24-1322-bk In re: 720 Livonia Developments LLC
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of The United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 4th day of March, two thousand twenty-five .
PRESENT: REENA RAGGI, GERARD E. LYNCH BETH ROBINSON, Circuit Judges. _________________________________________
IN RE: 720 LIVONIA DEVELOPMENTS LLC, Debtor. _________________________________________
CHAIM LANDAU,
Appellant,
MELUCHIM HOLDINGS LLC,
Petitioning Creditor-Appellant,
v. No. 24-1322
720 LIVONIA OPERATIONS LLC, Appellee. * _________________________________________
FOR APPELLANTS: KEVIN J. NASH (Joseph T. Donovan, on the brief), Goldberg Weprin Finkel Goldstein LLP, New York, NY.
FOR APPELLEE: MELISSA A. PEÑA, Norris McLaughlin, P.A., New York, NY.
Appeal from a judgment of the United States District Court for the Eastern
District of New York (Block, Judge) affirming an order of the Bankruptcy Court
(Mazer-Marino, Judge). UPON DUE CONSIDERATION WHEREOF, IT IS
HEREBY ORDERED, ADJUDGED, AND DECREED that April 24, 2024
judgment is AFFIRMED.
In this appeal, Appellant Meluchim Holdings LLC (“Meluchim”) and its
sole owner, Appellant Chaim Landau, challenge the bankruptcy court’s
judgment disallowing their proof of claim in the amount of $728,452.02 against
720 Livonia Development LLC (the “Debtor”). We assume the parties’
familiarity with the underlying facts, procedural history, and arguments on
appeal, to which we refer only as necessary to explain our decision to affirm.
* The Clerk’s office is directed to amend the caption as reflected above.
2 In December 2014, Landau caused Meluchim to remit $500,000 to CS
Construction Group, LLC, an LLC associated with Chaskiel Strulovitch. In
August 2015, Landau entered into a partnership agreement with Strulovitch for
the purpose of purchasing, renovating, and leasing property at 720 Livonia
Avenue, Brooklyn, NY. The agreement acknowledged that Landau had
provided $500,000 for the purpose of purchasing the building, and that
Strulovitch had contributed approximately $950,000, and established a
framework for allocating future proceeds from the endeavor.
Alleging that Strulovitch did not make good on his promise and instead
placed title to the property in two limited liability companies he owned, 720
Livonia Development LLC and MG Livonia LLC, Landau sued Strulovitch and
the two companies in state court, raising legal and equitable claims. Following a
bench trial, the state court concluded that Landau failed to prove his claims and
dismissed the action. Among other things, the state court concluded that Landau
failed to establish his interest in the partnership with sufficient specificity, to
show that Strulovitch had breached the agreement, and to establish fraud. The
court relied in part on the absence of any evidence that the venture had
generated any proceeds. With respect to Landau’s unjust enrichment claim, the
3 court held that even assuming that the defendants had been enriched by the
$500,000 contribution made on Landau’s behalf, that payment “was from the
bank account of Meluchim Holdings LLC,” and Landau submitted no evidence
regarding his relationship to Meluchim. App’x 164.
Meluchim, acting in its own name, subsequently filed an involuntary
bankruptcy petition against the Debtor, and, along with Landau, submitted a
proof of claim for $728,452.02, reflecting the $500,000 payment that Meluchim
made on Landau’s behalf plus interest. Appellee 720 Livonia Operations LLC, an
investor in the Debtor, objected to the claim. On cross motions for summary
judgment, the bankruptcy court entered summary judgment against Meluchim
and Landau on the ground that the state court judgment against Landau
concerning the same subject matter precluded their claim. In re 720 Livonia
Development LLC, No. 19-47797, 2023 WL 5421832, at *11–12 (Bankr. E.D.N.Y.
