New York Classic Motors, LLC

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
In re:
NEW YORK CLASSIC MOTORS, LLC,
Debtor.
NOT FOR PUBLICATION
Case No. 21-10670 (MG)
MEMORANDUM OPINION AND ORDER DENYING MOTION TO
DISMISS AND FOR OTHER RELIEF
A P P E A R A N C E S:
ROZARIO TOUMA, P.C.
Attorneys for Hudson River Park Trust and Daniel P. Kurtz
55 Broadway, 20th Floor
New York, NY 10006
By: 	Rovin Rozario, Esq
KIRBY AISNER & CURLEY LLP
Attorneys for the Debtor
700 Post Road, Suite 237
Scarsdale, New York 10583
By: 	Erica R. Aisner, Esq.
ARENT FOX LLP
Proposed Counsel for the Official Committee of Unsecured Creditors
1301 Avenue of the Americas, Floor 42
New York, NY 10019
By: 	George P. Angelich, Esq.
Beth M. Brownstein, Esq.
21-10670-mg Doc 68 Filed 06/04/21 Entered 06/04/21 12:28:50 Main Document
Pg 1 of 13

2
MARTIN GLENN
UNITED STATES BANKRUPTCY JUDGE
Pending before the Court is the motion of Hudson River Park Trust (“HRPT”) and
Daniel P. Kurtz (“Kurtz,” and together with HRPT, “Movants”) for an order: (1)
dismissing the bankruptcy petition pursuant to 11 U.S.C. § 1112(b), and (2) declaring that
the automatic stay does not prevent the termination of the Concession Agreement
(defined below) pursuant to its terms, or acts to recover possession of the premises
occupied by New York Classic Motors, LLC (the “Debtor”), pursuant to 11 U.S.C. §
362(b)(10) and (n)(1)(B),1 or, alternatively, conditioning, modifying or dissolving the
automatic stay pursuant to 11 U.S.C. § 362(d). (“Motion to Dismiss,” ECF Doc. # 36.)
On May 27, 2021, the Debtor filed its opposition to the Motion to Dismiss.
(“Opposition,” ECF Doc. # 55.) The declaration of Zachary Moseley is attached as
Exhibit A to the Opposition. (“Moseley Decl.,” ECF Doc. # 55-1.) That same day, the
Official Committee of Unsecured Creditors (the “Committee”) filed a statement and
reservation of rights in support of the Opposition. (“Opposition Statement,” ECF Doc. #
58.)
For the following reasons, the Motion to Dismiss is DENIED. The Court also
concludes that the automatic stay applies to the Concession Agreement and the stay
1 	Section 362(n)(1)(B) provides:
Except as provided in paragraph (2), subsection (a) does not apply in a
case in which the debtor . . . (B) was a debtor in a small business case
that was dismissed for any reason by an order that became final in the 2-
year period ending on the date of the order for relief entered with respect
to the petition.
11 U.S.C. § 362(n)(1)(B). Movants fail to explain how this section applies.
21-10670-mg Doc 68 Filed 06/04/21 Entered 06/04/21 12:28:50 Main Document
Pg 2 of 13

3
should not be lifted to permit HRPT to take any action in state court to recover possession
of the Property.
I. 	BACKGROUND
The Debtor is a New York limited liability company organized under New York
law that maintains its principal place of business at 1 Pier 76, New York, New York (the
“Premises”). (Moseley Decl. ¶ 6.)
The Debtor, together with its affiliates, operates an automobile showroom that is
open to the public and a luxury private automobile club that features a lounge, two bars, a
restaurant, and a terrace overlooking the Hudson River. (Id. ¶ 7.) In the spring of 2016,
the Debtor entered into a concession agreement (the “Concession Agreement”) with
HRPT under which it took possession of the Premises at the southern annex of Pier 76.
(Id.) 	In accordance with the Concession Agreement, the Debtor provides a number of
services to the public at no cost: monthly auto shows, mechanic/shop classes, outdoor
seating at the southern portion of the Premises, and science and technology programming,
which has included F1 in Schools (an international STEM competition for grade school).
(Id. ¶ 9.) The Debtor currently has nine employees that assist in running its operations.
(Id.)
As a result of the COVID-19 pandemic, the State of New York issued guidelines
requiring full and partial closures of restaurants and in-person events. (Id. ¶ 10.) As a
result of these guidelines, the Debtor and its affiliates contend they lost $4 million in
revenues. (Id.) Even before the shutdown, the Debtor experienced a decrease in its
revenues. (Id. ¶ 11.) The Debtor reached out to HRPT and requested relief. (Id.) The
21-10670-mg Doc 68 Filed 06/04/21 Entered 06/04/21 12:28:50 Main Document
Pg 3 of 13

