Mendelsohn v. Ross
Filing
7
MEMORANDUM AND OPINION. For the reasons set forth herein, the Court affirms the April 14, 2016 Order of the Bankruptcy Court and denies the appeal. SO ORDERED. Ordered by Judge Joseph F. Bianco on 5/9/2017. (Consalvo, Mikayla)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
_____________________
No 16-CV-2071 (JFB)
_____________________
ALLAN B. MENDELSOHN, AS FORMER CHAPTER 7 TRUSTEE OF THE ESTATE OF
BARBARA G. ROSS,
Appellant,
VERSUS
BARBARA G. ROSS,
Appellee.
___________________
MEMORANDUM AND ORDER
May 9, 2017
__________________
JOSEPH F. BIANCO, District Judge:
Court affirms the April 14, 2016 Order and
denies the appeal.
Pending before the Court is an appeal by
Allan B. Mendelsohn, as Former Chapter 7
Trustee of the Estate of Barbara G. Ross
(“appellant”) from the April 14, 2016 Order
of the Honorable Robert E. Grossman,
United States Bankruptcy Judge (the
“Bankruptcy Order”), denying the motion of
appellant to reopen the Chapter 7 proceeding
of debtor Barbara G. Ross (“appellee”) to
administer certain valuable property of the
estate. (ECF No. 1.) At issue in the appeal
is whether, under 11 U.S.C. § 541 (“§ 541”),
the Bankruptcy Court erred by finding that
certain settlement proceeds did not
constitute property of appellee’s estate
because no cause of action had accrued as of
the date appellee filed her bankruptcy
petition.
I. BACKGROUND
The following facts and procedural
history are relevant to the instant appeal.
A. The Bankruptcy Court Proceedings
Appellee filed a voluntary petition under
Chapter 7 of the Bankruptcy Code on
November 23, 2004. (R. 1 at 5.) She did not
schedule an interest in a product liability
claim or a personal injury claim on her
voluntary petition or schedules. (See id. at
8-26.)
By order dated July 22, 2005, the
Bankruptcy Court approved a stipulation of
1
“R.” refers to the Bankruptcy Record on Appeal.
(ECF No. 2-2.)
For the reasons set forth below, the
1
facts, a cause of action unquestionably arose
not only post-petition, but “five years after
the [bankruptcy proceeding] was closed,”
thus making it impossible that the settlement
proceeds were property of the estate
involved in the bankruptcy proceeding. (Id.
at 150.) In response, appellant argued that
when debtor became aware of her claim is
irrelevant, and that, because the settlement
proceeds arose solely out of pre-petition
conduct, they were sufficiently rooted in
appellee’s pre-bankruptcy past to be
considered property of her estate. (Id. at
167.)
settlement between appellant and appellee
with respect to appellant’s claims in the
appellee’s real property located at 150 Main
Street, Unit 1D, Islip, New York 11751. (Id.
at 60-61.) The funds from this settlement
were distributed to appellee’s creditors. (Id.
at 63-65.) The general unsecured claims of
appellee’s estate totaled $49,626.13, and
general unsecured creditors received a pro
rata distribution of approximately 23% on
account of their allowed claims. (Id.) By
order dated March 22, 2005, appellee
received a discharge. (Id. at 143.) The
bankruptcy proceeding was closed as an
“Asset” case by Final Decree issued on
August 2, 2006. (Id. at 141.)
A hearing on the motion to reopen was
conducted on February 3, 2016. By the
Bankruptcy Order at issue in the instant
action, the Bankruptcy Court denied
appellant’s motion to reopen. (Id. at 197.)
