In re Ocean 4660, LLC

534 B.R. 52

In re: Ocean 4660, LLC, Debtor.

Case No. 13–23165–JKO

United States Bankruptcy Court, S.D. Florida, Fort Lauderdale Division .

Signed July 21, 2015

Ocean 4660, LLC, Sherman Oaks, CA, pro se.

Drew M. Dillworth, Kristopher E. Pearson, Eric J. Silver, Miami, FL, Trustee, Maria Yip.

Zana Michelle Scarlett, Office of the U.S. Trustee, Miami, FL, U.S. Trustee, Office of the U.S. Trustee.

ORDER DENYING MOTION FOR DISQUALIFICATION [ECF 394]

JOHN K. OLSON, Judge

This case is before the Court on Kenneth A. Frank's Motion (the “Motion”) [ECF 394] for disqualification of this judge. The Motion seeks disqualification “pursuant to 28 U.S.C. section(s) 144 and 455, and the Due Process Clauses of the United States Constitution, Amendments V and IX.” Mr. Frank alleges that disqualification is required because (1) the Court's “impartiality might be reasonably questioned;” (2) the Court “has a personal bias and prejudice concerning a party and/or counsel for the party;” (3) the Court “has a substantial association with the law firm representing the Chapter 7 Trustee, Maria Yip;” and (4) “the Court's actions from the inception display a deep-seated favoritism and antagonism that make fair judgment impossible.”

Adversary Proceeding 13–1641

Adversary Proceeding 13–1641, Yip v. El Mar Associates, Inc., and Kenneth A. Frank, was filed by Trustee Yip on September 3, 2013. In that action, the Trustee sought a determination that a lease (the “Lease”) between the Debtor and El Mar Associates, Inc. (“El Mar”) was invalid and unenforceable and sought a temporary restraining order and preliminary and permanent injunction prohibiting El Mar and Mr. Frank from interfering with the Trustee's operation of the Debtor's hotel property located in Lauderdale–By–The–Sea, Florida. A Temporary Restraining Order [ECF 10] was entered on September 5, 2013, after service of the relevant pleadings on Mr. Frank at his email address.¹ An evidentiary hearing on the motion for preliminary injunction was scheduled and held on September 12, 2013. El Mar and Mr. Frank were represented by counsel at the hearing, and the parties agreed to the entry of a preliminary injunction [ECF 17] by Order entered September 17, 2013.

Mr. Frank apparently complains that the TRO was entered on an ex parte basis. Although counsel for Trustee Yip sent the relevant pleadings to Mr. Frank at his email address, there is nothing unusual or irregular in the entry of a TRO without notice. The Trustee's allegations in support of the TRO were that Mr. Frank had threatened the operations of the hotel. In these circumstances, entry of a TRO without notice is entirely appropriate. The propriety of its entry was in any event vindicated by the consensual entry of a Preliminary Injunction.

By Order [ECF 4] entered September 4, 2013, and Supplemental Order [ECF 58] setting trial and related deadlines, the Court fixed various deadlines for the filing of witness and exhibit lists, a joint pretrial stipulation, motions in limine or to strike, and pretrial memoranda. The Supplemental Order specifically provided that failure to comply with the requirements of the scheduling orders could result in the striking of pleadings, dismissal, or entry of default. Although represented by counsel,² El Mar and Mr. Frank failed to comply with the deadlines. Indeed, their witness and exhibit lists and trial memorandum were not filed until November 19, 2013, the day before trial. Trustee Yip immediately moved [ECF 79, 80, 81] to strike the late-filed documents. The Trustee's motions to strike were granted at trial by Orders [ECF 84, 86] entered November 21 and 22, 2013. The striking of these pleadings was entirely appropriate under the Court's inherent authority to conduct trials and to supervise proceedings before it.

Trial on Adversary Proceeding 13–1641 was conducted on November 20, 2013. As a result of trial, the Court ruled by Order [ECF 85] entered November 21, 2013, and Final Judgment [ECF 87] entered November 22, 2013, that El Mar's lease granted by the Debtor was invalid and unenforceable. This determination was critical in the broad context of the case. The Trustee contended, and the evidence adduced at trial established, that the lease was so financially disadvantageous to the Debtor and its estate that it amounted to a fraudulent transfer and that its validity would materially adversely affect the value of the Debtor's hotel by millions of dollars.

Mr. Frank, pro se, timely filed a Notice of Appeal [ECF 100] on December 2, 2013, and sought entry of a stay pending appeal [ECF 101]. El Mar did not appeal. Mr. Frank was not a party to the lease between El Mar and the Debtor, so exactly what relief Mr. Frank could have obtained on appeal is unclear. In any event, the Notice of Appeal and motion for stay pending appeal were withdrawn [ECF 110, 111] by pleadings filed December 3, 2013. The Order [ECF 85] and Final Judgment [ECF 87] are now final.

