15-3844-bk In re: Emmons‐Sheepshead Bay Dev.
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 COURTʹS 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 ʺSUMMARY ORDERʺ). A PARTY CITING 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 6th day of December, two thousand sixteen.
PRESENT: JOHN M. WALKER, JR., ROBERT D. SACK, DENNY CHIN, Circuit Judges.
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IN RE: EMMONS‐SHEEPSHEAD BAY DEVELOPMENT, LLC, Debtor,
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METROPOLITAN ESTATES, INC., ALBERT WILK, derivatively on behalf of Emmons Avenue, LLC, DBA Wilk Real Estate, Ltd., ALEX DIKMAN, Plaintiffs‐Appellants,
v. 15‐3844‐bk
EMMONS‐SHEEPSHEAD BAY DEVELOPMENT, LLC, Defendant‐Appellee.
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FOR PLAINTIFFS‐APPELLANTS: Karamvir Dahiya, Dahiya Law Offices LLC, New York, New York.
FOR DEFENDANT‐APPELLEE: Lori Schwartz, Robinson Brog Leinwand Greene Genovese & Gluck, P.C., New York, New York.
Appeal from the United States District Court for the Eastern District of
New York (Gleeson, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED.
Plaintiffs‐appellants appeal the district courtʹs judgment entered
November 18, 2015 affirming the orders of the bankruptcy court dismissing their
amended complaint in an adversary proceeding against defendant‐appellee Emmons‐
Sheepshead Bay Development, LLC (ʺEmmonsʺ). By order entered December 19, 2014,
the bankruptcy court (Stong, B.J.) dismissed the amended complaint with prejudice for
failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). By order entered
April 24, 2015, the bankruptcy court denied plaintiffsʹ motion to vacate, alter, or
reconsider the dismissal. On November 17, 2015, following oral argument, the district
court affirmed the bankruptcy courtʹs orders, ruling from the bench. We assume the
partiesʹ familiarity with the underlying facts, procedural history, and issues on appeal.
Plaintiff‐appellant Metropolitan Estates, Inc. (ʺMetropolitanʺ) invested in a
condominium development known as ʺThe Breakers at Sheepshead Bay Condominiumʺ
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(the ʺPropertyʺ). Plaintiffs‐appellants Alex Dikman and Albert Wilk are principals of
Metropolitan. The Property was conveyed to Emmons in 2007. The amended
complaint identifies non‐party Jacob Pinson as a member of Emmons.
In August 2012, Pinson filed for bankruptcy protection under Chapter 11
on behalf of Emmons and, according to plaintiffs, undervalued the Property at $14
million when it was actually worth more than $30 million. In July 2013, the bankruptcy
court confirmed Emmonsʹs proposed plan of reorganization despite plaintiffsʹ objection
that the plan had not been proposed in good faith. The bankruptcy court denied
plaintiffsʹ motion for reconsideration in August 2013, and the district court (Mauskopf,
J.) denied their appeal of that denial in September 2014.
Meanwhile, plaintiffs initiated this action as an adversary proceeding in
the bankruptcy court and thereafter filed an amended complaint. Plaintiffs sought to
revoke the confirmation order and rescind the discharge of the Property under 11 U.S.C.
§ 1144 on the grounds that (1) the order was procured by fraud, (2) the Property was
fraudulently conveyed and held in a constructive trust, (3) the plan of reorganization
benefitted the debtor but not the unsecured creditors, and also facilitated the secret sale
of the Property to a sham purchaser, and (4) plaintiffs were denied due process because
the bankruptcy court issued the confirmation order despite their lack of access to certain
material discovery. The bankruptcy court dismissed the amended complaint with
prejudice for failure to state a claim in December 2014 and, after convening a hearing in
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April 2015, denied plaintiffsʹ motion to vacate, alter, or reconsider the dismissal or its
findings. The district court (Gleeson, J.) affirmed the bankruptcy courtʹs orders and
decisions in November 2015.
