Reply Brief — Clean Air Car Service & Parking Branch Three, LLC, Petitioner v. Clean Air Car Service & Parking Branch Two, LLC, et al.

Case No. 25-463

IN THE SUPREME COURT OF

THE UNITED STATES

______________________

Clean Air Car Service & Parking Branch Three, LLC,

Petitioner,

v.

Clean Air Car Service & Parking Branch Two, LLC.,

et al.,

Respondents.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the Second Circuit

___________________

REPLY BRIEF OF THE PETITIONER

___________________

JOE ZHENGHONG ZHOU, ESQ.

Counsel of Record

Law Offices of Joe Zheng Hong

Zhou & Associates, PLLC

136-20 38th Avenue, Suite 10H

Flushing, NY 11354 USA

Tel: (718) 539-709

joezhoulaw@gmail.com

i

RULE 29.6 STATEMENT

The corporate disclosure statement included

in the petition 1 for a writ of certiorari

remains accurate.

1 The undersigned is currently working with the Clerk's Office of this

Court to finalize the title of this case. For the sole purpose of the

Petition, the petitioners should also include Clean Air Car Service &

Parking Corp, Inc., Operr Service Bureau, Inc., Operr Technologies,

Inc., and Kevin S. Wang. However, the current title is following the

Clerk Office’s instruction for compliance purposes with potential

amendment to the title if permitted by this Court eventually.

ii

TABLE OF CONTENTS

RULE 29.6 STATEMENT................................................... i

TABLE OF CONTENTS .................................................... ii

TABLE OF AUTHORITIES ............................................ iv

REPLY BRIEF FOR PETITIONER ............................... 1

A. The Second Circuit disregarded state law

and deemed the state court ruling as

jurisdictional, thereby contravening the

holdings from this Court's precedent,

creating circuit conflicts and departing so

far from “the accepted and usual course of

judicial proceedings” ............................................... 3

B. The Second Circuit limited the adverse

claim to solely dispute the property

ownership, which conflicts with the holding

from the Fifth Circuit citing this Court’

precedent, such conflict regarding the

interpretation of “good faith” under Section

363(m) has not been, but should be, resolved

by this Court .................................................................. 6

C. Both UCC sale and bankruptcy cases are

recurring in their natures with “national

significance” because the ruling from the

Second Circuit technically rendered state

law UCC 9-617(c) and its official comment (4)

ineffective and meaningless without

justification .................................................................... 7

iii

D. Granting the petition will promote the

public policy of “not rewarding those that do

not act in good faith”, which is consistent

with the Court's long-standing position in

the

interest

of

fairness

and

justice ............................................................................. 10

CONCLUSION ................................................................... 13

iv

TABLE OF AUTHORITIES

Cases

Page (s)

Atlas MF Mezzanine Borrower, LLC v. Macquarie Tex.

Loan Holder LLC,

2019 NY Slip Op 04495, 10, 174 A.D.3d

150, 165, 105 N.Y.S. 3d 59, 70 .................................... 8, 9

Boone v. Chiles,

35 U.S. 177, 210, 10 Pet. 177, 9 L.Ed. 388 (1836) ...... 6

C-TC 9th Avenue Partnership v Norton Co.,

113 F3d 1304, 1309 [2d Cir 1997] ................................. 11

Exxon Mobil Corp. v. Saudi Basic Indus. Corp.,

544 U.S. 280, 292, 125 S.Ct. 1526 – 27 (2005) ............ 4

Greenlaw v. United States,

554 U.S. 237, 243, 128 S. Ct. 2559, 171 L. Ed. 2d 399

(2008) ....................................................................................... 2

Matter of Adobe Trucking, Inc.,

551 Fed. Appx. 167, 172–173 (5th Cir. 2014) .............. 8

Matter of Cohoes Indus. Terminal, Inc.,

931 F.2d 222, 227 (2d Cir. 1991) .................................... 11

NASA v. Nelson,

562 U.S. 134, 147 n.10, 131 S. Ct. 746, 178 L.

Ed. 2d 667 (2011) .................................................................. 2

Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co.,

324 U.S. 806, 814–15, 65 S. Ct. 993, 997–98(1945).. 12

SR Constr., Inc. v. Hall Palm Springs, L.L.C.

