720 Livonia Development LLC

UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF NEW YORK

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In re:

Chapter 7

720 Livonia Development LLC, et al.,

Case No.: 19-47797-jmm

Debtor.

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MEMORANDUM DECISION (A) GRANTING 720 LIVONIA DEVELOPMENT LLC’S

MOTION FOR SUMMARY JUDGMENT TO DISALLOW AND EXPUNGE PROOF OF

CLAIM NUMBER 3 FILED BY MELUCHIM HOLDINGS LLC, AND (B) DENYING

MELUCHIM HOLDINGS LLC’s MOTION FOR SUMMARY JUDGMENT

J. Ted Donovan, Esq. Melissa A. Peña, Esq.

Goldberg Weprin Finkel Goldstein LLP Norris Mclaughlin, P.A.

125 Park Avenue 7 Times Square

12th Floor 21st Floor

New York, NY 10017 New York, New York 10036

Counsel for Meluchim Holdings LLC Counsel for 720 Livonia Operations LLC

INTRODUCTION

Chaim Landau (“Landau”) and Meluchim Holdings LLC (“Meluchim” and together with

Landau, the “Claimants”) assert a $500,000 general unsecured claim against 720 Livonia

Development LLC (the “Livonia Debtor”). 720 Livonia Operations LLC (“Operations”), which

holds membership interests in the Livonia Debtor, has moved for summary judgment seeking

disallowance of the claim arguing that an adverse state court judgment entered against Landau

precludes Claimants from asserting a claim in this case, and, if not barred by res judicata, the

claim should be disallowed because the Claimants failed to prove the claim.

Meluchim, the sole petitioning creditor in this involuntary bankruptcy case, contends it is

law of the case that its $500,000 claim is an allowed claim because the Order for Relief was a

determination that Meluchim’s claim was a bona fide claim as to liability and amount.

Additionally, Claimants contend Operations does not have standing to object to the claim

because Operations’ managers did not authorize the claim objection. Moreover, Claimants argue

the adverse judgment does not bar Meluchim from asserting the claim because Meluchim was

not a party to the state court action. Lastly, Claimants assert they have met their burden of proof

regarding the validity of the claim. Claimants have moved for summary judgment allowing the

claim.

For the reasons set forth below, the Court finds that Claimants’ claim is barred by the

doctrine of res judicata. Meluchim, as well as Landau, is bound by the adverse judgment

because Meluchim is in privity with Landau. If the claim were not barred by res judicata, the

claim would be disallowed based on Claimants’ failure to prove the claim by a preponderance of

the evidence. Further, the law of the case doctrine does not preclude Operations from objecting

to the claim and Operations has standing to bring the claim objection. Therefore, Operations’

motion for summary judgment is granted and Claimants’ motion for summary judgment is

denied.

JURISDICTION AND VENUE

The Court has jurisdiction to hear and determine these contested matters under 28 U.S.C.

§§ 157(a), 157(b)(1) and 1334(b), and the Eastern District of New York Standing Order of

Reference, dated August 28, 1986, as amended by Order, dated December 5, 2012. These

matters are core proceedings under 28 U.S.C. §§ 157(b)(2)(A), (B) and (O). This decision

constitutes the Court’s findings of fact and conclusions of law to the extent required by Rule

7052 of the Federal Rules of Bankruptcy Procedure. Venue of this case and these matters are

proper pursuant to 28 U.S.C. §§ 1408 and 1409.

BACKGROUND

The Debtors’ Bankruptcy Case

On December 31, 2019 (the “Petition Date”), Meluchim filed involuntary petitions for

relief under chapter 7 against the Livonia Debtor and MG Livonia LLC (the “MG Debtor” and

together with the Livonia Debtor, the “Debtors”). In re Livonia Development LLC, Case No. 19-

47797, ECF No. 1; In re MG Livonia LLC, Case No. 19-47798, ECF No. 1. Meluchim was the

sole petitioning creditor. Id. The Debtors did not respond to the involuntary petitions and on

January 31, 2020, the Court entered orders for relief under chapter 7 in both bankruptcy cases.

Order for Relief under Chapter 7, Case No. 19-47797, ECF No. 5; Order for Relief under

Chapter 7, Case No. 19-47798, ECF No. 5.

On February 5, 2020, Gregory Messer was appointed the interim chapter 7 trustee for

each Debtor’s estate. Notice of Appointment of Trustee Gregory Messer, Case No. 19-47797,

ECF No. 6; Notice of Appointment of Trustee Gregory Messer, Case No. 19-47798, ECF No. 6.

He has since qualified as the permanent chapter 7 trustee in each case. On September 8, 2020,

the Court ordered the Debtors’ cases be jointly administered. Order Granting Mot. for Joint

Administration on Lead Case: 19-47797-cec 720 Livonia Development LLC with Member Case:

19-47798-cec MG Livonia LLC., Case No. 19-47797, ECF No. 26; Order Granting Mot. for

Joint Administration on Lead Case: 19-47797-cec 720 Livonia Development LLC with Member

Case: 19-47798-cec MG Livonia LLC., Case No. 19-47798, ECF No. 22.

As of the Petition Date, the Debtors owned real property commonly known as 720

Livonia Avenue, Brooklyn, New York (the “Real Property”). Schedule A/B Assets Real and

Personal Property, Attach. 1, Case No. 19-47797, ECF No. 57. The Debtors purchased the Real

Property in June 2015 for $4,650,000. Mot. Summ. J. Allowing Claim No. 3 on behalf of Chaim

Landau, Meluchim Holdings LLC, Ex. H, Case No. 19-47797, ECF No. 128. The Debtors held

the Real Property as tenants in common with the Livonia Debtor owning a 95% interest and the

MG Debtor owning a 5% interest. Id. The Real Property was encumbered by a mortgage held

by Track Data Corporation. Claims Register, Case No. 19-47797, Claim No. 4. On December

19, 2019, the Supreme Court for the State of New York, Kings County entered a judgment of

foreclosure and sale in favor of Track Data Corporation respecting the Real Property. Id.

The chapter 7 trustee sold the Real Property at auction for $10,970,000. Statement

/Report of Sale of the Real Property at a Virtual Public Auction Held on December 22, 2020,

Case No. 19-47797, ECF No. 56. As of May 9, 2023, the chapter 7 trustee was holding

approximately $4,635,413 for the benefit of the Livonia Debtor’s estate. May 9, 2023 Hr’g

126:40, In re Livonia Development LLC, Case No. 19-47797. The chapter 7 trustee believes

after payment of administrative expenses and allowed proofs of claims in full (excluding the

Meluchim/Landau POC), the chapter 7 trustee will have between $3 million to $3.5 million

remaining for distribution to holders of membership interests in the Livonia Debtor. Id.

