In re: Chapter 7 Case No: (SMB) MARC S. DREIER,

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1 LaMonica Herbst & Maniscalco, LLP 3305 Jerusalem Avenue, Suite 201 Wantagh, New York Telephone: (516) Gary F. Herbst, Esq. Holly R. Holecek, Esq. Return Date: January 20, 2010 at 10:00 a.m. UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK x In re: Chapter 7 Case No: (SMB) MARC S. DREIER, Debtor x NOTICE OF MOTION OF CHAPTER 7 TRUSTEE TO APPROVE STIPULATION BETWEEN CHAPTER 7 TRUSTEE AND ELISA P. DREIER, PROVIDING FOR THE PAYMENT OF A CERTAIN CLAIM ENTITLED TO PRIORITY UNDER 11 U.S.C. 507(a)(1)(A) PLEASE TAKE NOTICE, that upon the attached Motion of the Chapter 7 Trustee to approve the stipulation between the Chapter 7 Trustee and Elisa P. Dreier, providing for the payment of a certain claim entitled to priority under 11 U.S.C. 507(a)(1)(A), Salvatore LaMonica, as Chapter 7 Trustee (the Trustee ) of the estate of Marc S. Dreier, by his attorneys, LaMonica Herbst & Maniscalco, LLP, will move before the Honorable Stuart M. Bernstein, Chief United States Bankruptcy Judge for the Southern District of New York, on January 20, 2010 at 10:00 a.m., or as soon thereafter as the Trustee may be heard, in Courtroom 723 at the United States Bankruptcy Court, One Bowling Green, New York, New York , for the entry of an order approving the stipulation, which is Exhibit A to the Trustee s Motion, between the Trustee and Elisa P. Dreier. PLEASE TAKE FURTHER NOTICE, that objections to the relief requested in the Motion, if any, must be in writing, conform with the Bankruptcy Code and Rules, state with particularity the grounds therefor and be filed with the Court, with a courtesy copy to the Chambers of Chief Judge Bernstein, and served upon, so as to be received by, LaMonica Herbst 1

2 & Maniscalco, LLP, 3305 Jerusalem Avenue, Wantagh, NY 11793, Attn: Holly R. Holecek, Esq., no later than seven (7) days prior to the return date on the Motion as follows: (a) (i) through the Bankruptcy Court s electronic filing system (in accordance with Order No. 473), which may be accessed through the internet at the Bankruptcy Court's website at and (ii) in portable document format (PDF) using Adobe Exchange Software for conversion; or (b) if a party is unavailable to file electronically, such party shall submit the objection in PDF format on a diskette in an envelope with the case name, case number, type and title of document, document number to which the objection refers and the file name on the outside of the envelope. PLEASE TAKE FURTHER NOTICE, that the hearing on the Motion may be adjourned from time to time without any other announcement other than as set forth in open Court. Dated: December 23, 2009 Wantagh, New York LaMONICA HERBST & MANISCALCO, LLP Attorneys for Salvatore LaMonica, as Trustee B y: s/ Gary F. Herbst Gary F. Herbst, Esq. A Member of the Firm 3305 Jerusalem Avenue, Suite 201 Wantagh, New York Telephone: (516)

3 LaMonica Herbst & Maniscalco, LLP 3305 Jerusalem Avenue, Suite 201 Wantagh, New York Telephone: (516) Gary F. Herbst, Esq. Holly R. Holecek, Esq. Return Date: January 20, 2010 at 10:00 a.m. UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK x In re: Chapter 7 Case No: (SMB) MARC S. DREIER, Debtor x MOTION OF CHAPTER 7 TRUSTEE TO APPROVE STIPULATION BETWEEN CHAPTER 7 TRUSTEE AND ELISA P. DREIER, PROVIDING FOR THE PAYMENT OF A CERTAIN CLAIM ENTITLED TO PRIORITY UNDER 11 U.S.C. 507(a)(1)(A) Salvatore LaMonica, the Chapter 7 Trustee (the Trustee ) of the estate of Marc S. Dreier (the Debtor ), by his attorneys, LaMonica Herbst & Maniscalco, LLP, moves for an order, pursuant to 11 U.S.C. 105 (the Bankruptcy Code ) and Federal Rules of Bankruptcy Procedure 2002(a)(3) and 9019(a), approving the stipulation (the Stipulation ) between the Trustee and Elisa P. Dreier providing for the payment of a certain claim entitled to priority under Bankruptcy Code 507(a)(1)(A), a copy of which is annexed as Exhibit A, and respectfully sets forth as follows: A. Procedural Background BACKGROUND 1. On January 26, 2009, an involuntary petition was filed against the Debtor by petitioning creditors Sheila M. Gowan, Trustee for Chapter 11 Estate of Dreier LLP, Wachovia Bank, N.A. and Steven J. Reisman, Post-confirmation Representative of the Bankruptcy Estates of 360networks (USA) Inc., for relief pursuant to Chapter 7 of the Bankruptcy Code. 2. An Involuntary Summons was issued on January 28, The Involuntary Summons was served on the Debtor on January 30,

