Plaza Equities LLC et al v. Pauker et al

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
---------------------------------------------------------------X
In re
Case No. 07-71327-CEC
COPPERFIELD INVESTMENTS, LLC,
Chapter 11
Debtor.
---------------------------------------------------------------X
Plaza Equities LLC, Plaza Investments, and 	Adv. Pro. 07-8253-
CEC
M&O Enterprises, PSP, Inc.,
Plaintiffs,
-against-
David Pauker as Chapter 11 Trustee of
Copperfield Investments, LLC,
Defendant-counterclaimant,
-against-
John Kiley and Scott Kiley,
Defendant on the counterclaims.
--------------------------------------------------------------X
Plaza Equities LLC, Plaza Investments, and M&O
Enterprises, PSP, Inc., John Kiley, Scott Kiley,
Third Party Plaintiffs,
-against-
Gerard M. Bambrick, Esq. and Bambrick& Ryan,
Third Party Defendants.
--------------------------------------------------------------X
DECISION
Case 8-07-08253-cec Doc 43 Filed 02/26/09 Entered 02/27/09 13:51:31

APPEARANCES:
Douglas Furth, Esq.
Adam Silverstein, Esq.
Ancela R. Nastasi, Esq.
Anthony Vassalo, Esq.
Golenbock, Eisman, Assor Bell & Peskoe
437 Madison Avenue
New York, New York 10022
Attorneys for David Pauker, Chapter 11 Trustee
of the estate of Copperfield Investments, LLC
Martin G. Bunin, Esq.
Grant Stein, Esq.
William Hao, Esq.
Alston & Bird, LLP
90 Park Avenue
New York, New York 10016
Attorneys for Ficus Investments, LLC and Private
Capital Group, a Florida limited liability company
Daniel Torchio, Esq.
80 Third Avenue - 13th Floor
New York, New York 10022
Attorney for John Kiley, Scott Kiley,
Plaza Equities LLC, Plaza Investments, and M&O
Enterprises, PSP, Inc.
Wayne Greenwald, Esq.
99 Park Avenue, Suite 900
New York, New York 10010
Attorney for John Kiley, Scott Kiley,
Plaza Equities LLC, Plaza Investments, and M&O
Enterprises, PSP, Inc.
John M. Lundin, Esq.
Schlam, Stone & Dolan LLP
26 Broadway
New York, New York 10004
Attorneys for Private Capital Group, a Nevada
limited liability company, Private Capital
Management Corp., and Private Capital Corp.
Valerie Millman, Esq.
Office of the United States Trustee
271 Cadman Plaza East, Suite 4529
Brooklyn, New York 11201
Burton Weston, Esq.
Afsheen Shah, Esq.
Garfunkel Wild & Travis
111 Great Neck Road, Suite 503
Great Neck, New York 11021
Attorneys for Private Capital Group, a Nevada
limited liability company, Private Capital
Management Corp., and Private Capital Corp.
CARLA E. CRAIG
Chief United States Bankruptcy Judge
Case 8-07-08253-cec Doc 43 Filed 02/26/09 Entered 02/27/09 13:51:31

