United States District Court, D. Nebraska
RICHARD D. MYERS, Bankruptcy Trustee of M&M Marketing, L.L.C. and Premier Fighter, L.L.C.; Plaintiff,
MICHAEL L. BLUMENTHAL, FRANK VICARI, an Individual; Defendants.
MEMORANDUM AND ORDER
JOSEPH F. BATAILLON, Senior District Judge.
This matter is before the court on a "Motion to Determine Default Judgment Was Non-Final Order, to Clarify Ruling on Trustee's Renewed Motion for Partial Summary Judgment, and Determine Collateral Estoppel Effect of Ruling in the Cronk Case; Request for Judicial Notice" filed by Richard D. Myers, (hereinafter, Myers or "the Trustee"), the bankruptcy trustee of M&M Marketing, L.L.C. and Premier Fighter, L.L.C. (hereinafter, "M & M, " "Premier, " or "debtors"), Filing No. 30, and on the parties' joint motion, in accordance with the progression order, to review certain orders of the United States Bankruptcy court, Filing No. 29. This is an adversary proceeding for avoidance of certain allegedly preferential transfers from the debtors to defendant that is part of a Chapter 7 proceeding in the United States Bankruptcy Court for the District of Nebraska.
The proceeding was transferred from the bankruptcy court for trial by jury under Executive Benefits Ins. Agency v. Arkison, 134 S.Ct. 2165, 2168 (2014). In that case, the Supreme Court assumed, without deciding, that a state law fraudulent conveyance claim is a "Stern Claim"-that is a proceeding that is defined as "core" under 28 U.S.C. §157(b), but that may not, as a constitutional matter, be adjudicated to final judgment by a bankruptcy court. Id. at 2174; see Stern v. Marshall, 564 U.S. ___, ___, 131 S.Ct. 2594, 2609 (2011) (stating Congress may not withdraw from Article III courts "any matter which, from its nature, is the subject of a suit at the common law, or in equity, or in admiralty."). When the Constitution does not permit a bankruptcy court to enter final judgment on a bankruptcy-related claim, the relevant statute nevertheless permits a bankruptcy court to issue proposed findings of fact and conclusions of law to be reviewed de novo by the district court. Executive Benefits Ins. Agency, 134 S.Ct. at 2174; see Wellness Int'l Network, Ltd. v. Sharif, No. 13-935, ___ S.Ct. at ___, ___, 2015 WL 2456619, *3 (May 26, 2015) (holding bankruptcy court has authority to issue final orders on most matters with the parties' knowing and voluntary consent).
Because Blumenthal asserted his right to a jury trial and to resolution by an Article III judge, the bankruptcy court recommended that the court withdraw the reference of the adversary proceeding to the bankruptcy court. Filing No. 1, Findings and Recommendations ("F&R") at 3-4. The bankruptcy court further recommended that the court deny the Trustee's renewed motion for summary judgment. Id. The Trustee objected to the bankruptcy court's F&R, but this court overruled the objection and adopted the F&R. See Filing No. 4, Memorandum and Order at 5-6; Myers v. Blumenthal, No. 14CV57, 2014 WL 1584220, *3 (D. Neb. April 21, 2014).
The relevant facts are set forth in earlier orders and need not be repeated here. See Myers v. Blumenthal, No. 8:14CV57, 2014 WL 4264788, at *1 (D. Neb. Aug. 28, 2014)(order on motion to compel); In re M & M Mktg., L.L.C., No. A11-8033, 2013 WL 5592909, at *1 (Bankr. D. Neb. Oct. 10, 2013) (order on motion to clarify); In re M & M Mktg., L.L.C., No. A11-8033, 2013 WL 3071005, at *1 (Bankr. D. Neb. June 18, 2013) (order on motions for summary judgment). Briefly, the debtors, M & M and Premier, were entities involved in promoting mixed martial arts and other events, and selling merchandise related to those events. In re M & M Marketing, 2013 WL 3071005 at *1. Both entities were owned by Matthew Anselmo. Id. Michael Blumenthal loaned money to the companies. Id. Matthew Anselmo was later prosecuted for mail and wire fraud, money laundering, uttering a counterfeit security, and aiding and abetting those crimes. See United States v. Anselmo, No. 8:09-cr-177 (D. Neb. April 1, 2010), aff'd, No. 10-1805 (8th Cir. Aug. 10, 2010). This action involves the financial relationship between the debtors and Blumenthal.
