Gordon v. Tese-Milner (In re Gordon)

577 B.R. 38
CourtDistrict Court, S.D. New York
DecidedAugust 17, 2017
Docket16 Civ. 5387 (ER), 16 Civ. 5398 (ER)
StatusPublished
Cited by29 cases

This text of 577 B.R. 38 (Gordon v. Tese-Milner (In re Gordon)) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Gordon v. Tese-Milner (In re Gordon), 577 B.R. 38 (S.D.N.Y. 2017).

Opinion

OPINION AND ORDER

Ramos, D.J.:

Daniel Gordon (“Gordon” or “Appellant”) appeals from an Order of the United States Bankruptcy Court for the Southern District of New York dated May 2, 2016 (the “May Order”). Angela Tese Milner, Trustee of the Estate of Daniel Gordon v. Daniel Gordon, Adv. Pro. No. 10-03767, Doc. 93. The May 2 Order awarded sanctions to Fox Rothschild, special litigation counsel to Angela Tese Milner, chapter 7 trustee of Gordon’s estate, pursuant to Sections 105(a) and 727(a)(2) and (4) of the Bankruptcy Code for Gordon’s improper conduct during the bankruptcy proceeding.

For the reasons set for below, the Appellant’s appeal is DENIED. The Judgment of the Bankruptcy Court is AFFIRMED.

I. Factual and Procedural Background

A. The Bankruptcy Court Proceedings & Appeal

On October 19, 2009, Gordon filed a voluntary petition for relief under Chapter 7 of Title 11 of the United States Code (the “Bankruptcy Code”). In re Daniel Gordon, No. 09-16230 (CGM) (“Discharge Proceeding”), Doc. 1. Angela G. Tese-Mil-ner is the trustee of Gordon’s estate (the “Trustee”). Id., Doc. 26.

Approximately one month later, on November 22, 2009, Gordon filed bankruptcy Schedules and a Statement of Financial Affairs in the Discharge Proceeding. Id., Docs. 22, 23. On February 1, 2010, he filed an Amended Statement of Financial Affairs. Id., Doc. 45. Gordon included the information in these filings under penalty of perjury. Id.

On February 17, 2010, the Court authorized the retention of Fox Rothschild LLP (“Fox”) as special litigation counsel for the Trustee. Id., Doc. 49. On September 28, 2010, the Trustee filed a complaint seeking a judgment denying Gordon’s discharge pursuant to Section 727(a) of the Bankruptcy Code claiming, among other things, that Gordon had failed to disclose assets totaling in excess of $8 million and made numerous false oaths in connection with his bankruptcy filings.1 Id., Doc. 77; [44]*44Angela Tese Milner, Trustee of the Estate of Daniel Gordon v. Daniel Gordon, Adv. Pro. No. 10-03767 (“Adversary Proceeding”), Doc. 1. Approximately two months later, on December 10, 2010, Gordon filed amended bankruptcy Schedules and a Second Amended Statement of Financial Affairs in the Discharge Proceeding. Discharge Proceeding, Docs. 89, 90. On December 16, he filed an answer in the Adversary Proceeding, generally denying the allegations in the complaint and reserving claims and causes of action against the Trustee. Adversary Proceeding, Doc. 12.

On February 8, 2012, the Trustee filed a motion to approve a settlement reached between, the Trustee, Gordon, and others, conditioned upon the discharge of all of Gordon’s filed claims. Id., Doc. 27. The settlement also provided that the Trustee would withdraw any complaints against Gordon. Id. However, on April 24, 2012 the Trustee informed the Court that she was withdrawing the settlement. Id., Doc. 31. Instead, on February 20, 2013, the Trustee filed an Amended Complaint, dismissing certain claims, but maintaining its allegations that Gordon had (1) failed to disclose assets with the intent to hinder, delay, or defraud creditors or a trustee under Section 727(a)(2) (“concealment claim”); (2) transferred property with the intent to hinder, delay, or defraud creditors or a trustee under Section 727(a)(2) (“transfer claim”); and (3) made materially false statements under oath under Section 727(a)(4). Id., Doc. 48. The Court held a bench trial on March 12 and 13, and the parties submitted final post-trial briefings on May 20, 2013. Id., Docs. 63, 64.