65 F.4th 752, 760-61 (5th Cir. 2023) .............................. 6

v

Constitution, Statutes, and Rules

11 U.S.C. § 363(m) ................................................... PASSIM

28 U.S.C. § 157 ......................................................................... 1

28 U.S.C. § 1334 ....................................................................... 1

28 U.S.C. § 1738 ....................................................................... 1

U.C.C. 9-617.............................................................. PASSIM

U.C.C. § 9-617(a) ..................................................................... 4

U.C.C. § 9-617(c) ....................................................... PASSIM

Sup. Ct. R.10 (a) ................................................................... 6, 7

Sup. Ct. R. 10 (c) .................................................................. 6, 7

1

Case No. 25-463

IN THE SUPREME COURT OF

THE UNITED STATES

______________________

Clean Air Car Service & Parking Branch Three, LLC,

Petitioner,

v.

Clean Air Car Service & Parking Branch Two, LLC,

et al.,

Respondents.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the Second Circuit

______________________

REPLY BRIEF OF THE PETITIONER

___________________

Respondents’ opposition (“Opposition” or “Opp”)

devotes substantial effort to argue irrelevant facts

without meaningfully disputing the central questions

presented by the Petition (“Petition” or “Peti”) filed by

the Petitioners dated on September 19, 2025: “(1)

whether the Bankruptcy Court has subject matter

jurisdiction over a bankruptcy petition under 28 U.S.C.

§ 157 and 28 U.S.C. § 1334, filed by an allegedly

managing member on behalf of a bankruptcy debtor,

while the petitioners raised an independent claim

under the Rooker-Feldman doctrine and 28 U.S.C. §

1738 that the alleged managing member is a bad-faith

transferee under U.C.C. § 9-617 and its Official

2

Comments in a U.C.C. Article 9 sale; and (2) if so,

whether the independent claim disputing the

ownership of the bankruptcy debtor constitutes an

adverse claim sufficient to defeat a buyer’ good-faith

purchaser status under 11 U.S.C. § 363(m) in a

bankruptcy sale for the bankruptcy debtor’s property.”

(Peti. pg. i)

When the Opposition failed to raise the meaningful

dispute that the bankruptcy court lacks the jurisdiction

tied to the bad faith transferee in U.C.C. Article 9 sale,

the arguments in the Petition along with other

undisputed petitioners’ argument should deem to be

unopposed as this Court held "we rely on the parties to

frame the issues for decision and assign to courts the

role of neutral arbiter of matters the parties present."

Greenlaw v. United States, 554 U.S. 237, 243, 128 S. Ct.

2559, 171 L. Ed. 2d 399 (2008). In other words, no

matter the theories we might conjure up on a party's

behalf, the longstanding party presentation rule

confines us to considering only the arguments raised,

not those we could imagine. See NASA v. Nelson, 562

U.S. 134, 147 n.10, 131 S. Ct. 746, 178 L. Ed. 2d 667

(2011).

Although the Opposition alleged that it did dispute

certain arguments raised in the Petition, however it

offers nothing more than conclusory statements

unsupported by legal authorities or relevant facts.

Especially, the entire Petition mainly related to

bankruptcy jurisdiction and interpretation of “good

faith” under 363(m), which is tied to U.C.C. 9-617 and

3

its Official Comment (4), the Opposition failed to raise

any meaningful argument at all. Considering the

national significance of Bankruptcy jurisdiction, U.C.C.

Article 9 sale, and interpretation of “good faith”

purchaser in bankruptcy sale, this petition warrants

this Court by favorable discretion to grant for review.

