UNITED STATES BANKRUPTCY COURT

DISTRICT OF NEW HAMPSHIRE

__________________________________________

)

In re: ) Case No. 12-13683-JMD

) Chapter 11

Focus Capital, Inc. )

)

Debtor )

__________________________________________)

OBJECTION TO FRANCES STRACCIA’S ET AL. EMERGENCY MOTION

PURSUANT TO SECTION 362 OF THE BANKRUPTCY CODE AND RULE 4001 OF

THE FEDERAL RULES OF BANKRUPTCY PROCEDURE, FOR AN ORDER

MODIFYING THE AUTOMATIC STAY TO ALLOW PAYMENT OF A JUDGMENT

UNDER THE ERRORS AND OMMISIONS INSURANCE POLICY ISSUED

TO THE DEBTOR AND TO PROCEED WITH DECLARATORY JUDGMENT

LITIGATION AGAINST THE E&O INSURANCE

CARRIER TO OBTAIN AGGREGATE INSURANCE COVERAGE

Alfred E. Yezbick, Jr. (“Yezbick”) by and through his attorneys, McLane, Graf,

Raulerson & Middleton, Professional Association object to Frances Straccia’s et als.

(“Movants”) Emergency Motion for an Order Modifying the Automatic Stay to Allow Payment

of a Judgment Under the Errors and Omissions Insurance Policy Issued to the Debtor and to

Proceed with Declaratory Judgment Litigation Against the E&O Insurance Carrier to Obtain

Aggregate Insurance Coverage (the “Motion”) and as grounds therefor, states as follows:

1. Yezbick is a creditor of the Debtor. He lost in excess of $240,000 in retirement

and other savings due to the inappropriate and unsuitable investments the Debtor made on

Yezbick’s behalf plus the return on his investments he should have enjoyed had the Debtor made

suitable investments and a return of management fees promised by the Debtor. Yezbick, now in

his late fifties, engaged the Debtor and its principal to invest his retirement and other savings

and informed the Debtor that he wanted to have his funds placed in moderate to moderately

aggressive investments. Instead, until Yezbick withdrew his remaining funds in 2011, the

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Debtor, without Yezbick’s informed consent employed a much more aggressive investment

strategy, including buying on margin (with already borrowed funds), betting on inverse ETFs,

options, leverage, shorting commodities, and other risky, unsuitable investments.

2. Through the Motion, the Movants seek relief from stay to pursue payment under

an E&O insurance policy held by the Debtor. Yezbick objects to the Motion because, in essence,

granting the Motion would result in a sub-group of harmed investors collecting some portion of

their damages while nearly all others would receive little or nothing on account of their claims.

The Movants’arbitration award allegedly totals $1.8 million. After reduction for defense costs

incurred, the E&O policy proceeds are less. Therefore, if the Motion is allowed, the insurance

policy’s remaining proceeds will be entirely depleted leaving nothing for the other investors to

collect. Granting the Motion would materially violate the strong Bankruptcy Code policy of

equality in distribution.

3. Though the Movants suggest otherwise, the E&O insurance policy is property of

the estate. The First Circuit Court of Appeals has held errors and omissions policies like that

here are estate property and should be made available for similarly situated plaintiffs to share. 

See, Tringali v. Hathaway Machinery Co., Inc. 796 F.2d 553, 560 (1st Cir. 1986)(explaining that:

“... language, authority, and reason all indicate that proceeds of a liability insurance policy are

‘property of the estate.’... The language of § 541(a)(1) is broad enough to cover an interest in

liability insurance, namely, the debtor's right to have the insurance company pay money to

satisfy one kind of debt — debts accrued through, for example, the insured's negligent

behavior.”)

4. The Movants, without citing any specific authority, claim that the arbitration

award grants them a preference to the insurance policy proceeds and alone is reason to grant

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relief from stay. Not so. Hathaway specifically addresses the assertion that state law priority in

distribution provides cause for relief from stay. The First Circuit, noting the policy of equality of

distribution and efficiency in claims administration held: “Given these policies underlying

federal bankruptcy law, the simple conclusory assertion that state law would give [movant] a

priority cannot (standing alone without some consideration of the plausible claim of harm by

Hathaway or other creditors) provide `cause' for lifting the stay.”Hathaway at 562.

5. For the forgoing reasons, and the reasons noted in the objections filed by the

Debtor and the New Hampshire Secretary of State, the Motion should be denied.

WHEREFORE, Alfred E. Yezbick, Jr. respectfully requests that the Court deny the

Motion and grant such other and further relief as may be just.

Dated: January 2, 2013 Respectfully submitted,

McLANE, GRAF, RAULERSON &

MIDDLETON, PROFESSIONAL ASSOCIATION

By: /s/ Joseph A. Foster

 Joseph A. Foster (BNH # 01572)

 900 Elm Street, 11th Floor

 P.O. Box 326

 Manchester, NH 03105-0326

 Telephone (603) 628-1175

 joe.foster@mclane.com

Attorneys for Alfred E. Yezbick, Jr.

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CERTIFICATE OF SERVICE

I, Joseph A. Foster, on this 2nd day of January, 2013, caused a copy of the forgoing

Objection to be served via the Court’s CM/ECF system:

Peter N. Tamposi

The Tamposi Law Group

159 Main Street

Nashua, NH 03060

603-204-5513

peter@thetamposilawgroup.com

 (Attorneys for the Debtor)

John L. Allen

Allen-Fuller, PA

40 Stark Street

Manchester, NH 03101

(603) 666-9966

603-668-7750 (fax)

john.allen@allen-fuller.com

(Attorneys for Frances Straccia, et al. )

Peter C.L. Roth

Environmental Protection Bureau

33 Capitol Street

Concord, NH 03301-6397

(603) 271-3679

(603) 223-6269 (fax)

peter.roth@doj.nh.gov

(Attorney for NH Secretary of State)

UST

Office of U.S. Trustee

1000 Elm Street

Suite 605

Manchester, NH 03101

603 666-7908

603 666-7913 (fax)

USTPRegion01.MR.ECF@usdoj.gov

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Daniel W. Sklar

Nixon Peabody LLP

900 Elm Street

Manchester, NH 03101

(603) 628-4000

603-628-4040 (fax)

dsklar@nixonpeabody.com

(Attorneys for Lisa Rowe)

/s/ Joseph A. Foster

Joseph A. Foster

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