Silverman v. Agriprocessors, Inc. et al

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
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In re:
Case No. 803-82321-511
ALLOU DISTRIBUTORS, INC., et al., 	(Substantively consolidated)
Chapter 7
Debtors.
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KENNETH P. SILVERMAN, ESQ., as Chapter 7
Trustee of Allou Distributors, Inc., et al.,
Plaintiff, 	Adv. Pro. No. 803-8548-511
- against -
AGRIPROCESSORS, INC., NEVEL PROPERTIES
CORP. and A.A. RUBASHKIN & SONS, INC.,
Defendants.
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DECISION GRANTING RECONSIDERATION
(Re: Summary Judgment against
Nevel Properties Corp. and A.A. Rubashkin & Sons, Inc.)
Defendants’ Motion for Reconsideration
Before the Court is a motion by defendants, Nevel Properties Corp. (“Nevel”), and
A.A. Rubashkin & Sons, Inc. (“Rubashkin”) (together, Nevel and Rubashkin will be referred to as
the “Defendants”) to reconsider this Court’s Order, dated September 5, 2006, which granted
summary judgment in favor of the plaintiff Chapter 7 Trustee with respect to the Seventh through
Tenth and Twelfth through Fifteenth causes of action in the Complaint, dated December 12, 2003,
against Nevel and Rubashkin, respectively.
Simultaneous with the filing of the instant motion to reconsider, the Defendants filed
a Notice of Appeal of the September 5, 2006 Order. Consequently, in his opposition, the Trustee
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argues, as a threshold matter, that the filing of the appeal divests this Court of jurisdiction to decide
the instant motion. The Court disagrees and believes that this is exactly the procedural situation that
is addressed in FRCP (“FRBP”) 8002(b). While the general rule is that the filing of a notice of
appeal divests a lower court of jurisdiction to hear matters which are the subject of the appeal, Rule
8002(b), patterned after Rule 4(a)(4) of the Federal Rules of Appellate Procedure, provides an
exception to the general rule.
Rule 8002(b) provides that:
Effect of Motion on Time for Appeal. If any party makes a timely motion of a type
specified immediately below, the time for appeal for all parties runs from the entry
of the order disposing of the last such motion outstanding. This provision applies to
a timely motion: (1) to amend or make additional findings of fact under Rule7052,
whether or not granting the motion would alter the judgment; (2) to alter or amend
the judgment under Rule 9023; (3) for a new trial under Rule 9023; or (4) for relief
under Rule 9024 if the motion is filed no later than 10 days after the entry of
judgment. A notice of appeal filed after announcement or entry of the judgment,
order, or decree but before disposition of any of the above motions is ineffective to
appeal from the judgment, order, or decree, or part thereof, specified in the notice of
appeal, until the entry of the order disposing of the last such motion outstanding. ...
Although the Defendants’ motion was titled “Motion for Reconsideration,” the Defendants did not
specify that they were moving under either Rule 9023 or 9024. The Trustee argues that this is fatal
to falling into the exception provided by Rule 8002(b). The Court disagrees and does not find this
failure fatal to applying the statutory exception in Rule 8002(b). Despite having requested a stay
pending appeal and having cited to FRBP 7062 (stay of proceedings to enforce a judgment) and
8005 (stay pending appeal), the Defendants are also clearly asking this Court to reconsider its
September 5th Order. A motion to reconsider is properly considered under Federal Rule of Civil
Procedure (“FRCP”) 59, incorporated into bankruptcy proceedings by FRBP 9023. See Woodard
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v. Hardenfelder, 845 F.Supp. 960, 964-67 (E.D.N.Y. 1994) (“The Second Circuit has noted that
‘most substantive motions brought within ten days of the entry of judgment are functionally motions
under Rule 59(e), regardless of their label or whether relief might also have been obtained under
another provision’”) (citing McCowan v. Sears, Roebuck & Co., 908 F.2d 1099, 1103 (2d Cir.
