Meisel v. Natale (In re JDN Props. At Florham Park, LLC), Case No. 10-11697 (VFP)

In re: JDN PROPERTIES AT FLORHAM PARK, LLC, Debtor.

STACEY L. MEISEL, Chapter 7 Trustee, Plaintiff, v. JOSEPH D. NATALE, JDN PROPERTIES, LLC, JDN PROPERTIES II, LLC, JDN PROPERTIES III, LLC, JDN

PROPERTIES IV, LLC, JDN PROPERTIES@SPRING LAKE, LLC, JDN PROPERTIES@LEBANON, LLC, JDN

PROPERTIES@24 MOUNTAIN, LLC, TOSCA RESTAURANT, LLC, CAFÉ EMILIA, INC., and JDN

PROPERTIES@WESTFIELD, LLC, FERNANDO ROQUE, JENNIFER GRAMBOR, CHRIS TSAMUTALIS, DONNA

CONROY, JOHN DOES 1-10 and ABC CORPORATIONS 1-10, Defendants.

Case No. 10-11697 (VFP)

Adv. Pro. No. 11-1863 (VFP)

UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW JERSEY

ENTERED: September 1, 2015

August 31, 2015

NOT INTENDED FOR PUBLICATION

Chapter 7

OPINION

Becker Meisel LLC

Michael E. Holzapfel, Esq.

Eisenhower Plaza II

354 Eisenhower Parkway, Ste. 1500

Livingston, NJ 07039

Attorneys for Chapter 7 Trustee

Stacey L. Meisel

Podvey, Meanor, Catenacci, Hildner,

Cocoziello & Chattman, PC

Robert L. Podvey, Esq.

One Riverfront Plaza, Ste. 800

Newark, NJ 07102

Attorneys for Defendant, Chris Tsamutalis

Meyner and Landis LLP

Rosaria A. Suriano, Esq.

One Gateway Center, Ste. 2500

Newark, NJ 07102

Attorneys for Defendant, Joseph D. Natale

Graham Curtin P.A.

Patrick J. Galligan, Esq.

Caitlin M. Hillenbrand, Esq.

4 Headquarters Plaza, P.O. Box 1991

Morristown, NJ 07962

Attorneys for Defendant, Donna Conroy, Esq.VINCENT F. PAPALIA, United States Bankruptcy Judge

I. INTRODUCTION

This matter comes before the Court on the motion of Chapter 7 Trustee and Plaintiff, Stacey L. Meisel (the "Trustee") for the estate of JDN Properties at Florham Park, LLC (the "Debtor"), to enforce the settlement (the "Settlement") of an adversary proceeding which she filed against Debtor's principal, Joseph D. Natale, various entities owned or controlled by Mr. Natale (as named in the Amended Complaint, the "Natale Entities"), and four professionals previously associated with the Debtor, to recover fraudulent transfers and preferences under 11 U.S.C. §§ 544, 547, 548, 549 and 550. The Settlement was never reduced to a final, agreed-upon writing, although numerous drafts were exchanged among the parties. Natale objects to the enforcement of the Settlement. Co-defendant Donna Conroy Esq. ("Conroy") supports the enforcement of the Settlement. The primary basis of the dispute is the parties' disagreement over the scope of the releases included as part of the Settlement and whether an enforceable Settlement Agreement exists between and among the parties.

II. JURISDICTIONAL STATEMENT

The court has jurisdiction over these matters under 28 U.S.C. § 1334(b) and the Standing Orders of Reference entered by the United States District Court on July 10, 1984 and amended on October 17, 2013. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (F), (H) and (O). Venue is proper in this court under 28 U.S.C. § 1408. The court issues the following findings of fact and conclusions of law pursuant to FED. R. BANKR. P. 7052.¹

III. FACTUAL AND PROCEDURAL BACKGROUND

Defendant Joseph D. Natale ("Natale") is a New Jersey resident with interests in construction and non-construction entities (Dkt. 70, Amended Complaint, ¶¶ 7, 20; Dkt. 73, Answer, ¶¶ 7, 20).² Prepetition in 2007, certain dissatisfied construction clients (the "Akhtars") filed a New Jersey Consumer Fraud Action, N.J.S.A. § 56:8-2, against the Debtor, Natale and others in Superior Court of New Jersey, Law Division, Morris County. In 2008, the Superior Court entered summary judgment on liability in favor of the Akhtars and against the Debtor and Natale. Damages were liquidated in a postpetition proof hearing as described below.

The Debtor filed a Chapter 11 petition on January 21, 2010, and the case was converted to Chapter 7 on February 24, 2010. As ultimately alleged by the Trustee, on or about February 8, 2010 (postpetition but preconversion), Debtor amended its 2005 through 2008 tax returns to recharacterize loans to Natale as equity distributions. The Chapter 7 Trustee (the "Trustee") filed the instant Complaint on May 27, 2011 under 11 U.S.C. §§ 544, 547, 548, 549 and 550: (1) to recover the $1,600,000 recharacterization as a fraudulent transfer and postpetition preference; and (2) to recover $160,000 in other prepetition transfers (Dkt. 1).

On January 19, 2011, having obtained stay relief in the Bankruptcy Court, and following a proof hearing in Superior Court, the Akhtars obtained judgment against the Debtor, Natale and others for $7,373,374 (including exemplary damages) under the New Jersey Consumer Fraud Act (Dkt. 127-1, Ex. A, Amended Order and Judgment) (the "Judgment"). Natale appealed the Judgment and unsuccessfully sought to stay this adversary proceeding while the appeal was pending (Dkt. 64, Order denying stay of adversary proceeding, February 13, 2013).