4
parties agreed that the Debtor would only have to pay half rent, which was accepted by
the Movants for at least six months between June and November of 2020.
On January 4, 2021, HRPT served a notice of default and demand to cure (the
“Rent Demand”) and threatened termination of the Concession Agreement for
noncompliance. (Id. ¶ 13.) On that same day, HRPT served a letter invoking its right to
terminate the Concession Agreement on one-year’s notice because of proposed
redevelopment of the Premises (“Termination Notice”). (Id. ¶ 14.) The Debtor disputes
that the Termination Notice was properly issued under Article 9 of the Concession
Agreement. (Id.)
On February 1, 2021, to preserve its rights and protect its interest in the Premises
and the Concession Agreement, the Debtor commenced an action in New York Supreme
Court, New York County (the “State Court”) captioned New York Classic Motors, LLC v.
Hudson River Park Trust, Index No. 650712/2021 (the “State Court Action”) and filed an
Order to Show Cause in State Court seeking a Yellowstone injunction. (Id. ¶ 15.) The
Debtor sought to toll the various notices served by HRPT to adjudicate the issues
between the Debtor and HRPT. (Id.) The Debtor was granted a Yellowstone injunction
in the State Court Action. (Id. ¶ 16.) But the State Court also required the Debtor to pay
three months of past-due rent in full (approximately $175,000), as well as post a bond
equal to the amount of past due rent claimed by HRPT (approximately $585,000).
On April 9, 2021 (the “Petition Date”), the Debtor filed a voluntary petition for
relief under Chapter 11 of the Bankruptcy Code. (Id. ¶ 17.) The Debtor claims that it
sought the protections of the Bankruptcy Court to protect the Debtor, its operations and
its valuable assets. (Id.) The Debtor’ alleges that its valuable assets include (i) bank
21-10670-mg Doc 68 Filed 06/04/21 Entered 06/04/21 12:28:50 Main Document
Pg 4 of 13

5
accounts, (ii) accounts receivable, (iii) automotive parts and supplies, (iv) office
furniture, fixtures, and equipment, (v) artwork, (vi) vehicles, (vii) shop equipment, (viii)
contingent and unliquidated claims, and (ix) interest in the Concession Agreement. (Id. ¶
18.) Additionally, on May 4, 2021, the Debtor filed a notice of removal of the State
Court Action, which is now pending in this Court. (Id. ¶ 19.)
II. 	ANALYSIS
A. The Chapter 11 Case Was Filed in Good Faith to Preserve the Debtor’s
Assets and Dismissal Is Not in the Best Interests of the Debtor’s Estate.
Movants seek dismissal of this bankruptcy case as a bad faith filing pursuant to
section 1112(b) of the Bankruptcy Code. HRPT contends that the bankruptcy petition
was filed merely to frustrate HRPT, where the Debtor lacks any legitimate ability to
reorganize.
Courts in the Second Circuit determine “bad faith” warranting dismissal of a
chapter 11 case by analyzing the factors set forth in In re C-TC 9th Ave. P’ship, 113 F.3d
1304, 1311 (2d Cir. 1997) (the “C-TC Factors”). The C-TC court, in turn, derived the C-
TC Factors from the eight factors identified by the district court and bankruptcy court in
Pleasant Pointe Apartments, Ltd. v. Kentucky Hous. Corp., 139 B.R. 828, 832 (W.D. Ky.
1992). The C-TC court explained:
The bankruptcy court in Pleasant Pointe considered the
following factors as indicative of a bad faith filing:
(1) the debtor has only one asset;
(2) the debtor has few unsecured creditors whose claims are
small in relation to those of the secured creditors;
(3) the debtor’s one asset is the subject of a foreclosure
action as a result of arrearages or default on the debt;
(4) the debtor’s financial condition is, in essence, a two party
dispute between the debtor and secured creditors which can
be resolved in the pending state foreclosure action;
21-10670-mg Doc 68 Filed 06/04/21 Entered 06/04/21 12:28:50 Main Document
Pg 5 of 13