1
This matter comes before the Court on the motion of David Pauker, the chapter 11 trustee
(the "Trustee") of the estate of Copperfield Investments, LLC (the "Debtor") to approve a
settlement agreement with John Kiley, Scott Kiley (together, the "Kileys") M&O Enterprises,
Inc., PSP, Inc., Plaza Equities LLC and Plaza Investments (collectively, the "Kiley Entities," and
with the Kileys, the "Kiley Parties"). Ficus Investments, Inc. ("Ficus") and Private Capital
Group, LLC, a Florida limited liability company ("PCG FL," and together with Ficus, the "Ficus
Entities"), two related entities which together assert the largest claims against the estate,
conditionally object to the approval of the settlement. For the following reasons, the settlement
is approved.
Jurisdiction
This court has jurisdiction over this core proceeding pursuant to 28 U.S.C. §§ 157 and
1334, and the Eastern District of New York standing order of reference dated August 28, 1986.
This decision constitutes the Court's findings of fact and conclusion of law to the extent required
by Federal Rule of Bankruptcy Procedure 7052.
Background
The following facts are undisputed.
On April 17, 2007, the Debtor filed a voluntary petition under chapter 11 of the
Bankruptcy Code. The Debtor is in the business of holding and servicing real estate mortgages
and the underlying debts.
On April 20, 2007, Ficus filed a motion to dismiss the case, or alternatively, to appoint a
chapter 11 trustee, and also sought relief from the automatic stay to continue an action pending
in New York state court. Thereafter, on April 26, 2007, the Court granted Ficus's motion to the
extent it sought appointment of a chapter 11 trustee. On May 1, 2007, the Court granted the
United States Trustee's a motion to appoint the Trustee as trustee in this case.
Case 8-07-08253-cec Doc 43 Filed 02/26/09 Entered 02/27/09 13:51:31

2
On August 7, 2007, the Bankruptcy Court entered an order directing the Trustee to hold
all proceeds from certain mortgage loans to which the Kiley Entities assert a claim of ownership
in a segregated account (the "Segregated Account").
On October 2, 2007, the Kiley Entities commenced an action (the "Kiley Action") against
the Trustee for a declaratory judgment that they are the sole and exclusive owners of eighty three
mortgages (the "Mortgages") in which the Trustee claimed an interest on behalf of the Debtor,
and which the Debtor was administering. The Kiley Entities also sought an accounting of all
servicing performed with respect to the Mortgages, and the turnover all proceeds received from,
and all records relating to, the Mortgages, in addition to an award of damages.
On October 15, 2007, the Kiley Entities filed proofs of claim in this case relating to the
Mortgages: Plaza Equities asserted a claim of $5,966,730; Plaza Investments asserted a claim of
$4,700,431; and M&O Enterprises asserted a claim of $3,774,566.
On May 13, 2008, the Trustee interposed an answer to the Kiley Entities' complaint and
asserted counterclaims. The Trustee asserted that the original instruments underlying the
Mortgages were not transferred to the Kiley Entities pre-petition, and that the Kiley Entities did
not perfect any security interest in the Mortgages. The Trustee also asserted that the Kiley
Parties violated the automatic stay by back-dating assignments of the Mortgages to the Kiley
Entities. The Trustee sought the avoidance of the post-petition assignments of the Mortgages,
declaratory relief that the Kiley Entities do not own the Mortgages and that they are property of
the estate, and directing the Kiley Parties to turn over all records relating to the Mortgages. On
October 8, 2008, the Trustee amended his counterclaims and sought a judgment against the Kiley
Parties for damages and to hold them in contempt for violating the automatic stay. The Trustee
Case 8-07-08253-cec Doc 43 Filed 02/26/09 Entered 02/27/09 13:51:31

3
further sought the equitable subordination of the Kiley Entities' proofs of claims against the
estate relating to the Mortgages, in the event those claims are allowed.
On September 9, 2008, the Trustee filed a Disclosure Statement for the chapter 11 plan of
liquidation (“Plan”), which was later amended on October 6, 2008, and October 8, 2008 (as
amended, “Disclosure Statement”). On October 8, 2008, the Court approved the Disclosure
Statement as containing adequate information with respect to the Plan.
On October 3, 2008, the Kiley Entities filed a motion for partial summary judgment in
the adversary proceeding.
On October 17, 2008, the Trustee filed an objection to the Kiley Entities' proofs of claim.
On December 19, 2008, the Trustee filed the instant motion to approve a settlement with
the Kiley Entities (the "Kiley Settlement"). Under the Kiley Settlement, the Kiley Entities will
receive the Mortgages and proceeds thereof in exchange for a payment of $2,619,806, plus
additional funds representing reimbursement of the expenses incurred by the estate in servicing
the Mortgages. Specifically, the settlement provides for the conveyance to the Kiley Entities of
all of the Mortgages which have not been sold, satisfied, or otherwise converted into cash
proceeds. The Trustee will also deliver to the Kiley Parties copies of all files in his possession,
custody and control relating to the servicing of the Mortgages, and will transfer to an account of
the estate the following amounts: (a) $1,505,000, representing actual costs incurred by the
Trustee in servicing the Mortgages; (b) an additional amount equal to the Trustee's reasonable
estimate of the actual expenses of servicing the Mortgages incurred or to be incurred by the
estate during the period from November 1, 2008 through and including the date of the closing of
the settlement; (c) $100,000 in excess of such estimate; and (d) an additional $2,619,806. The
Case 8-07-08253-cec Doc 43 Filed 02/26/09 Entered 02/27/09 13:51:31

