Case Information
IN THE UNITED STATES BANKRUPTCY COURT FO R TH E SO U TH ERN D ISTRICT OF TEXA S ENTERED 08/17/2017 HOUSTON DIVISION
m M
M ATTHEW JOHN DATE, CA SE NO. 15-31568-145-7
D ebtor,
RSL FUN D ING , LLC ,
Plaintiff,
A D V . N O . 15-3185 M ATTHEW JOHN D A TE,
Defendant. M EM ORANDUM OPW ION AND ORDER DISM ISSING ADVERSARY PROCEEDING
After the Court began the trial of this adversary proceeding, Defendant orally m oved to dismiss, on the ground that Plaintiff tiled this adversary proceeding in violation of 1996 injunction order barring Stewart Feldman and his then-wife,Dr. M arla M atz, and any of their aftiliated entities, com orations or partnerships he owns from filing any adversmy proceeding without perm ission of this Court. After reviewing the pleadings and evidence, the Court finds that its injunction remains effective. Feldman has wrongfully filed at least three other adversary proceedings which violated this Court's injunction. Consequently, the Court grants Defendant's motion to dism iss. P:ydate-201708 17.wpd Page 1 of 9
The Litigation Leadinz to the 1996 lniunction The Court entered an injunction on June 7, 1996 after extensive litigation and bad faith tactics by Feldman. Disputes arose between Feldman, Niel M organ, and Roy Berm ion, regarding a number of entities, including several real estate ventures, and Interm arque Autom otive Products, lnc. (''lntermarque'').Litigation among the parties began in the 125th Judicial District Court of Hanis County, Texas. Intermarque filed a Chapter 1 1 petition on July 16, 1993.
In the Intennarque case, Feldm an filed a m otion for relief from stay to continue the state court litigation. (Docket No. 6, Case No. 93-45460-114- l 1). The first motion for relief from stay was denied. Feldman objected to a disclosure statement and plan filed by M organ in the lntermarque case, and sought an order striking the plan. (Docket Nos. 68, 69, Case No. 93- 45460-114-1 1). The objections were ovenuled. Feldman filed a second motion for relief from stay, again seeking to continue the state court litigation. (Docket No. 80, Case No. 93-45460-114- 1 1). On the second motion for relief from stay, the claims by and against lntermarque were severed from the other claim s in the state court litigation, and relief from stay was granted by agreement as to the remainder.(Docket No. 108, Case No. 93-45460-1-14-1 1). The claims by and against lntermarque were combined with Intennarque's objection to Feldman's proof of claim in the lnterm arque case, in Adversary No. 93-4437.
On M ay 5, 1994, after the Court had confirm ed lnterm arque's Chapter 1 1 plan, the Court issued an injunction against Feldman's continuation of certain aspects of the litigation which was then pending in both the state court and federal district court. (Docket No. 44, Adv. No. 93- 4437). In an order entered on February 2, 1996, the Court determined that Feldman had violated the May 5, 1994 injunction by filing counterclaims and cross-claims against Texas Commerce P:hdate-20170817.wpd Page 2 of 9
Bank (''TCB''), and notices of 1is pendens. The Court further enjoined Feldman from filing any lawsuit against M organ without certifying that the prospective claim s were unrelated to lntermarque, had not previously been decided by any court, and were not filed for the purposes of harassment, and seeking and obtaining leave of Court. (Docket No. 102, Adv. No. 93-4437).
On July 28, 1995, in a separate adversary proceeding brought by TCB, the Court entered a declaratory judgment and permanent injunction against Feldman's prosecution of counterclaims and causes of action against TCB brought in state court and removed to federal district court related to lntermarque. (Docket No. 36, Adv. No. 95-4182).
Apparently undaunted by the 1994 injunctions against him, Feldman engineered a sham transaction to reconstitute M atz Real Estate Services. Inc. (''M atz'') and MBM lnvestment Real Estate, L.P. (''M BM ''), and filed Chapter 1 1 petitions on their behalf. (Docket No. 66, Case No. 95-47986-1-14-1 1; Docket No. 1 1 1, Case No. 95-47987-114-1 1).
