NRAD Medical Associates, P.C.
Before the Court is the second motion (the “Motion“) [Dkt. No. 677]1 of Alice Kim, M.D.; David Kaplan, M.D.; Corrine Tobin, M.D.; Elizabeth Lustrin, M.D.; Jay Bosworth, M.D.; Jed Pollack, M.D.; Colette Zito, as executor of the estate of Joseph Zito, M.D.; and Julian Safir, M.D. (collectively, the “Movant Former Shareholders“)2, former shareholders and creditors of the bankruptcy estate of the debtor, NRAD Medical Associates, P.C. (“NRAD” or the “Debtor“), to reopen the bankruptcy case of the Debtor pursuant to
In the Motion, the Movant Former Shareholders argue that, in light of the Court‘s holding that the MLMIC Proceeds are property of the bankruptcy estate, “other cause” exists pursuant to
The Court has carefully reviewed the parties’ submissions and heard oral argument on the Motion. For the reasons set forth below, the Court grants the Motion to reopen the Debtor‘s bankruptcy case.6
JURISDICTION
The Court has jurisdiction over this proceeding pursuant to
BACKGROUND
This section incorporates by reference the facts set forth in the Court‘s prior memorandum decision and order dated January 26, 2024 (the “Summary Judgment
On April 11, 2024, the Court held a pretrial conference, at which plaintiffs requested entry of a judgment in accordance with the Summary Judgment Decision, which in their minds obviated the need for a trial on the remaining counts in their complaint. See April 11
DISCUSSION
I. Legal Standard
Pursuant to
“Ultimately, the decision to reopen a case is at the broad discretion of the bankruptcy court.” In re Mancone, No. 18-36018 (KYP), 2026 WL 467326, at *3 (Bankr. S.D.N.Y. Feb. 18, 2026) (quoting In re HBLS, L.P., 468 B.R. 634, 638 (Bankr. S.D.N.Y. 2012)). “However, it is an abuse of discretion to deny reopening where there appears to be property of the estate of such ‘probability, administrability and substance . . . as to make it unreasonable under all the circumstances for the court not to deal with [such property].‘” In re Maeder, No. 8-12-73429-ast, 2025 WL 3298322, at *3 (Bankr. E.D.N.Y. Nov. 26, 2025) (quoting In re Arana, 456 B.R. 161, 173 (Bankr. E.D.N.Y. 2011)); see also In re Dicks, 579 B.R. 704, 707-08 (Bankr. E.D.N.Y. 2017) (citation omitted) (“[C]ourts have held that the court ‘has a duty to reopen the case whenever there is proof that [it] has not been fully administered.‘“); In re Riazuddin, 363 B.R. 177, 183-84 (B.A.P. 10th Cir. 2007) (citing In re Mullendore, 741 F.2d 306, 308 (10th Cir. 1984)) (“[A]lthough the bankruptcy court has discretion in many instances whether to reopen a bankruptcy case, it is the duty of the court to reopen a case whenever prima facie proof is made that the estate has not been fully administered.“); 3 COLLIER ON BANKRUPTCY ¶ 350.03[1] (16th ed. 2026) (“Under section 350(b) and Rule 5010, the discovery of unadministered assets, which was once the sole basis for reopening a case, continues to be a sufficient reason for the court to exercise its power.“).
However, courts have held that a case should not be reopened if the relief sought from reopening would be futile, reopening would result in a waste of judicial resources, or where creditors are unlikely to reap any benefit from the addition of an unadministered asset. See Gamez v. Lopez (In re Lopez), No. 23-326, 2023 WL 7485464, at *1 (2d Cir. Nov. 13, 2023) (finding that the bankruptcy court did not abuse its discretion when determining that
Regarding “other cause” in
(1) the length of time that the case was closed; (2) whether a nonbankruptcy forum has jurisdiction to determine the issue which is the basis for reopening the case; (3) whether in prior litigation the bankruptcy court determined that a state court would be the appropriate forum; (4) whether any parties would suffer prejudice should the court grant or deny the motion to reopen; (5) the extent of the benefit to the debtor by reopening; and (6) whether it is clear at the outset that no relief would be forthcoming by granting the motion to reopen.
