In re Arthur B. Adler & Assocs., Ltd.

588 B.R. 864
CourtUnited States Bankruptcy Court, N.D. Illinois
DecidedAugust 20, 2018
DocketCase No. 17 BK 11697
StatusPublished
Cited by2 cases

This text of 588 B.R. 864 (In re Arthur B. Adler & Assocs., Ltd.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Arthur B. Adler & Assocs., Ltd., 588 B.R. 864 (Ill. 2018).

Opinion

Jack B. Schmetterer, United States Bankruptcy Judge

This matter came to be heard on the Motion for Civil Contempt and Motion for Sanctions of the Chapter 7 Trustee, David P. Leibowitz ("Trustee"). Trustee sought to hold Arthur B. Adler ("Adler"), the president of the Debtor, Arthur B. Adler and Associates, Ltd. ("Debtor"), in contempt for his violations of the automatic stay, 11 U.S.C. § 362, and for violations of this Court's September 8, 2017 Turnover Order [Dkt. No. 43].

Trial was held on July 9 and 10 on Trustee's Motion. Oral closing argument was heard, and the parties previously submitted proposed findings of fact and conclusions of law.

For the reasons stated below, it is found and held that Adler did willfully violate the automatic bankruptcy stay by his actions and a finding of civil contempt will be entered against him because of those violations.

The Court now makes and enters the following Findings of Fact and Conclusions of Law.

I. FINDINGS OF FACT

A. BACKGROUND INFORMATION

Debtor is an Illinois corporation, a law firm which was engaged in the business of retail debt collection. Debtor would collect debts against individuals and small businesses on behalf of its clients. Arthur B. Adler is the President of the Debtor corporation. His wife, Jacquelyn Adler, serves as the corporation's secretary. The Debtor corporation was engaged in the business of debt collection until the Chapter 7 petition filing date, April 13, 2017. At that time, Debtor was actively collecting hundreds of accounts for at least forty clients.

Prior to the petition date, a judgment debtor of one of Debtor's clients, Amy Gregory ("Gregory"), challenged Debtor's collection practices pursuant to the Fair Debt Collection Practices Act. That action was filed in the United States District Court for the Northern District of Illinois as Cas No. 12-CV-7351, titled Gregory v. Arthur B. Adler and Associates Ltd. After a jury trial, judgment was entered on April 7, 2016 in favor of the plaintiff, awarding damages of $1,000 for the FDCPA violation. The District Court entered an order *867on October 3, 2016 awarding Gregory attorneys' fees in the amount of $94,814.64 and costs of $643.30.

On November 16, 2016, Gregory issued a citation to discover assets against JPMorgan Chase Bank ("Chase"). Chase responded to that citation, indicating that it maintained $ 12,607.35 in a frozen checking account ending in 9319 and an additional 77.08 in the form of a check. The 9319 account was Debtor's Expense Account. The District Court entered an order on December 5, 2016 requiring Chase to turn over $12,684.43 in partial satisfaction of the judgment. On February 22, 2017, Gregory issued a citation to discover assets against the Debtor itself. The District Court held a hearing on the citation on March 17, 2017 and Debtor was given 21 days to respond. Debtor filed for bankruptcy protection one day before the status hearing set on the citation, on April 14, 2017.

Trustee filed the instant Motion for Contempt and Sanctions on March 19, 2018. Trustee accused Adler of directing funds properly belonging to the bankruptcy estate of the Debtor to his and his wife's personal bank accounts. Trustee asserts that as of the petition date, Debtor's schedule B showed only one of the existing nine IOLTA accounts ("IOLTA Client Fund Account # 2") at Chase held any money in it, $28,019.33. On September 8, 2017, this Court entered an order requiring Adler to turn over all funds in all of Debtor's accounts, including the IOLTA Client Fund Account # 2. On September 14, 2017, Adler delivered a check to Trustee in the amount of $206,073.74, purportedly representing all funds in IOLTA Client Fund Account # 2. Given that this was far more than the amount initially scheduled, Trustee moved to examine Debtor's banking records at Chase Bank. The Court granted Trustee's request to examine the Debtor corporation's records at Chase Bank, but denied without prejudice his request to examine the bank records of Adler and his wife.

On November 20, 2017 Adler caused a cashier's check in the amount of $26,811.31 to be issued by SunTrust Bank ("SunTrust"). Adler represented this amount to be funds he had collected from twenty separate accounts of his clients. He did not explain where these funds had originally been deposited, nor what the sources of funds for the cashier's check were. Due to this cashier's check and the information Trustee received in the corporate bank records of the Debtor obtained from Chase, the Court granted Trustee's request to examine the personal bank records of Adler and his wife at both Chase and SunTrust on January 23, 2018 [Dkt. No. 82]. Trustee filed the instant Motion based upon his review of the Debtor corporation, Adler, and his wife's bank records. The Court entered a scheduling order on the Motion requiring that Adler Respond by April 12, 2018 and setting a status hearing on April 19, 2018.

Adler filed his Response, titled "Arthur Adler's Answer to Motion for Contempt," on April 12, 2018 [Dkt. No. 97]. Adler argued that he had properly turned over the $206,073.74 pursuant to the September 14, 2017 Turnover Order. Adler explained that the additional $26,811.31 cashier's check which was delivered to Trustee represented payments from creditors which continued to arrive at the Debtor's address. Adler asserted that he sent several such checks to the Trustee: a January 3, 2018 check in the amount of $15,848.17, a January 19, 2018 check in the amount of $21,896.48, and a March 5, 2018 check in the amount of $ 12,930.18 were all sent to Trustee after the payments from creditors arrived at Debtor's address. Adler argued that he had not violated any part of the turnover order because the requirement to *868turnover "all checks from judgment debtors or third parties in possession of Debtor" was not explicitly prospective. That language in the order, Adler argued, was ambiguous as to his specific responsibilities for incoming funds and thus, he could not be held in civil contempt because he was not clearly and unequivocally notified of the allegedly sanctionable behavior.

Adler further argued that his actions were not a violation of the stay under 11 U.S.C. § 362(a) because the Trustee is not an "individual" who was injured by a willful violation of the stay pursuant to 11 U.S.C. § 362(k)(1). Adler argued that bankruptcy courts may no longer use their equitable powers pursuant to 11 U.S.C. § 305 to take any action which explicitly contravenes the mandate of the Bankruptcy Code. Law v. Siegel,

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
588 B.R. 864, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-arthur-b-adler-assocs-ltd-ilnb-2018.