18‐2934‐bk
In re Maura E. Lynch
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE
OF APPELLATE PROCEDURE 32.1 AND THIS COURTʹS LOCAL RULE 32.1.1. WHEN CITING A
SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE
FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION ʺSUMMARY ORDERʺ).
A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED
BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second
Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in
the City of New York, on the 18th day of February, two thousand twenty.
PRESENT:
DENNIS JACOBS,
GUIDO CALABRESI,
DENNY CHIN,
Circuit Judges.
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In Re: MAURA E. LYNCH,
Debtor.
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MAURA E. LYNCH,
Debtor‐Appellant,
‐v‐ 18‐2934‐bk
STEPHEN VACCARO,
Creditor‐Appellee,
R. KENNETH BARNARD,
Chapter 7‐Trustee‐Appellee,
UNITED STATES TRUSTEE,
Trustee‐Appellee.
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FOR DEBTOR‐APPELLANT: MAURA E. LYNCH, pro se, Sag Harbor,
New York.
FOR CHAPTER 7‐TRUSTEE‐APPELLEE: GARY F. HERBST (David A. Blansky, on
the brief), Lamonica Herbst &
Maniscalco, LLP, Wantagh, New York.
Appeal from a judgment of the United States District Court for the Eastern
District of New York (Seybert, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED.
Debtor‐appellant Maura E. Lynch appeals from a judgment of the district
court entered September 20, 2018, affirming an order of the bankruptcy court and
dismissing her appeal. By order entered June 28, 2017, the bankruptcy court (Trust, B.J.)
converted Lynchʹs Chapter 11 case to a Chapter 7 case. The district court explained its
reasoning in a memorandum and order filed September 19, 2018. Lynch appeals. We
assume the partiesʹ familiarity with the underlying facts, the procedural history of the
case, and the issues on appeal.
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We review de novo the orders of district courts acting as appellate courts in
bankruptcy cases. See Anderson v. Credit One Bank, N.A. (In re Anderson), 884 F.3d 382,
387 (2d Cir. 2018), cert. denied sub nom. Credit One Bank, N.A. v. Anderson, 139 S. Ct. 144
(2018). In so doing, we ʺapply the same standard of review employed by the district
court to the decision of the bankruptcy court,ʺ thereby ʺreview[ing] the bankruptcy
courtʹs findings of fact for clear error and its legal determinations de novo.ʺ Id. An
order converting a bankruptcy case for cause is reviewed for abuse of discretion. See
Blaise v. Wolinsky (In re Blaise), 219 B.R. 946, 950 (2d Cir. B.A.P. 1998) (conversion from
Chapter 13 to Chapter 7 is reviewed for abuse of discretion). ʺA bankruptcy court
abuses its discretion if it bases its decision on an erroneous view of the law or clearly
erroneous factual findings,ʺ or commits a ʺclear error of judgment . . . based on all the
appropriate factors.ʺ Id. at 950.
The bankruptcy court has authority to convert a Chapter 11 proceeding to
a case under Chapter 7 for cause, after notice and hearing, where such conversion is in
the best interests of creditors and the estate. See 11 U.S.C. § 1112(b)(1). The bankruptcy
court may convert to Chapter 7 upon the motion of a party in interest, 11 U.S.C.
§ 112(b)(1), or sua sponte ʺ[as] necessary or appropriate to enforce or implement court
orders or rules, or to prevent an abuse of process.ʺ 11 U.S.C. § 105(a).
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Lynch contends that the bankruptcy court committed reversible error by
failing to give her notice and to conduct a proper hearing and because the requirements
for conversion were not met.
A. Notice and Hearing
Lynch was provided with both notice and an adequate hearing. The
bankruptcy court noted several times prior to issuing an order to show cause that it was
considering conversion of the proceedings because of Lynchʹs continuing failure to
propose a confirmable reorganization plan. The bankruptcy court gave notice orally on
July 13, 2016, and subsequently in three written orders. Moreover, Stephen Vaccaro,
Lynchʹs former husband and a creditor in the proceedings, made both written and oral
requests for Chapter 7 conversion, and Lynch was represented by counsel during the
bankruptcy proceedings. Lynch therefore received adequate notice that conversion to
Chapter 7 was requested.
Lynch also challenges the sufficiency of the hearing on June 28, 2017, when
the bankruptcy court ordered the conversion of the case to Chapter 7. But a full
evidentiary hearing is not required as long as the record permits the bankruptcy court to
ʺdraw the necessary inferencesʺ to determine cause. C‐TC 9th Ave. Pʹship v. Norton Co.
(In re C‐TC 9th Ave. Pʹship), 113 F.3d 1304, 1312‐13 (2d Cir. 1994) (concluding that
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informal hearing that offered debtor opportunity to address dismissal for bad faith was
sufficient under § 1112(b)). Although the hearing here did not focus wholly on
conversion, Lynch, Vaccaro, and the U.S. Trustee had opportunities to speak on the
conversion issue and did so. Accordingly, we conclude that Lynchʹs procedural
objections to the bankruptcy courtʹs conversion order are meritless.
B. The Merits
The bankruptcy court did not abuse its discretion in converting the case to
a Chapter 7 proceeding. The bankruptcy court identified three grounds for conversion:
(1) Lynchʹs repeated delays caused the bankruptcy estate to incur increased costs and
legal fees; (2) she failed to comply with court orders; and (3) it was apparent that she
would be unable to obtain a court‐approved disclosure statement and confirm a
reorganization plan by the deadline imposed by the bankruptcy court. See 11 U.S.C. §§
1112(b)(4)(A), (E), and (J); 11 U.S.C. § 1125(b) (requiring court approval of the disclosure
statement prior to plan confirmation); Fed. R. Bankr. P. 2002(b).
Indeed, Lynchʹs delays generated over $400,000 in legal fees, and she
continued to accrue arrears on her Wells Fargo mortgage while the bankruptcy case was
pending ‐‐ more than $700,000 in total as of June 2017. She also failed to comply with
the bankruptcy court order requiring her to obtain an approved disclosure statement by
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June 16, 2017. Finally, the U.S. Trustee explained that Lynchʹs proposed reorganization
plan was not confirmable for ʺnumerous reasons,ʺ including that the disclosure
statement provided inadequate information and the issues with respect to Vaccaro had
not been resolved. Appʹx at 567. Although, as Lynch contends, there might have been
sufficient assets in her estate to cover her debts, a year and a half had transpired with
little having been accomplished, and it was apparent that Lynch was not going to be able
to bring the matter to a successful resolution under Chapter 11. The bankruptcy court
reasonably concluded that it was in the best interest of the creditors and the estate to
convert the proceedings to a Chapter 7 liquidation.
* * *
We have reviewed the remainder of Lynchʹs arguments and conclude they
are without merit. Accordingly, we AFFIRM the judgment of the district court.
FOR THE COURT:
Catherine OʹHagan Wolfe, Clerk of Court
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