6
(5) the timing of the debtor’s filing evidences an intent to
delay or frustrate the legitimate efforts of the debtor’s
secured creditors to enforce their rights;
(6) the debtor has little or no cash flow;
(7) the debtor can’t meet current expenses including the
payment of personal property and real estate taxes; and
(8) the debtor has no employees.
113 F.3d at 1311. See also Phoenix Piccadilly, Ltd. v. Life Ins. Co. of Virginia (In re
Phoenix Piccadilly, Ltd.), 849 F.2d 1393, 1394–95 (11th Cir. 1988); Little Creek Dev.
Co. v. Commonwealth Mortg. Corp. (In re Little Creek Dev. Co.), 779 F.2d 1068, 1071
(5th Cir. 1986).
The Debtor persuasively argues that the C-TC Factors weigh against dismissal.
Examining each of these eight factors below, the Court concludes that the Motion to
Dismiss has no merit.
(1) The Debtor is an operating entity and, as such, has numerous assets typical
with an operating business. As set forth in the Debtor’s schedules (the “Schedules,” ECF
Doc. # 39), the Debtor’s assets include (i) bank accounts, (ii) accounts receivable, (iii)
automotive parts and supplies, (iv) office furniture, fixtures, and equipment, (v) artwork,
(vi) vehicles, (vii) shop equipment, (viii) intellectual property, (ix) contingent and
unliquidated claims, and (x) interest in the Concession Agreement. Although the
Debtor’s interest in the Concession Agreement is its most valuable asset, it is by no
means its only asset. As such, the first C-TC Factor weighs in favor of finding the Debtor
did not file its chapter 11 case in bad faith.
(2) The Schedules list a total of $7,821,469.63 of liabilities, consisting of
$3,410,827.52 in secured debts, $268,947.48 in priority unsecured debts, and
$4,141,694.63 in nonpriority unsecured debts. The debt owed to HRPT totals
21-10670-mg Doc 68 Filed 06/04/21 Entered 06/04/21 12:28:50 Main Document
Pg 6 of 13

7
$557,526.07, which is 7.13% of the Debtor’s total liabilities. Again, this C-TC Factor
weighs in favor of finding the Debtor did not file its chapter 11 case in bad faith.
(3) The Debtor’s interest in the Concession Agreement is not the Debtor’s sole
asset. The Debtor has additional assets and, more importantly, the interests of additional
creditors should be taken into account. The Court must view the Debtor’s estate as a
whole, and not focus exclusively on HRPT’s attempt to wrangle the Premises away from
the Debtor. Accordingly, this C-TC Factor weighs in favor of finding the Debtor did not
file its chapter 11 case in bad faith.
(4) This case is not a two-party dispute. As set forth in the Moseley Declaration,
the Debtor has numerous legitimate creditors whose interests should be considered by the
Court. Further, due to the COVID-19 pandemic, the Debtor’s ability to operate its
business has been limited, with the Debtor’s business allegedly suffering a loss of $4
million in revenue. The Debtor’s financial hardships resulting from the COVID-19
pandemic are another significant factor in the Debtor’s decision to file its chapter 11 case.
Again, this CT-C Factor weighs in favor of finding the Debtor did not file its chapter 11
case in bad faith.
(5) The Debtor admittedly filed this chapter 11 case following the entry of the
order granting the Debtor a Yellowstone injunction, which required the Debtor to post a
bond which it was unable to do because of its financial distress. Rather than being an
indicium of bad faith, an inability to post a bond because of financial distress is often the
sort of precipitating event that leads to a good faith bankruptcy filing. See In re
Sletteland, 260 B.R. 657, 666 (Bankr. S.D.N.Y. 2001) (petition filed as alternative to
posting a bond was not in “bad faith,” even where debtor had no business operations or
21-10670-mg Doc 68 Filed 06/04/21 Entered 06/04/21 12:28:50 Main Document
Pg 7 of 13

