Filing 9

DECISON AND ORDER denying 8 Motion for Reconsideration. This action is dismissed. Signed by Hon. Charles J. Siragusa on 10/16/09. (KAP)

United States District Court W e s t e r n District of New York _ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ A p p e ll a n t L a w re n c e Frumusa v. A p p e ll e e L e e E. W o o d a r d T r u s te e K a t h l e e n Schmitt _ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ IN T R O D U C T IO N N o w before the Court is Appellant's Motion for Reconsideration (Docket No. [#8]) o f the Court's Decision and Order [#3] denying his motion for a stay. For the reasons th a t follow, the application is denied and this appeal is dismissed. BACKGROUND T h e facts of this case were set forth in the Court's Decision and Order issued on S e p t e m b e r 22, 2009 (Docket No. [#3]), and need not be repeated here. It is sufficient to n o te that on June 5, 2009, Lawrence Frumusa ("Appellant") filed the underlying b a n k ru p tc y case, Case No. 09-21527, as a Chapter 11.1 On July 15, 2009, Monroe C a p ita l, Inc., one of Appellant's creditors, filed a Motion to Convert Case from Chapter 1 1 to Chapter 7. (Bankruptcy Docket No. [#72]). The United States Bankruptcy Trustee a n d creditor Marianela Hernandez joined in the application. Bankruptcy Court scheduled a hearing on the application for August 5, 2009 at 9:30 a.m. Appellant's attorneys, who h a d moved to withdraw after Appellant terminated their employment, requested an

D O C K E T NO. 09-CV-6436 B K 09-21527-JCN D E C IS IO N AND ORDER

Appellant had previously filed a Chapter 11 petition, which was dismissed on June 5, 2009, as a re s u lt of Appellant's failure to complete mandatory credit counseling. (Motion Requesting Stay of Appeal, B a n k r u p t c y Docket No. [#174], at ¶ 4).

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a d jo u rn m e n t to allow Appellant to proceed pro se or to retain new counsel, but did not f ile any substantive opposition to the motion. O n August 5 2, 2009, Bankruptcy Court heard oral argument on the application. A p p e lla n t did not appear personally at that time, because he was incarcerated based u p o n a Contempt Order issued in connection with a case pending in New York State S u p re m e Court.3 Appellant's attorneys appeared by telephone, however, stating that th e y were appearing in connection with a motion to withdraw as counsel, and further in d ic a tin g that Appellant had discharged them as his attorneys on July 29, 2009. Judge N in f o stated that he was aware of these circumstances, but nevertheless found that A p p e lla n t had not opposed the motion. In that regard, Judge Ninfo observed that, a lth o u g h Appellant, acting pro se, had filed various documents with the court in c o n n e c t io n with his case, he did not file anything which addressed the motion to convert th e case to a Chapter 7.4 A f te r hearing argument, Judge Ninfo stated as follows: A t this point, I'm going to grant the motion to convert Mr. Frumusa's case. I think there clearly are grounds under 11.12B4 for cause, including those th a t have been separately articulated by the US trustee and by Mr. Dove. [A t to rn e y for Monroe Capital, Inc.] And [the] stated causes, those are not a ll inclusive, in the kinds of actions that we have seen, including diversions a f te r filing the petition, failure to file the necessary schedules and reports, n o t get insurance on assets which weren't even initially disclosed.

