445 B.R. 124
S.D.N.Y.2011Background
- Pascazi appeals a bankruptcy court order denying standing to object to Fiber Consultants' claim in Fiber Optek case.
- Fiber Optek filed schedules listing assets ~$4.1 million and liabilities ~$525,000; most assets were soft assets (causes of action) valued at ~$3.78 million.
- Estate realized ~$308,000 after taxes and brokers' commissions; approximately $1.5 million in creditor claims were filed against the Debtor.
- Fiber Consultants filed a proof of claim; Pascazi objected, alleging Debtor had counterclaims worth $5 million.
- Bankruptcy Court allowed the claim for $40,094.80; Pascazi sought reconsideration; Trustee indicated willingness to examine claims post-liquidation.
- Bankruptcy Court concluded Pascazi lacked standing to object as a debtor, creditor, or equity holder; order appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does Pascazi have standing as a debtor to object? | Pascazi argues he has potential surplus interests. | Estate unlikely to have surplus; standard standing rule applies. | No standing absent a reasonable surplus possibility. |
| Does Pascazi have standing as a creditor to object? | Creditor status permits objection to other creditors' claims. | Majority rule requires trustee leave; objections by individual creditors are generally not allowed. | Denied; trustee's discretion preserves orderly administration. |
| Does Pascazi have standing as an equity holder to object? | Equity holders should be able to object to claims affecting potential surplus. | Equity holders lack standing when a trustee is appointed. | Denied; equity holders lack standing absent surplus. |
| Is Pascazi's motion for reconsideration governed by standing rules applicable to objections? | Rule 3008 reconsideration could be pursued by a creditor absent a surplus. | Standing inquiry for reconsideration mirrors that for objections; both require party in interest. | Denied; same standing principles apply to reconsideration and objections. |
Key Cases Cited
- In re 60 E. 80th St. Equities, Inc., 218 F.3d 109 (2d Cir. 2000) (debtor standing to object only if surplus is reasonably possible)
- In re Manshul, 223 B.R. 428 (S.D.N.Y. 1998) (trustee standing framework; orderly administration)
- In re Ulz, 401 B.R. 321 (Bankr.N.D. Ill. 2009) (surplus requirement for debtor standing; valuation basis)
- In re I & F Corp., 219 B.R. 483 (Bankr.S.D.Ohio 1998) (costs of litigation affect asset valuation; creditors’ costs borne by creditors)
- In re JNS Aviation, LLC, 334 B.R. 202 (Bankr.N.D.Tex. 2005) (trustee leave generally required for creditor objections)
- In re Thompson, 965 F.2d 1136 (1st Cir. 1992) (reasonableness of leave to object to claim)
- In re Trusted Net Med. Holdings, 334 B.R. 470 (Bankr.N.D.Ga. 2005) (lead to orderly administration; leave requirement)
- In re Sinclair's Suncoast Seafood, Inc., 140 B.R. 588 (Bankr.M.D. Fla. 1992) (orderly administration considerations in objections)
- In re Vebeliunas, 231 B.R. 181 (Bankr.S.D.N.Y. 1999) (equity holder standing principles; surplus concept)
- In re Bennett Funding Grp., Inc., 146 F.3d 136 (2d Cir. 1998) (party in interest carrying standing for claims)