On January 13, 2015, Bankruptcy Court Judge Robert E. Gerber issued a decision denying Gordon’s discharge. Id., Doc. 67 (the “Jan. 13 Opinion”). First, Judge Gerber ruled in Gordon’s favor on the transfer claim. He noted that it was Gordon’s failure to disclose the transfers—not the transfer themselves—that warranted the denial of the discharge. Jan. 13 Opinion at 37. Second, Judge Gerber held that the Trustee had proven the concealment claim finding that Gordon had purposefully concealed the following property interests: a $2 million receivable relating to Alistar Capital Inc. (“AUStar”), assets resulting from $650,000 in transfers relating to Citadel Construction Corporation (“Citadel”), and assets resulting from a $500,000 transfer from the debtor to Wurk Times Square LLC (“Wurk TS”). Id. at 38. Lastly, Judge Gerber found that Gordon made material false oaths under section 727(a)(4) on his bankruptcy schedules and statements with respect to these same transactions, and also with respect to his 2009 income, investments in Cascar LP (“Cascar”) and Citadel, a $49,000 IRA contribution, and a $25,000 payment to Wachovia Bank (‘Wa-chovia”). Id.

Gordon appealed the Jan. 13 Opinion on February 22, 2015. Adversary Proceeding, Doc. 71. On August 3, 2015, the District Court affirmed the Bankruptcy Court’s decision denying Gordon’s discharge. Id., Doc. 79; In re Gordon, 535 B.R. 531 (S.D.N.Y. 2015).

B. The Sanctions Motion

On March 17, 2016, Fox filed a motion pursuant to 11 U.S.C. § 105(a) (“Section 105(a)”) and Rule 9011 of the Federal Rules of Bankruptcy Procedure (“Rule 9011”), seeking sanctions in the amount of $500,000 against Gordon for his conduct during the Discharge Proceeding. Adversary Proceeding, Doc. 80. Specifically, Fox [45]*45claimed that because Gordon knowingly acted in bad faith by withholding information and making “deceptive” bankruptcy filings, Fox had to embark on an unnecessary fishing expedition to reveal Gordon’s true assets, greatly increasing their legal fees. Id. Fox further claimed that Gordon is of substantial means and capable of paying its legal fees and costs. Id.

The Bankruptcy Court directed the parties to appear on April 7, 2016 for a hearing on the motion—a date previously scheduled to address other issues in the ease, including fee applications and a motion to abandon an adversary proceeding. On March 28, 2015, Gordon’s counsel, Donald David, filed a letter with the Bankruptcy Court requesting a 30-day adjournment of the hearing date. Id., Doc. 83. He stated that his co-counsel on another matter had been admitted to a hospital for surgery, and that as a result he would have to attend an arbitration hearing in Florida for approximately two weeks. Id. Mr. David further claimed that since he was counsel for the Adversary Proceeding, Gordon would be at a “tremendous disadvantage if someone else were to try to handle [the motion for Sanctions].” Id. Fox opposed counsel’s request for an adjournment, claiming that the conference was set to resolve additional matters—not just the sanctions motion—and that Gabriel Del-Virginia, who had been representing Gordon throughout the bankruptcy, was still available to appear. Id., Doc. 84. After considering the parties’ submissions, the Bankruptcy Court denied counsel’s request for an adjournment.

Gordon timely filed his opposition to the motion for sanctions on March 31. Id., Doc. 86.

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577 B.R. 38, Counsel Stack Legal Research, https://law.counselstack.com/opinion/gordon-v-tese-milner-in-re-gordon-nysd-2017.