The court determined that no cause of action
had accrued as of the petition date, and,
therefore, the settlement proceeds did not
constitute property of appellee’s estate. (Id.
at 197.) Specifically, the court reasoned
that, in assessing whether potential tort
claims constitute property of a debtor’s
estate, “the proper focus is on whether there
was a viable cause of action the Debtor
could bring under applicable law on the date
the petition was filed.” (Id. at 184.) In such
cases, the court continued, “regardless of
what the Debtor knew, [] that cause of
action and all its proceeds would constitute
property of the estate.” (Id.) If, on the
other, “no cause of action had matured, it is
irrelevant whether the Debtor ultimately
develops an injury: the cause of action
resulting from that injury would not be
property of the estate.” (Id.)
By motion dated September 30, 2015,
appellant sought the entry of an order
reopening the bankruptcy proceeding to
administer an undisclosed asset, namely, a
product liability claim for personal injuries
sustained by appellee that resulted from a
pre-petition medical procedure involving the
implantation of a defective medical device.
(Id. at 143-44.) Appellee objected to the
motion, arguing that the cause of action
arose post-petition.
(Id. at 148.)
In
particular, appellee stated that she
underwent a surgery whereby the medical
device at issue—a mesh pelvic sling (the
“medical device”)—was implanted in 1999.
(Id. at 150.) On July 13, 2011 (nearly five
years after the bankruptcy proceeding was
closed), the FDA issued an advisory opinion
regarding possible defects with the medical
device. (Id.) In 2012, appellee became
aware of the possible defects, and contacted
a product liability counsel with respect to
asserting a claim in connection with those
defects.
(Id.)
Appellee subsequently
asserted a product liability claim, which
resulted in a settlement award in the amount
of $105,172.26 (the “settlement proceeds”).
(Id. at 169.)
B. The Appeal
Appellant filed a Notice of Appeal of the
Bankruptcy Order on April 25, 2016. (ECF
No. 1.) The Notice of Bankruptcy Record
Received was filed on June 14, 2016. (ECF
No. 2.) Appellant filed his brief in support
Appellee argued that, based on these
2
the
debtor,
future,
nonpossessory,
contingent, speculative, and derivative, is
within the reach of § 541.” In re Yonikus,
996 F.2d 866, 869 (7th Cir. 1993), cited with
approval, Chartschlaa v. Nationwide Mut.
Ins. Co., 538 F.3d 116, 122 (2d Cir. 2008).
There is a “broad and liberal construction of
the term ‘property’ that has been adopted
with a view to securing for creditors
everything of value belonging to the
bankrupt . . . .” In re Robbins Converting
Corp., 441 F.2d 1096, 1098 (2d Cir. 1971);
see also In re Prudential Lines, Inc., 928
F.2d 565, 573 (2d Cir. 1991) (finding
decision that property at issue was property
of bankruptcy estate was “consistent with
Congress’ intention to bring anything into
the estate” (citation omitted)); In re
Kokoszka, 479 F.2d 990, 994-95 (2d Cir.
1973) (acknowledging “a very narrow
exception to the general proposition that
everything of value passes to the trustee”
exists with respect to “weekly or other
periodic income required by a wage earner
for his basic support”).
of his appeal (“Appellant Br.”) on August
16, 2016. (ECF No. 4.) Appellee filed her
opposition (“Appellee Br.”) on September
15, 2016. (ECF No. 6.) Appellant did not
file a reply brief. The Court has fully
considered the parties’ submissions.
II. STANDARD OF REVIEW
This Court has jurisdiction to hear
appeals from bankruptcy courts under 28
U.S.C. § 158(a), which provides that “[t]he
district courts of the United States shall have
jurisdiction to hear appeals . . . from final
judgments, orders, and decrees; . . . [and]
with leave of the court, from other
interlocutory orders and decrees . . . of
bankruptcy judges.” 28 U.S.C. § 158(a)(1),
(3). Part VIII of the Federal Rules of
Bankruptcy
Procedure
outlines
the
procedure governing such appeals. Fed. R.
Bankr. P. 8001. The Court will review the
Bankruptcy Court’s legal conclusions de
novo and its factual findings for clear error.
