In Re: High Flow Funding LLC
- Nelson Roman
- 7:23-cv-08815
- U.S. District Court · Southern District of New York
- 8
In re Frank S. Sorbello: High Flow Funding LLC won its appeal, and Judge Roman reversed bankruptcy orders treating Sorbello as lessee and sanctioning High Flow.
High Flow Funding LLC prevailed: the district court reversed the bankruptcy-court sanctions and related rulings, entered judgment in High Flow’s favor with costs, and terminated the two district-court actions. Frank S. Sorbello’s bankruptcy-court motion and resulting sanctions order were set aside. The opinion also held that the bankruptcy court lacked jurisdiction over the underlying lease dispute involving Iconic Properties NY Inc.
What happened
In re Frank S. Sorbello concerned High Flow Funding LLC’s appeal of bankruptcy-court orders involving leased construction equipment. The bankruptcy court had treated Frank S. Sorbello as a co-lessee, found that High Flow violated the bankruptcy stay by repossessing a bulldozer, and imposed sanctions.
The district court concluded that the lease identified Iconic Properties NY Inc. as the lessee and that Sorbello signed only as a personal guarantor. It also concluded that the bankruptcy court lacked authority over the lease dispute because it was a state-law commercial dispute involving High Flow and Iconic Properties, not Sorbello’s bankruptcy case.
Judge Roman granted High Flow’s appeal and reversed both bankruptcy-court orders. The judgment was entered for High Flow, with costs, and the two district-court actions were terminated.
The detailed version
- In Re: High Flow Funding LLC · No. 7:23-cv-08815
- Nelson Roman
- Apr. 14, 2025
Background
High Flow Funding LLC appealed two orders issued by the United States Bankruptcy Court for the Southern District of New York. The first order granted Frank S. Sorbello’s motion concerning High Flow’s alleged violation of the bankruptcy automatic stay, imposed sanctions, and ordered High Flow to return leased equipment. The second order denied High Flow’s request for more time to respond to Sorbello’s sanctions motion and denied High Flow’s request to vacate the earlier decision.
The October 27, 2021 lease covered a Bobcat T300 and a John Deere 850J. The lease identified the customer-lessee as “Iconic Properties NY Inc. – Frank S. Sorbello,” and Iconic Properties, through Sorbello, signed the lease. Sorbello separately signed a section titled “Personal Guaranty for Lease Agreement.” That guaranty required him to perform the customer’s obligations if the customer defaulted and guaranteed payment and performance of the customer’s obligations.
Sorbello filed for Chapter 13 bankruptcy on December 1, 2022. High Flow repossessed the leased equipment on January 14, 2023, and later filed a proof of claim based on the lease. Sorbello then sought sanctions, arguing that the repossession violated the automatic stay. High Flow did not timely respond to the sanctions motion and did not attend the hearing. The bankruptcy court ordered High Flow to return the bulldozer, pay $1,500 per month for each month it was not returned after the order, and pay $2,365 in attorney’s fees and costs.
Contract interpretation
The district court reviewed the lease interpretation issue without deference because interpreting an unambiguous contract is a legal question. It held that Sorbello was not a lessee under the lease and was instead only a guarantor. The court relied on the lease’s identification of Iconic Properties as the lessee and the separate personal guaranty identifying Sorbello as guarantor.
The court explained that treating Sorbello as both a lessee and his own guarantor would make the personal-guaranty provisions meaningless or unnecessary. Applying contract-interpretation principles under New York and Pennsylvania law, the court concluded that Sorbello could not simultaneously be a lessee and guarantor for the same lease.
Bankruptcy-court jurisdiction
After determining that Sorbello was only a guarantor, the district court addressed whether the bankruptcy court had authority to decide the lease dispute. It concluded that the dispute arose from state contract law and concerned whether High Flow and Iconic Properties had breached a commercial lease. The court found that the dispute did not concern administration of Sorbello’s bankruptcy estate and that High Flow’s repossession proceeded against Iconic Properties, not Sorbello.
The district court therefore held that the bankruptcy court lacked jurisdiction over the underlying lease dispute. Because of that jurisdictional conclusion, the bankruptcy court’s order sanctioning High Flow for violating the automatic stay and its order denying High Flow’s requests to file late and vacate the sanctions decision could not stand.
Disposition
The district court granted High Flow Funding LLC’s appeal. It reversed the bankruptcy court’s August 14, 2023 and August 23, 2023 orders, awarded judgment in favor of High Flow with costs, and directed the clerk to terminate actions 23-cv-8815 and 23-cv-8819.
Read the full 8-page opinion on CourtListener, the free public archive maintained by the Free Law Project.