Court Opinion

ID: 1025032
Source: CourtListenerOpinion
Date Created: 2013-07-05 06:43:20.908324+00
Date Added: 2024-06-11T09:57:26.150701
License: Public Domain

UNPUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT

                            No. 06-2213

In Re: NADER MODANLO,

                                                              Debtor.
--------------------

FINAL   ANALYSIS     COMMUNICATION   SERVICES,
INCORPORATED,

                                     Party-in-Interest - Appellant,

NADER MODANLO,

                                                  Debtor - Appellant,

          versus

MICHAEL H. AHAN,

                                                 Creditor - Appellee,

CHRISTOPHER B. MEAD,

                                                  Trustee - Appellee.

Appeal from the United States District Court for the District of
Maryland, at Greenbelt.    Deborah K. Chasanow, District Judge.
(8:06-cv-01168-DKC; BK-05-26549; BK-06-10158)

Submitted:   January 16, 2008          Decided:     February 21, 2008
Before WILLIAMS, Chief Judge, SHEDD, Circuit Judge, and Liam
O’GRADY, United States District Judge for the Eastern District of
Virginia, sitting by designation.

Affirmed by unpublished per curiam opinion.

Joel S. Aronson, RIDBERG, SHERBILL & ARONSON, L.L.P., Bethesda,
Maryland, for Appellant Nader Modanlo; Edward J. Tolchin, FETTMANN,
TOLCHIN & MAJORS, P.C., Fairfax, Virginia, for Appellant Final
Analysis Communication Services, Inc.      Bradford F. Englander,
Jennifer D. Larkin, LINOWES AND BLOCHER, L.L.P., Bethesda,
Maryland, for Appellee Michael H. Ahan; Richard M. Goldberg,
Kimberly M. Stoker, SHAPIRO, SHER, GUINOT & SANDLER, Baltimore,
Maryland, for Appellee Christopher B. Mead.

Unpublished opinions are not binding precedent in this circuit.

                                2
PER CURIAM:

       In this bankruptcy case, debtor Nader Modanlo and Final

Analysis Communication Services, Inc. (“FACS”) appeal from the

district    court’s   affirmance       of   the    bankruptcy     court’s    order

granting trustee Christopher B. Mead’s motion for authority to

request a subsidiary of the debtor to schedule a shareholders’

meeting.    Finding no error, we affirm.

                                        I

       Modanlo and creditor Michael Ahan were business partners who

owned a company called Final Analysis, Inc. (“FAI”); FAI, in turn,

wholly owned FACS. After the business relationship between Modanlo

and Ahan deteriorated, Ahan, certain FACS shareholders, and FAI’s

Chapter 7 trustee brought a state court action against Modanlo

alleging fraud and related claims.                While this litigation was

pending, three FAI creditors filed an involuntary petition for

bankruptcy against FAI.        FAI’s Chapter 7 trustee then proceeded to

sell   certain   assets   of    FAI,   including     its   FACS    shares.      In

response,   Modanlo   formed     New    York      Satellite   Industries,      LLC

(“NYSI”), a single-member Delaware limited liability company, which

purchased FAI’s assets, including FACS’ shares.               Thus, NYSI, under

the control of Modanlo, controlled FACS by owning all of its shares

of stock.

                                        3
     In 2003, a jury in the state court action brought by Ahan,

FACS shareholders, and FAI’s trustee returned verdicts against

Modanlo and in favor of FAI and FACS for several million dollars.

A second jury later awarded over $100 million to Ahan for related

fraud claims.   While these awards were pending on appeal in state

court, Modanlo filed a Chapter 11 bankruptcy petition. The primary

asset of Modanlo’s estate is his ownership of NYSI.    In turn, the

primary asset of NYSI is its ownership of FACS.1     Under Delaware

law, because Modanlo is the sole member of NYSI, his bankruptcy

automatically “dissolved” NYSI.

     While Modanlo was in bankruptcy, NYSI obtained a loan from a

Swiss company, Prospect Telecom AG (“Prospect”).        After NYSI

defaulted on its loan, Prospect filed a replevin action in Maryland

state court.    As a result of this action, NYSI was forced to

surrender its FACS stock certificates to Prospect.