The transcript of this appearance indicates that the date was August 6, 2009, however, from the d o c k e t sheet, that date appears to be a typographical error. A p p a re n tly, Appellant was taken into custody on August 4 t h and released on August 5 t h , some time a f t e r the appearance in Bankruptcy Court. Transcript of August 5, 2009 appearance, at 20: THE COURT: "[H]e seems to be able to file all k in d of papers and pleadings on his own behalf, and he filed nothing in connection with this motion to c o n v e rt his Chapter 11 case . . . I can't tell you how many pleadings I've been told he's filed . . . . W h a t do yo u think he needs more time for? He hasn't filed anything with respect to this."
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*** I don't see how he can put together a plan. Mismanagement of [F ru m u s a 's ] companies ­ the mismanagement of everything that has been s h o w n to the Court, including these whole misdirected, [procedurally in c o r re c t ] motions and pleadings that keep getting filed with the Court, m a k e s pretty clear to the Court that really, Mr. Frumusa cannot be left in c h a r g e of any of the business or other assets that he may own or have in te re s t in, for the sake of the creditors, and that there is plenty of reason o r cause to convert this, as we heard today. T h e fact that Mr. Frumusa may be incarcerated at this point, although a f a c t, doesn't change the fact that he never, before his incarceration, which I believe took place yesterday, filed opposition to the pending motion as re q u ire d by the motion papers. And I can only conclude from that that he is not, in fact, opposed to the conversion. . . . I think there is cause. I think w e have to put an end to this.

(T r a n s c rip t of August 5, 2009 appearance at 32-33). On August 7, 2009, Bankruptcy C o u rt issued the Order (Bankruptcy Docket No. [#134]) converting Appellant's case to a C h a p te r 7. O n August 11, 2009, Appellant, proceeding pro se, filed a Notice of Appeal to D is t ric t Court (Bankruptcy Docket No. [#150]), and a Motion to Stay Pending Appeal with th e Bankruptcy Court. (Bankruptcy Docket No. [#148]). The Notice of Appeal did not in d ic a te the grounds for the appeal. However, the Civil Cover sheet contains the n o ta tio n , "As a result of others Plaintive [sic] was not present at Hearing and had e f f e c tiv e ly no representation." In connection with the request for a stay pending appeal, A p p e lla n t stated, in relevant part: "Conversion of Debtor's case will have irreparable d a m a g e s on Debtor's assets." (Motion Requesting Stay Pending Appeal, ¶ 16). By D e c is io n and Order (Bankruptcy Docket No. [#174]) filed on August 12, 2009, Judge N in f o denied the application for a stay. In that regard, Judge Ninfo noted: "Frumusa a s s e rt s that, `[c]onversion of Debtor's case will have irreparable damages on Debtor's

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a s s e ts ,' but he fails to in any way articulate what irreparable damages he believes may r e s u lt ." Id. at 4 (emphasis in original). Judge Ninfo further stated: "[T]he [U.S. Trustee] a n d other interested parties placed on the record numerous facts and circumstances e s ta b lis h in g good cause for conversion, including [the Trustee's] concern that it was im p o s s ib le to `follow the money' in this case and in the Affiliated Cases in which F r u m u s a was in control of the debtors, so that any stay pending appeal that would leave F ru m u s a in control of his assets could result in substantial and irreparable harm to his c r e d it o r s . " Id. at 5 (emphasis in original). O n August 26, 2009, Appellant commenced the instant action to appeal Judge N in f o 's Order converting Appellant's Chapter 11 case to Chapter 7. (Bankruptcy Case N o . 09-21527, Bankruptcy Docket No. [#134]). Appellant did not comply with Bankruptcy R u le 8006, by filing and serving a Designation of Record and Statement of Issues, even th o u g h Bankruptcy Court had notified him of the necessity of doing so, by Notice issued o n August 12, 2009.5 O n September 9, 2009, Appellant filed an "Emergency Motion for Relief Being S t a y of Order Filed August 7, 2009, Converting Case to Chapter 7 Pending Appeal." (D o c k e t No. [#2]). As part of the application, Appellant stated that Judge Ninfo unfairly d e c id e d the motion to convert in his absence, and that a stay of the order converting the
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On August 12, 2009, Bankruptcy Court issued a Notice to Appellant of Deadlines & R e s p o n s ib ilitie s (Notice Regarding Perfecting the Record on Appeal [Bankruptcy Rule 8006]), which, in re le v a n t part, advised Appellant that he was required to file with Bankruptcy Court, and serve on the a p p e lle e , within ten days, a "Designation of Record on Appeal and Statement of Issues," together with p r o o f of service, and that if he failed to do so, Bankruptcy Court would transmit the "incomplete record" to th e District Court. The notice concluded: "Appellant is advised that the appeal may be subject to dismissal b y District Court, in the event of Appellant's failure to serve and file the Designation within the time required b y Bankruptcy Rule 8006, upon a motion by the Appellee or on the Court's own motion." (Bankruptcy D o c k e t No. [#168]). On August 26, 2009, Bankruptcy Court transmitted the record on appeal to District C o u rt (Bankruptcy Docket No. [#203]), indicating that the record was incomplete because Appellant had n o t filed the Statement of Issues. (Bankruptcy Docket No. [#168]).

