Filing # E-Filed 10/09/ :39:26 PM

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1 Filing # E-Filed 10/09/ :39:26 PM IN THE CIRCUIT COURT OF THE 17 TH JUDICIAL CIRCUIT IN AND FOR BROWARD COUNTY, FLORIDA MATTHEW CARONE, et al., CASE NO (07) Complex Litigation Unit Plaintiffs, v. MICHAEL D. SULLIVAN, individually, Defendant. / MOTION TO APPROVE SETTLEMENTS BETWEEN ASSIGNEE AND (I) DIANE K. BIENES AS PERSONAL REPRESENTATIVE OF THE ESTATE OF MICHAEL S. BIENES; (II) FRANK AVELLINO; AND (III) STEVEN JACOB AND STEVEN F. JACOB, CPA & ASSOCIATES, INC. Philip J. von Kahle (the Conservator ), as conservator for P&S Associates, General Partnership ( P&S ) and S&P Associates, General Partnership ( S&P, together with P&S, the Conservatorship Partnerships ), by and through undersigned counsel, hereby files this Motion to Approve Settlements Between Assignee and (I) Diane K. Bienes as Personal Representative of the Estate of Michael S. Bienes; (II) Frank Avellino; and (III) Steven Jacob and Steven F. Jacob, CPA & Associates, Inc. (the Motion ) and respectfully requests this Court approve the settlement agreements attached hereto between Conservator and (1) Diane K. Bienes, as personal representative of the estate of Michael S. Bienes ( Bienes ); (2) Frank Avellino ( Avellino ); and (3) Steven Jacob and Steven F. Jacob, CPA & Associates, Inc. (collectively Jacob, together with Conservator, Bienes, and Avellino, the Parties ) in the case styled Philip J. von Kahle, as Conservator of P&S Associates, General Partnership and S&P Associates, General Partnership v. Michael D. Sullivan, et al., Case No pending in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida (the Insider Lawsuit ). In support of this Motion, Conservator states as follows: 1

2 1. Philip J. von Kahle is the court appointed conservator of the Conservatorship Partnerships in the conservatorship (the Conservatorship ) created pursuant to this Court s January 17, 2013 Order Appointing Conservator (the Conservatorship Order ). 2. Pursuant to the Conservatorship Order, [t]he Conservator is empowered, directed and authorized by this Court to act on its behalf as the Conservator of the Conservatorship Property, and to do any and all things necessary for the proper management, wind-down, preservation, maintenance, protection and administration of the Conservatorship Property. Conservatorship Order, The Insider Lawsuit was commenced on December 10, Thereafter, among other things, the following occurred: a. on October 5, 2014, Conservator filed his Fourth Amended Complaint; b. on December 15, 2014, this Court entered an Order Granting in Part, and Denying in Part, Defendants Frank Avellino and Michael Bienes Joint Motion to Dismiss Fourth Amended Complaint (the Dismissal Order ); c. on January 9, 2015, Conservator filed his Fifth Amended Complaint; d. on January 16, 2015, Jacob filed Steven Jacob and Steven F. Jacob, CPA & Associates, Inc. s Answer and Affirmative Defenses to Plaintiff s Fifth Amended Complaint; and e. on October 5, 2016, this Court entered its Order on Defendants Frank Avellino and Michael Bienes, Amended Joint Motion for Summary Judgment (the Summary Judgment Order ). 4. To avoid the costs and risks associated with litigation, the Parties have agreed to resolve their disputes as reflected by the terms of the settlement agreements attached hereto as: Exhibit A (the Bienes Settlement Agreement ); Exhibit B (the Avellino Settlement Agreement ); and Exhibit C (the Jacob Settlement Agreement, 2