On February 15, 2021, Schedules of Assets and Liabilities and a Statement of Financial

Affairs were filed on behalf of the Livonia Debtor. Schedules, Statements and Affidavit

Pursuant to E.D.N.Y. LBR 1007-1(b), Case No. 19-47797, ECF No. 57. The Schedules and

Statement of Financial Affairs were signed under penalty of perjury by Yechezkel Strulovitch

(“Strulovitch”) as the Livonia Debtor’s managing member. Id.

Meluchim’s and Landau’s Proof of Claim

Landau is Meluchim’s sole member. Statement Undisputed Facts (Stipulated Between

Parties) ¶ 6, Case No. 19-47797, ECF No. 123. On November 3, 2020, Claimants filed a proof

of claim, identified on the claims register of the Livonia Debtor, as amended, as Proof of Claim

Number 3-2 (the “Meluchim/Landau POC”). Claims Register, Case No. 19-47797, Claim No. 3-

2 at 1. The Claimants assert they are owed $728,452.02 as of the Petition Date. Id. Claimants

characterized their claim as one for repayment of a loan. Id. However, as set forth more fully

below, the genesis of the claim is Landau’s agreement with Strulovitch for Landau to invest

$500,000 to purchase the Real Property. The difference between the $728,452.02 claim amount

and the $500,000 investment is interest, calculated at 9% per annum. Claims Register, Case No.

19-47797, Claim No. 3-2 at 1.

Pre-Petition Date Litigation Concerning Claimants’

Claims against Strulovitch and the Debtors

On December 2, 2014 (approximately seven months prior to the Debtors’ purchase of the

Real Property), Landau caused Meluchim to fund a $500,000 cashier’s check payable to CS

Construction Group, LLC (“CS Construction”). Statement Undisputed Facts (Stipulated

Between Parties) at ¶¶ 1-3, Case No. 19-47797, ECF No. 123. Strulovitch was a managing

member of CS Construction. Mem. Law Opp’n Mot. Summ. J. by Meluchim Holdings LLC and

Chaim Landau for Allowance of Claim No. 3, Ex. 3 at ¶ 1, Case No. 19-47797, ECF No. 129.

See Mot. Summ. J. Expunding [sic] Claim No. 3 filed by Meluchim Holdings Inc. [sic] and

Chaim Landau on behalf of 720 Livonia Operations, Ex. A at ¶ 11, Ex. D at 11, Case No. 19-

47797, ECF No. 124.

On August 11, 2015 (approximately two months after the Debtors purchased the Real

Property), Landau and Strulovitch entered into a partnership agreement (the “Partnership

Agreement”). Statement Undisputed Facts (Stipulated Between Parties) at ¶ 6, Case No. 19-

47797, ECF No. 123. The Partnership Agreement acknowledges that Landau “provided five

hundred thousand dollars prior to the purchase of the [Real Property] for the purpose of

purchasing the [Real Property][] – [Strulovitch] invested approximately $950,000.” Statement

Undisputed Facts (Stipulated Between Parties), Ex. C at 4, Case No. 19-47797, ECF No. 123.

Under the Partnership Agreement, Strulovitch and Landau agreed that:

All proceeds of leasing, selling or refinancing, will be received and shared by the

two parties proportionate to their investment in the deal.

After all parties have received their money back, [Strulovitch] will receive the sum

of seven percent of the profit in return for his developing; thereafter, profit will be

shared proportionate to their investments.

Id.

Landau claims he did not receive any proceeds from the Real Property. Mot. Summ. J.

Allowing Claim No. 3 on behalf of Chaim Landau, Meluchim Holdings LLC, Attach. 1 at ¶ 18,

Case No. 19-47797, ECF No. 128. Landau also claims Strulovitch breached the Partnership

Agreement by naming the Debtors as the owners on the Real Property’s deed and denying that

Landau owns an interest in the Debtors. Statement Undisputed Facts (Stipulated Between

Parties) at ¶ 9, Case No. 19-47797, ECF No. 123.

On January 29, 2016, Landau commenced an action in the Supreme Court of New York

against Strulovitch and the Debtors (the “State Court Action”). Statement Undisputed Facts

(Stipulated Between Parties) at ¶ 8, Case No. 19-47797, ECF No. 123. By the Complaint,

Landau sought: a declaratory judgment against the Debtors and Strulovitch that Landau has an

ownership interest in the Property; a money judgment against Strulovitch for damages arising

from breach of contract, fraud, and breach of fiduciary duty; a constructive trust on the Real

Property; a money judgment against the Debtors and Strulovitch for unjust enrichment; an

accounting from Strulovitch; and an injunction restraining Strulovitch and the Debtors from

transferring or encumbering the Real Property. Id. at ¶ 11.

Landau also brought his dispute with Strulovitch to the Beis Din (Court of Jewish Law).

Mot. Summ. J. Allowing Claim No. 3 on behalf of Chaim Landau, Meluchim Holdings LLC,

Attach. 1 at ¶ 3, Case No. 19-47797, ECF No. 128. The Debtors are not named as parties to that

action. Id. On or about June 29, 2016, the Rabbinical Court approved an agreement (the

“Settlement”) between Landau and Strulovitch. Mot. Summ. J. Allowing Claim No. 3 on behalf

of Chaim Landau, Meluchim Holdings LLC, Ex. I, Case No. 19-47797, ECF No. 128. It appears

Strulovitch signed the Settlement in his individual capacity and not on behalf of the Debtors. Id.

Under the Settlement, Strulovitch agreed to pay Landau $500,000 by July 29, 2016, in full

settlement of Landau’s claims. Id. If Strulovitch failed to pay timely, then Landau could cancel

the Settlement and sue in secular court for the full amount he believed he was owed. Id.

Apparently, Strulovitch failed to pay Landau the $500,000 by July 29, 2016, because Landau

continued to prosecute the State Court Action.

The Hon. Loren Baily-Schiffman, Supreme Court of the State of New York, Kings

County, conducted a bench trial in the State Court Action on July 10, 2019. Due to Strulovitch’s

and the Debtors’ refusal to appear for a deposition, they were precluded from testifying at trial.

Statement of Undisputed Facts (Stipulated Between the Parties) on behalf of Chaim Landau,

Meluchim Holdings LLC, Ex. F, Case No. 19-47797, ECF No. 126. However, Strulovitch’s and

the Debtors’ counsel argued that Landau was not owed money because the venture had failed

and the Real Property was in foreclosure, albeit no evidence was offered that the venture had

failed or was unprofitable. Id. After the close of evidence, Strulovitch and the Debtors moved

for judgment as a matter of law. Id. 3-4. Justice Bailey-Schiffman granted Strulovitch’s and the

Debtors’ motion and issued a decision and order on December 18, 2019, dismissing Landau’s

claims (the “State Court Judgment”). Id.

