1
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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IN RE:
HOTI ENTERPRISES, L.P. and HOTI
REALTY MANAGEMENT CO., INC.,
Debtors.
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HOTI ENTERPRISES, L.P. and HOTI
REALTY MANAGEMENT CO., INC.,
Appellants,
v.
GECMC 2007 C-1 BURNETT STREET, LLC,
Appellee.
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MEMORANDUM DECISION
12 CV 8030 (VB)
12 CV 8757 (VB)
12 CV 8758 (VB)
12 CV 8759 (VB)
13 CV 0235 (VB)
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Briccetti, J.:
Debtor-appellants Hoti Enterprises, LP and Hoti Realty Management Co., Inc., appeal
from the bankruptcy court’s Order Confirming the Third Modified Chapter 11 Plan of
Reorganization For Hoti Enterprises, LP and Hoti Realty Management Co., Inc., dated June 19,
2012, (“Confirmation Order”) (Doc. #240),1 and subsequent Order Denying Motion for
Reconsideration of Order Confirming Plan of Reorganization, Or In the Alternative, For A Stay
Pending Appeal, dated July 16, 2012 (“Reconsideration Order”) (Doc. #276). Debtors also
appeal from four subsequent bankruptcy court orders sanctioning the debtor and its principals for
violating the terms of the Confirmation Order (the “Contempt Orders”).2
1 Unless otherwise noted, references to (Doc. #__) refer to the bankruptcy court docket in
case 10-24129.
2 The orders appealed from include the Order Granting Motion of GECMC 2007 C-1
Burnett Street, LLC for Entry of an Order (I) Compelling the Debtors and Related Persons and
Agents to Comply with the Chapter 11 Plan and Confirmation Order, (II) Directing the
Withdrawal of state court Preliminary Injunction Proceeding, (III) Finding the Debtors and
Certain Related Persons in Contempt of Court, and (IV) Imposing Sanctions, dated August 10,
2012, (Doc. #302) (the “August 10 Contempt Order”); the Order Granting, In Part, Motion of
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This decision addresses all of these appeals including motions to dismiss the Contempt
Orders by GECMC 2007 C-1 Burnett Street, LLC (“GECMC”). For the following reasons, the
Confirmation Order and Reconsideration Order are AFFIRMED. GECMC’s motions to dismiss
the August 10 Contempt Order, September 14 Contempt Order, and Chapter 11 Trustee Order
are GRANTED. The motion to dismiss the December 5 Contempt Order is GRANTED in part
and DENIED in part. Upon consideration of the merits of the December 5 Contempt Order, the
Court AFFIRMS the decision of the bankruptcy court.
The Court has subject matter jurisdiction pursuant to 28 U.S.C. § 158(a) and Federal Rule
of Bankruptcy Procedure 8001.
BACKGROUND
Debtor-appellants were the owners of a residential apartment complex known as 2801
Fillmore Avenue, 3001 Avenue R, and 2719 Fillmore Avenue, Brooklyn, New York (the
“Property”). (Doc. #8-1). When debtors filed voluntary petitions for relief under Chapter 11 of
Title 11 the United States Code, appellee GECMC asserted a claim in excess of $40 million.
The claim was based on a $31,000,000 loan evidenced by a note and secured by a mortgage and
an assignment of leases and rents encumbering the Property, all dated February 15, 2007 (the
“loan documents”). (Id.). Debtors contested the validity of the claim, arguing GECMC never
proved it obtained ownership of the loan documents. Overruling debtors’ objections, the
GECMC 2007 C-1 Burnett Street, LLC for Entry of an Order (I) Compelling the Debtors’ New
Counsel (Arnold E. DiJoseph, III) to Comply with the Chapter 11 Plan, Confirmation Order and
the August 10, 2012 Order, (II) Finding Such New Counsel in Contempt of Court, and (III)
Imposing Sanctions, dated September 14, 2012, (Doc. #325) (the “September 14 Contempt
Order”); the Order Directing the United States Trustee to Appoint a Chapter 11 Trustee, dated
September 14, 2012, (Doc. #327) (the “Chapter 11 Trustee Order”); and the Order Denying in
Part and Granting in Part Emergency Motion of GECMC 2007 C-1 Burnett Street, LLC for Entry
of an Order (I) Finding the Debtors and Victor Dedvukaj in Contempt of Court and (II) Directing
the Immediate Incarceration of Victor Dedvukaj, dated December 5, 2012, (Doc. #366) (the
“December 5 Contempt Order”).
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bankruptcy court approved a Chapter 11 plan requiring the debtors to turn over the Property to
GECMC. This appeal followed.
I. Origin of the Loan Documents
On February 15, 2007, Hoti Enterprises, LP (“Hoti”) and Deutsche Bank Mortgage
Capital, L.L.C. (“Deutsche Bank”) executed the loan documents. (See Docs. #34.1 ¶ 15, 179.7,
179.8, and 179.12). GECMC contends the loan documents were then assigned to U.S. Bank
National Association, as successor to Wells Fargo Bank, N.A., as Trustee (“Wells Fargo”), for
the Registered Holders of GE Commercial Mortgage Corporation, Commercial Mortgage Pass-
Through Certificates, Series 2007-C1 (the “trust”), by assignments dated May 8, 2007. GECMC
further contends the loan documents were then assigned to GECMC on or about February 6,
2009. (Doc. #8.1).
II. The State Court Foreclosure Action
On November 1, 2008, nearly two years before the debtors petitioned for bankruptcy
relief, GECMC alleges the debtors defaulted on the $31,000,000 loan. On February 27, 2009,
GECMC commenced a foreclosure action in New York Supreme Court, Kings County. (Doc.
#19). By order dated March 16, 2009, the state court appointed a receiver to operate and manage
the property. (Id.).
III. Bankruptcy Court Proceedings
On October 12, 2010, the debtors filed voluntary petitions for relief under Chapter 11.
Immediately thereafter, GECMC moved for an order allowing the receiver to remain in
possession and control of the property (Doc. #10), and for an order lifting the automatic stay so it
could continue to pursue its foreclosure action. (Doc. #24.1). Debtors also moved for various
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forms of relief including the ability to use the rents generated from the Property, i.e. the cash
collateral. (Doc. #34.1).
On December 22, 2010, the bankruptcy court entered an order approving a stipulation
between the Debtors and GECMC authorizing the use of cash collateral during the chapter 11
proceeding and allowing the receiver to remain in possession and control of the property (“Cash
Collateral Order”). (Doc. #43). The Cash Collateral Order also provided a “90 day challenge
period” during which the debtors could bring an adversary proceeding contesting the validity,
enforceability, or priority of GECMC’s claim. (Id. ¶ 7). If the debtors did not challenge the
claim during the ninety day period, then upon expiration of the period, the debtors would be
deemed to have “acknowledge[d] that [GECMC] holds a perfected valid first priority secured
claim . . . which is not subject to defense, counterclaim or off-set.” (Id. ¶ 3).
Debtors did not challenge GECMC’s claim during the ninety-day period set forth in the
Cash Collateral Order. (Doc. #212 at 10:4-10).3
IV. Bankruptcy and State Court Foreclosure Proceedings Proceed Simultaneously
Debtors having not challenged the validity of GECMC’s claim, on January 18, 2011, the
bankruptcy court lifted the automatic stay to permit GECMC to proceed with the state court
foreclosure proceedings. (Doc. #61). Thereafter, GECMC pursued both the state court
foreclosure action and confirmation of a Chapter 11 plan in bankruptcy court that would provide
3 Debtors assert the Cash Collateral Order was “unusual” for several reasons. The Court
does not address these issues because as debtors acknowledge, the issue of whether the Cash
Collateral Order was properly decided is not the subject of this appeal. As explained further
below, debtors moved for reconsideration of the Cash Collateral Order and that motion was
denied. Debtors appealed the order denying the motion for reconsideration. That appeal has
been decided and affirms the bankruptcy court’s decision. In re Hoti Enterprises, L.P., 2012 WL
6720378 (S.D.N.Y. Dec. 27, 2012).
