Gisele Bouillette Allard

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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In re:
GISELE BOUILLETTE ALLARD,
a/k/a GISELE ALLARD,
Debtor.
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NOT FOR PUBLICATION
Chapter 7
Case No. 18-14092 (MG)
MEMORANDUM OPINION AND ORDER APPROVING
SETTLEMENT AGREEMENT AND OVERRULING CLAIM OBJECTION
A P P E A R A N C E S:
WINDELS MARX LANE & MITTENDORF, LLP
Attorneys for Alan Nisselson, Chapter 7 Trustee
156 West 56th Street
New York, NY 10019
By: 	Leslie Barr, Esq.
ANNE ROSENBACH, ESQ., PLLC
Attorney for Gisele Bouillette Allard, Debtor
3 Delta Road
Massapequa, NY 11758
By: 	Anne Rosenbach, Esq.
OFFIT KURMAN, P.A.
Attorneys for Creditor 50 East 126th Street Realty LLC
590 Madison Avenue, 6th Floor
New York, NY 10022
By: 	Albena Petrakov, Esq.
Umar A. Sheikh, Esq.
OFFICE OF THE UNITED STATES TRUSTEE
33 Whitehall Street
21st Floor
New York, NY 10004
By: 	Greg M. Zipes, Esq.
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MARTIN GLENN
UNITED STATES BANKRUPTCY JUDGE
Pending before the Court is the motion of Alan Nisselson (the “Trustee”), in his capacity
as chapter 7 trustee of the estate of Gisele Bouillette Allard (the “Debtor”), for entry of an order
approving a stipulation (the “Stipulation”) between the Trustee and 50 East 126th Street Realty,
LLC (“126 Realty”), to resolve treatment of 126 Realty’s claim (“Claim No. 3,” Claim # 3-1)
and to authorize the Trustee to expend estate funds to procure insurance policies. (“Motion,”
ECF Doc. # 168.) The Trustee has attached a declaration in support of the Motion. (“Trustee
Decl.,” ECF Doc. # 168-3.) The Debtor filed an objection to the Motion. (“9019 Objection,”
ECF Doc. # 173.) 126 Realty submitted a statement in support of the 9019 Motion. (“126
Realty Statement,” ECF Doc. # 175.) The 126 Realty Statement is supported by the declaration
of Umar A. Sheikh. (“Sheikh Decl.,” ECF Doc. # 176.) The Trustee also filed a reply to the
9019 Objection. (“Reply,” ECF Doc. # 177.) On June 7, 2021, the Court held a hearing on the
Motion (the “Hearing”). On June 10, 2021, a transcript of the Hearing was filed. (“Transcript,”
ECF Doc. # 181.)
Also pending before the Court is the Debtor’s objection to Claim No. 3. (“Claim
Objection,” ECF Doc. # 172.) A hearing on the Claim Objection has been scheduled for July 7,
2021; however, as the Court concludes that the Claim Objection lacks merit, for the reasons
explained below in connection with the Court’s discussion of the Motion, the Claim Objection is
OVERRULED, and the hearing cancelled.
The 9019 Objection and the Claim Objection both rest on the Debtor’s contention that a
scrivener’s error in a judgment of foreclosure and sale order by New York State Supreme Court
Justice Judith N. McMahon, dated September 28, 2018, became the basis for a claim in excess of
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$5 million ($5,255,638.91),1 where—the Debtor contends—the claim amount should have been
entered as $525,538.91. (“JFS Order,” ECF Doc. # 176-1 at 11–17.) In essence, the Debtor
argues that the amount of “$5,255,38.91”—the sum which is in fact expressly included in the
JFS Order—should be interpreted to mean $525,538.91 rather than $5,255,638.91.2 This
argument is easily refuted, however, because the $5,255,638.91 amount (1) appears later in the
JFS Order, (2) equals the correct mathematical result when applying 25% compound interest to
the $94,677.16 principal for 19 years, and (3) is included in the Debtor’s own schedules.