Justice Baily-Schiffman dismissed Landau’s claim that he has an ownership interest in

the Real Property because Landau failed to prove his precise percentage ownership, stating:

The only evidence about the parties' share of the partnership is contained in the

"Partnership Agreement" which states, "the developer [Strulovitch] invested

approximately nine hundred fifty thousand [dollars]" (emphasis added). Plaintiff

has failed to prove what his interest in the partnership is, as the only evidence

Plaintiff submitted was an approximation. Accordingly, this Court cannot issue a

declaratory judgment as to Plaintiff's interest as it is unknown what that interest is.

Plaintiff's claim for a declaratory judgment is, therefore, dismissed.

Id. at 4.

Justice Baily-Schiffman dismissed Landau’s breach of contract claim, which was based

on Strulovitch’s failure to record Landau’s ownership interest in the Real Property or to pay

Landau his share of the proceeds from a refinancing of the Real Property. Id. at 4-5. The Justice

dismissed that claim because the Partnership Agreement did not require Strulovitch to record

Landau’s interest in the Real Property and Landau failed to prove that Strulovitch (or any other

investor) received money from any refinancing. Id.

Justice Baily-Schiffman dismissed Landau’s fraud claims because Landau failed to prove

his reliance on Strulovitch’s statements respecting the Real Property was reasonable. Id. at 6.

Although Justice Baily-Schiffman found Strulovitch owed a fiduciary duty to Landau, she

dismissed Landau’s breach of fiduciary duty claim based on Landau’s failure to prove

Strulovitch’s misconduct or a causal relationship between the purported misconduct and

Landau’s damages. Id. at 7.

The Justice dismissed Landau’s claims for constructive trust stating “[Landau] has not

addressed [his] claim of constructive trust nor proven that he meets the required elements.

Accordingly, Plaintiff’s claim for a constructive trust is dismissed for failure of proof.” Id. at 8.

Justice Baily-Schiffman dismissed Landau’s claim for unjust enrichment because, assuming

Strulovitch and the Debtors were enriched, Landau failed to show Strulovitch’s and the Debtors’

“enrichment” was at his expense; noting the $500,000 payment to CS Construction came from

Meluchim, not Landau. Id. at 9. The Justice dismissed Landau’s claim for an accounting

because he never had an ownership interest in and did not directly do business with the Debtors.

Id.

Landau did not appeal from the State Court Judgment. Instead, two days after entry of

the State Court Judgment and approximately two weeks after entry of Track Data Corporation’s

Judgement of Foreclosure and Sale, Meluchim filed the involuntary petitions commencing the

Debtors’ bankruptcy cases.

The Overseas Investors

On November 24, 2020, a group of over 120 individuals and entities (the “Overseas

Investors”) filed a proof of claim against the Livonia Debtor (the “Overseas Investors POC”).

Claims Register, Case No. 19-47797, Claim No. 5. Operations is listed as one of the Overseas

Investors. Overseas Investors POC, Ex. A. Operations owns 46% of the membership interests in

the Livonia Debtor. Mot. Summ. J. Expunding [sic] Claim No. 3 filed by Meluchim Holdings

Inc. [sic] and Chaim Landau on behalf of 720 Livonia Operations, Ex. D at 1, Case No. 19-

47797, ECF No. 124.

The Overseas Investors assert claims based on unjust enrichment, conversion,

constructive trust, equitable lien, and securities fraud and allege that Strulovitch and Mici

Oberlander (“Oberlander”) defrauded over 180 people by persuading them to invest over $20

million in approximately twenty New York City properties. Overseas Investors POC,

Addendum at ¶ 4. More specifically, the Overseas Investors allege that Strulovitch and

Oberlander persuaded investors to invest funds to purchase and renovate real properties. The

investors would purchase membership interests in limited liability companies. Id. The limited

liability companies were then, in turn, given a 45 or 46 percent interest in one of 22 limited

liability companies (the “Holding Companies”) that held title to the real properties. Id. CSRE

LLC, an entity wholly owned by Strulovitch and Oberlander would own the remaining 54 or 55

percent of the Holding Companies’ membership interests. Id. The Overseas Investors allege that

Strulovitch and Oberlander diverted the investments away from the Holding Companies to their

personal bank accounts or other entities they controlled. Id. at ¶ 7.

Meluchim objected to the Overseas Investors POC alleging, among other things, that the

Overseas Investors were not creditors or equity holders of the Debtors but were merely investors

in limited liability companies that, in turn, held interests in the Debtors. Mot.

Object/Reclassify/Reduce/Expunge Claims: Claim No. 5 on behalf of Meluchim Holdings LLC,

Case No. 19-47797, ECF No. 75. Subsequently, the Overseas Investors withdrew the Overseas

Investors POC. Withdrawal of Claim No. 5, Case No. 19-47797, ECF No. 98. Notwithstanding

the claim withdrawal, Claimants do not dispute that Operations holds equity interests in the

Livonia Debtor.

The 720 Livonia Debtor Operating Agreement

The Livonia Debtor Operating Agreement states it is effective as of February 10, 2015,

the Livonia Debtor is owned 54% by CSRE LLC and 46% by Operations, and that CSRE shall

be the Livonia Debtor’s managing member. Mot. Summ. J. Expunding [sic] Claim No. 3 filed

by Meluchim Holdings Inc. [sic] and Chaim Landau on behalf of 720 Livonia Operations Ex. D

at 12, Case No. 19-47797, ECF No. 124. The Livonia Debtor Operating Agreement recites that

the Livonia Debtor’s purpose is to acquire and develop the Real Property. Id. at § 2. It also

states it will cost $8 million to acquire and develop the Real Property, Operations shall contribute

or loan $3.4 million to the Livonia Debtor and CSRE shall obtain loans secured by the Real

Property for the balance. Id. at § 7.

The Livonia Debtor Operating Agreement contains provisions concerning Operations’

management including that Operations’ members agree that Operations’ business and affairs will

be managed by Strulovitch and Oberlander. Id. at §§ 5(b) (i), (iii), 14. The Court has not been

provided with Operations’ operating agreement.

