In Re: SWJ Management, LLC

Filing 19

ORDER. As set forth in the attached ruling, the bankruptcy court's decision is AFFIRMED. As a result of this ruling, Appellee's 12 Motion to Dismiss the Appeal is DENIED as moot. The Clerk of the Court is directed to close the case. Signed by Judge Michael P. Shea on 9/16/2015. (Osher, D.)

UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
SWJ Management, LLC,
Appellant,
No. 3:14-cv-01860 (MPS)

v.
Richard M. Coan, Trustee,
Appellee.
Opinion and Order

SWJ Management, LLC (“Management”), a debtor in bankruptcy, appeals from an order
of the bankruptcy court (Hon. Alan H.W. Shiff) granting a creditor’s motion to convert the case
from chapter 11 to chapter 7 and denying the debtor’s motion to dismiss. Because Management
has failed to demonstrate that the bankruptcy court abused its discretion in issuing the order, I
AFFIRM.
I.

Background
On March 3, 2014, SWJ Management, LLC (“Management”) filed a petition under

chapter 11 of the Bankruptcy Code in the District of Delaware, which transferred the case to the
District of Connecticut on April 4, 2014. Bankr. Docs. 1 & 2. This was not Management’s first
bankruptcy filing. It had filed in June 2013 in the District of New Jersey, but the bankruptcy
court in that District dismissed the case on January 15, 2014, for bad faith filing. Bankr. Dkt.
No. 13-29621(NLW) (Bankr. N.J.), Doc. 99.1 At the time, Management claimed that it had
assets consisting of claims in another bankruptcy case pending in this District and presided over
1

This Court may take judicial notice of filings in other litigation. See, e.g., Int’l Star Class Yacht Racing Ass’n v.
Tommy Hilfiger U.S.A., Inc., 146 F.3d 66, 70 (2d Cir. 1998) (“A court may take judicial notice of a document filed
in another court not for the truth of the matters asserted in the other litigation, but rather to establish a fact of such
litigation and related filings.”).

1

by Judge Shiff, In re First Connecticut Consulting Group, et al., Bankr. Dkt. No. 02-50852
(Bankr. Conn.) (the “First Connecticut Bankruptcy”). In a July 1, 2014 order ruling on a motion
by Management filed in the First Connecticut Bankruptcy (the “July 1, 2014 Order”), Judge Shiff
found that Management had no interest in the assets involved in that case. Bankr. Dkt. No. 0250852 (Bankr. Conn.), Doc. 2446. Management appealed the July 1, 2014 Order to this Court,
In re First Connecticut Consulting Group, Dkt. No. 14-cv-01202.
On August 29, 2014, the chapter 7 trustee in the First Connecticut Bankruptcy, acting as a
creditor of Management’s estate, filed a motion to convert Management’s bankruptcy case to
chapter 7. Bankr. Doc. 48. In its motion, the First Connecticut Trustee cited Management’s
failure to perform its duties under the Code, failure to submit operating reports, and failure to
retain counsel properly. Management objected to the motion to convert. Bankr. Doc. 76. The
bankruptcy court held its first hearing on the conversion motion on October 7, 2014.
Throughout the October 7 hearing, the parties continued to dispute whether Management
had retained proper counsel. Management proposed to have attorney David Carlebach appear on
its behalf, but the United States Trustee objected due to a claimed conflict of interest. The
United States Trustee alleged that Carlebach had represented Management’s principal, Richard
Annunziata, in a different matter, which allegedly created a conflict in Carlebach’s proposed
representation of Management. October 7 Hearing Transcript, Bankr. Doc. 134, at 6 (“October 7
Transcript”). After discussing the potential conflict with the bankruptcy court, Mr. Carlebach
informed the bankruptcy court that Annunziata, who was present during the hearing, had asked
Carlebach to withdraw his petition for representation. October 7 Transcript, at 35 (“Mr.
Annunziata is going – has indicated that he’s going to ask me to resign, withdraw my application