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for the transfer of the Property to GECMC. (See Doc. #114, Chapter 11 Plan Submitted by
GECMC, dated December 15, 2011).
A. Debtors Request Relief from Cash Collateral Order
On March 7, 2012, fourteen months after entry of the Cash Collateral Order, debtors
moved for reconsideration of that order. (Doc. #126). The debtors requested the court “relieve
them of the effect of the acknowledgements and waiver provisions of the Cash Collateral
Stipulation,” which took effect after the ninety-day period passed in January 2011, so that
debtors could adjudicate the validity of GECMC’s claim. (Doc. #126.2 at ¶ 2). The debtors’
principal argument was that there were document forgeries and problems with the chain of title.
(Doc. #126.2).
On March 29, 2012, GECMC responded to debtors’ motion denying any fraud or
wrongdoing and asserting the request was untimely and procedurally improper. (Doc. #152.1 at
pp. 2-3).
B. State Court Dismisses Foreclosure Action
Meanwhile, on April 4, 2012, the state court entered an order dismissing the foreclosure
action. The court held GECMC did not have standing to bring the foreclosure action because it
was not authorized to do business in New York. See GECMC 2007-C1 Burnett St., LLC v. Hoti
Enters., LP, No. 5006/2009, slip op. at 2-3 (N.Y. Sup. Ct. Apr. 4, 2012). GECMC moved for
reconsideration.
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C. Bankruptcy Court Denies Motion for Reconsideration of Cash Collateral Order
and Denies Debtors’ Objections to GECMC’s Chapter 11 Plan
Back in bankruptcy court, on April 26, 2012, to further rebut debtors’ allegations of fraud
and forgery with respect to the loan documents, GECMC submitted “confirmatory documents”4
by German American Capital Corporation, as successor in interest to Deutsche Bank. GECMC
argued these documents confirm that the loan documents were properly assigned by Deutsche
Bank to Wells Fargo effective in May 2007. (Doc. #179.1).
On May 3, 2012, the bankruptcy court held a confirmation hearing on GECMC’s
proposed Chapter 11 plan and also addressed debtors’ motion for reconsideration of the Cash
Collateral Order. (Doc. #212). The bankruptcy court first denied debtors’ motion for
reconsideration. The court concluded that “GECMC’s supplemental memorandum in which it
states and attaches exhibits supporting the statement that Deutsche Bank and [GECMC] have
corrected what the debtor contends was a defect in the chain of title render[ed] the dispute
moot.” (Id. at 16:1-6). The court also concluded that the Cash Collateral Order was “a final
word that [was] not susceptible to reconsideration and vacature under Bankruptcy Rule 9024.”
(Id. 18:21-24). Because the Cash Collateral Order was valid and binding, and because no party
challenged GECMC’s lien within the ninety-day period, the Court determined “GECMC in fact
is the holder of a secured claim, the note and the mortgage.” (Id. at 19:3-11). On May 16, 2012,
the bankruptcy court entered an order denying debtors’ motion and incorporating the May 3,
2012, bench ruling. (See Doc. #210).
With respect to the Chapter 11 plan, the bankruptcy court considered and overruled each
of debtors’ objections. (See Doc. #212 at 63:7-12; 70:24-71:6). The bankruptcy court then
4 These documents included a Confirmatory Allonge, Confirmatory Assignment of
Mortgage, and Confirmatory Assignment of Leases and Rents, each dated April 23, 2012.
(Docs. #179.7, 179.8, and 179.9).
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adjourned the hearing on confirmation of the plan to June 14, 2012, so GECMC could address
certain issues raised by the Internal Revenue Service. (Id. at 71:6-7).
D. State Court Denies GECMC’s Motion for Reconsideration of Dismissal of
Foreclosure Action
On June 13, 2012, the state court, by the Honorable Yvonne Lewis, J.S.C., denied
GECMC’s motion for reconsideration of the dismissal of the foreclosure action and adhered to
its earlier dismissal order. (Doc. # 246). The holding of this decision lies at the heart of this
dispute.
The state court made clear that “[t]he question squarely before this Court [was] whether
GECMC ha[d] standing to maintain this lawsuit.” GECMC 2007-C1 Burnett St., LLC v. Hoti
Enters., LP, Index No. 5006/2009, slip op. at 2 (N.Y. Sup. Ct. June 13, 2012). Relying on U.S.
Bank, N.A. v. Collymore, 68 A.D.3d 752 (2d Dep’t 2009), the court explained that “[i]n a
mortgage foreclosure action, a plaintiff has standing where it is both the holder or assignee of the
subject mortgage and the holder or assignee of the underlying note at the time the action is
commenced.” GECMC 2007-C1 Burnett St., LLC v. Hoti Enters., LP, at 2-3. The burden rested
with GECMC to “show/prove the chain of title in the assignments” of the loan documents. Id.
at 3.
The court considered GECMC’s confirmatory documents and the bankruptcy court’s
May 3, 2012, ruling that GECMC’s confirmatory documents rendered debtors’ arguments
concerning the chain of title moot. The state court, however, determined that “the documents
which GECMC labels confirmatory are not sufficient to establish title or a proper assignment
from Deutsche Bank.” Id. at 4. The court was not satisfied that the confirmatory allonge showed
“the assignment itself was properly done and actually signed by the Director, Michelle
Leighton,” id., nor could GECMC “fix it by saying that ‘as of April 23, 2012, the parties wish to
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confirm the actual and legal transfer of the note from the assignor to the assignee.’” Id. at 5.
Additionally, the court found an open question as to whether there was a missing link in the
chain of assignments. Id.
The state court, therefore, concluded “GECMC was not the assignee of the Hoti
mortgage/note at the time the foreclosure proceeding was filed.” Id.
E. Bankruptcy Court Confirms Chapter 11 Plan
The next day, on June 14, 2012, the bankruptcy court held a final confirmation hearing on
GECMC’s proposed Chapter 11 plan. In order to confirm GECMC’s proposed plan, the
bankruptcy court needed to be satisfied that GECMC did, in fact, hold a valid and secured claim.
Thus, the court solicited arguments from both GECMC and the debtors as to whether Justice
Lewis’s June 13, 2012, decision affected the confirmation of the Chapter 11 plan. (Doc. #281 at
36:9-50:16). The bankruptcy court concluded the state court decision did not prevent it from
confirming the Chapter 11 plan. Accordingly, the bankruptcy court confirmed the plan and, on
June 19, 2012, entered the Confirmation Order. (Doc. #243).
On June 29, 2012, pursuant to the plan and Confirmation Order, the Property was
transferred to GECMC. (Altman Decl. ¶ 5).5 That same day, debtors filed a motion for
reconsideration of the Confirmation Order or in the alternative for a stay pending appeal.
(Doc. #251). Debtors’ argued the state court’s June 13, 2012, order determined that GECMC’s
interest in the Property was not properly perfected and that principles of comity and federalism
required the bankruptcy court to defer to that holding. (Doc. #251).
5 Declaration of Steven Altman in Support of Appellee 2007 C-1 Burnett Street, LLC’s
Brief in Opposition to Appeal (Doc. #10 on docket 12-cv-8030).
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F. Bankruptcy Court Denies Motion for Reconsideration of Confirmation Order
At a July 12, 2012, hearing, the bankruptcy court denied debtor’s motion for
reconsideration of the Confirmation Order. (Doc. #334 at 17:22-24).
The bankruptcy court rejected GECMC’s argument that the request for reconsideration
was constitutionally and equitably moot because the plan had been substantially consummated.
(Id. at 17:20-22). The court agreed that the plan had been substantially consummated in that the
primary asset of the debtor had been transferred on June 29, 2012, and that GECMC had paid
most if not all of the payments required to be paid under the plan. (Id. at 16:7-12). The court
further recognized the “strong presumption that an appeal of an unstayed order is moot.” (Id. at
16:2-4 (citing In re: Shadow Gay Corp., 988 F.2d 322, 325 (2d Cir. 1993)). Nonetheless, the
court concluded that the confirmation order was not equitably or constitutionally moot “given the
relative ease with which the substantial conservation of the plan could be undone.” (Id. at 17:12-
15). The court explained that this was true “because this has always been a case with very few
real parties in interest beyond the professionals and focused almost exclusively on the disputes
between GECMC on the one hand and the debtor on the other.” (Id. at 17:15-19).
