In re Liza Hazan

Case Type:
Case Status:
19-14049 (11th Circuit, Sep 01,2021) Published
The 11th Circuit held that the bankruptcy court's determination of parties' rights under a series of state court judgments and orders did not violate the Rooker-Feldman doctrine and the doctrine of equitable mootness applies in individual chapter 11 cases. The appeal was equitably moot because creditor failed to timely seek a stay pending appeal, the debtor's plan had been substantially consummated by virtue of the property re-vesting in the reorganized debtor and the commencement of plan payments, and modifying the reorganization plan would adversely impact creditors who accepted the plan.
Procedural context:
Appeal from the United States District Court for the Southern District of Florida affirmed.
In 2007, NLG, LLC ("NLG") sold a home located on Fisher Island to Liza Hazan ("Hazan") for $5.1 million and received a purchase money note and mortgage on the residence from Hazan. Hazan defaulted under the terms of the note, and in April 2008, NLG obtained a judgment for money damages against Hazan in the amount of $1.6 million. In 2011, NLG filed a second lawsuit against Hazan, now seeking to foreclose the mortgage. Because NLG had elected a monetary remedy instead of foreclosure in the prior action, the state court dismissed the action, and NLG appealed. While the litigation between NLG and Hazan was pending, a foreign corporation obtained a $5 million judgment against NLG. Thereafter, the judgment was assigned to Selective Advisors Group, LLC ("Selective"), and all of NLG's rights and claims against Hazan, including NLG's judgment against Hazan for the breach of the note, were assigned to Selective by court order (the "Assignment Order"). NLG prevailed on its appeal, but notwithstanding the Assignment Order, on remand, the state trial court entered a foreclosure judgment in favor of NLG in the amount of $4.8 million. One day before the foreclosure sale, Hazan filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. NLG filed a proof of claim in the case. In response, Selective filed an adversary proceeding against NLG, seeking to determine the claim, and Hazan joined. Both Selective and Hazan took the position that NLG no longer had any claim against Hazan or the property. The bankruptcy court found that NLG had no further rights to the property, but that NLG should be credited $4.8 million towards the judgment held by Selective. NLG appealed the bankruptcy court's judgment. The chapter 11 case continued while NLG's appeal was pending. Hazan proposed and confirmed a plan of reorganization which resolved the claims of other creditors against the property. NLG failed to seek a stay pending appeal for nine months after the entry of the judgment by the bankruptcy court, three months after the confirmation hearing, and two months after the entry of the confirmation order, despite having been warned by the bankruptcy court that confirmation could render the appeal equitably moot. Unsurprisingly, NLG's request for a stay pending appeal was denied by the bankruptcy court. NLG then filed a second appeal of the bankruptcy court's judgment based on the Rooker-Feldman doctrine, which was dismissed by the district court based on equitable mootness. NLG appealed the district court's order.
William Pryor, Chief Judge, Jordan and Marcus, Circuit Judges

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