See In re Hyman, 502 F.3d 61, 65 (2d Cir.
2007).
Interests under § 541 include “causes of
action possessed by the debtor at the time of
filing.” Jackson v. Novak, 593 F.3d 171,
176 (2d Cir. 2010); United States v. Whiting
Pools, Inc., 462 U.S. 198, 203 (1983). To
determine whether a cause of action was
possessed by the debtor at the time of filing,
courts must examine whether such claims
had accrued at the time of filing. See
Osborne v. Tulis, 594 Fed. App’x 39, 40 (2d
Cir. 2015). Generally, “a right accrues when
it comes into existence,” United States v.
Lindsay, 346 U.S. 568, 569 (1954)—i.e.,
“when the plaintiff has a complete and
present cause of action.” Wallace v. Kato,
549 U.S. 384, 388 (2007); Aetna Life &
Casualty Co. v. Nelson, 67 N.Y.2d 169, 175
(N.Y. 1986). The law governing the accrual
of such a claim naturally controls this
analysis. Osborne, 594 Fed. App’x at 40.
Here, the parties do not dispute that the
III. DISCUSSION
Appellant argues that vacatur of the
Bankruptcy Order and remand to the
Bankruptcy Court is warranted because the
court incorrectly concluded that the
settlement proceeds were not property of
appellee’s bankruptcy estate.
For the
following reasons, having conducted a de
novo review, the Court disagrees and affirms
the decision of the Bankruptcy Court.
A. Applicable Law
A bankruptcy estate is created upon the
filing of a Chapter 7 bankruptcy petition.
Section 541 of the Bankruptcy Code
provides that the bankruptcy estate
encompasses “all legal or equitable interests
of the debtor in property as of the
commencement of the case.” 11 U.S.C. §
541(a)(1). “[E]very conceivable interest of
3
claim did not accrue pre-petition because
appellee did not sustain an injury, as
required in product liability claims.
(2) determine the extent to
which it is entangled with the
debtor’s ability to make an
unencumbered fresh start;
and then (3) with both
considerations in the balance,
determine whether, in view
of the purposes of the
[Bankruptcy Code], the claim
is more properly categorized
as prepetition property that
should come into the estate or
a post-petition asset that the
Debtor should take free of the
claims of pre-bankruptcy
creditors . . . .
There are exceptions to the rule that
“[b]ecause assets within the estate are those
that exist ‘as of the commencement of the
case,’ property acquired by the debtor after
the filing of a bankruptcy petition generally
does not become part of the estate.”
Chartschlaa, 538 F.3d at 122; see also Bell
v. Bell, 225 F.3d 203, 215 (2d Cir. 2000)
(“Unlike pre-petition claims, claims which
accrue to the debtor post-petition generally
will not adhere to the estate and remain
actionable by the debtor”). Where property,
including legal claims, is acquired postpetition, courts must employ a different
analysis, whereby “[p]ost-petition property
will become property of the estate only if it
is ‘sufficiently rooted in the pre-bankruptcy
past.’” Id. (quoting Segal v. Rochelle, 382
U.S. 375, 380 (1966)). In Segal, 2 for
example, the Supreme Court held that a
post-petition tax refund premised on prepetition losses is property of the estate. 382
U.S. at 378-79. The Court held that the facts
in that case indicated that the “refund
existed at the time the[] bankruptcy petitions
were filed,” and, as such, it constituted
property of the bankruptcy estate. Id.