Alas, this is not the first time the Debtor has objected to the amount awarded to 126
Realty by the State Court. The Debtor has made several unsuccessful attempts to overturn this
judgment, seeking to have the state trial court reconsider its decision, as well as seeking to appeal
the trial court decision. The Court recognizes the substantial difference between the original
principal amount of Debtor’s debt—$100,00—and the staggering amount she now owes—in
excess of $7 million. As detailed below, the bankruptcy court may not review the State Court’s
decision. Therefore, the Debtor’s objections to the Motion and to Claim No. 3 must fail.
Accordingly, for the reasons discussed below, the Court GRANTS the Motion and
OVERRULES the 9019 Objection and the Claim Objection.
I. 	BACKGROUND
A. 	The Bankruptcy Case
On December 19, 2018, the Debtor filed a voluntary petition under chapter 11 of the
Bankruptcy Code. (“Petition,” ECF Doc. # 1.) On January 21, 2019, the Debtor filed her
1 	As interest has continued to accrue in the more than two and a half years since entry of the JFS Order, the
total amount of Claim No. 3 has now grown to $7,120,547.68. (See Claim No. 3 at 5.)
2 	At the Hearing, the Debtor’s counsel admitted that the Debtor’s sole argument is that the “$5,255,38.91”
amount should be $525,538.91 rather than $5,255,638.91. (Transcript at 10:18–23.)
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schedules (the “Schedules,” ECF Doc. # 14), which list 126 Realty as having a claim for
$5,255,638.91, supported by collateral having a value of $1,400,000.00. (Id. at 11.) The
collateral that supports the claim is the apartment building located at 50 East 126th Street, New
York, New York 10035 (the “Property”). On April 18, 2019, 126 Realty filed a proof of claim
for $7,120.547.68. (Claim No. 3.) Attached to Claim No. 3 is a description of interest and cost
calculation, showing interest added to the claim of $5,255,638.91, first at a rate of 25%
(compounded) per year until the entry of judgment of foreclosure and sale (the “Judgment”) by
the state trial court (the “State Court”), then at a post-judgment rate of 9% up until the filing of
the Petition, for a total of $7,113,819.68. (Id. at 5.) The claim amount also includes sums of
$1,428; $300; and $5,000 ordered pursuant to the Judgment, for the total of $7,120.547.68. (Id.)
On February 25, 2019, 126 Realty filed a motion for relief from the automatic stay to
enforce its rights to the Property and to complete a foreclosure sale. (“Lift-Stay Motion,” ECF
Doc. # 18.) The Court granted the Lift-Stay Motion, modifying the stay so that 126 Realty could
complete the pending foreclosure proceeding in the State Court. (ECF Doc. # 22.)
In addition to the Property, the Debtor owned other real property, including properties at
32 West 120th Street, New York, New York, 10027 (the “120th Street Property”); 134 West
119th Street, New York, New York 10029 (the “119th Street Property”); 239 Lenox Avenue,
New York, New York 10027 (the “Lenox Ave Property”) (see Lift-Stay Motion ¶ 6), as well as a
property at 8201 Abbott Avenue, Miami Beach, Florida 33141 (the “Miami Property”).
(Schedules at 3.) The Schedules list the Miami Property as securing a debt of $311,836.00 and
having a collateral value of $880,822.00. (Id.at 11.)
On April 12, 2019, the Office of the United States Trustee (the “UST”) filed a motion to
convert the case to a case under chapter 7 of the Bankruptcy Code or, in the alternative, to
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dismiss the case. (ECF Doc. # 24.) The Debtor, through her first attorney,3 Steven Amshen,
filed a cross-motion to dismiss the case rather than have it converted to a case under chapter 7.
(ECF Doc. # 29.) On May 7, 2019, the Court entered an order converting the case to a case
under chapter 7 (ECF Doc. # 32), and the Trustee was appointed. (ECF Doc. # 33.) Since his
appointment, the Trustee has sold 120th Street Property and the Lenox Ave Property. (See
Motion to Sell Property Free and Clear, ECF Doc. # 44; Memorandum Opinion Approving Sales
at Auction of Two Properties Owned by the Debtor (the “Sale Order”), ECF Doc. # 84.) The
120th Street Property sold for $2,803,931.50; and the Lenox Ave Property sold for
$2,713,600.00. (Sale Order at 4–5; Interim Trustee’s Final Report, ECF Doc. # 112, at 4.) The
Trustee currently holds $3,265,999.55, comprised of, inter alia, the net proceeds of those sales
less Court-approved expenses and distributions. (Motion ¶ 10.)