The Second Circuit’s holding ignores this Court’s

long-standing position to close “the doors of a court of

equity to one tainted with inequitableness or bad faith

relative to the matter in which he seeks relief “in

refusing to aid the unclean litigant”, which there is also

no dispute from the Opposition. Therefore, nothing in

the Respondent's Opposition undermines the foregoing

points from the Petition or provides any legitimate basis

to deny the review.

A. The Second Circuit disregarded state law

and deemed the state court ruling as

jurisdictional, thereby contravening the

holdings from this Court's precedent,

creating circuit conflicts and departing so

far from “the accepted and usual course of

judicial proceedings”.

It is well established that state law governs whether

a party has authority to file a bankruptcy petition. The

Second Circuit erroneously treated the state court’s

determination upon U.C.C foreclosure as jurisdictional

without any meaningful analysis of New York state law,

and conclusively and arbitrarily rejected Petitioner’s

independent claim for bankruptcy Court’s lack of

4

jurisdiction under this Court’s holding in Exxon Mobil

Corp. v. Saudi Basic Indus. Corp.

The Petitioners have never asked the federal court to

initiate judicial review over the state court judgment. To

the contrary, Petitioners acknowledged that the State

Court judgment is correct under U.C.C. 9-617(a) for the

sole purpose of foreclosure, but the Petitioners’

independent claim is sought under U.C.C. 9-617(c),

which is a subject matter under a different cause of

action and/or claim. Petitioners asserted an injury not

caused by the state-court judgment, but caused by

Buyer 1, who was a bad-faith transferee in the U.C.C.

Article 9 sale. The State Court held in its August 20

Order that “Plaintiffs’ claims have nothing to do with

the operating agreements and do not implicate the

LLCs’ internal affairs.” (Peti. pg. 6). Without disputing

these critical facts advanced by Petitioners, all

arguments in the Opposition regarding RookerFeldman, res judicata, or collateral estoppel are entirely

without merit.

The Opposition alleged that “Petitioners’ contrived

claim that the State Court only decided the foreclosure

based on some subset of the UCC. If Petitioners could

have raised their UCC 9-617 claims (surely, they could

have) but did not, those claims are still precluded now.”

(Opp. pg. 31). While the Opposition did not dispute that

res judicata, or claim preclusion, does not apply where

"the initial forum did not have the power to award the

full measure of relief sought in the later litigation" (Peti.

pg. 19), nor does the Opposition meaningfully dispute

5

the August 20 Order, which expressly defined the

jurisdictional limits and the scope of Respondents’

claims in that case, the Opposition’s baseless allegation

that Petitioners could have raised their UCC 9-617

claims, but did not, those claims are still precluded now

should be rejected. Neither res judicata (claim

preclusion) nor collateral estoppel (issue preclusion)

applies to Petitioners’ independent claim regarding

managerial rights under U.C.C. § 9-617(c) and its

Official Comment (4) because it was never “actually and

necessarily decided” by the state courts, and Petitioners

had no “full and fair opportunity to litigate” the

independent claim before the state court issuing the

July 22 Order which acknowledged it lacked

jurisdiction for adjudicating the claim related to

managerial rights and LLC internal matters.

Consequently, Petitioners could not and should not

have raised a U.C.C. § 9-617(c) claim before that state

court.

The Opposition baselessly asserts that Petitioners

engaged in a “selective reading of August Order,

without fully disclosing its full content…” (Opp. pg. 14).

Regardless of how to read or how to characterize the

reading of the August 20 Order, the dispositive fact

remains unchanged: the August 20 Order was issued

after the July 20 Order and unequivocally clarified that

the court issuing the July 22 Order lacked jurisdiction

over Respondents’ LLC internal matters, including the

determination of who holds managerial rights which

must be adjudicated in Queens County pursuant to the

forum-selection clause. In light of this explicit

6

jurisdictional limitation, the Opposition’s allegation that

Petitioner could raise the U.C.C. 9-617 claim is

meaningless and not on point in its entirety.