Strulovitch signed the Livonia Debtor Operating Agreement as manager of each of the

Livonia Debtor, Operations, and CSRE LLC. Id. at 7. The Livonia Debtor Operating

Agreement contemplates it is to be signed by Operations’ members, however, the signature page

for only one member – who contributed $38,760.00 and holds a .513% interest in Operations –

has been provided to the Court. Mot. Summ. J. Expunding [sic] Claim No. 3 filed by Meluchim

Holdings Inc. [sic] and Chaim Landau on behalf of 720 Livonia Operations, Ex. D, Schedule B,

Case No. 19-47797, ECF No. 124.

The Overseas Investors claim they replaced Strulovitch and Oberlander with Binyomin

Schonberg, Raphael Baruch Elkaim, and Binyomin Halpern as Operations’ managers in

September 2019. See Mem. Law Supp. (Further) on behalf of 720 Livonia Operations LLC, Ex.

B, Case No. 19-47797, ECF No. 133.

The Claim Objection

On November 15, 2021, Operations and the other Overseas Investors objected to the

Meluchim/Landau POC. Mot. by Creditors and Equity Interest Holder for Entry of an Order,

Pursuant to Rule 3007 of the Federal Rules of Bankruptcy Procedures and 11 U.S.C. §§ 105 and

502 Disallowing Claim No. 3, Case No. 19-47797, ECF No. 74. Operations is the sole objector

as the remaining Overseas Investors conceded they are not parties in interest.

Operations argues the Meluchim/Landau POC must be disallowed because Landau and

Meluchim have no legal basis for asserting a claim for repayment of a loan with interest and

have failed to document the claim. Id. at ¶¶ 27, 30. Operations also contends the State Court

Judgment precludes Landau from asserting a claim against the Livonia Debtor. Id. at ¶ 31.

Further, Meluchim does not have a claim against the Livonia Debtor because any payment it

made was on Landau’s behalf. Id. at ¶ 29.

In the alternative, Operations requests the Court subordinate the claim under Bankruptcy

Code section 510(b). Id. at ¶¶ 32-27. That section requires subordination of claims related to the

purchase or sale of an equity interest in a debtor to the claims and interests senior or equal to the

claim or interest represented by such security. 11 U.S.C. § 510(b).

The Motions for Summary Judgment

Operations and Claimants each have moved for summary judgment. Mot. Summ. J.

Expunding [sic] Claim No. 3 filed by Meluchim Holdings Inc. [sic] and Chaim Landau on behalf

of 720 Livonia Operations, Case No. 19-47797, ECF No. 124; Mot. Summ. J. Allowing Claim

No. 3 on behalf of Chaim Landau, Meluchim Holdings LLC, Case No. 19-47797, ECF No. 128.

Claimants argue that Operations does not have standing to object to the

Meluchim/Landau POC because the claim objection was not duly authorized by Operations’

manager. Claimants’ Reply Mem. Law Further Supp. of Mot. Summ. J. at 2-3, Case No. 19-

47797, ECF No. 132.

Next, Claimants argue the Overseas Investors cannot object to the Meluchim/Landau

POC because the claim is an allowed claim by virtue of the law of the case doctrine. Mot.

Summ. J. Allowing Claim No. 3 on behalf of Chaim Landau, Meluchim Holdings LLC at 9-10,

Case No. 19-47797, ECF No. 128. In that regard, as Meluchim was the sole petitioning creditor,

the Order for Relief was a determination that Meluchim’s claim is a bona fide claim as to

liability and amount. Id. Further, Meluchim argues it has produced evidence of its claim,

including the Partnership Agreement, the Settlement, Landau’s testimony, and the Creditor

Matrix filed in the Livonia Debtor’s case, which lists Meluchim as a creditor. Id. at 13-14.

Although not entirely clear, it appears Claimants contend that, notwithstanding the adverse State

Court Judgment, Meluchim must have a claim against the Livonia Debtor because Meluchim

paid $500,000, and, that claim must be one for a loan repayment or reimbursement because the

State Court dismissed all other theories of recovery (such as unjust enrichment, breach of

fiduciary duty, fraud, and breach of contract). Id. at 12-13. Claimants also contend the State

Court’s sole reason for dismissing Landau’s unjust enrichment claim was that Meluchim was not

the plaintiff in the State Court Action. Id. Therefore, Meluchim should be permitted to assert

the unjust enrichment claim in this Court. Id.

In its motion for summary judgment, Operations argues the Meluchim/Landau POC is

barred by res judicata because the claim arises out of the same transaction or series of

transactions as the claims in the State Court Action. Mot. Summ. J. Expunding [sic] Claim No. 3

filed by Meluchim Holdings Inc. [sic] and Chaim Landau on behalf of 720 Livonia Operations at

6-8, Case No. 19-47797, ECF No. 124. Operations also claims Meluchim has not proven its

claim as there are no loan documents and no proof the Debtors received the $500,000. Id. at 8.

Lastly, Operations contends the objection to the Meluchim/Landau Claim was duly authorized

by its managers. Mem. Law Supp. (Further) on behalf of 720 Livonia Operations LLC at 4, Case

No. 19-47797, ECF No. 133.

DISCUSSION

I. The Law of the Case Doctrine Does Not Preclude the

Court from Considering Operations’ Claim Objection

Claimants contend it is the law of the case that the Meluchim/Landau POC is an allowed

unsecured claim against the Livonia Debtor. Mot. Summ. J. Allowing Claim No. 3 on behalf of

Chaim Landau, Meluchim Holdings LLC at 9, Case No. 19-47797, ECF No. 128. They argue an

involuntary bankruptcy case may be commenced only by a holder of a claim against a debtor that

is not the subject of a bona fide dispute as to liability or amount. Id. at 10-11. As Meluchim was

the only petitioning creditor, the Order for Relief is a determination by this Court that there is no

dispute concerning the liability or amount of Claimants’ $500,000 claim.

The Second Circuit Court of Appeals defines the law of the case doctrine as follows:

The law of the case doctrine has two branches. The first requires a trial court to

follow an appellate court's previous ruling on an issue in the same case. United

States v. Uccio, 940 F.2d 753, 757 (2d Cir. 1991) (citing United States v. Cirami,

563 F.2d 26, 32 (2d Cir. 1977)). This is the so-called “mandate rule.” United States

v. Tenzer, 213 F.3d 34, 39–40 (2d Cir. 2000). The second and more flexible branch

is implicated when a court reconsiders its own ruling on an issue in the absence of

an intervening ruling on the issue by a higher court. It holds “that when a court has

ruled on an issue, that decision should generally be adhered to by that court in

subsequent stages in the same case,” Uccio, 940 F.2d at 758, unless “cogent” and

“compelling” reasons militate otherwise, Tenzer, 213 F.3d at 39.

United States v. Quintieri, 306 F.3d 1217, 1225 (2d Cir. 2002).