4
Trustee will deliver to John Kiley a reasonably detailed statement of the actual expenses incurred
by the estate for servicing the Mortgages during the period from November 1, 2008 through and
including the date of the closing not later than 30 days after the closing. To the extent the
estimated servicing costs that were deposited into the account are ultimately less than the actual
expenses, the Trustee will give John Kiley the difference. At the closing, all cash remaining in
the Segregated Account will be disbursed to the Kiley Entities. The Kiley Action will be
dismissed with prejudice and the Kiley Entities' claims against the estate will be expunged.
On January 6, 2009, the Trustee filed the third amended Plan, which provides for
payment in full of all allowed unsubordinated claims, except for the claims of Ficus and the
Kiley Entities. The Plan also included a settlement between the Trustee and Ficus. Ficus voted
in favor of the Plan. On January 26 and 30, an evidentiary hearing was held on the confirmation
of the Plan and the approval of the Kiley Settlement.
The Ficus Entities have asserted a "conditional" objection to the Kiley Settlement, taking
the position that the Kiley Settlement is appropriate if the Plan is confirmed, but should not be
approved if the Plan is not confirmed. The Trustee and the Kiley Entities have requested that the
Court consider approval of the Kiley Settlement first, before addressing the issues involved in
considering confirmation of the Plan. Both the Trustee and the Kiley Entities persuasively argue
that, from an economic standpoint, it is urgent that the Kiley Settlement be implemented quickly.
The Kiley Entities believe strongly that it is critical that they regain management control of the
Mortgages; to the Trustee, it is important to be free of the burden of administering the Mortgages
as soon as possible. This Court is therefore giving first consideration to the approval of the
Kiley Settlement, and for the reasons set forth below, approves it.
Case 8-07-08253-cec Doc 43 Filed 02/26/09 Entered 02/27/09 13:51:31

5
Legal Standard
A bankruptcy court may approve a compromise and settlement if it is fair, reasonable and
adequately based on the facts and circumstances before the court. Fed. R. Bankr. P. 9019; In re
Hibbard Brown & Co., 217 B.R. 41, 45 (Bankr. S.D.N.Y. 1998). "As a general matter,
settlements or compromises are favored in bankruptcy and, in fact, encouraged." In re Adelphia
Commc'ns Corp., 368 B.R. 140, 226 (Bankr. S.D.N.Y. 2007).
In determining whether a proposed settlement should be approved, a court must
determine whether the settlement is in the best interests of the estate. In re Adelphia Commc'ns
Corp., 327 B.R. 143, 158 (Bankr. S.D.N.Y. 2005). The court's responsibility is to "canvass the
issues and see whether the settlement "fall[s] below the lowest point in the range of
reasonableness.'" Cosoff v. Rodman (In re W.T. Grant), 699 F.2d 599, 608 (2d Cir. 1983)
(quoting Newman v. Stein, 464 F.2d 689, 693 (2d Cir. 1972)); Adelphia, 327 B.R at 159.
The court may give weight to the trustee's opinion that the settlement is fair and
equitable. Adelphia, 327 at 159; In re Purofied Down Prods., 150 B.R. 519, 522 (S.D.N.Y.
1993); Official Comm. of Unsecured Creditors of Int'l Distribution Ctrs., Inc. v. James Talcott,
Inc. (In re Int'l Distribution Ctrs., Inc.), 103 B.R. 420, 423 (S.D.N.Y. 1989). It is not necessary
for the bankruptcy court to rule on disputed issues of fact and law or to conduct a "mini trial" on
the merits of the underlying litigation. Adelphia, 327 B.R. at 159; In re Ashford Hotels, 226
B.R. 797, 802 (Bankr. S.D.N.Y. 1998). At the same time, a court may not simply defer to a
trustee's judgment, but must independently evaluate the reasonableness of the settlement.
Protective Comm. For Indep. Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S.
Case 8-07-08253-cec Doc 43 Filed 02/26/09 Entered 02/27/09 13:51:31

