Four residents in the New Seabury neighborhood are taking the owner of the community's country club to court in a bid to stop membership changes that, they say, would increase their costs and reduce access to the facilities.
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IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF MASSACHUSETTS ) In re: ) ) Chapter 11 NEW SEABURY COMPANY ) LIMITED PARTNERSHIP, ) Case No. 97-12964-WCH ) Debtor. ) ) MOTION TO REOPEN BANKRUPTCY CASE AND HOLD NEW SEABURY PROPERTIES, LLC IN CONTEMPT Creditors Jerome Hoffman, James Egan, Charles Reidy and Donald H. Siegel (“Creditors”) file this motion to reopen the bankruptcy case of New Seabury Company Limited Partnership (the “Debtor”) and to hold New Seabury Properties, LLC (“NSP”), the successor to the Debtor, in civil contempt for violation of the Order Confirming Fourth Amended Plan of Reorganization of New Seabury Company Limited Partnership, dated June 15, 1998 (the “Confirmation Order”). 1 In support of this Motion, Creditors respectfully state as follows: I. PRELIMINARY STATEMENT 1. Creditors submit that cause exists to reopen the above-captioned bankruptcy case for the limited purpose of holding NSP in contempt for its actions in violation of the Confirmation Order and ordering NSP to rescind immediately its actions in violation of the 1 A copy of the Confirmation Order is attached as Exhibit A to the Declaration of Donald H. Siegel, dated April 8, 2016 and filed herewith. It appears from the docket that the Confirmation Order may have been modified in certain respects after it was entered. The modification is not available on ECF, due to the age of the case. Counsel for the Creditors has attempted to acquire a copy of the modification, but has been unable to do so as yet. Counsel does not believe that the modifications affected the Members’ rights at issue in this Motion. The Creditors will provide the Court with a copy of the modification upon receipt, if it is relevant to the dispute. Case 97-12964 Doc 723 Filed 04/08/16 Entered 04/08/16 16:52:43 Desc Main Document Page 1 of 10
Transcript
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MASSACHUSETTS
)
In re: )
) Chapter 11
NEW SEABURY COMPANY )
LIMITED PARTNERSHIP, ) Case No. 97-12964-WCH
)
Debtor. )
)
MOTION TO REOPEN BANKRUPTCY CASE AND
HOLD NEW SEABURY PROPERTIES, LLC IN CONTEMPT
Creditors Jerome Hoffman, James Egan, Charles Reidy and Donald H. Siegel
(“Creditors”) file this motion to reopen the bankruptcy case of New Seabury Company Limited
Partnership (the “Debtor”) and to hold New Seabury Properties, LLC (“NSP”), the successor to
the Debtor, in civil contempt for violation of the Order Confirming Fourth Amended Plan of
Reorganization of New Seabury Company Limited Partnership, dated June 15, 1998 (the
“Confirmation Order”).1 In support of this Motion, Creditors respectfully state as follows:
I. PRELIMINARY STATEMENT
1. Creditors submit that cause exists to reopen the above-captioned bankruptcy case
for the limited purpose of holding NSP in contempt for its actions in violation of the
Confirmation Order and ordering NSP to rescind immediately its actions in violation of the
1 A copy of the Confirmation Order is attached as Exhibit A to the Declaration of Donald H. Siegel, dated
April 8, 2016 and filed herewith. It appears from the docket that the Confirmation Order may have been
modified in certain respects after it was entered. The modification is not available on ECF, due to the age of the case. Counsel for the Creditors has attempted to acquire a copy of the modification, but has been
unable to do so as yet. Counsel does not believe that the modifications affected the Members’ rights at
issue in this Motion. The Creditors will provide the Court with a copy of the modification upon receipt, if it is relevant to the dispute.
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Confirmation Order. Messrs. Egan, Reidy and Siegel are Category 1 Members2 as referenced in
the Confirmation Order.