B. 	The Underlying State Proceedings Giving Rise to Claim No. 3
In 1998, the Debtor purchased the Property from Robert Robinson for $135,000, paying
$35,000 at the time of purchase and executing a promissory note (the “Note”) for the principal
balance of $100,000. (Lift-Stay Motion ¶ 8.) The Debtor did not make any payments on the
Note, and, in July 2005, 126 Realty’s predecessor in interest (the “Estate”4 or the “Plaintiff”)
commenced foreclosure proceedings in the State Court. (Sheikh Decl. ¶ 3.) The State Court
granted summary judgment in favor of the Estate and appointed a referee5 (the “Referee”) to
determine the amount due on the Note and the mortgage. (Id. ¶¶ 5–7.)
3 	The Debtor is currently on her fourth attorney. She has been represented in this case by Steven Amshen
(Petroff Amshen LLP), Robert J. Gumenick, Joel Shafferman (Shafferman & Feldman, LLP), and Anne Rosenbach
(Anne Rosenback, Esq., PLLC).
4 	After Mr. Robinson (the original seller) died, his estate commenced foreclosure proceedings with respect to
the Property.
5 	The State Court actually appointed two referees; however, the first referee’s determination of the amount
due on the Note was rejected on the basis that the Debtor never received notice of the hearing before the first
referee. The discussion that follows relates only to the second referee.
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On August 1, 2009, the Referee issued a reasoned report (the “Referee Report,” ECF
Doc. # 18-4), finding the total due on the Note to be $329,272.62. (Id. at 21.) The Referee
determined that the original amount of monthly payments on the Note should have been
“$1,161.09, to repay the $100,000 loan amortized at 7% per annum over the ten year term.” (Id.
¶ 10.) As the foreclosure proceeding was not commenced until after the applicable statute of
limitations had already run with respect to the first several payments on the Note, the referring
trial judge found that those payments should not be included in the principal amount. (Id. ¶ 11.)
The Referee found the total principal amount less the time-barred payments to be $94,677.16.
(Id. ¶ 12.) The Referee noted that the Plaintiff had sought an interest rate of 24.9% as this did
not exceed the 25% maximum rate permitted by the criminal usury law. (Id. ¶ 15 (citing Penal
Law § 190.426).) The Debtor argued that she owed no principal or interest as the Note was
usurious. (Id. ¶ 16.)
The Referee concluded that the Note was a purchase money mortgage and therefore not
subject to civil usury restrictions, but still subject to criminal usury restrictions. (Id. ¶ 18.)
Because the Referee found that the Note’s default rate of 5% interest per day far exceeded the
criminal usury restrictions of 25%, the Referee applied an interest rate of 24.9%. (Id. ¶ 22.) The
Referee declined to apply compound interest as requested by the Plaintiff, finding that the Note
did not expressly provide for compound interest. (Id. ¶¶ 23–25.) Accordingly, the Referee
determined that 24.9% interest should apply from the first non-time-barred payment date
(August 1, 1999) until entry of summary judgment in favor of the plaintiff (July 6, 2006), for a
total principal and pre-judgment interest amount of $258,017.44. (Id. at 21.) The Referee then
concluded that post-judgment interest should accrue on the principal at the statutory rate of 9%
6 	While the Referee Report actually cites to Penal Law § 190.24, this appears to be a typo, as it is Penal Law
§ 190.42 that sets forth the crime of criminal usury in the first degree.
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from the date of judgment through the date of the Referee Report for a total of $329,272.62.
(Id.)
For the next nine years the Plaintiff and the Debtor fought over the Referee Report.7 On
March 22, 2018, the Plaintiff filed a motion for an order modifying the Referee Report,
confirming the Referee Report as modified; and awarding the Plaintiff a judgment of foreclosure
and sale. (“Modification Motion,” ECF Doc. # 176-4.) The Modification Motion appears to be
the first instance where the amount of 126 Realty’s claim ($5,255,638.91) that is listed in the
Schedules appears. By the Modification Motion, the Plaintiff sought, inter alia, to clarify that
the 2006 judgment was not a judgment of foreclosure (and thus the 9% post-judgment statutory
rate should not have applied and should be replaced with the default rate); to set the default rate
at 25%; and to fix the amount due on the Note at $5,255,638.91, as of July 1, 2017. (Id. ¶ 4.)