6
414, 424 (1968); Kayo v. Fitzgerald, 91 Fed. Appx. 714, 716 (2d Cir. 2004); In re Drexel
Burnham Lambert Group, Inc., 134 B.R. 493, 496 (Bankr. S.D.N.Y. 1991).
A court will consider the following factors to decide whether a settlement falls above or
below the lowest point in the range of reasonableness:
a) 	the likelihood of success compared to the present and future
benefits offered by the settlement;
b) 	the prospect of complex and protracted litigation if the
settlement is not approved;
c) 	the proportion of the class members who do not object or who
affirmatively support the proposed settlement;
d) 	the competency and experience of counsel who support the
proposed settlement;
e) 	the relative benefits to be received by individuals or groups
within the class;
f) 	the nature and breadth of any releases to be issued as a result
of the proposed settlement; and
g) 	the extent to which the settlement is the product of arm's
length bargaining, and not the product of fraud or collusion.
Drexel Burnham Lambert, 134 B.R. at 497. See also In re Spielfogel, 211 B.R. 133, 144 (Bankr.
E.D.N.Y. 1997); In re Texaco, Inc., 84 B.R. 893, 902 (Bankr. S.D.N.Y. 1988).
Discussion
The Ficus Entities argue that the Disclosure Statement set forth a strong case against the
Kiley Entities, which precludes the settlement from being approved, other than as part of the
Plan. They state that the Disclosure Statement valued the Mortgages, which will be transferred
to the Kiley Entities under the Kiley Settlement, at $9.2 million, and assert that the creditors will
receive, in addition, $3.2 million of the $4,787,983 in the Kiley Account in the absence of the
Case 8-07-08253-cec Doc 43 Filed 02/26/09 Entered 02/27/09 13:51:31

7
Kiley Settlement, with the balance earmarked for related administrative expenses. Adding these
sums, the Ficus Entities argue that if the Mortgages and the proceeds thereof were retained by
the estate, the estate would have over $12 million in additional funds for distribution to creditors.
Therefore, they argue that the estate is losing approximately $9.4 million with the settlement
(representing the approximately $12 million the estate would receive if it retained the Mortgages
and their proceeds, minus the $2.6 million it will receive under the Kiley Settlement). 	Because
the Trustee's claims are so strong, the Ficus Entities argue, the only benefit of the settlement is
the savings of litigation costs, which would be less than $9.4 million. The Ficus Entities argue
that the benefit to the estate would be even greater if the Kiley Entities’ claims were equitably
subordinated, as the Trustee seeks by way of counterclaim. The Ficus Entities point out that if
the settlement is approved, the distribution to creditors would increase from 69.8% to 73%, but if
the settlement is not approved and the Kiley Entities' claims are subordinated, the distribution to
creditors would be 81%.
In the Disclosure Statement, the Trustee described the relationship between the Kiley
Entities, the Debtor, Thomas J. Donovan and the entities controlled by Mr. Donovan, including
Private Capital Group, LLC, a Nevada limited liability company, Private Capital Corp., and
Private Capital Management Corp. (each a "Donovan Entity"). The Trustee stated:
A Kiley Entity would transfer money to a Donovan [Entity] in
connection with a specific mortgage loan or mortgage loans then held
by the Donovan [Entity], on the promise that the Kiley Entity would
be repaid the full principal amount, plus an agreed-upon rate of
return, either in the form of interest, a share of the profits generated
by the Donovan [Entity] in liquidating the mortgage loans, or a
combination of interest and profit. Originally, the Kiley Entity would
get back the principal and half of the profit, but over time, different
iterations of this arrangement have existed between the parties. . . .
Case 8-07-08253-cec Doc 43 Filed 02/26/09 Entered 02/27/09 13:51:31