Morgan tiled motions for sanctions in both cases. (Docket No. 14, Case No. 95-47986-144-1 1; Docket No. 14, Case No. 95-47987-114-1 1). On Morgan's motion, the Court dismissed both cases and retained jurisdiction over M organ's motions for sanctions.(Docket No. 22, Case No. 95-47986-114-1 1; Docket No. 32, Case No. 95-47987-114-1 1).
Dtlring the litigation regarding M organ's m otions for sanctions, M organ issued a subpoena duces tecum to Feldm an and M arla M atz. Feldm an and M arla M atz failed to com ply with the subpoena. The Court entered an order com pelling Feldm an and M arla M atz to produce docum ents responsive to the subpoena, and assessed sanctions against Feldm an and M arla M atz jointly and severally in the amount of $8,000. (Docket No. 43, Case No. 95-47986-1-14-1 1; Docket No. 80, Case No. 95-47987-1-14-1 1).On Morgan's motion, the Court entered orders on P:ydate-201708 17.w pd Page 3 of 9
April 17, 1996 directing Feldm an and M arla M atz to show cause why they should not be held in civil contempt for failure to pay the $8,000 in sanctions. (Docket No. 52, Case No. 95-47986- H4-1 1; Docket No. 90, Case No. 95-47987-1-14-1 1).
The Court held a combined hearing on M organ's initial motions for sanctions and the Court's order to show cause. On May 15, 1996, the Court entered judgments of civil contempt on the Court's order to show cause against Feldman and M arla M atz for failure to pay the $8,000 sanction. The Court also awarded M organ an additional $1,000 in compensatory sanctions, and ordered daily coercive sanctions of $500 per day in each of the two cases. (Docket No. 61, Case No. 95-47986-114-1 1; Docket No. 103, Case No. 95-47987-114-1 1).
Feldman and M arla M atz appealed the M ay 15, 1996 judgments of civil contempt. (Docket No. 58, Case No. 95-47986-144-11). The appeal was docketed in the United States District Court under Civil Action No. 96-1840.
The Court ordered additional sanctions on M organ's initial m otions for sanctions by order entered on June 7, 1996. In the order, the Court found that the M BM and M atz cases were commenced in bad faith, and that Feldman was the driving force behind the filing of the cases. The order in each of the M BM and M atz cases provides in part:
The following entities are permanently enjoined from (i) filing a voluntary banknlptcy petition; (ii) filing orjoining in an involuntary bnnknmtcy petition against any entity; (iii) filing a notice of removal pursuant to 28 U.S.C. j 1452; or, (iv) filing an adversary proceeding in the United States Banknlptcy Court: (a) Stewart A. Feldman;
(b) M arla B. M atz;
(c) Any corporation in which Stewart A. Feldman owns any legal, beneticial or equitable interest, direct or indirect, of any size whatsoever; P:hdate-20170817.w pd Page 4 of 9
(d) Any partnership in which Stewart A. Feldman owns any Iegal, beneficial or equitable interest, direct or indirect, of any size whatsoever, whether such interest is as a general partner, a lim ited partner, or otherwise;
(e) Any corporation in which M arla Matz owns any legal, beneficial or equitable interest, direct or indirect, of any size whatsoever; and, (9 Any partnership in which M arla M atz owns any legal, beneticial or equitable interest, direct or indirect, of any size whatsoever, whether such interest is as a general partner, a lim ited partner, or otherwise.
Any entity that is governed by this paragraph 6 m ay seek relief from this injunction by filing an appropriate motion before this Court. Any entity that violates the injunction contained in this paragraph will be referred to the United States District Court for prosecution for crim inal contempt. Such a referral will occlzr only if the Court determines that a violation has occurred after notice and heming in accordance with then applicable law.
(Docket No. 66, Case No. 95-47986-114-1 1; Docket No. 1 1 1, Case No. 95-47987-114-1 1).