Most notably, in a section with the heading “$5,55,638.91 [sic] DUE AS OF JULY 1, 2017
BASED ON 25% PER ANNUM DEFAULT INTEREST RATE,” the Plaintiff sets forth
“calculations showing $5,25,638.91 [sic] is due as of July 1, 2017.” (Id. at 19 & ¶ 43.) The
Plaintiff sets out detailed calculations showing compound interest at 25% beginning July 1,
1999, and running to July 1, 2017, for a total of $5,255,638.91. (Id. ¶ 43.) Notwithstanding the
Plaintiff’s several typos in the Modification Motion, the calculations applying the 25%
compound interest to the beginning principal balance of $94,677.19 do indeed yield an ending
balance of $5,255,638.91 over the relevant time period. The Plaintiff acknowledged the
“profound difference” between the original principal amount on the Note and the asserted
amount in excess of $5 million but submitted that, as the Debtor “ignored her obligation for
7 	The Modification Motion (defined below) notes that the Plaintiff made requests for modification of the
Referee Report and for a new referee hearing in 2011, 2015, and 2017. (Modification Motion ¶ 10.)
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nineteen [sic] while no doubt reaping the benefits, rents and profits of the property[,] [i]t is now
time for the defendant to bear the consequences of their default.” (Id. ¶ 44.) The Modification
Motion stated in a parenthetical that interest should be compounded annually; it did not offer any
argument why that modification of the Trustee Report was warranted.8 (See id. ¶ 43 (“maximum
interest rate being 25% per annum (25% compounded annually)”).)
In the JFS Order dated September 4, 20189 (filed September 28, 2018), Justice Judith N.
McMahon entered judgment in the amount set out in the Modification Motion: $5,255,638.91.10
The State Court also awarded the three other sums ($1,428.00; $300.00; and $5,000.00)
contained in Claim No. 3. (JFS Order at 14.) While the Sheikh Declaration characterizes the
JFS Order as “detailed” (Sheikh Decl. ¶ 12), the JFS Order contains no reasoning or analysis
why it adopted the calculation provided by the Plaintiff or why it modified the Referee Report to
permit compound interest.
The Debtor made several unsuccessful attempts to overturn this judgment, seeking to
have the trial court reconsider its decision, as well as making several unsuccessful attempts to
appeal the decision. The Debtor filed an order to show cause in the State Court seeking to
rescind the JFS Order. (“OSC,” ECF Doc. # 176-5 at 2–13.) Justice McMahon denied the OSC
on November 9, 2018, stating, in a handwritten note:
8 	While the Sheikh Declaration characterizes this as a candid explanation that the Plaintiff’s calculations are
based on compound interest, reasonable minds may disagree as to the level of candor, particularly where the
Plaintiff offers no substantive argument why the Referee’s conclusion declining to apply compound interest should
be ignored.
9 	The date on the page bearing the judge’s signature is September 14; however, later filings refer to the date
of the JFS Order as September 4, 2018.
10 	This number is represented at one point in the JFS Order as $5,255,83.91, and the Debtor has sought to
argue in the 9019 Objection and the Claim Objection that this number, which is clearly a typographical error, was
meant to be the true amount of the judgment. However, $5,255,638.91, appears later in the JFS Order, it is precisely
the number contained in the Modification Motion, it is the correct mathematical result when applying 25%
compound interest to the $94,677.16 principal for 19 years, and, finally, it is the number listed in the Debtor’s
Schedules.
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This order to show cause is denied after oral argument. 	This is a
mortgage that goes back to 1998 and not one payment has been
made since that date. 	This court finds no meritorious cause for
vacating the default as all issues have been adjudicated in the last 13
years.
