Buchwald Capital Advisors, LLC v. Papas (In re Greektown Holdings, LLC)

621 B.R. 797

IN RE: GREEKTOWN HOLDINGS, LLC, et al., Debtors.

Buchwald Capital Advisors, LLC, solely in its capacity as Litigation Trustee to the Greektown Litigation Trust, Plaintiff,

v.Dimitrios ("Jim") Papas, Viola Papas, Ted Gatzaros, Maria Gatzaros, Barden Development, Inc., Lac Vieux Desert Band of Lake Superior Indians, Sault Ste. Marie Tribe of Chippewa Indians, Kewadin Casinos Gaming Authority, and Barden Nevada Gaming, LLC, Defendants.

Case No. 08-53104 Jointly Administered

Adv. Proc. No. 10-05712

United States Bankruptcy Court, E.D. Michigan, Southern Division, Detroit.

Signed October 21, 2020

Shannon L. Deeby, Clark Hill PLC, Linda M. Watson, Birmingham, MI, Mark Parry, New York, NY, Edward Todd Sable, Detroit, MI, for Plaintiff.

Michael O. Fawaz, Lisa Sommers Gretchko, Royal Oak, MI, Patrick M. McCarthy, Ann Arbor, MI, James Morgan, Chicago, IL, Nancy K. Stone, Franklin, MI, for Defendants.

CORRECTED OPINION DENYING DEFENDANTS DIMITRIOS ("JIM") PAPAS, VIOLA PAPAS, TED GATZAROS, AND MARIA GATZAROS' MOTION FOR SUMMARY JUDGMENT (ECF No. 266)¹

Maria L. Oxholm, United States Bankruptcy Judge

I. INTRODUCTION

Before the Court is Defendants Dimitrios ("Jim") Papas, Viola Papas, Ted Gatzaros, and Maria Gatzaros' ("Defendants," "Papases" or "Gatzaroses") Motion for Summary Judgment pursuant to Federal Rule of Civil Procedure 56, made applicable pursuant to Federal Rule of Bankruptcy Procedure 7056, arguing that there is no genuine issue of material fact that the safe harbor provision of 11 U.S.C. § 546(e) bars this adversary complaint. Plaintiff Buchwald Capital Advisors LLC, solely in its capacity as Liquidating Trustee for the Greektown Litigation Trust, ("Plaintiff") filed this adversary proceeding seeking to avoid transfers from the debtor Greektown Holdings, LLC ("Holdings") to the Papases and Gatzaroses under 11 U.S.C. § 544 and to recover the transferred funds or the value of those funds from the Papases and Gatzaroses under 11 U.S.C. § 550. In this motion, Defendants assert that the transfers are protected from avoidance by the § 546(e) safe harbor provision. For the reasons that follow, the Court denies Defendants' motion for summary judgment.

II. JURISDICTION

This Court has jurisdiction pursuant to 28 U.S.C. § 1334 and 28 U.S.C. § 157. This adversary proceeding seeks to avoid and recover prepetition transfers as fraudulent and therefore is a core proceeding as defined in 28 U.S.C. § 157(b)(2)(H).

III. PROCEDURAL HISTORY

While this adversary proceeding has a lengthy history dating back to 2010, the Court will only focus on the procedural background as it relates to this motion. This motion was originally filed and argued before this Court's predecessor, the Honorable Walter Shapero (Retired), who granted Defendants' motion on November 24, 2015. [ECF No. 685]. In doing so, Judge Shapero made numerous findings based on then binding Sixth Circuit precedent, In re QSI Holdings, Inc. , 571 F.3d 545 (6th Cir. 2009) (abrogated by Merit Management Group, LP v. FTI Consulting, Inc., ––– U.S. ––––, 138 S. Ct. 883, 200 L.Ed.2d 183 (2018) ). The Court's opinion was affirmed by the District Court on January 24, 2018. [ECF No. 745]. Plaintiff subsequently appealed the decision to the Sixth Circuit. Pending appeal, the United States Supreme Court issued a decision in Merit Management Group, LP v. FTI Consulting, Inc. , ––– U.S. ––––, 138 S. Ct. 883, 200 L.Ed.2d 183 (2018) that directly addresses the issues in this case. As a result, on April 22, 2019, the Sixth Circuit issued an order vacating and remanding this case for reconsideration.² [ECF No. 748; Filed on May 8, 2019].