2. Specifically, NSP has violated the Confirmation Order by: (i) forming a class of
members of New Seabury Country Club having rights which are superior to the rights of existing
Category 1 Members in violation of paragraph 12(e) of the Confirmation Order, (ii) failing to
consult with Members and obtain their input before making capital improvements, increasing
dues, changing New Seabury Country Club rules and policies and other matters directly affecting
Members in violation of paragraph 12(h) of the Confirmation Order, (iii) stating unequivocally
that it will increase the maximum number of golf memberships at the New Seabury Country
Club above the established limit of 690, in violation of paragraph 12(d)(ii) of the Confirmation
Order and (iv) imposing “second round” initiation fees in violation of paragraph 12(g) of the
Confirmation Order.
II. REQUEST AND BASIS FOR RELIEF
3. Pursuant to Section 350(b) of title 11 of the United States Code (the “Bankruptcy
Code”) and Rules 5010, 9014 and 9020 of the Federal Rules of Bankruptcy Procedure (the
“Bankruptcy Rules”), Creditors respectfully request that the Court reopen the case for the limited
purpose of holding NSP in contempt for violation of the Confirmation Order.
III. JURISDICTION & VENUE
4. This Court has jurisdiction over this matter under 28 U.S.C. §§ 1334 and 157.
This matter is a core proceeding under 28 U.S.C. § 157(b)(2)(L). Venue is proper pursuant to 28
U.S.C. §§ 1408 and 1409.
2 The term “Members” was defined in the Debtor’s Fourth Amended Plan of Reorganization as “any
person who is a member in the New Seabury Country Club on the Effective Date.” See Fourth Amended
Plan of Reorganization ¶ 1.32.
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IV. BACKGROUND
5. On March 31, 1997, the Debtor filed a Voluntary Chapter 11 Petition in this
Court. See Voluntary Chapter 11 Petition [ECF 1].
6. At the time of filing, the Debtor owned and operated the New Seabury Country
Club, located along Nantucket Sound on Cape Cod in Mashpee, Massachusetts. See Declaration
of Donald H. Siegel, dated April 8, 2016 (the “Siegel Decl.”) ¶ 3, filed herewith.
7. The Official Committee of Unsecured Member Creditors (the “Official
Committee”) was appointed to represent the interests of the Members of the New Seabury
Country Club in the Debtor’s bankruptcy case. [ECF 223].
8. Creditors are current members of the New Seabury Country Club and are
Members, and they estimate that there are between 150 and 200 similarly situated Members who
will be affected by NSP’s actions. See Siegel Decl. ¶¶ 1, 7. The relief sought in this Motion will
protect the rights of all 150-200 Members.
9. In the course of the proceedings the Official Committee negotiated with NSP for
and reached agreement on various matters affecting the members of New Seabury Country Club.
These agreements were embodied in the Confirmation Order. See Confirmation Order ¶¶ 11-12;
Siegel Decl. ¶ 5.
10. On June 15, 1998, the Court signed the Confirmation Order approving the Fourth
Amended Plan of Reorganization (the “Plan”). [ECF 387].
11. The bankruptcy case was closed on July 10, 2008. [ECF 720].
12. The Confirmation Order provided that NSP assumed all Membership Agreements
(as defined in the Fourth Amended Plan of Reorganization) in New Seabury Country Club and
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imposed various obligations on NSP with respect to the rights of the Members of New Seabury
Country Club. See Confirmation Order ¶¶ 11-12.
13. The Confirmation Order provided that NSP would limit golf memberships to no
more than 690. See Confirmation Order ¶ 12(d)(ii).
14. The Confirmation Order also provided that NSP would “not form a ‘preferred’ or
exclusive class of Members having rights which are superior to the rights of existing Category 1
members.” See Confirmation Order ¶ 12(e).
15. The Confirmation Order also provided that “Members may have input on such
items as capital improvements, increases in dues and initiation fees . . . New Seabury Country
Club rules and policies and other matters directly affecting Members.” See Confirmation Order
¶ 12(h).
16. The Confirmation Order also provided that “. . . Members are not subject to
‘capital assessments’, second round ‘initiation fees’ or similar payments over and above
annual dues . . . .” See Confirmation Order ¶ 12(g).
17. Post-bankruptcy, NSP assumed operation of the New Seabury Country Club,
which is now known as “The Club at New Seabury.” See Siegel Decl. ¶ 8.
