Lewiston v. APTCAM, LLC (In re Lewiston)

521 B.R. 811, 2014 Bankr. LEXIS 4972
CourtUnited States Bankruptcy Court, E.D. Michigan
DecidedDecember 10, 2014
DocketBankruptcy No. 12-58599; Adversary No. 14-04828-PJS
StatusPublished
Cited by4 cases

This text of 521 B.R. 811 (Lewiston v. APTCAM, LLC (In re Lewiston)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. Michigan primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Lewiston v. APTCAM, LLC (In re Lewiston), 521 B.R. 811, 2014 Bankr. LEXIS 4972 (Mich. 2014).

Opinion

PHILLIP J. SHEFFERLY, Bankruptcy Judge.

Opinion Granting Motion To Remand

Introduction

Leslie Etterbeek (“Etterbeek”) is a member in a limited liability company. Etterbeek filed a lawsuit in state court against five other members of the limited liability company and two individuals related to two of those members. The defendants removed the lawsuit to the bankruptcy court. Etterbeek filed a motion to remand the lawsuit back to state court or for the Court to abstain from hearing it. For the reasons set forth in this opinion, the Court has decided to grant the motion.

Jurisdiction

The District Court for the Eastern District of Michigan has jurisdiction to hear this motion pursuant to 28 U.S.C. § 157(a), § 1334(a) and (b), and § 1452(b). Pursuant to 28 U.S.C. § 157(b) and Local District Court Rule 83.50(a), the District Court for the Eastern District of Michigan has referred this motion to the Bankruptcy Court. “Although the Court’s authority to decide this adversary proceeding has been challenged, the Court has jurisdiction to determine wither it in fact has subject matter jurisdiction.” Bavelis v. Doukas (In re Bavelis), 453 B.R. 832, 844 (Bankr.S.D.Ohio 2011) (citing Chicot County Drainage Dist. v. Baxter State Bank, 308 U.S. 371, 376-77, 60 S.Ct. 317, 84 L.Ed. 329 (1940); Pratt v. Ventas, Inc., 365 F.3d 514, 521 (6th Cir.2004); and Mata v. Eclipse Aerospace, Inc. (In re AE Liquidation, Inc.), 435 B.R. 894, 900 (Bankr.D.Del.2010) (applying Chicot to determining jurisdiction over an adversary proceeding)).

Facts

The following facts are not in dispute.

On August 13, 2012, Richard Lewiston (“Debtor”) filed a Chapter 7 case. Prior to filing his case, the Debtor was engaged in the real estate development business for many years. The Debtor listed on his schedule B an interest in many limited liability companies and other entities, including an interest in Apartments at Cambridge Company, LLC, a limited liability company (“AAC”). AAC owns and manages a condominium development project in Canton, Michigan, that includes both vacant land subject to potential development, as well as already developed condominiums. In addition to listing an ownership interest in AAC, the Debtor also listed an account receivable owing to him by AAC in excess of $4.8 million.

AAC, its members and others filed four separate adversary proceedings against the Debtor. Three of the adversary proceedings sought multi-million dollar non-dischargeable judgments against the Debt- or under § 523 of the Bankruptcy Code. The fourth adversary proceeding sought denial of the Debtor’s discharge under § 727 of the Bankruptcy Code. A separate lawsuit was also filed by Gene R. Kohut, the Chapter 7 trustee (“Trustee”) against AAC in the United States District Court for the Eastern District of Michigan, which the District Court then referred to this Court. In that lawsuit, which is now an adversary proceeding in this Court, the Trustee sought a multimillion dollar judgment against AAC for alleged fraudulent transfers and for other claims. In addition to his own adversary proceeding, the Trustee also intervened as a party in the four adversary proceedings brought under § 523 and § 727 because they have common issues of fact and law with the Trustee’s adversary proceeding.

[815]*815The five adversary proceedings (collectively, the “Adversary Proceedings”) have been very vigorously litigated, consuming a substantial amount of time and expense by all parties. The Court has held multiple hearings in them, including motions to dismiss, motions for summary judgment, discovery related motions, and many other pretrial proceedings. The Adversary Proceedings are complex, with many claims and counterclaims, involving millions of dollars claimed to be owed by AAC to the bankruptcy estate, and millions of dollars claimed to be owed by the Debtor to AAC and others. At the joint request of all of the parties to the Adversary Proceedings, the Court consolidated them and set aside a very substantial block of time to try them.

After extensive proceedings held both in the bankruptcy case and in the Adversary Proceedings, the Trustee negotiated a settlement of most, but not all of the parties’ disputes. On April 3, 2014, the Trustee filed a motion (“9019 Motion”) seeking approval to enter the settlement pursuant to Fed. R. Bankr. P. 9019. Attached to the 9019 Motion was a term sheet (“Term Sheet”), signed as of March 25, 2014 by the Trustee, AAC, and by all other parties to the Adversary Proceedings except for the Debtor. Further, all individuals and entities that hold any interest in AAC also signed the Term Sheet, except for the Debtor, Etterbeek (his daughter), and Michael Lewiston (his brother). All told, there were 19 signatories to the Term Sheet.

The 9019 Motion summarized the content of the Term Sheet. First, the Term Sheet called for AAC to make substantial transfers of its personal and real property to the bankruptcy estate, consisting of over $558,000.00 of cash and its land and condominium development. The Term Sheet provided for the Trustee to then market and sell AAC’s land and condominium development and split the proceeds with those members of AAC who were signatories to the Term Sheet, with the bankruptcy estate retaining 65-1/2% of the net sale proceeds, and the other 34-1/2% of the net sale proceeds distributed to those members of AAC who had signed the Term Sheet. In addition, the bankruptcy estate would receive a release of certain charging orders against the Debt- or’s interest in AAC that were entered by a state court in Michigan prior to the time that the bankruptcy case was filed.

In exchange for these benefits, the Trustee agreed to dismiss all of his claims in the Adversary Proceedings against AAC and its members, and to release any claims that the Trustee may have either to any remaining cash held by AAC, or to the 34-1/2% of net sale proceeds that the Term Sheet directed to be distributed to the other signatories to the Term Sheet upon the sale of the land and condominium development by the Trustee. Finally, the Trustee agreed to withdraw any objections that he had filed to any proofs of claims filed in the Debtor’s bankruptcy case by any of the signatories to the Term Sheet.

The Debtor was not a party to the Term Sheet. However, he stood to receive substantial benefits under it because AAC and those members of AAC who signed the Term Sheet, also agreed to dismiss all of their claims in the Adversary Proceedings seeking nondischargeable judgments against the Debtor under § 523 of the Bankruptcy Code. The Debtor would no longer have to defend the § 523 Adversary Proceedings seeking nondischargeable multi-million dollar judgments against him, even though he would still have to defend the § 727 objection to discharge. The Term Sheet did not call for the Debtor to give or do anything in return. The Debtor [816]*816did not file any objection to the 9019 Motion.

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Bluebook (online)
521 B.R. 811, 2014 Bankr. LEXIS 4972, Counsel Stack Legal Research, https://law.counselstack.com/opinion/lewiston-v-aptcam-llc-in-re-lewiston-mieb-2014.