4 3. An Order for relief was entered on February 27, By Notice of Appointment, dated March 2, 2009, Salvatore LaMonica, Esq. was appointed as the interim Chapter 7 Trustee of this estate. He has since duly qualified and is the permanent Trustee. B. Factual Background 5. As set forth in the Stipulation, the Debtor and Ms. Dreier married in See, Exhibit A, 1, C. In 2003, the couple separated permanently, and later a judgment of divorce was entered. Id. at 2, C. The couple entered into a certain separation agreement, dated December 18, 2003 (the Separation Agreement ), which, among other things, determined Ms. Dreier s entitlement to alimony, support and maintenance from the Debtor for herself and the couples two children, Spencer and Jackie. 6. On or about November 17, 2009, Ms. Dreier filed a proof of claim, which was designated as Claim No. 14, in the amount of $ 7,105, (the DSO Claim ). Ms. Dreier has alleged that a large portion of her claim is in the nature of a domestic support obligation and, thus, entitled to a first priority pursuant to 507(a)(1)(A) of the Bankruptcy Code. 7. The Trustee disputes the validity, amount and priority of the majority of the DSO Claim. The Trustee also asserts that the substantial majority of the DSO Claim is subject to disallowance under section 502(d) of the Bankruptcy Code. 8. However, the Trustee agrees that Ms. Dreier does have a valid domestic support obligation under 507(a)(1)(A) claim of the Bankruptcy Code in the amount of $106, (the Undisputed DSO Claim ). Specifically, Ms. Dreier has represented and warranted that, prior to the commencement of this case, she paid certain expenses that the Debtor was obligated to pay pursuant to the Separation Agreement. As set forth in the Stipulation, these expenses include: (i) $2,201 for health insurance for herself, Spencer and Jackie; (ii) $900 for SAT tutoring for Jackie; 4

5 (iii) $1,500 for high school tutoring for Jackie; (iv) $8,205 in tuition for Riverdale High School for Jackie; (v) $16,694 for college tuition and books for Spencer; and (vi) $365 for medical expenses for Jackie; and (vii) $605 for medical expenses for Spencer. See, Exhibit A, 2, F. 9. The parties, together with their respective counsel, engaged in numerous discussions and exchanged various documents regarding the treatment of the Undisputed DSO Claim. As a result of arms-length negotiations, the parties agreed to settle their disputes regarding the Undisputed DSO Claim. THE PROPOSED SETTLEMENT 10. The proposed settlement provides that the Undisputed DSO Claim shall be allowed in full and entitled to priority pursuant to 507(a)(1)(A) of the Bankruptcy Code. Within five (5) days of the entry of a final and unappealable order approving the Stipulation, the Trustee shall deliver to Ms. Dreier a check in the amount of $106,485.00, which is the full amount of the allowed Undisputed DSO Claim. 11. As set forth in the Stipulation, the parties fully reserved all their respective rights with respect to the remaining DSO Claim and nothing contained in the Stipulation shall be deemed to be a waiver, settlement, compromise or release of any of the parties rights other than with respect to the Undisputed DSO Claim. See, Exhibit A, 3, Reference is made to the proposed Stipulation for its full terms and conditions, a copy of which is Exhibit A to this Motion. 5

