Schermerhorn v. CenturyTel, Inc. (In re Skyport Global Commc'n, Inc.)

IN RE: SKYPORT GLOBAL COMMUNICATIONS, INC., Debtor.

JOANNE SCHERMERHORN, ET AL., Plaintiffs

v.CENTURYTEL, INC. (A/K/A CENTURYLINK), ET AL., Defendants.

SKYPORT GLOBAL COMMUNICATIONS, INC., ET AL., Plaintiffs

v.JOANNE SCHERMERHORN, ET AL., Defendants.

CASE NO. 08-36737-H4-11

ADVERSARY NO. 10-03150

ADVERSARY NO. 10-03225

UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

Filed: August 7, 2013

(CONSOLIDATED UNDER

ADVERSARY NO. 10-03150)

MEMORANDUM OPINION

REGARDING ADVERSARY DOCKET NUMBERS 317; 359; 360; 419; 460 and 461^*

[Adv. Doc. Nos. 317, 359, 360, 419, 460, 461]

I. INTRODUCTION

The power to impose sanctions for contempt of an order is an inherent and well-settled power of all federal courts—including bankruptcy courts. United States. v. Fidanian, 465 F.2d 755, 757 (5th Cir. 1972) (citations omitted); Ingalls v. Thompson (In re Bradley), 588 F.3d 254, 266 (5th Cir. 2009); Placid Ref. Co. v. Terrebonne Fuel & Lube, Inc. (In re Terrebonne Fuel & Lube, Inc.), 108 F.3d 609, 613 (5th Cir. 1997). While the Court should use this power sparingly, the right to sanction those who flout this Court's authority is both necessary and integral to this Court's performance of its duties. Without this power, the Court would be a "mere board[] of arbitration, whose judgments and decrees would be only advisory." Gompers v. Buck's Stove & Range Co, 221 U.S. 418, 450 (1911). Indeed, if a party can "make himself a judge of the validity of orders which have been issued, and by his own act of disobedience set them aside,then are the courts impotent, and what the Constitution now fittingly calls the 'judicial power of the United States' would be a mere mockery." Id.; In re Bradley, 588 F.3d at 265.

On June 10, 2010, this Court issued a written injunction order under Rule 65 of the Federal Rules of Civil Procedure.¹ The Court issued this injunction in order to prevent irreparable harm to the reorganized debtor, SkyPort Global Communications, Inc. (SkyPort). Subsequent to its issuance, however, the Court learned that two individuals—Samuel Goldman (Goldman) and Franklin Craig (Craig)—conspired to thwart this order, pursuing certain barred claims and impermissibly contacting Dawn Cole (Cole), a former employee of SkyPort. Accordingly, this Court now issues this opinion to discuss Goldman's and Craig's contumacious conduct, to restore integrity to the judicial process, and most importantly, to affirm that its orders cannot be "flouted, obstructed and violated with impunity." Waffenschmidt v. MacKay, 763 F.2d 711, 716 (5th Cir. 1985) (quoting Berry v. Midtown Serv. Corp., 104 F.2d 107, 110 (2d Cir. 1939)).

II. FINDINGS OF FACT

1. On August 12, 2009, this Court entered the Order Confirming Plan of Reorganization (the Confirmation Order) [Main Case Doc. No. 340], approving the Chapter 11 Plan of Reorganization for SkyPort Global Communications, Inc. (defined previously as SkyPort)² and its modifications (collectively, the Plan). [Main Case Doc. No. 223, 289].

2. In the Confirmation Order, and pursuant to the language of the Plan, this Court placed limitations on certain actions between various interested parties to the bankruptcy case, particularly on derivative actions filed on behalf of SkyPort.

3. The plaintiffs/counter-defendants in this proceeding include Joanne Schermerhorn, John K. Waymire, Chet Gutowsky, John Llewellyn, Joseph A. Lopez, Robert Foote, BLF Partners Ltd., ECAL Partners, Ltd., Whizkid Venture, LLC, Bella Krieger, Martin Pollack, George Metcalf, Gloster Holdings, LLC,³ Melvyn Reiser, Barry Klein, Cheskel Kahan, John A. Rees, Brian W. Harle, Michael Stein, Lawrence Solomon, Tracy Elstein & David Togut, Jason Charles Togut Trust, BMT Grantor Trust, Lynn Joyce Elstein Trust, Charles Stack, Joseph Baker, Movada, Ltd., Puddy, Ltd., Draco Capital, Inc., Edward Pascal, Robert Mendel, Stanley Beraznik, Don Bui, Ben Ariano, 3791068 Canada, Inc., Peter Taylor, John E. Panneton, Wayne C. Fox, David Currie, Byron Messier, Darshan Khurana, Mateo Novelli, Diya Al-Sarraj, Sequoia Aggressive Growth Fund, Ltd., Sequoia Diversified Growth Fund, Rig III Fund, Ltd., Aran Asset Management SA, Semper Gestion SA and Eosphoros Asset Management, Inc. (collectively, the Schermerhorn Parties).

4. At the time these proceedings commenced, Robert Kubbernus (Kubbernus)⁴ was the indirect controlling shareholder and CEO of SkyPort and resided in Texas. Since then, Kubbernus has sold his controlling interest in SkyPort [Tr. Nov. 28, 2012 23:12-25:9]and in January or February of 2012, ceased being CEO of SkyPort. [Tr. Nov. 27, 2012 158:9-158:15].

5. Balaton Group, Inc. (defined previously as Balaton) is a Canadian corporation controlled by Kubbernus, which he used to raise money from investors. Pursuant to the Confirmation Order, all shares of the reorganized debtor⁵ were issued to Balaton. [Tr. Nov. 27, 2012 115:17-20].