8
The Kiley Entities collectively transferred more than $12 million to
PCG FL, the Debtor and/or other Donovan Entities in connection
with these transactions.
(Disclosure Statement at 44.)
Based on the structure of the transaction, and on his investigation (Disclosure Statement at
9, n.2; 49, n.88; 56), the Trustee contended that the Mortgages are either property of the estate
and/or of PCG FL. To the extent the Mortgages are property of the estate, the Trustee argued that
the Kiley Entities were unsecured creditors of the estate because they had not perfected any security
interest in any of the Mortgages pre-petition by filing UCC-1 statements, or by taking possession
of the collateral. (Disclosure Statement at 44-45.)
The Trustee further stated in the Disclosure Statement that as of the petition date, no
assignments of the Mortgages to the Kiley Entities had been recorded, and any assignments
made were executed after the petition date. (Disclosure Statement at 46.) The Trustee stated
that he believes that the Kiley Entities do not own the Mortgages because the provisions of the
transactions resembled loan transactions as opposed to purchase transactions. The Trustee stated
that he found, for example, that the transactions did not provide the Kiley Entities with the risks
associated with ownership, that "the benefits of ownership were only conditionally, partially and
indirectly transferred to the Kiley Entity," and that the Kiley Entities did not exercise typical
rights of ownership, such as selling or conveying the Mortgages. (Disclosure Statement at 53-
54.) The Trustee also asserted that the terminology used in the transactions, such as "Lender"
and "Borrower," are similar to the terminology typically used in loan transactions. (Disclosure
Statement at 53.)
Case 8-07-08253-cec Doc 43 Filed 02/26/09 Entered 02/27/09 13:51:31

9
The Trustee stated in the Disclosure Statement that he believed that the Kiley Entities
and their principals violated the automatic stay by backdating assignments of the Mortgages to
them, which were purportedly notarized in 2005 and 2006. (Disclosure Statement at 54.) Based
on this alleged stay violation, the Trustee sought to subordinate the Kiley Entities' claims.
The Ficus Entities argue that there is overwhelming evidence in support of the Trustee's
claims against the Kiley Entities, as outlined in the Disclosure Statement. However, while the
Disclosure Statement sets forth the Trustee's contentions with respect to the estate's claims
against the Kiley Entities, it also made clear that many of these contentions are disputed by the
Kiley Entities. For example, the Disclosure Statement noted the Kiley Parties' contention that
the Kiley Entities purchased the Mortgages from PCG Fl. (Disclosure Statement at 54, n.99.)
The Kiley Entities contend that the books and records of the Debtor and PCG FL support their
position. (Disclosure Statement at 54, n. 99.) The Kiley Entities also argue that their attorney
held the mortgage instruments in escrow for the Kiley Entities' benefit, and therefore that no
UCC-1s were needed because their security interest was perfected by the possession of the
mortgage instruments. (Disclosure Statement at 54, n.99). The Kiley Entities also assert that
their claims of ownership are supported by the fact that they never received a promissory note or
other evidence of a loan in connection with any of the Mortgages. (Disclosure Statement at 55,
n.99.) With respect to the assignments, the Kiley Entities argue that they gave valuable
consideration in exchange for the unconditional assignment of the Mortgages. (Disclosure
Statement at 55, n.99.)
Although the Ficus Entities would like this Court to believe that the issues are clear-cut,
this Court cannot make such a finding. The most important consideration in determining
Case 8-07-08253-cec Doc 43 Filed 02/26/09 Entered 02/27/09 13:51:31

