Long Island Pine Barrens Society Inc v. Sandy Hills, LLC

Filing 19

MEMORANDUM AND ORDER - For the foregoing reasons, Pine Barrens' appeal is DENIED and the Bankruptcy Court's Sanctions Order is AFFIRMED. The Clerk of the Court is directed to mark this matter CLOSED. So Ordered by Judge Joanna Seybert on 9/30/2015. C/ECF; E.D. Bankruptcy Case No. 8-12-74482(AST) (Valle, Christine)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
-------------------------------------X
LONG ISLAND PINE BARRENS
SOCIETY, INC.,
Appellant,
-against-

E.D. Bankr. Case
No. 8-12-74482(AST)
MEMORANDUM & ORDER
14-CV-4678(JS)

SANDY HILLS, LLC,

Appellees.
-------------------------------------X
APPEARANCES
For Appellant:
Regina Seltzer, Esq.
Long Island Pine Barrens Society
547 East Main Street
Riverhead, NY 11901
For Appellee:

Stephen P. Gelfand, Esq.
Law Office of Stephen P. Gelfand, Esq.
548 West Jericho Turnpike
Smithtown, NY 11787

SEYBERT, District Judge:
This action is an appeal of an order entered in the
Chapter 11 bankruptcy proceeding of debtor and appellee herein,
Sandy Hills, LLC (“Appellee” or “Sandy Hills”).

Specifically,

appellant Long Island Pine Barrens Society, Inc. (“Appellant” or
“Pine Barrens”) and its attorney, Regina Seltzer, appeal the
May 22, 2014 Order of the United States Bankruptcy Court for the
Eastern District of New York (the “Bankruptcy Court”), in which
the Bankruptcy Court found that Pine Barrens and Ms. Seltzer
willfully violated the automatic bankruptcy stay and imposed civil
contempt sanctions on Pine Barrens and Ms. Seltzer, jointly and

severally (“Sanctions Order,” Docket Entry 1, at 5-26.)
following

reasons,

Pine

Barrens’

appeal

is

DENIED

For the
and

the

Bankruptcy Court’s Sanctions Order is AFFIRMED.
BACKGROUND
Pine Barrens is a non-profit environmental group whose
mission is to protect the Long Island Central Pine Barrens, an
area of about 100,000 acres of protected land located in Suffolk
County, New York (the “Pine Barrens Region”).
1.)

(Sanctions Order at

In May 2003, Sandy Hills, the debtor in the underlying

bankruptcy

proceeding,

acquired

approximately

thirty-nine

contiguous acres of undeveloped land in the Town of Brookhaven,
New York (the “Town”), which was located in the Pine Barrens Region
(the “Property”).
In

(Sanctions Order at 2.)

July

2011,

after

years

of

protracted

litigation

concerning zoning of the Property, the Town conditionally resolved
to rezone the Property to permit Sandy Hills to develop residential
and business properties (the “July 2011 Resolution”).
Order at 3-4.)

(Sanctions

On August 12, 2011, Pine Barrens and others filed

an Article 78 proceeding in New York State Supreme Court, Suffolk
County, alleging that the Town failed to follow proper procedures
when

it

adopted

Proceeding”).

the

July

2011

Resolution

(the

“Article

78

See Long Island Pine Barrens Soc’y, Inc., et al. v.

Town of Brookhaven Town Board, et al., No. 25657/2011 (N.Y. Sup.
Ct. Suffolk Cnty.)

On July 19, 2012, while the Article 78
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Proceeding was still pending, Sandy Hills filed the underlying
Chapter 11 bankruptcy case. As a result, the Article 78 Proceeding
was stayed pursuant to 11 U.S.C. § 362.
At

the

time

Sandy

Property was its only asset.

Hills

filed

for

bankruptcy,

(Sanctions Order at 4.)

the

Believing

that a decision approving the July 2011 Resolution in the Article
78 Proceeding would increase the value and marketability of the
Property, Sandy Hills filed a motion on December 12, 2012, seeking
relief from the automatic stay to permit the Supreme Court to
render a decision in the Article 78 Proceeding.
at 4-5.)

(Sanctions Order

On January 14, 2013, the Bankruptcy Court granted Sandy

Hills’ motion and lifted the automatic stay “to allow the Supreme
Court of The State of New York County of Suffolk . . . to render
a decision in the Article 78 Proceeding” (the “Lift Stay Order”).
(Sanctions Order at 5 (quoting the Lift Stay Order).)

No party

opposed Sandy Hills’ motion to lift the stay or appealed the Lift
Stay Order.

(Sanctions Order at 5.)

On June 18, 2013, the Supreme Court affirmed the July
2011 Resolution and dismissed the Article 78 Proceeding (the “June
2013

Order”).

(Sanctions

Order

at

7.)

Without

seeking

or

obtaining relief from the automatic stay, Pine Barrens appealed
the June 2013 Order to the Appellate Division, Second Department.
(Sanctions Order at 7.)

On September 26, 2013, the Bankruptcy

Court approved a sale of thirty-six acres of the Property to a
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non-profit

group

(“Concern”).

called

Concern

for

Independent

Living,

Inc.

(Sanctions Order at 7.)

On January 23, 2014, Sandy Hills filed a motion with the
Bankruptcy Court seeking to void the appeal, contending that the
Lift Stay Order permitted the Supreme Court to render a decision,
but not an appeal of such decision.

(Sanctions Order at 8.)