Turning to the merits of the motion, the bankruptcy court determined that the only basis
for considering debtors’ motion brought pursuant to Bankruptcy Rule 9023 and Federal Rule of
Civil Procedure 59 was that the court made a clear error or that modification was needed to
prevent manifest injustice. (Id. at 18:23-19:1).
The court re-examined the state court’s June 13, 2012, decision and concluded the
bankruptcy court made no clear error. (Id. at 25:2-6). First, the bankruptcy court reasoned that
the legal issue before the state court differed from that before the bankruptcy court. Therefore,
the state court’s June 13, 2012, decision did not conflict with the bankruptcy court’s conclusion
reached on May 3, 2012, that GECMC had an allowed secured claim. Specifically, the
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bankruptcy court explained that whereas the issue before the state court was whether “at the time
of the commencement of the foreclosure proceeding in 2009 GECMC had standing to seek
foreclosure,” the issue before the bankruptcy court was whether “at the time of the confirmation
of the plan [] GECMC owned a secured claim against the debtor.” (Id. at 22:1-7) (emphasis
added).
Since the filing of the foreclosure action in 2009, two things had happened: (1) the
bankruptcy court entered the Cash Collateral Order, and (2) GECMC filed confirmatory
documents. The bankruptcy court’s May 3, 2012, determination that GECMC had a valid,
secured claim was based in part on both of those things. The bankruptcy court noted the state
court did not address the Cash Collateral Order. The bankruptcy court reasoned that that
omission supported its view that each court was addressing a different issue because the state
court would only have needed to address the Cash Collateral Order if it was making a ruling as to
GECMC’s ownership for a time period after the commencement of the foreclosure proceedings.
(Id. at 22:11-16).
In other words, the bankruptcy court read the state court decision as limited to whether
GECMC demonstrated ownership of the note and mortgage (i.e., had standing) at a particular
period in time; namely, at the commencement of the foreclosure action in 2009. The bankruptcy
court concluded that a determination by the state court that GECMC did not adequately
demonstrate ownership in 2009, however, did not conflict with determinations by the bankruptcy
court that GECMC later demonstrated ownership (i.e., because debtors waived the issue by not
challenging GECMC’s claim during the ninety-day period or because the confirmatory
documents established GECMC’s ownership).
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Additionally, the bankruptcy court determined, for purposes of confirmation of the plan,
that the Cash Collateral Order was final and binding for res judicata purposes. (Id. at 22:20-23:9
(citing Arizona v. California, 530 U.S. 392, 405 (2000), for the proposition that the Cash
Collateral Order fell within an exception to the rule that issue preclusion does not lie with respect
to a stipulation or agreed order because the Cash Collateral Order “specifically contemplated
barring litigation” on the validity of GECMC’s secured claim)).
The bankruptcy court rejected debtors’ argument that the Cash Collateral Order was
procured by fraud, particularly because (1) debtors’ “representatives were present in court when
the cash collateral stipulation was approved and did not oppose its entry” (id. at 24:1-3), and (2)
debtors did not seek to vacate the order for over two years even though all the arguments they
raised were “available to them and in fact considered by them at the time the [C]ash [C]ollateral
[O]rder was entered into as well as 90 days later when the investigation period expired and the
stipulation with regard to the validity of GECMC’s claim became binding.” (Id. at 24:4-11).
Finally, the bankruptcy court declined to issue a stay pending appeal in light of its
determination that (1) the matter was not moot, the reasons for which also supported a finding
that debtors would not suffer irreparable harm, and (2) there was not a substantial possibility of
success on appeal. (Id. at 26:4-14).
V. Debtors Appeal Order Denying Motion to Reconsider Cash Collateral Order
As previously stated, in addition to appealing the bankruptcy court’s Confirmation Order
and Reconsideration Order, debtors also appealed the order denying debtors motion for
reconsideration of the Cash Collateral Order. That appeal was heard and decided by the
Honorable Cathy Seibel. Judge Seibel determined that the bankruptcy court did not abuse its
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discretion in denying debtors’ motion. In re Hoti Enterprises, L.P., 2012 WL 6720378, at *4
(S.D.N.Y. Dec. 27, 2012). Accordingly, the Cash Collateral Order is law of the case.
VI. Debtors Appeal the Confirmation Order and the Reconsideration Order
On July 27, 2012, debtors filed a notice of appeal of the Confirmation Order and the
Reconsideration Order. Debtors did not seek a stay of the Confirmation Order from this Court.
VII. Contempt Orders
After entry of the Confirmation Order, the bankruptcy court sanctioned debtors and
Victor Dedvukaj, a 10% limited partner of Hoti Enterprises and president of Hoti Management,
for engaging in conduct that violated the Confirmation Order.
A. August 10 Contempt Order (Doc. #302) (Subject of Civil Action 12-cv-8759)
The Confirmation Order, among other things, provided for the transfer of the Property to
GECMC and the recording of the deed. (See Doc. #240 ¶ 8). In fact, paragraph 8 required the
debtors to “take any and all actions necessary or requested by GECMC to effectuate” that
transfer. (Id.). Paragraph 22, labeled “Injunction,” also provided, in relevant part, that “[u]pon
entry of this Confirmation Order . . . the Debtors, and other parties in interest, along with their
respective present or former employees, agents, officers, directors, or principals, shall be
enjoined from taking any actions to interfere with GECMC’s . . . implementation or
consummation of the Plan.” (Id. at ¶ 22) (emphasis added).
However, on July 13, 2012, the day after the bankruptcy court denied the motion for
reconsideration of the Confirmation Order, the debtors filed with the state court an ex parte
application for a temporary restraining order (“TRO”) to enjoin the New York City Office of the
City Register from recording the deed to the Property. Mr. Dedvukaj submitted an affidavit in
support of the application. (Doc. #288, Ex. C). The state court issued the TRO on July 13, 2012,
and prohibited the City Register from recording the deed transferring ownership of the Property
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“until the final resolution of the issue of plaintiff’s standing by the United States Court of
Appeals for the Second Circuit of New York on ultimate appeal of the United States bankruptcy
court’s June 19, 2012 Order, and any order of the United States District Court for the Southern
District of New York upholding same.” (Id. at Ex. C).
In response, GECMC moved the bankruptcy court to compel the debtors to comply with
the Chapter 11 plan and Confirmation Order and to impose sanctions. At a hearing on the
motion on August 9, 2012, the bankruptcy court found the Confirmation Order was clear and
unambiguous in requiring debtors to effectuate the transfer of the Property (Doc. #335 at 30:11-
19), and the proof of non-compliance was clear and convincing: “Nothing would constitute a
greater interference with the implementation or consummation of the plan than obtaining an
order prohibiting the recordation of the transfer of the property which was the whole purpose of
the plan as had been litigated in several years before this Court.” (Id. at 26:5-9). Finally, the
court found debtors were not diligent in attempting to comply with the Confirmation Order.
Accordingly, the bankruptcy court granted the motion and found both the debtors and Mr.
Dedvukaj were in contempt for “violating the Confirmation Order by directing the filing and
prosecution of the TRO and preliminary injunction proceeding in state court.” (Doc. #302). The
court further ordered debtors and their counsel to take action to have the TRO vacated, and to
cease prosecution and withdraw the application for a preliminary injunction. (Id. ¶¶ 3-4).
Finally, debtors and Mr. Dedvukaj were sanctioned and ordered to pay all costs and expenses,
including attorneys’ fees, incurred by GECMC in connection with defending against the TRO
proceedings in state court. (Id. ¶ 5).
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B. September 14 Contempt Order (Doc. #325) (Subject of Civil Action 12-cv-8758)
and Chapter 11 Trustee Order (Doc. #327) (Subject of Civil Actions 12-cv-8757)
Following the entry of the August 10 Contempt Order, debtors’ counsel in the state court
proceedings complied with the bankruptcy court’s order and moved by order to show cause to
dismiss the injunction proceeding. (Doc. #337 at 39:21-23). However, the debtors, through Mr.