II. Procedural History of This Case Matthew John Date (''Debtor'') filed a Chapter 7 case on M arch 20, 2015. RSL Funding, LLC (''RSL'') filed a complaint under Section 523 of the Bankruptcy Code on July 6, 2015. Trial of the adversary proceeding com menced on April 13, 2017.
RSL called Stewart Feldman as a witness at trial. Feldm an testified that he is the chief executive oftk er of RSL. He testifed that RSL is a limited liability company, of which he is the managing member.
Aher the conclusion of Feldman's direct testimony, Debtor orally m oved to dismiss, citing the injunction entered on Jtme 7, 1 996 in the Chapter 1 1 cases filed by Matz and M BM . The Court suspended the trial in order to allow RSL to respond to the m otion to dism iss. On M ay 16, 2017, this Court ordered Feldman to file a list of every voluntary bnnknlptcy petition, P:ydate-201708 17.wpd Page 5 of 9
involuntary bankruptcy petition, notice of removal pursuant to 28 U.S.C. j 1452, or adversary proceeding he or any corporation or partnership in which he owned or owns any legal, beneficial or equitable interest, direct or indirect, of any size whatsoever, whether such interest is as a general partner, a limited partner, or otherwise, has filed after June 7, 1996. (Docket No. 64).
RSL filed a response to Debtor's oral motion to dismiss (Docket No. 57) and a response to this Court's order of May 16, 2017 (Docket No.' 64). RSL asserts the June 7, 1996 injunction is no longer effective as a result of Feldm an's payment of monetary sanctions. lt asserts this case does not merit ''death penalty'' sanctions of dismissal with prejudice, because Feldman believed the injunction was no longer effective.
111. Appeal of the 1996 lniunction In the M BM case, Feldm an and M arla M atz filed a notice of appeal of the June 7, 1996 injunction. (Docket No. 113, Case No. 95-47987-114-1 1).1 The appeal was not docketed in the United States District Court.
On July 2, 1996, the United States District Court dism issed M arla M atz and Feldman's appeal of the judgment of civil contempt, for failure to file briefs.The Court ordered Feldman to appear and show cause why he should not be sanctioned, in light of his repeatedly filing notice of appeal from bankruptcy court orders and failing to file the appellant's brief. (Docket No. 3, C.A. No. 96-1840).
On July 26, 1996, the District Court held its show cause hearing. The court's m inute order of that hearing provides:
lFeldm an and M arla M atz did not file a notice of appeal in the M atz case.
P:hdate-201708 17.wpd Page 6 of 9
7/26/96 (NW B) M inutes of hearing, held on 7/26/96.
Stewart Feldman is enjoined from filing additional matters, including notice of appeal from Banknlptcy Court orders, in either the United States Banknlptcy Court or the United States District Court for the Southern District of Texas until the sanctions im posed by United States Bankruptcy Judge Greendyke have been paid in 1 11.
(Docket No. 5, C.A. No. 96-1840).
On August 1, 1996, the District Court entered an order in C.A. No. 96-1840 directing Feldman and M arla M atz to deposit into the Court Registry any money received by them from Universal Surety of America relating to a $250,000 collateralized supersedeas bond.2 (Docket No. 6, C.A. No. 96-1840).
On August 2, 1996, the District Court entered an order sua sponte withdrawing the reference of a11 pending sanctions orders issued in the lntermarque, M atz, and M BM cases. The order commenced Civil Action No. 96-2489. (Docket No. 1, C.A. No. 96-2489).
On August 9, 1996, Feldm an and M arla M atz requested a hearing on the sanctions matters. (Docket No. 5, C.A. No. 96-2489).The District Court ordered Feldman and M arla M atz to appear and show cause w hy the Court should not appoint a receiver over their assets.
The order provides in part:
lt should be understood that the Court's only interest is in preserving funds for disposition according to 1aw and not in retrying findings and decisions of the United States Bankruptcy Court which are now final and non-appealable.
(Docket No. 4, C.A. No. 96-2489).
