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In re Bernheim Litigation

February 28, 2003


The opinion of the court was delivered by: Bassler, District Judge



Defendants move for summary judgment. The Court previously determined that it had subject matter jurisdiction over the first action, Civ. No. 00-6297 (WGB), ("First Action") pursuant to 28 U.S.C. § 1334 because the Complaint alleges violations of the United States Bankruptcy Code and in particular 11 U.S.C. § 362(h) thereof. The Court has original subject matter jurisdiction over the second action, Civ. No. 02-935 (WGB), ("Second Action") pursuant to 28 U.S.C. § 1331 (federal question). The Court grants Defendants' motion for summary judgment. *fn1


Pro se Plaintiff L. Andrew Bernheim ("Bernheim") *fn2 filed two separate Complaints against an overlapping group of Defendants. The Court consolidated the two actions by Order dated February 28, 2003, but will describe the procedural history of each action separately.

I. First Action

Bernheim filed his first Complaint on December 29, 2000. The Complaint alleges that after Bernheim had filed for Chapter 11 Bankruptcy, a group of individuals actively solicited the sale of his equitable interest in a partnership called Township Village Associates ("TVA"). These individuals, Defendants Dr. Martin Jacobs, Steven Trenk, Alvin Trenk and Jeffrey Claman ("Individual Defendants"), knew that Bernheim was a debtor in Chapter 11 procedings. According to Bernheim, the Individual Defendants encouraged two other individuals (not named as Defendants) to sell Bernheim's TVA partnership interest to the Individual Defendants. Bernheim claims that by soliciting this sale, the Individual Defendants violated 11 U.S.C. § 362(h) and 18 U.S.C. §§ 152 and 153.

The first Complaint also alleges four state law causes of action under the doctrine of pendent jurisdiction: (1) tortious interference with contract; (2) fraudulent conversion of Bernheim's property in the form of his TVA partnership interest; (3) unjust enrichment; and (4) creation of a constructive trust.

Defendants moved to dismiss the first Complaint under Fed. R. Civ. P. 12(b)(1), 12(b)(6) and 12(b)(7) respectively for lack of subject matter jurisdiction, failure to state a claim and failure to join indispensable parties. In an Opinion and Order dated August 28, 2001, the Court denied the motion without prejudice. One of Defendants' arguments in support of dismissal under Rule 12(b)(6) was that Bernheim's state law claims of tortious interference with contract and fraudulent conversion of property were barred by the applicable New Jersey six-year statute of limitations. See N.J. Stat. Ann. § 2A:14-1. Bernheim argued that the statute of limitations was tolled because he had been adjudged insane during a period that encompassed the date his cause of action accrued. The Court concluded that it could not yet rule on the statute of limitations defense because there was "insufficient evidence in the record for the Court to determine when, under New Jersey's discovery rule, Plaintiff's cause of action accrued." (August 28, 2001 Op. at 8-9.)

Bernheim and the Trenk Defendants then entered into settlement negotiations. On October 25, 2001, Bernheim wrote to the Court that he had settled with prejudice all of his claims against Defendants Jacobs, Alvin and Steven Trenk, Continental Choice Care, Inc., Techtron Inc. and Air Pegasus, Inc. (See July 30, 2002 Op. at 4.) In the Settlement Agreement and Stipulation of Dismissal, which did not include Defendants Claman or TVA, Bernheim released the other Defendants in exchange for ten dollars, a general release and covenant not to sue, an indemnification agreement and "other good and valuable consideration." The Court did not approve the Settlement Agreement or Stipulation of Dismissal because of concerns over whether the Agreement had been entered in good faith and without overreaching by Defendants. (See July 30, 2002 Opinion at 4 and 13.)

On November 29, 2001, Bernheim moved to enforce or alternatively avoid the alleged Settlement Agreement ("Agreement"). Defendants (not including Claman or TVA) cross-moved to dismiss the Complaint based on the same Agreement. In an Opinion and Order dated July 30, 2002, the Court denied both motions without prejudice and scheduled an evidentiary hearing regarding the Agreement and the circumstances under which it had been entered into by the parties.

Following the hearing on the motions to enforce or alternatively avoid the Settlement Agreement, the Court issued a letter-order notifying the parties that the Court would entertain either a renewed motion to dismiss or motion for summary judgment. (See November 8, 2002 Letter-Order.) If the Defendants chose to renew their motion to dismiss, the Court was inclined to treat it as a motion for summary judgment and to give the parties a "reasonable opportunity to present all material made pertinent to such a motion by Rule 56." See Fed. R. Civ. P. 12(c).

As an alternative to proceeding according to the steps outlined in Rule 12(c), the Court invited the Defendants to file a motion for summary judgment. To that end, the Court set forth a schedule for the submission of briefs and affidavits by both parties. The Court held oral argument on the Defendants' motion for summary judgment on February 20, 2003.

II. Second Action

Bernheim filed his second Complaint on March 4, 2002. He filed an Amended Complaint as of right on March 6, 2002 ("RICO Complaint"). The Amended Complaint asserts federal question jurisdiction under 28 U.S.C. § 1331 and claims violations of the federal Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(b) and (c), and the corresponding New Jersey racketeering statute, N.J. Stat. Ann. § 2C:41-2(b) and (c). The Amended Complaint notably alleges the very same facts as the first Complaint described above. While the RICO Complaint does not name Claman as a Defendant, it does name an additional seven Trenk family members and some of their estates as Defendants, causing the Trenk Defendants to label Bernheim a "litigation terrorist."