Aug. 22, 2023). The bankruptcy court concluded that claim preclusion applied
against Meluchim as well as Landau because the state court judgment was a
disposition on the merits; it arose from the same transaction as that underlying
Meluchim’s proof of claim; and Meluchim was in privity with Landau, its sole
4 member. Id. at *12. Alternatively, the bankruptcy court ruled that Meluchim and
Landau had failed to prove their claim on the merits. Id. at *12–14.
The district court affirmed the bankruptcy court’s judgment based on the
claim-preclusion rationale; it did not consider the merits of Meluchim and
Landau’s claim. In re 720 Livonia Development LLC, No. 1:23-cv-06752 (FB), 2024
WL 1740669, at *5–6 (E.D.N.Y. Apr. 23, 2024).
Before this Court, Meluchim and Landau primarily challenge the
bankruptcy court’s application of claim preclusion against Meluchim, which was
not a party to the state court action. They contend that the bankruptcy and
district courts erroneously concluded that Meluchim was in privity with Landau
in connection with the state court action.
On appeal of a district court’s affirmance of a bankruptcy court’s order, we
review the bankruptcy court’s decision “independently,” evaluating its legal
conclusions without deference to the bankruptcy court’s reasoning, and its
factual findings for “clear error.” In re Wireless Data, Inc., 547 F.3d 484, 492 (2d
5 Cir. 2008). 1 In other words, our review of the bankruptcy court’s ruling is
“plenary.” Super Nova 330 LLC v. Gazes, 693 F.3d 138, 141 (2d Cir. 2012).
We apply New York law to determine the preclusive effect of a New York
state court judgment. See Whitfield v. City of New York, 96 F.4th 504, 522–23 (2d
Cir. 2024) (“The full faith and credit statute, 28 U.S.C. § 1738, requires federal
courts to give to a state-court judgment the same preclusive effect as would be
given that judgment under the law of the State in which the judgment was
rendered.”).
“Under New York law, a final judgment on the merits of an action
precludes the parties or their privies from relitigating issues that were or could
have been raised in that action.” Giannone v. York Tape & Label, Inc., 548 F.3d 191,
193 (2d Cir. 2008). Privies include “those who are successors to a property
interest, those who control an action although not formal parties to it, those
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24-1322-bk In re: 720 Livonia Developments LLC
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of The United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 4th day of March, two thousand twenty-five .
PRESENT: REENA RAGGI, GERARD E. LYNCH BETH ROBINSON, Circuit Judges. _________________________________________
IN RE: 720 LIVONIA DEVELOPMENTS LLC, Debtor. _________________________________________
CHAIM LANDAU,
Appellant,
MELUCHIM HOLDINGS LLC,
Petitioning Creditor-Appellant,
v. No. 24-1322
720 LIVONIA OPERATIONS LLC, Appellee. * _________________________________________
FOR APPELLANTS: KEVIN J. NASH (Joseph T. Donovan, on the brief), Goldberg Weprin Finkel Goldstein LLP, New York, NY.
FOR APPELLEE: MELISSA A. PEÑA, Norris McLaughlin, P.A., New York, NY.
Appeal from a judgment of the United States District Court for the Eastern
District of New York (Block, Judge) affirming an order of the Bankruptcy Court
(Mazer-Marino, Judge). UPON DUE CONSIDERATION WHEREOF, IT IS
HEREBY ORDERED, ADJUDGED, AND DECREED that April 24, 2024
judgment is AFFIRMED.
In this appeal, Appellant Meluchim Holdings LLC (“Meluchim”) and its
sole owner, Appellant Chaim Landau, challenge the bankruptcy court’s
judgment disallowing their proof of claim in the amount of $728,452.02 against
720 Livonia Development LLC (the “Debtor”). We assume the parties’
familiarity with the underlying facts, procedural history, and arguments on
appeal, to which we refer only as necessary to explain our decision to affirm.
* The Clerk’s office is directed to amend the caption as reflected above.