ʺIn an appeal from a district courtʹs review of a bankruptcy court decision,
we review the bankruptcy court decision independently, accepting its factual findings
unless clearly erroneous but reviewing its conclusions of law de novo.ʺ In re Enron Corp.,
419 F.3d 115, 124 (2d Cir. 2005) (quoting In re AroChem Corp., 176 F.3d 610, 620 (2d Cir.
1999)).1
I. Dismissal of the Amended Complaint
The sufficiency of a complaint in an adversary proceeding is evaluated
under Federal Rule of Civil Procedure 12(b)(6). Fed. R. Bankr. P. 7012(b). We review
the dismissal of a complaint pursuant to Rule 12(b)(6) de novo while construing the
complaint liberally, accepting all factual allegations as true, and drawing all reasonable
inferences in the plaintiffʹs favor. Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d
Cir. 2002). To survive a motion to dismiss under Rule 12(b)(6), the complaint must
plead ʺenough facts to state a claim to relief that is plausible on its face.ʺ Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 570 (2007); see Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).
1 Emmons argues that plaintiffs lack standing to pursue certain claims, and that their claims are equitably moot. We need not reach these issues, as we decide the appeal on the merits.
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To revoke a confirmation order under 11 U.S.C. § 1144, a plaintiff must
show the order was procured by fraud. 11 U.S.C. § 1144. Moreover, Federal Rule of
Civil Procedure 9(b) requires plaintiffs alleging fraud to ʺstate with particularity the
circumstances constituting fraud or mistake,ʺ In re Motors Liquidation Co., 462 B.R. 494,
505 (Bankr. S.D.N.Y. 2012) (applying Rule 9(b) to a § 1144 claim in a bankruptcy case),
and to ʺallege facts that give rise to a strong inference of fraudulent intent,ʺ Shields v.
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15-3844-bk In re: Emmons‐Sheepshead Bay Dev.
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 COURTʹS 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 ʺSUMMARY ORDERʺ). A PARTY CITING 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 6th day of December, two thousand sixteen.
PRESENT: JOHN M. WALKER, JR., ROBERT D. SACK, DENNY CHIN, Circuit Judges.
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x
IN RE: EMMONS‐SHEEPSHEAD BAY DEVELOPMENT, LLC, Debtor,
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x
METROPOLITAN ESTATES, INC., ALBERT WILK, derivatively on behalf of Emmons Avenue, LLC, DBA Wilk Real Estate, Ltd., ALEX DIKMAN, Plaintiffs‐Appellants,
v. 15‐3844‐bk
EMMONS‐SHEEPSHEAD BAY DEVELOPMENT, LLC, Defendant‐Appellee.
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FOR PLAINTIFFS‐APPELLANTS: Karamvir Dahiya, Dahiya Law Offices LLC, New York, New York.
FOR DEFENDANT‐APPELLEE: Lori Schwartz, Robinson Brog Leinwand Greene Genovese & Gluck, P.C., New York, New York.
Appeal from the United States District Court for the Eastern District of
New York (Gleeson, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED.
Plaintiffs‐appellants appeal the district courtʹs judgment entered
November 18, 2015 affirming the orders of the bankruptcy court dismissing their
amended complaint in an adversary proceeding against defendant‐appellee Emmons‐
Sheepshead Bay Development, LLC (ʺEmmonsʺ). By order entered December 19, 2014,
the bankruptcy court (Stong, B.J.) dismissed the amended complaint with prejudice for
failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). By order entered
April 24, 2015, the bankruptcy court denied plaintiffsʹ motion to vacate, alter, or
reconsider the dismissal. On November 17, 2015, following oral argument, the district
court affirmed the bankruptcy courtʹs orders, ruling from the bench. We assume the
partiesʹ familiarity with the underlying facts, procedural history, and issues on appeal.