18. On March 17, 2016, NSP sent each Member a letter detailing a new membership
structure for the year 2016. See Siegel Decl. ¶¶ 9-10. The new membership structure replaces
the old membership categories with six new categories. See Siegel Decl. ¶ 11. The letters
offered each Member the choice of retaining his membership category or switching into one of
the new membership categories. See Siegel Decl. ¶ 11. NSP also invited members to a meeting
on March 26, 2016 (Saturday of Easter weekend) ostensibly to provide more information and
answer questions about the new membership structure, knowing full well that a large portion of
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the Members would still be in Florida or other out of state locations. At the meeting, however,
representatives of NSP were unable or unwilling to provide more information or answer
Members’ questions. NSP stated at the meeting that Members who did not convert to a new
membership class would not have access to the club’s new fitness and community center.
Members were informed that final packets of information and election forms regarding the new
membership structure would be mailed soon and that members would only have until April 30,
2016, to make their elections. See Siegel Decl. ¶ 14.
19. The March 17 letters also set forth the annual dues structure for each of the
categories of membership. See Siegel Decl. ¶ 12. While the letters to each member were
different, as a general rule, a member, including a Category 1 Member, who elects to stay in his
current category will see his dues increase by 20-30%, whereas historically dues have increased
by no more than 3-5% per annum. An equivalent Member who opts into a new category will see
his dues increase by 4%, while still enjoying greater benefits than he would enjoy if he were to
retain his court validated Category 1 Membership rights.
20. The transparent purpose of the new dues structure is to coerce members to switch
from their current membership categories to one of the new membership categories and to
relinquish their rights under the Confirmation Order. However, in so doing, NSP has created
new classes of members who have rights superior to the rights of the Category 1 Members,
making the retention of existing rights illusory at best.
21. Moreover, by nominally increasing the dues associated with the new
membership categories and significantly raising dues to penalize those members who keep their
current membership categories, NSP has devalued the rights of Category 1 Members and
imposed a second round initiation fee in the guise of a 25-30% increase in dues.
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22. Furthermore, the manner and timing of the announcement of these changes, and
their coercive nature, constitute bad faith and unfair dealing on the part of NSP with respect to all
members.
23. In addition to describing the new membership and dues structure, NSP’s March
17, 2016 letter also states unequivocally that “the Club is increasing the cap limit on the number
of golf memberships to 900 from current cap limit of 690 . . . .” See Siegel Decl. ¶ 13.
24. NSP failed to consult with and obtain input from Members before announcing or
implementing the above changes to membership dues and policies or with respect to ongoing
capital improvements and other matters at the New Seabury Country Club. See Siegel Decl.
¶ 15.
V. CAUSE EXISTS TO REOPEN THE BANKRUPTCY CASE
25. Creditors seek to reopen the case for the limited purpose of enforcing the
Confirmation Order by way of an order holding NSP in contempt. Bankruptcy Rule 5010
provides that a “case may be reopened on motion of . . . [a] party in interest pursuant to § 350(b)
of the Code. Bankruptcy Code Section 350(b) provides that [a] case may be reopened in the
court in which such case was closed to administer assets, accord relief to the debtor, or for other
cause.” 11 U.S.C. § 350(b). “While the Code does not define ‘other cause’ for purposes of
reopening a case under section 350(b), the decision to reopen or not is discretionary with the
court, which may consider numerous factors including equitable concerns and ought to
emphasize substance over technical considerations.” In re Emmerling, 223 B.R. 860, 864 (2d
Cir. B.A.P. 1997) (quoting Collier on Bankruptcy, ¶ 350.03[5], pp. 350-10-11 (1996)). Section
350(b) “gives the court broad discretion in the reopening of a case.” 3 Collier on Bankruptcy ¶
350.03 (Alan N. Resnick & Henry J. Sommers eds., 16th ed.).
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26. In addition, the provisions of the Confirmation Order state that the Court shall
retain jurisdiction to determine such matters “which may arise in connection with . . . the
Confirmation Order.” See Confirmation Order ¶ 25(h). It is well accepted that bankruptcy
courts retain jurisdiction after confirmation and after the case is closed to enforce their own
orders, including the confirmation order. See In re Texaco, Inc., 182 B.R. 937, 944 (Bankr.
