429 F. App'x 462
6th Cir.2011Background
- Maloof, former CEO/shareholder of Level Propane Gases, Inc. and Park Place, Inc., challenges multiple bankruptcy orders in consolidated appeals.
- Creditors filed involuntary Chapter 7 petitions against several Level Propane-related entities, later consolidated and converted to Chapter 11.
- An examiner was appointed; Maloof sought and was denied relief to reopen the examiner’s investigation; sanctions were later upheld on prior appeals.
- Maloof filed a fifth motion to vacate the Conversion Order and related sale orders; the bankruptcy court denied relief as barred by finality and laches.
- Maloof pursued an adversary proceeding alleging stay violations; the court held no proper abandonment or fraud-on-the-court basis to undo the proceeding; the court also addressed the related counterclaim.
- A settlement between Himmelman, National Union, the Debtors, and the Committee culminated in a $1.5 million payment to the Debtors and broad releases; Maloof objected on due process grounds.
- The court ordered Maloof to turn over electronic media and documents; that issue became moot after subsequent decisions and actions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Second Motion to Vacate finality | Maloof asserts substantial new evidence warrants relief | Bankruptcy court correctly found finality applies | Barred by doctrine of finality |
| Abandonment of claims in adversary action | Debtors abandoned claims by their actions | No proper 6007 notice or abandonment occurred | Abandonment not proven; stay violation not established |
| Summary judgment on Maloof’s counterclaim | Counterclaim mirrors Second Motion to Vacate | Ruling on Second Motion to Vacate forecloses counterclaim | Properly dismissed; no error in denial |
| Settlement approval and due process | Settlement violated Maloof’s due process rights | Settlement did not strip rights or prejudice Maloof | Settlement approved; no due process violation |
| Turn over of electronic records mootness | Discovery of tapes necessary for fraud claim | Issues moot after rulings; no further action necessary | Moot; no further consideration necessary |
Key Cases Cited
- Demjanjuk v. Petrovsky, 10 F.3d 338 (6th Cir. 1993) (fraud-on-the-court elements defined)
- In re Parker, 499 F.3d 616 (6th Cir. 2007) (direct review of bankruptcy court decisions; de novo/clear error standards)
- In re Trident Assocs. Ltd. P’ship, 52 F.3d 127 (6th Cir. 1995) (standard of review for bankruptcy issues)
- In re M.J. Waterman & Assocs., Inc., 227 F.3d 604 (6th Cir. 2000) (supporting appellate standards of review)
- Blue Diamond Coal Co. v. Trustees of the UMWA Combined Benefit Fund, 249 F.3d 519 (6th Cir. 2001) (fraud-on-the-court and related relief principles)