Académique Documents
Professionnel Documents
Culture Documents
Debtor.
____________________________/
MARIKA TOLZ, as chapter 7 trustee (the “Trustee”) for the bankruptcy estate of
Creative Desperation, Inc. (f/k/a Peter Letterese & Associates, Inc.)(the “Debtor”), by and
through undersigned counsel, hereby files her omnibus reply to (i) the Church of Scientology
International and Bridge Publications, Inc. (collectively, the “Scientology Group”) Preliminary
Objection to Trustee’s Motion for Authority to Dismiss Parties and to Abandon Certain
Litigation Claims; and (ii) Limited Objection to Trustee’s Abandonment (the “Abandonment
Motion”) of Claims to Creative Desperation, Inc., and Request for §725 Disposition of Claims
Against Dr. Douglas G. Ness, Dr. Marc A. Schwartz, Schwartz Dental Practice, Dr. L. Scott
Brody, Edwards Angell Palmer & Dodge LLP, Simeon Brier, Antoinette Theodossakos and Gary
I. Introduction
Two objectors to the Abandonment Motion pursue the same objective. Each contends
that the litigation involved are mertiless, yet each contends that the trustee has an obligation not
to abandon, but rather dismiss with prejudice. At issue is whether the Trustee should be
1
The Scientology Group and the EAPD Group shall collectively be referred to as the “Objecting Creditors.”
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conscripted into litigating the long standing lawsuits between the Objecting Creditors and the
Debtor’s former principal, Peter Letterese (“Letterese”). The Objecting Creditors ignore the
plain language of the Bankruptcy Code, by objecting to the Trustee’s proposed abandonment of
certain litigation which the Objecting Creditors themselves claim are meritless, and of
inconsequential value to anyone, including the Debtor’s bankruptcy estate. The Objecting
Creditors propose that the Trustee, without any assets to fund litigation, investigate the factual
basis of these claims and conclude that they are both factually and legally meritless, and then
dismiss those actions with prejudice. The Trustee’s counsel, who has advised the Trustee, has
testified that the legal claims asserted may be deficient as presently framed, but that does not
mean that the Trustee could conclude that there are no facts to support other legal claims in the
same actions. The Objecting Creditors, however, do not propose any source of funding for the
Trustee to accomplish the investigation of underlying factual issues. Instead, the Objecting
Creditors propose that the Trustee simply dismiss all claims with prejudice, and then brace for
potential objections and appeals that the Objecting Creditors believe that Letterese will
perpetuate. The Objecting Creditors fail to state any colorable basis for imposing such a burden
on the Trustee and the Debtor’s bankruptcy estate. Accordingly, the Trustee respectfully
requests that the Court enter an Order authorizing the Trustee to dismiss certain parties from the
litigation claims, and abandon the balance of those claims pursuant to Section 554 of the
Bankruptcy Code.
II. Background
The Debtor filed a voluntary petition from relief under Chapter 11 of Title 11 of the
United States Code (“Bankruptcy Code”) on June 30, 2008 [C.P. 1]. Pursuant to the Scientology
Group’s Motion to Convert to Chapter 7 Proceeding [C.P. 50], the case was converted to a
proceeding under Chapter 7 of the Bankruptcy Code by this Court’s Order dated September 9,
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2008 [C.P. 89] (the “Conversion Order”). The Conversion Order also denied as moot a Motion
to Dismiss [C.P. 50] that had been filed by the Debtor on August 15, 2008. Thereafter, Marika
Tolz (the “Trustee”) was appointed as the duly acting Chapter 7 trustee for the Debtor’s
Shortly after the Conversion Order, the Trustee retained undersigned counsel and began
administering the Debtor’s estate, which has been administratively insolvent since its inception.