Therefore, the Second Circuit’s rulings not only conflict

with the precedent of this Court but also create a direct

circuit split regarding how to determine authorization

to file a bankruptcy petition, which warrants this Court

to grant the petition for review. Sup. Ct. R. 10 (a) and (c).

(Peti. pg. 23).

B. The Second Circuit limited the adverse

claim to solely dispute the property

ownership, which conflicts with the holding

from the Fifth Circuit citing this Court’

precedent, such conflict regarding the

interpretation of “good faith” under Section

363(m) has not been, but should be, resolved

by this Court.

While the Second Circuit restricts adverse claims to

disputes over the ownership of the property to be sold,

the Fifth Circuit, consistent with this Court’s longstanding precedent, clearly held that "adverse claims"

with regard to good faith purchasers imply ownership

must be disputed. In Boone v. Chiles, 35 U.S. 177, 210,

10 Pet. 177, 9 L.Ed. 388 (1836)]. “The threshold for an

‘adverse claim’ is a dispute in ownership interest.” SR

Constr., Inc. v. Hall Palm Springs, L.L.C. (In re RE

Palm Springs II, L.L.C.), 65 F.4th 752, 760–61 (5th Cir.

2023). (Peti. pg. 25). Nothing from the Fifth Circuit

citing this Court’s precedent limits adverse claim solely

to disputes over ownership of the property itself,

7

excluding disputes over ownership of the entity that

owns the property, which is precisely the circumstance

presented here.

The Opposition admitted that “Petitioners’ ‘adverse

claim’ only relates to K. Wang’s dispute over his equity

interests in Debtors” (Opp. pg. 33) and “the Eastern

District Court acknowledged that the ownership of the

Respondents is under dispute.” (Peti. pg. 26). The above

admission and acknowledgement created a legal issue

for how to interpret the “good faith” which have circuit

conflict regarding what constitutes adverse claims

which the Bankruptcy Code does not explicitly define

“good faith” for purposes of determining a good-faith

purchaser status. The unresolved legal issue for

interpretation of the statutory language between

different circuits warrants this Court to grant certiorari

under Sup. Ct. R. 10 (a) and (c).

C. Both UCC sale and bankruptcy cases are

recurring in their natures with “national

significance” because the ruling from the

Second Circuit technically rendered state

law UCC 9-617(c) and its official comment (4)

ineffective and meaningless without

justification.

The Opposition falsely contends that the Bankruptcy

Court found the secured lender had credit-bid $100,000

for collateral securing a $12.3 million debt is reasonable

because the purchase price “represented the purchase

of the equity interests in the Debtors” characterizing the

transaction as “typical under these types of defaults and

8

equity interest sales” (Opp. pg. 36). Such an allegation

from the Opposition is misleading as a matter of both

fact and law. It was not the lender who credit bid

$100,000; rather, it was Buyer 1 who submitted a

$100,000 bid and signed the Bill of Sale between the

Lender and Buyer 1 upon the U.C.C. Article 9 sale. (Peti.

pgs. 32–33).

Even if the lender had submitted a credit bid for

$100,000 subject to the existing debts, such a practice

would not be “typical,” contrary to the Opposition’s

misleading assertion. For example, in the very case as

in Atlas cited by the Opposition (Opp. pg. 35), the facts

clearly demonstrate otherwise: Atlas MF Mezzanine

Borrower, LLC (Atlas), the debtor, had borrowed a $71

million loan from Macquarie Texas Loan Holder LLC

(Macquarie), the secured creditor. Following Atlas’s

default, Macquarie credit-bid $73.5 million in the U.C.C.

Article 9 sale for the collateral, which consisted of the

debtor’s LLC membership interests. A third-party KKR

submitted the winning bid of $76.75 million. Atlas MF

Mezzanine Borrower, LLC v. Macquarie Tex. Loan

Holder LLC, 2019 NY Slip Op 04495, ¶ 10, 174 A.D.3d

150, 165, 105 N.Y.S.3d 59, 70 (App. Div. 1st Dep’t).

