In Re: Steven J. Ancona
Filing
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OPINION & ORDER re: 7 MOTION to Stay [Proposed] Order to Show Cause for Stay Pending Appeal and for a Temporary Restraining Order filed by Steven J. Ancona, 9 MOTION to Stay [Proposed] Order to Show Cause for Stay Pen ding Appeal and for a Temporary Restraining Order filed by Steven J. Ancona. For the reasons set forth above, appellant's motion for a TRO and a stay pending appeal is DENIED. As stated in the Court's November 15, 2016 Order (ECF No. 5), the parties are directed to file promptly on ECF all papers in support of an in opposition to the motion. The parties shall also submit a proposed briefing schedule with respect to the underlying appeal not later than Wednesday, November 30, 2016. The Clerk of Court is directed to terminate the motions at ECF Nos. 7 and 9. (As further set forth in this Opinion & Order.) (Signed by Judge Katherine B. Forrest on 11/17/2016) (mro)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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In re: STEVEN J. ANCONA,
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Debtor.
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STEVEN J. ANCONA,
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Appellant,
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-v:
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3 WEST 16TH STREET, LLC,
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Appellee.
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USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: November 17, 2016
16-cv-8804 (KBF)
OPINION & ORDER
KATHERINE B. FORREST, District Judge:
This is an appeal by debtor-appellant Steven J. Ancona from a November 3,
2016 order of the United States Bankruptcy Court for the Southern District of New
York (Vyskocil, J.) (the “Bankruptcy Court”) appointing a Chapter 11 trustee. (ECF
No. 1.) Before the Court is debtor-appellant’s motion for a temporary restraining
order (“TRO”) and stay pending appeal to prevent the Chapter 11 trustee from
taking any actions vis-à-vis his estate until this appeal is resolved. (ECF Nos. 7,
9.)1
For the reasons set forth below, the Court finds that debtor-appellant has
failed to make a sufficient showing of irreparable harm to merit the relief
requested. Given that failure, the Court declines to reach the additional elements
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The same motion appears to have been filed on ECF twice.
of likelihood of success on the merits or balance of the hardships. In addition, the
Court has not identified any facts supportive of the issuance of a stay pending
appeal.
Appellant’s motion is therefore DENIED.
I.
BACKGROUND2
Debtor-appellant Ancona (hereafter, “appellant”) is, inter alia, an owner and
investor in a number of companies that own and manage real properties. He owns
95% of Flat Iron Real Estate Advisors, LLC (“Flat Iron”); the other 5% are owned in
equal shares by his parents. Flat Iron, in turn, has interests in a number of other
LLCs which own and manage various real properties. The LLCs are managed
through operating agreements; Ancona is designated as the managing member in
certain of those agreements.
On March 5, 2014, appellant filed a voluntary petition for relief under
Chapter 11 in the Bankruptcy Court. Bankr. Case No. 14-10532. One of the
creditors of his estate is 3 West 16th Street, LLC (“3 West 16th Street”)—the
appellee herein. Appellant and appellee have been litigating an adversary
proceeding relating to claims appellee asserts are valued at $20 million or more.
Apparently, though this Court knows very little about that litigation, the claims
arise from a personal guarantee Ancona is alleged to have made. The parties
dispute whether that proceeding and the various issues involved in the bankruptcy
proceeding have been dealt with expeditiously and, to some extent, properly;
These facts derive from the filings in support of and in opposition to the motion, as well as
statements made during a hearing the Court held on November 15, 2016.
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Appellant argues that the damage claim is “made up” and has been inexplicably
growing exponentially over the past few years.
On August 26, 2016, appellee 3 West 16th Street filed a motion to convert
appellant’s Chapter 11 case to one under Chapter 7 or, in the alternative, to appoint
a Chapter 11 trustee. At a contested hearing on November 3, 2016, the Bankruptcy
Court found that the interests of the creditors of the estate as well as the estate
itself would be served by the appointment of a Chapter 11 trustee. Specifically, the
Bankruptcy Court stated:
The totality of the circumstances in the Court’s view, support the conclusion
that the best [interests] of all of the creditors and of the estate would be
served by the appointment of a trustee. I do find that there has been a lack
of meaningful progress in the Chapter 11 case since it was filed two and a
half years ago. I’m troubled by apparent conflicts of interest that are present
in the circumstances of this particular case. I’m troubled by the failure to
investigate potential fraudulent transfers by the interrelatedness of the
various companies in which Ancona has holdings and who has been involved
in some prior proceedings before this Court. I do find that there has been a
lack of transparency in this bankruptcy proceeding. And all of that supports
my conclusion that the best interests of all of the creditors and of the estate
would be served by the appointment of a Chapter 11 trustee.