2 In December 2014, Landau caused Meluchim to remit $500,000 to CS
Construction Group, LLC, an LLC associated with Chaskiel Strulovitch. In
August 2015, Landau entered into a partnership agreement with Strulovitch for
the purpose of purchasing, renovating, and leasing property at 720 Livonia
Avenue, Brooklyn, NY. The agreement acknowledged that Landau had
provided $500,000 for the purpose of purchasing the building, and that
Strulovitch had contributed approximately $950,000, and established a
framework for allocating future proceeds from the endeavor.
Alleging that Strulovitch did not make good on his promise and instead
placed title to the property in two limited liability companies he owned, 720
Livonia Development LLC and MG Livonia LLC, Landau sued Strulovitch and
the two companies in state court, raising legal and equitable claims. Following a
bench trial, the state court concluded that Landau failed to prove his claims and
dismissed the action. Among other things, the state court concluded that Landau
failed to establish his interest in the partnership with sufficient specificity, to
show that Strulovitch had breached the agreement, and to establish fraud. The
court relied in part on the absence of any evidence that the venture had
generated any proceeds. With respect to Landau’s unjust enrichment claim, the
3 court held that even assuming that the defendants had been enriched by the
$500,000 contribution made on Landau’s behalf, that payment “was from the
bank account of Meluchim Holdings LLC,” and Landau submitted no evidence
regarding his relationship to Meluchim. App’x 164.
Meluchim, acting in its own name, subsequently filed an involuntary
bankruptcy petition against the Debtor, and, along with Landau, submitted a
proof of claim for $728,452.02, reflecting the $500,000 payment that Meluchim
made on Landau’s behalf plus interest. Appellee 720 Livonia Operations LLC, an
investor in the Debtor, objected to the claim. On cross motions for summary
judgment, the bankruptcy court entered summary judgment against Meluchim
and Landau on the ground that the state court judgment against Landau
concerning the same subject matter precluded their claim. In re 720 Livonia
Development LLC, No. 19-47797, 2023 WL 5421832, at *11–12 (Bankr. E.D.N.Y.
Aug. 22, 2023). The bankruptcy court concluded that claim preclusion applied
against Meluchim as well as Landau because the state court judgment was a
disposition on the merits; it arose from the same transaction as that underlying
Meluchim’s proof of claim; and Meluchim was in privity with Landau, its sole
4 member. Id. at *12. Alternatively, the bankruptcy court ruled that Meluchim and
Landau had failed to prove their claim on the merits. Id. at *12–14.
The district court affirmed the bankruptcy court’s judgment based on the
claim-preclusion rationale; it did not consider the merits of Meluchim and
Landau’s claim. In re 720 Livonia Development LLC, No. 1:23-cv-06752 (FB), 2024
WL 1740669, at *5–6 (E.D.N.Y. Apr. 23, 2024).
Before this Court, Meluchim and Landau primarily challenge the
bankruptcy court’s application of claim preclusion against Meluchim, which was
not a party to the state court action. They contend that the bankruptcy and
district courts erroneously concluded that Meluchim was in privity with Landau
in connection with the state court action.
On appeal of a district court’s affirmance of a bankruptcy court’s order, we
review the bankruptcy court’s decision “independently,” evaluating its legal
conclusions without deference to the bankruptcy court’s reasoning, and its
factual findings for “clear error.” In re Wireless Data, Inc., 547 F.3d 484, 492 (2d
5 Cir. 2008). 1 In other words, our review of the bankruptcy court’s ruling is
“plenary.” Super Nova 330 LLC v. Gazes, 693 F.3d 138, 141 (2d Cir. 2012).
We apply New York law to determine the preclusive effect of a New York
state court judgment. See Whitfield v. City of New York, 96 F.4th 504, 522–23 (2d
Cir. 2024) (“The full faith and credit statute, 28 U.S.C. § 1738, requires federal
courts to give to a state-court judgment the same preclusive effect as would be
given that judgment under the law of the State in which the judgment was
rendered.”).
