In re: U LOCK, INC.,

Summarized by Amir Shachmurove , Brown Rudnick LLP
4 months 3 weeks ago

Case Type:

Business

Case Status:

Affirmed

Citation:

24-1842 & 24-3134 (3rd Circuit, Sep 30,2025) Not Published

Tag(s):

Ruling:

In this consolidated appeal of two decisions by the U.S. District Court for the Western District of Pennsylvania (DC) by creditor Shanni Snyder (Snyder) arising out of the bankruptcy of U Lock, Inc. (DR) pending before that same district's bankruptcy court (BC), the U.S. Court of Appeals for the Third Circuit (Circuit) dismissed her appeal of the DC order denying as moot her motion under § 157(d) to withdraw the reference of another creditor objection to Snyder’s proof of claim for lack of appellate jurisdiction but affirmed the DC ruling affirming the BC's order sustaining this objection.

Procedural context:

After winning and recording a federal judgment for violations of the Fair Labor Standards Act (FLSA), Snyder filed an involuntary Chapter 7 petition, pursuant to 11 U.S.C. § 303(b)(2), against the DR. In these initial filings, Snyder listed herself as the sole creditor, based on the FLSA judgment, and valued her claim at $375,100. Snyder later filed a proof of claim for the reduced amount of $263,100. When the DR did not timely respond to the petition, the BC entered an order for relief under 11 U.S.C. § 303(h), directed the DR to file schedules, a mailing matrix, and other required documents, and appointed a trustee for the DR. Months after entry of the order for relief, Christine Biros (Biros), another one of the DR's creditors (and an original partner in the DR, along with two of Snyder's brothers, possibly among others), filed her objection to Snyder’s proof of claim. Biros argued that Snyder obtained the FLSA judgment through fraud because Snyder’s sworn filings in prior court cases—among other evidence—contradicted her allegations about employment with the DR. After an evidentiary hearing during which three witnesses, including Snyder, testified, the BC released an opinion finding Snyder to have committed fraud upon it; thus, it sustained Bisos's objection, disallowed Snyder's claim, and initiated sanctions proceeding against Snyder. After the hearing on Biros’s objection, but before entry of the BC's order sustaining that objection, Snyder filed in the DC a counseled motion under § 157(d) and Bankruptcy Rule 5011(a) to withdraw the reference of the objection. Before the DC could issue any kind of decision, the BC had ruled on Bisos's objection. In response, the DC sua sponte entered a text order that rejected Snyder’s § 157(d) motion as moot, in light of that ruling on Biros’s objection. It subsequently denied Snyder's pro se motion for reconsideration. Acting pro se again, Snyder subsequently appealed that order to the Circuit. Meanwhile, in the bankruptcy proceedings, Snyder appealed the BC's disallowance order (through counsel) to DC, which affirmed the BC's order, which netted another pro se motion for reconsideration. A pro se appeal of the order affirming her claim's disallowance followed--once the DC granted Snyder's counsel's motion to withdraw, only days after Snyder had filed her motion for reconsideration and the DC had struck it on the bases of impermissible hybrid representation and lack of merit. The Circuit consolidated both appeals "for all purposes."

Facts:

A group of real estate speculators, including Bisos and Snyder’s brothers, George Snyder and Kash Snyder, decided to form the DR to buy a commercial property on Route 30 in North Huntingdon, Pennsylvania (Property). Biros lent the DR all of the funds needed to complete the purchase. Because the DR never repaid Biros for the loan, however, Biros sued the DR in the Court of Common Pleas for Westmoreland County. Ultimately, the latter trial court imposed a constructive trust on the Property and ordered the transfer of its ownership to Biros; the Pennsylvania Superior Court affirmed. Separately, even as Biros’s case against the DR was winding its way through Pennsylvania’s appellate courts, Snyder filed a pro se complaint under the FLSA in the DC, naming the DR as the defendant. The DR was served with process but did not enter an appearance and defend itself in the FLSA case. Ultimately, the DC entered a $263,104 default judgment in Snyder’s favor, comprising $131,351 in compensatory damages as requested, an equal amount in liquidated damages (which Snyder had not requested), and $402 in costs. Thereafter, Snyder recorded the FLSA judgment in the Court of Common Pleas for Westmoreland County, commenced (pro se) quiet title litigation against several named defendants (e.g., U Lock, Biros, the county Recorder of Deeds, Pennsylvania’s Attorney General), and had a lis pendens indexed against the Property. Less than two months later, Snyder forced the DR into bankruptcy.

Judge(s):

Stephanos Bibas; Arianna J. Freeman; and Richard L. Nygaard

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