There is no trial transcript in the record. The Court did strike Mr. Frank's and El Mar's untimely motions, lists and brief, as was appropriate in the circumstances, and conducted the trial in a professional and appropriate manner.

Relationships with attorneys and other professionals

Drew Dillworth. Prior to my appointment to the bench effective in February 2006, some nine and a half years ago, I was for 18 years a shareholder in the Tampa office of Stearns Weaver Miller. Drew Dillworth, Trustee Yip's counsel in this case, is currently a shareholder in the Miami office of Stearns Weaver. My tenure at the firm overlapped with his by 5 or 6 years. I never socialized with Mr. Dillworth other than at firm functions while I was a lawyer at Stearns Weaver, and I have never socialized with Mr. Dillworth other than at Bar functions since I became a judge.

These facts cannot form a basis for disqualification. As the Seventh Circuit has explained, “friendships among judges and lawyers are common” and “a judge need not disqualify himself just because a friend—even a close friend—appears as a lawyer.” United States v. Murphy, 768 F.2d 1518, 1537 (7th Cir.1985). Recusal was required in Murphy because the extent of intimacy between the judge and lawyer was “unusual” and an objective observer might reasonably doubt the judge's impartiality when “he was such a close friend of the prosecutor that the families of both were just about to take a joint vacation.” Id. at 1538. Even so, the Seventh Circuit chose not to reverse the trial judge's denial of the disqualification motion because it was inexcusably untimely. Much of what Mr. Frank complains of in his Motion occurred in 2013; the Motion was filed March 30, 2015, and appears to be materially untimely.

Mr. Frank states in paragraph 21 of the Motion that Mr. Dillworth serves as a court appointed fiduciary in this Court and that I preside over matters in which Mr. Dillworth is the court appointed fiduciary. Mr. Frank notes³ that I serve as Chair of the Abuse of the Bankruptcy Process Subcommittee of the Business Bankruptcy Committee of the American Bar Association. None of these facts suggest a basis for recusal.

Kevin Gleason. Mr. Gleason has, at various times, represented both El Mar and Mr. Frank in this case. He has sought to withdraw as counsel for one or both at various times and currently does not represent either. Mr. Frank contends that the Court is hostile to Mr. Gleason as a result of “bad blood” stemming from another case. In that case, In re New River Dry Dock, Inc., Case No. 06–13274, Mr. Gleason was sanctioned for improper conduct toward this judge in an Order [ECF 680] signed by all seven of the judges on this Court following an en banc evidentiary hearing and affirmed on appeal by the District Court and by the Court of Appeals. That same conduct resulted in a public reprimand by the Florida Supreme Court.

Parties and their lawyers sometimes behave in ways that predictably engender a judge's animus, but such behavior does not trigger the need for disqualification. To hold otherwise would be to create an opportunity for parties to exhibit hostile behavior strategically, as a means to force disqualification. Upholding a refusal to disqualify where the litigant had verbally attacked the judge in public, the First Circuit said that “[a] party cannot force disqualification by attacking the judge and then claiming that these attacks must have caused the judge to be biased against [her].” FDIC v. Sweeney, 136 F.3d 216, 219 (1st Cir.1998). Indeed, where a party argued that the judge's ongoing hostility toward him required disqualification, the Third Circuit held that the party's own public hostility toward the judge counseled against disqualification “lest we encourage tactics designed to force recusal.” United States v. Bertoli, 40 F.3d 1384, 1414 (3d Cir.1994). It is perhaps notable that it is Mr. Frank, not Mr. Gleason, who seeks recusal in this case. In any event, Mr. Frank's assertions regarding the Court's relationship with Mr. Gleason do not require disqualification.

Entry of orders granting ex parte motions. Federal Rule of Bankruptcy Procedure 9003 prohibits “ex parte meetings and communications with the court concerning matters affecting a particular case or proceeding.” A distinction must be made between ex parte meetings and communications, on the one hand, and ex parte motions, on the other: the former are prohibited and the latter are not. Federal Rule of Bankruptcy Procedure 7065, generally applying Federal Rule of Civil Procedure 65, expressly permits the entry of temporary restraining orders under the circumstances which existed in Adversary Proceeding 13–1641.⁴ Each of the other motions of which Mr. Frank complains were in connection with the retention of professionals and other administrative matters which are expressly permitted to be considered on an ex parte basis pursuant to Local Rule 9013–1(C). Nothing about the entry of these ex parte orders was irregular or improper, let alone a basis for recusal.

Mr....