The Trustee generally seeks a de novo reconsideration of certain Bankruptcy Court rulings in order to eliminate any doubt with respect to jurisdictional and/or Constitutional issues. The Trustee asks the court to treat the Bankruptcy Court's earlier orders as Findings and Recommendations and then to adopt or reject those Findings and Recommendations on de novo review. He asks that the court make certain rulings as a matter of law, to wit: to find that the order of the United States District Court for the Northern District of Illinois purportedly granting defendant Blumenthal a default judgment against M&M was a non-final interlocutory order on which Blumenthal had no right to execute; to determine that Matthew Anselmo's guilty plea to, and conviction of, a charge of mail fraud in violation of 18 U.S.C. § § 1341 and 2, in United States v. Anselmo, No. 8:09-cr-177 (D. Neb. April 1, 2010), aff'd, No. 10-1805 (8th Cir. Aug. 10, 2010), conclusively establishes: (1) that the debtors operated a Ponzi scheme from 2006 to 2008; (2) that transfers from Premier in the amount of $330, 460.24 and from M&M in the amount of $171, 341.73 to Michael Blumenthal were made in furtherance of that Ponzi scheme; (3) that M&M and Premier were insolvent at the time of the transfers; (4) that the transfers were made in furtherance of the Ponzi scheme with fraudulent intent; (5) that the Ponzi presumption is recognized in the Eighth Circuit and applies to this case; and (6) that the bankruptcy court's determination that the debtors were insolvent in the Cronk case is binding on defendant Blumenthal in the instant case under the doctrine of collateral estoppel. Essentially, the Trustee contends that rulings as a matter of law on these matters will narrow the issues for trial.
In their joint motion, the parties ask the court to review the following orders of the Bankruptcy Court and supporting documentation:
1. In re M&M, No. 09-81458 BK, Myers v. Blumenthal, Adversary Case No.11-0833, Filing No. 30, Order denying defendant Blumenthal's motions to dismiss and for sanctions (Bankr. D. Neb. October 14, 2011).
2. Id., Filing Nos. 244 & 246, Orders denying cross-motions for summary judgment (Bankr. D. Neb. June 18, 2013).
3. Id., Filing Nos. 264 & 265, Orders granting Chapter 7 Trustee's motion to clarify the court's ruling on the trustee's motion for summary judgment (Filing No. 249) (Bankr. D. Neb. October 10, 2013) and 276, Order denying motion to reconsider (Bankr. D. Neb. Dec. 4, 2014).
A. The Present Action
In bankruptcy court, the Trustee filed a complaint for recovery of money as a preference or fraudulent transfer against Blumenthal. Id., Filing No. 1, Complaint. Blumenthal moved to dismiss the Trustee's complaint and for sanctions, based on the assertion that he was not an insider at the time of the alleged preferential transfers. See id., Filing No. 16, Motion; Filing No. 28, Ex. A, Disclaimer. He submitted evidence-a document entitled "Disclaimer of Interest, " that allegedly shows he was not an insider at the time of the transfers and argued that any allegations of preferential or fraudulent transfer were barred by the statute of limitations as it pertains to non-insiders. See id., Filing No. 28. After a hearing, the Bankruptcy Court found that
A plausible argument may be made that a person who has had transferred to him all of the assets of the two limited liability companies could be considered an insider because a person in possession or ownership of all of the assets ...