FINK et al v. ADVANCED LOGIC SYSTEMS, INC.

Filing 25

OPINION. Signed by Judge Noel L. Hillman on 3/25/2013. (dmr)

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

In re
ADVANCED LOGIC SYSTEMS, INC.

Civil No. 12-4479 (NLH)
OPINION

EDWARD ROBERT GROSSI
Law Office of Edward R. Grossi, LLC
464 Valley Brook Ave, Box 911
Lyndhurst, NJ 07071
On behalf of appellant John W. Fink
JOHN D. KUTZLER
Buzby & Kutzler
1524 West Girard Avenue
Philadelphia, PA 19130
On behalf of appellee Advanced Logic Systems, Inc.
HILLMAN, District Judge
I.

Background

Presently before the Court is the appeal by appellant John
Fink to reverse the bankruptcy court’s denial of his motion to
reopen the bankruptcy of Advanced Logic Systems, Inc. (“ALSI”).1
Fink had been a financial consultant for ALSI, but he eventually
entered into a series of credit agreements with ALSI to provide
working capital to the company’s operations.

Fink provided over

$500,000 to ALSI, and in return, he received rights to purchase a

1

This Court has appellate jurisdiction to review the
bankruptcy court’s order under 28 U.S.C. § 158(a).

certain amount of stock in ALSI.
The financial condition of ALSI deteriorated, litigation
between Fink and ALSI ensued, and eventually the parties settled.
After paying only half of the million dollar settlement to Fink,
ALSI filed for bankruptcy in 2008.2

Fink was listed as a secured

creditor on ALSI’s bankruptcy petition.

ALSI’s assets, at the

time of its final petition on April 7, 2009, totaled $263,194.82.
After an investigation by the trustee into ALSI’s assets, the
trustee deemed ALSI’s assets abandoned, and no other assets
remained.

ALSI’s bankruptcy was closed on August 13, 2009.

In March 2012, Fink sought to reopen ALSI’s bankruptcy based
on evidence he claims he discovered after ALSI’s bankruptcy was
closed.

Fink argued to the bankruptcy court that the evidence

showed that ALSI omitted several assets on its bankruptcy
petition, and ALSI’s bankruptcy should be reopened in order to
allow the trustee to investigate what Fink contended was a theft
of ALSI’s missing assets totaling over $60 million.
The bankruptcy court denied Fink’s motion, and his motion
for reconsideration.

The bankruptcy court found that even in the

2

In a later lawsuit, Fink claimed that ALSI owed him over
$60 million due to its breach of the settlement and various other
agreements. Fink attempted to collect on what he was owed from
EdgeLink, Inc., an entity Fink claimed was a successor-ininterest to ALSI. Judgment was entered in EdgeLink’s favor on
summary judgment. That case is on appeal. (See Fink v.
EdgeLink, Civ. A. No. 09-5078 (D.N.J.).) Evidence gathered from
discovery in that case serves as the basis, in part, for Fink’s
request to reopen the bankruptcy of ALSI.
2

absence of statute of limitations concerns,3 the trustee
diligently investigated ALSI’s finances and did not find any
suspicious activity or indication of missing assets.

Fink

contends that the bankruptcy court’s blind reliance on the
trustee, without any further inquiry into Fink’s allegations,
constitutes reversible error.

ALSI has opposed Fink’s appeal to

the extent that it supports the bankruptcy court’s denial of
Fink’s motion to reopen the bankruptcy.
II.

Analysis

Pursuant to the Bankruptcy Code, “A case may be reopened in
the court in which such case was closed to administer assets, to
accord relief to the debtor, or for other cause.”
350(b).

11 U.S.C. §

Bankruptcy courts have broad discretion to reopen cases

after an estate has been administered.
214, 223 (3d Cir. 2005).

In re Zinchiak, 406 F.3d

This Court reviews the bankruptcy

court’s decision denying a motion to reopen for abuse of
discretion.
1997).

Donaldson v. Bernstein, 104 F.3d 547, 551 (3d Cir.

Under the abuse of discretion standard, this Court will

3

In denying Fink’s first motion to reopen, the bankruptcy
court found that any fraudulent conveyance claims were barred by
the four-year statute of limitations. In denying his motion for
reconsideration, which clarified that Fink was alleging
conversion - a claim governed by a six-year statute of
limitations and thus not a bar to his claims on their face - the
bankruptcy court reiterated that the basis for the denial of his
motions was not the statute of limitations, but rather the
diligence of the trustee, the absence of any evidence of missing
assets, and the unpersuasiveness of Fink’s purported new
evidence.
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not disturb the bankruptcy court’s decision unless it rests on “a
clearly erroneous finding of fact, an errant conclusion of law or
an improper application of law to fact.”

