Removal would not be proper in this case. The language of Celsius’s Chapter 11 Plan gives this Court exclusive jurisdiction over all adversary proceedings which arise from the debtor’s Chapter 11 case.

Moreover, even absent the Plan language, the interests of justice and consideration for the convenience of the parties counsel in favor of retaining jurisdiction over this matter. First, this is an adversary proceeding in a bankruptcy case, establishing the presumption that this Court is the appropriate venue. Second, an analysis of the section 1404(a) factors shows that Casla has not overcome this presumption: The witnesses in this adversary proceeding—which will inevitably include Celsius’s NY-based witnesses, given that a component of the claim turns on determining that Celsius was insolvent at the time of the transfers—will be spread between New York and Puerto Rico, certainly, but will not necessarily be concentrated in Puerto Rico. The same can be said for the documents in this case (and, in the era of electronic file transfers, this is hardly a consideration at any rate). The locus of operative facts may be in Puerto Rico, but we do not know where each individual was at the time of the Ethereum transfers, so that prong is neutral. Conservation of estate resources is essential in a bankruptcy proceeding and favors retaining venue of this adversary proceeding in this Court. This Court has deep knowledge of the bankruptcy law governing this adversary proceeding. In a bankruptcy, heavy weight is accorded to the plaintiff’s choice of forum. And finally, given that this case arises from a chapter 11 case which unfolded here, and since this Court has institutional knowledge about the Debtor’s assets, financial condition, and operations (which will be important in showing that Celsius was insolvent at the time of the transfer), judicial economy counsels in favor of keeping the case here.

In a pretrial filing, Chase flagged the guidance issued by the Department of Justice in November 2022 to assist DOJ attorneys in evaluating whether excepting student loans owed to DOE would impose an undue hardship on a debtor and the debtor’s dependents. Chase urged the Court to adopt that guidance in evaluating undue hardship in this proceeding. However, as set forth in the DOJ memorandum, the guidance is “an internal” DOJ policy that is “not intended to and does not create any rights, substantive or procedural, enforceable at law by any party in any matter.” Guidance 16 n.22. The standards set forth in the DOJ memo are not binding on this Court, or any other court. The undue hardship analysis is informed by the text of the statute and caselaw interpreting the statute.

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Chase did not establish that his present inability to maintain a minimal standard of living while repaying the loans is a hardship that can be fairly characterized as “undue.” This conclusion has nothing to do with his expenses. ECMC criticized only one of Chase’s expenses – the $800 per month for an apartment. In the absence of evidence that other rental units are available for less, $800 per month is not unreasonable. As noted previously, Chase’s expenses, including his rental expense, are relatively modest. The outcome here turns on the income side of the equation and Chase’s efforts – or lack of efforts – to maximize his income.

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Chase did not establish that he has made, or that he is willing to make, reasonable efforts to maximize his earning potential. He has decades of experience in the construction industry. He also has a law school degree and the skills required to take on relatively lucrative work in the fashion industry. Completing law school and passing the bar exam is no small feat; that was an accomplishment that required sustained effort on Chase’s part. When he lived in New York, Chase earned much more than he is currently earning. Based on his education and employment history, the Court infers that Chase is capable of working hard and capable of earning more than he does now. If he were willing to leave the small town of West Forks to look for work, there would be more opportunities for him to find higher paying employment. He concedes as much, but he is not willing to relocate.

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The same is true of his decision to leave his relatively lucrative employment in the fashion industry in New York City. Chase testified that he could afford to make payments on his student loans while he lived in New York, and that he made the bulk of his payments on the loans using funds earned during those years. Chase protested that the cost of living was higher there, and that rings true. Even so, he conceded that if he lived in New York, he could theoretically repay all of his student loans. Why Chase left New York is not clear. What is clear is that he does not want to move back, or to return to his work in the fashion industry, where he was able to earn much more than he earns now.