2

and hire a different counsel.”).2 The bankruptcy court continued the conversion hearing until
October 28, 2014, expressing concern that if the parties proceeded to argument regarding
conversion, Management would have no counsel and would be “defenseless to challenge”
conversion. Id. at 43.
In a colloquy with the bankruptcy court during the October 7 hearing, Carlebach also
suggested to the court that Management would prefer the matter be dismissed rather than
converted to chapter 7. Id. at 34. At the end of the hearing, Judge Shiff stated the following:
At one point during this morning’s hearing Mr. Carlebach – and I recognized that
he doesn’t represent the entity, nonetheless said that there was a potential for SWJ
to file a motion to dismiss the Chapter 11 case.
Pending now is a trustee’s motion to convert the case. There is no motion to
dismiss pending.3 Perhaps the U.S. Trustee will file one, perhaps not.
And as I mentioned, perhaps the entity, Management[, ]will get an attorney that is
permitted to represent it and that entity may file a motion to dismiss. Right now
there’s nobody to act for that entity. . . .
[I]f a motion to dismiss is filed by a person who has the right to file, I’ll take that
up on the 28th.
Now it may be that I’ll need evidence unless the record demonstrates a basis that
as a matter of law there should be a dismissal, or I’m persuaded that the record is
sufficient and, again, I emphasize if SWJ Management isn’t represented, it will
remain unrepresented at the hearing.
Id. at 43–44.
In the week prior to the October 28 hearing, Attorney Lamya Forghany, who had
previously filed an appearance on behalf of Management, Bankr. Doc. 10, submitted monthly
operating reports dating from March 2014 to October 2014. Bankr. Doc. 97–104. Forghany also

2

The Court notes that Management listed Attorney Carlebach as its “Proposed Counsel” in briefs submitted in this
appeal. Dist. Doc. 15, 18.
3
It appears this statement was incorrect. On July 24, 2014, the United States Trustee filed a motion to dismiss
Management’s bankruptcy case due to, inter alia, Management’s failure to submit required monthly operating
reports. Bankr. Doc. 29. The bankruptcy case docket suggests no action was taken on this motion.

3

filed a motion to dismiss on behalf of Management on October 23, 2014. Bankr. Doc. 95. In
that motion, Management argued that in light of the bankruptcy court’s July 1, 2014 Order
finding that Management had no interest in the assets involved in the First Connecticut
Bankruptcy, Management no longer held any assets, and as a result, dismissal, rather than
conversion, was appropriate. Id. at ¶ 18, 19.
At the October 28 hearing, Forghany appeared on behalf of Management. October 28
Hearing Transcript, Bankr. Doc. 125, at 2 (“October 28 Transcript”). The First Connecticut
Bankruptcy Trustee also appeared, and argued that conversion, rather than dismissal, was
appropriate, on the following grounds: (1) Management had made contradictory statements to
different courts regarding its possession of assets, telling some it held no assets and telling others
it had “considerable” assets, (2) this case was Management’s second bankruptcy filing in two
years, and dismissal would force the creditors to continue to “chase” Management around the
country,4 (3) Management had failed to retain non-conflicted counsel, (4) no burden would be
placed on the estate if the court appointed a trustee, and (5) Management had been delinquent in
filing operating reports and paying fees. The United States trustee also argued in support of
conversion, asserting that the monthly operating reports that were filed were submitted in
improper form and that the United States had still not received Management’s fees.
During Forghany’s argument in support of dismissal, the bankruptcy court inquired about
Management’s allegedly inconsistent statements regarding its possession of assets. The
bankruptcy court asked Forghany what Management’s position was on whether the estate held
any assets. Forghany responded that Management did hold assets, and that the only reason
Management was making assertions that it did not have assets in other courts was that the
4

The Trustee’s counsel informed the bankruptcy court that the New Jersey bankruptcy court had dismissed
Management’s bankruptcy the year before because Mr. Annunziata was using Management as his “personal piggy
bank.” October 28 Transcript, at 8–9, 12.

