UNITED STATES BANKRUPTCY COURT
DISTRICT OF MASSACHUSETTS
In Re:
MODERN CONTINENTAL
CONSTRUCTION CO., INC.
Debtor
)
)
)
)
)
)
)
)
Chapter 11
Case No. 08-14558-WCH
SMYRNA REBAR, INC.’S SUPPLEMENTAL MEMORANDUM IN SUPPORT
OF ITS MOTION FOR A F.B.R. 2004 EXAMINATION OF THE DEBTOR
MODERN CONTINENTAL CONSTRUCTION CO., INC.
Smyrna Rebar, Inc. (“Smyrna”), through its counsel, the Law Offices of Kenneth
M. Diesenhof, P.C. and the Law Offices of Thomas A. Dougherty file this supplemental
memorandum in support of its request for an examination pursuant to F.B.R. 2004 of the
debtor Modern Continental Construction Co., Inc. (“MCC”)including but not limited to
current employee John Pastore, and former employees Robert Pine and Ed Latesa.
MCC’s MOTION
MCC’s Motion contains numerous factual and legal arguments that are simply
false.
A.
Resolution of Smyrna’s Claim
MCC claims it would be a waste of judicial resources for a 2004 Examination to
done because the matter will be resolved in State Court. This is not true. The State Court
action will probably be resolved in early to mid 2009. MCC at the Meeting of Creditors
stated it expects to wind up it affairs and dissolve by no later than late 2008 and therefore
1
the State Court action would not be completed before MCC was dissolved. (Affidavit of
Kenneth M. Diesenhof)
B.
2004 Examination Is Appropriate as long as neither an Adversary
Proceeding or a Contested Matter has been Filed in the Bankruptcy
Court
In its motion MCC states “The general rule is that a 2004 examination is not
appropriate where there is pre-existing litigation involving the matters for which the 2004
examination is requested.” MCC Motion page 4, paragraph 13. This is simply not true.
What the general rule is that if the party seeking the Rule 2004 Examination has either
filed an Adversary Proceeding or filed any motion in the Bankruptcy Court that could be
deemed related to a contested matter than the party must conduct discovery pursuant to
the Federal Rules of Civil Procedure (“FRCP”) specifically Rules 26, 30, 31, 33, 34, and
36.
An Adversary Proceeding is defined, according to FBR 7001, as
a proceeding (1) to recover money or property, except a proceeding to
compel the debtor to deliver property to the trustee, or a proceeding under
§ 554(b) or § 725 of the Code, Rule 2017, or Rule 6002, (2) to determine
the validity, priority, or extent of a lien or other interest in property, other
than a proceeding under Rule 4003(d), (3) to obtain approval pursuant to §
363(h) for the sale of both the interest of the estate and of a co-owner in
property, (4) to object to or revoke a discharge, (5) to revoke an order of
confirmation of a chapter 11, chapter 12, or chapter 13 plan, (6) to
determine the dischargeability of a debt, (7) to obtain an injunction or
other equitable relief, (8) to subordinate any allowed claim or interest,
except when subordination is provided in a chapter 9, 11, 12, or 13 plan,
(9) to obtain a declaratory judgment relating to any of the foregoing, or
(10) to determine a claim or cause of action removed pursuant to 28
U.S.C. § 1452.
A contested matter is any dispute not classified as an Adversary Proceeding and usually
triggered by motion or an objection raising the issue involved. Collier Consumer
Banrkuptcy Practice Guide, p. 32-11, s. 32.04. Smyrna has not filed an Adversarial
2
Proceeding and currently none of the motions filed by Smyrna could be classified as
motions dealing with contested matters. (Affidavit of Kenneth M. Diesenhof). Therefore,
there is no rule that would prohibit the Rule 2004 Examination.
MCC claims that all of the cases cited in its motion stand for the proposition that
if there is any pre-existing litigation a Rule 2004 Examination is not appropriate. MCC’s
reliance on these cases to support this claim is misplaced at best and at worst is
intentional or unintentional misrepresentation of the law. The following is a brief review
of the cases cited in MCC’s motion. In re 2435 Plainfield Ave. Inc., 223 B.R. 440, 455
(Bankr. D.N.J. 1998) states “The majority of courts that have addressed this issued have
prohibited a Rule 2004 exam of parties involved in or affected by an adversary
proceeding while it is pending.” In re Symington, 209 B.R. 678, 684 (Bankr. D. Md.