Dedvukaj, fired that counsel and hired new counsel, Arnold DiJoseph, Esq. Mr. Dedvukaj then
filed an affidavit in reply to GECMC’s opposition to the request for a preliminary injunction.
(Id. at 39:23-40:6). The hearing on the motion for a preliminary injunction was adjourned from
September 6 to September 14, 2012, and consolidated with the request by debtors’ prior counsel
to dismiss the action. (Id. at 40:6-10).
GECMC again moved for sanctions in the bankruptcy court.
At a hearing on September 13, 2012, the bankruptcy court adhered to its initial
conclusion that action taken in furtherance of the state court TRO and preliminary injunction
proceedings violated the Confirmation Order and enjoined Mr. DiJoseph and any potential
further counsel for the debtors from seeking such relief. (Id. at 45:24-46:7). The court further
found that Mr. Dedvukaj continued to be in contempt of the bankruptcy court’s orders.
Nonetheless, the court declined to incarcerate him because the court believed that “incarceration
would merely punish him and not result in what is required here in an order of civil contempt,
which is a purging of the contempt.” (Id. at 47:18-21).
Finally, the court found the circumstances warranted the appointment of a trustee under
Section 114(a) of the Bankruptcy Code based on both (1) “dishonesty by debtor’s management”
including the taking of security deposits and failure to return the same (Id. at 49:4-6), and (2) the
“clear and willful contempt of the Court’s orders.” (Id. at 49:7-8). Accordingly, the court
directed the appointment of a trustee. (Id. at 50:13-17).
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Thereafter, the bankruptcy court entered the September 14 Contempt Order, which, in
relevant part, enjoins counsel for the debtors from taking further action in the state court TRO
proceedings (Doc. #325), and the Chapter 11 Trustee Order, which, in relevant part, directs the
United States Trustee for the Southern District of New York to appoint a chapter 11 trustee and
provides that the debtors’ “directors, officers, managers, principals, members, and equity
holders, including, without limitation, Victor Dedvukaj, shall have no authority or right to take
any action” on behalf of the debtors. (Doc. #327).
C. December 5 Contempt Order (Doc. # 366) (Subject of Civil Action 13-cv-235)
Despite the state court’s July 13, 2012 TRO, the Office of the City Register recorded the
deed transferring the Property from debtors to GECMC. (See Doc. #342, Ex. A, Affidavit of
Victor Dedvukaj).
When this recording came to Mr. Dedvukaj’s attention, he informed Justice Lewis by
letter dated October 10, 2012, and notwithstanding the bankruptcy court’s prior orders, on
October 16, 2012, Mr. Dedvukaj sought and obtained another ex parte TRO from the state court
enjoining GECMC from transferring the Property. The application for the TRO was supported
by affidavits signed by Mr. Dedvukaj. (See id.).
A hearing was held in state court on the debtors’ request for a preliminary injunction on
November 6, the request was granted on November 7, and an amended order was entered on
November 14, 2012. (Doc. #357). The state court’s order expunged the recording of the deed by
the City Register’s Office, continued the TRO restraining GECMC from transferring ownership
of the Property, and restrained the City Register’s Office from transferring or recording a deed of
transfer. (Id.).
Thereafter, on a motion made by GECMC, the bankruptcy court entered the December 5
Contempt Order that, among other things, held debtors and Mr. Dedvukaj in contempt for
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violating the bankruptcy court’s orders including the Confirmation Order, the August 10
Contempt Order, the September 14 Contempt Order, and the Chapter 11 Trustee Order. (Doc.
#366). Debtors and Mr. Dedvukaj were sanctioned and ordered:
to pay all actual damages, including reasonable costs, expenses,
and attorneys’ fees, incurred [through that date] and to be incurred
in the future by GECMC in connection with the July 13 TRO, the
October 16 TRO, the order entered by the state court on November
7, 2012 (as amended), and any and all related injunctive
proceedings in state court, appellate court proceedings and
proceedings in this Court to enforce the Court’s prior orders or
seek relief based on the Debtors and Victor Dedvukaj’s contempt
of Court . . . provided, that, as stated by the Court on the record of
the Hearing, the Debtors are not prohibited from defending any
appeals by GECMC, its successors and assigns of any of the state
court’s injunctions or the November 7, 2012 order, as amended.
(Doc. #366 ¶ 3).
DISCUSSION
The Federal Rules of Bankruptcy Procedure provide that a district court “may affirm,
modify, or reverse a bankruptcy judge’s judgment, order, or decree.” Fed. R. Bankr. P. 8013; In
re Loews Cineplex Entm’t Corp., 2004 WL 875819, at *2 (S.D.N.Y. 2004). The Court reviews
a bankruptcy court’s conclusions of law de novo and its findings of fact under a clearly
erroneous standard. Id. The standard of review for the denial of a motion for reconsideration is
abuse of discretion. Bank of Am. Nat. Ass’n v. AIG Fin. Prods. Corp., 2013 WL 1352520, at *3
(2d Cir. Apr. 5, 2013) (citing Empresa Cubana del Tabaco v. Culbro Corp., 541 F.3d 476, 478
(2d Cir.2008)).
I. Appeal of the Confirmation Order
A. Equitable Mootness
GECMC invokes the doctrine of equitable mootness arguing the “substantial
consummation of the Plan and the implementation of the various transactions in furtherance
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thereof render” this appeal moot. “Equitable mootness is a prudential doctrine that is invoked to
avoid disturbing a reorganization plan once implemented.” Deutsche Bank AG v. Metromedia
Fiber Network, Inc. (In re Metromedia Fiber Network, Inc.), 416 F.3d 136, 144 (2d Cir. 2005).
“An appeal should . . . be dismissed as moot when, even though effective relief could
conceivably be fashioned, implementation of that relief would be inequitable.” Official Comm.
of Unsecured Creditors of LTV Aerospace and Def. Co. v. Official Comm. of Unsecured
Creditors of LTV Steel Co. (In re Chateaugay Corp.), 988 F.2d 322, 325 (2d Cir. 1993).
“Because equitable mootness bears only upon the proper remedy, and does not raise a threshold
question of our power to rule, a court is not inhibited from considering the merits before
considering equitable mootness.” In re Metromedia Fiber Network Inc., 416 F.3d at 144.
The Court has reviewed the bankruptcy court’s Reconsideration Order and agrees the
plan has been substantially consummated. See (Doc. #334 at 16:7-12); see also 11 U.S.C. §
1101; In re Indu Craft Inc., 2012 WL 3070387, at *13 (S.D.N.Y. July 27, 2012) (“whether a plan
has been substantially consummated is a factual finding that is reviewed on appeal for clear
error”). Thus, a presumption of mootness applies, and the appeal “should be dismissed unless
several enumerated requirements” as set forth in Frito-Lay, Inc. v. LTV Steel Co., Inc. (In re
Chateaugay Corp.), 10 F.3d 944, 952-53 (2d Cir. 1993) (“Chateaugay Corp. II”) are satisfied. In
re Metromedia Fiber Network Inc., 416 F.3d at 144.
Substantial consummation will not moot an appeal if the following five circumstances
exist: (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
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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 a stay of execution of the objectionable order. See Chateaugay Corp. II,
10 F.3d at 952-53 (internal citations and quotations omitted).
“A chief consideration under Chateaugay II is whether the appellant sought a stay of
confirmation. If a stay was sought, we will provide relief if it is at all feasible’” unless it would
create an unmanageable situation for the bankruptcy court. In re Metromedia Fiber Network
Inc., 416 F.3d at 144 (quoting Chateaugay II, 10 F.3d at 953).
The Court finds the question of whether this appeal is equitably moot is a close call, but
concludes, under the facts and circumstances of this case, the appeal is not moot. First, debtors
sought a stay of the Confirmation Order before the bankruptcy court, but not in this Court. The
Court also agrees with GECMC that the second factor does not apply in these circumstances.