See In re Borchert, No. 04-65653, 2010 WL
153384, at *2-3 (Bankr. N.D.N.Y. Jan. 8,
2010); Riccitelli v. Grasso, 320 B.R. 483,
490-91 (Bankr. D. Mass. 2005). 3
The Second Circuit has also addressed
this issue. For example, in Chartschlaa, the
issue was whether debtor’s post-petition
lawsuit concerning a contract formed by a
company that debtor began organizing prepetition, but did not formally incorporate
until post-petition, was property of his
bankruptcy estate. Chartschlaa, 538 F.3d at
119-20. The Second Circuit found the
lawsuit was property of the bankruptcy
estate, citing the following facts in support
of its conclusion: the company was formed
(unofficially)
pre-petition;
it
was
incorporated to simply change the name of
debtor’s preexisting company; debtor
delayed formally incorporating the company
until soon after filing for bankruptcy; debtor
In the instant action, the Bankruptcy
Court cited a framework derived from Segal
and employed by other courts to determine
whether the settlement proceeds were
“sufficiently rooted in the pre-bankruptcy
past.” (See R. at 190; Appellee Br. 6.)
Under that framework, courts
(1) determine the extent to
which the claim is rooted in
the pre-bankruptcy past;
3
The Bankruptcy Code was amended post-Segal to
adopt the “sufficiently rooted in the pre-bankruptcy
past” language, but it omitted the requirement that it
not be entangled in the debtor’s ability to make a
fresh start. See In re Richards, 249 B.R. 859, 861
(Bankr. E.D. Mich. 2000). However, some courts
still examine the “fresh start” factor in conducting
analyses of property acquired post-petition.
2
Segal involved an analysis of § 541’s predecessor,
but its analysis has consistently been applied to §
541. See In re Prudential Lines, Inc., 928 F.2d at
571.
4
must utilize the inquiry set forth in Segal
and its progeny—i.e., whether the “[p]ostpetition property . . . is ‘sufficiently rooted
in the pre-bankruptcy past.’” Id. (quoting
Segal, 382 U.S. at 380).
should have disclosed the successor
company to the bankruptcy trustee; the
contract at issue—although it had been
signed post-petition—was only signed at the
debtor’s request because the company’s
name had changed; and the contract had a
retroactive effective date, making it “merely
a continuation of [a] longstanding business
relationship.” Id. at 123. In including this
last fact, the Second Circuit cited the
Bankruptcy Law Manual for the proposition
that “[i]t is important to distinguish between
property that is acquired after the case is
commenced and property that merely
changes in form.” Id. (citing Benjamin
Weintraub & Alan N. Resnick, Bankruptcy
Law Manual § 5:6 (5th ed. 2008)).
Here, the Bankruptcy Court properly
cited this line of cases in its Order.
However, it failed to actually conduct this
portion of the analysis.
The court
incorrectly noted that, in cases such as the
instant action, “the proper focus is on
whether there was a viable cause of action
the Debtor could bring under applicable law
on the date the petition was filed.” (R. at
184.) The court then determined that,
“[b]ecause the elements necessary to
commence an action under state law were
not present as of the date of the petition, the
right to receive the settlement proceeds are
not sufficiently rooted in the Debtor’s
prepetition past to warrant inclusion of the
settlement proceeds in the Debtor’s
bankruptcy estate.” (Id. at 2.) In so holding,
the court conflated the inquiry of when a
claim accrues with the additional Segal
inquiry.
B. Analysis
The Bankruptcy Court’s determination
that the settlement proceeds do not
constitute property of appellee’s estate is a
legal conclusion, and, thus, the Court
reviews it de novo. See In re Hyman, 502
F.3d at 65.