1990)); In re Jamesway Corp, 203 B.R. 543, 545-46 (Bankr. S.D.N.Y. 1996). Accordingly, the
Court will deem the Defendants’ motion to be one under FRCP 59(e) and FRBP 9023, and finds that
it has jurisdiction to hear and determine this motion under Rule 8002(b). 	See Woodard v.
Hardenfelder, 845 F.Supp. at 964 (finding jurisdiction to hear Rule 59 motion even though matter
was appealed to Second Circuit); In re Brandt-Airflex Corp., 73 B.R. 59, 60 (E.D.N.Y. 1987)
(declining appellate jurisdiction where motion to reconsider was pending in bankruptcy court); In
re Overmyer, 53 B.R. 952, 954 (Bankr. S.D.N.Y. 1985).
Having concluded that there is jurisdiction over this motion, the Court turns to the
standards for reconsideration under Rule 59. Courts have imposed a strict standard under Rule 59.
“[A] motion for reconsideration or reargument ‘will generally be denied unless the moving party can
point to controlling decisions or data that the court overlooked – matters, in other words, that might
reasonably be expected to alter the conclusion reached by the court.’” Lehmuller v. Incorporated
Village of Sag Harbor, 982 F. Supp. 132,135 (E.D.N.Y. 1997) (quoting Schrader v. CSX Transp.,
Inc., 70 F.3d 255, 257 (2d Cir. 1995)). The matters overlooked by the court must be matters that
were put before the court in the original motion. See Eismann v. Green, 204 F.3d 393, 395 n.2 (2d
Cir. 2000) (citing Shamis v. Ambassador Factors Corp., 187 F.R.D. 148, 151 (S.D.N.Y. 1999)).
“The rule is calculated to ‘insure the finality of decisions and to prevent the practice of a losing party
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1
Familiarity with the background facts of this proceeding and the arguments of the parties is presumed
and will not be restated in this Order.
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examining a decision and then plugging the gaps of a lost motion with additional matters.’”
Jamesway, 203 B.R. at 546. Finally, motions to reconsider “cannot be used as a vehicle to introduce
new evidence that should have been set forth during the pendency of the motion or could have been
discovered in the exercise of due diligence ... [and such motions] may not be used as a substitute for
an appeal.” Brown v. J.F.H. Mak Trucking, No. 95-CV-2118 (JS), 1999 WL 1057274 at *1
(E.D.N.Y. Nov. 8, 1999) (citations omitted).
The Trustee’s Motion as to Rubashkin
By their motion to reconsider, the Defendants are not seeking to introduce any new
evidence or legal theories. Rather, they argue that the Court “overlooked certain facts previously
submitted, which if considered would have resulted in the denial of the plaintiff’s motion for
summary judgment against [the Defendants].”1 Motion ¶ 12. Specifically, the Defendants argue that
with respect to Rubashkin, the Court did not take into consideration the arguments that: (1) the
check ultimately deposited into the Rubashkin account was an Allou check made out to Lefkowitz
Hardware and received by Rubashkin from an individual named Weiss in exchange for meat
products; (2) Rubashkin is a holder in due course of the check pursuant to NY Uniform Commercial
Code § 3-302; and (3) there was never any direct dealing between Rubashkin and Allou. With
respect to Nevel, the Defendants argue that the Court overlooked their arguments that: (1) $75,000
of the alleged transfers made to Nevel were deposited directly into the account of Agriprocessors,
Inc. (“Agriprocessors”) and were not received by Nevel, and (2) $55,000 of the alleged transfers
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made to Nevel were deposited into the Nevel account but were immediately (the same day)
transferred to Agriprocessors.
The Court agrees with the Defendants that it did not give sufficient consideration to
these arguments. The Court also finds that the arguments, if ultimately persuasive, might change
the Court’s ruling as to the alleged Nevel and Rubashkin transfers. For these reasons, the Court
grants the Defendants’ motion to reconsider.