“Under New York law, a final judgment on the merits of an action
precludes the parties or their privies from relitigating issues that were or could
have been raised in that action.” Giannone v. York Tape & Label, Inc., 548 F.3d 191,
193 (2d Cir. 2008). Privies include “those who are successors to a property
interest, those who control an action although not formal parties to it, those
whose interests are represented by a party to the action, and possibly coparties to
a prior action.” Ferris v. Cuevas, 118 F.3d 122, 126 (2d Cir. 1997) (applying New
York law) (emphasis omitted). The rationale for extending the preclusive effect
1 In quotations from caselaw and the parties’ briefing, this summary order omits all internal quotation marks, footnotes, and citations, and accepts all alterations, unless otherwise noted.
6 of a decision to those in privity with a litigating party is that the two are
“identified . . . in interest.” Matter of Shea, 309 N.Y. 605, 617 (1956).
Moreover, under the federal Due Process Clause a nonparty to an action
may be bound by a judgment in that action only if the concerned parties
understood that the first suit “was brought in a representative capacity,” or the
court took steps to protect the nonparty’s interests. Taylor v. Sturgell, 553 U.S.
880, 897–98 (2008) (identifying “representative suit” as one of six claim preclusive
categories).
The critical issue here is whether Meluchim and Landau had a sufficient
identity of interests in the New York litigation and whether Landau sufficiently
represented Meluchim’s interests to warrant binding Meluchim to the final
decision in that case. We conclude that they did.
As the sole owner of Meluchim, Landau’s interest in vindicating
Meluchim’s legal rights in connection with the $500,000 payment was
coextensive with Meluchim’s. “A clearer case for application of the [privity]
doctrine could hardly be imagined than one involving successive attempts to
litigate the same question by a corporation and by its owner or owners.” Matter
of Shea, 309 N.Y. at 617. See Shire Realty Corp. v. Schorr, 55 A.D.2d 356, 363 (N.Y.
7 App. Div. 2nd Dep’t 1977) (“[S]ole stockholders of . . . corporation[] should be
deemed to have been in privity with it.”); cf. In re Teltronics Servs., Inc., 762 F.2d
185, 190–91 (2d Cir. 1985) (individual who was the founder, president, chairman
of the board, and a “substantial shareholder” of a corporation and who
controlled prior action held to be in privity with the company and thus bound by
prior judgment against corporation).
Meluchim and Landau distinguish Shea on the basis that in the state court
action Landau did not seek recovery of the $500,000 for Meluchim but instead
sought vindication of his partnership rights stemming from the $500,000
payment. But this argument is undercut by the state court complaint in which
Landau sought, among his alternate claims for relief, recovery of the $500,000 on
unjust enrichment grounds. Especially given that Landau’s state court action
sought recovery of the $500,000 payment, Meluchim’s potential recovery of those
funds was squarely in the mix of issues implicated in that action. See Giannone,
548 F.3d at 193 (explaining that claim preclusion bars claims that “were or could
have been raised” in a prior action (emphasis added)).
In addition, it seems clear that if Landau had succeeded in his claim before
the state court, then Meluchim would be barred from suing the Debtor for return
8 of the same $500,000. See Watts v. Swiss Bank Corp., 27 N.Y.2d 270, 277–78 (1970)
(ruling that two parties were in privity in part because they shared the same
interest in the ownership of the proceeds of a bank account).
Finally, we reject Meluchim’s argument that the state court prevented
Landau from fully developing his claims during the bench trial. Any challenges
to the state trial court proceedings could have been pursued through the state
appellate process. Cf. Federated Dep’t Stores, Inc. v. Moitie, 452 U.S. 394, 398 (1981)
(“[A]n erroneous conclusion reached by the court in the first suit” does not
prevent the application of res judicata. Instead, “A judgment . . . based upon an
erroneous view of the law is not open to collateral attack, but can be corrected
only by a direct review. . . ”).
Because we conclude the bankruptcy court’s application of claim
preclusion was not erroneous, we need not consider its alternative basis for
disallowing Meluchim and Landau’s claims. Accordingly, the District Court’s
FOR THE COURT: Catherine O’Hagan Wolfe, Clerk of Court