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a c tio n to Chapter 7 was necessary to avoid irreparable harm to his assets. In that re g a rd , Appellant stated that he was solvent, and that liquidating his assets would "only d e s t ro y other performing businesses Lawrence Frumusa is involved with." Id. at ¶ 18. Appellant's mention of "other businesses" referred to three corporations which he o w n s that are also in bankruptcy proceedings. Appellant stated that a Chapter 7 liq u id a tio n in his personal case would negatively affect the Chapter 11 petitions of those c o rp o ra tio n s , since he personally guaranteed loans on construction equipment used by th e corporations: "This equipment and its low cost overhead is critical to implementing th e corporate Chapter 11 reorganization plan. However, current Chapter 7 actions will c a u s e equipment to be liquidated, sever[ely] impacting the reorganization plans."Id. at ¶ 19. Appellant's reference to existing Chapter 11 reorganization plans, though, was in c o r re c t , since the corporate debtors' cases were also converted from Chapter 11 to C h a p t e r 7 months earlier, upon motions of the corporate debtors. (See, Bankruptcy C a s e Nos. 09-21123, 09-21124, 09-21126; see also, Transcript of August 5, 2009 A p p e a ra n c e at pp. 5-9, denying motions to reconsider orders converting cases from C h a p t e r 11 to Chapter 7). By Decision and Order issued on September 22, 2009, this Court denied the a p p lic a tio n for a stay. In doing so, the Court stated: A p p e lla n t is requesting a stay of Judge Ninfo's Order, converting his case f ro m Chapter 11 to Chapter 7, pending the outcome of this appeal. It is w e ll settled that, [t]h e decision as to whether to issue a stay of an order p e n d in g appeal lies within the sound discretion of the district c o u rt. Four factors are considered in exercising that d is c re tio n : (1) whether the movant will suffer irreparable in ju ry absent a stay, (2) whether a party will suffer substantial

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in ju ry if a stay is issued, (3) whether the movant has d e m o n s tra te d a substantial possibility, although less than a lik e lih o o d , of success on appeal, and (4) the public interests th a t may be affected. In re Adelphia Communications Corp., 361 B.R. 337, 346 (S.D.N.Y. 2007) ( f o o t n o t e s , citations, and internal quotation marks omitted); see also, Id. (N o tin g that courts must balance these factors.) (Footnotes and citations o m it te d ) . Applying these factors, the Court finds that a stay is not warranted. In that re g a rd , the Court finds, first, that Appellant may well suffer irreparable h a rm if a stay is not granted, since this will result in the continued liq u id a tio n of the estate. However, as discussed above, Appellant's c o n te n tio n that such liquidation will negatively affect the Chapter 11 plans in his companies' bankruptcy proceedings has no merit, since the c o m p a n ie s are not in Chapter 11 at present. Second, Appellant's creditors m a y well suffer substantial injury if a stay is granted, given the allegations o f mismanagement and noncompliance by Appellant. Third, Appellant has n o t shown that his appeal is likely to succeed. The fact that Appellant was n o t present in Court on August 5 th probably had no effect on the outcome o f the motion, given the nature and number of allegations of m is m a n a g e m e n t and noncompliance that were presented. Additionally, th e explanations that Appellant proffered to the U.S. Trustee, consisting p r im a r ily of accusations of wrongdoing by others, are not persuasive. Moreover, Appellant filed no opposing papers, even after firing his a tt o rn e ys . Fourth, the Court finds that the public interest does not strongly f a v o r Appellant or Appellee. Considering all of these factors, a stay p e n d in g appeal is not warranted. (D e c is io n and Order [#3] at 6-7). Further, the Court discussed the fact that the appeal w a s not perfected, since Appellant had not complied with Bankruptcy Rule 8006. In that re g a rd , the Court stated: A d d itio n a lly, Appellant did not comply with Bankruptcy Rule 8006, since he f a ile d to file and serve a Designation of Record on Appeal and Statement o f Issues. Bankruptcy Court's notice in that regard was clear, and A p p e lla n t has provided no explanation for his failure to comply. Appellant is directed to file and serve, within five days of the date of this Decision a n d Order, the following: 1) the Record on Appeal and Statement of Is s u e s ; 2) proof of service; and 3) an explanation for his failure to comply w it h Rule 8006. Failure to comply with this directive may result in the d is m is s a l of this action. See, In re Harris, 464 F.3d 263 (2d Cir. 2006).