(Id. at 4.) On January 11, 2019, Justice McMahon denied another motion by the Debtor for an
order to show cause. (ECF Doc. # 176-6.) On May 17, 2019, Justice Arlene P. Bluth denied the
Debtor’s motion for reargument as moot. (ECF Doc. # 176-7.) On September 9, 2019, Justice
Bluth denied another attempt by the Debtor to correct the amount of the judgment set out in the
JFS Order. (ECF Doc. # 176-9.) Justice Bluth acknowledged the Debtor’s arguments about
compound interest but noted that she was not able to
review decisions made by the judge previously assigned to the case;
that is the province of the appellate court. 	Justice McMahon
awarded plaintiff a judgment and the interest rate sought by plaintiff;
if Allard did not agree with that decision, then her remedy was to
pursue an appeal and to file a motion to reargue (which she did but
was unsuccessful).
(Id. at 13.) The Debtor also initiated several appeals, which she failed to perfect. (Sheikh Decl.
¶¶ 24, 30.) At the Hearing, the Debtor’s counsel acknowledged that she reviewed the Debtor’s
various unperfected appeals, as well as the orders of Justices McMahon and Bluth referred to
above. (Transcript at 10:24–13:22.)
II. 	LEGAL STANDARD
A. 	Proof of Claim
The filing of a timely proof of claim constitutes prima facie evidence of the validity and
amount of the claim. Fed. R. Bankr. P. 3001(f). To rebut the prima facie validity of a claim, an
objecting party must “produce evidence equal in force to the prima facie case. The objector must
produce evidence equal in force to that provided by the claimant to rebut the presumption of the
claimant’s prima facie case.” In re Residential Cap., LLC, 501 B.R. 624, 641 (Bankr. S.D.N.Y.
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2013). Only once the objector satisfies the burden of producing evidence sufficient to rebut the
claimant’s prima facie case does the burden “shift[] back to the claimant to produce additional
evidence to prove the validity of the claim by a preponderance of the evidence.” Id.
B. 	Rooker-Feldman Doctrine
The Rooker-Feldman doctrine is premised upon two Supreme Court decisions: Rooker v.
Fidelity Trust Co., 263 U.S. 413 (1923) and District of Columbia Court of Appeals v. Feldman,
460 U.S. 462 (1983). In a more recent decision explaining the Rooker-Feldman doctrine, the
Supreme Court explained:
The Rooker–Feldman doctrine takes its name from the only two
cases in which we have applied this rule to find that a Federal
District Court lacked jurisdiction. In Rooker, a party who had lost
in the Indiana Supreme Court, and failed to obtain review in this
Court, filed an action in Federal District Court challenging the
constitutionality of the state-court judgment. We viewed the action
as tantamount to an appeal of the Indiana Supreme Court decision,
over which only this Court had jurisdiction, and said that the
aggrieved litigant cannot be permitted to do indirectly what he no
longer can do directly. Feldman, decided 60 years later, concerned
slightly different circumstances, with similar results. The plaintiffs
there had been refused admission to the District of Columbia bar by
the District of Columbia Court of Appeals, and sought review of
these decisions in Federal District Court. Our decision held that to
the extent plaintiffs challenged the Court of Appeals decisions
themselves—as opposed to the bar admission rules promulgated
nonjudicially by the Court of Appeals—their sole avenue of review
was with this Court.
Lance v. Dennis, 546 U.S. 459, 463 (2006) (internal quotation marks and citations omitted).
The Rooker-Feldman doctrine bars “cases brought by state-court losers complaining of
injuries caused by state-court judgments rendered before the district court proceedings and
inviting district court review and rejection of those judgments.” Exxon Mobil Corp. v. Saudi
Basic Indus. Corp., 544 U.S. 280, 284 (2005). “Underlying the Rooker-Feldman doctrine is the
principle, expressed by Congress in 28 U.S.C. § 1257, that within the federal judicial system,
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only the Supreme Court may review state-court decisions.” Hoblock v. Albany Cnty. Bd. Of
Elections, 422 F.3d 77, 85 (2d Cir. 2005). The Rooker-Feldman doctrine applies to cases
satisfying a four-part test: (1) the federal-court plaintiff lost in state court; (2) the plaintiff “must
complain of injuries caused by a state-court judgment”; (3) the plaintiff “must invite district
court review and rejection of that judgment”; and (4) “the state-court judgment must have been
rendered before the district court proceeding commenced.” Green v. Mattingly, 585 F.3d 97, 101
(2d Cir. 2009).
