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Checks Cashed For Less v. Richard Kipperman

July 9, 2012


The opinion of the court was delivered by: Barry Ted Moskowitz, Chief Judge United States District Court


Appellant, the Debtor in the underlying Chapter 7 proceeding has filed an appeal from the bankruptcy court's Order Approving Final Application of Trustee for Compensation and Reimbursement of Expenses, entered on September 29, 2011. For the reasons discussed below, the Court AFFIRMS the bankruptcy court's decision.


On February 25, 2010, Checks Cashed for Less, Inc. ("Debtor") filed a petition for relief under Chapter 7 of the Bankruptcy Code. The Debtor scheduled unsecured claims of $794,250.00. Appellee Richard M. Kipperman ("Trustee") was appointed Chapter 7 Trustee for the case.

The first § 341(a) meeting of creditors was held on March 26, 2010. Salam Mahmood, President of Checks Cashed for Less, Inc., and Debtor's counsel appeared at the meeting. (Appellee's Excerpt 13 at ¶ 2.) The Trustee requested some additional information, including a copy of the general ledger for Quick Books, three months of bank statements, and the originals of all checks that were represented by the Accounts Receivable listed in the schedules, and continued the hearing to April 26, 2010. (Id. at ¶ 3.)

After the March 26 meeting, Mr. Mahmood approached Debtor's attorney with concerns that he could potentially be sued for invasion of privacy if he provided the Trustee with the uncollected checks. (Id. at ¶ 4.) Mr. Mahmood also represented that he had been actively negotiating with all of the creditors and expected that all of the creditors' claims would be resolved outside of bankruptcy. (Id.) Mr. Mahmood asked that Debtor's counsel dismiss the case. (Id.)

Debtor's counsel advised Mr. Mahmood that if he failed to appear at the continued creditors' meeting, the case would most likely be dismissed. (Id. at ¶ 5.) Based on this advice, neither Mr. Mahmood or Debtor's counsel appeared at the April 26, 2010 meeting. (Id.) Accordingly, the Trustee continued the meeting to May 6, 2010. (Appellee's Excerpt 2 at 2.) Sometime thereafter, Debtor's counsel informed the Trustee about Mr. Mahmood's privacy concerns regarding the checks and told the Trustee that the Debtor was going to file a motion to dismiss. (Appellant Excerpt 14 at ¶¶ 7-8.) The Trustee went forward with the May 6, 2010 continued meeting, and Debtor again failed to appear. (Appellee's Excerpt 2 at 2.) The meeting was continued to July 13, 2010. (Id.)

On May 11, 2010, the Trustee sought an order declaring Mr. Mahmood to be the Debtor's authorized representative and compelling him to appear and testify on the Debtor's behalf at the continued creditors' meeting. (Appellee's Excerpt 2.) The court ordered Mr. Mahmood to show cause why he should not be appointed as the representative of Debtor and compelled to attend. (Appellee's Excerpt 5.)

On June 24, 2010, the Debtor filed a motion for dismissal of the case on the ground that "with the exception of one small creditor there are no creditors to be satisfied." (Appellee's Excerpt 5.) In a declaration in support of the motion to dismiss, Mr. Mahmood claimed that arrangements had been made between himself and creditors Bank of America, Kirby Noonan, Union Bank and Wells Fargo. (Appellee's Excerpt 6 at ¶¶ 3-7.) Mr. Mahmood explained that the only other two creditors were his wife, Entsar Mahmood, and Beyond Voicemail. (Id. at ¶ 7.) As for his wife, those obligations would be worked out during divorce proceedings. (Id.) The claim of Beyond Voicemail was disputed. (Id.)

The Trustee opposed the motion to dismiss. (Appellee's Excerpt 8.) The Trustee pointed out that the settlement produced by Mr. Mahmood regarding Union Bank was only as to Mr. Mahmood and not the Debtor. The Trustee also submitted a declaration by Michael L. Kirby, who explained that his firm's claim against the Debtor had not been resolved. (Id.) Subsequently, the Trustee submitted an email from Union Bank's counsel, which stated that Union Bank settled with Mr. Mahmood only, and that Union Bank objected to the dismissal of the bankruptcy case. (Appellee's Excerpt 10, Ex. A.)

On July 21, 2010, the bankruptcy court granted the Trustee's motion to compel the Debtor's attendance at the rescheduled § 341(a) meeting. The bankruptcy court designated Mr. Mahmood as the Debtor representative and ordered Mr. Mahmood to appear at the continued § 341(a) meeting (then scheduled for August 18, 2010) and turn over all documents requested by the Trustee. (Bankr. Docket No. 46.) The hearing on the Debtor's motion to dismiss was continued to August 3, 2010.

On August 3, 2010, the court held a hearing on the motion to dismiss. At the hearing, the court agreed with the Trustee that the case should not be dismissed until the Debtor could provide documentation showing that the claims of Bank of America, Union Bank, and Entsar Mahmood had been resolved. (Appellant's Excerpt 15 at 7-8, 13.) By the time of the hearing, the claim of Kirby Noonan had been satisfied. (Id. at 6, 13.) The court continued the hearing to allow the Debtor to provide additional information regarding the claims at issue. (Id. at 16. The court also continued the § 341(a) hearing to September 16, 2010. (Id.) A meeting of creditors was held on September 16, 2010 as well as on October 28, 2010.

On September 21, 2010, the bankruptcy court issued an order that required creditors to file their claims on or before December 20, 2010. Union Bank was the only creditor to file a claim. On July 19, 2011, the Debtor filed a stipulation between the Debtor and Union Bank to withdraw Union Bank's claim conditioned on dismissal of the bankruptcy case. (Appellant's Excerpt 12.)

On August 8, 2011, the Trustee filed an application for compensation and reimbursement of costs for the period from February 25, 2010 through August 8, 2011. (Appellee's Excerpt 12.) The Trustee sought fees in the amount of $10,215.00 and costs in the amount of $132.70. The Debtor filed an opposition to the Trustee's motion. (Appellee's Excerpt 13.) The Debtor argued that the Trustee took unreasonable positions throughout the case and ...

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