The law of the case doctrine “‘expresses the practice of courts generally to refuse to

reopen what has been decided,’ but it does not ‘limit [a court’s] power.’” Musacchio v. U.S., 577

U.S. 237, 245, 136 S.Ct. 709, 716, 193, L.Ed.2d 639, 649 (2016) (quoting Messenger v.

Anderson, 225 U.S. 436, 444, 32 S.Ct. 739, 740, 56 L.Ed. 1152, 1156 (1912)); see Zdanok v.

Glidden Co., Durkee Famous Foods Div., 327 F.2d 944, 953 (2d Cir. 1964) (“[W]here litigants

have once battled for the court’s decision, they should neither be required, nor without good

reason permitted, to battle for it again.”). The doctrine “does not rigidly bind a court to its

former decisions but is only addressed to its good sense.” Johnson v. Holder, 564 F.3d 95, 99

(2d Cir. 2009) (quoting Higgins v. Cal. Prune & Apricot Grower, Inc., 3 F.2d 896, 898 (2d Cir.

1924)); see In re Hypnotic Taxi LLC, 543 B.R. 365, 372 (Bankr. E.D.N.Y. 2016) (“Application

of law of the case is not mandatory; it is a discretionary doctrine which does not constitute a

limitation on the court's power but merely expresses the general practice of refusing to reopen

what has been decided.”).

The Court should apply the law of the case doctrine to avoid undue prejudice. As stated

by the Second Circuit Court of Appeals:

"The decision whether or not to apply law-of-the-case is . . . informed principally

by the concern that disregard of an earlier ruling not be allowed to prejudice the

party seeking the benefit of the doctrine." Id. (citing United States v. Birney, 686

F.2d 102, 107 (2d Cir. 1982); First National Bank of Hollywood v. American Foam

Rubber Corp., 530 F.2d 450, 453 n.3 (2d Cir.), cert. denied, 429 U.S. 858, 50 L.

Ed. 2d 135, 97 S. Ct. 157 (1976)). "Prejudice" in this context "does not mean harm

resulting from the failure to adhere to the prior decision," but instead "'refers to a

lack of' . . . sufficient 'opportunity to prepare armed with the knowledge that'" the

prior ruling is not deemed controlling. Id. (quoting Birney, 686 F.2d at 107).

Prisco v. A & D Carting Corp., 168 F.3d 593, 607 (2d Cir. 1999).

The law of the case doctrine should not preclude the Court from considering Operations

objection to the Meluchim/Landau POC because Claimants have had notice of Operations’ claim

objection and the opportunity to respond. Accordingly, Claimants were not deprived of an

opportunity to prepare and are not unduly prejudiced.

That Operations could not be heard on the involuntary petition is a compelling reason

not to apply the law of the case doctrine. An involuntary bankruptcy case is commenced by

filing the involuntary petition and serving the summons and petition on the alleged debtor. Fed.

R. Bankr. P. 1010(a). The petitioning creditor is not required to provide notice of the petition to

other creditors. Id. Only the debtor may answer or respond to an involuntary petition for relief.

11 U.S.C. § 303(d); see In re MarketXT Holdings Corp., 347 B.R. 156, 160 (Bankr. S.D.N.Y.

2006) (denying creditor’s motion to dismiss involuntary bankruptcy case after entry of order for

relief due, in part, on creditor’s lack of standing and stating “the sufficiency of an involuntary

petition may only be challenged by the debtor and not by creditors or third parties”). If the

involuntary petition is not timely controverted by the debtor, the court must enter an order for

relief. 11 U.S.C. § 303(h). See Sphere Hospitality Group, LLC v. Bella Hospitality Group LLC,

(In re Bella Hosp. Grp., LLC), 649 B.R. 200, 205 (B.A.P. 9th Cir. 2023) (where debtor waived

right to seek dismissal of involuntary case after entry of the order for relief, notwithstanding

petitioning creditor was ineligible to commence involuntary case because it purchased a claim

for the sole purpose of commencing the case.).

Here, the Debtors failed to respond to the involuntary petition and the Court entered the

Orders for Relief without any proceedings to determine the validity of Meluchim’s claims.

Order for Relief under Chapter 7, Case No. 19-47797, ECF No. 5; Order for Relief under

Chapter 7, Case No. 19-47798, ECF No. 5. The Livonia Debtor may have had no economic

incentive to controvert the involuntary petition because a judgment of foreclosure and sale

already had been entered. At that point, it may have appeared there was no equity in the Real

Property. Alternatively, the Livonia Debtor may have determined a chapter 7 sale of the Real

Property would be preferable to a foreclosure sale. Regardless of the reason, the Court was

required to enter Orders for Relief once the deadline for the Debtors to controvert the involuntary

petitions expired.

Assuming Operations had notice of the involuntary petition and the inclination to

controvert it, the Court could not have considered Operations’ objection to the bona fides,

liability, or amount of Meluchim’s claim. Further, the Court observes that Meluchim

commenced this bankruptcy case two days after the State Court determined that Landau was

owed no money by, and was not entitled to equitable relief against, the Debtors. Therefore,

Claimants’ belief that they were creditors of the Debtors, entitled to file involuntary petitions for

relief, may not have been reasonable.

Anecdotally, in the early stages of a bankruptcy case, the Court cannot know the legal

rights and motivations of the debtor or creditors. If an involuntary petition is not controverted by

a debtor, the Court cannot know whether the petitioning creditor’s claims are bona fide or

whether the involuntary petition is a “friendly” involuntary, filed with a debtor’s tacit consent, to

prevent other creditors from enforcing their rights and remedies.

For the reasons set forth above, the Court holds that the law of the case doctrine does not

preclude Operations from objecting to the Meluchim/Landau POC.

II. Standard for Summary Judgment

Rule 56(c) of the Federal Rules of Civil Procedure, as incorporated by Bankruptcy Rule

7056(c), provides that summary judgment should be granted to the moving party if the Court

determines that “the pleadings, depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no genuine issue as to any material fact and

that the moving party is entitled to judgment as a matter of law.” Celotex Corp. v. Catrett, 477

U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265, 273 (1986) (quoting Fed. R. Civ. P. 56(c))

(internal quotation marks omitted). A movant has the initial burden of establishing the absence

of any genuine issue of material fact. Celotex, 477 U.S. at 322–23, 106 S.Ct. at 255, 91 L.Ed.2d

at 273. A fact is “material” if it “might affect the outcome of the suit under the governing law.”

