Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_08-cv-01387/USCOURTS-casd-3_08-cv-01387-2/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

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- 1 - 08cv1387

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

LASALLE BANK NATIONAL

ASSOCIATION,

Plaintiff,

CASE NO. 08CV1387 DMS (POR)

ORDER RE: RECEIVER’S

TWELFTH REPORT

vs.

COMAIR ROTRON, INC., THERMAFLO,

INC.; and COMAIR PARENT CORP.,

Defendant.

On January 31, 2012, and pursuant to Court order, Joel B. Weinberg, the receiver herein

(“Receiver”), filed the Receiver’s Twelfth Report and Petition for Further Instructions (“Report”).

No objections to the Twelfth Report have been filed. The matter is suitable for submission without

oral argument pursuant to Civil Local Rule 7.1(d). 

Pursuant to Civil Local Rule 66.1, a receiver’s report must include (1) a summary of

Receiver’s operations; (2) an inventory of receivership assets and their appraised value; (3) a schedule

of all receipts and disbursements; (4) a list of all creditors, their addresses, and claimed amounts; and

(5) a petition for instructions including a recommendation as to whether the receivership should be

continued. For the reasons which follow, the Receiver’s report and the proposals, included in his

request for instructions, are APPROVED.

Case 3:08-cv-01387-DMS-POR Document 164 Filed 02/16/12 Page 1 of 4
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- 2 - 08cv1387

1. Summary of Receiver’s Operations

On July 31, 2008, Plaintiff LaSalle Bank National Association filed a complaint against

Defendants Comair Rotron, Inc., Thermaflo, Inc. and Comair Parent Corp. for breach of contract and

appointment of a receiver. Plaintiff alleged it had lent Defendants in excess of $20 million, secured

by a “blanket” security interest in Defendants’ personal property, and that Defendants defaulted on

their obligation to repay Plaintiff’s loans. In addition to a receivership, Plaintiff requested entry of

judgment against Defendants for over $ 20 million owing on Plaintiff’s loans. 

On or about August 1, 2008, Defendants stipulated to an order appointing a receiver. Pursuant

to the terms of his appointment and approval of the Court, the Receiver liquidated Defendants’ assets.

Accordingly, the receivership estate is no longer conducting business operations. The Receiver’s

operations have been reduced to the pursuit of a claim against Gary Kuzmin for approximately

$200,000 in attorney’s fees and the resolution of tax penalties assessed by New York, California and

federal tax authorities. 

2. The Receivership’s Financial Condition

 As of December 31, 2011, the receivership had a cash balance of $111,301.64. (Report Ex.

B & C.) With the exception of the claim against Mr. Kuzmin, this appears to be the receivership’s

only asset. (Id.) The Receiver continues to maintain adequate cash reserves for the payment of

receivership expenses. (Id. Ex. A.) During the reporting period, the Receiver has paid all professional

fees incurred in connection with the Receivership and as provided in the October 17, 2011 Order

Granting Receiver’s Fifteenth Petition for Order Authorizing Payment of Professional Fees, which

accounts for the bulk of the receivership’s disbursements. (See id. Ex. B.) The Receiver is unaware

of any actual or alleged unpaid administrative expenses with respect to the receivership. (Id. Ex. A.)

The estate faces potential liabilities of approximately $53,000 for tax penalties as well as associated

professional expenses. (See id.) Finally, the Report discloses a list of Defendants creditors other than

Plaintiff with current balances. (Id. Ex. D.)

Case 3:08-cv-01387-DMS-POR Document 164 Filed 02/16/12 Page 2 of 4
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- 3 - 08cv1387

3. Receiver’s Petition for Instructions

The Receiver requests approval for further proceedings against Mr. Kuzmin and management

of the tax penalty issues. He requests the receivership to continue through July 2012 to allow for

resolution of these matters. 

The claim against Mr. Kuzmin arises out of pre-receivership litigation filed by Mr. Kuzmin

against Defendants in the United States District Court in Texas, which was stayed pending arbitration.

(Report at 3.) The Receiver’s claim for fees is based on contract which provides for attorney’s fees

when a party files a lawsuit in violation of the arbitration clause. (Id.) The attorney fee claim is being

handled by Defendants’ pre-receivership counsel and is not paid out of the receivership estate. (Id.

& Ex. A.) It is pending before JAMS in Los Angeles. Because Mr. Kuzmin has substituted counsel,

the JAMS proceedings have been delayed, but the Receiver believes the attorney fee claim is more

likely to settle. At present, however, the JAMS hearing has been continued and is anticipated to occur

in May or June 2012. (Id. Ex. A.)

The Internal Revenue Service (“IRS”) assessed a $50,000 penalty for failure to file IRS Form

4571, which is required when a taxpayer controls foreign subsidiaries. (Report Ex. A.) Defendants

Comair Rotron, Inc. and Comair Parent Corp. controlled subsidiaries in China, Mexico and the United

Kingdom. (Id.) When the Receiver filed the 2007, 2008 and 2009 tax returns, neither he nor his

accountants were aware of the requirement to file the form. (Id.) In June 2011, the Receiver’s

accountants requested abatement of the penalty, which was denied. Given the large sum involved, the

denial of abatement has been appealed. (Id.) The appeal could take as long as a year to resolve. (Id.)

The State of New York has assessed a $1,400 penalty and $200 to $300 in interest against the

receivership estate for a late tax filing. (Report Ex. A.) During their last two years of operation,

Defendants were deficient in the maintenance of their books and records. (Id.) The Receiver made

the requisite tax filings to bring Defendants current, however, this triggered the late filing penalties.

(Id.) The Receiver’s accountants have filed a request to abate the penalties and interest, and the matter

in under advisement with the New York taxing authorities. (Id.) Given the amount involved, the

Receiver proposes to pay the penalties and interest without further proceedings, if the request for

abatement is denied.

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- 4 -

The California Franchise Tax Board assessed a $1,200 penalty because the 2009 tax return was

paid by check rather than electronic fund transfer. (Report Ex. A.) The Receiver does not believe it

would be cost effective to contest the penalty and therefore proposes to pay it. (Id.)

Based on the foregoing, IT IS HEREBY ORDERED:

1. The Receiver’s proposal regarding further proceedings in the arbitration against Mr.

Kuzmin is approved. However, with his next report, the Receiver shall explain whether the merits of

Mr. Kuzmin’s claims against Defendants, pending in the United States District Court in Texas, have

been resolved, and if not, a status report and assessment whether an unfavorable outcome could

expose the receivership estate to an adverse claim.

2. The Receiver’s proposals regarding tax penalties are approved. 

3. The Receivers’s request to continue the receivership is approved. The receivership shall

continue through the date upon which this Court makes a further Order with respect to the Receiver’s

Thirteenth Report and Petition for Instructions.

4. Pursuant to Civil Local Rule 66.1, the Receiver shall file and serve his Thirteenth Report

and Petition no later than June 29, 2012. Comments or objections shall be filed no later than July 9,

2012. The matter shall be calendared for Friday, July 20, 2012 at 1:30 p.m., but unless otherwise

ordered, the issues will be addressed on the briefs and without oral argument.

5. The Receiver shall notify interested parties of the Court’s decision.

IT IS SO ORDERED.

DATED: February 16, 2012

HON. DANA M. SABRAW

United States District Judge

Case 3:08-cv-01387-DMS-POR Document 164 Filed 02/16/12 Page 4 of 4