On Septem ber 9, 1996, Feldm an and M arla M atz filed a m otion to m odify, vacate, or alter 2It appears that the bond had been issued with respect to matters pending in the state courq and was subsequently reduced in amount, such that the difference may have been subject to a potential refund. See Docket N o. 5, C.A . N o. 96-2489.
P:ïdate-20170817.w pd Page 7 of 9 the outstanding sanctions. The motion acknowledged the monetary sanctions and the injunction. The motion sought only to modify the monetary sanctions, not moditkation of the injunction.
(Docket No. 19, C.A. No. 96-2489). The Court denied the motion to modify. (Docket No. 22, C.A. No. 96-2489).
On January 14, 1997, the District Court ordered $253,700 in monetary sanctions payable to M organ. The Court dismissed C.A. No. 96-2489, but retained enforcementjurisdiction.
(Docket No. 29, C.A. No. 96-2489). Feldman and Marla M atz subsequently appealed. The Fifth Circuit affirmed the judgment of the District Court.(See Docket Nos. 93, 94, C.A. No. 96- 2489).
lV . Feldm an Repeatedly Violated the Court's June 7. 1996 lniunction An injunction issued by a court acting within its jurisdiction must be obeyed until the injunction is vacated or withdrawn. W R. Grace dr Co. v. f ocal Union 759, Intern. Union of UnitedRubber, Cork, L inoleum andplastic Workers ofAmerica, 461 U.S. 757, 103 S.Ct. 2177, 76 L.Ed.2d 298 (1983), citing Walker v. City ofBirmingham, 388 U.S. 307, 87 S.Ct. 1824, 18 L.Ed.2d 12 10 (1967), United States v. UnitedM ine Workers, 330 U.S. 258, 67 S.Ct. 677, 9 1 L.Ed. 884 (1947), and Howat v. Kansas, 258 U.S. 181, 42 S.Ct. 277, 66 L.Ed. 550 (1922).
The terms of an injtmction remain in force and unless set aside must be complied with. Firehghters v. Stotts, 467 U.S. 561, 104 S.Ct. 2576, 8 1 L.Ed.2d 483 (1984); Tory v. Cochran, 544 17.5.734, 125 S.Ct. 2108, 161 L.Ed.2d 1042 (2005).
The June 7, 1996 injunction permanently enjoined Feldman and his entities from tiling adversary proceedings. He filed this adversary proceeding in contempt of this Court's injunction. The injunction contained a mechanism for a party to request relief Feldman did not request P:hdate-20170817.wpd Page 8 of 9
relief from the injunction before he filed this adversary proceeding. Feldman is an attorney licensed to practice in Texas, and is a graduate of the University of Pennsylvania and the 1aw school at the University of Michigan. He knows or should know the effect of an injunction.
RSL argues that the injtmction is no longer in force because a) the District Courfs July 26, 1996 minute order modified the June 7, 1996 injunction such that its effectiveness ended upon full payment of monetary sanctions; and b) the District Court's withdrawal of reference rendered the June 7, 1996 injunction ineffective. These arguments are without merit.
W ithdrawal of the reference does not nullify the prior final orders of the Banknlptcy Court acting within its jurisdiction. The Court entered the June 7, 1996 injunction to curb Feldman's vexatious litigation tactics.
Prior to this adversary proceeding, Feldman completely disregarded the injunction in filing Adv No. 07-3124, Rapid Settlem ents Ltd. v. Scott D . Shcolnik; Adv. No. 16-3129, Stewart Feldman, et a1. v. Joseph K. W atts; and Adv No. 15-3270, Capstone Associated Services, Ltd. v. M elinda K. Genitempo.The Court addressed m onetary sanctions in a separate order. The July 26, 1996 minutes were entered in an appeal of the m onetary sanctions, and were entered before the District Court withdrew the reference as to the other sanctions m atters. The District Court reaffirmed in its August 9, 1996 order that the Court was only addressing the m onetary sanctions, and that the remainder were final and non-appealable. The injunction remains in effect.
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Signed at Houston, Texas on this 10 day of e> , 2017.
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UNITED STATES BANKRUPTCY JUDGE P:ïdate-20170817.wpd Page 9 of 9