The parties have filed supplemental briefs addressing the motion in light of Merit Management . In their supplemental brief, Defendants maintain that this Court should not re-evaluate several of its earlier conclusions that were not implicated by Merit Management arguing that they are beyond the instructions of the Sixth Circuit's remand, and the law of the case doctrine dictates that they should not be disturbed. These conclusions include: (1) "a single component transfer of the 2005 Transaction cannot be isolated when conducting a Section 546(e) analysis: the transaction must be evaluated as an integrated whole"; (2) Merrill Lynch is a financial institution; (3) the challenged transfers were settlement payments; and (4) the challenged transfers were made in connection with a securities contract. [ECF No. 794, p. 1].

Defendants raise three separate arguments in support of their summary judgment motion: (1) Judge Shapero already conducted the factual and legal analysis required by Merit Management , that the transaction must be viewed in its entirety; (2) the transfers were for the benefit of Merrill Lynch; and (3) Holdings is by 11 U.S.C. § 101(22)(A) deemed to be a "financial institution" because Merrill Lynch was acting as an agent or custodian for its customer Holdings in making the transfers.

In response, Plaintiff asserts that in addition to the Sixth Circuit's mandate to reconsider this case in light of Merit Management , this Court is free to examine the prior grant of summary judgment under one of the three exceptions to the "law of the case" doctrine, citing to Westside Mothers v. Olszewski , 454 F.3d 532, 538 (6th Cir. 2006). Plaintiff first claims that defining the transfer at issue is directly implicated by Merit Management . Plaintiff next argues this Court should reconsider the following: (1) the transfers were not settlement payments; (2) the transfers were not made in connection with a securities contract; and (3) Merrill Lynch is not a financial institution. Finally, Plaintiff contends that Defendants fail to establish that Holdings meets the requirements of § 101(22)(A) to be deemed a "financial institution."

After a hearing on November 21, 2019, the parties filed post hearing briefs to clarify the different Merrill Lynch entities involved and their roles in the relevant transfers. The parties also analyzed the definition of a "financial institution" under § 101(22)(A) and whether Holdings, itself, qualifies as a "financial institution" by virtue of its status as a "customer" of Merrill Lynch. [ECF Nos. 782, 788, and 794].

IV. SUMMARY JUDGMENT STANDARD

Fed. R. Civ. P. 56, incorporated by Fed. R. Bankr. P. 7056 provides that

summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48, 106 S. Ct. 2505, 2509–10, 91 L.Ed.2d 202 (1986). "[S]ubstantive law will identify which facts are material[,]" and "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Id. at 248, 106 S. Ct. at 2510. Moreover, the disputed material fact must be "genuine." Id. "[A] material fact is ‘genuine,’ ... if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. The rule "mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett , 477 U.S. 317, 322–23, 106 S. Ct. 2548, 2552, 91 L.Ed.2d 265 (1986).

The moving party "always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of ‘the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,’ which it believes demonstrate the absence of a genuine issue of material fact." Id. at 323, 106 S. Ct. at 2552. "[W]here the nonmoving party will bear the burden of proof at trial on a dispositive issue, a summary judgment motion may properly be made in reliance solely on the ‘pleadings, depositions, answers to interrogatories, and admissions on file.’ " Id. at 324, 106 S. Ct. 2548, 2552. Thereafter, "the nonmoving party [has] to go beyond the pleadings and by her own affidavits, or by the ‘depositions, answers to interrogatories, and admissions on file,’ designate "specific facts showing that there is a genuine issue for trial." Id.

V. ANALYSIS

a. Findings of Fact

i. Predecessor's Findings

Before turning to Merit Management and the Sixth Circuit's order, it is important to understand this Court's predecessor's opinion granting Defendants' motion for summary judgment ("Opinion") [ECF No. 685]. A summary follows.

Significantly, in its Opinion, the court noted that "[n]either party ... contests the authenticity of any exhibit or disputes the occurrence or essential details of the transactions evidenced thereby. There are no genuine disputes as to any material facts, only as to how those facts should be construed and their legal consequences." Id. at 8.

In terms of factual findings, defendants Papases and Gatzaroses collectively owned approximately 86% of the membership interests in Monroe Partners, LLC ("Monroe") who, in turn, owned a 50% interest in Greektown Casino, LLC ("Greektown Casino").³ [ECF No. 685, p. 3]. The other 50% interest in Greektown Casino was owned by Kewadin Greektown Casino, LLC ("Kewadin"). Id.

On July 28, 2000, Defendants and Monroe entered into an agreement ("the 2005 Redemption") wherein "Monroe purchased and redeemed the membership interests ... of Defendants in exchange for Monroe's agreement to pay Defendants specified future installment payments." Id....