571 B.R. 525
Bankr. E.D.N.Y.2017Background
- Ladder 3 (Debtor) sued OTR Media Group in state court; Ladder 3 then filed chapter 11 and removed the suit to bankruptcy, creating the 2010 adversary proceeding.
- Debtor and OTR executed a written stipulation (approved by the bankruptcy court under Fed. R. Bankr. P. 9019) by which OTR agreed to pay $250,000 in monthly installments; OTR paid once and then defaulted.
- The 2010 chapter 11 case was later dismissed. Years afterward Ladder 3 filed a chapter 7; the chapter 7 trustee (Trustee) reopened the matter and sued to enforce the stipulation and recover liquidated damages and fees for the estate.
- OTR opposed enforcement, arguing 11 U.S.C. § 349(b) rendered the stipulation unenforceable after dismissal (invoking subsections (2) and (3)).
- The parties did not dispute the stipulation’s execution, court approval under Rule 9019, or OTR’s post-approval default on payments.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 349(b)(2) vacated the court-approved stipulation | Trustee: approval under Rule 9019 is valid and not an order under any § listed in § 349(b)(2) | OTR: approval was effectively an order under § 542(b) (turnover) and thus vacated on dismissal | Court: § 349(b)(2) does not apply; the stipulation was approved under Rule 9019, not § 542 turnover |
| Whether § 349(b)(3) revested the right to payment in OTR on dismissal | Trustee: the payment right belonged to the Debtor/estate after the adversary; nothing vested in OTR pre-petition | OTR: dismissal revested estate property to pre-petition holders, so the claim revested in OTR | Court: § 349(b)(3) does not apply because no property vested in OTR before the case; stipulation remains enforceable |
| Whether the stipulation is a binding, enforceable contract post-dismissal | Trustee: stipulation is a clear, court-approved contract entitling estate to liquidated damages on default | OTR: challenges enforceability based on § 349 and procedural objections | Court: stipulation is a binding contract; enforceable and must be applied according to its plain terms |
| Procedural challenges to summary judgment (evidence, amendment, local rules) | Trustee: court may judicially notice the stipulation and approval; amendment authorized; local rule requirement waived | OTR: moved to strike or object on those procedural grounds | Court: rejected OTR’s procedural objections; evidence and amendments were proper; local rule requirement waived |
Key Cases Cited
- Anderson v. Liberty Lobby, 477 U.S. 242 (U.S. 1986) (summary judgment standard)
- Motorola, Inc. v. Official Comm. of Unsecured Creditors (In re Iridium Operating LLC), 478 F.3d 452 (2d Cir. 2007) (court must make informed independent judgment when approving settlements under Rule 9019)
- United States v. Ramirez, 291 B.R. 386 (N.D. Tex. 2002) (court-approved chapter 11 stipulations/plan provisions can remain enforceable after dismissal)
- Gulf Ins. Co. v. Glasbrenner, 343 B.R. 47 (S.D.N.Y. 2006) (§ 349(b)(2) vacates only orders entered pursuant to the specifically enumerated sections)
- Ricci v. DeStefano, 557 U.S. 557 (U.S. 2009) (standard for when record could not lead a rational trier of fact to find for nonmovant)