With respect to the remaining factors, the Court has reviewed the bankruptcy court’s July
12, 2012, opinion on the record, and agrees with the court’s conclusion that consummation of the
plan could be undone. See (Doc. #334 at 17). Although nearly ten months have passed since the
plan was confirmed and consummated, and GECMC has no doubt expended significant sums to
preserve, protect and invest in the property, including entering into lease agreements with new
tenants, (see Altman Decl.), as the bankruptcy court explained, this case involves few real parties
in interest and essentially involves disputes between GECMC and the debtor. The Court has
some concerns as to whether tenants who have entered into new lease agreements at the Property
have received notice of this appeal or have been provided an opportunity to participate; however,
it is not clear how they would be adversely affected by a modification of the plan that returned
ownership to the debtors.
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Given the facts of this case, the Court concludes relief could conceivably be fashioned
that would not “create an unmanageable, uncontrollable situation for the bankruptcy court.” See
Chateaugay Corp. II, 10 F.3d at 953. Accordingly, the Court finds debtors’ appeal of the
bankruptcy court’s Confirmation Order and Reconsideration Order is not equitably moot.
B. Res Judicata, Collateral Estoppel, and Rooker-Feldman
The sole basis upon which debtors challenge the entry of the Confirmation Order is the
claim that the state court determined GECMC does not have a valid security interest in the
Property that was turned over to it under the plan, and that determination was binding on the
bankruptcy court. Thus, debtors argue the principles of res judicata, collateral estoppel, and the
Rooker-Feldman doctrine6 bind the bankruptcy court to the state court’s finding that GECMC
does not have a properly perfected security interest. The Court disagrees.
1. Rooker-Feldman
The Rooker-Feldman doctrine has no applicability to this case. That doctrine applies in
“cases brought by state-court losers complaining of injuries caused by state-court judgments
before the district court proceedings commenced and inviting district court review and rejection
of those judgments.” Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005).
Here, the federal bankruptcy action was brought by debtors, the “winners” of the state court
proceedings, long before the state court judgment was obtained. Indeed, the state and federal
actions proceeded as parallel actions. Id. at 292 (“When there is parallel state and federal
litigation, Rooker–Feldman is not triggered simply by the entry of judgment in state court.”).
6 The Rooker-Feldman doctrine is derived from two cases: Rooker v. Fid. Trust Co., 263
U.S. 413 (1923), and Dist. of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983).
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2. Res Judicata and Collateral Estoppel
The Court also finds that neither res judicata nor collateral estoppel precluded entry of the
Confirmation Order. These doctrines apply to prevent parties from relitigating claims or issues
that have already been determined by a court of competent jurisdiction. See Burgos v. Hopkins,
14 F.3d 787, 789 (2d Cir. 1994). Res judicata provides that “a final judgment on the merits of an
action precludes the parties or their privies from relitigating issues that were or could have been
raised in that action.” Id. (quoting Allen v. McCurry, 449 U.S. 90, 94 (1980). “Under collateral
estoppel, once a court has decided an issue of fact or law necessary to its judgment, that decision
may preclude relitigation of the issue in a suit on a different cause of action involving a party to
the first case.” Id. (quoting Allen v. McCurry, 449 U.S. at 94). Because the Court agrees with
the bankruptcy court’s reading of Justice Lewis’s June 12, 2012, decision – namely, that the legal
issue before each court was different (and, thus, any factual determinations made were different)
– the state court decision did not have preclusive effect on the bankruptcy court under either
doctrine.
The Court rejects debtors’ alternative reading of the state court decision. Under that
reading, the state court made a broader finding that GECMC did not establish, even as of June
12, 2012, that it is the legitimate holder of the note and mortgage, and, therefore, by operation of
logic, it did not establish its ownership as of the time it commenced the foreclosure lawsuit.
Although the Court understands how some of the language in the state court decision taken in
isolation could support such a reading, in context, the statements made concerning GECMC’s
confirmatory documents appear to be focused on whether GECMC could use those documents to
show that it owned the mortgage and note as of the commencement of the foreclosure action.
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Additionally, under the reading proposed by debtors, the state court would necessarily
have had to disavow both the Cash Collateral Order and the bankruptcy court’s prior May 3,
2012, decision that the confirmatory documents mooted the chain of title issue brought before
the bankruptcy court. But the state court did not do that. The state court decision does not
mention the Cash Collateral Order. And, although the state court considered Judge Drain’s May
3 ruling, it examined the May 3 ruling in the context of whether GECMC could use that ruling to
show GECMC had title as of the commencement of the foreclosure action.
In its argument that it has title GECMC addresses Hoti’s
contention that the allonge signed by Michelle Leighton as
Director of Wells Fargo was fraudulent by offering “confirmatory”
documents issued by GACC, the successor in interest to Deutsche
Bank as proof of its successful transfer and title. GECMC also
quotes the bankruptcy court’s statement on May 3, 2012 that “I
conclude that based upon GECMC’s supplemental memorandum
in which it states and attaches exhibits supporting the statement
that Deutsche Bank and it has corrected what the debtor [Hoti]
contends was a defect in the chain of title renders the dispute moot
in any event,” renders their obligation to show that they had title at
the commencement of the Lawsuit and therefore standing moot.
This Court believes that the documents which GECMC labels
confirmatory are not sufficient to establish title or a proper
assignment from Deutsche Bank.
GECMC 2007-C1 Burnett St., LLC v. Hoti Enters., LP, No. 5006/2009, slip op. at 4.
The state court rejected GECMC’s argument that the confirmatory documents could be
used in the state court proceedings the same way the bankruptcy court used them in the
bankruptcy proceedings. Thus, the bankruptcy court’s ruling as to the significance of the
confirmatory documents had no bearing on the issue before the state court. This Court
understands the state court to have concluded that for purposes of deciding the issue before the
state court – whether “they [GECMC] had title at the commencement of the Lawsuit” – the state
court “believe[d] that the documents which GECMC label[ed] confirmatory [were] not sufficient
to establish title or a proper assignment from Deutsche Bank.” Id.
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In short, given the clear language qualifying the state court’s holding to a finding that
GECMC did not have standing “at the commencement of the action,” which was expressed
throughout the state court decision, and the lack of language expressly disavowing legal
determinations made by the bankruptcy court, this Court agrees with the bankruptcy court that
the state court decision has no preclusive effect on the bankruptcy court.
3. Conclusion
Because the state court’s June 12, 2012, decision did not preclude the bankruptcy court
from adhering to its prior rulings, both in the Cash Collateral Order, and at the hearing on May 3,
2012, that GECMC possessed a valid and secured claim, the Court concludes that confirmation
of the Chapter 11 plan was appropriate and AFFIRMS the Confirmation Order.
II. Reconsideration Order
The court has reviewed bankruptcy court’s decisions and the record on appeal and for the
reasons set forth above the Court finds the bankruptcy court did not abuse its discretion in
denying debtors’ motion for reconsideration. The Court agrees that the only ground that could
have justified reconsideration in this case was the potential need to correct clear error or to
prevent manifest justice. Because there was no clear error or manifest injustice, the motion was
properly denied.
III. Contempt Orders
The Contempt Orders appealed from were filed by Victor Dedvukaj, principal of the
debtors. The notices of appeal initially appeared to be filed exclusively on behalf of debtors.
Upon closer examination, the Court now understands the appeals to have been filed by Mr.
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Dedvukaj on behalf of the debtors, himself, and in some cases individual general partners7 of the
debtors.
Appellants, through Mr. Dedvukaj, filed a brief in support of the appeal from the
December 5 Contempt Order (13-cv-235). No appeal briefs have been filed in support of the
appeals from any of the other Contempt Orders – the August 10 Contempt Order (12-cv-8759),
the September 14 Contempt Order (12-cv-8758), or the Chapter 11 Trustee Order (12-cv-8757).
GECMC, apparently interpreting these appeals to be brought solely on behalf of the
debtors, as the Court did, moved to dismiss each appeal because Mr. Dedvukaj, a non-lawyer,
may not represent the debtors. GECMC also moved to dismiss the three appeals filed in 2012 for
failure to timely file appeal briefs.