Yvette Austin, trustee of the Alliance Health Liquidating Trust, filed this adversary proceeding against the Debtors’ former chapter 11 attorneys in this chapter 11 case. The complaint brings a wide variety of claims ranging from legal malpractice to fraud and federal RICO offenses. Baker & Hostetler, LLP filed a motion to dismiss the complaint for failure to state a claim. FED. R. CIV. P. 12(b)(6).

Under Rule 12(b)(6), the Court must assume that Austin’s well-pled allegations are true. Stokes v. Gann, 498 F.3d 483, 484 (5th Cir. 2007). On that assumption, the motion to dismiss the civil RICO claims is denied. Notwithstanding that assumption, all other claims for relief are dismissed with prejudice.

Appellant’s arguments concerning the First Plan are now equitably moot. “Equitable mootness is a pragmatic doctrine grounded in the notion that, with the passage of time after a judgment in equity and implementation of that judgment, effective relief on appeal becomes impractical, imprudent, and therefore inequitable.”

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First, Appellant did not seek or obtain a stay. Second, the Fourth Plan has been substantially consummated: following the plan’s confirmation, “[d]ebtor has made timely payments which have been distributed to allowed claimants who filed timely Proofs of Claim.” Third, the requested relief would undoubtedly affect the success of the confirmed plan because it would in effect nullify that plan. Fourth, because the requested relief would nullify a plan under which claimants have already received payments, the interests of those claimants would be substantially affected.

At that hearing, the Bankruptcy Court asked Debtor why the deficiencies in its Bankruptcy Petition had not been rectified. Debtor’s counsel responded, “[W]e spoke to the client. I think (indiscernible) the client [sic] to exit bankruptcy and go to state court on this matter.” Id. at 7. The Bankruptcy Judge then asked, “Oh, so you have no objection to dismissal?” Id. To which Debtor responded, “Yes.” On November 20, 2023, the Bankruptcy Judge ordered—“[u]pon the joint motion” of Creditors and parties in interest for an order that, among other things, “dismiss[es] Debtor’s Chapter 11 case for cause pursuant to Bankruptcy Code Section 1112(b)”—“that this bankruptcy case is hereby dismissed pursuant to Section 1112(b) of the Bankruptcy Code for the reason set forth in the record.”

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Debtor asks this Court to vacate the Bankruptcy Court’s order dismissing the case for cause because “Debtor’s offer of voluntary dismissal was an offer made pursuant to Section 349(b) of the Bankruptcy Code which provides that, ‘unless the court, for cause, orders otherwise,’ the dismissal of a bankruptcy case generally reinstates [the] status quo ante . . . .” Debtor asks that I modify the Bankruptcy Court’s order from a dismissal for cause to a voluntary dismissal. Creditors oppose, see ECF No. 14 (Creditors’ Opposition), and move to dismiss the appeal as frivolous on the basis that Debtor consented to the relief in the Bankruptcy Judge’s dismissal order. Creditors further move for sanctions against Debtor’s counsel, arguing the appeal is “frivolous and presented for an improper purpose, such as to harass or to cause unnecessary delay or needless increase in cost of litigation.”

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Because Debtor has already been granted the relief it seeks, the Court finds that Debtor’s appeal is moot. “The duty of an Article III court is to decide live controversies, not to give opinions upon moot questions or abstract propositions, or to declare principles or rules of law which cannot affect the matter in issue in the case before it.”

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Debtor requests “an order vacating the order of the [B]ankruptcy [C]ourt which dismissed Debtor’s Chapter 11 case for cause and modifying it to voluntary dismissal” in order to “undo the bankruptcy case, as practicable, and to restore all property rights to the position in which they were found at the commence [sic] of the case.” ECF No. 3 at 2. Debtor’s argument is flawed because the relief he seeks has already been granted to it.

Appellees claim that the sanctions Jackson seeks under 11 U.S.C. § 303(i) are only available if the bankruptcy court dismissed the case under 11 U.S.C. § 303. They maintain that Jackson does not have “standing to pursue this appeal because she cannot be granted an award under Section 303(i) for a case dismissed under Section 305.”