Id. (quoting In re Easley-Brooks, 487 B.R. 400, 407 (Bankr. S.D.N.Y. 2013)). “When weighing these factors, a court should emphasize substance over technical considerations.” Id. (citing In re Atari, Inc., No. 13-10176 (JLG), 2016 WL 1618346, at *4 (Bankr. S.D.N.Y. Apr. 20, 2016)). In addition, courts have considered the benefit to creditors of the estate. See Arana,
II. Analysis
A. Prima Facie Evidence of an Unadministered Asset of the Debtor‘s Bankruptcy Estate
The Court has ruled that the MLMIC Proceeds are property of the Debtor‘s bankruptcy estate. See Summ. J. Dec. at 18 [Adv. Dkt. No. 61]. “During NRAD‘s Bankruptcy Proceeding, NRAD did not reference MLMIC or the MLMIC Policies,” nor did NRAD‘s Bankruptcy Plan reference MLMIC or the MLMIC Policies. JSF ¶¶ 34-35. In addition, the Current Shareholders testified that they did not become aware of the MLMIC Demutualization until August 2018, approximately 5 months after the Debtor‘s Chapter 11 case was first closed on March 2018. See id. ¶¶ 38, 87. Thus, according to the Current Shareholders’ own testimony, these MLMIC Proceeds were not known to the parties at the time the Debtor‘s bankruptcy case was first closed. Furthermore, the MLMIC Proceeds exceed $3.2 million and were distributed by NRAD to only the Current Shareholders in March 2020 (after arbitration and litigation concerning whether the MLMIC Proceeds should be distributed to NRAD as the policy administrator or to individual policyholders) rather than pursuant to the distribution scheme of the Debtor‘s Plan, notwithstanding the issue of any releases and waiver of the MLMIC proceeds. See id. ¶¶ 103-11. As a result, there appears to be prima facie evidence of the existence of unadministered estate assets of such “probability, administrability and substance” that it would be unreasonable for the Court not to reopen the Debtor‘s Chapter 11 case. See In re Stanley, No. 2:17-bk-15178-ER, 2022 WL 256769,
It must be noted that in making this decision, the Court is not ruling on the proposed motion for derivative standing by the Movant Former Shareholders, nor is the Court making any determinations with respect to any causes of action that the Movant Former Shareholders (on behalf of the Debtor) intend to bring against the Current Shareholders or any defenses the Current Shareholders may raise in such causes of action. The Court, in its discretion, is granting the Motion based upon, inter alia, its decision that the MLMIC Proceeds are property of the estate and because there is prima facie evidence of unadministered assets of the estate.
B. Reopening of Debtor‘s Case Not Futile or a Waste of Judicial Resources.
Courts have held that reopening a debtor‘s bankruptcy case is not warranted if such reopening would be futile, would result in a waste of judicial resources, or where creditors are unlikely to reap any benefit from the addition of an unadministered asset. See Lopez, 2023 WL 7485464, at *1; Mohammed, 536 B.R. at 355. The Debtor argues, inter alia, that the Movant Former Shareholders waived their claims to the MLMIC Proceeds and it would be futile to reopen the Debtor‘s bankruptcy case. See Debtor‘s Mem. of Law in Opp. at 17-25 [Dkt. No. 680]. The Movant Former Shareholders contest these assertions. See Reply Mem. of Law in Further Support to Reopen at 3-5 [Dkt. No. 684]. However, whether the Movant Former Shareholders waived their claims to the MLMIC Proceeds is a matter of dispute with colorable arguments on both sides. The fact that a finding of waiver is possible or that further
C. The Doctrine of Equitable Mootness Inapplicable to the Facts and Circumstances of this Case.
The Debtor argues that its bankruptcy case should not be reopened because the doctrine of equitable mootness applies. “Equitable mootness is a prudential doctrine under which a court may dismiss a bankruptcy appeal ‘when, even though effective relief could conceivably be fashioned, implementation of that relief would be inequitable.‘” GLM DFW, Inc. v. Windstream Holdings, Inc. (In re Windstream Holdings, Inc.), 838 F. App‘x 634, 636 (2d Cir. 2021) (citations omitted). “The doctrine is deployed in a ‘pragmatic’ and flexible fashion, and must be responsive to the ‘specific factors presented in a particular case.‘” Id. (citing Beeman v. BGI Creditors’ Liquidating Tr. (In re BGI, Inc.), 772 F.3d 102, 107–08 (2d Cir.
