Opinion ID: 52508
Heading Depth: 3
Heading Rank: 2

Heading: Justice Oaks Factors

Text: Romagosa argues that the bankruptcy court did not properly evaluate the Justice Oaks factors. When a bankruptcy court decides whether to approve a proposed settlement agreement, the court must consider: (a) The probability of success in the litigation; (b) the difficulties, if any, to be encountered in the matter of collection; (c) the complexity of the litigation involved, and the expense, inconvenience and delay necessarily attending it; (d) the paramount interest of the creditors and a proper deference to their reasonable views in the premises. 11 In re Justice Oaks, 898 F.2d at 1549. A bankruptcy court is not obligated to actually rule on the merits of the various claims “only the probability of succeeding on those claims.” Id. (emphasis in original). “The approval of a compromise is within the sound discretion of the bankruptcy judge . . . and [an appellate court] will not overturn a decision to approve a compromise absent a clear showing that the bankruptcy judge abused her discretion.” Jeffrey v. Desmond, 70 F.3d 183, 185 (1st Cir. 1995). Romagosa argues that the bankruptcy court did not properly consider the strength and the monetary value of her claims against Van Diepen and OIM. The Trustee found a viable preferable transfer claim estimated to be worth about $55,000, but offered to settle that claim and all other claims for $45,000 in lieu of the uncertainty and high costs of litigation. The Trustee did not find that the piercing of the corporate veil and the fraudulent transfer claims had much if any value due to the difficulty in litigating such claims and because of the facts of the case. However, Romagosa cites to Amjad Munim, M.D., P.A. v. Azar, 648 So.2d 145 (Fla. Dist. Ct. App. 1995) for the proposition that her claims were not only strong, but she was likely to recover. The facts in Munim are similar to the facts of our case. In Munim, the plaintiff was a doctor who was employed by a medical firm 12 owned and operated by Dr. Munim. Id. at 148. The plaintiff was fired by the firm, and sued for breach of contract. Id. The plaintiff won and was awarded a substantial money judgment against the firm. Id. Twelve days after the entry of the final judgment, Dr. Munim incorporated a new medical firm. Id. at 150. The old firm stopped seeing patients and rendering medical services. The new firm commenced seeing patients the next day. Id. at 150-51. The new firm was located in the same office building and used the same equipment. Id. at 151. The staff and patient files were the same. Id. The plaintiff brought supplementary proceedings against the new firm for fraudulent transfer of assets, de facto merger and/or mere continuation of business. Id. at 150. The trial court granted summary judgment in favor of the plaintiff on all his claims, and the Florida district court of appeal affirmed. Id. at 155. Based on this case, Romagosa argues that she had a high probability of success in litigating her claims and that the litigation was not complex. While Munim ended with a summary judgment, Romagosa’s state court case was only scheduled for a final summary judgment hearing. We can only speculate what the state court would have ruled based on the facts of the case before it. Furthermore, both the fraudulent transfer and piercing the corporate veil claims are based on fraud. See Carnes v. Fender, 936 So.2d 11, 12-13 (Fla. Dist. Ct. App. 13 2006). “Ordinarily, the issue of fraud is not a proper subject of a summary judgment. Fraud is a subtle thing, requiring a full explanation of the facts and circumstances of the alleged wrong to determine if they collectively constitute a fraud.” Lab. Corp. of Am. v. Prof’l Recovery Network, 813 So.2d 266, 271 (Fla. Dist. Ct. App. 2002) (citation omitted). Unlike Munim, most of the P.A.’s assets were leased. The court in Munim also found as a substantial asset the medical association’s patient list, which “are bought and sold for consideration all the time.” Munim, 648 So.2d at 153. Since the decision in Munim, the sale of a medical association’s patient list is restricted under HIPPA. The bankruptcy court is not required to rule on the merits, and must look only to the probabilities. In re Justice Oaks, 898 F.2d at 1549. Furthermore, the bankruptcy court must also consider the interests of all the creditors. The P.A. had five creditors and only Romagosa objected to the settlement agreement. Romagosa claims that she and Brown represent the vast majority of the unpaid claims against the P.A., and since Brown is in bankruptcy, she is not willing to fight for additional assets. However, it is within the bankruptcy court’s discretion to determine whether settling the claims, in light of the uncertainties and costs of litigation, was in the best interest of all the creditors, not just creditor Romagosa. As such, we do not find that the bankruptcy court abused its discretion in finding 14 that the probabilities as to the possible outcome of the state court litigation were uncertain, continued litigation would be costly, and collection of any assets would be difficult.