4

bankruptcy court had found in the July 1 Order that Management did not have an interest in the
assets of the First Connecticut Bankruptcy estate. October 28 Transcript, at 15–19.
The bankruptcy court granted the motion to convert and denied the motion to dismiss the
following day. Dist. Doc. 1-1. In support of its decision to convert the matter to chapter 7, the
bankruptcy court gave the following non-exhaustive list of reasons: (1) Management’s
contradictory statements regarding whether the estate had assets, (2) Management’s failure to
take any steps towards reorganization as a chapter 11 debtor, (3) the possibility that it made
avoidable transfers, (4) its efforts to employ counsel with actual or potential conflicts of interest,
and (5) its failure to file operating reports and other reports in the required format and in a timely
fashion. Id. at ¶ 10. With regard to its denial of the motion to dismiss, the bankruptcy court
found that, in light of the fact that Management had made contradictory statements to different
courts about whether its estate had assets, “Management has articulated no cause for the
dismissal of this case and that the dismissal of the above-referenced bankruptcy case is not in the
best interest of creditors.” Id. at ¶ 9. Management has appealed the bankruptcy court’s order to
convert the case to chapter 7 and to deny Management’s motion to dismiss.
II.

Standard of Review
A bankruptcy court must find “cause” either to dismiss a chapter 11 case or convert it to

chapter 7. 11 U.S.C. § 1112(b)(1). Once the bankruptcy court determines there is cause to
dismiss or convert, it must choose dismissal or conversion based on the “best interests of
creditors and the estate.” Id. The bankruptcy court’s choice between dismissal and conversion is
reviewed for abuse of discretion. See, e.g., In re Mechanical Maintenance, Inc., 128 B.R. 382,
386 (E.D. Pa. 1991) (citing S. Rep. No. 989, 95th Cong., 2d Sess. 117, and collecting cases); In
re Hampton Hotel Investors, LP, 270 B.R. 346, 359 (Bankr. S.D.N.Y. 2001) (“Courts agree that

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ultimately, the determination of whether to dismiss a chapter 11 case, on the one hand, or to
convert it, on the other, is a matter for sound judicial discretion.”). While one court has reviewed
a decision to convert under a “clear error” standard, see Loop Corp. v. U.S. Trustee, 290 B.R.
108, 112 (D. Minn. 2003), I choose to follow the majority of courts in reviewing for abuse of
discretion. A court abuses its discretion “when (1) its decision rests on an error of law (such as
application of the wrong legal principle) or a clearly erroneous factual finding, or (2) its
decision—though not necessarily the product of a legal error or a clearly erroneous factual
finding—cannot be located within the range of permissible decisions.” Zervos v. Verizon New
York, Inc., 252 F.3d 163, 169 (2d Cir. 2001) (footnotes and internal quotation marks omitted).
III.

Discussion
Management’s opening and reply briefs read more like a screed than a legal argument.

Neither identifies the proper standard of review or cites a single court decision, and both bristle
with accusations of impropriety about events that occurred either long before or months after the
bankruptcy court’s decision. These are not proper appeal briefs, and it is not this Court’s
responsibility to spot legal arguments in this fog of rhetoric. See In Re Potter, 354 Fed. App’x
387, 389 (10th Cir. Dec. 4, 2009) ("In the midst of these accusations, Mr. Friedlander's appellate
arguments are not at all apparent. Nor are there citations to supporting legal authorities that
would enable us to discern his appellate arguments. We cannot take on the responsibility of
serving as the litigant's attorney in constructing arguments and searching the record.” (internal
quotation marks and citation omitted)); see also Tolbert v. Queens College, 242 F.3d 58, 75 (2d
Cir. 2001) (“It is a settled appellate rule that issues adverted to in a perfunctory manner,
unaccompanied by some effort at developed argumentation, are deemed waived.” (internal
quotation marks and citations omitted)).

