Court Opinion

ID: 2798578
Source: CourtListenerOpinion
Date Created: 2015-05-05 15:01:58.716123+00
Date Added: 2024-06-11T11:26:14.365618
License: Public Domain

14-3178-bk(L)
     In re: Nuevo Pueblo, LLC, Homesteads Community at Newtown, LLC

                          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 “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST
     SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

 1            At a stated term of the United States Court of Appeals
 2       for the Second Circuit, held at the Thurgood Marshall United
 3       States Courthouse, 40 Foley Square, in the City of New York,
 4       on the 5th day of May, two thousand fifteen.
 5
 6       PRESENT: DENNIS JACOBS,
 7                ROSEMARY S. POOLER,
 8                PETER W. HALL,
 9                              Circuit Judges.
10
11       - - - - - - - - - - - - - - - - - - - -X
12
13       IN RE: NUEVO PUEBLO, LLC, HOMESTEADS
14       COMMUNITY AT NEWTOWN, LLC,
15                Debtors
16
17       - - - - - - - - - - - - - - - - - - - -X
18
19       NUEVO PUEBLO, LLC, HOMESTEADS COMMUNITY
20       AT NEWTOWN, LLC,
21                Appellants,
22
23                    -v.-                                               14-3178-bk(L)
24                                                                       14-3251-bk(CON)
25       ROBERTA NAPOLITANO, TRUSTEE, RONALD
26       CHORCHES, TRUSTEE,
27                Appellees.
28       - - - - - - - - - - - - - - - - - - - -X

                                                  1
 1
 2   FOR APPELLANTS:            PATRICK W. BOATMAN, Law Offices
 3                              of Patrick W. Boatman, LLC, East
 4                              Hartford, Connecticut.
 5
 6   FOR APPELLEES:             WILLIAM S. FISH, JR. (David A.
 7                              DeBassio, on the brief),
 8                              Hinckley Allen & Snyder, LLP,
 9                              Hartford, Connecticut.
10
11                              DEAN W. BAKER, Law Office of
12                              Dean W. Baker, New Haven,
13                              Connecticut.
14
15        Appeal from judgments of the United States District
16   Court for the District of Connecticut (Haight, J.).
17
18        UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED
19   AND DECREED that the judgments of the district court be
20   AFFIRMED.
21
22        Appellants Nuevo Pueblo, LLC (“NP”) and Homesteads
23   Community at Newtown, LLC (“HCN” and, collectively, the
24   “Debtors”) appeal from the judgments of the United States
25   District Court for the District of Connecticut (Haight, J.),
26   affirming the ruling of the United States Bankruptcy Court
27   for the District of Connecticut (Weil, J.). We assume the
28   parties’ familiarity with the underlying facts, the
29   procedural history, and the issues presented for review.
30
31        The Chapter 7 bankruptcy trustees of the Debtors--
32   Roberta Napolitano and Ronald Chorches (collectively, the
33   “Trustees”)--jointly moved for approval of a settlement to
34   resolve claims by a number of related parties. As relevant
35   here, the proposed settlement provided that the HCN estate
36   would pay $450,000 to Konover Construction Corp. (“Konover”)
37   to settle litigation over the validity of a blanket
38   mechanic’s lien that Konover recorded in 2001 against real
39   estate then owned by HCN (the “HCN Property”).1 The
40   bankruptcy court approved the settlement pursuant to
41   Bankruptcy Rule 9019, and the district court affirmed. On
42   appeal, the Debtors argue that the Trustees overpaid to
43   settle meritless litigation and that the bankruptcy court
44   abused its discretion in approving the settlement.