(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 [b]ankruptcy [c]ourt; (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 all available remedies to obtain a stay of execution of the objectionable order if the failure to do so creates a situation rendering it inequitable to reverse the orders appealed from.
Id. (quotation marks omitted) (quoting Frito-Lay, Inc. v. LTV Steel Co. (In re Chateaugay Corp.), 10 F.3d 944, 952-53 (2d Cir. 1993)). “The Second Circuit has placed ‘special emphasis’ on the fifth factor in considering equitable mootness.” In re Celsius Network LLC, No. 23 Civ. 10368 (LGS), 2024 WL 3376496, at *3 (S.D.N.Y. July 11, 2024) (citing Matter of MPM Silicones, L.L.C., 874 F.3d 787, 805 (2d Cir. 2017)).
While it is true that the doctrine of equitable mootness is not limited to appeals of plan confirmation orders and has been applied in a “range of contexts, including appeals involving all manner of bankruptcy court orders,” In re 307 Assets LLC, 665 B.R. 214, 220 (S.D.N.Y. 2024) (quotation marks and citations omitted), the Court finds that this doctrine is inapplicable to the circumstances of this case. In particular, the Court finds that the fifth Chateaugay Factor is inapplicable because the Movant Former Shareholders did not know of the existence of the MLMIC proceeds until after the Debtor‘s bankruptcy case was closed. Courts have held that in order to reopen a case under
D. “Other Cause” Exists to Reopen the Debtor‘s Bankruptcy Case.
The Court finds that “other cause” exists under the Easely Factors and other equitable concerns to reopen the Debtor‘s case.
Courts have recognized that as the time between the close of a bankruptcy case and its reopening increases, “so must the cause for reopening increase in weight“; however, “nothing in the Bankruptcy Code or [the Bankruptcy Rules] proscribes the time within which a motion to reopen a closed case must be made.” In re Navillus Tile, Inc., 634 B.R. 847, 859 (Bankr. S.D.N.Y. 2021) (quotation marks omitted) (citing Atari, 2016 WL 1618346, at *5); see also In re Texaco, Inc., 668 B.R. 1, 7 (Bankr. S.D.N.Y. 2025) (reopening debtor‘s 37-year-old closed bankruptcy case because of the “paramount bankruptcy-court and systemic interest in having bankruptcy courts determine the meaning and impact” of their own orders, particularly with regard to a plan‘s discharge and injunction provisions). “While there is no time limitation imposed by § 350 or Bankruptcy Rule 5010, the doctrine of laches may be a basis to deny a motion to reopen.” In re Stein, 394 B.R. 13, 16 (Bankr. E.D.N.Y. 2008) (citations omitted). “Generally, laches is applied where it is clear that a plaintiff unreasonably delayed in initiating an action and a defendant was prejudiced by the delay.” Id. (quoting Robins Island Pres. Fund, Inc. v. Southold Dev. Corp., 959 F.2d 409, 423 (2d Cir. 1992)). However, the length of time a case was closed is “not a meaningful factor” during time periods when the moving party does “not have any reason to seek reopening.” Navillus Tile, 634 B.R. at 859 (quotation marks omitted) (citing Atari, 2016 WL 1618346, at *5).
In Navillus Tile, the debtor moved to reopen its bankruptcy case to invoke a plan‘s discharge and injunction provision to bar litigation initiated by the New York City Housing Authority (“NYCHA“). Id. at 850. The Navillus Tile court found, that similar to the circumstances in Atari, the debtor “did not have any reason to seek to reopen this case until NYCHA commenced its action in state court,” which was nine months before the debtor filed the motion to reopen. Id. at 859 (citing Atari, 2016 WL 1618346, at *5). The Navillus Tile
Here, NRAD‘s bankruptcy case was first closed on March 15, 2018. See JSF ¶ 38. The Current Shareholders testified that they did not become aware of the MLMIC Demutualization until August 2018. See id. ¶ 87. After NRAD informed eligible policyholders (including certain of the Movant Former Shareholders) of its intention to claim the MLMIC Proceeds, several months of litigation and arbitration ensued. See id. ¶¶ 95, 104. On October 4, 2019, Arbitrator Erica Garay awarded the MLMIC Proceeds to NRAD, and on October 28, 2019, Justice Timothy Driscoll of the Supreme Court of the State of New York, County of Nassau, also awarded the MLMIC Proceeds to NRAD. See id. ¶¶ 105-06. In March 2020, after MLMIC considered those decisions final and non-appealable, the MLMIC proceeds were distributed to NRAD, which then distributed the proceeds to the Current Shareholders. See id. ¶¶ 109-10.
