Nedbank Ltd. v. Peykar International Co., Inc. et al

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UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK

Inre:
Chapter 7 Case
FINE DIAMONDS, LLC No. 09-10492 (REG)

Debtor.

GREGORY MESSER, as Chapter 7 Trustee
of Fine Diamonds, LLC,

Plaintiff, Adversary Proceeding
V. No. 09-01033 (REG)
PEY KAR INTERNATIONAL CO., INC., MITCH PEY KAR
and MEHRAN PEY KAR,

Defendants.

a a ae a ee ee ee e_ ee_ e_ e_ ee_ ee

ERRATA ORDER RE MEMORANDUM AND
ORDER WITH RESPECT TO DECISION AFTER
TRIAL
This matter having come up on the Court’s own motion, itis ORDERED:
1. The Court’s Memorandum and Order with Respect to Decision after Trial,
dated November 18, 2013, is corrected in the respect noted below:
(a) Last paragraph: change “Mitchell” to “Mitch”.
2. Future references to this decision shall be to the decision as corrected, a

copy of which is attached as exhibit A.

Dated: New Y ork, New Y ork S/Robert FE’. Gerber
January 17, 2014 United States Bankruptcy Judge
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Exhibit A

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UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
In re:
FINE DIAMONDS, LLC
Debtor.
)
)
)
)
)
Chapter 7 Case
No. 09-10492 (REG)
GREGORY MESSER, as Chapter 7 Trustee
of Fine Diamonds, LLC,
Plaintiff,
v.
PEYKAR INTERNATIONAL CO., INC., MITCH PEYKAR
and MEHRAN PEYKAR,
Defendants.
)
)
)
)
)
)
)
)
)
)
)
)
)
Adversary Proceeding
No. 09-01033 (REG)
MEMORANDUM AND ORDER WITH RESPECT
TO DECISION AFTER TRIAL
Constitutional limits on the power of bankruptcy judges to enter final judgments
in certain matters have resulted in confusion here as to “what happens next” after a
bankruptcy judge, in lieu of entry of a judgment in an adversary proceeding, issues
proposed findings of fact and conclusions of law, and a party wishes entry of a judgment
implementing them, on the one hand, or is unhappy with them, on the other.
Here I issued a Decision after Trial,1 noting that by reason of constitutional
constraints on my power as a bankruptcy judge to issue a final judgment on most of the
claims, my decision should be deemed to be proposed findings of fact and conclusions of
1 	See Messer v. Peykar Int'l Co. (In re Fine Diamonds, LLC), --- B.R. ---, 2013 Bankr. LEXIS 4280,
2013 WL 5614231 (Bankr. S.D.N.Y. Oct. 11, 2013) (ECF #108).
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law (“Proposed Findings”).2 I also issued a supplemental order providing for notice of
the Proposed Findings, initiating the process under Fed.R.Bankr.P. 9033, discussed
below, with which the bankruptcy clerk’s office duly complied. Thereafter, defendants
Mitch and Mehran Peykar filed notices of appeal from the Proposed Findings,3 although
there was not yet a judgment from which to appeal, and where the appropriate procedure
would have been to file objections to the Proposed Findings in accordance with Rule
9033. At the same time, my Chambers received an inquiry (to which it did not respond,
and to which I respond only by this Memorandum and Order), from the plaintiff side, as
to what it should do if it simply wanted judgment entered by the district court consistent
with the Proposed Findings.
I find no fault with either side; the uncertainty is understandable. There are holes
in the procedure, which the Court’s Local Rules only partially plug. This Memorandum
and Order addresses the remainder.
Fed.R.Bankr.P. 9033 provides, in relevant part:
(a) Service
In non-core proceedings heard pursuant to
28 U.S.C. § 157(c)(1), the bankruptcy judge shall
file proposed findings of fact and conclusions of
law. The clerk shall serve forthwith copies on all
parties by mail and note the date of mailing on the
docket.
2 	See 2013 Bankr. LEXIS 4280, at *69, 2013 WL 5614231, at *21 (“This is a Decision only, and
neither an order nor judgment. Under Fed.R.Bankr.P. 7058 and Fed.R.Civ.P. 58, the judgment
will need to be embodied in a separate document. At this point, this Decision should be deemed to
be this Court’s Proposed Findings of Fact and Conclusions of Law, subject to the procedures set