As the Bankruptcy Court noted, this case
presents a somewhat novel question in this
Circuit: in a situation in which a debtor
receives proceeds of a settlement where,
because the underlying facts do not establish
all the elements of the potential legal basis
for suit, she may not ever be able to
successfully bring suit, how does a court
determine whether those settlement proceeds
are the property of the debtor’s bankruptcy
estate? The typical inquiry made of legal
claims—i.e., whether a “cause[] of action
[was] possessed by the debtor at the time of
filing,” Jackson, 593 F.3d at 176—cannot
apply to such situations. Thus, courts must
conduct an analysis of the exception to the
general rule that “property acquired by the
debtor after the filing of a bankruptcy
petition [] does not become part of the
estate.” Chartschlaa, 538 F.3d at 122. As
noted above, under such an analysis, courts
In particular, the analysis does not
comport with Segal’s holding, applied in
numerous Second Circuit cases, that
property that is acquired post-petition can be
deemed to be the property of a bankruptcy
estate, so long as it is “sufficiently rooted in
the pre-bankruptcy past” of a debtor. The
court failed to specifically analyze whether,
despite the fact that a claim had not accrued
under state law as of the petition date, the
settlement proceeds were nonetheless
“sufficiently rooted in the pre-bankruptcy
past” of appellee that they should be
considered part of her bankruptcy estate. 4
4
The court incorrectly relied on In re Witko, 374 F.3d
1040 (11th Cir. 2004), for the proposition that “no
action that accrues post-petition can be ‘sufficiently
rooted in the pre-bankruptcy past’ of a debtor” (R. at
191)—a statement that conflicts directly with Segal.
5
This Court recognizes, as the Second Circuit
noted in Bell, that “claims that accrue to the
debtor post-petition generally will not
adhere to the estate and remain actionable
by the debtor.” 225 F.3d at 215. However,
an analysis still must be conducted to
determine whether an unaccrued claim is
nonetheless sufficiently rooted in the prebankruptcy past. Indeed, some courts have
found that such claims that had not accrued
at the time the petition was filed were
sufficiently rooted in the pre-bankruptcy
past to constitute property of the bankruptcy
estate. See, e.g., In re Sommer, 2008 WL
704401 (Bankr. N.D. Ohio Mar. 14, 2008)
(finding asbestos claim to be property of the
bankruptcy estate because debtor’s asbestos
exposure, which led to his development of
lung cancer, was prepetition and was the
basis of the wrongful death claim).
inquiry pursuant to Segal. 5
Here, as the Bankruptcy Court noted, it
was not inevitable that debtor’s claim in the
instant case would have ever accrued. (See
R. at 193 (“So long as the required element
of injury is hypothetical, the debtor has no
legally cognizable cause of action, and thus
has no property interest and any asserted
claim would be subject to dismissal as
unripe for adjudication.”).)
The court
incorrectly concluded from this fact that the
settlement proceeds could not be considered
estate of the property, without conducting an
(R. at 195.) The Bankruptcy Court found
that these facts supported its decision, but
this Court concludes that an additional
analysis must be conducted. The fact that
the settlement proceeds did not result from a
viable claim, but instead were offered in
exchange for pre-injury release, undermines
the view that a § 541 analysis should be
limited to whether a claim had accrued prepetition. Instead, the appropriate inquiry is
whether the facts underlying the settlement
agreement were “sufficiently rooted in the
In explaining its reasoning,
Bankruptcy Court stated that
the
settlement in this case
requires [appellee to] release
all possible claims, present
and future regarding the
Device. . . . Assuming the
Debtor was not injured as of
the commencement of the
case, as the record appears to
indicate,
the
settlement
proceeds are offered in
exchange for the Debtor’s
pre-injury release to absolve
others in advance of any
liability and to transfer the
risk of any such liability to
the Debtor.
5
This Court’s interpretation of Segal is consistent
with the “broad and liberal construction of the term
‘property’ that has been adopted with a view to
securing for creditors everything of value belonging
to the bankrupt.” In re Robbins Converting Corp.,
441 F.2d at 1098; In re Prudential Lines, Inc., 928
F.2d at 573 (finding decision that property at issue
was property of bankruptcy estate was “consistent
with Congress’ intention to bring anything into the
estate” (citation omitted)). In light of this expansive
view, it would stray far from the purposes of the
Bankruptcy Code and, relatedly, the Supreme Court’s
and Second Circuit’s interpretations of § 541, to
exclude this category of property from bankruptcy
estates without requiring an analysis under Segal.