On May 8, 2020, the Movant Former Shareholders filed their first motion to reopen the Debtor‘s bankruptcy case [Dkt No. 655], which was approximately 2 years and 2 months after the case was first closed on March 15, 2018 but approximately 2 months after the MLMIC Proceeds were distributed to the Current Shareholders in March 2020. See id. ¶¶
On September 24, 2020, the Movant Former Shareholders commenced an adversary proceeding, seeking, inter alia, a judgment “determining that the MLMIC Proceeds are property of NRAD‘s bankruptcy estate” and “directing NRAD to distribute the MLMIC Proceeds to creditors whose claims have not been paid in full, in accordance with the Plan . . . .” See Compl. ¶ 121 [Adv. Dkt. No. 1]. On August 12, 2021, the Debtor moved to close the bankruptcy case a second time on the grounds that (i) the Debtor‘s bankruptcy was fully administered and reopened solely for the purpose of allowing the adversary proceeding to commence, (ii) there was no other activity in the bankruptcy case, and (iii) closing the case was in the best interest of the estate and creditors due to continuing United States Trustee fees and other administrative costs. See Mot. to Close Reopened Case ¶ 1-2 [Dkt. No. 669]. The Movant Former Shareholders did not oppose this motion “because it was administrative, without prejudice to reopening, and beneficial to the estate.” See Reply Mem. of Law in Further Support to Reopen at 1-2 (citation omitted) [Dkt. No. 684]. The Court granted the motion to close the Debtor‘s bankruptcy case a second time on September 3, 2021, “without prejudice to the rights of any party in interest to seek to reopen the Chapter 11 Case,” and the case was closed a second time on September 24, 2021. [Dkt. Nos. 674-75].
After several years of litigation, on January 26, 2024, the Court entered the Summary Judgment Decision in the adversary proceeding, holding that the MLMIC Proceeds constitute property of the Debtor‘s estate. See Summ J. Dec. at 18 [Adv. Dkt. No. 61]. On September 6, 2024, the Court entered a judgment in the plaintiffs’ favor on their first claim for relief, adjudging solely that the MLMIC Proceeds constitute property of the Debtor‘s bankruptcy
Consequently, the time elapsed between the second close of the Debtor‘s bankruptcy case on September 24, 2021 and the date when the Movant Former Shareholders filed the second motion to reopen on April 23, 2025 was approximately 3 years and 7 months. However, the Movant Former Shareholders first had reason to file the Motion after the Court entered judgment on their first claim for relief on September 6, 2024 and the adversary proceeding was closed on December 18, 2024. Thus, the Motion was filed approximately 4 months after the adversary proceeding was closed and approximately 7.5 months after the Court entered judgment on the first claim for relief—this time, with the stated purpose of seeking derivative standing to bring suit against the Current Shareholders for the return of the MLMIC Proceeds to the Debtor‘s estate. See Second Mot. to Reopen Ex. 14 [Dkt. No. 677]. Given that timeframe and the facts of this case, the Court finds that the Movant Former Shareholders did not unreasonably delay in filing the Motion. See In re Congoleum Corp., 149 F.4th 318, 330-31 (3d Cir. 2025) (considering the timeliness of the motion to reopen from the date the moving party received communication that its adversary refused to dismiss a pending suit despite a bankruptcy court order, and finding that a 1 month delay was minor and non-prejudicial); Navillus Tile, 634 B.R. at 859 (finding a 9 month delay to file a motion to reopen a bankruptcy case to bar state court litigation that had commenced was not a “meaningful delay“). Moreover, the Court finds the Debtor was not prejudiced by the approximately 4 to 7.5 month delay because the Debtor was actively involved in the