C. 	Res Judicata
Most attempts to relitigate an issue determined in a state case are properly analyzed under
issue or claim preclusion principles rather than Rooker-Feldman because, in addition to the
inherently limited scope of Rooker-Feldman, preclusion in federal court on the basis of a state
court judgment is determined by state law, not federal law. As the Supreme Court has said,
“[i]ncorporation of preclusion principles into Rooker-Feldman risks turning that limited doctrine
into a uniform federal rule governing the preclusive effect of state-court judgments, contrary to
the Full Faith and Credit Act.” Lance, 546 U.S. at 466; see also id. (“A more expansive Rooker–
Feldman rule would tend to supplant Congress’ mandate, under the Full Faith and Credit Act, 28
U.S.C. § 1738, that federal courts ‘give the same preclusive effect to state court judgments that
those judgments would be given in the courts of the State from which the judgments emerged.’
Congress has directed federal courts to look principally to state law in deciding what effect to
give state-court judgments.”) (internal citations omitted).
Res judicata, or claim preclusion, provides that “a final judgment on the merits of an
action precludes the parties or their privies from relitigating issues that were or could have been
raised in that action.” Burgos v. Hopkins, 14 F.3d 787, 789 (2d Cir. 1994) (quoting Allen v.
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McCurry, 449 U.S. 90, 94 (1980)). “[T]he preclusive effect of a state court determination in a
subsequent federal action is determined by the rules of the state where the prior action
occurred . . . .” New York v. Sokol (In re Sokol), 113 F.3d 303, 306 (2d Cir. 1997) (citing 28
U.S.C. § 1738). Furthermore, in the bankruptcy context, the court must also consider “whether
an independent judgment in a separate proceeding would ‘impair, destroy, challenge, or
invalidate the enforceability or effectiveness’ of the reorganization plan.” Corbett v. MacDonald
Moving Servs., Inc., 124 F.3d 82, 88 (2d Cir. 1997) (quoting Sure-Snap Corp. v. State St. Bank &
Tr. Co., 948 F.2d 869, 875–76 (2d Cir. 1991)). “In applying the doctrine of res judicata, [a
court] must keep in mind that a state court judgment has the same preclusive effect in federal
court as the judgment would have had in state court.” Burka v. New York City Transit Auth., 32
F.3d 654, 657 (2d Cir. 1994); see also Residential Cap., 501 B.R. at 635.
Under New York’s doctrine of res judicata “a final judgment on the merits of an action
precludes the parties or their privies from relitigating claims that were or could have been raised
in that action.” Marvel Characters, Inc. v. Simon, 310 F.3d 280, 286–87 (2d Cir. 2002). “This
doctrine also applies to defenses that could have been litigated, including defenses to a
foreclosure.” Yeiser v. GMAC Mortg. Corp., 535 F. Supp. 2d 413, 421 (S.D.N.Y. 2008).
Although this doctrine requires “an identicality, or privity, of the plaintiffs and defendants in the
initial and subsequent actions,” this requirement “is not strictly imposed where the party against
whom claim preclusion is sought has, in essence, already received his or her day in court, and the
application of res judicata would not alter this conclusion.” Pharr v. Evergreen Garden, Inc.,
123 F. App’x 420, 424 (2d Cir. 2005).
When the elements for res judicata are satisfied, bankruptcy courts may look behind a
state court decision only where such judgment was obtained by fraud or collusion, or where the
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state court lacked jurisdiction. Kelleran v. Andrijevic, 825 F.2d 692, 694 (2d Cir. 1987).
“‘[F]raud in the procurement of a judgment’ sufficient to warrant relief therefrom is properly
identified with ‘fraud on the court,’ i.e., ‘fraud which is directed to the judicial machinery itself
and is not fraud between the parties . . . .’” In re Laing, 945 F.2d 354, 358 (10th Cir. 1991)
(quoting Bulloch v. United States, 763 F.2d 1115, 1121 (10th Cir. 1985) (en banc)) (denying
reconsideration of state court judgment where alleged fraud “was not . . . directed at the state
court that rendered [the] judgment” but instead “related to the events that made up the subject
matter of the state court action”). See Residential Cap., 501 B.R. at 636.