Appellees’ argument is rejected. As the Eighth Circuit Court of Appeals recently noted in Stursberg v. Morrison Sund PLLC, it is “obvious from the structure and purpose of § 303 that Congress intended that the federal court that dismisses an involuntary case has exclusive jurisdiction to enforce the debtor remedies provided in § 303, including remedies for bad faith filings under § 303(i), and for fraudulent filings under § 303(k)(1).” 112 F.4th 556, 563 (8th Cir. 2024). These remedies are available whether the bankruptcy court dismissed the involuntary case under 11 U.S.C. § 303 or under 11 U.S.C. § 305. Id. at 565 (“In sum, § 303(i)(2) damages are allowed when an involuntary petition is dismissed under § 305(a)(1).”).

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Although the bankruptcy court informed the parties that it would conduct an evidentiary hearing on Jackson’s request for sanctions, damages, and other relief if it dismissed the case, no such hearing was held. Jackson was denied the opportunity to support her claim for damages. While an award under 11 U.S.C. § 303(i) is left to the discretion of the bankruptcy court, it is an abuse of that discretion to rule without giving the parties an opportunity to offer evidence and fully develop the record.

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For the reasons stated, we remand this case to the bankruptcy court for an evidentiary hearing to determine whether a judgment should be entered under 11 U.S.C. § 303(i) and to determine whether Jackson is entitled to the other relief she seeks.

At the May 3 hearing, the Court specifically requested Trustee provide the Court with a method to quantify monetary sanctions because Trustee did not list a definite amount in either the original or Amended Motion for Sanctions. Trustee later submitted a large volume of evidence to show the harm experienced by Trustee, including Trustee’s counsels’ lodestars that indicated attorney’s fees totaling over $260,000. Trustee also claimed damages in excess of eight million dollars for Shumate’s violations of the automatic stay.

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If the party seeking sanctions would have incurred expenses absent the contemnor’s contumacious conduct, there is no harm and the court “lacks a basis for shifting the expense.” Shumate argues Trustee incurred no fees or expenses because Trustee employed counsel on a contingency basis. . As a result, Shumate contends Trustee has suffered no harm and is not entitled to compensatory monetary sanctions. Id. The Court disagrees with Shumate. If a contemnor can evade sanctions because the party seeking to enforce a court order is employed on a contingency basis rather than an hourly rate, a contemnor could frustrate the purpose of § 105 which is to “prevent an abuse of process.”

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The Court applies the same logic, finding that Trustee’s contingency fee arrangement does not preclude the Court from fashioning a sanctions award to compensate Trustee for additional work Trustee had to perform as a result of Shumate’s failure to cooperate. Accordingly, the Court views Trustee’s counsel’s lodestars as evidence of the damage incurred by Trustee.

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Shumate alternatively argues that a large majority of the fees and damages claimed by Trustee are unrelated to violations of the TRO or other Court orders and should be denied. To support his position, Shumate submitted exhibits that suggest roughly $22,000 of Trustee’s fees are connected to Trustee seeking enforcement of the Court’s orders. The Court agrees with Shumate.

On November 26, 2024, Kung & Brown, counsel for debtor Miomni Sports Ltd. (Sports) and joint liquidators Gavin Savage and John Walters in the above-captioned proceeding, filed its Motion to Withdraw as Counsel of Record for UK Liquidators Gavin Savage and John Walters as Authorized Foreign Representatives of Miomni Sports, Ltd. and Miomni Sports, Ltd. (ECF No. 91) (Motion). In her declaration filed in support of the Motion, Kung & Brown attorney A.J. Kung stated that she has been advised that Kung & Brown’s “services are no longer necessary because the Liquidators have concluded their investigations… and as such, are in the process of concluding the UK liquidation and terminating their roles as UK liquidators in the Sports UK liquidation proceedings pursuant to UK law and [Kung & Brown’s] services are no longer required.”

