LUGO MENDER et al v. EQUUS GAMING CO LP et al

OCR transcription for search; preserved printed pages are authoritative

; Caselo7-00096-ESL Doc#:55 Filed:10/19/07 Entered:10/22/07 15:40:55 Desc: Main

mn &e WD

SND

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

AUTHENTICATED /

U.S. GOVERNMENT
INFORMATION
GPO

Document Page 1of5

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF PUERTO RICO

IN RE:
EL COMANDANTE MANAGEMENT : Case No. 04-10938
COMPANY, LLC, et al., : Chapter 11

Debtors. : (Jointly Administered)

WIGBERTO LUGO MENDER as

LITIGATION TRUSTEE under EL :
COMANDANTE RACETRACK LITIGATION :
TRUST AGREEMENT AND DECLARATION :
OF TRUST. :

Plaintiff, : Adv. Proc. No. 07-00096
v.

EQUUS ENTERTAINMENT CORP.,
ET AL.

Defendants.

OPINION AND ORDER

This adversary proceeding is before the court on Defendants’ Motion for Stay of
Adversary Proceeding Pending Appeal (“Motion for Stay”) filed on September 12, 2007 (DKt.
No. 43). El Comandante Racetrack Litigation Trust Agreement and Declaration Trust through
Mr. Wigberto Lugo Mender, in his capacity as Litigation Trustee of the Litigation Trust (the
“Plaintiff’) filed an opposition to the Motion for Stay on September 14, 2007 (Dkt. No. 45) and
Defendants filed a reply on September 18, 2007 (Dkt. No. 48).

On April 11, 2007 the Plaintiff, Mr. Wigberto Lugo as the Litigation Trustee, filed a
complaint against Defendants to avoid and recover preferential and/or fraudulent transfers

pursuant to §§ 544, 547 and 548 of the Bankruptcy Code. Defendants filed a motion for

Case

nH BF WH WD

oO CO ND

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

7-00096-ESL Doc#:55 Filed:10/19/07 Entered:10/22/07 15:40:55 Desc: Main
Document Page 2 of 5

summary judgment asserting, inter alia, that the causes of action are time barred because the
validity of the extension of the Limitations Period through the Tolling Agreements must be
analyzed solely under Puerto Rico law, as the Tolling Agreements provide that they “shall be
governed by the laws of the Commonwealth of Puerto Rico”. This court entered an order on
August 29, 2007 denying the motion for summary judgment in part (Dkt. No. 31). A notice of
appeal of said order ensued.

In the Motion for Stay Defendants argue that they meet the standard the courts have
adopted when determining whether to grant a stay, that is, that they are likely to succeed on the
merits of the appeal, that they will suffer irreparable harm if the stay is not granted because the
continuation of the proceedings to judgment would render the appeal moot, that the Plaintiff will
not be substantially harmed by the stay and that the public interest will be served by granting the
stay. Defendants assert that the federal statute fixing the applicable statute of limitations does
not contain a tolling provision “against which to gauge the validity vel non of the TA [Tolling
Agreement].” Motion for Stay, Dkt. No. 43, p 8. According to Defendants the Tolling
Agreement is null under Puerto Rico law, the law specifically chosen by the parties to the
contract to govern the same, therefore because the statute of limitations was not effectively
tolled, the action is time-barred. In turn, Plaintiff asserts that regarding Defendants likelihood to
prevail on the appeal this court found in its August 29, 2007 Opinion and Order that Defendants’
position is without merit, that mootness is insufficient to show irreparable injury sufficient for
the court to grant a stay, that the Litigation Trustee and creditors will suffer irreparable injury if
the stay is granted for the delay in distributing available funds, and that Defendants have failed to
show that the granting of a stay is not against public interest.

In its reply to Plaintiff's objection Defendants argue, inter alia, that they are likely to

prevail on the merits of the appeal because, again, there is no federal statute governing the tolling

-2-

; ’ Case]07-O00096-ESL Doc#:55 Filed:10/19/07 fEntered:10/22/07 15:40:55 Desc: Main
Document Page 3 of5

1 | of the limitations period, therefore, the contract’s choice of Puerto Rico law must prevail.