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Nonetheless, this Court has reviewed the briefs, and from what it can discern,
Management is making three points: (1) the bankruptcy court, given the evidence before it,
should have dismissed rather than converted, (2) the bankruptcy court misled Management by
initially making statements suggesting that it would dismiss the case, and those statements
prevented the bankruptcy court from deciding later to convert rather than dismiss, and (3) the
bankruptcy court’s intent in converting the case was to destroy Management’s appellate rights.
None of these assertions is supported by citations to the record or the law, and none persuades
me that the bankruptcy court abused its discretion.
A. The Decision to Convert Rather than Dismiss
11 U.S.C. § 1112(b) empowers a bankruptcy court to dismiss a chapter 11 case or convert
it to a chapter 7 case. Under the statute, the bankruptcy court must conclude that “cause” exists
before converting or dismissing a chapter 11 case. On appeal, Management does not challenge
the bankruptcy court’s decision that cause existed to dismiss or convert. Rather, it challenges the
bankruptcy court’s choice of conversion over dismissal.
Once a bankruptcy court finds cause under Section 1112(b), it must determine whether
dismissal or conversion to chapter 7 is in “the best interests of creditors and the estate.” When a
party moves for one of conversion or dismissal rather than the other, the movant bears the burden
to show that its preferred action is in the best interests of the creditors and the estate. See 7Alan
N. Resnick & Henry J. Sommer, Collier on Bankruptcy ¶ 1112.04[4] (16th ed.) (“[T]he movant
bears the initial burden of demonstrating that cause exists . . . . Likewise if the moving party
seeks dismissal rather than conversion, or conversion rather than dismissal, the moving party
should demonstrate why the requested alternative is in the best interests of creditors and the
estate.”). A chapter 11 debtor’s preference for dismissal is not dispositive: “While [a] debtor

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may voluntarily choose to place [itself] in bankruptcy, [it] does not enjoy the same discretion to
withdraw [its] case once it has been commenced. If dismissal will prejudice parties, a court may
refuse to allow debtor to dismiss [the] petition.” In re Sanders, 417 B.R. 596, 602 (D. Ariz.
2009) (citations and internal quotation marks omitted).
“The Code does not define the phrase ‘best interests of creditors and the estate.’” 7
Collier on Bankruptcy ¶ 1112.04[7]. As a result, courts have indicated various reasons for
choosing conversion and rejecting dismissal. Courts have considered “prejudice to creditors” to
be a proper reason for a bankruptcy court’s refusal to dismiss a chapter 11 case. See id.; Matter
of Atlas Supply Corp., 857 F.2d 1061, 1063 (5th Cir. 1988) (“If dismissal would prejudice the
creditors, then it will ordinarily be denied.”). Misconduct of the debtor, i.e., debtor actions that
delay creditors’ ability to collect their claims or otherwise protect their interests, also warrants
conversion rather than dismissal. See In re Simmons, 200 F.3d 738, 743 (11th Cir. 2000)
(“When dismissal will only allow the Debtor to hinder creditors, secret[e] assets, and further the
Debtor’s abuse of the system, dismissal or her voluntary petition is not warranted.”); In re
Picacho Hills Utility Co., Inc., 518 B.R. 75, 80 (Bankr. N.M. 2014) (finding the need for a
“neutral, unbiased trustee” to investigate transfers favored conversion rather than dismissal); In
re FL. Invest. USA, Inc., No. 13-10814, 2013 WL 4039807, at *5 (Bankr. E.D. Cal. Aug. 7,
2013); see also 7 Collier on Bankruptcy ¶ 1112.04[7] (“In [choosing between conversion and
dismissal], the court may consider such factors as . . . whether the debtor had engaged in
misconduct and whether creditors are in need of a chapter 7 case to protect their interests.”).
Collier also lists “whether the debtor would simply file a further case upon dismissal” as a reason
to convert rather than dismiss. 7 Collier on Bankruptcy ¶ 1112.04[7].