The debtor, Miomni Sports Ltd., invoked the protections of chapter 15 in support of its main foreign proceeding. The case remains open. If the main foreign proceeding is concluding, the debtor should seek to close this ancillary case pursuant to 11 U.S.C. § 1517 (referencing § 350) and Fed. R. Bankr. P. 5009(c). Moreover, NV LR 9010 provides that “[a]ny corporation, partnership, limited liability company, trust, or other non-individual debtor must be represented by, an attorney.” Debtor Miomni Sports Ltd., as a non-individual debtor, must be represented by counsel in its open chapter 15 proceeding. Nowhere in the Motion does Kung & Brown provide the name of new counsel retained by Miomni Sports Ltd. to take over after Kung & Brown’s withdrawal. Withdrawal of debtor’s counsel at the conclusion of the main foreign proceeding is not the appropriate manner in which to close this case.

After Solimano Framing Group LLC (“Debtor”) filed its chapter 111 subchapter V petition, it proposed a plan of reorganization through which Debtor sought to assume several contracts, including a number of contracts with Pier Construction & Development, LLC (“Pier”). Debtor referred to these contracts as executory both in the plan and its filed schedules, implying that Debtor had the power to assume them.

Contrary to Debtor’s assertions, six of the contracts identified by Debtor had been terminated by Pier prior to the petition date. Unfortunately, given Debtor’s misrepresentations concerning the status of the contracts and Debtor’s associated nondisclosures, the bankruptcy court remained unaware of this fact and confirmed the plan.

One day after confirmation of Debtor’s plan, Pier timely asserted an approximately $500,000 claim against the estate in accordance with the deadline set by the bankruptcy court in the claims bar order. Subsequently, Pier filed an amendment reducing its claim to $0 based on Pier’s setoff and recoupment rights. Debtor objected, arguing that the plan, by operation of the doctrine of claim preclusion, precluded Pier’s claim. The bankruptcy court disagreed, holding that Debtor could not assume contracts that were terminated prepetition, concluding that claim preclusion did not apply to the facts of this case, and otherwise allowing Pier’s claim as amended.

We AFFIRM. We publish to explain that, even in an expedited proceeding under subchapter V, bedrock principles of due process require adequate, comprehensible, and consistent notice of plan provisions that affect creditors’ rights.

Assuming for purposes of the Motions that the Lease was not tem1inated before it was rejected, recoupment under § 365(h)(l)(A)(ii) may provide a remedy otherwise unavailable under Massachusetts law. In deciding the issues directly presented by these Motions, the Debtor's most significant argun1ent comes into focus. MIM has merely alleged that the Debtor breached the covenant in the Lease to maintain the Leased Premises in good repair and that MIM suffered substantial consequential damages as a result of that breach. The Debtor also asserts that it has coverage under an insurance policy that would indemnify the Debtor from and against any liability for such a claim and that the carrier has issued a reservation of rights letter with respect to MIM's claims. MIM will bear the burden of proof with respect to its asserted rights of recoupment. See, e.g., Carney v. Cold Spring Brewing Co., 304 Mass. 392, 396 (1939) (determining that party asserting recovery by recoupment had burden of proving damages in recoupment). MIM has not yet met that burden.

Even where equitable recoupment may be a remedy available to MIM (assuming the Lease was not terminated by notice), MIM has yet to meet its burden of proof on a number of issues and, therefore, equitable recoupment only remains a potential remedy as to which the Court has latitude in applying to fashion equitable relief. In the context of this case, it would be inequitable for MIM to withhold post-rejection rent as "recoupment" for pre-rejection damages that have been claimed, but not proven and, therefore, payment of rent into escrow is appropriate.

The IRS’s primary contention is that this Adversary Proceeding boils down to a tax refund dispute concerning the tax liabilities of non-debtor former shareholders of CHT. Conversely, the Trustee asserts that it has not sued the IRS to obtain a tax refund and explains these claims are “bread-and-butter, standard chapter 5 fraudulent transfer bankruptcy claims” against the IRS because the IRS allegedly received a fraudulent conveyance pursuant to Bankruptcy Code section 548 and is purportedly holding funds belonging to Debtors which necessitates turnover pursuant to Bankruptcy Code section 542. The Trustee also maintains that this is not an action brought pursuant to Bankruptcy Code section 505.