For the reasons stated in Plaintiffs opposition the Motion for Stay is denied.
3
Discussion
4
5 Fed R Bankr P 8005 provides in part as follows:
6 A motion for a stay of the judgment, order, or decree of a bankruptcy judge, for approval
of a supersedeas bond, or for other relief pending appeal must ordinarily be presented to
7 the bankruptcy judge in the first instance. Notwithstanding Rule 7062 but subject to the
P power of the district court and the bankruptcy appellate panel reserved hereinafter, the
bankruptcy judge may suspend or order the continuation of other proceedings in the case
9 under the Code or make any other appropriate order during the pendency of an appeal on
such terms as will protect the rights of all parties in interest.
10
ll The motion for a stay pending appeal follows the same standard as any motion for stay,

12 || Which is in the nature of a preliminary injunction’ and will only be granted upon a showing of:

13 |f the likelihood of prevailing on the merits of the appeal; that movant will suffer irreparable injury

14 | ifthe stay is denied; that the other party will not be substantially harmed by the stay; and that the
15
public interest will be served by the granting of the stay. 9 Lawrence P. King Collier on
16
u Bankruptcy {8005.07 at page 8005-7 (15" Ed. Revised). “The sine qua non of this four-part

1g || Mquiry is likelihood of success on the merits: if the moving party cannot demonstrate that he is
19 || likely to succeed in his quest, the remaining factors become matters of idle curiosity.” Esso

20 || Standard Oil Co. v. Monroig Zayas, 445 F3d. 13 (1* Cir. 2006) citing New Comm Wireless

21 . . ; .
Servs., Inc. v. SprintCom, Inc., 287 F.3d 1, 9 (1 Cir. 2002); Ross-Simons of Warwick. Inc. v.
22
3 Baccarat, Inc., 102 F.3d 12, 15 (1* Cir. 1996); Weaver v. Henderson, 984 F.2d 11, 12 (1* Cir.
2
4 1993). However, failure to establish irreparable injury if the stay is denied, is sufficient to deny

25 || the stay requested. Puerto Rico Hospital Supply, Inc. v. Boston Scientific Corp., 426 F.3d 503

26 || (1* Cir. 2005) (“Because PRHS cannot establish irreparable harm, the district court did not abuse
27

28 * 6 Lawrence P. King, Collier Bankruptcy Practice Guide, § 117.11[2] at page 117-36
(Matthew Bender 2005).

-3-

¥

Case

SN NN OO BP WH WN

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27

28

07-00096-ESL Doc#:55 Filed:10/19/07 Entered:10/22/07 15:40:55 Desc: Main
Document Page 4of5

its discretion in denying the injunction”.) “Irreparable injury in the preliminary injunction
context means an injury that cannot adequately be compensated for either by a later-issued
permanent injunction, after a fall adjudication on the merits, or by a later-issued damages
remedy.” Rio Grande Community Health Center, Inc. v. Rullan, 397 F.3d 56 (1* Cir. 2005). The
threat of substantial loss of a business and possible bankruptcy qualify as irreparable harm

needed to sustain a request for preliminary injunction. Foran v. Salem Inn, Inc., 422 U.S. 922,

932, 95 S.Ct. 2561, 45 L.Ed.2d 648 (1975). To establish irreparable harm the movant does not
need to show that the injunctive relief will be fatal to the business, only that its legal remedies are

inadequate. Ross-Simons of Warwick, Inc. v. Baccarat, Inc., 102 F.3d 12, 15 (1* Cir. 1996). “If

the plaintiff suffers a substantial injury that is not accurately measurable or adequately
compensable by money damages, irreparable harm is a natural sequel.” Id. For example “harm to
goodwill, like harm to reputation, is the type of harm not readily measurable of fully
compensable in damages-and for that reason, more likely to be found “irreparable”.”” K-Mart

Corp. v. Oriental Plaza, Inc., 875 F.2d 907, 915 (1* Cir. 1989).

Plaintiff has failed to establish any of the factors applied to determine whether to grant a
stay pending appeal. Firstly, this court does not believe that the appeal has a likelihood of
success, Plaintiff has raised the same arguments presented in the motion for summary judgment
and again this court reaches the same conclusion it did on August 29, 2007. The issue was not
one of first impression.

Furthermore, this court cannot find that this appeal may become moot if the case is not
stayed, or how such mootness may be interpreted as irreparable injury warranting the stay of the

adversary proceeding pending the appeal.

Caselb7-00096-ESL Doc#:55 Filed:10/19/07 fEntered:10/22/07 15:40:55 Desc: Main
Document Page 5of5

1 In view of the foregoing, Defendants’ Motion for Stay of Adversary Proceeding Pending
Appeal is hereby denied.
SO ORDERED.

In San Juan, Puerto Rico, this 19" day of October 2007.

QUE S. LAMOUTTE
U.S. Bankruptcy Judge

Oo Oo YN WN MN BS

10
1
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28