D. 	Rule 9019
Pursuant to Rule 9019 of the Bankruptcy Rules, “[o]n motion by the trustee and after
notice and a hearing, the court may approve a compromise or settlement.” FED. R. BANKR. P.
9019(a). Settlements are generally favored in bankruptcy because they “minimize costly
litigation and further parties’ interests in expediting the administration of the bankruptcy estate.”
In re MF Global, Inc., 2012 Bankr. LEXIS 3701, at *15 (Bankr. S.D.N.Y. 2012) (citing Myers v.
Martin (In re Martin), 91 F.3d 389, 393 (3d Cir. 1996)). Before approving a settlement, a
bankruptcy court must determine that it “is fair and equitable and in the best interests of the
estate.” In re Drexel Burnham Lambert Grp. Inc., 134 B.R. 493, 496 (Bankr. S.D.N.Y. 1991)
(citing Protective Comm. for Indep. S’holders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S.
414, 424 (1968)) (internal quotation marks omitted).
In determining whether a proposed settlement is fair and equitable, courts in the Second
Circuit have set forth the following interrelated factors (each an “Iridium Factor” or a “Factor,”
and, collectively, “Iridium Factors” or “Factors”) to consider:
(1) the balance between the litigation’s possibility of success and the
settlement’s future benefits; (2) the likelihood of complex and
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protracted litigation, “with its attendant expense, inconvenience, and
delay,” including the difficulty in collecting on the judgment; (3)
“the paramount interests of the creditors,” including each affected
class’s relative benefits “and the degree to which creditors either do
not object to or affirmatively support the proposed settlement”; (4)
whether other parties in interest support the settlement; (5) the
“competency and experience of counsel” supporting, and “[t]he
experience 	and 	knowledge 	of 	the 	bankruptcy 	court 	judge”
reviewing, the settlement; (6) “the nature and breadth of releases to
be obtained by officers and directors”; and (7) “the extent to which
the settlement is the product of arm’s length bargaining.”
Motorola, Inc. v. Official Comm. of Unsecured Creditors (In re Iridium Operating LLC), 478
F.3d 452, 462 (2d Cir. 2007) (quoting In re WorldCom, Inc., 347 B.R. 123, 137 (Bankr.
S.D.N.Y. 2006)).
The court must “canvass the issues and see whether the settlement falls below the lowest
point in the range of reasonableness.” In re W.T. Grant Co., 699 F.2d 599, 608 (2d Cir. 1983)
(citation and internal quotation marks omitted). While “the court is not required to conduct a
trial on the terms to approve a settlement . . . [,] the court must inform itself of ‘all facts
necessary for an intelligent and objective opinion of the probabilities of ultimate success should
the claim be litigated.’” In re Kerner, 599 B.R. 751, 755 (Bankr. S.D.N.Y. 2019) (quoting
O’Connell v. Packles (In re Hilsen), 404 B.R. 58, 70 (Bankr. E.D.N.Y. 2009)).
“Although approval of a settlement rests in the Court’s sound discretion, the debtor’s
business judgment should not be ignored.” In re Stone Barn Manhattan LLC, 405 B.R. 68, 75
(Bankr. S.D.N.Y. 2009) (citation omitted). In addition, the court “may give weight to the
informed judgments of the trustee or debtor-in-possession and their counsel that a compromise is
fair and equitable.” In re Drexel Burnham Lambert Grp. Inc., 134 B.R. 499, 505 (Bankr.
S.D.N.Y. 1991).
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III. 	DISCUSSION
The Court GRANTS the Motion to approve the settlement. The Stipulation is fair and
equitable, within the range of reasonableness, and in the best interests of the Debtor’s estate.
A. 	The Debtor Is Prevented from Challenging the State Court Orders in the
Bankruptcy Court.
The Debtor argues that 126 Realty has overstated the amount of its claim. Claim No. 3 is
an allowed claim based on a State Court judgment entered against the Debtor. A claim based on
a state court judgment is entitled to full faith and credit, and a federal court may not look behind
it. See 28 U.S.C. § 1738; Kremer v. Chem. Const. Corp., 456 U.S. 461, 462–63 (1982) (“As one
of its first acts, Congress directed that all United States courts afford the same full faith and
credit to state court judgments that would apply in the State’s own courts. Act of May 26, 1790,
ch. 11, 1 Stat. 122, 28 U.S.C. § 1738.”).