On October 9, 2008, the Trustee filed a Motion to Enforce the Automatic Stay [C.P. 129], in
part, to preserve the many litigation claims that had been scheduled by the Debtor. On
November 13, 2009, the Court entered an Order granting the Motion to Enforce the Automatic
Stay (the “Stay Relief Order”) [C.P. 168], requiring, among other things, that any party that
sought to take any action in any litigation involving the Debtor was required to obtain stay relief
Since the entry of the Stay Relief Order, the Trustee has examined the many litigation
claims scheduled by the Debtor and, in particular, has evaluated the claims commonly known as
the Rico Case, the Due Process Case, and the Bankruptcy Due Process Case (the “Subject
Litigations”).2
At trial on the Trustee’s Motion for Sanctions and Contempt against Charles D. Franken,
the Trustee’s counsel stated that, after having spent months trying to negotiate a sale of the
Litigation Claims to Letterese or the Scientology Group, such efforts were not successful.
Indeed, the Scientology Group, through its counsel, has advised for at least eight months that a
proposal for a global settlement of all claims, or a purchase of these claims would be
forthcoming. Worse, at the request of the Scientology Group, the Trustee delayed the
2
See Chapter 7 Trustee’s Motion for Authority to Dismiss Parties and Abandon Certain Litigation Claims [C.P.
265].
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commencement of other litigation, now pending before this Court, because such litigation would
also be the subject of the Scientology Group’s offer. In evaluating the Subject Litigations, the
Trustee maintains that although the Subject Litigations may be deficient based on the present
legal theories advanced, the Trustee is without independent knowledge as to whether any of the
facts alleged in the Subject Litigations, against the Objecting Creditors or otherwise, may in fact
support any actionable claims through amendment or independent actions. After careful
examination by the Trustee and her counsel, and given the lack of resources, the Trustee has
determined that the Subject Litigations are therefore unduly burdensome for the Trustee to
administer, and are of inconsequential value to the Debtor’s estate. Accordingly, the Trustee
seeks to abandon these claims pursuant to Section 554 of the Bankruptcy Code.
III. The Trustee has absolutely no obligation to administer burdensome litigation claims
that have no value to the Debtor’s bankruptcy estate.
Case law is legion, and it is undisputed by the Objecting Creditors, that a trustee has
broad discretion in deciding whether to abandon litigation claims that are property of a debtor’s
bankruptcy estate. See Hanover Insurance Co. v. Tyco Industries, Inc., 500 F. 2d 654 (3rd Cir.
1974)(in carrying out the trustee’s duty to maximize the bankruptcy estate, a trustee may
abandon a cause of action that is deemed less valuable than the cost of asserting the claim); In re
Blumenburg, 263 B. R. 704 (E.D. N.Y. Bankr. 2001)(a trustee could abandon a fraudulent
transfer claim arising from a prepetition distribution of assets derived from debtor’s deceased
Motors, Inc., 202 B.R. 389, 393 (W.D. Pa. Bankr. 1996)(trustee was free to abandon a suit where
the secured interest of other principals in the suit were greater than the proposed settlement value
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The Trustee recognizes that her right to abandon burdensome litigation claims, or any
burdensome asset of the estate for that matter, while nearly so are not entirely absolute. The
Supreme Court, in Midlantic Nat'l Bank v. New Jersey Dept. of Envtl. Protection, held that a
trustee may not abandon property in contravention of a state statute or regulation that is
reasonably designed to protect the public health or safety from identified hazards. 474 U.S. 494
(1986). The parameters of the Supreme Court's ruling in Midatlantic are clear and no court
since then has gone beyond the Court's limited holding the public welfare. See In re Smith-
Douglass, 856 F. 2d 12, 15 (4th Cir. 1988) (interpreting Midlantic as creating a limited exception
to trustee's abandonment power under § 554 in those cases where abandonment would
contravene state laws reasonably designed to protect public from imminent harm); Matter of
Commonwealth Oil Refining Co., 805 F. 2d 1175, 1182 (5th Cir. 1986), cert. denied, 483 U.S.
1005 (1987) (same). Despite the Objecting Creditors assertions that the Subject Litigations are
somehow toxic, the Objecting Creditors do not (and can not) suggest that any great public
interest is implicated by the Trustee’s decision to seek abandonment of certain litigation claims.