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202, 211

(1986). An issue of fact is genuine “if the evidence is such that a reasonable jury could return a

verdict for the nonmoving party.” Id. If the movant meets its initial burden, the nonmoving

party “must do more than simply show that there is some metaphysical doubt as to the material

facts.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct.

1348, 1356, 89 L.Ed.2d 538, 552 (1986). “If the evidence is merely colorable, or is not

significantly probative, summary judgment may be granted.” Anderson, 477 U.S. at 249–50, 106

S.Ct. at 2511, 91 L.Ed.2d at 212 (internal citations omitted). “As a general rule, all ambiguities

and inferences to be drawn from the underlying facts should be resolved in favor of the party

opposing the motion, and all doubts as to the existence of a genuine issue for trial should be

resolved against the moving party.” Brady v. Town of Colchester, 863 F.2d 205, 210 (2d Cir.

1988) (citing Celotex Corp., 477 U.S. at 330, 106 S.Ct. at 2557, 91 L.Ed.2d at 278 (Brennan, J.,

dissenting)); see also Tomka v. Seiler Corp., 66 F.3d 1295, 1304 (2d Cir. 1995); Burrell v. City

Univ. of New York, 894 F.Supp. 750, 757 (S.D.N.Y. 1995). “If, when viewing the evidence

produced in the light most favorable to the non-movant, there is no genuine issue of material

fact, then the entry of summary judgment is appropriate.” Pereira v. Cogan, 267 B.R. 500, 506

(S.D.N.Y. 2001); see Burrell, 894 F.Supp. at 758 (citing Binder v. Long Island Lighting Co., 933

F.2d 187, 191 (2d Cir.1991)); see also In re Oak Rock Fin., LLC, 527 B.R. 105, 113 (Bankr.

E.D.N.Y. 2015).

III. Operations has Standing to Object to the Meluchim/Landau POC.

Claimants argue that Operations lacks standing to object to the Meluchim/Landau POC

because Operations’ managing members did not duly authorize Operations to file the objection.

A limited liability company’s operating agreement determines who may bring a legal

action on the company’s behalf. See In re E. End Dev., LLC, 491 B.R. 633, 638 (Bankr.

E.D.N.Y. 2013). If the company does not have an operating agreement, New York’s Limited

Liability Company Law governs. In re Eight of Swords, LLC, 96 A.D.3d 839, 839, 946

N.Y.S.2d 248, 249 (2012); Spires v. Casterline, 4 Misc. 3d 428, 435–36, 778 N.Y.S.2d 259,

265–66 (Sup. Ct. 2004). New York’s Limited Liability Company Law does not state specifically

who may initiate a suit on behalf of a limited liability company but sets forth, generally, who has

authority to act on the company’s behalf. N.Y. Ltd. Liab. Co. Law § 401 (McKinney 2019).

Under New York law, unless the company’s articles of organization provide for it to be

managed by managers, management of the limited liability company vests in its members. Id.

Additionally, except as provided in the operating agreement, managers of a limited liability

company may be removed or replaced, with or without cause, by a vote of a majority in interest

of the members entitled to vote and members are permitted to provide written consent to act in

lieu of an actual vote. N.Y. Ltd. Liab. Co. Law §§ 407, 414 (McKinney 2019); see Overhoff v.

Scarp, Inc., 2005, 12 Misc.3d 350, 360, 812 N.Y.S.2d 809, 817 (Sup. Ct. 2005).

Neither the Claimants nor Operations produced Operations’ operating agreement,

assuming one exists. The only document produced to the Court purporting to govern

Operations’ management is the Livonia Debtor Operating Agreement, which provides for

Operations to be managed by Strulovitch and Oberlander. Mot. Summ. J. Expunding [sic] Claim

No. 3 filed by Meluchim Holdings Inc. [sic] and Chaim Landau on behalf of 720 Livonia

Operations Ex. D § 5(b), Case No. 19-47797, ECF No. 124. The Livonia Debtor Operating

Agreement is silent respecting the rights of Operations’ members to replace the managers.

Therefore, under New York law, a majority of Operations’ members may vote to replace

Operations’ managers. Operations has provided the Court with written consent from a majority

of its members to replace Strulovitch and Oberlander with Binyomin Schonberg, Raphael Baruch

Elkaim, and Binyomin Halpern as Operations’ managers. See Mem. Law Supp. (Further) on

behalf of 720 Livonia Operations LLC, Ex. B, Case No. 19-47797, ECF No. 133. The Claimants

have not produced evidence supporting their contention that Operations’ members were not

permitted to replace Strulovitch and Oberlander as managers or that the vote of Operations’

members did not comport with New York law. Based on the foregoing, the Court finds that

Operations has established, by a preponderance of the evidence, that it is duly authorized to

object to the Meluchim/Landau POC.

Additionally, it is questionable whether Claimants have standing to seek dismissal of the

claim objection based on lack of due authorization. Where an entity’s insider brings an action

on behalf of that entity, a non-insider lacks standing to object to due authorization. See

Rothman & Schneider, Inc. v. Beckerman, 2 N.Y.2d 493, 498–99 141 N.E.2d 610, 613–14

(1957) (holding a company’s officer was authorized to institute lawsuit and defendants who

were “complete strangers to the corporation and actually charged with converting a portion of

its assets, should not be permitted to question his authority and thereby frustrate the action.”);

see also § 4216. Authority to institute or defend suit, 9 Fletcher Cyc. Corp. § 4216 (“Generally,

if a corporation does not object to an officer’s lack of authority to initiate a lawsuit, a third

person may not object.”); Cf. § 8:10. Authorization to file—On behalf of corporation—Standing

to challenge authorization to file, 1 Bankruptcy Desk Guide § 8:10 (“[A] creditor lacks standing

to challenge the entity’s authority to file [bankruptcy] based solely on the grounds that the board

of directors failed to comply with its own certificate of incorporation, bylaws, or with

procedural requirements of state law.”).

IV. Res judicata

Operations argues the Meluchim/Landau POC must be disallowed because the Claimants

are barred by res judicata from asserting claims against the Debtors. The doctrine of res judicata,

otherwise known as claim preclusion, prevents parties from re-litigating issues in a subsequent

litigation that were or could have been litigated in a prior action. See Allen v. McCurry, 449 U.S.