(Declaration of Douglas J. Pick dated November 14, 2016 (ECF No. 10), Ex. E, ECF
No. 10-8 at 69:8-22.) Thereafter, on November 3, 2016, the Bankruptcy Court
entered an order formally granting the motion and directing the appointment of a
Chapter 11 trustee (the “Trustee Order”). On November 4, 2016, Ancona filed a
notice of appeal of that order. (ECF No. 1.) On November 7, 2016, the United
States Trustee appointed Marianne T. O’Toole as the Chapter 11 trustee (the
“Trustee”).
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On November 15, 2016, appellant moved in this Court for a TRO and stay
pending appeal. (ECF Nos. 7, 9.) That same day, this Court held a hearing that
lasted several hours. In light of the issues raised, the Court determined that it
would proceed as follows: (1) it would determine whether the Trustee Order was
immediately appealable, (2) if so, it would address the question of whether
appellant had made a sufficient showing of irreparable harm to support either a
TRO or a stay pending appeal, and (3) if that showing was made, the parties would
be directed to file any additional materials necessary to an assessment of a
likelihood of success on the merits.3
On November 15, 2016 this Court issued an order indicating that the Trustee
Order was immediately appealable. (ECF No. 5.)4 This Opinion & Order addresses
the question of irreparable harm.
II.
RELEVANT LEGAL PRINCIPLES
A. Standards Governing the Issuance of Temporary Restraining Orders
A temporary restraining order “is an extraordinary and drastic remedy, one
that should not be granted unless the movant, by a clear showing, carries the
Appellee and the Trustee indicated that they had not had sufficient time to prepare a submission
containing the factual materials supporting the Bankruptcy Court’s determination that the Trustee’s
appointment was appropriate. It appears that such materials would include information relating to
each of the factual issues recited in the Bankruptcy Court’s oral decision and could be voluminous.
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Appellee has also argued that this motion is premature insofar as the Bankruptcy Court has
indicated that a fuller written decision on the appointment of the trustee is forthcoming. This Court
appreciates that position. However, in light of the fact that the order directing the appointment of a
Chapter 11 trustee was signed by the Bankruptcy Court on November 3, 2016 and that appointment
has occurred, there has been a change in the status quo. If there was irreparable harm (which, as
discussed below, there is not), it would be important to ensure that such an order could be appealed
promptly. In a situation in which an order is immediately appealable as of right, the Bankruptcy
Court might want to consider holding issuance of the order directing appointment until the fuller
decision has been issued.
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burden of persuasion.” Grand River Enter. Six Nations, Ltd. v. Pryor, 481 F.3d 60,
66 (2d Cir. 2007). The function of a temporary restraining order is to maintain the
status quo for a short period of time, usually only until a hearing can be held. See
Granny Goose Foods, Inc. v. Bhd. of Teamsters & Auto Truck Drivers Local No. 70
of Alameda Cnty., 415 U.S. 423, 439 (1974). To obtain a temporary restraining
order, the movant must demonstrate “(1) irreparable harm in the absence of the
injunction and (2) either (a) a likelihood of success on the merits or (b) sufficiently
serious questions going to the merits to make them a fair grounds for litigation and
a balance of hardships tipping decidedly in the movant's favor.” MyWebGrocer,
L.L.C. v. Hometown Info., Inc., 375 F.3d 190, 192 (2d Cir. 2004).
The first and most important element this Court must examine is whether in
the absence of issuing a temporary restraining order, there will be irreparable
harm. See, e.g., Rodriguez ex rel. Rodriguez v. DeBuono, 175 F.3d 227, 234 (2d
Cir.1999); Emmet & Co. v. Catholic Health East, No. 11-cv-3272 (RMB), 2011 WL
2015533, at *3 (S.D.N.Y. May 18, 2011). To establish irreparable harm, “[t]he
movant must demonstrate an injury that is neither remote nor speculative, but
actual and imminent and that cannot be remedied by an award of monetary
damages.” Rodriguez ex rel. Rodriguez v. DeBuono, 175 F.3d 328, 332 (2d Cir.1995)
(internal quotation marks and citations omitted).