A. Standing As To Debtors
In federal court, “parties may plead and conduct their own cases personally or by
counsel.” 28 U.S.C. § 1654. “This provision authorizes only two types of representation: that by
an attorney admitted to the practice of law by a governmental regulatory body and that by a
person representing himself.” Berrios v. N.Y.C. Hous. Auth., 564 F.3d 130, 132 (2d Cir. 2009)
(internal quotation marks omitted). “Although § 1654 thus recognizes that an individual
generally has the right to proceed pro se with respect to his own claims or claims against him
personally, [t]he statute does not permit unlicensed laymen to represent anyone else other than
themselves.” Id. (internal quotation marks omitted).
In addition to prohibiting an individual from representing another individual, § 1654 also
prohibits an individual from representing corporations and partnerships. See Jones v. Niagara
7 Appeals of the August 10 Contempt Order, September 14 Contempt Order, and Chapter
11 Trustee Order appear to have been filed on behalf of the following individuals: Violeta
Dedvukaj, Marash Dedvukaj, Gjelosh Dedvukaj, and Maruka Dedvukaj.
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Frontier Transp. Auth., 722 F.2d 20, 22 (2d Cir. 1983) (“The rule that a corporation may litigate
only through a duly licensed attorney is venerable and widespread.”); Eagle Assocs. v. Bank of
Montreal, 926 F.2d 1305, 1310 (2d Cir. 1991) (“28 U.S.C. § 1654 prohibits a layperson from
appearing on behalf of a partnership.”). The reasons for requiring that a corporation appear
through an attorney
are principally that the conduct of litigation by a nonlawyer creates
unusual burdens not only for the party he represents but as well for
his adversaries and the court. The lay litigant frequently brings
pleadings that are awkwardly drafted, motions that are
inarticulately presented, [and] proceedings that are needlessly
multiplicative. In addition to lacking the professional skills of a
lawyer, the lay litigant lacks many of the attorney’s ethical
responsibilities, e.g., to avoid litigating unfounded or vexatious
claims.
Jones v. Niagara Frontier Trasnp. Auth., 722 F.2d at 22.
The Court agrees with GECMC that Hoti Enterprises, LP, is a partnership and Hoti
Realty Management Co., Inc., is a corporation, and therefore, Mr. Dedvukaj may not appear on
their behalf. Neither may Mr. Dedvukaj appear on behalf of other individuals.
At a conference held on February 14, 2013, the Court informed Mr. Dedvukaj that he
needed to retain counsel by March 8, 2013, for the debtors to proceed with these appeals. No
counsel appeared by March 8, 2013. Indeed, no counsel has appeared for debtors as of the date
of this decision more than six weeks past that deadline.
Instead, on March 1, 2013, Mr. Dedvukaj filed an application in each appeal requesting
additional time to retain counsel, Arnold DiJoseph, Esq., because he needed an order from the
bankruptcy court authorizing the retention of counsel on behalf of the debtors. Mr. Dedvukaj
represented that he had made an application to the bankruptcy court, but that his application
would not be heard until March 20, 2013. GECMC opposed the application and noted, among
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other things, that appellants only sought retention of counsel in three out of the four appeals
pending before this Court.
On March 20, 2013, the bankruptcy court denied debtors’ application without prejudice
because Mr. DiJoseph’s application did not comply with the disclosure requirements set forth in
Fed. R. Bankr. P. 2014(a). (Doc. #395).
On April 8, 2013, Mr. Dedvukaj made a second request for additional time to retain
counsel to appear on behalf of debtors. Mr. Dedvukaj represented that he made a renewed
application to the bankruptcy court for permission to retain Mr. DiJoseph; however, as of the
time of his submission, he had not been given a hearing date. GECMC also opposed this
application.
Although the Court is mindful of the need to afford pro se litigants latitude in presenting
their claims, see Triestman v. Fed. Bureau of Prisons, 470 F.3d 471, 474 (2d Cir. 2006) (per
curiam), and that “the right to appear pro se ‘should not be impaired by harsh application of
technical rules,’” see Caidor v. Onondaga County, 517 F.3d 601, 605 (2d Cir. 2008) (quoting
Edwards v. INS, 59 F.3d 5, 8 (2d Cir. 1995)), Mr. Dedvukaj must still comply with jurisdictional
and procedural requirements. See LoSacco v. City of Middletown, 71 F.3d 88, 92 (2d Cir. 1995)
(It is “especially true in civil litigation” that pro se litigants “are required to inform themselves
regarding procedural rules and to comply with them.”).
Here, the Court informed Mr. Dedvukaj of the requirement that debtors be represented by
counsel at the February 14, 2013, hearing and gave him a firm deadline by which to do so.8 No
8 The Court notes that the February 14 hearing was not the first time Mr. Dedvukaj learned
of the need for debtors to be represented by counsel. At a conference on a related appeal
concerning the Confirmation and Reconsideration Orders, at which Mr. Dedvukaj was present,
the Court expressed concern that there was no attorney of record on the appeals then pending on
the Sanction Orders. See Transcript of Record, 12-cv-8030, at 43:21-25 (Jan. 3, 2013) (“There is
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counsel has appeared for debtors and the Court finds no “excusable neglect” under Rule
6(b)(1)(B) would justify granting the requests for extensions.
First, the Court finds further delay will cause undue prejudice to GECMC. The Court has
concluded that the Confirmation and Reconsideration Orders were properly entered, and each of
these appeals arises from orders sanctioning debtors for violating the Confirmation Order by
impeding the transfer of the Property, which was the whole purpose of the plan. Further delay
on these appeals would continue to undermine enforcement of the Confirmation Order.
Second, the Court has thoroughly reviewed the record on appeal in each of these cases
and the decisions of the bankruptcy court, and finds no error, clear or otherwise, by the
bankruptcy court. Thus, the appeals appear to be meritless.
Third, the Court finds Mr. Dedvukaj has not pursued the retention of counsel diligently,
thereby causing unnecessary delay. GECMC correctly notes that appellants, in their renewed
application, have only asked the bankruptcy court to approve Mr. DiJoseph’s retention in
connection with three of the four appeals pending before this Court, despite GECMC’s having
pointed out this apparent oversight in response to Mr. Dedvukaj’s initial request for additional
time. (See Doc. #396 at 12). Thus, it is unclear whether debtors intend to retain counsel in
connection with the appeal of the August 10 Contempt Order (12-cv-8759), the violations of
which form part of the basis for each additional sanction order.
Even assuming the debtors intend to retain counsel for all of the Contempt Orders
appeals, they have not diligently pursued their application in bankruptcy court. At the March 20,
another problem, though, with the other appeals, which is they appear to have been filed pro se
on behalf of the corporate entity and the partnership, which, as we all know, those entities cannot
appear pro se. They have to appear through a lawyer.”); see also Transcript of Record, 13-cv-
235, at 7:25-8:3 (Feb. 14, 2013) (Mr. Dedvukaj confirmed his presence at the January 3, 2013,
conference).
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2013, hearing on the first application, Judge Drain informed Mr. Dedvukaj that the court would
promptly schedule another hearing if Mr. DiJoseph promptly filed his supplemental affidavit.
(Doc. #16, Ex. B at 10:20-22, 13-cv-235). However, Mr. DiJoseph did not promptly file a
supplemental affidavit. Debtors waited nearly three weeks to renew their request even though
this Court’s March 8, 2013, deadline had long since passed. Further, the application was not
made on an emergency or expedited basis. The Court is informed that the hearing on that
application is scheduled for June 6, nearly three months past the March 8 deadline.
Last, there is a significant question as to whether that application will be granted even
though Mr. DiJoseph has now filed a supplemental affidavit. At the March 20, 2013, hearing,
Judge Drain expressed concern that Mr. DiJoseph could not meet the standard for retention under
Section 327(a) of the Bankruptcy Code if he were to propose representing both debtors and Mr.
Dedvukaj personally because that might create an adverse interest. (Id. at 6-7). The renewed
application provides for just that dual representation. (See Doc. #14, 13-cv-235, DiJoseph Aff.
¶ 2).