The Trustee filed an Amended Complaint and moved on September 10, 2012 for summary judgment (Dkt. 22, summary judgment motion). In an oral opinion on February 8, 2013, the BankruptcyCourt denied Trustee's motion for summary judgment largely because the Trustee was unable to establish that the findings and conclusions of the Superior Court (generated by the summary judgment and proof hearing on damages) collaterally estopped Natale from denying liability on the Trustee's claims (Dkt. 83, Transcript of February 8, 2013 opinion of the Bankruptcy Court; Dkt. 22, Ex. U, Transcript of January 14, 2011 opinion of the Superior Court).

On March 19, 2013 the Trustee, with leave of the Bankruptcy Court, filed a Second Amended Complaint (Dkt. 70) which added claims against Natale, but in relevant part added four professionals of Debtor/Natale and alleged that they aided and abetted Natale's alleged breach of fiduciary duty:

Donna Conroy, Esq. ("Conroy") - former counsel to Debtor and Natale

Chris Tsamutalis - accountant to Debtor and Natale

Fernando Roque - former in-house accountant to Debtor³

Jennifer Grambor - former in-house bookkeeper to Debtor

On September 25, 2014, Conroy moved to dismiss the Second Amended Complaint (largely for Trustee's failure to include an Affidavit of Merit as to Conroy), a motion never joined and now returnable on September 15, 2015 (Dkt. 121). Judge Kaplan of this Bankruptcy Court, then assigned to this adversary proceeding, held settlement conferences on July 17, 2014 and on October 1, 2014 (Dkt. 127-1. ¶ 16). On February 24, 2015, the New Jersey Appellate Division vacated both the January 19, 2011 damage award against Natale, the Debtor and others and the 2008 summary judgment on liability which had issued in favor of the Akhtars and remanded the case to the trial court for a jury trial.

On April 30, 2015 the Trustee filed the instant motion to enforce the Settlement and a related Notice of Settlement of Controversy (Dkt. 127 and 128). Objections and responses by Natale and Conroy followed. The primary basis of the dispute is the scope of releases embodied in the Settlement and whether an enforceable settlement agreement exists between and among the parties. The BankruptcyCourt held a hearing on June 2, 2015 and requested additional submissions from the parties, which were made through June 25, 2015.

In connection with those supplemental submissions, the parties agreed that the Court could decide this matter on the basis of the record before it, without the need for an evidentiary hearing. See, e.g., Docket Nos. 148, 149 and 150. This Court agrees. No hearing is necessary where there is no dispute as to the facts underlying a motion to enforce a settlement. See Tiernan v. Devoe, 923 F.2d 1024, 1031 (3d Cir. 1991), citing Petty v. Timken Corp., 849 F.2d 130, 132 (4th Cir. 1988) (finding summary enforcement of settlement agreement appropriate); Amatuzzo v. Kozmiuk, 305 N.J. Super. 469, 474-75 (App. Div. 1997) ("[o]n a disputed motion to enforce a settlement, as on a motion for summary judgment," a hearing is not necessary if the available competent evidence allows the factfinder to resolve factual disputes in favor of the non-moving party); and Filtrator Apparatus Co., Inc. v. Food Enter., Inc., 491 F. Supp. 566, 568-69 (D.N.J. 1980) (there was no need to look beyond the submitted affidavits or to conduct an evidentiary hearing to decide that a newly filed complaint was barred by a prior release and stipulation of dismissal).

IV. ARGUMENTS OF THE PARTIES

A. The Chapter 7 Trustee

In her motion, the Trustee identified the Settling Parties as: (i) the Trustee; (ii) Natale; (iii) the defendant Natale Entities; (iv) Conroy; (v) Tsamutalis; (vi) Grambor; (vii) Roque; and (viii) the Lloyds of London underwriters on Conroy's professional liability policy SYN-102786 (Dkt. 127-2, p.2). No party indicated otherwise.

The Trustee, through counsel, Michael E. Holzapfel, Esq., described the terms of the Settlement as follows:

1. Natale, Conroy and Tsamutalis will pay $140,000 to the estate which would immediately disburse it to Trustee's counsel for fees;2. The Trustee will dismiss the adversary proceeding with prejudice, "and all claims asserted by the Settling Parties related to the Adversary Proceeding and the Bankruptcy Case would be released";

3. The Settlement is conditioned on the Bankruptcy Court's dismissal of the bankruptcy case;

4. The pro rata contribution toward the Settlement payment will be confidential "unless disclosure of this information is compelled by this Court or other legal process";

5. The Settling Parties agreed not to disclose the terms of the Settlement, except to the extent compelled by law or to satisfy the Fed. R. Bankr. P. 9019 motion; and

6. The Settling Parties agreed not to disparage one another.

(Dkt. 127-1, Trustee's Application in Support of Motion, ¶ 20) (emphasis supplied). The Trustee reported in her initial submission that Natale balked at consummating a Settlement Agreement because he did not want the releases (paragraph 2 above) to prevent his bringing certain potential claims against Conroy who maintained that such claims would be barred by the Settlement (Dkt. 127-1, ¶¶ 28-30).⁴

The Trustee...