10
whether a settlement should be approved is the likelihood of success compared to the benefits of
the settlement. Adelphia, 327 B.R. at 160. The proposed settlement provides for the estate to
receive over $4.1 million, consisting of $2.6 million as a negotiated amount with respect to the
parties' positions, and the remainder constituting reimbursement to the estate of expenses
incurred in servicing the Mortgages. In seeking approval of the Kiley Settlement, the Trustee
explained that, based on his investigation, which continued after the Disclosure Statement was
filed, he concluded that it was likely that 43 of the Mortgages would be proven to be property of
the estate, while the other Mortgages would be determined to be property of the other entities.
(Trustee's Aff. ¶ 10.) The Trustee pointed out that even if he were successful in establishing that
43 Mortgages belonged to the estate, Mr. Kiley "would receive a claim for the loss of those
properties from which he might ultimately receive a distribution approximately of 70%."
(Trustee's Aff. ¶ 10.) The Trustee explained that the $2.6 million "represents the 30% that would
be retained by the [e]state for distribution to other creditors", if the Court were to determine that
the estate is the owner of 43 of the 83 Mortgages, and if the Court were to decide against
equitable subordination of the Kiley Entities' claims. (Trustee's Aff. ¶ 12.)
The Trustee further acknowledged that there is a significant chance that he would not
succeed in equitably subordinating the Kiley Entities' claims, because he was not certain of his
ability to prove willful misconduct on the part of the Kiley Entities, and because "equitable
subordination is an extraordinary remedy rarely invoked against creditors with valid underlying
claims." (Trustee Aff. ¶ 11.) Thus, the Kiley Settlement provides the estate (without further
litigation costs) with the economic equivalent of what the estate would receive if the Trustee
were successful in establishing estate ownership of 43 of the 83 Mortgages, and were
Case 8-07-08253-cec Doc 43 Filed 02/26/09 Entered 02/27/09 13:51:31

11
unsuccessful in seeking equitable subordination of the Kiley Entities' claims - which reflects the
Trustee's informed assessment of the likely outcome of the litigation.
The settlement will also save the estate the cost of litigating the claims and counterclaims
asserted in the Kiley Action. Although the Ficus Entities argue that the continuation of the Kiley
Action would not lead to protracted litigation, experience indicates otherwise. The Kiley Action
has been pending for almost a year and a half, and the Kiley Entities' partial summary judgment
motion is pending. Given the history of the bankruptcy case and the Kiley Action, it is not
unreasonable to anticipate significant additional motion practice and litigation. The litigation
between the Trustee and the Kiley Entities has been hotly contested, and the Trustee stated in the
Disclosure Statement that it has been difficult to obtain requested discovery from the Kiley
Entities. (Disclosure Statement at 50-52.) The Trustee points out that while he has expended
substantial amounts of time and resources to investigate transactions involving the Mortgages,
further factual and legal development would be required to prepare for trial, in addition to the
costs of preparing numerous witnesses and experts, and the expense of conducting a trial. This
Court concludes that it is not unreasonable for the Trustee to anticipate protracted litigation of
the issues and high litigation costs.
The Trustee's lack of certainty about his ability to prevail on his equitable subordination
claims against the Kiley Entities is well founded. Section 510(c)(1) of the Bankruptcy Code
authorizes the court to equitably subordinate claims. 11 U.S.C. § 510(c)(1). A claim may be
subordinated if that claimholder is guilty of misconduct. 4 Collier on Bankruptcy ¶ 510.05[1]
(Alan N. Resnick & Henry J. Summer eds.,15th ed. rev.). This remedy is available when (1) the
claimholder engaged in inequitable conduct, (2) the misconduct caused injury to the creditors or
Case 8-07-08253-cec Doc 43 Filed 02/26/09 Entered 02/27/09 13:51:31