Accordingly, Mr. Dedvukaj’s requests for additional time to retain counsel to appear on
behalf of debtors are DENIED, and the appeals of the Contempt Orders are dismissed to the
extent they are appealed on behalf of the debtors. The appeals of the Contempt Orders are also
dismissed to the extent they are appealed from on behalf of individuals other than Mr. Dedvukaj.
Finally, because the time to appeal each of the Contempt Orders has passed, the dismissal as to
debtors and individuals Violeta Dedvukaj, Marash Dedvukaj, Gjelosh Dedvukaj and Maruka
Dedvukaj is with prejudice.
Although Mr. Dedvukaj may not represent the debtors, or other individual general
partners, he can represent himself. Thus, to the extent the Contempt Orders appealed from
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concern sanctions against him individually, Mr. Dedvukaj may proceed. Based on a review of
each of the Contempt Orders appealed from, the Court finds the following orders involve rulings
directed at Mr. Dedvukaj individually; the August 10 Contempt Order (12-cv-8759), the Chapter
11 Trustee Order (12-cv-8757), and the December 5 Contempt Order (13-cv-235). The
September 14 Contempt Order (12-cv-8758) was not directed at Mr. Dedvukaj individually;
therefore, to the extent he purports to appeal that order on behalf of himself, that appeal is
dismissed with prejudice.
B. Failure to Prosecute
GECMC contends the appeals of the August 10 Contempt Order (12-cv-8759) and the
Chapter 11 Trustee Order (12-cv-8757) should also be dismissed because Mr. Dedvukaj failed
timely to file and serve briefs. The Court agrees.
Bankruptcy Rule 8009(a) provides, in relevant part, that the “appellant shall serve and
file a brief within 14 days after entry of the appeal on the docket” unless otherwise ordered by
the district court. Failure to timely file a brief is grounds for dismissal of the appeal. See
Balaber-Strauss v. Reichard (In re Tampa Chain Co., Inc.), 835 F.2d 54, 55 (2d Cir. 1987); Adler
v. BankPlus Mortgage Corp., 108 B.R. 435, 438 (S.D.N.Y. 1989) (dismissal appropriate where
appeal lacked merit and appeared to be “only the latest in a long series of dilatory tactics in both
the state and federal courts.” Whether dismissal is appropriate falls within the discretion of the
district court and will be affirmed unless the court has abused its discretion. In re Tampa Chain
Co., Inc., 835 F.2d at 55 (noting bad faith, negligence and indifference are proper bases for a
district court’s exercise of its discretion and declining to limit the list to those three bases).
The appeals of these decisions were docketed in the district court on December 3, 2012.
Mr. Dedvukaj never made an application for an extension of time to file briefs, and this Court
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did not excuse the filing of briefs or specify a different time limit for filing briefs. Therefore,
Mr. Dedvukaj was required to file his brief by December 17, 2012. He failed to do so.
Mr. Dedvukaj’s procedural default is not excused by his status as a pro se litigant.
LoSacco v. City of Middletown, 71 F.3d at 92. Particularly, where, as here, Mr. Dedvukaj has
already demonstrated he understood the need to timely file a brief as evidenced by the pro se
brief he filed in support of his appeal of the December 5 Contempt Order (13-cv-235).
Further, it now appears Mr. Dedvukaj intended to retain counsel to represent him in these
appeals, and, in fact, came to an agreement with Mr. DiJoseph with respect to that representation,
(see Doc. #14, 13-cv-235, DiJoseph Aff. ¶ 2). However, Mr. DiJoseph has never appeared on his
behalf. Instead, Mr. Dedvukaj has repeatedly filed applications for extensions of this Court’s
March 8, 2013, deadline for the appearance of counsel on behalf of the debtors because Mr.
Dedvukaj needed permission from the bankruptcy court to retain counsel for the debtors. Mr.
Dedvukaj has never argued, nor does the Court believe there is a basis to argue, that he needs
permission from the bankruptcy court to retain counsel for himself. Indeed, there is no
explanation in any of Mr. Dedvukaj’s applications of why he needs more time to have Mr.
DiJoseph appear on his behalf.
In short, there is no explanation for why Mr. Dedvukaj failed to file appeal briefs in three
out of the four appeals from the Contempt Orders. Based on this record, the Court finds either
Mr. Dedvukaj was negligent in failing to file briefs in support of his appeals, or the failure is an
effort to further delay enforcement of the Confirmation Order. Either way, the appeals from the
August 10 Contempt Order (12-cv-8759) and the Chapter 11 Trustee Order (12-cv-8757) are
dismissed.
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C. December 5 Contempt Order (13-cv-235)
The December 5 Contempt Order was entered following Mr. Dedvukaj’s actions taken to
obtain a second ex parte TRO in state court. The order held Mr. Dedvukaj in contempt for
violating numerous bankruptcy court orders including the Confirmation Order, the August 10
Contempt Order, the September 14 Contempt Order, and the Chapter 11 Trustee Order. (Doc.
#366). Additionally, Mr. Dedvukaj was ordered to pay actual damages, including reasonable
costs, expenses and attorneys’ fees incurred by GECMC in relation to the state court TRO
proceedings. (Doc. #366 at ¶ 3).
On appeal, Mr. Dedvukaj does not argue that he did not obtain a second ex parte TRO in
state court in violation of the bankruptcy court’s orders, or that the bankruptcy court erred in its
application of the law in the December 5 Contempt Order. Rather, Mr. Dedvukaj directs the
majority of his arguments towards challenging the validity of the Confirmation Order and other
contempt orders he is charged with violating. Because none of these arguments is properly
before the Court on this appeal, they are not grounds for reversing the December 5 Contempt
Order. Even if these arguments are properly before the Court, they all lack merit.
1. Confirmation Order
Mr. Dedvukaj’s arguments with respect to the Confirmation Order are a rehash of the
same arguments this Court has already rejected in the direct appeal of the Confirmation and
Reconsideration Orders. The Court will not revisit that ruling here. Suffice it to say, the
Confirmation Order was valid and binding upon debtors and Mr. Dedvukaj.
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2. Injunctions Issued in Other Contempt Orders
As to the other Contempt Orders, which enjoined Mr. Dedvukaj from taking action in
violation of the Confirmation Order, Mr. Dedvukaj argues GECMC did not demonstrate that the
requirements for obtaining injunctive relief were met. The Court disagrees.
Ordinarily, “[a] plaintiff seeking a preliminary injunction must establish that he is likely
to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary
relief, that the balance of equities tips in his favor, and that an injunction is in the public
interest.” Winter v. Natural Resources Defense Council, Inc., 129 S.Ct. 365, 374 (2008). Courts
have discretion, however, incident to their inherent power, to impose a variety of sanctions for
conduct that abuses the judicial process. See Chambers v. NASCO, Inc., 501 U.S. 32, 35, 44-45
(1991) (affirming sanction assessing attorney’s fees and related expenses for a party’s bad-faith
conduct); see also Solow v. Kalikow (In re Kalikow), 602 F.3d 82, 96 (2d Cir. 2010) (“The
statutory contempt powers given to a bankruptcy court under §105(a) complement the inherent
powers of a federal court to enforce its own order.”).
Here, the Contempt Orders entered by the bankruptcy court did not enjoin the state court
proceedings. Rather, they enforced the injunction in paragraph 22 of the Confirmation Order,
which prohibited debtors and Mr. Dedvukaj from taking actions to interfere with GECMC’s
implementation of the plan. The bankruptcy court had the inherent power to enforce its own
order.
Even if the Contempt Orders could be construed as issuing new injunctive relief, Mr.
Dedvukaj’s arguments lack merit. Here, the debtors were bound to the provisions of the plan.
See 11 U.S.C. § 1141(a); see also 11 U.S.C. § 1142(b) (“The court may direct the debtor and
any other necessary party to execute or deliver or to join in the execution or delivery of any
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instrument required to effect a transfer of property dealt with by a confirmed plan, and to
perform any other act, including the satisfaction of any lien, that is necessary for the
consummation of the plan.”). Thus, “[e]xercise of the Court’s section 105(a) authority [to
enforce or implement its earlier orders and prevent abuses of process], vindicates the interests of
the Court, as much as (and perhaps more than) it vindicates the interest of an individual litigant.