2. Whether a Nonbankruptcy Forum Has Jurisdiction to Determine the Issue Which Is the Basis for Reopening the Case.
This factor weighs in favor of reopening the Debtor‘s bankruptcy case because there is currently no nonbankruptcy forum exercising jurisdiction to determine the issues, which are the basis of reopening the Debtor‘s bankruptcy case: namely, how certain newly discovered property of the estate is to be re-distributed in accordance with the Plan, including whether re-distribution is appropriate given a claimed waiver of any right to the MLMIC Proceeds by the Movant Former Shareholders. In October 2018, litigation and arbitration commenced by NRAD over the MLMIC Proceeds ended, with the holding that NRAD was entitled to the MLMIC proceeds and not eligible policyholders.12 See JSF ¶¶ 105-06. There were no appeals taken after these decisions. See id. ¶ 109. There is no pending litigation in
Furthermore, it is well-settled that a bankruptcy court has “a strong interest in construing the meaning of its own confirmation orders, which are central to the case and to [its] institutional role.” Texaco, 668 B.R. at 21 (citing Texaco Inc. v. Sanders (In re Texaco Inc.), 182 B.R. 937, 947 (Bankr. S.D.N.Y. 1995)); see also In re Jones, 2025 WL 432843, at *3 (citation omitted) (noting bankruptcy courts have jurisdiction and are “undoubtedly the best qualified” to interpret and enforce their own orders). Here, an issue that will likely arise in subsequent litigation following the reopening of the Debtor‘s case is whether the language of the Plan, Confirmation Order, and other documents in the case supports a release and/or waiver of the claims of the Movant Former Shareholders to the MLMIC Proceeds. See Aug. 22, 2024 Hr‘g Tr. 30:7-18 [Adv. Dkt. No. 87]. This Court is “undoubtedly the best qualified” to interpret the Plan, its own Confirmation Order and any other orders or documents in the Debtor‘s bankruptcy case. See Texaco, 668 B.R. at 42 (reopening debtor‘s bankruptcy case for the sole purpose of determining whether the confirmed plan precludes certain plaintiffs from pursuing pending state court actions). Therefore, this factor weighs in favor of reopening the Debtor‘s bankruptcy case.
3. Whether in Prior Litigation the Bankruptcy Court Determined that a State Court Would Be the Appropriate Forum.
This factor is inapplicable to this case because the Court has not determined in a prior litigation that a state court would be the appropriate forum for the Movant Former Shareholders to seek return of the MLMIC Proceeds from the Current Shareholders.
In weighing this factor, the Court considers whether NRAD and the Current Shareholders will suffer any prejudice from the opening of Debtor‘s case and whether creditors, including the Movant Former Shareholders, will suffer any prejudice from the Court denying the Motion. NRAD, as a corporate entity, will not suffer any legal prejudice from reopening because (1) NRAD is nominal entity, See Mot. for Entry of J. ¶ 6 [Adv. Dkt. No. 79], and pursuant to the Plan, “all claims against NRAD‘s estate have been satisfied, in full, except those of the Former Shareholders and Current Shareholders,” JSF ¶ 72, and (2) NRAD stands to benefit by a possible return of more than $3.2 million13 to its bankruptcy estate to pay creditor claims.
