By: Donald L Swanson
The Bankruptcy Court opinion is In re Brizinova and Soshkin, 565 B.R. 488 (Bkrtcy. E.D.N.Y. 2017).
The Trustee sues the debtors to recover assets for the bankruptcy estate. The Debtors file a motion to dismiss, in which their attorney, (i) makes statements the Trustee finds objectionable, and (ii) references information from a mediation session.
So, the Trustee asks the Bankruptcy Court for a finding of contempt and for sanctions against the debtors’ attorney.
The debtor’s attorney denies any wrongdoing and insists he’s traveled the straight-and-narrow road of propriety.
Five Offending Statements
The Trustee identifies five statements in the Defendants’ motion to dismiss that are “highly objectionable and offensive” to him and, he suggests, are contemptible and should be sanctioned. The five statements are:
(i) The Trustee, “having realized that he has gotten money from the sons, he could extract more, he has begun his extortionist journey again.”
(ii) “[A]s stated earlier, trustee wants to threaten a family into further submission.”
(iii) “They had sued the sons and settled with them. Seeing the promptness of the settlement [the Trustee] has to devise ways to reach deeper to extort more settlement.”
(iv) The Trustee “has been known to never file an estate closure reports on an expeditious basis but for keeping it open. Why? Unexpected accretion!”
(v) The Trustee “brought a lawsuit against the sons of the debtors, Nick Soshkin and Igor Soshkin on grounds very frivolous . . . . This settlement, became a source of inspiration to [the Trustee] to dig more.”
Disclosure of Mediation Information
The Trustee also seeks contempt and sanctions against Debtors’ counsel for “an impermissible disclosure of a statement made during a mediation.” The disclosure in question is this:
–The mediated Stipulation “was signed only on the basis of being urged with the words: ‘Sometimes, it takes a stronger person to walk away.’ I decided to walk away.”
The Trustee and attorney have a history. They don’t get along.
In a prior case (In re Ng, Case No. 11-46867, Bankry, E.D.N.Y.), this same Trustee files a “Motion for an Order Imposing Sanctions” against this same attorney. The categories of misconduct alleged in such Motion are: multiplied proceedings, unreasonable and vexatious actions, increasing costs of litigation, and bad faith actions.
The presiding Judge in the In re Ng case is different from the one presiding in the Brizinova and Soshkin case – but both cases are filed in the same Court. The In re Ng Judge sends the the two professionals off to mediation to settle the sanctions dispute. The trustee and attorney then reach a mediated settlement, which is reduced to a written Stipulation and is approved by the Court on November 6, 2014.
Under the Stipulation:
–The attorney “apologizes” and “reaffirms his commitment to practice in accordance with” specified legal standards;
–The trustee “withdraws with prejudice” his sanctions motion; and
–They mutually release each other,
Fast Forward to the Present
In the Brizinova and Soshkin case, the same two professionals are now at it again.
One difference is that Trustee is now asserting a violation of the mediated settlement Stipulation, in addition to the same types of legal arguments raised in his In re Ng Motion for sanctions.
Long Story Short
The Bankruptcy Judge, in the 2017 Brizinova and Soshkin opinion, denies the Trustee’s contempt and sanctions requests. Trustee then appeals – and that’s where it stands today.
Discussion of Mediation
The discussion of mediation in the Bankruptcy Judge’s 2017 Brizinova and Soshkin opinion is interesting and enlightening. Here are some excerpts.
Allegations of Improper Disclosure
The Trustee argues that the attorney “violated the Ng Mediation Order and the Local Bankruptcy Rules” on mediation.
–The “Trustee states” that the attorney “improperly discloses” that the mediated Stipulation “was signed only on the basis of being urged with the words [of the Mediator]: Sometimes, it takes a stronger person to walk away. I decided to walk away.”
Local Bankruptcy Rule 9019-1(l) “generally prohibits parties from disclosing ‘[a]ny oral or written statements made by the mediator, the mediation participants, or others during the mediation process.’”
Courts “regularly recognize that the confidentiality of mediation communications is fundamental to the mediation process”:
“the guarantee of confidentiality permits and encourages counsel to discuss matters in an uninhibited fashion”; and
“If participants cannot rely on the confidential treatment of everything that transpires during these sessions, then counsel of necessity will feel constrained to conduct themselves in a cautious, tight lipped, non-committal manner more suitable to poker players in a high-stakes game than to adversaries attempting to arrive at a just resolution in a civil dispute.”
Confidentiality Distinctions and Ambiguitites
“The proscription of Rule 9019-1, while broad, is also precise, and it bars the disclosure of oral or written statements made ‘by the mediator, the mediation participants, or others during the mediation process.’”
The disclosure in question here, and what the disclosed information actually means, is unclear:
–We don’t know “the identity of the mediation participant who made” the statement.
–The disclosed information:
–is not identified with “any particular mediation participant” or “even necessarily to the mediation, as opposed to the process that led to the settlement”; and
–“does not identify who urged him to consider ‘that sometimes it takes a stronger person to walk away,’ when that statement was made, or the context in which it occurred.”
–“Indeed it was the Trustee, not [the attorney], that attributed the statement to the mediator.”
So . . . the battle between these two professionals rages on. Fortunately, we can derive a mediation-confidentiality lesson from the stage of their battle described above:
–namely, that sanctions against an attorney are neither easily obtained nor lightly granted.