12
conferred an unfair advantage on the claimholder, and (3) equitable subordination is consistent
with bankruptcy law. 80 Nassau Assocs. v. Crossland Fed. Sav. Bank (In re 80 Nassau Assocs.),
169 B.R. 832, 837 (Bankr. S.D.N.Y. 1994). Cases in which equitable subordination is
authorized generally involve fraud, illegality or breach of fiduciary duty; undercapitalization of
the debtor by the claimholder; or control or use of the debtor as an alter ego for the benefit of the
claimholder. Id. at 838. "The doctrine is also applicable to general creditors, but identifying the
degree of conduct that will justify its invocation has proven even more ‘slippery’ and
unpredictable." Id.
Here, it is far from clear that the Kiley Entities' claims would be equitably subordinated
for their alleged violation of the automatic stay. Other remedies for violations of the automatic
stay are available to the Court, such as a finding of contempt and the award of damages. See In
re Chateaugay Corp., 920 F.2d 183, 187 (2d Cir. 1990) ("For [corporate] debtors, contempt
proceedings are the proper means of compensation and punishment for willful violations of the
automatic stay."); In re Worldcom, Inc., 361 B.R. 697, 721 (Bankr. S.D.N.Y. 2007); United
States v. D-M Sales Corp., 903 F. Supp. 431, 433 (E.D.N.Y. 1995) ("Generally, the purpose of
holding a party in civil contempt is to enforce compliance with an order of the court or to
compensate for losses or damages.") (quotation marks omitted).
Based upon this record, it is clear that the Kiley Settlement, which provides the estate
with a recovery equivalent to that which it would receive if the litigation between the Trustee
and the Kiley Entities concludes as the Trustee expects it will, falls well above the "lowest point
in the range of reasonableness." W.T. Grant, 699 F.2d at 608 (quotation marks omitted).
Case 8-07-08253-cec Doc 43 Filed 02/26/09 Entered 02/27/09 13:51:31

13
Lastly, the Ficus Entities argue that their objection should be accorded deference because
they are the largest creditors of the estate. It is true that, in determining whether to approve a
settlement, "[t]he bankruptcy court should also consider the paramount interest of the creditors
and give proper deference to their reasonable views." Spielfogel, 211 B.R. at 144 (citing In re
Woodson, 839 F.2d 610, 620 (9th Cir. 1988) and In re Am. Reserve Corp., 841 F.2d 159, 161
(7th Cir. 1987)). This does not mean, however, that a creditor - even a creditor holding the
overwhelming majority of claims in the case - may arbitrarily veto a settlement that otherwise
satisfies the criteria for approval. Here, all of the other relevant factors enumerated in Drexel
Burnham Lambert, 134 B.R. 493, 497, support approval of the Kiley Settlement.1 With respect
to the balance between the likelihood of success compared to the benefits offered by the
settlement, the Kiley Settlement provides the estate with the equivalent of its likely recovery in
litigation, without further litigation cost. If the Kiley Settlement is not approved, the continuing
litigation between the Kiley Entities and the Trustee is likely to be protracted and costly. Both
the Trustee and his counsel are highly competent and experienced, and there is no allegation that
the Kiley Settlement is anything other than the product of an arm's length negotiation.
In short, the record strongly supports approval of the Kiley Settlement. In evaluating the
Ficus Entities' objection, this Court notes that the objection is conditional only; the Ficus Entities
do not object to the Kiley Settlement if the Plan (which includes the Trustee's settlement with the
1 As set forth above, those factors are: a) the balance between the likelihood of success compared to the
present and future benefits offered by the settlement; b) the prospect of complex and protracted litigation if the
settlement is not approved; c) the proportion of class members who do not object or who affirmatively support the
proposed settlement; d) the competency and experience of counsel who support the proposed settlement; e) the
relative benefits to be received by individuals or groups within the class; f) the nature and breadth of any releases to
be issued as a result of the proposed settlement; and g) the extent to which the settlement is the product of arm's
length bargaining, and not the product of fraud or collusion. Drexel Burnham Lambert, 134 B.R. at 497.
Case 8-07-08253-cec Doc 43 Filed 02/26/09 Entered 02/27/09 13:51:31