1997) states that a Rule 2004 Examination “is independent of a complaint or contested
matter.” In re The Bennett Funding Group, Inc., 203 B.R. 24, 29 (Bankr. N.D.N.Y.
1996) states that “once an adversary proceeding has been commenced, discovery is made
pursuant to the Fed. R. Bankr. P. 7026 et. seq., rather than by Fed. R. Bankr. P. 2004
examination.” In re Bakalis, 199 B.R. 443, 448 (Bankr. E.D.N.Y. 1996) states “Once a
matter becomes contested or adversary proceeding is commenced, further discovery
should be obtained pursuant to the Federal Rules of Civil Procedure.” In re Sutera, 141
B.R. 539, 542 (Bankr. D. Conn. 1992) does not touch upon when a Rule 2004
examination can be requested but merely states that a debtor can not be forced to prepare
a document that does not already exist. Last but not least the in the case of In re
Szadkowski, 198 B.R. 140, 142 clearly states that even when an adversary proceeding
3
has been commenced or there is a contested matter pending the court may order a Rule
2004 Examination if the court feels it is appropriate.
It is clear from the case law above that the only question is not whether Smyrna
can conduct an examination of Modern but rather should it be done pursuant to Rule
2004 or Rule 7026.
C.
SMYRNA’S REQUESTED DISOVERY IS NEEDED
MCC argues Smyrna claims that MCC only made two inconsistent admissions
regarding its liability to Smyrna and the difference is only $80,000.00 and this pales in
comparison to the $5.8 million owed to MCC by Smyrna. This is again not true. MCC
has made five inconsistent statements regarding both its liability to Smyrna and the
amount of the liability. On October 29, 1999 in a letter from MCC to Smyrna, MCC
admitted it owed Smyrna money but declined to give an amount. (Exhibit A). In its
Answer and Counterclaim dated June 29, 2001 MCC admitted it owed Smyrna money
but again declined to state the amount. (Exhibit B). In the Appeals Court decision the
Court ruled MCC now stipulates it owes $90,300.60. (Exhibit C). At trial MCC claimed
it did not owe Smyrna a dime. In the Bankruptcy filing MCC claimed the amount owed
to Smyrna was $9,613.03 and that is was not subject to a set off. (Exhibit D) Now MCC
claims the amount is $9,613.03 and it is subject to a setoff. If one only looks at the MCC
letters, pleadings, briefs, and filings the amount owed to Smyrna by MCC ranges from
$0.00 to unknown which may or may not be subject to a set off. The only thing that is
clear is that nothing is clear regarding the amount owed to Smyrna by MCC.
D.
MISCELLEONOUS REASONS FOR THE ALLOWING THE
MOTION
4
At the first meeting of creditors MCC’s president was questioned by Smyrna’s
counsel regarding the amount owed by MCC to Smyrna as reflected on MCC’s
schedules. At that time MCC’s president said he could not answer the question because
he did not know. The Trustee then suggested to Smyrna’s counsel that he file for a Rule
2004 Examination. After this suggestion was made MCC’s counsel, Harold B. Murphy,
Esq., said he would send Smyrna’s counsel information that answered his questions. As
of August 18, 2008 no such information has been received by Smyrna’s counsel.
WHEREFORE; Smyrna respectfully requests that the Court enter the Order
previously attached to Smyrna original Motion for 2004 examination directing MCC and
its principal officers and directors and certain former employees, including but not
limited to John Pastore, Robert Pine and Ed Latesa, to appear for examinations under
oath by Smyrna’s counsel and to produce documents pursuant to Rule 2004 of the
Federal Rules of Bankruptcy Procedure and for such other relief as the court deems
appropriate.
Respectfully Submitted
SMYRNA REBAR, INC.
By its attorneys
/s/ Kenneth M. Diesenhof
Kenneth M. Diesenhof (BBO #561270)
Law Offices of Kenneth M. Diesenhof, P.C.
142 Main Street, Suite #407
Brockton, MA 02301
Tel:
508-580-6907
Fax:
508-580-8768
E-mail:
[email protected]
Date: August 18, 2008
Thomas A. Dougherty (BB0 #630881)
142 Main Street, Suite 402
Brockton, MA 02301
Tel:
508-583-5454
5
UNITED STATES BANKRUPTCY COURT
DISTRICT OF MASSACHUSETTS
In Re:
MODERN CONTINENTAL
CONSTRUCTION CO., INC.