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( D e c is io n and Order [#3] at 7-8). O n September 24, 2009, in response to the Court's Decision and Order, Appellant f ile d a document [#4]6 in which he explained that he had inadvertently filed a "Statement o f Issues and Election to appeal" [sic] in another pending action, Case No. 09-CV-6438. However, Case No. 09-CV-6438 is a civil action captioned "Michael Siragusa v. Michael J . Astrue" that has no connection to the instant case. The Court assumes that A p p e lla n t was intending to refer to Case No. 09-CV-6448, which is an appeal from b a n k r u p t c y court by one of his corporations, Lawrence Frumusa Land Development LLC. In that case, Appellant did in fact file documents entitled "Appellant's Designation of Ite m s in Record on Appeal" and "Appellant's Statement of Issues." However, those d o c u m e n ts refer to the docket in bankruptcy case number 09-21126-JCN, while the in s t a n t action involves bankruptcy case number 09-21527-JCN. In any event, in response to this Court's prior Decision and Order in this case, A p p e lla n t stated that by the following day, he would file a "Statement of Issues and E le c tio n to appeal" and "Supplement Record of Appeal." Despite this representation, A p p e lla n t, to date, has not filed either, nor has he filed a proof of service. In s te a d , on October 2, 2009, Appellant filed the subject Motion for R e c o n s id e ra tio n [#8]. In his application, Appellant states that the August 5, 2009, h e a rin g in Bankruptcy Court was unfair, and that certain participants at the hearing made

Appellant also filed the following documents: 1) an affidavit [#5] from Devin Hollands ("Hollands"), w h o identifies himself as a "Certified Turnaround Professional," and who opines, in conclusory fashion, that "L a w re n c e Frumusa Land Development LLC," which is a separate entity from Appellant, "could successfully re o rg a n iz e itself under Chapter 11 with proper oversight"; 2) an affidavit [#7] by Gary Bunce ("Bunce"), who id e n t if i e s himself as the CEO of one of the unsecured creditors of Lawrence Frumusa Land Development, L L C , which, again, is not the Appellant, and who states, inter alia, that he thought the August 5, 2009 h e a rin g in Bankruptcy Court was unfair to Appellant and to unsecured creditors; and 3) a "supplemental m o tio n " [#6] asking the Court to consider the affidavits by Hollands and Bunce.