In re Nutraquest, Inc.,

434 F.3d 639, 645 (3d Cir. 2006) (citation omitted).
Fink argues that the bankruptcy court discounted substantial
evidence demonstrating ALSI’s missing assets, and instead
improperly favored the trustee’s report, which failed to show any
indication of hidden assets.

Moreover, Fink argues that the

alleged missing assets could not have been abandoned because they
were not listed on ALSI’s bankruptcy petition, and they are
therefore still part of the bankruptcy estate.
To support his contention that ALSI still has assets assets stolen or improperly converted by ALSI’s founder and other
members - Fink provides evidence that he claims proves that even
after ALSI filed for bankruptcy in 2008, ALSI was soliciting
business to sell its proprietary software and technology, ANICS,
and that it was renewing contracts for licensing of ANICS or its
product spinoffs.

This software, however, was not listed on

ALSI’s bankruptcy petition.

Fink explains this is due, in part,

to ASLI’s affiliate corporation, Advanced Logic Services, Inc.
(“ALServ”), continuing the business of ALSI even after ALSI’s
bankruptcy.

It is also due, Fink claims, to ALSI’s deliberate

falsifications on the bankruptcy petition.

Additionally, Fink

claims that there are 27 million shares of stock missing from

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ALSI’s petition, as well as several missing creditors.
In denying Fink’s motion to reopen, the bankruptcy court
considered that: (1) Fink did not show any evidence that there is
a benefit to the estate; (2) there is no documentation of any
transfers; (3) the trustee analyzed the potential asset and made
a determination that he was not going to pursue it because there
was no benefit to the estate; (4) the trustee did not support the
motion to reopen; (5) if the trustee believed that there was some
transfer that was collectible for the estate, he probably would
have taken action before; (6) it is in the trustee’s interest to
try to maximize the value for the estate; (7) “whatever the
investigation back in 2009, [the trustee] came to the conclusion
that it was not a benefit to the Estate to attempt to collect,
because he has to take into account whether he thinks he’ll be
successful, how expensive it would be to do it, whether there is
real benefit to the Estate that would be valuable to the Estate.
He was satisfied that there was not. . . .”; (8) there were no
assets in the case to fund an investigation or fund the
litigation; (9) the trustee knew of the potential assets because
Fink had informed him about his suspicions at the creditors
meetings in 2009, and the trustee actually withdrew his original
report in order to look into Fink’s claims; (10) the trustee
found that the value of any software was highly speculative; and
(11) specifically addressing Fink’s evidence of a 2007 ALSI

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software licensing proposal, which Fink claims demonstrates that
ALSI retained that asset even though it was not listed on the
petition, the bankruptcy court noted that it was possible that
ALSI no longer had that asset when it filed its petition in 2008,
and that reason, or some other reason, explains its omission.
(08-BR-31052, June 5, 2012 Transcript.)

Based on all these

considerations, the bankruptcy declined to reopen ALSI’s
bankruptcy.
“Parties do not have an absolute right to reopen a hearing
in order to introduce further testimony.

On the contrary, [the

bankruptcy court] should not be expected to reopen a closed
proceeding after the parties have had the normal opportunities to
present evidence absent a special reason for permitting
reopening.”

In re Time Sales Finance Corp., 474 F.2d 1197, 1201

(3d Cir. 1971).

Even though undisclosed pre-petition assets

provide sufficient grounds to reopen a bankruptcy case, In re
Atanasov, 221 B.R. 113, 116 (D.N.J. 1998), the bankruptcy court
in this matter listed numerous considerations as to why Fink
could not demonstrate persuasively the existence of undisclosed
assets.

This Court does not find that the bankruptcy court

abused its broad discretion in making that finding.

Further,

this Court does not find that the bankruptcy court abused its
discretion in determining that Fink had not shown a “special
reason” to reopen the bankruptcy three years after it was

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closed.4

Accordingly, Fink’s request for this Court to reverse

the bankruptcy’s order denying his motion to reopen must be
denied.
An appropriate order will entered.

Date: March 25, 2013
At Camden, New Jersey

s/ Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.

4

As this Court noted in Fink v. EdgeLink, Civ. A. No. 09-5078
(D.N.J.), Fink had not “provided any evidence that the bankruptcy
trustee discovered any asset transfers by ALSI - during or prior
to its bankruptcy filing - to avoid its creditors[.]” (March 27,
2012 Opinion at 13.)
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