On the merits, the Court finds that its decision to grant the Trustee’s motion for
summary judgment against Rubashkin was erroneous. 	Exhibit 5 to the Trustee’s Statement of
Undisputed Facts, dated January 17, 2006, supports Rubashkin’s factual assertion that the $3,000
check ultimately deposited into the Rubashkin account was an Allou check made out to Lefkowitz
Hardware and subsequently endorsed over to Rubashkin. Therefore, genuine issues of a material
fact exist including, but not limited to, (i) whether there was any “transfer” between Allou and
Rubashkin; (ii) whether Allou received fair consideration from Lefkowitz Hardware; and (iii)
whether Rubashkin qualifies as a “holder in due course” under New York law.
The Trustee’s Motion as to Nevel
In support of their opposition to the Trustee’s motion for summary judgment as to
the alleged Nevel transfers, the Defendants provided the Court with an affidavit of Sholom M.
Rubashkin, President of Nevel. Rubashkin’s sworn affidavit states that:
Contrary to the assertions of the Trustee only the sum of $130,000 was forwarded by
Allou to Nevel. Immediately upon receipt, Nevel transferred the $55,000 payment
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to Agri[processors]. The $75,000 payment made by check dated August 29, 1998,
was deposited directly into the account of Agriprocessors, Inc. annexed hereto and
made parat (sic) hereof and marked Exhibit “G” are copies of the $55,000 check
dated September 3, 1998 made payable to “Navel” which was deposited into the
Nevel account as represented by the deposit ticket along with a debit memo dated
September 9, 1998 indicating the transfer of funds from Nevel to Agri.”
Although not entirely legible, Exhibit G does contain a “debit memo” which appears
to debit $55,000 from Nevel’s account on the same day it was deposited. It is not clear to whose
account the money was transferred; nor does this document appear to be an official bank document
but merely a handwritten debit receipt. Conspicuously absent from Nevel’s exhibits are any bank
statements of Nevel or Agriprocessors showing the transfer from Nevel to Agriprocessors.
Nonetheless, at the summary judgment phase, it is not the Defendants’ burden to prove their defense.
The Court must draw all ambiguities and reasonable inferences in favor of the nonmoving party.
Thornton v. Syracuse Savings Bank, 961 F.2d 1042 (2d Cir. 1992); Levin v. Analysis & Technology,
Inc., 960 F.2d 314 (2d Cir. 1992). Factual allegations backed by affidavits or other evidence made
by the party opposing the motion must be regarded as true and viewed in the light most favorable
to the non-movant. Cartier v. Lussier, 955 F.2d 841 (2d Cir. 1992). As for the admissibility of the
documentary evidence submitted in opposition to summary judgment, courts have applied Rule
56(e) to mean that “evidence presented by a non-movant need not be in admissible form, but the
substance of the evidence must be admissible. ... [S]tatements in cases that a party opposing
summary judgment must present admissible evidence should be understood in this light, as referring
to the content or substance, rather than the form, of the submission.” Bernhardt v. Interbank of New
York, 18 F.Supp.2d 218 (E.D.N.Y. 1998).
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The Court therefore finds that Rubashkin’s sworn affidavit together with the
documents found at Exhibit G to the Defendants’ opposition are sufficient to set forth genuine issues
of material fact on the Trustee’s claims of fraudulent conveyance against Nevel, including but not
limited to whether Nevel was a “mere conduit” of the transfer. In re Apponline.com, 296 B.R. 602,
621-23 (Bankr. E.D.N.Y. 2003). For these reasons, the Court agrees that its decision to grant the
Trustee’s motion for summary judgment against Nevel was erroneous and the Court, upon
reconsideration, thus denies that motion.
The Court will issue an Order contemporaneous with this Decision denying summary
judgment for the Trustee against Nevel and Rubashkin. Accordingly, the Court declines to enter the
judgments against Nevel and Rubashkin settled by the Trustee.
Dated: 	Central Islip, New York
October 23, 2006
/s/ Melanie L. Cyganowski
Hon. Melanie L. Cyganowski, U.S.B.J.
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