On

February 4, 2014, after a hearing on the motion, the Bankruptcy
Court ruled that Pine Barrens’ appeal did violate the automatic
stay and that if it wished to pursue an appeal, it would need to
move for relief from the stay in the Bankruptcy Court.
Order at 8-9.)

(Sanctions

The Bankruptcy Court did not impose sanctions for

the violation.
On February 21, 2014, Pine Barrens filed a motion seeking
relief from the automatic stay to appeal the decision in the
Article 78 Proceeding, but the Bankruptcy Court denied the motion
due to improper service of the motion.

(Sanctions Order at 9.)

On March 18, 2014, Sandy Hills sold the thirty-six acres of the
Property to Concern and retained the remaining portion of the
Property.

(Sanctions Order at 9.)

Three days later, Ms. Seltzer,

on Pine Barrens’ behalf, filed an order to show cause with the
Appellate Division, asking the court (1) to determine that the
sale of the thirty-six acres to Concern terminated the automatic
stay and (2) to enjoin any development of the Property pending
appeal. (Sanctions Order at 10.) On March 24, 2014, the Appellate
4

Division denied Pine Barrens’ order to show cause, finding that
the Bankruptcy Court should decide whether the automatic stay was
terminated as a result of the sale of a portion of the Property to
Concern.

(Sanctions Order at 10.)
On March 31, 2014, Sandy Hills filed a motion for

sanctions in the Bankruptcy Court against Pine Barrens and Ms.
Seltzer, arguing that they had willfully violated the automatic
stay by filing the order to show cause with the Appellate Division.
(Sanctions Order at 10-11.)

On May 22, 2014, the Bankruptcy Court

rendered its Sanctions Order, finding that Pine Barrens and Ms.
Seltzer’s order to show cause was a willful violation of the
automatic stay that warranted civil contempt sanctions in the form
of reasonable attorneys’ fees.

(Sanctions Order at 11-20.)

The

Bankruptcy Court directed Sandy Hills to file a fee statement
detailing the attorneys’ fees incurred in filing and prosecuting
its motion for sanctions and in opposing the order to show cause
filed in the Appellate Division.

(Sanctions Order at 21.)

The

Bankruptcy Court subsequently entered an order setting amount of
attorneys’ fees to be awarded at $6,496.00.

(See Docket Entry 234

in In re Sandy Hills, LLC, No. 8–12–74482 (Bankr. E.D.N.Y. Nov. 5,
2014)).

5

DISCUSSION
I.

Legal Standard
Federal

district

courts

have

jurisdiction

to

hear

appeals from final judgments, orders, and decrees of bankruptcy
judges.

FED. R. BANKR. P. 8013.

The Bankruptcy Court’s “[f]indings

of fact, whether based on oral or documentary evidence, shall not
be set aside unless clearly erroneous.”

Id.; see also Momentum

Mfg. Corp. v. Emp. Creditors Comm. (In re Momentum Mfg. Corp.), 25
F.3d 1132, 1136 (2d Cir. 1994).

The Bankruptcy Court’s legal

conclusions, however, are reviewed de novo.

See Momentum Mfg.

Co., 25 F.3d at 1136.
II.

Analysis
“The law in this Circuit is clear that sanctions for

violations of the automatic stay pursuant to § 362(h) are only
appropriate as to debtors who are natural persons.”

Ball v. A.O.

Smith Corp., 321 B.R. 100, 108 (N.D.N.Y. 2005), aff’d, 451 F.3d 66
(2d Cir. 2006).

“‘For other debtors, contempt proceedings are the

proper means of compensation and punishment for willful violations
of the automatic stay.’”

Id. (quoting In re Chateaugay Corp., 920

F.2d 183, 187 (2d Cir. 1990)).

Thus, as in this case, “where a

debtor is a corporation, sanctions can be imposed only as a result
of a contempt finding, on a showing of maliciousness or a lack of
a good faith argument and belief that the party’s action[s] were
not in violation of the stay.”

Id.
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Pine

Barrens

argues

that

the

Bankruptcy

Court’s

Sanctions Order should be reversed because there was no evidence
of maliciousness or a lack of good faith argument and belief that
Pine Barrens’ order to show cause in the Appellate Division did
not violate the automatic stay. Pine Barrens specifically contends
that Ms. Seltzer exercised a good faith belief that the sale of a
portion of the Property to Concern terminated the automatic stay.
The Court disagrees.

As noted, the Bankruptcy Court previously

ruled that Pine Barrens’ first appeal of the Supreme Court’s June
2013 Order violated the automatic stay, but declined to impose
sanctions.

This ruling came after the Bankruptcy Court approved

the sale of the portion of the Property to Concern.

Nonetheless,

Pine Barrens proceeded to file an order to show cause in the
Appellate

Division

asking

the

court

to

find

that

the

sale

terminated the automatic stay, and even more egregiously, to stay
any development of the Property pending appeal.

Under these

circumstances, the Court cannot say that the Bankruptcy Court
lacked evidence of maliciousness or a lack of good faith argument
and belief that Pine Barrens’ order to show cause in the Appellate
Division did not violate the automatic stay.
Court’s Sanctions Order is therefore AFFIRMED.

7

The Bankruptcy

CONCLUSION
For

the

foregoing

reasons,

Pine

Barrens’

appeal

is

DENIED and the Bankruptcy Court’s Sanctions Order is AFFIRMED.
The Clerk of the Court is directed to mark this matter CLOSED.

SO ORDERED.

/s/ JOANNA SEYBERT______
Joanna Seybert, U.S.D.J.
Dated:

September
30 , 2015
Central Islip, New York

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