Similarly, the Rooker-Feldman doctrine prevents litigants from challenging state court
orders in federal courts as a means of re-litigating matters that were considered and decided by a
court of competent jurisdiction. Because the judgment underlying Claim No. 3 is entitled to full
faith and credit, the Claim Objection and the 9019 Objection both fail.
Furthermore, even if this Court had jurisdiction to review the validity of the foreclosure
judgment, the Debtor’s arguments would be barred by res judicata. Because the Debtor was a
party to the State Court foreclosure action, and because she could have raised these defenses in
that action, she is barred from asserting them at this juncture. Additionally, no extrinsic fraud is
alleged in the procurement of the foreclosure judgment.
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B. 	The Iridium Factors Weigh in Favor of Approving the Stipulation.
An analysis of the Iridium Factors weighs in favor of approving the Stipulation.
1. 	Balance Between the Litigation’s Possibility of Success and the Settlement’s
Benefits; Likelihood of Complex and Protracted Litigation and Related Costs
In the Motion, the Trustee submits that the first Iridium factor is not applicable because
there is currently no litigation pending in this case before this Court. 	(Motion ¶ 27.) The
Trustee also submits that the Stipulation will eliminate potential disputes concerning the
allowance of 126 Realty’s claim, including any deficiency judgment that 126 Realty might
otherwise obtain from the State Court. (Id.)
Furthermore, the possibility of success in litigating the Claim Objection likely does not
outweigh the benefits of the Stipulation. 126 Realty has argued that it has timely filed Claim No.
3 which evidences the validity and amount of its claim and that the Debtor has not produced any
evidence rebutting the validity of the claim. Rather, the Debtor raises the same arguments as she
did in the State Court. The Rooker-Feldman doctrine applies to bar the Debtor from relitigating
the State Court issues in the Bankruptcy Court. Furthermore, on February 4, 2021, the Appellate
Division denied the Debtor’s motion to reinstate her appeal. (Index No. 109284/05, Motion No.
2020-038757.)
As to the second Iridium Factor, the Trustee contends that the potential disputes
regarding the amount of 126 Realty’s deficiency judgment could significantly delay the
administration of the Estate and result in additional administrative expenses. (Motion ¶ 27.)
Accordingly, the first and second Iridium Factors weigh in favor of approving the
Stipulation.
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2. 	The Interest of Creditors; Support of Other Parties in Interest; Sophistication of
Counsel and Experience of the Court
The Trustee represents that the “the approval of the Stipulation is in the best interest of
creditors because it will enable the Trustee to immediately take steps to complete the
administration of this case, and make a 100% distribution to all allowed administrative expenses
and presently filed unsecured claims.” (Id.) Although the Debtor has objected to the Stipulation,
the Stipulation also benefits the Debtor by abandoning to her the RBC Advantage funds of
$60,075.91, the Miami Property, and her homestead, the 119th Street Property, as well as
preserving her right to receive a discharge from the Court. (Id.) Additionally, the Trustee states
that the Stipulation was the product of good faith discussions between sophisticated and
experienced counsel for the Parties. (Id. ¶ 22.)
Accordingly, the third, fourth, and fifth Iridium Factors weigh in favor of approving the
Stipulation.
3. 	Nature and Breadth of the Releases to be Obtained by Officers and Directors
The sixth Iridium Factor does not appear to be relevant here. Accordingly, the Court
gives it no weight.
4. 	Arm’s-Length Bargaining
The Trustee represents that the Stipulation was the product of arm’s length and good faith
discussions between sophisticated and experienced counsel for the Parties. (Id. ¶ 22; see also
Trustee Decl. ¶ 7.)
Accordingly, this Factor also weighs in favor of approving the Stipulation.
IV. 	CONCLUSION
The Iridium factors weigh heavily in favor of approving the Stipulation. For the reasons
explained above, the 9019 Objection and the Claim Objection are OVERRULED, the Motion is
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GRANTED, and the Court will enter an order, in the form of the proposed order attached to the
Motion as Exhibit 2.
IT IS SO ORDERED.
Dated: 	June 21, 2021
New York, New York
Martin Glenn
MARTIN GLENN
United States Bankruptcy Judge
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