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In Re: Yehud-Monosson Usa, Inc., Debtor. v. Habbo Fokkena

October 5, 2011

IN RE: YEHUD-MONOSSON USA, INC., DEBTOR. YEHUD-MONOSSON USA, INC., DEBTOR - APPELLANT,
v.
HABBO FOKKENA, U.S. TRUSTEE - APPELLEE,



Appeal from the United States Bankruptcy Court for the District of Minnesota

The opinion of the court was delivered by: Venters, Bankruptcy Judge.

Submitted: September 13, 2011

Before VENTERS, FEDERMAN, and SALADINO, Bankruptcy Judges.

The Debtor, Yehud-Monosson USA, Inc., appeals the bankruptcy court's order converting its Chapter 11 bankruptcy case to one under Chapter 7. An order converting a case from one chapter to another is a final order over which we have jurisdiction.*fn1 For the reasons stated below, we affirm the order of the bankruptcy court.*fn2

I. STANDARD OF REVIEW

A bankruptcy court's conversion of a bankruptcy case is reviewed for an abuse of discretion.*fn3 A court abuses its discretion when it fails to apply the proper legal standard or bases its order on findings of fact that are clearly erroneous.*fn4

II. BACKGROUND

The following facts have been gleaned from the pleadings.

A. The Prior Bankruptcy Cases.

This case is the fifth time in two years that the Debtor's 100% shareholder -- the Dr. R. C. Samanta Roy Institute of Science & Technology ("SIST") -- and president, Naomi Isaacson, have requested Chapter 11 relief through a series of related business entities involving essentially the same assets and liabilities.

The first petition was filed on March 16, 2009, by an entity known as Midwest Oil of Minnesota, LLC ("Midwest Oil") in the bankruptcy court for the District of Delaware.*fn5 That case was dismissed on September 22, 2009. Notably, in dismissing Midwest Oil and the bankruptcy cases of several related entities, the Delaware bankruptcy court stated in its order of dismissal that the "[d]ebtors have, beyond cavil, abused the bankruptcy process."*fn6 On appeal, the District Court for the District of Delaware affirmed the bankruptcy court's dismissal of the bankruptcy cases of Midwest Oil and its affiliates. The Delaware debtors further appealed the dismissal of their cases to the Third Circuit Court of Appeals, but on July 26, 2010, Midwest Oil withdrew from the appeal prior to its resolution.*fn7

On July 26, 2010, the same day it withdrew from its appeal to the Third Circuit, Midwest Oil filed a bankruptcy case in the Bankruptcy Court for the District of Minnesota, Case No. 10-35450. That case was dismissed on August 18, 2010, upon motion by the United States Trustee for Region 12. At the conclusion of the hearing on the UST's motion, the bankruptcy court in that case (Kressel, J.) commented, "I think it's (this case) been filed in bad faith and as a sort of manipulation of the system."*fn8

On September 1, 2010, Midwest Oil filed another bankruptcy case -- its third -- in the Bankruptcy Court for the District of Delaware, Case No. 10-12771. That case was dismissed on December 20, 2010, on several grounds, including a lack of good faith.*fn9 The Delaware bankruptcy court also barred Midwest Oil from filing any further petitions or pleadings in that court until it could retain counsel properly licensed to practice in Delaware.*fn10

Midwest Oil filed its fourth bankruptcy case less than a month later, on January 19, 2011, once again in the Bankruptcy Court for the District of Minnesota (Kressel, J).*fn11 This case was dismissed less than two months later, on March 9, ...


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