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f a ls e statements. For example, Appellant states that some of the individuals at the h e a r in g who spoke against him, whom the Bankruptcy Court identified as creditors, are n o t actually creditors. Additionally, Appellant contends that "the US Trustee joined with in v a lid creditors [in the motion to convert], and [did not inform] real creditors of their rig h ts ." Appellant also alleges that Judge Ninfo intentionally arranged to have him in c a rc e ra te d for contempt by New York State Supreme Court, so that he could not a t te n d the hearing.7 Appellant further maintains that the conversion of his case to C h a p te r 7 is partly due to a personal vendetta against him by the U.S. Trustee, and p a r tly due to a minority partner's attempt to cheat him out of millions of dollars. In s u p p o rt of the application, Appellant relies on the documents mentioned in footnote 6 a b o v e , as well as upon portions of the transcript of a "341 Meeting" held on July 7, 2009. Strangely, Appellant further states, "Please also see that now the proper d o c u m e n ts are filed correctly in compliance of 8006, and since the clerk transmitted the f u ll record to the district court. It is the understanding that the designation of the record is not required." [sic] (Motion for Reconsideration [#8] ¶ 31(d)). The Court reiterates that to date, Appellant has not filed a statement of issues or a designation of record on a p p e a l in this case. DISCUSSION A t the outset, the motion for reconsideration is denied. The Court construes the a p p lic a t io n as being made pursuant to Federal Rule of Civil Procedure ("FRCP") 60(b),

Appellant further asks the Court to schedule a hearing concerning another case that he has filed in this Court, Case No. 09-CV-6448: "Given the vast disparity between the allegations raised and the f a c tu a l truth, I would request your Honor schedule a hearing at the earliest possible time so the Appellant m a y properly present this Motion for stay the Emergency Motion for stay in the Corporate case (09-cv0 6 4 4 8 ) . Allowing your Honor the benefit of an informed decision." [sic]

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w h ic h provides that: On motion and just terms, the court may relieve a party or its legal re p re s e n ta tiv e from a final judgment, order, or proceeding for the following re a s o n s : (1) mistake, inadvertence, surprise, or excusable neglect; (2) n e w ly discovered evidence that, with reasonable diligence, could not have b e e n discovered in time to move for a new trial under Rule 59(b); (3) fraud (w h e th e r previously called intrinsic or extrinsic), misrepresentation, or m is c o n d u c t by an opposing party; (4) the judgment is void; (5) the ju d g m e n t has been satisfied, released or discharged; it is based on an e a rlie r judgment that has been reversed or vacated; or applying it p ro s p e c tiv e ly is no longer equitable; or (6) any other reason that justifies r e lie f .

F R C P 60(b). Applying this rule, the Court finds that Appellant has not shown any basis f o r reconsideration of the Court's prior order. The information upon which Appellant re lie s , namely, the affidavits and transcript of the 341 Meeting, are not newly-discovered e v id e n c e . Moreover, none of the information in these documents would cause the Court to reach a different outcome than it did in its prior Decision and Order. In that regard, th e affidavits are essentially conclusory statements of opinion, and the portions of the 3 4 1 Meeting transcript that Appellant provided do not refute the allegations of m is m a n a g e m e n t that were leveled against him in the moving papers and at the August 5 th hearing. T h e Court will now consider Appellant's failure to comply with that portion of the C o u r t's prior Decision and Order which stated: Appellant is directed to file and serve, within five days of the date of this D e c is io n and Order, the following: 1) the Record on Appeal and Statement o f Issues; 2) proof of service; and 3) an explanation for his failure to c o m p ly with Rule 8006. Failure to comply with this directive may result in the dismissal of this action. See, In re Harris, 464 F.3d 263 (2d Cir. 2 0 0 6 ).

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C le a rly, Appellant has not complied with this Order. As mentioned above, to date no R e c o r d on Appeal or Statement of Issues has been filed in this action. Moreover, A p p e lla n t's explanation for his failure to file those documents makes no sense. R u le 8001(a) of the Federal Rules of Bankruptcy states, in relevant part, that "[a]n a p p e lla n t's failure to take any step other than timely filing a notice of appeal does not a f f e c t the validity of the appeal, but is ground only for such action as the district court or b a n k ru p tc y appellate panel deems appropriate, which may include dismissal of the a p p e a l." In In re Harris, 464 F.3d at 269-272, the Second Circuit discussed the factors t h a t a district court should consider, pursuant to Bankruptcy Rule 8001, when faced with a n Appellant's failure to comply with the Bankruptcy Rules. The Court has considered th o s e factors. Additionally, the Court gave Appellant additional time to file his d e s ig n a t io n of record on appeal and statement of issues, and advised him that his failure to do so could result in the dismissal of this action. However, although Appellant re s p o n d e d that he would file those items, he did not do so. The Court has also c o n s id e re d whether a lesser sanction would be appropriate, but concludes that dismissal is appropriate here, since Appellant seems unwilling to comply with the Court's d ire c tio n s . Consequently, the appeal is dismissed. I n the event that a reviewing court should disagree with this Court's decision to d is m is s the appeal, the Court further notes that it would affirm Judge Ninfo's decision on th e merits. Pursuant to 28 U.S.C. §158, "the district courts of the United States . . . have ju ris d ic tio n to hear appeals" "from final judgments, orders, and decrees" of a bankruptcy ju d g e . 28 U.S.C. §158(a)(1). Additionally, as outlined under Rule 8013 of the Federal R u le s of Bankruptcy Procedure, "[o]n an appeal the district court may affirm, modify, or

