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Keeper of Word Foundation v. Nathan

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

February 6, 2018

KEEPER OF THE WORD FOUNDATION, et al., Appellants,
v.
KENNETH A. NATHAN, Appellee.

          ORDER AFFIRMING BANKRUPTCY COURT'S MAY 9, 2017, ORDER GRANTING APPELLEE KENNETH NATHAN'S MOTION FOR AN ORDER ENJOINING APPELLANTS FROM FILING LAWSUITS WITHOUT FURTHER ORDER OF THE COURT

          MATTHEW F. LEITMAN UNITED STATES DISTRICT JUDGE.

         This appeal arises out the Chapter 7 bankruptcy of Debtor Gregory Reed. On March 13, 2017, Appellee Kenneth Nathan, the Bankruptcy Trustee for Reed's estate, moved the Bankruptcy Court to enjoin Appellants Gregory Reed, Keeper of the Word Foundation (“KWF”), Mic-Arian Corporation, and the Gregory J. Reed Scholarship Foundation from filing certain legal actions without prior permission of the court.[1] The Bankruptcy Court granted Nathan's motion and entered an order so enjoining Appellants on May 9, 2017 (the “Order to Enjoin”). For the reasons explained below, the Order to Enjoin is AFFIRMED.

         I

         Debtor Gregory Reed filed for bankruptcy under Chapter 7 of the Bankruptcy Code on August 28, 2014. On December 17, 2015, the Bankruptcy Court entered an order in which it held, among other things, that (1) certain assets in KWF's possession were property of Reed's bankruptcy estate and (2) KWF needed to turnover the assets to Nathan (the “Turnover Order”). Those assets included a 50-percent interest in real property located at 1201-1209 Bagley in Detroit, Michigan (the “Bagley Property”). KWF appealed the Turnover Order to this Court, and this Court affirmed. See Reed v. Nathan, 558 B.R. 800 (E.D. Mich. 2016), aff'd, No. 16-2685 (6th Cir. Sept, 7, 2017).

         In August 2016, the Bankruptcy Court authorized Nathan to employ Dwellings Unlimited, LLC as a real estate broker to market and sell the Bagley Property. Nathan and the co-owner of the Bagley Property, the Charles H. Brown Trust, eventually agreed to sell the property to Byzantine Holdings, LLC for $1, 060, 000, and the Bankruptcy Court entered an order authorizing the sale.

         Neither Reed nor any of the other Appellants appealed the Bankruptcy Court's order authorizing the sale of the Bagley Property. Instead, Appellants filed a series of lawsuits in state court in an effort to stop the sale and collaterally attack the Bankruptcy Court's orders. As described by the Bankruptcy Court, Appellants filed the following three actions in the Wayne County Circuit Court:

• On November 16, 2016, KWF filed an action against Nathan, David Findling (special counsel for Nathan), Byzantine Holdings, Dwellings Unlimited, and Reed's estate in which KWF sought to void the Turnover Order and stop the sale of the Bagley Property;
• On December 27, 2016, KWF, Mic-Arian Corporation, and the Gregory J Reed Scholarship Foundation filed an action against the Charles H. Brown Trust, the Brown Companies, Byzantine Holdings and Dwellings Unlimited in which they sought to partition the Bagley Property and stop the sale of that property; and
• On January 6, 2017, Reed filed an action against Findling for breach of fiduciary duty, conflict of interest, breach of confidentiality, extortion, abuse of process, misrepresentation, and malicious prosecution related to Finding's role as special counsel and Finding's actions administering assets of Reed's bankruptcy estate.

         Each of these actions were removed to the Bankruptcy Court, and that court ultimately dismissed them. Appellants never appealed any of those dismissals.[2]

         On March 17, 2017, Nathan moved the Bankruptcy Court to enjoin Appellants from filing certain lawsuits without prior permission of that court. Nathan argued that the requested injunction was warranted based upon Appellants' vexatious litigation conduct. The Bankruptcy Court granted Nathan's motion and entered the Order to Enjoin on May 9, 2017. The Order to Enjoin provides in relevant part that:

IT IS HEREBY ORDERED that the Trustee's Motion is granted to the extent it seeks to enjoin Debtor Gregory Reed, KWF, Mic-Arian Corporation, the Gregory J. Reed Scholarship Foundation, and any entity of which Debtor is a member or shareholder, from commencing litigation in any forum, subject to the additional conditions set forth in the following paragraph.
IT IS FURTHER HEREBY ORDERED that Debtor Gregory Reed, KWF, Mic-Arian Corporation, the Gregory J. Reed Scholarship Foundation, and any entity of which Debtor is a member or shareholder, their heirs, assignees, officers, agents, servants, employees, or attorneys or anyone in active concert or participation with them, who receives actual notice of this Order shall not file any lawsuit against:
(a). Kenneth A. Nathan, Chapter 7 Trustee, or any agent or employee of Kenneth A. ...

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