The Trustee’s decision to abandon the Subject Litigations is not in contravention of any state or
Federal statute designed to protect the public welfare. See Midatlantic, infra. The Objecting
Creditors each had varying deepness of connections with Letterese ultimately leading to
litigation. The Trustee is a stranger. Nothing in law or policy requires litigations to be foisted on
a trustee where it is not in the estate’s interest. Abandonment, both under statute and policy, is
consistent with the public interest. The same question, giving wide latitude to the Trustee’s
In the matter of In re Wilson, the court held that the only consideration in determining
whether to abandon a claim under the bankruptcy code is whether such an action is in the best
interest of the estate. 94 B.R. 886 (E.D. Va. Bankr. 1989). In Wilson, as in the instant dispute,
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the parties objecting to the abandonment of certain litigation claims argued that the claims were
of inconsequential value. The parties objecting to the abandonment of certain litigation claims
were certain proposed defendants in a litigation that included claims against officials of foreign
governments. Id. The proposed defendants argued that the Court should not allow the trustee to
abandon certain “meritless” claims against foreign government officials because they were
precluded by statutes of limitation and the doctrine of sovereign immunity. The court noted,
specifically, that the assertions disputing the debtor's cause of action, if true, would support a
determination that the proposed litigation was of inconsequential value to the estate and,
therefore, should affirm rather than challenge the trustee's position that the claims should be
abandoned.
Ultimately, the Wilson court affirmed the trustee’s decision to abandon the claims,
without taking a position on the exact value of the claims, was within the sound business
judgment of the Trustee. See also In re Stephenson, 2009 WL 507052 (Bankr. D. Idaho) (stating
in dicta that the court in Wilson correctly concluded that argument by proposed defendants that
litigation claims were inconsequential supported, rather than impeached, claim that litigation
should be abandoned). Accordingly, the provisions of Section 554 of the Bankruptcy Code
provide the Trustee with ample authority to dismiss the Subject Litigations. The claims argued
by the Objecting Creditors to be meritless merely affirms the Trustee’s judgment that the claims
need to be abandoned.
In the Motion, the Trustee has sought authority to dismiss certain parties, with prejudice,
from the Subject Litigations prior to abandoning same. These parties are limited to (i) members
of the judiciary and clerk’s of court; (ii) the trustee and her counsel; and (iii) Assistant United
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States Trustee Ariel Rodriguez. The Trustee, in exercising her sound business judgment, has
determined that no set of facts may be alleged by the Debtor as to the members of the judiciary
and clerks of court that would support any actionable claim. The Trustee, also exercising her
sound business judgment, seeks to dismiss all parties that were sued by the Debtor and its former
counsel (ultra vires) after the Petition Date, and in violation of the Barton Doctrine, as their
joinder as parties to Subject Litigations were not authorized by the Court. See Barton v.
Barbour, 104 U. S. 126 (1881) (suit may not be filed against a fiduciary and her counsel without
V. Objecting Creditors Fail to Allege Any Basis Upon Which Proposed Dismissal of
Parties and Abandonment of Litigation Claims Should be Denied.
The EAPD Group proposes that the Trustee should not only dismiss the claims against
them with prejudice, but also proposes that the Trustee should be compelled to seek an order
confirming the dismissal from the District Court. The EAPD Group fails to provide any
authority to support this demand. The EAPD Group fails to provide any modicum of authority to
support their demand that the Trustee incur the expense and liability of dismissing the litigation
claims asserted against them which they repeatedly assert are frivolous. If these claims are
indeed frivolous, the EAPD Group should have no difficulty having these claims dismissed after
they are abandoned by the Trustee. It is worth noting that at no time has the EAPD Group
sought relief from the Stay Relief Order to pursue dismissal of these claims.
3
The Trustee recognizes the argument set forth by the EAPD Group that the Barton Doctrine might beinterpreted to
protect creditors improperly sued by a Debtor post-petition. See EAPD Group’s Objection at p.7; citing Lawrence v.
Goldberg, et al., 2009 WL 1974755 (11th Cir. July 10, 2009). Should the Objecting Creditors seek dismissal of post
petition actions commenced by the Debtor, they should affirmatively seek that relief. Any claims against the EAPD
Group, however, either pre-date the petition date, or appear to have been filed with leave of Court.
