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In re Glieberman

United States District Court, E.D. Michigan, Southern Division

April 14, 2017




         This is an appeal from a final order of the Eastern District of Michigan Bankruptcy Court, compelling production of documents, finding Debtor Bernard Sloane Glieberman in contempt of court and imposing sanctions “Contempt Order”) (Bankr. Dkt. No. 162). The Contempt Order held Debtor in contempt of the Bankruptcy Court for willfully failing to comply with the Bankruptcy Court's August 24, 2016 order compelling production of documents and imposed a $2, 000 sanction. Debtor argues on appeal that the Bankruptcy Court deprived him of his due process rights by holding him contempt and levying sanctions on an expedited basis and without an evidentiary hearing, and erred in finding that he had possession, control or custody over the documents required to be produced.


         North (“Appellee”) holds a judgment of over $81 million against Debtor and is his single largest creditor. On November 2, 2015, Debtor filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code, which was converted to a Chapter 7 liquidation case on December 20, 2016. On June 21, 2016, in preparation for a planned multi-party mediation in the bankruptcy case, the parties stipulated to entry of an Order under Bankruptcy Rule 2004 for the Production of Documents by Debtor (the “Stipulation”). The Bankruptcy Court entered the Stipulated Order on June 22, 2016 (the “Production Order”). This Production Order required Debtor to produce to Appellee all the documents specified by the Stipulation by July 14, 2016, contemplating “all information and/or documents available to the Debtor or obtainable by the Debtor from his agents, representatives, ” etc. Relevant to this appeal, the Production Order required Debtor to produce:

A. From January 11, 2011 to present, documents evidencing any compensation for services and/or employee, retiree, consultant, or similar benefits provided to the Debtor, to the extent any such documents exist. These documents should include, but not be limited to, all documents reflecting rights to future compensation and/or benefits.
B. From January 11, 2011 to present, all records of wires, checks, or other transfers evidencing payments, or compensation or income of any kind attributable to Mr. Glieberman, made into any account held by Tracey Katzen, to the extent any such documents exist.
C. From January 11, 2011 to present, all statements of the American Express Platinum card (account ending in 0-16003), which is or was previously in the name of the Debtor; which have not been previously been produced to BR North, and all records, if any of Debtor's payments with respect to the same.
D. From April 1, 2015 through the present day, any and all documents of the real property development known as HRS Communities; Home Renewal Systems, LLC; Home Renewal Realty, LLC; Londonberry, LLC; and/or any other companies involving Tracey Katzen that relate to the Debtor, including, but not limited to, documents in the possession or control of the Debtor, reflecting any payments by these entities made to him, for him and/or on his behalf.

Exhibit A to Stipulation at ¶ 5-6.

         From July 8, 2016 through August 15, 2016, Debtor produced certain documents to Appellee pursuant to the Production Order. However, Appellee believed Debtor failed to produce “any and all” documents responsive to the quoted paragraph, and on August 17, 2016 filed a Motion Compel, for Contempt and Sanctions (“First Contempt Motion”). Appellee argued that Debtor could have complied with the Production Order, numerous exhibits in support of its argument. Appellee also moved for a shortened notice of hearing, pursuant to Bankruptcy Rules 9006(c) and The Bankruptcy Court granted an expedited hearing and scheduled the hearing for six days later on August 23, 2016.

         In its First Contempt Motion, Appellee pointed out that the Production Order required bank records of Debtor's daughter Tracey Katzen to be produced, as well as the bank records and other records of numerous Debtor-related entities. Appellee established that Debtor previously used Tricia Gregart, the long-time controller of his real estate projects, to obtain documents regarding his personal financial affairs and those of the companies he was affiliated with for the Bankruptcy Court. Appellee attached exhibits to its motion, including (1) documentary evidence including public records, corporate filings and newspaper articles related to Debtor, daughter, and his new projects which had not been revealed to the Bankruptcy Court or creditors, and (2) deposition testimony that revealed Debtor's role in founding, managing or controlling the numerous companies whose documents he refused to produce.

         For example, Appellee alleges that Debtor formed more than 15 real estate development and other investment companies in the last few years, listing his daughter Tracey Katzen as registered agent. Appellee's source for this allegation is the Michigan Department of Licensing and Regulatory Affairs. One project, the Grandview Marquette Apartment Project, was allegedly led by Debtor, using several of his real estate companies. This project has been in the works for over a year and closed on June 3, 2016. Appellee ties several of Debtor's companies to the project by citing to newspaper articles and the Warranty Deed for the purchase of the property, including Home Renewal Systems, LLC, Grandview Marquette developer, LLC, GMHRR, LLC, and Grandview MT LLC.

         In another example, Appellee documents that Debtor is known to be President and Manager of HRS Communities. HRS Communities developed the Clyde Smith Farms development, which represents 146 site condos. Appellee presented the deposition of Tricia Gregart that Debtor himself managed Clyde Smith Farms. Gregart further testified that although Tracey Katzen was held out as the principal of numerous companies, including Londonberry, the management company over Clyde Smith Farms, she was not a manager and Debtor was really in charge. As for Ms. Katzen's duties for Home Renewal Realty, Clyde Smith and Londonberry, Gregart testified that Katzen funds them and sits in on Tuesday meetings. (Gregart dep., pp 158, 161). Beyond that, Ms. Gregart was “not sure” what Katzen did for the companies.

         In its order granting Appellee's motion for expedited hearing, the Bankruptcy Court permitted any response to the First Contempt Motion to be raised at the hearing. Debtor did not file anything with the Bankruptcy Court in response to the First Contempt Motion, nor did it rebut any of Appellee's evidence at the hearing. The Bankruptcy Court found on the record that there was enough evidence that Debtor was able to obtain the documents set forth in the Production Order. On August 24, 2016, the Court ordered Debtor to produce all documents set forth in the Production Order, for all companies listed in that order, as well as for twenty-one other companies in which Debtor and his daughter are involved, by noon on AugusDt e2b6t, o 2r 0p1r6o.duced some documents, but not all, and on September 9, 2016, Appellee filed a Second Motion to Compel, for Contempt and for Sanctions (“Second Contempt Motion”). The Bankruptcy Court granted Appellee's Motion to Expedite Hearing, and set the hearing for eleven days later on September 20, 2016. Debtor did not file a response to the Second Contempt Motion. At the hearing, Debtor's counsel argued, without presenting any evidence, that his client lacked possession or control of of the documents, other than those that were ...

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