8
employees). Here, the Debtor’s purpose of the filing was to preserve the Debtor’s
interest in the Concession Agreement, without which it cannot rehabilitate, at least in the
short term. There are also disputed issues of fact and law about the amount of rental
arrears that the Debtor owes HRPT. A state court action raising these issues has now
been removed to this Court so that the determination of the issues and claims can be
determined on an expedited basis. Thus, this C-TC Factor weighs in favor of finding the
Debtor did not file its chapter 11 case in bad faith.
(6) Although the Debtor admittedly has reduced cash flow as a result of the
COVID-19 pandemic, now that the general population is receiving vaccinations, and
restrictions are easing, the Debtor is expecting to see an increase in revenues as events
open up and attendance increases. The Debtor is not even 45 days into its chapter 11 case
and has filed one monthly operating report. The Debtor should be allowed time to
resume operations and stabilize and reorganize its business, without the immediate threat
of dismissal of its chapter 11 case as a bad faith filing. Accordingly, this C-TC Factor
weighs in favor of finding the Debtor did not file its chapter 11 case in bad faith.
(7) The Debtor’s reorganization effort is in its nascent stages. As the Debtor’s
business emerges from the COVID-19 pandemic, it is too early to make any assumptions
about the Debtor’s ability to meet its expenses. Accordingly, this C-TC Factor hasn’t
been satisfied.
(8) The Debtor employs nine employees. Thus, this C-TC Factor weighs in favor
of finding the Debtor did not file its chapter 11 case in bad faith. Notwithstanding the
COVID-19 pandemic, the State Court Action, and HRPT’s hostile attempts to terminate
the Concession Agreement, the Debtor has continued its efforts to operate its business
21-10670-mg Doc 68 Filed 06/04/21 Entered 06/04/21 12:28:50 Main Document
Pg 8 of 13

9
and project future operations. The Debtor has been in contact with third parties who are
prepared to invest in the Debtor’s business once the State Court Action has been
resolved. Allowing the Debtor to operate is the only way to maximize the value of the
Debtor’s assets for all creditors and interest holders.
The C-TC Factors clearly weigh against dismissal. The Court CONCLUDES
that the chapter 11 case was filed in good faith to preserve the Debtor’s assets and
dismissal is not in the best interests of the Debtor’s estate. Therefore, the Motion to
Dismiss is DENIED.
B. The Automatic Stay Applies to the Concession Agreement, Which
Did Not Terminate Pre-Petition.
In addition to the Motion to Dismiss, the Movants seek a determination that the
automatic stay does not apply to the Concession Agreement or prevent HRPT from
taking actions to recover possession of the premises that had been leased to the Debtor.
The Movants argue that section 362(b)(10) of the Bankruptcy Code applies. That
subsection provides an exception to the automatic stay for leases that terminate in
accordance with their terms. However, as of the Petition Date, the Concession
Agreement was, and continues to be, in full force and effect. (Id. ¶ 10.) The issuance of
the Yellowstone injunction by the State Court tolled the cure period set forth in the notice
of default issued by HRPT, and it prevented the expiry of the Concession Agreement.
(Id. ¶ 11.) The Debtor sought the injunction to preserve its rights in the Concession
Agreement and prevent termination under the notice of default, and the State Court
granted this relief. While the injunction was in effect, the Debtor filed this chapter 11
case, which triggered the automatic stay under section 362 of the Bankruptcy Code. As
the cure period in the notice of default had not expired, the Concession Agreement was
21-10670-mg Doc 68 Filed 06/04/21 Entered 06/04/21 12:28:50 Main Document
Pg 9 of 13