The Court disagrees with the Trustee and concludes that permissive abstention is appropriate.

The IRS is not alleged to be the recipient of a fraudulent transfer. Rather, the Trustee sued the non-debtor shareholders claiming they had received fraudulent transfers by receiving the Shareholder Redemption Payments (as defined in the Third Amended Complaint) and the IRS Funds, regardless of their character, and that the payment of their potential tax liabilities on their behalf to the IRS on account of the Merger was a fraudulent transfer for their benefit. Whether the IRS Funds would be considered redemptions or withholdings under the IRC does not change the basic nature of those funds as reflecting rights the shareholders had against the IRS. In fact, the Trustee even “recognizes that tax issues may become relevant for purposes of analyzing the [Trustee’s] claims and the IRS’s defenses.” No determination has been made concerning the nature of the non-debtor tax payments.

The Trustee’s position is that by having settled with each non-debtor Non-IRS shareholder defendant, there is no dispute about who is entitled to the IRS Funds. However, the fact that the Trustee has received an assignment of the shareholders rights to refunds of the IRS Funds does not render the IRS Funds the proceeds of fraudulent transfers as a matter of law. While the Trustee is correct that there is “no dispute between the Shareholder Defendants and the Liquidating Trustee as to the ownership of the IRS Funds.”, Third Am. Comp. ¶ 99, a determination has yet to be made as to the shareholders’ right to refunds. Further, because Debtors do not purport to have owed federal taxes on the shareholders’ payments, this is not a Bankruptcy Code section 505 proceeding to determine a debtor’s tax liability or right to a refund.

Abstention will have no effect on efficient administration of the estate. Either this Court or the federal district court would have to determine who has rights to the IRS Funds, and any appeal from this Court to the District Court would be likely, and quite possibly de novo review of decisions of law. Thus, abstention saves a step in the process.

Further, the unsettled tax law issues clearly predominate over bankruptcy law issues in this Adversary Proceeding. In that regard, it appears that the United States District Court would be the more appropriate forums for determining those predominate tax law issues.

Of significant importance, on November 12, 2024, the mediators filed their first interim report, which advised the Court that many of the key parties to the mediation have reached an agreement-in-principle on certain core economic terms of a settlement with nine of the ten Sackler family groups, as well as agreement on important non-monetary terms of the settlement. See Co-Mediators’ First Interim Status Report ¶ 3 (the “First Mediators’ Report”). The mediators did note that “much work remains,” including the resolution of complex intercreditor issues and attempting to expand the agreement in principle to encompass the final Sackler family group. The mediators noted that the preliminary injunction remains “absolutely vital” to progress towards a successful reorganization of the Debtors’ estates, and while there have been “dozens of calls and Zooms, various in-person meetings” since the granting of the last requested extension at the October 31, 2024 hearing, the mediators state that more time is necessary to resolve important open issues. At the October 31st hearing, Judge Chapman—one of the mediators—reported further positive developments and reiterated the importance of the preliminary injunction remaining in place to the success of the mediation. Notwithstanding the progress, the mediation was described as ongoing and fluid with “daily” activity and development.

On November 25, 2024, the mediators filed a second report. See Co-Mediators’ Second Interim Status Report (the “Second Mediators’ Report,” and together with the First Mediators’ Report, the “Mediators’ Reports”). The Second Mediators’ Report stated that additional progress has been made, with additional points of agreement having been reached between and among the covered parties, the Debtors, the Ad Hoc Committee, the Unsecured Creditors’ Committee, the States Attorneys General and the Multi-State Governmental Entities Group. The mediators reported that the agreements were reflected in a term sheet, that the total amount of cash consideration being made available by the settling covered parties being higher than the amount that was contained in the Debtors’ previously confirmed plan, and that the Debtors expected to file a plan and disclosure statement in January 2025. The mediators stated that there were ongoing negotiations to resolve the remaining open issues.

Based on the record before the Court, and for reasons explained below, the Court will grant a further extension of the preliminary injunction for three weeks, until December 23, 2024, as supported by much the same reasons that justified the prior extensions.