     In November 2005, Ahan, Modanlo’s principal creditor, filed a

motion for appointment of a Chapter 11 trustee over Modanlo’s

estate, arguing that Modanlo was not managing the estate for the

benefit of his creditors.   The bankruptcy court granted the motion

and appointed Mead trustee.

     1
      When this case was litigated below, FACS was a valuable asset
because of a judgment it held against General Dynamics Corporation.
However, on appeal, that judgment was vacated, rendering FACS a
judgment-debtor of General Dynamics. See Final Analysis Commc’ns
Servs., Inc. v. Gen. Dynamics Corp., 2007 WL 3230733 (4th Cir. Nov.
1, 2007).

                                  4
     Mead ascertained that FACS had obtained several loans at very

unfavorable terms and had pledged security interests in a judgment

that FACS had obtained against General Dynamics Corp. to certain

lenders.   As a result, Mead determined that it was necessary to

take control of FACS to prevent a further deterioration of its

value and, thus, the Modanlo estate’s value.         Mead therefore

amended NYSI’s LLC agreement and appointed himself, as Modanlo’s

trustee, as manager of NYSI.      Pursuant to his appointment as

manager, Mead filed a Chapter 11 petition on behalf of NYSI and

commenced the NYSI bankruptcy case.2   Mead then sought to have FACS

call a shareholders’ meeting to remove Modanlo and an associate

from FACS’ board of directors and to have himself put on the board.

FACS’ secretary requested that Mead seek authorization from the

bankruptcy court.

     Mead then filed an emergency motion seeking authorization to

request that FACS’ secretary call a shareholders’ meeting.    Prior

to a hearing on the motion, Mead executed an LLC consent agreement

which purported to appoint himself, as personal representative of

Modanlo, sole member of NYSI and which declared that NYSI was to

continue in operation, its prior dissolution upon Modanlo’s filing

for bankruptcy notwithstanding.

     2
      Modanlo contends Mead had no authority to appoint himself as
manager of NYSI and therefore that the NYSI bankruptcy filing is
invalid.   This issue is being litigated separately and is not
currently before us.

                                  5
     The bankruptcy court granted Mead’s motion for authorization

to request that FACS’ secretary call a shareholders’ meeting, and

the district court affirmed. Both courts concluded, first, that an

adversary proceeding was not required under the bankruptcy code.

Both courts then found that Mead could act as Modanlo’s personal

representative under Deleware law to revive NYSI after it was

dissolved upon Modanlo’s bankruptcy.       Finally, both courts held

inapplicable   certain   provisions   of   Deleware   law   which   would

seemingly prevent Mead’s appointment as a member of NYSI and his

revival of NYSI.   Modanlo and FACS now appeal.

                                 II

     In a bankruptcy appeal, we review the bankruptcy court’s

decision directly, applying the same standard of review as did the

district court.    Educ. Credit Mgmt. Corp. v. Frushour, 433 F.3d

393, 398 (4th Cir. 2005); Schlossberg v. Barney, 380 F.3d 174, 178

(4th Cir. 2004).   Under this standard, we review legal conclusions

de novo and factual findings for clear error.         Schlossberg, 380

F.3d at 178.

     We have reviewed the decision of the bankruptcy court pursuant

to the standard set forth above, and we find no reversible error.

Accordingly, we affirm the judgment based substantially on the

reasoning of the bankruptcy court. In re Modanlo, No. 05-26549-NVA

(Bankr. D. Md. May 19, 2006); In re New York Satellite Indus., LLC,

                                  6
No. 06-10158-NVA (Bankr. D. Md. May 19, 2006).              We dispense with

oral       argument   because   the   facts   and   legal   contentions   are

adequately presented in the materials before us and argument would

not aid the decisional process.3

                                                                    AFFIRMED

       3
      We previously deferred ruling on Appellees’ motion to dismiss
this appeal as moot. We now deny that motion.

                                        7