Contrary to the court’s assertion, the court in In re
Witko correctly noted that post-petition claims in
Segal were the property of the bankruptcy estate
because the “predicates for receiving the refunds . . .
occurred pre-petition.” In re Witko, 374 F.3d at
1043. The claim at issue in In re Witko was a
medical malpractice claim, and the Eleventh Circuit
determined that it could not be deemed property of
the debtor’s bankruptcy estate, in part, because one of
the elements required to sustain the claim, namely,
that the attorney’s negligence proximately caused a
loss to the client, was not present until after the
bankruptcy petition was filed. Id. at 1043-44.
6
pre-bankruptcy past” of appellee. Other
courts have reached a similar conclusion.
See, e.g., Gaito v. A-C Product Liability
Trust, 542 B.R. 155 (Bankr. E.D. Pa. 2015)
(“[A]ny new, post-petition interest (such as
a legal claim) that is ‘sufficiently rooted in
the pre-bankruptcy past’ can also constitute
part of the debtor’s bankruptcy estate.”
(citing Segal, 382 U.S. at 375)); In re
Sommer, 2008 WL 704401, at *4 (“[T]he
accrual of an action is not the determining
factor for when the property interest arises
for the purposes of defining property of the
estate. Instead, bankruptcy courts look at
whether there is a strong nexus between the
action and prebankruptcy events.”); Mueller
v. Hall, 2007 WL 1376081, at *8 (B.A.P.
6th 2007) (“[T]he question in this case is not
whether the malpractice claim accrued,
based on the moment the last element of the
cause of action accrued, prior to [debtor]
filing bankruptcy, but whether the
malpractice claim is sufficiently rooted in
[debtor]’s prebankruptcy past to constitute
property of the estate.”). 6
bankruptcy past did not create an interest
that manifested itself in the settlement
agreement. Instead, it was the combination
of an event that occurred in her prebankruptcy past (the implantation of the
medical device) and certain post-bankruptcy
events (the FDA issued an advisory opinion
regarding possible defects with the medical
device; appellee became aware of the
possible defects) that created the interest that
resulted in the settlement proceeds. Without
the post-bankruptcy events, the prebankruptcy event would be rendered
meaningless insofar as plaintiff’s ability to
obtain settlement proceeds is concerned.
Thus, under the particular facts of this case,
it simply cannot be said that her interest was
“sufficiently rooted in the prebankruptcy
past” to render the settlement proceeds
property of the bankruptcy estate.
Although courts have not reached a
uniform result in cases raising similar issues,
a number of courts have reached results
consistent with the one reached by this
Court. 8 For example, in In re Harber, the
Bankruptcy Court for the Western District of
Pennsylvania applied the Segal-derived
framework to proceeds a debtor might
receive in a lawsuit related to a hip
However, this Court has conducted this
additional analysis and determines that the
result reached by the Bankruptcy Court
should be upheld because the interest at
stake in the settlement agreement was not
sufficiently rooted in appellee’s prebankruptcy past. 7 Here, appellee’s pre-
8
The Fifth Circuit reached a similar result in In re
Burgess, 438 F.3d 493 (5th Cir. 2006), where the
court determined that a legislatively enacted,
retroactive relief payment for a pre-petition crop
disaster was not property of a bankruptcy estate
because “it [was] the combination of [debtor’s] crop
loss and the enactment of the [legislation] that gave
him [a legal interest in the disaster-relief payment.”
438 F. 3d at 497. Thus, the debtor “did not have a
prepetition claim to, or interest in, the disaster-relief
payment because the legislation authorizing the
payment had not yet been enacted.” Id. at 499.
However, in so holding, the court rejected the vitality
of Segal, which is clearly at odds with recent and
controlling Second Circuit precedent. Thus, while
the Court agrees with the Fifth Circuit’s result, it
would have conducted the analysis using the Segal
approach.