B. Stay Pending Appeal
In determining whether to grant a motion for a stay pending appeal, this
Court analyzes the following factors: “(1) whether the stay applicant has made a
strong showing that [it] is likely to succeed on the merits; (2) whether the applicant
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will be irreparably injured absent a stay; (3) whether issuance of the stay will
substantially injure the other parties interested in the proceeding; and (4) where
the public interest lies.” Nken v. Holder, 556 U.S. 418, 434 (2009). “The burden is
on the moving party to establish these elements.” In re New York Skyline, Inc., 520
B.R. 1, 5 (Bankr. S.D.N.Y. 2014). “A stay of a judgment pending an appeal is an
exercise of judicial discretion and is not a matter of right, even if irreparable injury
might otherwise result.” Id.
III.
DISCUSSION
As described above, the focus of this decision is whether appellant has made a
sufficient showing that he will be irreparably harmed by the appointment of the
Trustee and actions taken by the Trustee in connection with the bankruptcy estate.
The law is clear that irreparable harm is “an injury that is neither remote nor
speculative, but actual and imminent and that cannot be remedied by an award of
monetary damages.” Rodriguez, 175 F.3d at 332. Typically, movants seeking
injunctive relief address this element by proffering significant facts suggestive of
such harm. Appellant has not done so. Indeed, all that he has done by way of a
showing is proffer argument. That is insufficient.
Appellant has made three arguments in support of his position that he will be
irreparably harmed if the Trustee fulfills the very duties she has been appointed to
fulfill. First, he argues that the Trustee will become “so ensconced” that a reversal
of the order appointing her would be “moot”. (ECF No. 8 at 19.) This makes little
sense and certainly does not support a finding of irreparable harm. The Trustee is
appointed to do that which the Ancona himself is supposed to be doing—
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administering the estate and dealing with issues in a manner that progresses the
bankruptcy proceeding. If it turns out she has been appointed improvidently, she
will cease to fulfill those functions. That is all. There are no facts suggesting that
the Trustee would be “ensconced” in some extraordinary way beyond that which
ordinarily occurs when trustees are appointed in bankruptcy proceedings.
Appellant’s second argument is that the Trustee’s appointment has
“essentially removed Ancona from control of all his financial affairs”. (Id.) This
argument is simply a restatement of what trustees are appointed to do: manage the
financial affairs of debtors. Once a bankruptcy judge has made a determination
that appointment of a trustee is appropriate, loss of control by the debtor follows.
That Ancona would prefer it otherwise—and indeed may find it offensive that he
has lost control—does not support a finding of irreparable harm. No facts have
been proffered that suggest that he is somehow in a worse position by the
appointment of a trustee than any other debtor would be.
Appellant’s third and final argument is that the Trustee’s appointment will
“seriously compromise[] Ancona’s prosecution of his highly complex objection to the
approximate $20.6 million dollar claim asserted against him by the Appellee.” (Id.)
This assertion appears to be based on the fact that Ancona’s current bankruptcy
counsel, who has participated in the relevant adversary proceeding for two years, is
unlikely to be paid or retained by the Trustee. Thus, his knowledge will be lost to
Ancona. (The litigation counsel with the most experience on the matter withdrew
during the summer of 2016 and new counsel does not yet have significant
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experience in the matter.) This argument also fails to support a finding of
irreparable harm.
First, the Trustee will be in a position to retain necessary and adequate
counsel to assist with the litigation; that is one of the jobs of a trustee and they do it
all the time. There are also numerous cases every day that involve new counsel
coming into a complex matter and having to get up to speed quickly. That process is
not unusual and not in and of itself does not inflict harm.
Second, Ancona can of course always choose to retain his bankruptcy counsel
to advise him, thereby leveraging his experience in the adversary proceeding. The
question is only one of payment: will Ancona’s estate pay or will Ancona have to
find another source? The latter may be the case—but that fact does not constitute
irreparable harm. This Court has no facts before it suggesting that there is
something about a particular counsel’s experience that cannot be adequately
replaced.
A showing of irreparable harm is required for issuance of a stay pending
appeal as well as a TRO. See Nken, 556 U.S. at 434. As appellant has failed to
make such a showing, both applications must be denied.
IV.
CONCLUSION
For the reasons set forth above, appellant’s motion for a TRO and a stay
pending appeal is DENIED.
As stated in the Court’s November 15, 2016 Order (ECF No. 5), the parties
are directed to file promptly on ECF all papers in support of an in opposition to the
motion.
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The parties shall also submit a proposed briefing schedule with respect to the
underlying appeal not later than Wednesday, November 30, 2016.
The Clerk of Court is directed to terminate the motions at ECF Nos. 7 and 9.
SO ORDERED.
Dated:
New York, New York
November 17, 2016
KATHERINE B. FORREST
United States District Judge
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