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The considerations listed above formed the basis of the bankruptcy court’s decision to
convert rather than dismiss. In its non-exhaustive list of reasons favoring conversion, the
bankruptcy court noted that Management had failed to take steps to reorganize, had made
avoidable transfers, and had attempted to employ counsel with actual or potential conflicts of
interest. Further, the list of reasons given by the bankruptcy court was not exhaustive, Dist. Doc.
1-1 at ¶ 10, and the record suggests that Management was already showing signs of “abus[ing] . .
. the system,” In re Simmons, 200 F.3d at 743, by initially making a filing in New Jersey found to
have been in bad faith and two months later filing in Delaware, although its principal asset was
identified as a claim in a pending Connecticut bankruptcy case. These behaviors by
Management prejudiced creditors by frustrating their ability to collect on their claims. Dismissal
would have further frustrated these efforts – possibly permitting Management to file for
bankruptcy in yet another jurisdiction and forcing its creditors to respond, again. Considering
these factors, and Management’s failure to cite any portions of the record or any case law to
challenge the decision, this Court finds that the bankruptcy court did not abuse its discretion by
choosing conversion over dismissal. There was a legal basis to do so, the factual reasons the
court set out in its decision were not clearly erroneous, and, given these facts, the decision was
“permissible.”
B. The Bankruptcy Court’s Statements Regarding Dismissal and Management’s Lack of
Assets
Management argues that the bankruptcy court committed reversible error by indicating to
Management during the October 7 hearing that it would grant a motion to dismiss. It asserts that
the bankruptcy court improperly “switched it up” on Management by making inconsistent
statements during the October 7 and October 28 hearings. Appellant’s Br. 16. At some point
during the October 7 hearing, Management claims, the bankruptcy court told the First
9

Connecticut trustee “straight out that it would dismiss it.” Id. at 10. Management fails to cite or
quote any such statement from the October 7 hearing transcript. After a full review of the
hearing transcript, the Court finds only a single mention of a motion to dismiss, which is
reproduced in the “Background” section of this opinion. The bankruptcy court’s only statement
mentioning a motion to dismiss during the October 7 hearing was that it would entertain a
motion to dismiss during the continued conversion hearing if any party chose to make one –
which is, of course, not an indication that it would grant one. October 7 Transcript, at 44. Even
if the bankruptcy court had made a statement suggesting that it was inclined to grant a motion to
dismiss, Management fails to cite any statute, rule, or case that suggests a court’s stated
“inclinations” during a motion hearing will have binding effect on that court’s ultimate ruling.
Although Management makes a vague reference to the “law of the case” doctrine, that doctrine
applies only to earlier rulings of a court – not musings or inclinations mentioned during a hearing
– and, in any event, that doctrine is discretionary. Aramony v. United Way of Am., 254 F.3d 403,
410 (2d Cir. 2001) (“Application of the law of the case doctrine is discretionary and does not
limit a court’s power to reconsider its own decisions prior to final judgment.”) (internal quotation
marks and citations omitted); see also 18B Charles A. Wright, et al., Fed. Prac. & Proc. Juris. §
4478 (2d ed.) (“Actual decision of an issue is required to establish the law of the case. Law of
the case does not reach a matter that was not decided.”). Management points to no earlier ruling
by the bankruptcy court to support its attempt to invoke the law of case doctrine.
At times, Management also seems to argue that the July 1, 2014 Order in the First
Connecticut Bankruptcy somehow prevented the bankruptcy court from deciding to convert
Management’s bankruptcy case to chapter 7. According to this argument, the bankruptcy court
was required to grant the motion to dismiss because its July 1, 2014 Order found that

10

Management held no interest in the assets at issue in the First Connecticut Bankruptcy. Lack of
estate assets can be a proper cause under Section 1112(b) for a bankruptcy court to dismiss a
chapter 11 bankruptcy case. See, e.g., In re Allison Assocs., 63 B.R. 756, 766 (S.D.N.Y. 1983)
(“[S]ince Ellison had no assets save its contested claim to the Property, its petition for
bankruptcy was properly dismissed under 11 U.S.C. § 1112(b)(1) & (2).”). But the bankruptcy
court cited the fact that Management had made inconsistent representations about its assets in
other fora. 5 In any event, Management cites no authority for the proposition – nor does it even
argue clearly – that the bankruptcy court must dismiss, rather than convert, a chapter 11 case if
the estate’s assets are determined to belong to another. Without any indication that the
bankruptcy court misapplied the law, that it determined facts in a clearly erroneous manner, or
that the decision was outside “the range of permissible decisions,” this Court cannot rule that the
bankruptcy court abused its discretion in its decision to convert in light of its ruling in the First
Connecticut Bankruptcy.
C. Management’s Other Allegations of Impropriety
Management’s alternative argument in challenging the bankruptcy court’s order is its
allegation that the bankruptcy court granted conversion only for the “improper purpose of
destroying” Management’s appellate rights in the First Connecticut Bankruptcy. Appellant’s Br.
18. As noted, at the time of the October hearings, Management’s appeal of the July 1, 2014
Order was pending before this Court. On March 24, 2015, long after the bankruptcy court’s
order converting Management’s case, the appointed chapter 7 trustee filed a stipulation of
dismissal of Management’s appeal, which was dismissed on March 30, 2015. Dist. Dkt. No. 14-

