Opinion ID: 4015399
Heading Depth: 2
Heading Rank: 3

Heading: A Detour to Bankruptcy Court

Text: In its bankruptcy filings, Coquico, through Benin, claimed to have little to no assets. As for creditors, aside from the judgment owed to Rodríguez, the majority of Coquico's purported creditors were Benin's own friends and family. And, consistent with Benin's and Acquanetta's motions to stay filed in the collection action, Coquico professed in its filings to own no intellectual property, claiming instead that all intellectual property was subject to a claim of Acquanetta Benin. Rodríguez, who appeared in the bankruptcy action as a creditor of Coquico's, moved to dismiss the bankruptcy petition for lack of good faith pursuant to 11 U.S.C. § 707, arguing that the sole reason for the [bankruptcy] filing was to prevent the Judicial Sale [of Coquico's intellectual property]. Rodríguez noted that the notarized transfer documents — which supposedly showed that the intellectual property had been assigned to Acquanetta — didn't even appear to be genuine. For example, Rodríguez pointed out that, although Benin claimed he had assigned the copyright for another of Coquico's products, the Vejigante Bear, to his mother on January 23, 2006, the Vejigante Bear copyright was not registered with the United States Copyright - 9 - Office until February 24, 2006. So, Benin could not have assigned it to his mother, Acquanetta, a month before the copyright even existed.14 In addition, Rodríguez argued that Coquico had intentionally diverted [its] business and operations . . . to a new entity to attempt to avoid payment to Rodríguez. Responding to Rodríguez's motion to dismiss, the bankruptcy court held a two-day evidentiary hearing on December 2, 2013, and January 13, 2014. Noteworthy here, during the evidentiary hearing, Benin explained that he was operating a newly surfaced Pennsylvania limited liability company — 18 Degrees North — which he had registered with Pennsylvania's Department of State Corporation Bureau in March 2010. Somewhat remarkably, Benin admitted at the evidentiary hearing that 18 Degrees North was essentially the same business as Coquico, minus [Rodríguez's] judgment. And, in fact, the similarities are considerable:  Benin is the Chief Executive Officer, President, and principal shareholder of 18 Degrees North, as with Coquico; 14 At the two-day evidentiary hearing in the bankruptcy court, Benin attempted to explain the discrepancy by admitting that he had altered the notarized documents submitted to the copyright and trademark offices, submitting amended transfer documents but using the same signature page. Benin explained that he thought this was appropriate because the original was simply a placeholder. The bankruptcy court later speculated that Benin’s conduct, altering a notarized document, may have amounted to a first-degree misdemeanor. - 10 -  18 Degrees North has the same mailing address as Coquico and manufactures and sells the same plush toys as Coquico;  Acquanetta licensed her intellectual property exclusively to Coquico until 2016, and then (somehow) also licensed it to 18 Degrees North, effective August 31, 2009;  18 Degrees North's bank account and Pennsylvania registration are under the name 18 Degrees North, LLC, d/b/a Coquico;  18 Degrees North's customers overlap with Coquico's customers and were derived from Coquico's customer lists;  Orders made at Coquico's website are filled by 18 Degrees North, and Benin testified that the frontend of [Coquico's] website [is] essentially the brand Coquico, but the transactions and the inventory [are] associated with 18 Degrees North;  In a single year Coquico transferred approximately $45,000 to 18 Degrees North. At the conclusion of the two-day evidentiary hearing, the bankruptcy court granted Rodríguez's motion to dismiss Benin's bankruptcy petition, finding it was filed in bad faith. See In re Coquico, Inc., 508 B.R. 929, 933 (Bankr. E.D. Pa. 2014). The bankruptcy court determined that Coquico's bankruptcy schedules contain[ed] so many material falsehoods, inaccuracies, and omissions that it was shocking. Highlighting that Coquico's bank accounts reflected the commingling of funds, the payment - 11 - of personal expenses,[15] prepetition defalcations, [and] postpetition unauthorized transactions, the bankruptcy court found that virtually every bad faith criteria [was] met . . . without question. See also In re Coquico, Inc., 508 B.R. at 944 (noting that [t]he evidence established that Benin looted Coquico both prepetition and postpetition, and that he lied in multiple court filings as to Coquico's assets). The bankruptcy court further noted that 98 percent of Coquico's debt was held by Benin's family members — his wife, his father, and, of course, his mother, Acquanetta. What's more, the bankruptcy court found Benin's testimony to be extremely evasive, not credible, contrived and, frankly, coached. Finally, the bankruptcy court found the timing of the filing suspicious, especially given Benin's own (striking) testimony that the purpose of the bankruptcy filing was to stop the judicial sale. The bankruptcy court concluded that Coquico's bankruptcy filing was nothing more . . . than an attempt to relitigate the copyright lawsuit and the collection lawsuit, and to spirit away the only valuable asset . . . the copyrights . . . [t]aking the customers, the products, everything and . . . transitioning them . . . into 18 [D]egrees [N]orth simply to attain 15 Benin had readily admitted to the bankruptcy court that Coquico paid basically all of his personal expenses, as well as his family's personal expenses, including, for example, charges to Nordstrom Rack and DirecTV services in his wife's name. - 12 - relief from a judgment creditor. See also In re Coquico, Inc., 508 B.R. at 943-44 (noting that Benin's own testimony from the Dismissal Motion hearing made crystal clear that it was his ultimate intention to spirit away the business and assets of Coquico in order to leave Coquico judgment proof and his plush toy business insulated from the Rodr[í]guez judgment).