On April 8, 2002 Defendants moved to dismiss the RICO Complaint. In support of their motion they argued that the alleged October 25, 2001 Settlement Agreement mandated dismissal of the RICO Complaint. Before ruling on the motion to dismiss and after the evidentiary hearing regarding enforcement of the Settlement Agreement, the Court issued the November 8, 2002 Letter-Order (described above) setting forth the schedule for summary judgment submissions regarding both actions instituted by Bernheim. The Defendants named in the RICO Complaint have also moved for summary judgment with respect to the RICO action. The oral argument held on February 20, 2003 therefore encompassed both actions.

III. Undisputed Facts

A. Bernheim and TVA

Bernheim and two non-party individuals named Milford Inganamort and Raymond Uzzi were shareholders in an entity known as LIB Realty, Inc. ("LIB")(Berheim Cert., ¶ 2.) Bernheim and Inganamort allegedly entered into a shareholder agreement providing that both individuals would share a beneficial half-interest "in whatever ownership interest in a real estate project was held in the name of either Bernheim or Inganamort." (Compl., ¶ 18.) Bernheim allegedly also entered into an agreement with Uzzi in which Uzzi agreed to purchase from Inganamort and Bernheim one-third of their respective stock interests in various corporations and partnerships, including LIB and TVA. (Compl., ¶ 19.)

Through LIB and its predecessors, Inganamort and Bernheim managed an apartment complex originally owned by Jackie Gleason and known as Township Village. (Bernheim Cert., ¶ 6; Berheim SOF at 3, ¶ 1.) Aware that Gleason wanted to sell Township Village, Berheim "brought the deal" to Defendants Alvin and Steven Trenk. The following events ensued:

[LIB] and the Trenks negotiated that Inganamort, Uzzi and [Bernheim] would receive a 2.2% partnership interest in the TVA partnership to be formed. Uzzi later transferred his 2.2% interest to [Bernheim], giving [Bernheim] a 4.4% interest which was held in Inganamort's name as nominee. (Bernheim Cert., ¶ 6.)

TVA was formed as a New Jersey partnership in 1981 to purchase the Township Village apartment complex. (Bernheim Resp. at 3, ¶ B1.) TVA consisted of 24 partners. (Id. at 3, ¶ B2.) In January, 1984, TVA purchased the 6.6% interest in the partnership held in Inganamort's name for $122,301. (Id. at 3, ¶ B4.) Bernheim claims that he had a "direct beneficial interest" of 4.4% in this TVA interest "held by Inganamort" and then sold by Inganamort back to the TVA partnership. (Id. at 3, ¶ B11.)

Bernheim alleges that Defendants Jacobs, the Trenks and Claman were aware that Bernheim held a 4.4% interest in TVA. (Compl., ¶ 22.) These Defendants were also aware that Bernheim was a Chapter 11 debtor with pending bankruptcy proceedings. (Id., ¶ 24.) In fact, Bernheim "expressly objected to any efforts to sell [his TVA] interest," claiming "that the sale of any such interest required the approval of the Bankruptcy Court." (Id., ¶ 25.)

Because Bernheim objected to the sale of his beneficial interest, Steven Trenk asked one of the TVA partners, Jeffrey Claman, if Claman "would consider buying only that part of Inganamort's interest which was beneficially owned by [Claman] while allowing [Bernheim] to stay in the transaction." (Bernheim Cert., ¶ 7.) Although Claman believed Bernheim "had an interest in the property or project through Inganamort," Claman indicated that he intended to buy the full interest" held in Inganamort's name "at what he thought was a good price." (Id.)

Bernheim wrote to Claman attempting to stop the sale of Bernheim's beneficial interest in TVA. (Id., ¶¶ 8, 10.) Around the time of the actual sale Bernheim "spoke to Claman and told him that [Claman] needed Bankruptcy Court approval for any sale." (Id., ¶ 11.) The TVA partnership, which included as partners individual Defendants Jacobs, the Trenks and Claman, nevertheless purchased from Inganamort the 6.6% interest in TVA held in Inganamort's name. (Compl., ¶ 28; Bernheim Cert., ¶ 12.)

Jacobs, the Trenks and Claman thereafter sold their total interest in TVA to investors for $7,000,000. TVA eventually sold the Township Village property in October 1985. (Berheim Resp. at 3, ¶ B6.) TVA did not pay Bernheim any money when it sold its property. Id. Bernheim contends that based on the sale price of the property ($7 million), his alleged 4.4% interest in TVA "was actually worth in excess of $300,000." (Compl., ¶ 28.)

B. Bankruptcy Proceedings and Judge Gindin's 1985 and 1999 Orders

In 1982, Bernheim filed a personal bankruptcy petition. In 1983, three entities he owned and controlled also filed bankruptcy petitions. All four bankruptcy matters were consolidated (the "bankruptcy proceedings") before United States Bankruptcy Judge William H. Gindin. (Bernheim Resp. at 4, ¶¶ B13-B15.)

In 1985, the attorneys for the debtors in the bankruptcy proceedings filed a motion to withdraw as counsel. On October 31, 1985, Judge Gindin signed an Order granting the attorneys' motion to withdraw as counsel and containing the following language:

The movants have submitted certifications showing that L. Andrew Bernheim ... has been unwilling or unable to cooperate with the attorneys for the debtors. The record of this Court shows that [Bernheim] has been unable or unwilling to comply with a direction or order of this Court on several occasions and that he was last brought before this Court by warrant for his arrest. As a result ... it has become impossible for the attorneys for the debtor to perform their professional roles as attorneys and officers of this Court. ... Nonetheless, the Court is of the opinion that the debtors cannot properly be left without counsel representing them in this proceeding. ... Robert A. Baime, Esq. is hereby appointed as guardian ad litem for L. Andrew Bernheim for purposes of ...

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