The Current Shareholders may be disadvantaged by the loss of a certain portion of the MLMIC Proceeds that was distributed to them in March 2020—if the Movant Former Shareholders are successful in obtaining derivative standing and in prosecuting certain causes of action against the Current Shareholders. Assuming there were no waivers of the MLMIC proceeds by creditors, the Current Shareholders may have to return the portion of the MLMIC Proceeds that they were not entitled to under the Plan. In addition, the Current Shareholders will have to expend time and resources to defend against the motion and adversary proceeding to be brought by the Movant Former Shareholders in the reopened bankruptcy case. However, these potential losses or disadvantages are not legal prejudice because (1) it is not prejudice to suffer the loss of property that one is not legally entitled to keep (assuming the Court finds in favor of the Movant Former Shareholders); and (2) it is well-settled that having to defend a lawsuit on the merits is not legal prejudice. See Jones,
In addition, the Debtor, Current Shareholders, and Movant Former Shareholders did not object to the Court‘s retention of jurisdiction provisions in the Plan—which included retention of jurisdiction to “to recover all assets and properties of the Debtor and Reorganized Debtor wherever located, if any” and “to hear and determine any and all pending applications, adversary proceedings, contested matters and litigated matters, if any.” See 2d Amended Plan ¶ 12.01 (f) and (j) [Dkt. No. 496]. Thus, none of them can claim legal prejudice if the Court reopens the case, after having decided that the MLMIC Proceeds are property of the estate, to exercise jurisdiction to determine the fate of the MLMIC Proceeds in any subsequent adversary proceeding, litigation, or contested matter. See Atari, 2016 WL 1618346, at *10 (finding that no party will be prejudiced by the court‘s reopening the debtor‘s bankruptcy case because none of the parties “objected to the jurisdiction retention provisions of the [p]lan and [c]onfirmation order” and that the parties had submitted themselves to the exclusive jurisdiction of the court with respect to the interpretation and enforcement of the plan and confirmation order).
The Court notes that, even though the Court did not retain exclusive jurisdiction to hear disputes concerning property of the estate, there is currently no nonbankruptcy forum exercising concurrent jurisdiction to hear these matters. Thus, the Movant Former Shareholders, as creditors of the estate, would be prejudiced by the Court‘s not reopening the Debtor‘s case because they would be denied access to the forum that has jurisdiction to hear
Accordingly, this factor weighs in favor of reopening the Debtor‘s bankruptcy case.
5. Extent of the Benefit to the Debtor by Reopening.
“In considering the benefit to the debtor, courts generally consider whether reopening the case serves some beneficial purpose, such as allowing claims to proceed in another forum.” Arana, 456 B.R. at 173 (citing Katz v. I.A. Alliance Corp. (In re I. Appel Corp.), 300 B.R. 564, 571 (S.D.N.Y. 2003), aff‘d, 104 F. App‘x 199 (2d Cir. 2004)) (finding that reopening the
Here, reopening the case would allow the Movant Former Shareholders to seek derivative standing to pursue certain causes of action against the Current Shareholders, and if successful, the Debtor would stand to benefit by an addition of over $3.2 million to its bankruptcy estate.15 The Movant Former Shareholders have pointed out that NRAD is a nominal entity, which is controlled by the Current Shareholders, who are NRAD‘s board of directors and corporate officers. See Mot. for Entry of J. ¶ 6 [Adv. Dkt. No. 79]. The Movant Former Shareholders have argued that the interests of the Debtor as a corporate entity are adverse to the personal interests of the Current Shareholders with regard to the MLMIC Proceeds. See Reply in Further Supp. of Mot. for Entry of J. ¶ 4 [Adv. Dkt. No. 83]. Because it is unlikely that the Debtor will pursue on its own any claims against the Current Shareholders—who are its owners, directors, and officers—reopening the bankruptcy case may allow the claims of the Movant Former Shareholders to proceed and result in a return of the MLMIC Proceeds to the estate. Cf. Maeder, 2025 WL 3298322, at *3 (quoting Arana, 456 B.R. at 173) (“A bankruptcy case should be reopened to administer newly identified property of the estate ‘to prevent a windfall’ to the debtor.“); In re Dicks, 579 B.R. at 710 (citation omitted) (finding that if the bankruptcy case is not reopened, defendants in a related lawsuit may receive “a windfall at the creditors’ expense” by avoiding a decision on the merits). Accordingly, this factor weighs in favor of reopening the Debtor‘s bankruptcy case.
6. Whether No Relief Would be Forthcoming by Granting the Motion.
“Case law does provide that reopening of a case is a ministerial act that, in and of itself, has no substantive effect.” Roberts v. Vara (In re Roberts), 659 B.R. 271, 280 (Bankr.
