Final Analysis Communication Services, Inc. v. Ahan , 266 F. App'x 272 ( 2008 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 06-2213
In Re: NADER MODANLO,
Debtor.
--------------------
FINAL ANALYSIS COMMUNICATION SERVICES,
INCORPORATED,
Party-in-Interest - Appellant,
NADER MODANLO,
Debtor - Appellant,
versus
MICHAEL H. AHAN,
Creditor - Appellee,
CHRISTOPHER B. MEAD,
Trustee - Appellee.
Appeal from the United States District Court for the District of
Maryland, at Greenbelt. Deborah K. Chasanow, District Judge.
(8:06-cv-01168-DKC; BK-05-26549; BK-06-10158)
Submitted: January 16, 2008 Decided: February 21, 2008
Before WILLIAMS, Chief Judge, SHEDD, Circuit Judge, and Liam
O’GRADY, United States District Judge for the Eastern District of
Virginia, sitting by designation.
Affirmed by unpublished per curiam opinion.
Joel S. Aronson, RIDBERG, SHERBILL & ARONSON, L.L.P., Bethesda,
Maryland, for Appellant Nader Modanlo; Edward J. Tolchin, FETTMANN,
TOLCHIN & MAJORS, P.C., Fairfax, Virginia, for Appellant Final
Analysis Communication Services, Inc. Bradford F. Englander,
Jennifer D. Larkin, LINOWES AND BLOCHER, L.L.P., Bethesda,
Maryland, for Appellee Michael H. Ahan; Richard M. Goldberg,
Kimberly M. Stoker, SHAPIRO, SHER, GUINOT & SANDLER, Baltimore,
Maryland, for Appellee Christopher B. Mead.
Unpublished opinions are not binding precedent in this circuit.
2
PER CURIAM:
In this bankruptcy case, debtor Nader Modanlo and Final
Analysis Communication Services, Inc. (“FACS”) appeal from the
district court’s affirmance of the bankruptcy court’s order
granting trustee Christopher B. Mead’s motion for authority to
request a subsidiary of the debtor to schedule a shareholders’
meeting. Finding no error, we affirm.
I
Modanlo and creditor Michael Ahan were business partners who
owned a company called Final Analysis, Inc. (“FAI”); FAI, in turn,
wholly owned FACS. After the business relationship between Modanlo
and Ahan deteriorated, Ahan, certain FACS shareholders, and FAI’s
Chapter 7 trustee brought a state court action against Modanlo
alleging fraud and related claims. While this litigation was
pending, three FAI creditors filed an involuntary petition for
bankruptcy against FAI. FAI’s Chapter 7 trustee then proceeded to
sell certain assets of FAI, including its FACS shares. In
response, Modanlo formed New York Satellite Industries, LLC
(“NYSI”), a single-member Delaware limited liability company, which
purchased FAI’s assets, including FACS’ shares. Thus, NYSI, under
the control of Modanlo, controlled FACS by owning all of its shares
of stock.
3
In 2003, a jury in the state court action brought by Ahan,
FACS shareholders, and FAI’s trustee returned verdicts against
Modanlo and in favor of FAI and FACS for several million dollars.
A second jury later awarded over $100 million to Ahan for related
fraud claims. While these awards were pending on appeal in state
court, Modanlo filed a Chapter 11 bankruptcy petition. The primary
asset of Modanlo’s estate is his ownership of NYSI. In turn, the
primary asset of NYSI is its ownership of FACS.1 Under Delaware
law, because Modanlo is the sole member of NYSI, his bankruptcy
automatically “dissolved” NYSI.
While Modanlo was in bankruptcy, NYSI obtained a loan from a
Swiss company, Prospect Telecom AG (“Prospect”). After NYSI
defaulted on its loan, Prospect filed a replevin action in Maryland
state court. As a result of this action, NYSI was forced to
surrender its FACS stock certificates to Prospect.
In November 2005, Ahan, Modanlo’s principal creditor, filed a
motion for appointment of a Chapter 11 trustee over Modanlo’s
estate, arguing that Modanlo was not managing the estate for the
benefit of his creditors. The bankruptcy court granted the motion
and appointed Mead trustee.
1
When this case was litigated below, FACS was a valuable asset
because of a judgment it held against General Dynamics Corporation.
However, on appeal, that judgment was vacated, rendering FACS a
judgment-debtor of General Dynamics. See Final Analysis Commc’ns
Servs., Inc. v. Gen. Dynamics Corp., 2007 WL 3230733 (4th Cir. Nov.
1, 2007).
4
Mead ascertained that FACS had obtained several loans at very
unfavorable terms and had pledged security interests in a judgment
that FACS had obtained against General Dynamics Corp. to certain
lenders. As a result, Mead determined that it was necessary to
take control of FACS to prevent a further deterioration of its
value and, thus, the Modanlo estate’s value. Mead therefore
amended NYSI’s LLC agreement and appointed himself, as Modanlo’s
trustee, as manager of NYSI. Pursuant to his appointment as
manager, Mead filed a Chapter 11 petition on behalf of NYSI and
commenced the NYSI bankruptcy case.2 Mead then sought to have FACS
call a shareholders’ meeting to remove Modanlo and an associate
from FACS’ board of directors and to have himself put on the board.
FACS’ secretary requested that Mead seek authorization from the
bankruptcy court.
Mead then filed an emergency motion seeking authorization to
request that FACS’ secretary call a shareholders’ meeting. Prior
to a hearing on the motion, Mead executed an LLC consent agreement
which purported to appoint himself, as personal representative of
Modanlo, sole member of NYSI and which declared that NYSI was to
continue in operation, its prior dissolution upon Modanlo’s filing
for bankruptcy notwithstanding.
2
Modanlo contends Mead had no authority to appoint himself as
manager of NYSI and therefore that the NYSI bankruptcy filing is
invalid. This issue is being litigated separately and is not
currently before us.
5
The bankruptcy court granted Mead’s motion for authorization
to request that FACS’ secretary call a shareholders’ meeting, and
the district court affirmed. Both courts concluded, first, that an
adversary proceeding was not required under the bankruptcy code.
Both courts then found that Mead could act as Modanlo’s personal
representative under Deleware law to revive NYSI after it was
dissolved upon Modanlo’s bankruptcy. Finally, both courts held
inapplicable certain provisions of Deleware law which would
seemingly prevent Mead’s appointment as a member of NYSI and his
revival of NYSI. Modanlo and FACS now appeal.
II
In a bankruptcy appeal, we review the bankruptcy court’s
decision directly, applying the same standard of review as did the
district court. Educ. Credit Mgmt. Corp. v. Frushour, 433 F.3d
393, 398 (4th Cir. 2005); Schlossberg v. Barney, 380 F.3d 174, 178
(4th Cir. 2004). Under this standard, we review legal conclusions
de novo and factual findings for clear error. Schlossberg, 380
F.3d at 178.
We have reviewed the decision of the bankruptcy court pursuant
to the standard set forth above, and we find no reversible error.
Accordingly, we affirm the judgment based substantially on the
reasoning of the bankruptcy court. In re Modanlo, No. 05-26549-NVA
(Bankr. D. Md. May 19, 2006); In re New York Satellite Indus., LLC,
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No. 06-10158-NVA (Bankr. D. Md. May 19, 2006). We dispense with
oral argument because the facts and legal contentions are
adequately presented in the materials before us and argument would
not aid the decisional process.3
AFFIRMED
3
We previously deferred ruling on Appellees’ motion to dismiss
this appeal as moot. We now deny that motion.
7