5

Furthermore, Management’s own statements during the bankruptcy court hearing contradict its argument on
appeal. During the October 7 hearing, when the bankruptcy court asked Management’s counsel whether she
believed Management held any assets, counsel stated that despite the bankruptcy court’s July 1, 2014 Order,
Management does hold assets. See October 28 Transcript, 15–19.

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cv-1202 (D. Conn.), Doc. 42. Citing this history – all of which postdates this appeal –
Management argues that the actual, but unexpressed, reason the bankruptcy court granted
conversion and denied dismissal in October 2014, was to enable it to appoint a trustee who could
take over the First Connecticut Bankruptcy appeal, dismiss the case, and prevent Management
from ever again asserting rights to the assets at issue.
The bulk of Management’s attack would not normally be cognizable in this appeal
because it relies on events occurring after the bankruptcy court entered the order being reviewed
on appeal. “Normally, the court of appeals will consider only the record and facts considered in
the [lower court].” Landy v. Fed. Deposit Ins. Corp., 486 F.2d 139, 150 (1973). In
“extraordinary circumstances,” however, an appellate court may “take judicial notice of
developments in [a] case on appeal which have occurred in the [lower court] after the appeal was
filed.” In re Cummins, 20 B.R. 652, 653 (9th Cir. BAP 1982). While this case in no way
presents “extraordinary circumstances,” I err on the side of considering Management’s claims of
impropriety, and conclude that they lack merit.
Management argues that the bankruptcy court’s colloquy with the Trustee during a March
24, 2015 hearing, see Bankr. Doc. 170 (“March 24 Transcript”), proves Judge Shiff’s intent to
“destroy” Management’s appeal in the First Connecticut bankruptcy. Management claims that
Judge Shiff “openly threatened” the Trustee during the hearing that if she continued to pursue the
First Connecticut appeal, “she would be violating her duty as an attorney.” Appellant’s Br. 12.
Management’s argument is based on the following colloquy between Judge Shiff and the
Trustee, Ms. Rescia, which refers to James Licata, an individual involved in the First
Connecticut Bankruptcy and other bankruptcies before Judge Shiff:
The Court:

Mr. Licata is involved in any number of cases; he and/or his wife.
He continues to be involved, notwithstanding any orders that say
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he isn’t involved, that he has nothing to get involved with, that
doesn’t dissuade him.
He files bankruptcy petition after bankruptcy petition after
bankruptcy petition. He files them in other districts, New Jersey,
Delaware, they all end up back here.
And you’ve got this duty as an attorney, to research these matters,
look at them, and any participation you make and anything you say
or do or write, goes through the filter that I have read the file, I
understand the file, I know the facts, and there is law that supports
what I am doing. And you just told me you did that.
Ms. Rescia:

And that I understand that Mr. Licata is connected to Reclaimed
and that’s set forth in my motion and mentioned by the Licata
trustees.
However, after my investigation it’s still unclear to me in this case
what the debtor [i,e, Management] owns, if anything.

The Court:

Well, it should not be unclear to you. There are court orders that
have not been appealed, that has stated very clearly, as clearly as
words could accomplish the task. So why is it unclear to you?

Ms. Rescia:

Well, if there’s any value to any assets of the estate that I have
been offered to bring money into the estate.

The Court:

Of course you have. That’s what they do. They offer money, then
they don’t pay it.

Ms. Rescia:

Well, these funds have been paid. I am holding the 50,000.

The Court:

But what you’re conflating, I believe, and -- is you want to bring
money into an estate that you’re the trustee for, and somebody is
handing you a bag of money. And you’re saying, why should I
refuse this money? I’m going to take this money and I’m going to
distribute it, and then I’m going to take a commission because I
made a distribution and everybody goes home happy.
But you’re trying to bring the Court into this, and that’s where my
concern is because this Court has already ruled on what property
there is.
You may sit down, sir.
I’ve already ruled it, on this question.
13

Ms. Rescia:

I understand.