6. SkyPort, Balaton and Kubbernus are all named defendants/counter-plaintiffs in this proceeding. The other plaintiffs include CenturyTel, Inc.⁶ (CenturyTel), Clarence Marshall, R. Stewart Ewing, Jr., Michael E. Maslowski, Harvey P. Perry, Bankton Financial Corporation, Bankton Financial Corporation, LLC and ClearSky Management, Inc. (collectively, the SkyPort Parties).

7. Franklin Craig (defined previously as Craig)⁷ is an independent investment advisor and securities broker who resides in Paris, France. Craig earns his living by recommending and selling investments to European institutional investors and high net worth individuals. [Tr. Apr. 20, 2012 189:18-190:9]. In this particular suit, Craig recommended that five of the Schermerhorn Parties entities—Sequoia Aggressive Growth Fund, Ltd., Sequoia Diversified Growth Fund, Rig III Fund, Ltd., Aran Asset Management SA, and Semper Gestion SA.—invest in four of the SkyPort Parties— ClearSky Investments, L.P., SkyComm Technologies Corp., Lavell Systems, Inc. and Victoria Grey. [Adv. Doc. No. 681 at p. 15, ¶ 5 n.5].

8. Until sometime in 2009, Dawn Cole (previously defined as Cole)⁸ was employed by Balaton as an independent contractor. [Tr. May 27, 2012 221:19-225:5]. In that capacity, she reported to Kubbernus and ran the operations of another entity called Victoria Grey, LLC (Victoria Grey). Victoria Grey raised money from investors to purchase residential properties in Detroit, Michigan. [Tr. Apr. 20, 2012 140:2-140:15].

9. In his role as an independent investment advisor, Craig introduced Kubbernus to various investors for both SkyPort and Victoria Grey. For this service, Craig received a finder's fee. Craig also personally invested in Victoria Grey. [Id. at 141:15-17].

10. In May 2009, Craig accused Kubbernus of fraud and misappropriation of the Victoria Grey investors' funds. As a result, Kubbernus was ultimately ousted as the manager of Victoria Grey. Kubbernus then became manager of SkyPort and Craig took over as the manager of Victoria Grey.⁹ [Id. at 146:8-146:20].

11. After Kubbernus began managing SkyPort, Cole joined SkyPort as an employee. She also assisted Craig and Victoria Grey in taking over the management of several properties in Detroit, Michigan. [Tr. Nov. 29, 2012 70:23-71:8].

12. On or about June 22, 2009, Kubbernus sued Craig and the other investors in Victoria Grey for ousting him. [Adv. Doc. No. 681 at p. 18, ¶ 17].

13. Also in June of 2009, Cole sought compensation from Craig and Victoria Grey for the unreimbursed expenses she had incurred while at Balaton for Victoria Grey's benefit. [Id. at p. 17, ¶ 16].

14. On July 31, 2009, Cole, inter alia, sued Balaton in Canada for unpaid compensation and reimbursable expenses, as well as the repayment of loans she had made to Balaton which were to be used to acquire properties for Victoria Grey. [Tr. May 27, 2012 132:16-134:9].

15. In January of 2010, Craig was introduced to Samuel Goldman (defined previously as Goldman),¹⁰ an attorney licensed by the State of New York whose law offices are in New York City. Craig then began to send Goldman documents from investors in Kubbernus' various business ventures. [Tr. Apr. 20, 2012 168:15-25]; [Tr. June 6, 2012 95:17-96:4]. Craig was, in fact, a very important source of information for Goldman as he (i.e., Goldman) prepared to file Schermerhorn v. CenturyLink, which is discussed in detail below. [Adv. Doc. No. 681 at p. 19]. Goldman and Craig became personal friends. [Tr. June 6, 2012 86:3-86:11].

16. On February 12, 2010, the Schermerhorn Parties filed an original petition to initiate Schermerhorn v. CenturyLink (Case No. 2010-09675) in the District Court of Harris County, Texas (the State Court Lawsuit). In the State Court Lawsuit, Kubbernus, inter alia, is named as a defendant, and is accused of fraud, securities fraud and oppression. The other parties named as defendants are: Clarence Marshall, R. Stewart Ewing, Jr., Michael E. Maslowski, Harvey P. Perry, Balaton, Bankton Financial Corporation, Bankton Financial Corporation, LLC, Clearsky Management, Inc., Wilson Vukelich, LLP and Clearsky Investment, LP. [Adv. Doc. No. 1-1 at p. 5]. SkyPort is not a named defendant in the State Court Lawsuit, nor is Craig a named plaintiff or defendant. See[id.]. Goldman was one of the attorneys-of-record for the Schermerhorn Parties. [Id. at p. 115].

17. As an attorney for the Schermerhorn Parties, Goldman arranged to speak to Cole in February or March 2010. Craig set up the phone call. [Tr. Aug. 28, 2012 118:22-120:6].

18. On March 26, 2010, the SkyPort Parties¹¹ responded to the State Court Lawsuit by filing a Notice of Removal of all claims asserted in the State Court Lawsuit [Adv. Doc. No. 1], as well as a Motion to Dismiss the State Court Lawsuit [Adv. Doc. No. 2]. Schermerhorn v. CenturyLink was thereafter removed to this Court (the Removed Lawsuit). [Adv. Doc. No. 1]. The Removed Lawsuit was assigned Adversary No. 10-03150.

19. On April 15, 2010, Cole left SkyPort. On the same day, Cole notified Craig that she was "free from Kubbernus."¹² [SkyPort Parties/SkyPort's Ex. No. 37]. Cole,

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