         1
              The HCN Property was sold in 2005.
                                  2
 1        In deciding whether to approve a settlement pursuant to
 2   Bankruptcy Rule 9019, a court asks whether the settlement is
 3   “fair and equitable,” considering the following factors:
 4
 5       (1) the balance between the litigation’s
 6       possibility of success and the settlement’s future
 7       benefits; (2) the likelihood of complex and
 8       protracted litigation . . . ; (3) . . . the degree
 9       to which creditors either do not object to or
10       affirmatively support the proposed settlement;
11       (4) whether other parties in interest support the
12       settlement; (5) the competency and experience of
13       counsel supporting . . . the settlement; (6) the
14       nature and breadth of releases to be obtained by
15       officers and directors; and (7) the extent to
16       which the settlement is the product of arm’s
17       length bargaining.
18
19   In re Iridium Operating LLC, 478 F.3d 452, 462 (2d Cir.
20   2007) (citations and internal quotation marks omitted). A
21   bankruptcy court’s balancing of these factors is reviewed
22   for abuse of discretion. Id. at 461 n.13.
23
24        The Debtors argue that the settlement should not have
25   been approved because there was no possibility that
26   Konover’s mechanic’s lien on the HCN Property would have
27   been found valid. Konover recorded the lien after payment
28   disputes arose with The Homesteads at Newtown, LLC (“THN”),
29   an entity related to the Debtors. THN contracted with
30   Konover to perform work on THN’s property adjoining the HCN
31   Property. The validity of the mechanic’s lien over the HCN
32   Property turned on: (1) whether HCN consented to have
33   Konover perform work on the HCN Property; and (2) whether
34   Konover’s work on the adjoining property also benefitted the
35   HCN Property. In a separate adversarial proceeding, HCN
36   alleged that its own construction plans were derailed by the
37   improper lien, and sought damages against Konover.
38
39        The bankruptcy court did not abuse its discretion in
40   approving the settlement. Following testimony from the
41   Trustees and from Konover’s counsel,2 the court concluded

         2
              The Debtors’ objection that this testimony was
     hearsay is meritless. The bankruptcy court properly
     considered the testimony to determine the positions of the
     Trustees (standing in the shoes of the Debtors) and Konover,
                                  3
 1   that HCN’s suit (whatever its merits) was likely to entail
 2   expensive and protracted litigation, and unlikely to result
 3   in a significant damages award for HCN, even if it
 4   succeeded. With respect to the other Iridium factors, the
 5   court concluded that: the Konover litigation was the main
 6   impediment to progress in the Debtors’ bankruptcies;
 7   approval of the settlement was in the best interests of the
 8   creditors, none of whom objected; and the settlement terms
 9   were negotiated at arm’s length by experienced attorneys.
10
11        The Debtors argue that the bankruptcy court should have
12   undertaken a more searching merits analysis of the lien
13   before approving the settlement. But “[i]n undertaking an
14   examination of the settlement, we emphasize that this
15   responsibility of the bankruptcy judge, and ours upon
16   review, is not to decide the numerous questions of law and
17   fact raised by appellants but rather to canvass the issues
18   and see whether the settlement fall[s] below the lowest
19   point in the range of reasonableness.” In re W.T. Grant
20   Co., 699 F.2d 599, 608 (2d Cir. 1983) (citation and internal
21   quotation marks omitted). The bankruptcy court satisfied
22   that obligation before approving the settlement.
23
24        The Debtors further argue that, before the bankruptcy
25   court ruled on the proposed settlement, it should have
26   resolved their pending objections to claims filed against
27   the estates by Franklin Construction, LLC, a secured
28   creditor. That argument is meritless. Approval of the
29   settlement did not impair the Debtors’ ability to advance
30   those objections, and the merits of the objections were not
31   the basis of the bankruptcy court’s ruling. The merits of
32   those objections also had no bearing on any of the Iridium
33   factors.
34

     and to identify the issues the parties would have litigated.
     See, e.g., In re Adelphia Commc’ns Corp., 327 B.R. 143, 159
     (Bankr. S.D.N.Y. 2005), aff’d, 337 B.R. 475 (S.D.N.Y. 2006),
     aff’d, 224 F. App’x 14 (2d Cir. 2006) (summary order); In re
     Int’l Distribution Centers, Inc., 103 B.R. 420, 423
     (S.D.N.Y. 1989).
                                  4
1        For the foregoing reasons, and finding no merit in the
2   Debtors’ other arguments, we hereby AFFIRM the judgments of
3   the district court.
4
5                              FOR THE COURT:
6                              CATHERINE O’HAGAN WOLFE, CLERK
7

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