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re v e rs e a bankruptcy judge's judgment, order, or decree or remand with instructions for f u rt h e r proceedings," and findings of fact "shall not be set aside unless clearly e r ro n e o u s . " Fed.R.Bankr.P.8013. Moreover, [u]nder this standard, the district court is not authorized to engage in in d e p e n d e n t fact finding and reviews the bankruptcy court's findings only f o r clear error. The findings of fact can only be set aside by the district c o u rt when, after reviewing the evidence, the court is left with the firm and d e f in ite conviction that a mistake has been committed. Bagel Bros. Maple, Inc. v. Ohio Farmers, Inc., 279 B.R. 55, 61 (Bankr. W .D . N . Y . 2002) (c ita tio n s and internal quotation marks omitted). However, when a district court is re v ie w in g conclusions of law, a de novo standard is applied. Id.; See also, In re Enron N o rth America Corp., 312 B.R. 27, 28 (Bankr. S.D.N.Y. 2004). Here, the Court has reviewed the applicable motions to convert the action to C h a p te r 7, that were filed by Monroe Capital, Inc., the U.S. Trustee, and Marianela H e rn a n d e z . (Bankruptcy Docket Nos. [## 72, 100, 115, 116]). These applications allege a pattern of serious wrongdoing by Appellant. As just one example, the motion by M o n ro e Capital describes what it calls "gross mismanagement of the estate, if not o u t rig h t fraud," including the fact that Appellant diverted $250,000.00 from Hospitality D e v e lo p m e n t, LLC, a company that he controlled, after he had been ordered by New Y o rk State Supreme Court, Monroe County, to turn over all of Hospitality Development's a s s e ts to a receiver. Appellant filed no opposition to the motions. At most, Appellant's a tto rn e ys , who had moved to withdraw from representing him, filed a request for an e x te n s io n of time to allow him to either proceed pro se or retain new counsel.8 After

In various documents filed with this Court, Appellant indicates that he is proceeding pro se b e c a u s e he is unable to retain new counsel.

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f irin g his attorneys on July 29, 2009, Appellant filed nothing on his own behalf in o p p o s it io n to the motions to convert. In support of this appeal, Appellant alleges only that he "was not present at H e a rin g and had effectively no Legal Representation." (Civil Cover Sheet, Docket No. [# 1 ]). However, it was Appellant's own fault that he was not at the hearing. That is, A p p e lla n t was in custody because he violated a court order. Moreover, contrary to A p p e lla n t's earlier contention that he "effectively had no legal representation" at the h e a rin g on August 5 th, he now maintains that his "personal attorneys were present A u g u s t 5, 2009." (Docket No. [#8], ¶ 15). More importantly, Appellant failed to oppose th e motions to convert, as Judge Ninfo correctly found. For all of the foregoing reasons, t h e Court would affirm Judge Ninfo's decision converting Appellant's case to Chapter 7.

CONCLUSION A p p e lla n t's motion for reconsideration [#8] is denied and this action is dismissed. S O ORDERED. D A T E D : Rochester, New York October 16, 2009 /s / Charles J. Siragusa CHARLES J. SIRAGUSA U n ite d States District Judge

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