20-70295
Bankr. S.D. Tex.May 16, 2022Background
- Debtor Fatih Ozcelebi’s chapter 11 (subchapter V) case was converted to chapter 7 by Memorandum Opinion and Order dated April 1, 2022 based on extensive factual findings. The Court also made a criminal referral to the U.S. Attorney under 18 U.S.C. § 3057.
- On April 15, 2022 Ozcelebi moved under Fed. R. Civ. P. 59(e) (Bankr. R. 9023) to alter or amend the judgment and for a new trial, asking removal of certain factual findings and reversal of the criminal referral.
- The United States Trustee and Dr. K.V. Chowdary (joined creditor) objected. A prior hearing on the UST’s motion to convert was held January 5, 2022.
- Ozcelebi’s motion advanced three principal grounds: (1) post‑hearing accounting evidence to explain $22,698.58 alleged missing from monthly operating reports (MORs); (2) January 2017 meeting minutes allegedly proving he never had an LLC membership interest; and (3) challenge to the Court’s conclusion that trust payments to counsel were improper.
- The Court denied relief: Rule 59(e) is an extraordinary remedy and not a vehicle for evidence or arguments that were available before judgment; the new affidavit and receipts were not newly discovered, the minutes were available earlier, Ozcelebi remained responsible for sworn MORs, and the Court did not find the trusts were estate property.
- The Court also rejected Ozcelebi’s claim that an alleged language barrier explained credibility problems and refused to withdraw the criminal referral, finding many independent factual bases supporting it.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Appropriateness of Rule 59(e) relief / new trial | Ozcelebi: Court should alter/amend order and grant new trial to correct errors and consider additional evidence | UST/Chowdary: Relief improper because evidence/arguments were available before entry of judgment; Rule 59(e) is extraordinary | Denied — Rule 59(e) cannot be used to relitigate matters or introduce evidence available earlier |
| $22,698.58 allegedly unaccounted for in MORs | Ozcelebi: Post‑hearing affidavit by accountant and 400+ pages of receipts show the amount is accounted for | UST/Chowdary: Accounting evidence was available earlier; Debtor signed sworn MORs and is responsible for accuracy | Denied — evidence could/should have been offered earlier; Debtor remains responsible for sworn MORs |
| LLC membership (Fatih Ozcelebi MD Management LLC) | Ozcelebi: January 20, 2017 meeting minutes prove he never had a membership interest, contradicting the 2017 Franchise Tax Report | UST/Chowdary: Franchise Tax Report was in evidence; minutes were available earlier and not timely offered | Denied — minutes were available pre‑order and Rule 59(e) cannot be used to introduce them belatedly |
| Trust payments to counsel and criminal referral | Ozcelebi: Court improperly inferred trust funds might be estate property and relied on findings to refer criminally; language barrier excuses credibility issues | UST/Chowdary: Court did not find trusts were estate property; many independent findings support referral; language barrier not persuasive | Denied — Court clarified it did not find trusts estate property; credibility rulings stand and criminal referral remains based on numerous findings |
Key Cases Cited
- Stern v. Marshall, 564 U.S. 462 (2011) (Supreme Court decision delimiting bankruptcy courts’ constitutional authority; court here confirmed it has authority over this core matter)
- Templet v. HydroChem, 367 F.3d 473 (5th Cir. 2004) (Rule 59(e) is an extraordinary remedy to be used sparingly)