Isaacson v. Manty (In re Yehud-Monosson USA, Inc.)

472 B.R. 868, 2012 WL 1658484, 2012 U.S. Dist. LEXIS 65995
CourtDistrict Court, D. Minnesota
DecidedMay 11, 2012
DocketBankruptcy No. 11-42834; Civil No. 12-449 (JNE)
StatusPublished
Cited by8 cases

This text of 472 B.R. 868 (Isaacson v. Manty (In re Yehud-Monosson USA, Inc.)) is published on Counsel Stack Legal Research, covering District Court, D. Minnesota primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Isaacson v. Manty (In re Yehud-Monosson USA, Inc.), 472 B.R. 868, 2012 WL 1658484, 2012 U.S. Dist. LEXIS 65995 (mnd 2012).

Opinion

ORDER

JOAN N. ERICKSEN, District Judge.

This matter is before the Court on Naomi Isaacson’s appeal from the United States Bankruptcy Court for the District of Minnesota’s January 4, 2012 and January 5, 2012 Orders.1 For the reasons set forth below, the Court affirms the decisions of the bankruptcy court.

I. BACKGROUND

On March 23, 2011, an entity called Ye-hud-Monosson USA, Inc. (“Yehud”) filed a Chapter 11 bankruptcy petition in the Southern District of New York. The case was transferred to the bankruptcy court for the District of Minnesota and was subsequently converted to Chapter 7. Issues arose during the bankruptcy proceedings related to the turnover of various documents — the Chapter 7 Trustee, Nauni Jo Manty, asserted that certain documents were not turned over; the debtor’s representative and president, Naomi Isaacson, contended that she had turned over all documents in her possession. The trustee filed a motion for turnover with the bankruptcy court on September 14, 2011. United States Bankruptcy Judge Dennis D. O’Brien held a hearing on October 6, 2011 and entered an order granting the motion for turnover on October 7, 2011 (“Turnover Order”). The Turnover Order stated that if Isaacson failed to turnover the books, records, documents and information described in the Order, and the trustee submitted an affidavit identifying the missing material, the court would issue “the appropriate sanctions against Naomi Isaacson for her failure to comply with this court’s order, which may include monetary sanctions and/or a finding of contempt punishable by arrest and incarceration.”

The trustee believed that Isaacson failed to comply with the Turnover Order and filed an affidavit of non-compliance on October 17, 2011. Judge O’Brien recused himself on October 19, and United States Bankruptcy Judge Nancy C. Dreher took over the case. The trustee then filed a motion for contempt on November 2, 2011. The hearing on the motion for contempt was scheduled for 1:00 p.m. on November 17, 2011 — but there was an error in the notice provided to Isaacson, which noticed [873]*873the hearing at 1:30 p.m. instead of 1:00 p.m. Rebekah Nett, the attorney representing the debtor, appeared at 1:20 p.m. and learned of the mistake. During the hearing, it was also revealed that Isaacson may not have been properly served with the Turnover Order. The court continued the hearing and rescheduled it for December 6, 2011. On November 18, 2011, the bankruptcy court issued an order that continued the hearing on the trustee’s contempt motion. The November 18 Order stated that “[a]t the continued hearing, the trustee will be permitted to make a record — one that meets the test for a finding of contempt — that Naomi Isaacson ... received notice of, or otherwise had knowledge of the court’s [Turnover Order].” It also ordered Isaacson to appear in person or by telephone at the continued hearing on December 6 because contempt was sought personally against her, rather than against the debtor. If Isaacson failed to appear, the Order noted that such failure “may be cause for entry of an order on default.”

Isaacson erroneously believed that the November 18 Order already found that she was in contempt for violating the Turnover Order and that she no longer had an opportunity to present her arguments to the court. In response, on November 25 she filed a motion to vacate the November 18 Order. She submitted a memorandum in support of her motion to vacate, signed by attorney Nett and verified by Isaacson. The “factual background” section of the memorandum contained numerous allegations of bigotry, deceit, and conspiracy against Judge Dreher, Judge O’Brien, the Chapter 7 Trustee, the United States Trustee, and bankruptcy courts in general.2 A hearing was held on the motion to vacate on November 29 and the bankruptcy court denied the motion. At that hearing, Nett admitted that Isaacson had written the inflammatory statements and that she had merely signed off on the memorandum. Nett also acknowledged that she had an obligation to make a reasonable inquiry into the law and facts before signing papers submitted to the court.

The continued contempt hearing was held on December 6, but Isaacson did not appear as ordered. On December 8, the bankruptcy court issued a Contempt Order, finding Isaacson, as the debtor’s representative, in civil contempt based upon her failure to comply with the Turnover Order. The Order stated that Isaacson could purge herself of the civil contempt if she provided the trustee with identified documents and information by December 16. A failure to produce the identified information would constitute a continuing contempt of the December 8 Order and of the Turnover Order. The court scheduled a continued hearing for January 4, 2012. The Contempt Order also found Isaacson, individually, in civil contempt based upon her failure to appear at the December 6 hearing. She could purge herself of the contempt by appearing at the January 4 hearing, at which time she could testify in her own defense. The December 8 Contempt Order also permitted the trustee to file an affidavit of her reasonable costs and attorneys’ fees incurred in bringing the motion for contempt. Finally, the order noted that “[i]n light of Naomi Isaacson’s continuing contempt for failure to appear before the Court on December 6, 2011, and in anticipation of her continuing to disobey orders of this court, the United States [874]*874Marshal or any Authorized United States Officer is hereby ordered and directed to bring Naomi Isaacson ... before this court at a hearing to be held on January 4, 2012.” On December 19, the trustee filed an affidavit of non-compliance. In response, on December 29, Isaacson submitted an affidavit stating that she already produced all the records in her possession.3

On December 7, the Court, sua sponte, issued two Orders to Show Cause related to the November 25 submissions — one directed at attorney Rebekah Nett, and the other at Naomi Isaacson. The Order to Show Cause stated that “[t]o be clear, the court’s November 17, 2011 order made absolutely no ruling on the merits of the trustee’s motion for contempt”4 and that the “factual background” section of the memorandum in support of the motion to vacate the November 18 Order “was replete with unsupported and outrageous allegations.” It identified ten separate statements contained within the memorandum and ordered Nett and Isaacson to appear at the January 4 hearing to show cause as to why sanctions should not be imposed against them pursuant to Rule 9011 of the Federal Rules of Bankruptcy Procedure.5 The Orders stated that possible sanctions may include, among other things, a monetary sanction of $1,000 per factually unsupported statement, payable within ten days of any sanction order.

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Cite This Page — Counsel Stack

Bluebook (online)
472 B.R. 868, 2012 WL 1658484, 2012 U.S. Dist. LEXIS 65995, Counsel Stack Legal Research, https://law.counselstack.com/opinion/isaacson-v-manty-in-re-yehud-monosson-usa-inc-mnd-2012.