Likewise, in Matter of Adobe Trucking, Inc., the Fifth

Circuit held that a credit bid amounting to 67% of the

collateral’s alleged value was commercially reasonable.

Matter of Adobe Trucking, Inc., 551 Fed. Appx. 167,

172–173 (5th Cir. 2014).

As the Petitioners correctly noted, which has no

dispute from the Opposition, that “Respondents never

9

alleged, either in the lower courts or in their Opposition,

that Buyer 1 is a good-faith purchaser; there are no

lower courts, including state courts or federal courts, to

adjudicate or determine that Buyer 1 is a good-faith

purchaser in the U.C.C. Article 9 sale.” (Peti. pg. 11).

Furthermore, the Opposition falsely alleging that

“Petitioners’ improper[ly] challenge to the

reasonableness of the UCC Sale, which had already

been adjudicated in State Court” (Opp. pg. 33), should

be rejected because there is no denial from the

Opposition that the case for determining whether the

U.C.C sale in this case is commercial reasonable or not

under Index No. 714973/2021 still pending before the

Queens County Court for adjudication. (Peti. pg. 7).

Regardless of how the Opposition cited case law from

the County Court or intermediate Court related to

U.C.C sale, there is no ruling from the highest Court in

New York State, the Court of Appeals has not ruled on

the issue related to bad faith purchaser under U.C.C. 9617(c) and its Official Comment (4). When the PEB

clearly disagreed with the position of the First

Department’s ruling in Atlas, it is unlikely that the

Court of Appeals of New York State will not follow the

PEB’s position as it is consistent with the PEB’s Official

Comments to rule the U.C.C. dispute.

Both the Bankruptcy Court’s jurisdiction and the

validity of the bankruptcy sale, titled to U.C.C. Article 9

sale, are all having national significance because the

U.C.C. has been called “the backbone of American

commerce,” promoting economic growth in our nation.

10

The Bankruptcy Code is to afford the honest but

unfortunate debtor “a new opportunity in life with a

clear field for future effort”. (Peti. pg. 30). If the Petition

is denied, the Second Circuit’s ruling will, as a practical

matter, technically render relief to be sought after the

U.C.C. Article 9 sale in state court becomes

meaningless across the nation. (Peti. pg. 32). This is a

serious and recurring matter in its nature, which will

continue to arise until and unless this Court issues a

new precedent to declare that such interference of state

law is unwarranted.

D. Granting the petition will promote the

public policy of “not rewarding those that do

not act in good faith”, which is consistent

with the Court's long-standing position in

the interest of fairness and justice.

While only this Court holds the ultimate authority to

interpret statutory language governing Bankruptcy

Court jurisdiction and of “good faith” under 11 U.S.C. §

363(m), both issues of bankruptcy court jurisdiction and

the proper interpretation of the Bankruptcy Code are

clearly presented as important federal questions in this

case, by them alone, which warrant this Court exercises

the favorable discretion to grant the Petition.

There is no dispute from the Opposition that the

District Court found Respondents had no meaningful

argument to challenge the Petitioners’ position that the

Bankruptcy Court has no jurisdiction in this case and

the Bankruptcy petitions were filed frivolously and in

bad faith, (Peti. pg. 31 footnote). The Respondents failed

11

to raise any meaningful argument in their Opposition

including but not limited to lack of cash flow with no

reasonable possibility of reorganization2 under Section

1112(b), under the factors articulated in In re C-TC 9th

Ave. Partnership, bankruptcy petitions should be

deemed to be filed in bad faith3 , and the bankruptcy

petition should be deemed to be filed in bad faith for

litigation tactics4 . It is frivolous for the Opposition to

The Opposition admitted that Respondents did not seek to

“reorganize” but filed the bankruptcy for the sole purpose of

liquidation without any possibility of reorganization with negative

cash flow (Opp. pg. 33-34). The Second Circuit held that “[a] Chapter

11 bankruptcy petition may be deemed frivolous if, as of the filing date,

the debtor had no reasonable likelihood of reorganization with

emerging from bankruptcy proceedings.” Matter of Cohoes Indus.

