LLC, was paid just over $600, 000 for costs associated with Trustee Neier's work on the bankruptcy[5] and for the firm's representation of Trustee Neier in the nearly dozen district court appeals filed by Appellant. Id., Dkt. 908, 126, 1798 at 5; see also, id. Dkt. 453, 616, 706, 1122, 1530, 1539, 1592, 1635, 1698, 1693, 1853 [Appellant's appeals of Bankruptcy Court orders during Ms. Neier's tenure as trustee].

         On May 3, 2013, Trustee Neier filed a settlement agreement under Federal Rule of Bankruptcy Procedure 9019. Trustee's Mot. to Approve Settlement, id., Dkt. 1359; Fed.R.Bankr.P. 9019. On November 11, 2013, following filings and hearings, the Bankruptcy Court approved the settlement. Mem. of Decision and Order Granting Mot. to Approve Settlement Agreement, Id., Dkt. 1535. Appellant appealed the settlement to the district court, In re Friedberg, 3:13-cv-01856 (AVC), Dkt. 1, and then to the Second Circuit. In re Friedberg, 634 Fed.Appx. 333 (2d Cir. 2016) (summ. order). On February 24, 2016, the Second Circuit affirmed the Bankruptcy Court's order, holding that “the bankruptcy court correctly held that Friedberg lacked standing to oppose the approval of the settlement agreement because he had no pecuniary interest directly and adversely affected by the bankruptcy court's order adopting the settlement.” Id. at 334. The court explained:

[T]o have standing to appeal from a bankruptcy court ruling, an appellant must be a person aggrieved-a person directly and adversely affected pecuniarily by the challenged order of the bankruptcy court. [A] Chapter 7 debtor is a ‘party in interest' and has standing to object to a sale of the assets, or otherwise participate in litigation surrounding the assets of the estate, only if there could be a surplus after all creditors' claims are paid.

Id. (internal citations and quotations omitted). The court found that:

[a]fter accounting for administrative expenses, just over $1.9 million remained for distribution to creditors pursuant to the proposed settlement. This amount was far less than the allowed creditor claims against the estate; the priority claim of Marianne ...

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