Court Opinion

ID: 4374740
Source: CourtListenerOpinion
Date Created: 2019-03-07 15:00:16.208081+00
Date Added: 2024-06-11T14:49:34.649292
License: Public Domain

18-865
In re Steinberg

                         UNITED STATES COURT OF APPEALS
                             FOR THE SECOND CIRCUIT

                                   SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF
APPELLATE PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY
ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL
APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION ASUMMARY ORDER@). A PARTY
CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY
COUNSEL.

      At a stated term of the United States Court of Appeals for the Second
Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley
Square, in the City of New York, on the 7th day of March, two thousand
nineteen.

PRESENT: AMALYA L. KEARSE,
         DENNIS JACOBS,
         PETER W. HALL,
             Circuit Judges.

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IN RE SAMUEL STEINBERG,
                  Debtor.

DAVID JAROSLAWICZ, DAVID WALKER, HOWARD
FREUND, NEIL HERSKOWITZ, PHIL LIFSCHITZ,
ABRAHAM ELIAS,
         Creditors-Appellants,

                  -v.-                                             18-865

SAMUEL STEINBERG,
                   Debtor-Appellee.
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FOR CREDITORS-APPELLANTS:                    PAUL ALEX RUBIN, Rubin LLC,
                                             New York, NY.

FOR DEBTOR-APPELLEE:                         DANIEL G. LYONS, Westerman Ball
                                             Ederer Miller Zucker & Sharfstein,
                                             LLP, Uniondale, NY.

      Appeal from a judgment of the United States District Court for the
Southern District of New York (Schofield, J.).

      UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of the district court is
AFFIRMED.

      Appellants appeal an order of the United States District Court for the
Southern District of New York (Schofield, J.) affirming the order of the United
States Bankruptcy Court for the Southern District of New York (Glenn, Bankr. J.)
dismissing their objection to the discharge of Appellee Samuel Steinberg’s debt.
We assume the parties’ familiarity with the underlying facts, the procedural
history, and the issues presented for review.

      Steinberg was the “man on the ground” for the parties’ unsuccessful
Romanian real estate venture. Appellants’ Br. at 4. Although he kept records of
transactions relating to the venture, Steinberg gave those records to the judicial
administrator of the venture’s insolvency proceedings in Romania. He did not
make copies. Appellants then commenced adversary proceedings in Steinberg’s
Chapter 7 bankruptcy case, arguing that Steinberg’s debts should not be
discharged because he “failed to keep or preserve” sufficient records “from
which [his] financial condition or business transactions might be ascertained,”
and that his failure was not justified. 11 U.S.C. § 727(a)(3). The bankruptcy court
disagreed, concluding that Steinberg did produce sufficient records and that, in
any event, any failure was justified. On appeal, the district court affirmed the
bankruptcy court’s determination that Steinberg produced sufficient records.
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      Bankruptcy court decisions are subject to appellate review in the first
instance by district courts. The court of appeals then applies “the same standard
of review employed by the district court to the decision of the bankruptcy court.
Accordingly, we review the bankruptcy court’s findings of fact for clear error
and its legal determinations de novo.” In re Anderson, 884 F.3d 382, 387 (2d
Cir.), cert. denied sub nom. Credit One Bank, N.A. v. Anderson, 139 S. Ct. 144
(2018).

      For Section 727(a)(3) claims, the creditor bears the initial burden of
showing that the debtor failed to keep and preserve books or records sufficient to
ascertain the debtor’s financial condition or business transactions. In re Cacioli,
463 F.3d 229, 235 (2d Cir. 2006). The burden then shifts to the debtor to show that
the failure was justified. Id. Section 727 “impos[es] an extreme penalty for
wrongdoing, [and thus] must be construed strictly against those who object to
the debtor’s discharge and liberally in favor of the bankrupt.” Id. at 234 (internal
quotation marks omitted).

      Although he was no longer in possession of the accounting files for the
venture’s investment vehicles, Steinberg nonetheless produced 1,494 pages of
business records and 4,112 pages of emails prior to the bankruptcy court’s four-
day trial—a “very substantial volume of probative evidence.” S. App’x at 33.
This included eight years of joint tax returns, bank account statements, and credit
card statements, id., as well as bank account statements from 2006 to 2011 for
each of the limited liability companies involved in the venture, id. at 34.
Steinberg also prepared a chart summarizing bank records and land contracts
produced in discovery and describing the venture’s transactions, itemizing the
costs of each purchase, and describing the source of funding for each purchase.
Id. at 35. Finally, the bankruptcy court credited Steinberg’s testimony explaining
why the records produced were sufficient, see id. at 32–33, but not Appellants’
testimony, see id. at 33 (“Jaroslawicz demonstrated substantial credibility
issues.”).
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      Appellants’ generalized and conclusory allegations are insufficient to carry
their burden. Although some of the venture’s transactions were made in cash,
Steinberg testified that the summary chart lists “all transactions . . . with regard
to all the assets that were purchased” as part of the venture. App’x at 491
(emphasis added). In any event, Appellants have not proven that the cash
transactions—which Steinberg testified amount to less than five percent of the
venture’s business, see id. at 311—were material to assessing the venture’s
financial condition. And Appellants’ complaint that the summary chart only
accounts for the venture’s “major transactions” is not supported by any evidence
or allegation of transactions not included in the chart.

      We have considered the Appellants’ remaining arguments and find them
to be without merit. Accordingly, we AFFIRM the judgment of the district court.

                                  FOR THE COURT:
                                  Catherine O’Hagan Wolfe, Clerk of Court

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