6 BASIS FOR REQUESTED RELIEF 13. By this Motion, pursuant to Rules 2002(a)(3) and 9019(a) of the Federal Rules of Bankruptcy Procedure, the Trustee seeks approval of the Stipulation as being fair and equitable and in the best interests of the Debtor s estate. 14. Bankruptcy Rule 9019(a), provides that [o]n motion by the trustee and after notice and a hearing, the court may approve a compromise and settlement. In deciding whether to approve a settlement, a bankruptcy court must determine whether the compromise is reasonable, Saccurato v. Masters, Inc. (In re Masters, Inc.), 149 B.R. 289, 292 (Bankr. E.D.N.Y. 1992), and whether the compromise is fair and reasonable and in the best interests of the estate. In re Drexel Burnham Lambert Group, Inc., 134 B.R. 493, 496 (Bankr. S.D.N.Y. 1991) (quoting Protective Comm. for Indep. Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, 424 (1968), reh. denied, 391 U.S. 909 (1968)). The Court may consider such factors as: (i) the likelihood of success in the litigation compared to the present and future benefits offered by the settlement; (ii) the prospect of protracted litigation if the settlement is not approved as well as the related expense, inconvenience and delay, including potential difficulty in collecting on the judgment, (iii) the paramount interests of the creditors and the degree to which the creditors support the settlement; (iv) the nature and extent of releases to be obtained by the officers and directors; and (v) whether the settlement was the result of arm's length bargaining. Motorola, Inc. V. Official Comm. Of Unsecured Creditors, et al. (In re Iridium Operating LLC, et al.), 478 F.3d 452, 462 (2d Cir. 2007) (citing In re Worldcom, Inc., 347 B.R. 123, 137 (Bankr. S.D.N.Y. 2006); see also In re Masters, Inc., 149 B.R. at 292 (citing Cosoff v. Rodman (In re W.T. Grant Co.), 699 F. 2d 599, 608 (2d Cir. 1983), cert. denied, 464 U.S. 822 (1983)); In re Drexel Burnham Lambert Group, Inc., 134 B.R. at 497. In assessing whether a settlement should be approved, the Court need only canvass the issues and see whether the 6

7 settlement falls below the lowest point in the range of reasonableness. In re Drexel Burham Lambert Group, Inc., 134 B.R. at 497 (citations omitted). 15. The Trustee submits that the terms of the Stipulation fall well above the lowest point in the range of reasonableness. The issues raised by Ms. Dreier and the DSO Claim involve areas of family law and bankruptcy law as to which there is limited reported case law interpreting the relevant provisions of the Bankruptcy Code, i.e., 362(b)(2) and 507(a)(1), These difficult issues include, among other things, whether, and to what extent, the DSO Claim is entitled to priority under 507(a)(1) and whether, and to what extent, the DSO Claim is subject to disallowance or setoff under 502(d). In addition, there are unique factual circumstances insofar as the Debtor is incarcerated and has no means to personally satisfy his support obligations. 16. While the Trustee believes he has strong arguments on each of these disputed issues, the outcome of any litigation is always uncertain and the probability of success is difficult to weigh. The instant settlement resolves that portion of the DSO Claim that is undisputed by the Trustee. As such, it eliminates the potentially significant expenses associated with litigation over the Undisputed Claim. Viewed in every light, the settlement is a good one in terms of certainty, amount and timing and therefore merits approval by this Court. NOTICE 17. Notice of this Motion has been provided to (a) Elisa P. Dreier and her counsel, Fox Rothschild LLP, (b) each entity that filed a Notice of Appearance, (c) the United States Trustee, (d) applicable taxing authorities, and (e) all known creditors of the estate. The Trustee submits that no further notice is required. 7

8 CONCLUSION 18. For the reasons set forth above, the Trustee respectfully requests that the Court (a) approve the Stipulation and (b) grant such other relief as is just and proper. Dated: December 23, 2009 Wantagh, New York LaMONICA HERBST & MANISCALCO, LLP Attorneys for Salvatore LaMonica, as Trustee B y: s/ Gary F. Herbst Gary F. Herbst, Esq. A Member of the Firm 3305 Jerusalem Avenue, Suite 201 Wantagh, New York Telephone: (516)