S.D.N.Y. 1995) (holding that the Bankruptcy Code, case law, the provisions of the plan of
reorganization, and public policy all compelled the conclusion that the bankruptcy court has
subject matter jurisdiction to enforce and interpret its own orders, including the order confirming
the plan).
27. Courts have repeatedly reopened bankruptcy cases to enforce their orders through
exercise of their contempt powers. See, e.g., In re Grihalva, No. 11-26893, 2013 Bankr. LEXIS
4057, at *22 (Bankr. D. Nev. Sep. 3, 2013) (reopening case to hold creditor in contempt for
violation of discharge injunction); In re Andreas, 373 B.R. 864, 871, 873-74 (Bankr. N.D. Ill.
2007) (reopening case and holding attorney in contempt for violation of fee order); In re Searles,
70 B.R. 266, 271-72 (D.R.I. 1987) (upholding court’s sua sponte reopening of bankruptcy case
to enforce consent order).
28. Here, the Court specifically retained jurisdiction in the Confirmation Order to
determine matters arising in connection with the Confirmation Order. NSP has violated the
Confirmation Order by creating a class of members with rights superior to those of Category 1
members, by increasing the number of golf memberships above the limit of 690 set forth in the
Confirmation Order and by failing to consult with and obtain input from Members before
announcing or implementing changes to membership dues and policies and with respect to
ongoing capital improvements and other matters at the New Seabury Country Club as required
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by the Confirmation Order. Accordingly, cause exists to reopen the Debtor’s bankruptcy case to
enable Creditors to seek appropriate relief.
VI. NSP IS IN CONTEMPT OF THE CONFIRMATION ORDER
29. “It is well settled law that bankruptcy courts are vested with contempt power.”
Eck v. Dodge Chem. Co. (In re Power Recovery Sys.), 950 F.2d 798, 802 (1st Cir. 1991); see In
re Andreas, 373 B.R. at 873-74 (explaining bankruptcy court’s contempt power). Bankruptcy
Rule 9020 specifically provides for contempt proceedings and directs that they be brought by
way of motion under Bankruptcy Rule 9014. “Sanctions in a civil contempt proceeding are
employed to coerce the defendant into compliance with the court’s order or, where appropriate,
to compensate the harmed party for losses sustained.” Eck, 950 F.2d at 802.
30. Here, NSP has brazenly violated four very specific provisions of the Confirmation
Order:
(a) First, NSP has stated unequivocally that it will increase the number of golf
memberships from 690 to 900 in violation of paragraph 12(d)(ii), which explicitly
requires NSP to limit the number of golf memberships to no more than 690.
(b) Second, NSP has created a class of members, referred to as a “Platinum
Membership,” with rights superior to existing Category 1 Members.
(c) Third, NSP has failed to consult with Members and obtain their input before
making capital improvements, increasing dues, changing New Seabury Country Club
rules and policies and other matters directly affecting Members in violation of
paragraph 12(h) of the Confirmation Order.
(d) Fourth, by raising the annual fees for current Category 1 members by 20-30%,
while raising the fees for the new member categories by only 4% for superior
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benefits, NSP has taken action to diminish the value of the Category 1 Members’
rights and imposed a second round initiation fee in the guise of a 25-30% increase in
dues.
31. NSP therefore should be held in contempt for violating the Confirmation Order.
Creditors respectfully request that the Court order NSP immediately to rescind its actions in
violation of the Confirmation Order in order to comply with the Confirmation Order, impose a
daily fine on NSP pending NSP’s compliance with the Confirmation Order, and award the
Members their attorneys’ fees incurred in connection with this Motion.
VII. PRAYER
32. WHEREFORE, Creditors respectfully request that this Court enter an order
reopening the Debtor’s bankruptcy case, holding NSP in contempt for violation of the
Confirmation Order, ordering NSP to rescind all actions in violation of the Confirmation Order,
imposing a daily fine on NSP pending NSP’s compliance with the Confirmation Order, awarding
Creditors their attorneys’ fees incurred in connection with this Motion, and granting such other
and further relief as the Court may deem just and proper.
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