In Re: Mosdos Chofetz Chaim Inc.

Background

The opinion resolves two related appeals from an adversary proceeding in the bankruptcy court. The dispute concerned the transfer of real property from Mosdos Chofetz Chaim Inc. to Congregation Radin Development Inc. under Mosdos’s Second Amended Plan of Reorganization and the bankruptcy court’s order confirming that plan.

Mosdos and Rabbi Mayer Zaks appealed two April 2, 2021 bankruptcy-court orders: one denying Mosdos’s request for reconsideration, reargument, or other relief, and another granting defendants’ motion to dismiss the adversary proceeding after trial. The appellants also sought emergency relief staying those orders, but the district court denied the emergency request on the record. The appellants later withdrew and abandoned their motion for a preliminary injunction.

Issues and Analysis

The appellants raised five arguments: (1) the bankruptcy court lacked constitutional authority under Stern v. Marshall to enter final judgment; (2) the bankruptcy court improperly narrowed the issues for trial; (3) the bankruptcy court’s ruling on a motion in limine, including requested sanctions for destruction of evidence, violated due process because Mosdos allegedly lacked counsel; (4) the appellants had not waived certain approval requirements under New York law; and (5) the bankruptcy court violated the First Amendment by interfering with Mosdos’s religious autonomy.

The district court first held that all five arguments were waived because the appellants raised them for the first time on appeal. The appellants did not respond to that objection or explain why they had not raised the arguments in the bankruptcy court, and the district court found no serious unfairness that would justify making an exception.

The court then addressed the arguments alternatively. It held that Stern did not prevent the bankruptcy court from entering final judgment because the circumstances differed from the narrow situation addressed in Stern. It also held that the bankruptcy court acted within its discretion by simplifying the trial around two potentially case-dispositive questions: whether Mosdos’s board composition complied with the plan and confirmation order, and whether the property transfer required additional approval under New York law.

The court found no due-process error concerning the motion in limine because the record showed that Mosdos’s interests were represented through Rabbi Mayer and his counsel, and the bankruptcy court kept counsel in place while deciding the motion. The court further explained that the bankruptcy court had not found a waiver of the approval requirements themselves; instead, it had correctly treated the appellants’ new position as inconsistent with their earlier concession that the required approvals had occurred. Finally, the court held that applying neutral New York corporate-law principles did not improperly intrude on religious autonomy.

Disposition

The district court affirmed the bankruptcy court’s April 2, 2021 orders docketed as Documents 148 and 149. The clerk was directed to terminate the two appeals. The opinion does not state that either order was affirmed with or without prejudice.

Effect

The ruling left in place the bankruptcy court’s denial of reconsideration and its dismissal of the adversary proceeding after trial. It also ended the two district-court appeals.