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In re National Pool Construction, Inc.

United States District Court, Third Circuit

December 31, 2013

IN RE: NATIONAL POOL CONSTRUCTION, INC., et al, Chapter 11, Debtor.
v.
AMERICAN MANAGEMENT SERVICES, INC., Appellee/Defendant. SCOTT C. PYFER, LIQUIDATING TRUSTEE FOR NATIONAL POOL CONSTRUCTION, INC. LIQUIDATING TRUST, Appellant/Plaintiff, No. 09-34394 (KCF)

OPINION

JOEL A. PISANO, District Judge.

This matter comes before the Court on the appeal of Scott C. Pyfer, Liquidating Trustee (the "Trustee") for National Pool Construction, Inc. ("NPC"), from the Order of the Honorable Katherine C. Ferguson of the United States Bankruptcy Court, District of New Jersey, entered on March 13, 2013, granting summary judgment in favor of American Management Services, Inc. ("AMS"). For the reasons set forth below, the decision of the Bankruptcy Court is AFFIRMED.

I. BACKGROUND

A. Factual and Procedural History

The background of this dispute has been set forth in detail before the Bankruptcy Court. Accordingly, the Court sets forth only those facts that are relevant to this appeal.[1] The following facts are undisputed by the parties.[2]

AMS is a management consulting services company that specializes in strategic management and profitability programs for small and medium-sized businesses. AMS works with their clients to identify and implement changes aimed at improving cash flow and profits. The business relationship between AMS and NPC began when AMS performed a "business survey" for NPC, during which an AMS analyst evaluated NPC's processes and financials and identified areas where profits could be increased and losses minimized.

After the business survey was conducted, NPC and AMS entered into a consulting agreement (the "Agreement") on October 19, 2005. Pursuant to the Agreement, a team of AMS consultants began working for NPC. From October 19, 2005 to August 25, 2006, AMS consultants worked 1, 293.75 cumulative hours identifying and helping to solve NPC's "business problems." NPC was billed monthly by AMS for services rendered, and pursuant to the agreement between the parties, NPC made periodic progress payments to AMS in the amount of $5, 500.00. At no time did NPC complain about the services performed or the amount billed by AMS.

On August 25, 2006, NPC informed AMS that it was terminating the Agreement and ending the business relationship between the parties. Upon notice of termination, AMS did not demand immediate payment of all due invoices as provided for the in the Agreement and continued to perform services for NPC until December 2006. AMS never received payment from NPC for outstanding invoices in the amount of $18, 965.67.

On September 16, 2009, NPC filed a voluntary petition for relief under Chapter 11 of the United States Code in the United States Bankruptcy Court for the District of New Jersey, and the Trustee commenced an action against AMS to avoid and recover transfers in the amount of $492, 500.00, alleging that the transfers were constructively fraudulent. The Bankruptcy Court entered an initial pre-trial scheduling order ("Initial PT Order") on January 27, 2012, which provided for all discovery to be completed by June 29, 2012, and for all dispositive motions to be filed by August 20, 2012. Pursuant to the Initial PT Order, AMS filed its first motion for summary judgment on August 20, 2012, which was voluntarily withdrawn on October 1, 2012. The Bankruptcy Court entered an amended pre-trial order (the "Amended Order") on September 24, 2012, which provided for all discovery to be completed by December 5, 2012, and for all dispositive motions to be filed no later than February 15, 2013.

On February 15, 2013, pursuant to the Amended Order, AMS filed a second motion for summary judgment (the "Motion"). In support of the Motion, AMS filed with the Bankruptcy Court: (1) the Affidavit of Louis M. Mosca; (2) relevant exhibits; (3) a brief in support of the motion; (4) a Statement of Material Facts; and (5) a proposed form of order for the Motion. On February 19, 2013, AMS filed a certificate of service certifying that the Motion had been served. The Notice of Motion set oral argument in front of the Bankruptcy Court on March 12, 2013. The Trustee filed a brief in opposition to the Motion ("the Opposition") on March 11, 2013 at 5:11 p.m., in violation of Local Bankruptcy Rule 9013-1(d)(1), which provides that "[a]ll answering papers and cross-motions shall be filed and served at least 7 days before the return date."

The Opposition does not dispute any of the facts asserted by AMS in the support of the Motion, and contains no citations to legal authority or legal argument. Instead of addressing the facts underlying the fraudulent transfer claim set forth by AMS in the Motion, the Opposition argues that the Motion was "improper" because AMS had not yet designed an expert witness or deposed NPC's expert witness, as allegedly agreed to in the Amended Order.

B. Ruling of the Bankruptcy Court

The Bankruptcy Court held oral argument on the Motion on March 12, 2013, and granted summary judgment in favor of AMS. See Transcript of Motion Hearing Before the Honorable Katherine C. Ferguson ("Bkr. Tr."). At oral argument, the Trustee acknowledged that the Opposition was untimely filed, but argued that "there was a uniform agreement that there were factual disputes, " which precluded AMS from moving for summary judgment. Bkr. Tr. 3:12-24. When the Bankruptcy Court inquired as to why, if there was an alleged agreement between the parties to continue with discovery, the Trustee did not contact AMS and request that the Motion be withdrawn when it was filed on February 15th, the Trustee responded that they "didn't think this was going to be an issue" based on the alleged agreement between the parties to "exchange expert reports." Bkr. Tr. 4:1-25. However, the Trustee agreed that even though the Amended Order "requires an exchange of expert reports, " if AMS did not "want to retain an expert that's entirely up to them." Bkr. Tr. 8:14-15.

The Trustee's only assertion of disputed of material fact in front of the Bankruptcy Court is the statement, made without elaboration or factual support, that summary judgment is improper in the present case because there exist "clear issues of material fact that [AMS] raised in their papers." Bkr. Tr. 8:2-3. The Bankruptcy Court reviewed the Motion "as an uncontested motion" and held that "the proofs submitted [by AMS]... establish a reasonably equivalent value defense." Bkr. Tr. 8:22-25. Additionally, the Bankruptcy Court stated that the Opposition was read by the Court, ...


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