Here, the Debtor argues that there would be no relief forthcoming to the Movant Former Shareholders if the Debtor‘s bankruptcy case is reopened because, inter alia, the Movant Former Shareholders have waived their claims or are ineligible to receive the MLMIC Proceeds. See Debtor‘s Mem. of Law in Opp. at 17-25 [Dkt. No. 680]. For example, the Debtor argues that the Movant Former Shareholders waived their claims to the MLMIC Proceeds by executing and delivering a Declaration and Release agreement, whereby they consented to a 13.33% reduction of their maximum distribution under the Debtor‘s Plan in exchange for an upfront payout of $6,500,250 from NRAD after the close of the NYU Transaction. Id. at 17. The Movant Former Shareholders, on the other hand, argue that such releases only barred claims against NYU, not NRAD or the Current Shareholders. See Reply Mem. of Law in Further Support to Reopen at 3 [Dkt. No. 684]. The Movant Former Shareholders also argue that the releases in the Plan contain an exception for the parties’
The Court, though not deciding on the question of releases and waiver of claims, does find that there are colorable arguments on both sides, which preclude a finding of futility in reopening the Debtor‘s case. A determination on the scope of the releases in the Plan and waiver of claims by the Movant Former Shareholders are matters better suited for briefing after the reopening of the Debtor‘s case because it would involve, among other things, interpretation of language in the Plan and other documents by this Court. In Atari, the parties agreed to defer consideration of the merits of the issue of whether certain releases in the plan and confirmation order barred one party‘s claims against another until after the court resolved the threshold question of whether to reopen the bankruptcy cases. See Atari, 2016 WL 1618346, at *12. However, the Atari court noted that “even if the parties had not agreed to defer consideration of the merits, the [c]ourt would find that it is not clear at the outset that no relief would be forthcoming if the case is reopened.” Id. Because one party had “made at least a colorable claim that an antisuit injunction should issue in order to protect the releases contained in the [p]lan and [c]onfirmation [o]rder . . . it [was] not clear at the outset that no relief would be forthcoming if these cases are reopened.” Id. at *13. Similarly here, because the Movant Former Shareholders have made at least a colorable claim that they have not waived their claims to the MLMIC Proceeds, the Court finds that it would not be futile to reopen the Debtor‘s bankruptcy case. Accordingly, this factor weighs in favor of reopening the Debtor‘s bankruptcy case.
“Absent countervailing considerations, the court should grant a motion to reopen the case if doing so is needed to administer estate assets or if there is a reasonable prospect that creditors would benefit from a reopening of the case.” Yakubova, 2026 WL 1246576, at *11 (citing Zinchiak v. CIT Small Bus. Lending Corp. (In re Zinchiak), 406 F.3d 214, 224 (3d Cir. 2005)). In certain circumstances, such as when administering an undisclosed asset, the interests of creditors weigh more heavily in the Court‘s analysis. See Watts, 2023 WL 5525045, at *11 (citation omitted) (“The Court‘s focus in the context of reopening a case to administer new assets ‘is simply whether the administrative expense and inconvenience outweighs the potential benefit to the estate’ and ‘debtor‘s good faith is irrelevant‘“); Arana, 456 B.R. at 175 (“The prospect of a benefit to creditors is the most important consideration in determining whether to reopen a bankruptcy case to add an undisclosed asset.“); In re Corkran, No. 13-30909, 2019 WL 965102, at *2 (Bankr. N.D.N.Y. Feb. 25, 2019) (citations omitted) (noting that in determining whether cause exists to reopen a bankruptcy case, “the primary factor for consideration is the potential benefit to creditors of the estate“).
Here, there is a clear potential benefit to creditors of the Debtor‘s estate if the bankruptcy case is reopened. If the Movant Former Shareholders prevail on their causes of action after the Debtor‘s case is reopened, the MLMIC Proceeds, a substantial sum, may be returned to the Debtor‘s estate to be re-distributed to creditors in accordance with the Plan. See Arana, 456 B.R. at 176 (finding that “creditors stand to reap a substantial benefit if the trustee prevails in the [m]alpractice [a]ction” and that the case should be reopened so that the trustee could “determine how to proceed, based on an investigation of the asset and the claims that are filed“). Accordingly, this equitable concern weighs in favor of reopening the Debtor‘s bankruptcy case.
For the foregoing reasons, the second motion to reopen the Debtor‘s bankruptcy case is granted.
SO ORDERED.
Louis A. Scarcella
United States Bankruptcy Judge
Dated: May 29, 2026
Central Islip, New York