forth in Fed.R.Bankr.P. 9033.”). See also id. n.3, explaining the reason for that approach.
3 	See ECF #112, #114.
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(b) Objections: time for filing
Within 14 days after being served with a copy of the
proposed findings of fact and conclusions of law a
party may serve and file with the clerk written
objections which identify the specific proposed
findings or conclusions objected to and state the
grounds for such objection. A party may respond to
another party’s objections within 14 days after
being served with a copy thereof. A party objecting
to the bankruptcy judge’s proposed findings or
conclusions shall arrange promptly for the
transcription of the record, or such portions of it as
all parties may agree upon or the bankruptcy judge
deems sufficient, unless the district judge otherwise
directs.
. . . .
(d) Standard of review
The district judge shall make a de novo review upon
the record or, after additional evidence, of any
portion of the bankruptcy judge’s findings of fact or
conclusions of law to which specific written
objection has been made in accordance with this
rule. The district judge may accept, reject, or
modify the proposed findings of fact or conclusions
of law, receive further evidence, or recommit the
matter to the bankruptcy judge with instructions.
Thus in non-core matters,4 under national Bankruptcy Rule 9033, district judges
review the proposed findings; rule on any objections to the proposed findings that may
have been filed; and enter judgment consistent with the proposed findings, decline to do
so, or take any of the other actions enumerated in Rule 9033(d). They may also, if
4 	It is non-core matters to which 28 U.S.C. § 157(c)(1), mentioned in Rule 9033(a), applies. See
section 157(c)(1) (“A bankruptcy judge may hear a proceeding that is not a core proceeding . . . .
In such proceeding, the bankruptcy judge shall submit proposed findings of fact and conclusions
of law to the district court, and any final order or judgment shall be entered by the district judge
after considering the bankruptcy judge’s proposed findings and conclusions and after reviewing de
novo those matters to which any party has timely and specifically objected.”).
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warranted, overrule the objections but nevertheless make any further adjustments to the
findings they deem appropriate.5
In matters that are statutorily core but nevertheless beyond the constitutional
power of a bankruptcy judge to enter a final judgment, district judges, at least in this
district, do likewise—under caselaw,6 bankruptcy court local rule,7 and district court
standing order.8
5 	See, e.g., Fox v. Koplik (In re Perry H. Koplik & Sons, Inc.), 499 B.R. 276, 309–10, n.2, n.10
(S.D.N.Y. 2013) (Castel, J.).
6 	See, e.g., Retired Partners of Coudert Brothers Trust v. Baker & McKenzie, 2011 U.S. Dist.
LEXIS 110425, at *6–7, 2011 WL 5593147, at *3 (S.D.N.Y. Sept. 22, 2011) (McMahon, J.)
(converting bankruptcy court ruling into report and recommendation); Adelphia Recovery Trust v.
FLP Group, Inc. (In re Adelphia Commun. Corp.), 2012 U.S. Dist. LEXIS 10804, at *16–18, *22–
23, 2012 WL 264180, at *6, *8 (S.D.N.Y. Jan. 30, 2012) (Crotty, J.) (noting, on motion for
withdrawal of reference, that while Judicial Code and Bankruptcy Rules didn’t specifically
contemplate bankruptcy courts issuing proposed findings on core matters where the bankruptcy
judge’s issuing a final judgment was constitutionally prohibited, bankruptcy court “should proceed
with the reference, conduct the trial and issue proposed findings of fact and conclusions of law”);
Kirschner v. Agoglia (In re Refco Inc.), 461 B.R. 181, 192–93 (S.D.N.Y. 2011) (Drain, J.)
(concluding that the court had authority to enter final judgment on avoidance claims but in any
event had the power to submit proposed conclusions of law to the district court); In re
Containership Co. (TCC) A/S, 466 B.R. 219, 234 (Bankr. S.D.N.Y. 2012) (Lane, J.) (same, citing
several of the earlier cases).