10
not terminated and it remains in full force and effect. Therefore, the automatic stay is
effective and prevents HRPT from taking any action in state court to recover the
Premises.
C. Cause Does Not Exist for Relief from the Automatic Stay
The Movants argue that cause exists for relief from the automatic stay to continue
the State Court Action. In determining whether “cause” exists to lift the automatic stay
under section 362(d) to permit litigation to proceed in another forum, courts in the
Second Circuit examine the twelve factors set forth in In re Sonnax Industries, Inc., 907
F.2d 1280, 1286 (2d Cir. 1990). The Court only applies the factors that are relevant to
the particular case, not necessarily giving each factor equal weight. In re Burger Boys,
Inc., 183 B.R. 682, 688 (S.D.N.Y. 1994).
Here, the Court must determine whether to lift the automatic stay to continue the
State Court Action which has already been removed to the Bankruptcy Court. The
Debtor argues that following Sonnax factors weigh in favor of denying relief from the
automatic stay:
i. Factor One—Whether Relief Would Result in a Partial of Complete
Resolution of the Issues: The Debtor submits that relief from the automatic
stay to proceed with the State Court Action would only resolve one of
several issues in the Debtor’s chapter 11 case. The Debtor is an operating
entity, with assets other than the Concession Agreement, and creditors other
than Movants. As such, part of the Debtor’s reorganization efforts will be
to address repayment to its other creditors. Although the Debtor’s interest
21-10670-mg Doc 68 Filed 06/04/21 Entered 06/04/21 12:28:50 Main Document
Pg 10 of 13

11
in the Concession Agreement is one of the most important factors in this
chapter 11 case, it is not the only factor.
ii. Factors Two—Lack of Any Connection with or Interference with the
Bankruptcy Case; Seven—Whether Litigation in Another Forum Would
Prejudice the Interests of Other Creditors; and Ten—the Interests of
Judicial Economy and the Expeditious and Economical Resolution of
Litigation: The Debtor submits that granting relief from the automatic stay
will interfere with this chapter 11 case because the Debtor will be forced to
litigate with Movants in separate forums, State Court and Bankruptcy Court,
causing an undue and unnecessary financial burden. Moreover, given that
the Concession Agreement, the remaining term and the amounts due by the
Debtor thereunder are issues central to the chapter 11 case, the Debtor
submits that the Bankruptcy Court is the most economical and expeditious
forum to adjudicate the disputes between the parties. For this very reason,
the Debtor removed the State Court Action to the Bankruptcy Court for a
streamlined and expedited determination of issues.
iii. Factors Four—Whether a Specialized Tribunal with the Necessary
Expertise Has Been Established to Hear the Cause of Action; and Eleven—
Whether the Parties Are Ready for Trial in the Other Proceeding: The State
Court Action is not before a specialized tribunal. 	Discovery has not
commenced, and the proceeding is in its nascent stages.
iv. Factors Three—Whether the Other Proceeding Involves the Debtor as A
Fiduciary; 	Five—Whether 	the 	Debtor's 	Insurer 	has 	Assumed 	Full
21-10670-mg Doc 68 Filed 06/04/21 Entered 06/04/21 12:28:50 Main Document
Pg 11 of 13

12
Responsibility for Defending the state court action; Six—Whether the
Action Primarily Involves Third Parties; Eight—Whether the Judgment
Claim Arising from the Other Action is Subject to Equitable Subordination;
and Nine—Whether Movant’s Success in the Other Proceeding Would
Result in a Judicial Lien Avoidable by the Debtor: None of these factors are
relevant in this case and the Court need not consider them.
v. Factor Twelve—Impact of the Stay on the Parties and the Balance of
Harms: Movants will not suffer harm if relief from the automatic stay is
denied since the State Court Action has been removed to this Court for
adjudication.
(Opposition ¶ 19.)
Considering the circumstances of this chapter 11 case and the Sonnax factors, the
Court CONCLUDES that cause does not exist to grant Movants relief from the
automatic stay.
III. 	CONCLUSION
For the reasons explained above, this chapter 11 case was filed in good faith.
Additionally, the Concession Agreement—the Debtor’s most valuable asset—was not
terminated prepetition. The automatic stay remains in place preventing HRPT from
taking any action outside the bankruptcy court to recover possession of the property, and,
to the extent HRPT seeks an order from this Court lifting the stay, that relief is denied as
well.
21-10670-mg Doc 68 Filed 06/04/21 Entered 06/04/21 12:28:50 Main Document
Pg 12 of 13

13
Whether the Debtor will be able successfully to reorganize remains far from
certain, but like so many businesses in New York and elsewhere adversely impacted by
COVID-19, it is entitled to a chance to do so.
IT IS SO ORDERED.
Dated: 	June 4, 2021
New York, New York
________Martin Glenn________
MARTIN GLENN
United States Bankruptcy Judge
21-10670-mg Doc 68 Filed 06/04/21 Entered 06/04/21 12:28:50 Main Document
Pg 13 of 13