14
Ficus Entities) is approved. Given the factors in favor of approval of the Kiley Settlement, this
Court concludes that the Ficus Entities' objection, if not a litigation tactic, is not well founded,
and therefore is not entitled to the deference which would properly be accorded to a creditor's
"reasonable views." See Spielfogel, 211 B.R. at 144.
Conclusion
For all the foregoing reasons, the Kiley Settlement is approved. A separate order will
issue herewith.
Dated: Brooklyn, New York
February 26, 2009
s/ Carla E. Craig
CARLA E. CRAIG
Chief United States Bankruptcy Judge
Case 8-07-08253-cec Doc 43 Filed 02/26/09 Entered 02/27/09 13:51:31

15
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
---------------------------------------------------------------X
In re
Case No. 07-71327-CEC
COPPERFIELD INVESTMENTS, LLC,
Chapter 11
Debtor.
---------------------------------------------------------------X
Plaza Equities LLC, Plaza Investments, and 	Adv. Pro. 07-8253-CEC
M&O Enterprises, PSP, Inc.,
Plaintiffs,
-against-
David Pauker as Chapter 11 Trustee of
Copperfield Investments, LLC,
Defendant-counterclaimant,
-against-
John Kiley and Scott Kiley,
Defendant on the counterclaims.
--------------------------------------------------------------X
Plaza Equities LLC, Plaza Investments, and M&O
Enterprises, PSP, Inc., John Kiley, Scott Kiley,
Third Party Plaintiffs,
-against-
Gerard M. Bambrick, Esq. and Bambrick& Ryan,
Third Party Defendants.
--------------------------------------------------------------X
MAILING CERTIFICATE
I, Elise Kanter, hereby affirm that on February 26, 2009 a copy of a decision was served on the parties
named below by United States Postal Service first class mail, telecommunication, facsimile or any other delivery
method, as follows:
Douglas Furth, Esq.
Adam Silverstein, Esq.
Ancela R. Nastasi, Esq.
Anthony Vassalo, Esq.
Golenbock, Eisman, Assor Bell & Peskoe
437 Madison Avenue
New York, New York 10022
Attorneys for David Pauker, Chapter 11 Trustee
of the estate of Copperfield Investments, LLC
Case 8-07-08253-cec Doc 43 Filed 02/26/09 Entered 02/27/09 13:51:31

16
Martin G. Bunin, Esq.
Grant Stein, Esq.
William Hao, Esq.
Alston & Bird, LLP
90 Park Avenue
New York, New York 10016
Daniel Torchio, Esq.
80 Third Avenue - 13th Floor
New York, New York 10022
Wayne Greenwald, Esq.
99 Park Avenue, Suite 900
New York, New York 10010
John M. Lundin, Esq.
Schlam, Stone & Dolan LLP
26 Broadway
New York, New York 10004
Valerie Millman, Esq.
Office of the United States Trustee
271 Cadman Plaza East, Suite 4529
Brooklyn, New York 11201
Burton Weston, Esq.
Afsheen Shah, Esq.
Garfunkel Wild & Travis
111 Great Neck Road, Suite 503
Great Neck, New York 11021
Dated: 	Brooklyn, New York
February 26, 2009
s/ Elise Kanter
Elise Kanter
Case 8-07-08253-cec Doc 43 Filed 02/26/09 Entered 02/27/09 13:51:31