7 	S.D.N.Y. Rule 9033-1, captioned “Proposed Findings and Conclusions in Certain Core
Proceedings,” provides:
If the Court determines that it cannot enter a final order or
judgment consistent with Article III of the United States
Constitution in a particular proceeding referred to the Court
and designated as core under section 157(b) of title 28, and the
Court hears the proceeding, Rule 9033(a), (b), and (c) of the
Federal Rules of Bankruptcy Procedure shall apply as if it is a
non-core proceeding.
8 	The district court’s Amended Standing Order of Reference Re: Title 11, M10–468, 12 Misc
00032, dated January 31, 2012 (Preska, C.J.), provides, in relevant part:
If a bankruptcy judge or district judge determines that entry of
a final order or judgment by a bankruptcy judge would not be
consistent with Article III of the United States Constitution in
a particular proceeding referred under this order and
determined to be a core matter, the bankruptcy judge shall,
unless otherwise ordered by the district court, hear the
proceeding and submit proposed findings of fact and
conclusions of law to the district court. The district court may
treat any order of the bankruptcy court as proposed findings of
fact and conclusions of law in the event the district court
concludes that the bankruptcy judge could not have entered a
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But national Bankruptcy Rule 9033, S.D.N.Y. Bankruptcy Rule 9033-1, and the
District Court’s Amended Standing Order of Reference do not address what parties
should do if they have no objections, but still want entry of a judgment by the district
court. And the applicable rules and orders do not address the mechanics of the docketing
in the district court that is necessary for entry of a judgment and for the district court’s
consideration of any objections that might be filed.
To address those gaps, I believe that I may, and should, order on my own motion,
since Rule 9033 objections were not lodged, (1) the opening of a matter in the district
court for the consideration (and, if appropriate, implementation) of my Proposed
Findings, and (2) the transmission of my Proposed Findings and the record on which they
were based—all, of course, for further proceedings as a district judge may see fit. A
party that wishes implementation of the Proposed Findings may then ask the district
judge to issue a judgment on them, and a party who has objections may then be heard.9
The bankruptcy clerk is authorized and directed (1) to open up a “Civ” case in the
district court, and (2) to electronically transmit to the district court, for filing in that case,
(a) the Proposed Findings; (b) this Memorandum and Order; and (c) the remainder of the
bankruptcy court ECF docket10 in this adversary proceeding.
final order or judgment consistent with Article III of the
United States Constitution.
9 	I don’t express a view as to what a district judge should do if an objecting party has failed to
comply with the requirements of Fed.R.Bankr.P. 9033, or, as here, has, notwithstanding the
absence of a judgment at the bankruptcy court level, filed a notice of appeal in lieu of compliance
with Rule 9033. Those decisions are properly made by the district judge.
10 	When the matter goes up to the district court, the parties or the district judge may wish
supplementation of the documents that are now on ECF, e.g., by the inclusion of trial exhibits or
transcripts that were not docketed here. Whether that is done, and, if so, how accomplished, is a
matter best decided by the district court.
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This order is without prejudice to the rights of any party to address the
significance, if any, of the early filing of an appeal by defendants Mitch and Mehran
Peykar; their failure to comply with Rule 9033; or any other matter with respect to
whether judgment should be entered consistent with my Proposed Findings.
SO ORDERED.
Dated: New York, New York 	s/Robert E. Gerber
November _18_, 2013 	United States Bankruptcy Judge
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