The Court:

I’ve ruled three times on this question. They’re all written. One of
them was not appealed. Two of them are on appeal.
And what you’re doing is taking -- giving Mr. Licata and friends
an opportunity to muscle their way into the appeal process on one
of those, or both of those conclusions by this Court that there are
no assets that belong to SWJ Management.
Now, is that not a correct statement of what’s happening here?

Ms. Rescia:

Yes, Your Honor.

The Court:

All right.

Ms. Rescia:

So regardless of whether there’s any assets of the estate I do have a
party coming forward to purchase whatever --

The Court:

Purchase nothing.

Ms. Rescia:

Exactly, Your Honor. Purchase nothing, as has been told. And I,
you know, certainly tried -- have discussed with the Licata trustees
at length to see any other way to resolve the issues in the case. I
did speak to Mr. Mocco’s attorney to see if he had any interest in
it.
If I could go back to, I listened to the October 28th, 2014 hearings
prior to my appointment, which was the Court’s hearings on the
motion to dismiss this case by the debtor, and the motion to
convert the case by the Licata trustees.
And at that hearing Attorney Miltenberger, on behalf of Trustee
Coan, supported conversion to have an independent trustee to
investigate to see what could be recovered for the benefit of
creditors.
And Trustee Chorches stated that he believed that the conversion
could net meaningful distribution to creditors. And the recoveries
that were mentioned at that time related to fraudulent transfers by
Richard Annuziata.

The Court:

Sure. Sure.

14

Ms. Rescia:

And, which funds that went through the prior debtor-in-possession
account of the debtor, which were small amounts that the debtor
does -- debtor. Excuse me, Mr. Annuziata does appear to have
used as his own personal checking account. And those amounts
total approximately $10,000.
I’ve been given an informal notice from Attorney Miltenberger
that Mr. Annuziata has recently filed a bankruptcy proceeding
himself in New Jersey.
And although I don’t know the status of that, it does appear that
collecting this $10,000 from Mr. Annuziata would be difficult,
even if his case was dismissed based on other information, and that
the other reason that the case was converted was that there was a
question about unauthorized fees, attorney’s fees to Attorney
Carlebach and some others.
And based on my investigation it does appear that the debtor did
not pay those fees so that there would be no point in recovering
those fees because it would not benefit the estate. And the total
amount of those fees together is approximately $50,000. The same
amount that I am asking this Court to bring into the bankruptcy
estate.
As to the Licata trustee’s objection, mentioned that it’s not going
to benefit creditors. That if I bring this money in that the estates
will continue to spend funds in litigation. And this may or may not
be true.
I do understand enough of the history. I won’t contend to say that
I -- since I haven’t been involved in the other cases until recently,
that the Licata estates have compromised their rights with Mr.
Mocco, the appeal that is before Judge Shea, which is also -- I have
put in here to assign any rights of this estate in that appeal to
Reclaimed, is before Judge Shea and --

The Court:

So you are the appellant then the in that. Is that right?

Ms. Rescia:

Well, technically I am the appellant.

The Court:

Well, not technically. Actually you are.

Ms. Rescia:

Yes.

The Court:

So your efforts before District Judge Shea are, reverse the
bankruptcy court so that I am out of business and this case is not a
15

7 any longer, and I won’t be the trustee any longer, and it will be a
Chapter 11. That’s your effort up in the District Court?
Ms. Rescia:

Well, that’s the position I have been put in, Your Honor.

The Court:

All right. Well, no, because you’re not obligated to continue that
appeal. You can drop the appeal. You wouldn’t have brought this
appeal to put yourself out of business, I don’t assume.

Ms. Rescia:

Well, Your Honor, I didn’t bring the appeal. The appeal was
pending at the time of the conversion.

The Court:

I understand that. And I’m saying, had it not been this isn’t
something you would be bringing.

Ms. Rescia:

That’s correct, Your Honor.

The Court:

So you inherited it.