6
Some have gone so far as to eliminate the accrual
inquiry from the § 541 analysis altogether. See, e.g.,
In re Richards, 249 B.R. at 861 (“[I]n determining
whether a claim is property of the bankruptcy estate,
the test is not the date the claim accrues . . . . [T]he
appropriate inquiry is whether the claim is
‘sufficiently rooted in the prebankruptcy past.’”). In
the absence of an indication from the Second Circuit
that such a departure from existing case law is
warranted, this Court declines to limit its inquiry in
this way.
7
Courts reviewing appeals of orders may affirm on
other grounds. See, e.g., Davis v. New York, 106 Fed.
App’x 82, 83 (2d Cir. 2004); Zarcone v. Perry, 581
F.2d 1039, 1040 (2d Cir. 1978).
7
rooted” in her pre-bankruptcy past for
purposes of § 541.
replacement that was filed pre-petition,
dismissed without prejudice post-petition,
and subsequently revived when she
experienced an injury arising from the hip
replacement. Id. The court there conducted
an extensive analysis of § 541, Segal, and its
progeny, and concluded that “[t]hrough
Segal, the bankruptcy estate can retain value
from claims that were predominantly rooted
in the debtor’s prepetition history but, as a
matter of happenstance, did not fully accrue
until after the petition date.” Id. at 532. It
determined that, “[u]ndoubtedly, [debtor’s]
Claim ha[d] ‘roots’ in [her] prepetition
past,” including that the hip replacement
device was implanted seven years prepetition, and that she had received “notice
informing her of the possibility that the
device could fail.” Id. at 533. The court
held, however, that “it is not enough that a
claim be ‘rooted’ in the pre-bankruptcy past.
It must be ‘sufficiently rooted.’” Id. It then
engaged in a fact-intensive analysis “to
assess whether a substantial portion of the
claim elements existed prepetition so that it
would be inequitable to deprive the
bankruptcy estate of this asset.” Id. The
court concluded that “the most critical
elements of [debtor’s] Claim had not taken
root as of the time her bankruptcy was
filed,” including that she had not sustained
an injury, had not incurred any damages, did
not exhibit any symptoms pre-petition, and
did not purposely delay any medical
evaluation.
Id.
As such, the court
determined that her claim was not property
of the bankruptcy estate.
An examination of Chartschlaa, where,
as noted, the Second Circuit determined
property acquired post-petition was property
of the bankruptcy estate, is instructive. The
facts cited by the Second Circuit do not
apply here, including the crucial point that
the contract at issue there was “merely a
continuation of [a] longstanding business
relationship,” rendering it “property that
merely change[d] form,” rather than
“property that [wa]s acquired after the case
[] commenced.” 538 F.3d at 123. Here, on
the other hand, appellee’s interest in the
settlement agreement to which she agreed
cannot be said to have existed in any real
sense pre-petition, let alone to have “merely
change[d] form.” As a result, the settlement
proceeds in this case were plainly “acquired
after the [bankruptcy proceeding was]
commenced.” Id.
IV. CONCLUSION
For the foregoing reasons, the Court
affirms the April 14, 2016 Order of the
Bankruptcy Court, and denies the appeal.
SO ORDERED.
______________________
JOSEPH F. BIANCO
United States District Judge
Dated:
May 9, 2017
Central Islip, New York
***
This Court concludes that the same
conclusion applies here.
Although
appellee’s interest in the settlement
undoubtedly stems from pre-petition events,
“the most critical element[]” that created her
interest—the discovery that there was a
defect with the medical device—did not
occur until well after the petition date.
Thus, her interest was not “substantially
Appellant is represented by Holly R.
Holecek and Salvatore LaMonica of
LaMonica Herbst & Maniscalco, LLP, 3305
Jerusalem Avenue, Suite 201, Wantagh, NY
11793. Appellee is represented by Michael
G. McAuliffe, 68 South Service Road, Suite
100, Melville, NY 11747.
8
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