TOWN SPORTS INTERNATIONAL, LLC V RAMON MORENO-CUEVAS
- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- 24-1020 (3rd Circuit, Aug 21,2024) Not Published
- Tag(s):
-
- Ruling:
- In a per curiam opinion, the U.S. Court of Appeals for the Third Circuit (Circuit) found no error in the decision of the U.S. Bankruptcy Court for the District of Delaware (BC) denying relief from the injunction in a confirmed chapter 11 plan (Injunction) barring continuation of an action arising out of a purported sublease agreement for office space at a fitness club in West Hartford initiated by Ramon Moreno-Cuevas (RMC) against Town Sports International LLC (with affiliates, Town Sports) and related parties in the United States District Court for the District of Connecticut (CT Action).
- Procedural context:
- In December 2020, the BC approved the plan of liquidation proposed by Town Sports and its affiliates (Plan). Among other things, the Plan designated a Plan Administrator to wind down the affairs, and it established a Non-Released Claims Trust to oversee the administration of general unsecured claims. As usual, upon the Plan's confirmation, the automatic stay was replaced with the Injunction. Throughout this time, RMC held a contingent, unliquidated, and disputed claim, at least according to Town Sports; though privy to these bankruptcy proceedings, RMC did not object to the confirmation of the Plan. Ultimately, the Plan Administrator and Non-Released Claims Trustee subsequently reconciled the claims filed in the chapter 11 cases and made distributions to creditors.
Thereafter, RMC filed a series of motions asking the BC “lift the automatic stay” so that he could proceed with the CT Action. Construing these motions as requests for relief from the Injunction, the BC repeatedly denied them. At the hearing on his fourth and final motion, the BC went further. In detail, it explained to RMC that the exclusive source of recovery for his pre-petition claim was Town Sports’ estate, but he could not recover from the estate because he had not filed a proof of claim. Accordingly, even if the BC modified the Injunction to permit him to litigate the CT Action, he would be left with no source of recovery. Despite this explanation, RMC appealed to the U.S. District Court for the District of Delaware.
- Facts:
- While the CT Action was pending, Town Sports and its affiliates filed voluntary petitions under chapter 11 of the Bankruptcy Code, thereby automatically staying it under § 362(a). During the chapter 11 proceedings, Town Sports identified RMC as holding a contingent, unliquidated, and disputed claim and notified him of the procedures and “bar date” for filing a proof of claim. Yet, RMCs chose not to file a proof of claim, "apparently because he believed that if he declined to participate in the bankruptcy case, he could move forward with the" CT Action; later, he would emphasize a different reason--the refusal to give up his right to a jury trial in that action. (Separately from this appeal, shortly before the BC had approved the Plan, RMC moved to dismiss the bankruptcy cases on the ground that it impinged on his right to a jury trial in the Connecticut action. The BC denied relief, the District Court dismissed Moreno-Cuevas’s appeal as untimely, and we dismissed the appeal for lack of jurisdiction.) Regardless of the actual reason that RMC failed to submit a proof, Town Sports proceeded with a court-approved process for the sale of substantially all of its assets.
- Judge(s):
- Cheryl Ann Krause; Paul Matey; and Cindy K. Chung
ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!
