In Re: Treasures and Gems, Ltd.

Opinion

26-372-bk In Re: Treasures and Gems, Ltd.

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 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 September, two thousand twenty-six. Present:

REENA RAGGI,

DENNY CHIN,

WILLIAM J. NARDINI,

Circuit Judges.

_____________________________________

IN RE: TREASURES AND GEMS, LTD.,

Debtor.

_____________________________________

BENJAMIN NAZMIYAL, RACHEL GREENBERG, MICHAEL E. CRANE, WRISTWATCH CAFE LLC, KOSHER FOOD CONNECTION LLC,

Appellants,

v. 26-372-bk TREASURES AND GEMS, LTD., Debtor-Appellee,

1739 2ND AVE PARTNERS LLC,

Intervenor-Plaintiff-Appellee.

_____________________________________

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For Appellants: MITCHELL C. SHAPIRO, MC Shapiro Law Group PC, Great Neck, New York.

For Debtor-Appellee: ERIC J. SNYDER, Wilk Auslander LLP, New York, New York.

For Intervenor-Plaintiff-Appellee: BRETT S. SILVERMAN, Silverman Law PLLC, Livingston, New Jersey.

Appeal from a judgment of the United States District Court for the Southern District of New York (Arun S. Subramanian, District Judge).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED.

Appellants Benjamin Nazmiyal, Rachel Greenberg, Michael E. Crane, Wristwatch Café LLC, and Kosher Food Connection LLC appeal from a judgment of the district court entered on February 5, 2026, dismissing Appellants’ appeal from bankruptcy court as equitably moot. We assume the parties’ familiarity with the case.

Appellants are a group of former commercial leaseholders in a property that was sold at bankruptcy auction on December 17, 2024. The bankruptcy court entered an order approving the sale of the property on January 31, 2025, and held that any claims “shall be and hereby are forever barred . . . against the Successful Bidder, its successors or assigns . . . .” App’x at 53. On February 5, 2025, Appellants filed an appeal in the district court, challenging the bankruptcy court order approving the sale.

In February 2025, the current owner encumbered the property with two mortgages totaling approximately $7,232,500. At the same time, the deedholder also assigned leases for the property to new companies through multi-million-dollar transactions. On March 18, 2025, the debtor in the bankruptcy case, Treasures and Gems, Ltd., filed a motion to dismiss the appellants’ appeal to the

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district court. Appellants conceded in the district court that the property sale had been substantially consummated.

On February 5, 2026, the district court dismissed the appeal as equitably moot. The equitable mootness doctrine provides that dismissal is appropriate “when, even though effective relief could conceivably be fashioned, implementation of that relief would be inequitable.” In re Charter Commc’ns, Inc., 691 F.3d 476, 481 (2d Cir. 2012). 1 A bankruptcy appeal is presumed equitably moot when the debtor’s reorganization plan has been substantially consummated. In re BGI, Inc., 772 F.3d 102, 108 (2d Cir. 2014).

As the district court explained, the presumption of equitable mootness created by a plan’s substantial consummation can be overcome, but only if an objector satisfies all five of the following factors:

(1) the court can still order some effective relief;

(2) such relief will not affect the re-emergence of the debtor as a revitalized corporate entity;

(3) such relief will not unravel intricate transactions so as to knock the props out from under the authorization for every transaction that has taken place and create an unmanageable, uncontrollable situation for the Bankruptcy Court;

(4) the parties who would be adversely affected by the modification have notice of the appeal and an opportunity to participate in the proceedings; and

(5) the appellant pursued with diligence all available remedies to obtain a stay of execution of the objectionable order if the failure to do so creates a situation rendering it inequitable to reverse the orders appealed from.

1 Unless otherwise indicated, in quoting cases, all internal quotation marks, alteration marks, emphases, footnotes, and citations are omitted.

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In re Charter Commc’ns, 691 F.3d at 482 (quoting In re Chateaugay Corporation, 10 F.3d 944, 952–53 (2d Cir. 1993)). We have explained that this presumption applies unless all five factors are met. In re Charter Commc’ns, 691 F.3d at 482.

The district court based its decision primarily on Chateaugay factors three and five. As to the third factor, the district court found that “reversing the sale of the building, which was purchased free and clear of appellants’ leases and now is subject to a new mortgage, would plainly be infeasible.” App’x at 37. As to the fifth factor, the district court found that the appellants “failed to pursue with diligence all available remedies to obtain a stay of execution.” Id. On February 18, 2026, Appellants filed a notice of appeal challenging the district court’s dismissal of their appeal of the bankruptcy court order. We review that dismissal for abuse of discretion, examining conclusions of law de novo and findings of fact for clear error. In re BGI, 772 F.3d at 107.

We conclude that the district court did not abuse its discretion in declining to undo the sale of the property. “[T]he district court [must] carefully balance the importance of finality in bankruptcy proceedings against the appellant’s right to review and relief.” In re Charter Commc’ns, 691 F.3d at 481. Because Appellants had to satisfy all five Chateaugay factors to overcome the presumption of equitable mootness, see id. at 482, their failure to satisfy even one of them would warrant affirmance. Limiting ourselves to consideration of the third factor for purposes of this appeal, we agree with the district court that the sale of the building represented the core feature of the bankruptcy plan, and it appears “that none of the completed transactions can be undone without violence to the overall arrangements.” In re Metromedia Fiber Network, Inc., 416 F.3d 136, 145 (2d Cir. 2005). Unwinding the sale, two mortgages, and new leases more than eighteen months after the plan was substantially consummated would “knock the props out from”

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a complicated series of later arrangements—precisely the kind of situation that the equitable mootness doctrine is meant to avoid. Chateaugay, 10 F.3d at 953.

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We have considered Appellants’ remaining arguments and find them unpersuasive. For the reasons stated above, the judgment of the district court is AFFIRMED.

FOR THE COURT:

Catherine O’Hagan Wolfe, Clerk