Plaintiff‐appellant Metropolitan Estates, Inc. (ʺMetropolitanʺ) invested in a
condominium development known as ʺThe Breakers at Sheepshead Bay Condominiumʺ
‐ 2 ‐
(the ʺPropertyʺ). Plaintiffs‐appellants Alex Dikman and Albert Wilk are principals of
Metropolitan. The Property was conveyed to Emmons in 2007. The amended
complaint identifies non‐party Jacob Pinson as a member of Emmons.
In August 2012, Pinson filed for bankruptcy protection under Chapter 11
on behalf of Emmons and, according to plaintiffs, undervalued the Property at $14
million when it was actually worth more than $30 million. In July 2013, the bankruptcy
court confirmed Emmonsʹs proposed plan of reorganization despite plaintiffsʹ objection
that the plan had not been proposed in good faith. The bankruptcy court denied
plaintiffsʹ motion for reconsideration in August 2013, and the district court (Mauskopf,
J.) denied their appeal of that denial in September 2014.
Meanwhile, plaintiffs initiated this action as an adversary proceeding in
the bankruptcy court and thereafter filed an amended complaint. Plaintiffs sought to
revoke the confirmation order and rescind the discharge of the Property under 11 U.S.C.
§ 1144 on the grounds that (1) the order was procured by fraud, (2) the Property was
fraudulently conveyed and held in a constructive trust, (3) the plan of reorganization
benefitted the debtor but not the unsecured creditors, and also facilitated the secret sale
of the Property to a sham purchaser, and (4) plaintiffs were denied due process because
the bankruptcy court issued the confirmation order despite their lack of access to certain
material discovery. The bankruptcy court dismissed the amended complaint with
prejudice for failure to state a claim in December 2014 and, after convening a hearing in
‐ 3 ‐
April 2015, denied plaintiffsʹ motion to vacate, alter, or reconsider the dismissal or its
findings. The district court (Gleeson, J.) affirmed the bankruptcy courtʹs orders and
decisions in November 2015.
ʺIn an appeal from a district courtʹs review of a bankruptcy court decision,
we review the bankruptcy court decision independently, accepting its factual findings
unless clearly erroneous but reviewing its conclusions of law de novo.ʺ In re Enron Corp.,
419 F.3d 115, 124 (2d Cir. 2005) (quoting In re AroChem Corp., 176 F.3d 610, 620 (2d Cir.
1999)).1
I. Dismissal of the Amended Complaint
The sufficiency of a complaint in an adversary proceeding is evaluated
under Federal Rule of Civil Procedure 12(b)(6). Fed. R. Bankr. P. 7012(b). We review
the dismissal of a complaint pursuant to Rule 12(b)(6) de novo while construing the
complaint liberally, accepting all factual allegations as true, and drawing all reasonable
inferences in the plaintiffʹs favor. Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d
Cir. 2002). To survive a motion to dismiss under Rule 12(b)(6), the complaint must
plead ʺenough facts to state a claim to relief that is plausible on its face.ʺ Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 570 (2007); see Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).
1 Emmons argues that plaintiffs lack standing to pursue certain claims, and that their claims are equitably moot. We need not reach these issues, as we decide the appeal on the merits.
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To revoke a confirmation order under 11 U.S.C. § 1144, a plaintiff must
show the order was procured by fraud. 11 U.S.C. § 1144. Moreover, Federal Rule of
Civil Procedure 9(b) requires plaintiffs alleging fraud to ʺstate with particularity the
circumstances constituting fraud or mistake,ʺ In re Motors Liquidation Co., 462 B.R. 494,
505 (Bankr. S.D.N.Y. 2012) (applying Rule 9(b) to a § 1144 claim in a bankruptcy case),
and to ʺallege facts that give rise to a strong inference of fraudulent intent,ʺ Shields v.
Citytrust Bancorp, Inc., 25 F.3d 1124, 1128 (2d Cir. 1994).