Terminal, Inc., 931 F.2d 222, 227 (2d Cir. 1991). “ In any event, while

a debtor may conclude Chapter 11 proceedings by liquidating and

may even enter them with an intent to liquidate if necessary, there is

no reason a debtor should be permitted to enter these proceedings

without a possibility of reorganization”. See C-TC 9th Avenue

Partnership v Norton Co., 113 F3d 1304, 1309 [2d Cir 1997].

2

3 There is no meaningful dispute from the Opposition that under the

factors articulated in In re C-TC 9th Ave. Partnership, 113 F.3d 1304,

1311 (2d Cir. 1997), Two Debtors’ filings met all of them without

meaningful dispute, which the bankruptcy petition should be deemed

for filing in bad faith.

4 Since this dispute though the bankruptcy petition can be resolved in

the non-bankruptcy forum in the state court, as it is pending before

the New York State Court which the Lender filed for Judicial

Foreclosure with Index No. 727299/2021, (Peti. pg. 7). Filing

bankruptcy petition for litigation tactics should be deemed for filing in

bad faith. See C-TC 9th Ave. P'ship, 113 F.3d at 1312 (affirming

dismissal of Chapter 11 case where debtor’s “financial problems”

involve only a two-party dispute with [litigation adversary] that can be

12

contend that a Chapter 11 bankruptcy filed solely for

liquidation, with no possibility of reorganization, is

permissible as a matter of law.5

There is no dispute from the Opposition that “[a]ny

policy based on commercial certainty is subordinate to

the policy of not rewarding those that do not act in good

faith.” (Peti. pg. 125a). This policy from the PEB is

consistent with this Court’s well-established position as

this Court has repeatedly emphasized, equity courts

have broad discretion to refuse relief to an unclean

litigant. Precision Instrument Mfg. Co. v. Auto. Maint.

Mach. Co., 324 U.S. 806, 814–15, 65 S. Ct. 993, 997–98

(1945). (Peti. pg. 35). Since there is no meaningful

dispute that the bad faith transferee in the Article 9 sale

filing the bankruptcy petitions for Respondents in bad

faith and frivolously, this Court should hear this case by

denying the bankruptcy relief to the “unclean litigant”

Respondents.

The issues regarding bankruptcy jurisdiction and

interpretation of statutory language of “good faith”

under 363(m) tied to U.C.C. dispute are clearly

presented, fully briefed, and were expressly decided by

the Second Circuit. There are no factual or procedural

obstacles that would prevent this Court from

addressing the critical legal questions raised in the

petition. A decision from this Court establishing clear

resolved in the pending state court action"); See also In re Efron, 529

B.R. 396, 406 (1st Cir. 2015).

5 The Appeal with case number 25-908 (Lead), 25-912 (Con.), 25-1507

(Con.) are pending before the Second Circuit for adjudication.

13

precedent on these issues would have a far-reaching

and positive impact on U.S. commerce, especially at the

crucial intersection of the U.C.C. and bankruptcy law

tied to U.C.C. Article 9 disputes, and there is no

meaningful argument from the Opposition. Public

interest also strongly favors this Court by equitable

discretion to grant the petition.

CONCLUSION

For the foregoing reasons and those stated in the

petition for a writ of certiorari, the petition should be

granted.

Dated: November 30, 2025

Queens, New York

Respectfully submitted,

/s/Joe Zhenghong Zhou

Joe Zhenghong Zhou, Esq.

Counsel of Record

Law Offices of Joe Zhenghong

Zhou & Associates, PLLC

136-20 38th Avenue, Suite 10H

Flushing, NY 11354 USA

Tel: (718) 539-7098

joezhoulaw@gmail.com