Debtor
)
)
)
)
)
)
)
)
Chapter 11
Case No. 08-14558-WCH
AFFIDAVIT OF KENNETH M. DIESENHOF
I, Kenneth M. Diesenhof, do depose and say the following:
1.
I am an attorney licensed to practice law in the Commonwealth of Massachusetts.
2.
I, along with Thomas A. Dougherty, am counsel for Smyrna Rebar, Inc. and have
been for the last eight years.
3.
Smyrna Rebar, Inc. has not filed either an Adversary Proceeding or a Contested
Matter with regards to this debtor in the bankruptcy court.
4.
I attended the first meeting of creditors.
5.
At that meeting counsel for Modern Continental Construction, Inc., Harold B.
Murphy, Esq., stated that it was the debtor’s intention to wind up all of its affairs
and permanently go out of business by no later the end of 2008.
6.
At that meeting Eric K. Bradford of the U.S. Trustee’s Office, suggested that I file
for a Rule 2004 Examination.
7.
At that meeting counsel for Modern Continental Construction, Inc., Harold B.
Murphy, Esq., stated that he would send me information that answered the
questions raised by me at the meeting.
8.
As of this date I have received no such answers.
SIGNED UNDER THE PAINS AND PENALATIES OF PERJURY ON
AUGUST 18, 2008.
/s/ Kenneth M. Diesenhof
Kenneth M. Diesenhof
COMMONWEALTH OF MASSACHUSETTS
APPEALS COURT
03-P-1435
SMYRNA REBAR t INC.
MODERN CONTINENTAL CONSTRUCTION COMPANY, INC. & othersU'
MEMORANDUM AND ORDER PURSuANT TO RULE 1: 28
This action involving multiple claims and counterclaims
arises out of disputes concerning a contract and a memorandum of
understanding between the plaintiff subcontractor and the
defendant general contractor. A judge of the Superior Court
granted partial summary judgment to the defendants on two of
their counterclaims and on five of ~he plaintiff's claims. The
judge also ~llowed the defendants' motion for a separa~e and
final judgment under Mass.R.Civ.P. 54 (b), 365 Mass. 821 (1974).
Judgment entered for the defendants in the amount of
$1,443,231.91 plus interest from April 14, 1999, and costs.
There is no question that numerous claims remain to be
litigated and that those claims arise from the same transaction
as the claims on which partial summary judgment was allowed. The
defendants concede (defendants' brief pp. 23-2~) that a certain
amount ($90,300.60) is a proper offset, and that the plaintiff's
alleged claims amount to $674,912.
(Motion for entry of separate
~United States Fidelity & Guaranty Company, Fireman's Fund
Insurance Co~any and National Surety Corporation .
. ;~,
~!tl ~ .
:
28
and final judgment). The plaintiff in its opposition to the
motionVasserted that t~e value of its remaining claims is
$1,700,000.
At oral argument we asked, sua sponte, for copies of the
I
defendants' motion seeking 54 (b) "certification, and we have
examined all the papers submitted" to us relating thereto. The
judge did not file a memorandum stating his reasons for allowing
the motion. The reasons in the defendants' motion are inadequate
to support its grant. Neither the fact, if it be the fact, that
the value of the plaintiff's claims are less than the sums
awarded to ~he defendants or the fact, if it be the fact, that
the plaintiff is judgment proof supports a 54 (b) certification.
No reasons consistent with our decision in Lonq v. Wickett, 50
Mass. App. Ct. 380, 386-404 (2000), appear in the record before
us.
Accordingly, for substantially the considerations set forth
in that case, the certification and entry, pursuant to
Mass.R.Civ.P." 54 (b), of the partial judgment for the appellees,
is vacated, aI).d the order on summary judgment is restored to its
interlocutory status under the second sentence of rule 54 (b) .
The appeal is otherwise dismissed as interlocutory, and the case
is remanded to the Superior Court for further proceedings
~on appeal the plaintiff does not argue that the 54 (b)
certification was erroneous.
2
29
'consistent with this order.
So ordered.
By the Court (Cypher, Dreben &
Katzmann, JJ.),
~~ A1.w-Clerk
Entered: January 18, 2005
3
30