90, 96, 101 S.Ct. 411, 416–17, 66 L.Ed.2d 308, 314 (1980). Under the Full Faith and Credit

Clause, federal courts must apply the same preclusive effect to a state court judgment as the

judgment would be given by the state in which the judgment was rendered. Migra v. Warren

City School Dist. Bd. Of Educ., 465 U.S. 75, 81, 104 S.Ct. 892, 896, 79 L.Ed.2d 56, 61–62

(1984); Allen v. McCurry, 449 U.S. 90, 96, 101 S.Ct. 411, 416–17, 66 L.Ed.2d 308, 314 (1980);

Burka v. N.Y.C. Transit Auth., 32 F.3d 654, 657 (2d Cir. 1994); see also 28 U.S.C. § 1738

(“[J]udicial proceedings … shall have the same full faith and credit in every court within the

United States … as they have by law or usage in the courts of such State … from which they are

taken.”). Accordingly, the Court will apply New York law to determine the preclusive effect of

the State Court Judgment.

Under New York law, “a disposition on the merits bars litigation between the same

parties, or those in privity with them, of a cause of action arising out of the same transaction or

series of transactions as a cause of action that either was raised or could have been raised in the

prior proceeding.” Abraham v. Hermitage Ins. Co., 47 A.D.3d 855, 855, 851 N.Y.S.2d 608, 609

(2008); see O’Brien v. City of Syracuse, 54 N.Y.2d 353, 357, 445 N.Y.S.2d 687, 429 N.E.2d

1158, 1159 (1981) (“Once a claim is brought to a final conclusion, all other claims arising out of

the same transaction or series of transactions are barred, even if based upon different theories or

if seeking a different remedy.”); Pope v. Enzo Biochem, Inc., 432 F. App'x 7, 9 (2d Cir. 2011)

(citing Green v. Santa Fe Industries, Inc., 70 N.Y.2d 244, 253, 519 N.Y.S.2d 793, 796, 514

N.E.2d 105, 108 (1987)) (stating that a final judgement in a prior action is binding on both the

parties to the action and those in privity with them).

New York courts find privity where the nonparty’s interests were adequately represented

in the prior litigation. Pope, 432 F. App'x at 9–10. Privity “include[s] those whose interests are

represented by a party to the previous action and those whose own rights or obligations in the

subsequent proceeding are conditioned in one way or another on, or derivative of, the rights of

the party to the prior litigation.” Bayer v. City of New York, 115 A.D.3d 897, 898, 983 N.Y.S.2d

61, 63 (2014).

If a corporation is closely held, “the judgment in an action by or against the holder of

ownership in the corporation is conclusive upon the corporation except when re-litigation of the

issue is justified in order to protect the interest of another owner or a creditor of the corporation.”

Restatement (Second) of Judgments § 59 (1982); see Specialty Rest. Corp. v. Barry, 236 A.D.2d

754, 755 (1997) (holding that a judgment against corporation collaterally estopped corporation’s

sole shareholder and officer from litigating liability because defendant’s controlling status over

corporation established privity as a matter of law); Shire Realty Corp. v. Schorr, 55 A.D.2d 356,

361 390 N.Y.S.2d 622, 626 (1977) (citations omitted) (precluding a closely held corporation

from relitigating claims that all stockholders previously litigated); McNamara, 256 A.D. 554,

558 11 N.Y.S.2d 491, 496 (App. Div. 1939) (precluding a corporation from relitigating claims

previously brought by a shareholder who held 480 of 500 shares of the corporation’s stock). The

Restatement speaks to privity between shareholders and corporations – but the concept should

apply equally to members of closely held limited liability companies.

The State Court Judgment precludes Claimants from asserting claims against the Livonia

Debtor. First, the State Court Judgment is a disposition on the merits because the State Court

Judgment was entered after trial. Statement Undisputed Facts (Stipulated Between Parties) at ¶

13, Case No. 19-47797, ECF No. 123. Second, the claims asserted in the Meluchim/Landau

POC arise from the same transactions complained of in the State Court Action. Compare

Statement Undisputed Facts (Stipulated Between Parties) Ex. D, Case No. 19-47797, ECF No.

123, with Claims Register, Case No. 19-47797, Claim No. 3-2. Both the complaint in the State

Court Action and the Meluchim/Landau POC assert claims arising from Meluchim’s $500,000

transfer to CS Construction and the Partnership Agreement between Landau and Strulovitch.

Claimants argue their claims are different than those raised in the State Court Action because,

notwithstanding Claimants’ characterization of their claim as a loan, Meluchim is seeking

“reimbursement” instead of repayment of a debt. Mem. Law Opp. Mot. Summ. J. filed by 720

Livonia Operations LLC at 5, Case No. 19-47797, ECF No. 130. Claimants’ argument fails

because claims for reimbursement and loan repayment – assuming those claims are different

from the causes of action raised in the State Court Action – are claims that could have been

raised in the State Court Action.

Third, Meluchim is in privity with Landau because Landau is Meluchim’s sole member.

Statement Undisputed Facts (Stipulated Between Parties) at ¶ 1, Case No. 19-47797, ECF No.

123. Claimants argue that the State Court found there was no privity between Meluchim and

Landau because the State Court Judgment states that “[n]o evidence was provided about the

nature of Meluchim Holdings LLC, but it is clearly not Chaim Landau the only Plaintiff in this

action.” Statement of Undisputed Facts (Stipulated Between the Parties) on behalf of Chaim

Landau, Meluchim Holdings LLC, Ex. F 9, Case No. 19-47797, ECF No. 126. The Court

disagrees with Claimants’ analysis of the State Court Judgment. The State Court’s statement that

Meluchim is not Landau is not inconsistent with this Court’s finding that Meluchim is in privity

with Landau. After all, privity is relevant only when a party is seeking to enforce a prior

judgment against someone who was not a party to the prior action. Based on the foregoing, the

Court holds the Meluchim/Landau POC is barred by res judicata.

V. Claimants Have Not Evidenced the Claim.

If Meluchim were not precluded by res judicata from asserting a claim against the

Livonia Debtor, the Court, nonetheless, would disallow the Meluchim/Landau POC based on

Claimants’ failure to prove its claim.

A proof of claim executed and filed in accordance with the bankruptcy rules is prima

facie evidence of the validity and amount of the claim. Fed. R. Bankr. P. 3001(f). “If an

objection is filed, the objecting party bears the initial burden of presenting sufficient evidence to

overcome the presumed validity and amount of the claim. If the objecting party overcomes the

prima facie validity of the claim, then the burden shifts to the claimant to prove its claim by a

preponderance of the evidence.” In re Pinnacle Brands, Inc., 259 B.R. 46, 50 (Bankr. D. Del.

2001) (internal citations and quotations omitted); see In re Wolfe, 378 B.R. 96, 102 (Bankr.

W.D. Pa. 2007) (“While the burden of production may shift, the burden of persuasion does not.

It lies with the claimant throughout.”) (citing In re Allegheny International, Inc., 954 F.2d 167,

173 (3d Cir.1992)).

