United States District Court, D. New Jersey, Camden Vicinage
IN RE MANLEY TOYS LIMITED, Debtor in a Foreign Proceeding.
ASI, INC., Appellee/Cross-Appellant. TOY QUEST LTD., Appellant/Cross-Appellee,
WASSERMAN, JURISTA & STOLZ By: Donald W. Clarke, Esq. and
NOVACK AND MACEY LLP By: Monte L. Mann, Esq. Counsel for
Appellant / Cross-Appellee
HELLRING LINDEMAN GOLDSTEIN & SIEGAL LLP By: Richard B.
Honig, Esq. Matthew E. Moloshok, Esq. and WEISBROD MATTEIS
& COPLEY PLLC By: Stephen A. Weisbrod, Esq. Counsel for
Appellee / Cross-Appellant
RENÉE MARIE BUMB, UNITED STATES DISTRICT JUDGE
before the Court are the cross-appeals of ASI, Inc.
(“Aviva”), a pre-petition judgment creditor of
the Debtor, Manley Toys Limited (“Manley
Toys”), and Toy Quest Ltd. (“Toy
Quest”), which Aviva contends-- over Toy Quest's
vigorous objections-- is an alter ego and / or a trade name
of the Debtor. On February 14, 2018 the Bankruptcy Court
granted Aviva's Motion for Sanctions upon a finding that
Toy Quest had violated the stay imposed by the Bankruptcy
Court shortly after the filing of the Debtor's Chapter 15
petition in March 2016, and granted Aviva leave to file an
additional submission seeking reasonable attorney's fees
(hereafter “the Sanctions Order”). On June 21,
2018, the Bankruptcy Court granted in part, and denied in
part, the fee petition, awarding Aviva $25, 651.00 of its
$282, 966.49 fee request (hereafter “the Fee
reasons stated herein, the Court affirms both the Sanctions
Order and the Fee Order.
The Garnishment Action
2015, before Manley Toys filed its Chapter 15 petition, Aviva
registered its judgment against Manley Toys in the United
States District Court for the Middle District of Tennessee.
Then, seeking to collect on the judgment, Aviva filed an
application for writ of execution asserting that
“Manley does business in the United States under the
trade name Toy Quest Ltd.” and, additionally,
“[t]here is also an entity in Hong Kong called Toy
Quest Ltd., with the same address as Manley, the same owners
as Manley, the same directors as Manley, and that acts
through the same employees with ‘manley.com' email
addresses, and uses the same website as Manley.”
[Bankr. Docket 16-15374, Doc. 235-2] Based on these
allegations, Aviva sought to recover, through garnishment,
$97, 654.31 which Dollar General stated it owed to Toy Quest.
To that end, Aviva filed a formal Motion for Judgment and
Execution. Dollar General deposited the funds with the Court,
and those funds remained in the Tennessee District
Court's registry awaiting a ruling as to the funds'
rightful recipient at the time Manley Toys filed its Chapter
15 petition in March 2016. Toy Quest had filed a Motion to
Intervene in the garnishment action, but the Court had not
ruled on the motion by the petition date.
December 2016, after the petition date, the Tennessee
District Court granted Toy Quest's Motion to Intervene.
Shortly thereafter, Toy Quest filed a lengthy opposition to
Aviva's Motion for Judgment and Execution. The opposition
asserted that Toy Quest is neither a trade name of Manley
Toys, nor an alter ego of Manley Toys, and therefore Aviva--
which holds a judgment against Manley Toys only-- was not
entitled to the Dollar General funds. [M.D. Tenn. Docket
3:15-mc-00015, Doc. 54] Rather, Toy Quest asserted that the
funds belonged to it (not the Debtor, Manely Toys, nor Aviva)
as Dollar General's documents reflected. [Id.]
It is the filing of this opposition by Toy Quest, in which
Toy Quest asserted the right to the funds, which the
Bankruptcy Court held violated the Stay Order.
Proceedings in New Jersey Bankruptcy Court
stated above, Manley Toys filed its Chapter 15 case and
motion on March 22, 2016. On April 1, 2016 the Bankruptcy
Court entered the Stay Order which incorporated the automatic
stay provisions of 11 U.S.C. § 326.
September 13, 2016-- before the Tennessee District Court
ruled on Toy Quest's Motion to Intervene-- Aviva sought
relief from the Stay Order, so as to pursue, among other
things, “alter ego, fraudulent transfer, or other
claims against Toy Quest Ltd. or other nondebtor affiliates
or agents of Manley and Toy Quest Ltd.” [Bankr. Docket
16-15374, Doc. 144-1] On October 25, 2016-- also before the
Tennessee District Court ruled on the Motion to Intervene--
the Bankruptcy Court, addressing Aviva's Motion for Stay
Relief, modified the Stay Order to state, in relevant part,
2. The provisional stay entered by this Court on March 24,
2016 and set forth in the Court's April 1, 2016 Order
Granting Provisional Relief and Setting Date for Further
Hearing (the “Provisional Stay”) does not apply
to any actions taken with respect to persons or entities
other than Debtor Manley Toys Limited (“Manley”),
except that, as set forth below, the Court reserves
judgment on whether the assertion of non-independent claims
such as alter ego or fraudulent transfer claims against such
persons or entities is subject to the Provisional Stay, and,
if so, whether cause exists to lift the Provisional Stay as
to such claims.
* * *
10. The Court reserves judgment on all relief requested in
Aviva's Motion for Relief from Provisional Stay not
specifically addressed herein, including: . . .
f. Whether Aviva . . . may assert non-independent claims,
including but not limited to fraudulent transfer,
unjust enrichment, conversion, and money had and received
claims, in any appropriate forum against Toy Quest Ltd.,
and/or other affiliates or agents of Manley, Manley Toy
Direct, or Toy Quest Ltd.
[Bankr. Docket 16-15374, Doc. 159] (emphasis added).
Toy Quest filed its opposition in the garnishment action,
Aviva filed the Motion for Sanctions asserting that Toy Quest
had willfully violated the Stay Order as modified. The
Bankruptcy Court granted the motion. Importantly, in the
Opinion granting Aviva's Sanctions Motion, the Bankruptcy
Court specifically stated, “[t]he Court cautions that
only those fees reasonably necessary to establishing the
elements of this Motion will be awarded.” In re
Manley Toys Ltd., 2018 WL 1033426, at *8 (Bankr. D.N.J.
Feb. 14, 2018). Aviva, however, apparently did not heed the
Court's warning; it subsequently filed a fee application
seeking an extraordinary amount-- $282, 966.49-- in fees and
costs incurred in connection with the sanctions motion. The
Bankruptcy Court found Aviva's Fee Application
“wholly unreasonable, and shock[ing to] the Court,
[t]he Fee Application requests $282, 966.49 for 518 hours of
work on the Sanctions Motion. The Court finds this beyond all
reason. Not only is the Fee Application far beyond any
comparable amount of fees granted in cases of similar
complexity, but considering only proportionality, there is
nothing reasonable about this. Aviva has requested attorney
fees that are nearly three-times the amount in controversy;
and the Court notes that these fees relate exclusively to the
Sanctions Motion, they do not include the fees Aviva is
claiming it expended on actually litigating the merits of the
Garnishment Action as a whole. The Court shudders at the
amount of money Aviva's Counsel claims to have expended
in an effort to retrieve $97, 654.31 for its client.
In re Manley Toys Ltd., 2018 WL 3213710 at *6-7
(Bankr. D.N.J. June 21, 2018).