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Alternatively, the EAPD Group requests that the Trustee somehow transfer the litigation
claims against the EAPD Group, as litigation defendants, to the EAPD Group, as purported
creditors of the estate under Section 725 of the Bankruptcy Code. Again, the relief sought by the
EAPD Group is not authorized by the Bankruptcy Code. In fact, such request wholly misapplies
the provisions of Section 725, which provides that “the trustee, after notice and a hearing, shall
dispose of any property in which an entity other than the estate has an interest, such as a lien, and
that has not been disposed of under another section of this title.” Courts have interpreted Section
725 to provide for the Trustee to abandon property that is encumbered by secured interest that
are in excess of a debtor’s interest in the property. See generally In re Williams, 9 B. R. 228
(Bankr. D. Kan. 1981) (trustee who filed pleading indicating desire to abandon property of the
estate to debtors was required to dispose of fully encumbered property of estate which remained
in estate at or near close of case to those parties in interest possessing valid liens in the property
and debtors had no interest whatsoever in encumbered property of the estate); In re Wild Lilly,
Inc., 51 B.R. 963 (Bankr. S.D.N.Y. 1985) (where no bailment existed with regard to fabric
supplied to debtor, proceeds from debtor's sale of fabric inured to the estate for benefit of its
creditors and proceeds were not required to be turned over to seller). Section 725 of the
Bankruptcy Code simply may not be interpreted as the EAPD Group would suggest.
Accordingly, the Trustee respectfully requests that the EAPD Group’s objection not be sustained
by the Court.
While having promised, for months, a global proposal to settle or purchase all of the
estate’s claims, the Scientology Group now asserts that the Trustee should be compelled to
accept the Scientology Group’s offer of nominal consideration for the Subject Litigations instead
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of abandoning these claims. In short, the Scientology Group argues that by receiving nominal
value for the Subject Litigations the Debtor’s estate will receive a net benefit from such a
settlement. In reality, such a proposal is nothing more than an offer to substitute the Trustee for
the Scientology Group in its longstanding litigation with Letterese. If the Trustee was compelled
to accept such and offer to sell the Subject Litigations for nominal value, any benefit from such
nominal consideration offered by the Scientology Group would quickly be eclipsed by the near
certain expense of a series of objections and appeals that Letterese and other shareholders of the
In the coincidentally named case, In re Cult Awareness Network, Inc., a chapter 7 trustee
moved to abandon assets of estate consisting of debtor's files which contained information about
religious organizations. 205 B. R. 575 (Bankr. N. D. Ill. 1997). The trustee in this case had
previously sought to sell the assets, but decided to abandon them instead when it became
apparent that the cost of defending any sale would far outweigh any value that the asset may
have had to the estate. Id. at 578. The Court, citing Wilson, held that the trustee only needed to
demonstrate that he had exercised sound business judgment in making the determination to
abandon the assets. In affirming the trustee’s decision to abandon the assets, the court noted that
the parties objecting to the sale of the assets were not interested in generating funds for the
estate, but merely sought to obtain a benefit for themselves, namely obtaining or preventing
dissemination of the information contained in the files the trustee sought to abandon. In its
reasoning, the Court further noted that the history of the case revealed that any disposition of the
assets could spawn endless litigation, and as such the Court could not determine that the trustee
The Scientology Group’s objection is premised upon its desire to have the Trustee settle
all claims against it by the Debtor, and prevent through a dismissal with prejudice Letterese from
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engaging in future litigation against it. The suggestion that the Trustee should be required to
settle all claims by the Debtor against the Scientology Group for nominal consideration is not
supported by any relevant authority. Case law is clear that the Trustee should in fact be allowed
to abandon such claims where the cost of defending the settlement will far exceed any benefit to
the estate. Accordingly, the Trustee respectfully requests that the Scientology Group’s objection
WHEREFORE, Marika Tolz, as Chapter 7 Trustee for the Debtor Creative Desperation,
Inc., respectfully requests the Court overrule the (i) the Church of Scientology International and
Bridge Publications, Inc.’s Preliminary Objection to Trustee’s Motion for Authority to Dismiss
Parties and to Abandon Certain Litigation Claims; and (ii) Limited Objection to Trustee’s
Abandonment of Claims to Creative Desperation, Inc., and Request for §725 Disposition of
Claims Against Dr. Douglas G. Ness, Dr. Marc A. Schwartz, Schwartz Dental Practice, Dr. L.
