In Re: Kossoff PLLC
- Alvin Hellerstein
- 1:21-cv-07122
- U.S. District Court · Southern District of New York
- 6
In re Kossoff PLLC: Judge Hellerstein denied appellants’ request to appeal a bankruptcy order and stay proceedings.
Kossoff PLLC and Mitchell H. Kossoff were required to continue complying with the bankruptcy court’s order; the Chapter 7 interim trustee, Albert Togut, could continue seeking the debtor’s documents, information, and cooperation.
What happened
In re Kossoff PLLC involved a bankruptcy court order requiring Mitchell H. Kossoff, the debtor’s designated responsible officer, to produce the firm’s documents, testify at a creditors’ meeting, and cooperate with the Chapter 7 trustee. Kossoff refused, citing his constitutional protection against self-incrimination because he was being investigated by the Manhattan District Attorney.
Kossoff PLLC and Mitchell H. Kossoff asked the district court for permission to appeal that order and to pause the bankruptcy case. They argued that the order violated Kossoff’s protection against self-incrimination.
Judge Alvin K. Hellerstein denied both requests. He ruled that the protection did not cover Kossoff’s production of the firm’s corporate documents, while any protection concerning oral testimony had to be asserted separately for each question. The court also found that the requirements for an immediate appeal were not met.
The detailed version
- In Re: Kossoff PLLC · No. 1:21-cv-07122
- Alvin Hellerstein
- Sept. 30, 2021
Background
Creditors filed an involuntary Chapter 7 bankruptcy petition against Kossoff PLLC. Albert Togut, the Chapter 7 interim trustee, sought the debtor’s documents and information to investigate its affairs. The bankruptcy court designated Mitchell H. Kossoff, the firm’s sole managing member, as the debtor’s responsible officer.
Kossoff refused to produce the firm’s documents or testify, invoking the Fifth Amendment privilege against self-incrimination and stating that he was under investigation by the Manhattan District Attorney. On August 5, 2021, the bankruptcy court ordered him to produce information and documents required by the trustee, appear for examination at creditors’ meetings, and otherwise cooperate with the trustee.
Arguments and legal standard
Kossoff PLLC and Mitchell H. Kossoff sought permission for an immediate, or interlocutory, appeal of the bankruptcy court’s order. They also asked the district court to stay, or pause, the bankruptcy proceedings while the appeal was considered.
The district court applied the standards used for interlocutory appeals under 28 U.S.C. § 1292(b). Those standards require a controlling legal question, substantial grounds for disagreement about the correct legal rule, and an immediate appeal that could materially advance the end of the litigation.
Court’s analysis
The court held that the question whether Kossoff could invoke the Fifth Amendment as the debtor’s designated responsible officer was controlling and could affect the bankruptcy proceeding’s outcome. But the court found no substantial grounds for disagreement about the law governing production of corporate records. Under controlling precedent, a corporate custodian cannot invoke the Fifth Amendment to refuse to produce corporate documents, even when the company is small. The court stated that Kossoff PLLC was not a sole proprietorship and that Kossoff could not disregard the consequences of choosing a corporate form.
The court distinguished oral testimony from document production. It explained that testimony could implicate Kossoff’s individual Fifth Amendment rights. Any such privilege had to be asserted on a question-by-question basis if he reasonably believed a particular answer could incriminate him; a blanket assertion was not sufficient. Because the issue was premature without particular questions and answers, it did not support an immediate appeal in the abstract.
The court also found that the appellants had not shown that resolving the privilege issue immediately would materially advance the end of the bankruptcy litigation.
Disposition
Judge Alvin K. Hellerstein denied the motion for leave to appeal and denied the motion to stay the bankruptcy proceedings. The clerk was directed to terminate the open motions and close the civil case. The court stated that it was unnecessary to decide whether Kossoff PLLC had standing to appeal an order directed to Kossoff.
Read the full 6-page opinion on CourtListener, the free public archive maintained by the Free Law Project.