Particularly in such a situation, it is not surprising that the usual grounds for injunctive relief,
such as irreparable injury, need not be shown in a proceeding for an injunction under section
105(a).” In re Ames Dep’t Stores, Inc., 317 B.R. 260, 274 (Bankr. S.D.N.Y. 2004); see also In re
Chateaugay Corp., Reomar, Inc., 93 B.R. 26, 29 (S.D.N.Y. 1988) (“Rather, a bankruptcy court
may enjoin proceedings in other courts when it is satisfied that such a proceeding would defeat
or impair its jurisdiction with respect to a case before it.”).
Here, debtors sought to enjoin the transfer of the Property, the very purpose of the
Chapter 11 plan. The bankruptcy court’s authority to enjoin the debtors from proceeding with
the state court proceedings could not be clearer in these circumstances. See In re Momentum
Mfg. Corp., 25 F.3d 1132, 1136 (2d Cir. 1994) (“Section 105(a) should be ‘construed liberally to
enjoin [actions] that might impede the reorganization process.’”) (citations omitted); In re
Adelphia Commc’ns Corp., 345 B.R. 69, 86 (Bankr. S.D.N.Y. 2006) (finding the adverse effects
that would be caused by defendants efforts to enjoin “the very transaction that will provide the
underpinnings of the Debtors’ reorganization, and provide the lion’s share of creditor
recoveries,” was “the poster child for exercise of the Court’s section 105(a) power.”).
Finally, contrary to Mr. Dedvukaj’s argument that GECMC was unlikely to succeed on
the merits, GECMC did, in fact, succeed on the merits. The Court also rejects the argument that
GECMC needed to and failed to show that it would be irreparably harmed by requiring it to
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proceed in state court, or that the balance of the equities tipped in the debtors’ favor. Last, the
public “has a strong interest in ensuring that the orders of a bankruptcy court (like any other
court) cannot be circumvented.” In re Ames Dep’t Stores, Inc., 317 B.R. at 274 n.68.
3. Concurrent Jurisdiction
Mr. Dedvukaj also challenges the Contempt Orders arguing the state court has concurrent
jurisdiction over Chapter 11 enforcement. Although it may be true that a state court can interpret
and enforce a Chapter 11 plan, In re Sunbrite Cleaners, Inc., 284 B.R. 336, 342 (N.D.N.Y. 2002),
the state court proceedings instigated by Mr. Dedvukaj were not brought to interpret and enforce
the Chapter 11 plan, they were brought to thwart the implementation of the Chapter 11 Plan.
Accordingly, the fact that the state court has concurrent jurisdiction is not a defense to
nor grounds to reverse the bankruptcy court’s Contempt Orders, which incidentally enjoined
only the debtors and Mr. Dedvukaj, and not the state court.
4. Good Faith
Last, Mr. Dedvukaj argues that the fact that the state court granted his requested TROs
demonstrates that he acted in good faith and provides cause for reversing the bankruptcy court’s
sanctions. To the extent this argument applies to the December 5 Contempt Order, it is properly
raised on this appeal. In an abundance of caution, the Court also addresses this argument as to
each Sanctions Order.
A court may hold individuals in civil contempt if “the order violated by the contemnor is
‘clear and unambiguous,’ the proof of non-compliance is ‘clear and convincing,’ and the
contemnor was not reasonably diligent in attempting to comply.” See EEOC v. Local 638, 81
F.3d 1162, 1171 (2d Cir. 1996) (quoting United States v. Local 18-04-1, Int’l Longshoremen’s
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Ass’n, 44 F.3d 1091, 1096 (2d Cir. 1995)); see also In re Chief Executive Officers Clubs, Inc.,
359 B.R. 527, 542 (Bankr. S.D.N.Y. 2007).
The Court has conducted a thorough review of the record on appeal and the bankruptcy
court’s decisions and finds this standard was met in each of the Contempt Orders.
With respect to the August 10 Contempt Order, the Court finds (1) Paragraph 22 of the
Confirmation Order was clear and unambiguous in prohibiting Mr. Dedvukaj from taking action
“to interfere with GECMC’s . . . implementation or consummation of the Plan,” (2) Mr.
Dedvukaj’s non-compliance is evident from his affidavits in support of the ex parte application
for the July 13 TRO, and (3) Mr. Dedvukaj was not reasonably diligent in attempting to comply
as evidenced by his running to state court the day after the bankruptcy court denied debtor’s
motion for reconsideration of the Confirmation Order to obtain the relief the bankruptcy court
denied (i.e., a stay pending appeal of the Confirmation and Reconsideration Orders).
With respect to the September 14 Contempt Order, the Court finds (1) the Confirmation
Order was clear and unambiguous, as set forth above, and paragraph 2 of the August 10
Contempt Order was clear and unambiguous in directing debtors to “take any and all actions
necessary to (i) have the TRO vacated as expeditiously as possible . . . and (ii) cease prosecution
and otherwise withdraw and discontinue pursuit of the Debtors’ request in state court for a
preliminary injunction with respect to the recordation of the Deed,” (2) Mr. Dedvukaj’s non-
compliance is evident from his replacing debtors’ state court counsel in order to continue the
state court TRO proceedings with new counsel, and (3) Mr. Dedvukaj was not reasonably
diligent in attempting to comply with either of these orders as evidenced by his hiring new
counsel expressly for the purpose of disobeying the August 10 Contempt Order. These same
findings apply to the issuance of the Chapter 11 Trustee Order.
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Last, with respect to the December 5 Contempt Order, the Court finds (1) the
Confirmation Order and August 10 Contempt Order were clear and unambiguous as set forth
above, the Chapter 11 Trustee Order was clear and unambiguous in directing the appointment of
a trustee and directing that the debtors and “Victor Dedvukaj, shall have no authority or right to
take any action on behalf of, or represent the interests of, either of the Debtors or their respective
estates, having been relieved of such authority and right under 11 U.S.C. § 1104(a),” (2) Mr.
Dedvukaj’s non-compliance is evident from his application for the October 16 TRO,9 and (3)
Mr. Dedvukaj was not reasonably diligent in attempting to comply with any of these orders as
evidenced by his repeated willful actions taken in contravention of the bankruptcy court’s orders.
The Court agrees with GECMC that Mr. Dedvukaj was given repeated opportunities to
voluntarily come into compliance with the bankruptcy court’s orders but chose not to.
The fact that the state court granted Mr. Dedvukaj’s requested TROs indicates only that
the state court believes there is some merit to his position. It does not, however, demonstrate that
he acted in good faith, or provide cause for reversing the bankruptcy court’s orders.
5. Conclusion
Having thoroughly reviewed the record on appeal and the bankruptcy court’s decisions,
the Court concludes that the December 5 Contempt Order was properly entered and affirms the
decision of the bankruptcy court.
9 Mr. Dedvukaj argues that he should not be sanctioned because Justice Lewis issued the
TRO sua sponte. Even if the state court ultimately made a ruling sua sponte the record reflects
that Mr. Dedvukaj submitted affidavits in support of the application in contravention of the
bankruptcy court’s clear and unambiguous orders. Accordingly, the Court rejects this argument.
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CONCLUSION
The bankruptcy court’s June 19, 2012, Confirmation Order and July 16, 2012,
Reconsideration Order are AFFIRMED.
GECMC’s motions to dismiss the August 10 Contempt Order, September 14 Contempt
Order, and Chapter 11 Trustee Order are GRANTED with prejudice.
GECMC’s motion to dismiss the December 5 Contempt Order is GRANTED with
prejudice as to the debtors and individuals Violeta Dedvukaj, Marash Dedvukaj, Gjelosh
Dedvukaj, and Maruka Dedvukaj, and DENIED as to Victor Dedvukaj.
Upon consideration of the merits of Mr. Dedvukaj’s appeal from the December 5
Contempt Order, the Court AFFIRMS the decision of the bankruptcy court.
The Clerk is instructed to terminate these appeals and close these cases.
Dated: April 26, 2013
White Plains, NY
SO ORDERED:
____________________________
Vincent L. Briccetti
United States District Judge
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