The Meluchim/Landau POC was filed timely in accordance with the bankruptcy rules

and is prima facie evidence of its validity and amount. Operations presented the following

evidence to overcome the presumed validity and amount of the Meluchim/Landau POC:

 Landau’s admission that neither he nor Meluchim loaned money to either

Debtor. Statement of Undisputed Facts (Material) ¶¶ 1-4, Case No. 19-47797,

ECF No. 125.

 Landau caused Meluchim to transfer $500,000 to CS Construction, not the

Debtors. Statement of Undisputed Facts (Stipulated Between the Parties) on

behalf of Chaim Landau, Meluchim Holdings LLC at ¶ 3 Case No. 19-47797,

ECF No. 126.

 Landau has not seen any bank documents showing the $500,000 that was

transferred to CS Construction was used to purchase the Real Property.

Statement Undisputed Facts (Stipulated Between Parties), Ex. A 19:24 –

20:10, Case No. 19-47797, ECF No. 123.

 The Partnership Agreement is between Landau and Strulovitch. Statement of

Undisputed Facts (Stipulated Between the Parties) on behalf of Chaim

Landau, Meluchim Holdings LLC, Ex. C. 4, Case No. 19-47797, ECF No.

126. Neither Meluchim nor the Debtors are parties to the Partnership

Agreement. Id.

The foregoing evidence is sufficient to overcome the presumed validity and amount of

the Meluchim/Landau POC.

Landau and Meluchim present the following as evidence of the validity of their claim:

 The $500,000 check came from Meluchim’s bank account and was made out

to CS Construction. Statement of Undisputed Facts (Stipulated Between the

Parties) on behalf of Chaim Landau, Meluchim Holdings LLC at ¶¶ 3, 5,

Case No. 19-47797, ECF No. 126.

 Strulovitch confirmed he is the managing member of CS Construction. Mot.

Summ. J. Expunding [sic] Claim No. 3 filed by Meluchim Holdings Inc. [sic]

and Chaim Landau on behalf of 720 Livonia Operations, Ex. D ¶ 1, Case No.

19-47797, ECF No. 124.

 Landau’s repeated testimony that he made a $500,000 investment to purchase

the Real Property and it was his understanding that a corporation would be set

up to purchase the Real Property but had not yet been formed. Mem. Law

Opp. Mot. Summ. J. filed by 720 Livonia Operations LLC, Ex. E 17:19-25;

18-2-9, Case No. 19-47797, ECF No. 130.

 Counsel for Strulovitch and the Debtors admitted they received the funds. See

Statement of Undisputed Facts (Stipulated Between the Parties) on behalf

of Chaim Landau, Meluchim Holdings LLC, Ex. E 16:15-17, Case No. 19-

47797, ECF No. 126.

 Strulovitch conceded in the Settlement that $500,000 was owed to Landau in

connection with the Real Property. Mot. Summ. J. Allowing Claim No. 3 on

behalf of Chaim Landau, Meluchim Holdings LLC, Ex. I, Case No. 19-

47797, ECF No. 128.

But for the State Court Judgment, those facts would be persuasive evidence that

Strulovitch – not the Livonia Debtor – owes $500,000 to the Claimants. Counsel’s

acknowledgment in the State Court Action that Strulovitch and the Debtors received the

$500,000 is not persuasive because the Court cannot determine how much money (if any) was

received by the Livonia Debtor. Statement of Undisputed Facts (Stipulated Between the

Parties) on behalf of Chaim Landau, Meluchim Holdings LLC, Ex. E, Case No. 19-47797, ECF

No. 126.

Neither the Partnership Agreement nor the Settlement evidence the Meluchim/Landau

POC because the Debtors are not parties to either of those agreements. Rather, both agreements

are signed by Strulovitch individually.

Landau’s repeated testimony that he believes the $500,000 was used to purchase the

Property is not persuasive because it is not supported by other evidence. Looney v. Macy's Inc.,

588 F. Supp. 3d 328, 340 (E.D.N.Y. 2021) (“Bald assertions, completely unsupported by

evidence, do not satisfy the … burden [of the party opposing summary judgment].”) (citing

Carey v. Crescenzi, 923 F.2d 18, 21 (2d Cir. 1991)). Claimants have not provided bank records

or other documentary evidence that Landau’s $500,000 was used to buy the Real Property or

transferred to the Debtors.

Based on the foregoing, Claimants have failed to carry their burden of proof to establish,

by a preponderance of the evidence, the amount and validity of their claim.

CONCLUSION

Absent the commencement of this chapter 7 case, it is possible Track Data Corporation

would have foreclosed its mortgage lien and sold the Real Property at a foreclosure sale at a

significant discount. As a result of Meluchim’s commencement of this involuntary bankruptcy

case, the chapter 7 trustee was able to maximize the Real Property’s value and create an estate

sufficient to pay claims in full, with interest, and to distribute funds on account of equity. A

chapter 7 case that produces a distribution to equity holders is rare and the chapter 7 trustee’s

results are commendable. Therefore, it is counterintuitive the Meluchim/Landau POC should be

disallowed. Additionally, Landau and the Overseas Investors are similarly situated in that

Strulovitch took their money and did not account for it. Yet, the Overseas Investors that are

members of Operations likely will receive some compensation and Landau likely will not.

In hindsight, the State Court Judgment could appear harsh (especially considering she

ruled in favor of Strulovitch after precluding Strulovitch from admitting evidence). However,

this Court cannot know whether the State Court Justice was aware of Strulovitch’s alleged fraud

on investors. Moreover, this Court cannot know whether the State Court Justice was aware of

the Real Property’s high fair market value relative to Track Data Corporation’s mortgage claim

or that Track Data Corporation’s foreclosure action was not an indication that the investment in

the Real Property was a failure. Whether correct or not, this Court does not have the authority to

disregard the State Court Judgment. D.C. Ct. of Appeals v. Feldman, 460 U.S. 462, 482, 103 S.

Ct. 1303, 1315, 75 L. Ed. 2d 206 (1983) (finding a lower court has no authority to review final

judgments of a state court in judicial proceedings). Further, neither Claimant requested relief

from the automatic stay to appeal the State Court Judgment.

Based on the foregoing, Claimants’ motion for summary judgment is denied, Operation’s

motion for summary judgment is granted and the Meluchim/Landau POC is disallowed in full

and expunged. Operations is directed to submit an order consistent with this memorandum

within fourteen days of its entry on the docket.

SS, _

ky &. Ge; Fone ~

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Dated: August 22, 2023 □□ fi

A □

Brooklyn, New York oa. Ay Jil Mazer-Marino

ety United States Bankruptcy Judge

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