We conclude that the bankruptcy court properly dismissed the amended
complaint because plaintiffs failed to sufficiently allege that the confirmation order was
procured by fraud. The amended complaint presents only conclusory allegations that
defendants fraudulently and intentionally misled the bankruptcy court by
underreporting the value of the Property, obscuring the ownership history of the
Property, and manufacturing a false sense of urgency in the bankruptcy proceedings.
There are no factual allegations to substantiate those claims or to support an inference,
let alone a strong inference, of fraudulent intent. Plaintiffsʹ claims as to incomplete
discovery, the partiesʹ unsuccessful settlement negotiations, the priority of creditors, the
post‐order sale of the Property, and the lack of due process are inapposite because
§ 1144 expressly limits the basis for revocation to procurement by fraud. The amended
complaint thus fails to state a claim under § 1144. See In re Motors Liquidation, 462 B.R. at
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508 (dismissing the complaint in an action brought under § 1144 for failure to plead
fraud with sufficient particularity).
II. Denial of Plaintiffsʹ Motion to Vacate, Alter, or Reconsider
Motions to vacate, alter, or reconsider a bankruptcy courtʹs decisions or
findings are governed by Federal Rules of Civil Procedure 52(b), 59(e), and 60(b), which
apply to adversary proceedings through Federal Rules of Bankruptcy Procedure 7052,
9023, and 9024, respectively. Rule 52(b) allows a court to make amended or additional
findings that are supported by the record and to amend the judgment accordingly. Fed.
R. Civ. P. 52(b); Sequa Corp. v. GBJ Corp., 156 F.3d 136, 143‐44 (2d Cir. 1998). Rule 59(e)
permits a court to ʺalter or amend judgment to correct a clear error of law or prevent
manifest injustice.ʺ ING Glob. v. United Parcel Serv. Oasis Supply Corp., 757 F.3d 92, 96
(2d Cir. 2014) (quoting Schwartz v. Liberty Mut. Ins. Co., 539 F.3d 135, 153 (2d Cir. 2008)).
Rule 60(b) authorizes a court to grant relief from a judgment on specific grounds such
as mistake, inadvertence, surprise, or excusable neglect; newly discovered evidence that
could not have been discovered earlier with reasonable diligence; fraud,
misrepresentation, or misconduct by the opposing party; and a void, satisfied, released,
or discharged judgment. Fed. R. Civ. P. 60(b). Although Rule 60(b) ʺstrikes a balance
between serving the ends of justice and preserving the finality of judgments[,] . . . final
judgments should not be lightly reopened.ʺ Tapper v. Hearn, 833 F.3d 166, 170 (2d Cir.
2016) (quoting Nemaizer v. Baker, 793 F.2d 58, 61 (2d Cir. 1986)).
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We review rulings on motions under Rules 52(b), 59(e), and 60(b) for
abuse of discretion. ING Glob., 757 F.3d at 97 (Rule 59(e)); Motorola Credit Corp. v. Uzan,
561 F.3d 123, 126 (2d Cir. 2009) (Rule 60(b)); Sequa, 156 F.3d at 143 (Rule 52(b)).
In this case, plaintiffs sought to have the dismissal of their amended
complaint vacated, altered, or reconsidered. A review of their submissions and the
transcript of the April 21, 2015 hearing, however, demonstrates that they merely
rehashed the arguments that they raised at the motion to dismiss stage without
establishing a basis under Rules 52(b), 59(e), or 60(b) for amending or altering the
findings or judgment of the bankruptcy court. Accordingly, the bankruptcy court did
not abuse its discretion in denying their motion to vacate, alter, or reconsider.
We have considered all of plaintiffsʹ additional arguments and find them
to be without merit. For the reasons stated herein, the judgment of the district court is
AFFIRMED.
FOR THE COURT: Catherine OʹHagan Wolfe, Clerk
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