Ms. Rescia:

Correct.

The Court:

And you’re not obligated to prosecute it.

Ms. Rescia:

That’s correct, Your Honor.

The Court:

But if you do prosecute it and you succeed, what you’d succeed in
doing is putting yourself out of business and taking this out of
Chapter 7.

Ms. Rescia:

No, Your Honor, that appeal is the appeal of the conversion in the
First Connecticut case.

The Court:

Oh, okay. I stand corrected. That’s First Connecticut. But is there
an appeal in the Licata case?

Mr. Miltenberger: Your Honor, there’s two appeals. One is an appeal of Your
Honor’s denial of SWJ motions -- SWJ Management’s motion to
convert the First Connecticut case. I think that’s the appeal to
which Trustee Rescia was referring.
There’s a second appeal which is SWJ Management’s appeal of the
conversion of its Chapter 11 case to a Chapter 7 case. SWJ
Management has not filed a brief in that matter and we’ve made a
motion to dismiss, which is currently pending in front of Judge
Shea. It has not been responded to.

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Ms. Rescia:

And, Your Honor, in that appeal I am the actual appellee, because
as the Court knows --

The Court:

Let’s get back to really -- and I apologize for diverting you from
this track.

March 24 Transcript, at 6–13. While Judge Shiff’s characterization of the long and complicated
First Connecticut Bankruptcy history – and his decade-long involvement in it – could be
described as colorful, the transcript does not support the accusation that he was threatening the
Trustee. In short, the March 24, 2015 Transcript supplies no reason to question the propriety of
the bankruptcy court’s October 29, 2014 decision to convert this case.
To the extent Management is suggesting that Judge Shiff was somehow biased against it
when he issued the order denying dismissal and converting the case to chapter 7, Management is,
again, long on rhetoric and short on support. The fact that a judge has ruled against a litigant –
even multiple times in a row – is not an indication of bias or grounds for recusal. See, e.g.,
United States v. Schwartz, 535 F.2d 160, 165 (2d Cir. 1976) (“Adverse rulings, standing alone,
do not establish judicial bias or prejudice, nor create a reasonable question of judicial
impartiality.” (citations and internal quotation marks omitted)); In re Int’l Bus. Machines Corp.,
618 F.2d 923, 929 (2d Cir. 1980) (“Judicial independence cannot be subservient to a statistical
study of the calls [a judge] has made during the contest.”). Further, Management did not move
to recuse Judge Shiff.
In short, this Court finds no basis in the record to suggest that Judge Shiff was biased or
to question the validity of his order converting this bankruptcy case to chapter 7. 6
6

Management also claims the United States Trustee made a misrepresentation by failing to inform the bankruptcy
court of its then-pending motion to dismiss during the October 7 hearing. Appellant’s Opening Br. 17; see Bankr.
Doc. 29. Sitting as an appellate body, this Court is not the proper venue in which to make such a claim. Even if the
alleged actions amounted to misrepresentation under 18 U.S.C. § 157 – an assertion upon which I express no
opinion – Management fails to show how this misrepresentation would have affected the bankruptcy court’s
decision to convert rather than dismiss. The bankruptcy court heard argument on Management’s motion to dismiss
during the October 28 hearing. At that hearing, the United States Trustee argued in favor of conversion rather than

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IV.

Conclusion
For the reasons stated above, the bankruptcy court’s decision granting the First

Connecticut Bankruptcy Trustee’s motion to convert and denying Management’s motion to
dismiss was not an abuse of discretion. The bankruptcy court’s decision is therefore
AFFIRMED. As a result of this ruling, Appellee’s Motion to Dismiss the Appeal (Dist. Doc. 12)
is DENIED as moot. The Clerk of the Court is directed to close the case.

IT IS SO ORDERED.

/s/
Michael P. Shea, U.S.D.J.
Dated:

Hartford, Connecticut
September 16, 2015

dismissal. See October 28 Transcript, at 14–15. There is no evidence that any failure by the United States Trustee
to notify the bankruptcy court of its pending motion to dismiss during the October 7 hearing had an appreciable
effect on the bankruptcy court’s decision to convert rather than dismiss.

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