Scott Brody, Edwards Angell Palmer & Dodge LLP, Simeon Brier, Antoinette Theodossakos
and Gary Woodfiled; and enter an order authorizing Trustee to dismiss parties from the Due
Process Case, the Bankruptcy Due Process Case and the RICO Case; and to subsequently
abandon all remaining claims in a manner consistent with the provisions of Section 554 of the
Bankruptcy Code, and for such other relief as the Court may deem just and proper.
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Respectfully Submitted,
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a true and correct copy of the foregoing was served via
electronic mail, facsimile and/or First-Class U.S. Mail to all parties a Court in this case on the
24th day of August, 2009.
I HEREBY CERTIFY that I am admitted to the Bar of the U.S. District Court for the
Southern District of Florida and that I am in compliance with the additional qualifications to
practice in this Court set forth in Local Rule 2090-1(A).
12
Label Matrix for local noticing Case 08-19067-JKO Doc 292 Association
American Arbitration Filed 08/24/09 PageBridge
13 ofPublications,
15 Inc.
113C-0 c/o John Arrastia, Jr. P.A. c/o Alan J Perlman
Case 08-19067-JKO 1110 Brickell Ave. Suite 403 350 E. Las Olas Blvd., Suite 1700
Southern District of Florida Miami, FL 33131-3135 Ft. Lauderdale, FL 33301-4217
Fort Lauderdale
Mon Aug 24 15:59:28 EDT 2009
Church of Scientology International Church of Scientology International Creative Desperation Inc
c/o Alan J Perlman c/o Michele R De Bianchi 4581 Weston Road
350 E. Las Olas Blvd., Suite 1700 1688 Meridian Ave #902 #306
Ft. Lauderdale, FL 33301-4217 Miami Beach, FL 33139-2712 Weston, Fl 33331-3141
Edwards Angell Palmer & Dodge LLP Ford Motor Credit Company LLC Schwartz Dental Practice
c/o Simeon D Brier, Esq c/o Kenneth M Jones c/o Simeon D Brier
1 N Clematis St #400 1333 S. University Dr. # 201 1 N Clematis St #400
West Palm Beach, FL 33401-5552 Plantation, FL 33324-4001 W Palm Beach, FL 33401-5552
Florida Department of Revenue Ford Motor Credit Gallert Dreyer & Berkey
Post Office Box 6668 POB105697 845 3rd Avenue # 8
Tallahassee, Florida 32314-6668 Atlanta GA 30330-0001 New York NY 10022-6601
SEC Commercial Realty Group SEC Communication Realty Group Shurgard Storage Centers
7050 West Palmetto Park Rod # 51 7050 West Palmetto Park Road # 51 701 Western Avenue
Boca Raton Fl 33433-3464 Boca Raton Fl 33433-3464 Glendale CA 91201-2349
Tree Trimmers & Associates United States Trustee Verizon Wireless South
4301 NE 13th Terrace 51 SW 1 Ave., Room 1204 Verizon Wireless
Oakland Park Fl 33334-4707 Miami, FL 33130-1614 POB 3397
Bloomington IL 61702-3397
Verizon Wireless Telecom Case 08-19067-JKO Doc 292
Wandique Casta Filed 08/24/09 PageWandique
15 of Mauro
15
One Verizon Way 5610 Hood St 5610 Hood St
Basking Ridge NJ 07920-1097 Hollywood Fl 33021-3232 Hollywood Fl 33021-3232
The following recipients may be/have been bypassed for notice due to an undeliverable (u) or duplicate (d) address.
(d)Dr Douglas Ness (d)Gallert Dreyer & Berkey (d)Monge, Jose Luis
1400 W Benson Blvd Suite 150 845 3rd Avenue # 8 5610 Hood Street
Anchorage Alaska 99503-3688 New York, NY 10022-6601 Hollywood Fl 33021-3232