3 together with the Bienes Settlement Agreement and the Avellino Settlement Agreement, the Settlement Agreements ) Conservator intends to resolve all claims between Parties through the Settlement Agreements, which contemplate the following key terms: Bienes Settlement Agreement a. Dismissal of Action and Appeal. Within seven days of the execution of the Bienes Settlement Agreement, Parties shall: (1) submit a Final Judgment 2 incorporating the Dismissal Order and the Summary Judgment Order, and providing that each side bear its own attorney s fees and costs; and (2) jointly file a Joint Stipulation of Dismissal solely as to the remaining pending claims, Count IV of the Fifth Amended Complaint, and the Avoidance of Fraudulent Transfers claims against Bienes. b. Attorney s Fees. Each side shall bear its own attorney s fees and costs. c. Appeal. The Final Judgment preserves the Parties rights and ability to appeal the Dismissal Order, the Summary Judgment Order, and any interlocutory orders entered in the Insider Lawsuit. d. Disposal of Entire Case. The Final Judgment disposes of the entire Insider Lawsuit as to Bienes and Avellino at the trial stage. Conservator is likely to lodge an appeal. e. Tolling Agreement. Any and all Timing Defenses applicable to the Tolled Claims shall be tolled during the Tolling Period. The Bienes Settlement Agreement does not 1 In the event there is a conflict between this Motion and the terms of the Settlement Agreements, the terms contained in the Settlement Agreements control. This Motion is not intended to amend or alter the Settlement Agreements in any manner. 2 All capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the applicable Settlement Agreement. 3

4 constitute a waiver of any Timing Defense or other defense that existed prior to the execution or after termination of same. f. Refiling of Claims. In the event an appellate court reverses the Dismissal Order, the Summary Judgment Order, or any other order entered in the Insider Action that has the effect of reinstating any claims against Bienes and Avellino, the Parties agree that the Conservator may refile any of the Tolled Claims. If the Conservator refiles, then Bienes or Avellino may reassert all affirmative defenses previously asserted against such claims, including claims for attorneys fees and costs. g. Admission of Liability. The Parties agree and acknowledge that nothing contained in the Bienes Settlement Agreement shall be deemed an admission or concession of liability, wrongdoing, or any other form of admission with respect to any matter, thing, or dispute whatsoever. Avellino Settlement Agreement 6. The Avellino Settlement Agreement incorporates the above terms in paragraphs 5.a. through 5.g., as made applicable to the Avellino Settlement Agreement. Additionally, the following terms shall apply: a. Payment. Within seven days following the Court s entry of an order approving the Avellino Settlement Agreement, Avellino shall pay Conservator the sum of fifty thousand dollars ($50,000) (the Payment ). The Payment is non-refundable and shall not be returned to Avellino regardless of the outcome of any appeal, but will be credited toward any judgment Conservator obtains against Avellino. 4

5 b. Satisfaction of Partnership Judgment Against Michael Sullivan. Within 30 days of receipt of Payment, Conservator shall file a satisfaction of that certain judgment existing against Michael Sullivan in favor of the Conservatorship Partnerships. Jacob Settlement Agreement 7. The Jacob Settlement Agreement contains the following key terms: a. Payment. Within 21 days following the Court s entry of an order approving the Jacob Settlement Agreement, Conservator shall pay to the Peter Herman Trust Account the sum of seventy five thousand dollars ($75,000). b. Releases. The Parties release each other as to all claims, demands, and defenses that were or could have been raised against one another in connection with the instant action, the Insider Lawsuit, the Conservatorship, or anything that occurred before commencement of the Conservatorship. c. Dismissal of Action. Within seven days of Court approval of the Jacob Settlement Agreement, the Parties shall submit a Joint Voluntary Dismissal With Prejudice of the Insider Lawsuit. d. Withdrawal of Motions. Jacob will withdraw all pending motions and agrees neither to file any additional pleadings or papers, nor appear voluntarily at any hearing, nor take any position in any legal matter concerning P&S, S&P, or the Conservator, unless required to do so by court order or subpoena. The Conservator will withdraw all pending motions and agrees neither to file any additional pleadings or papers, nor appear voluntarily at any hearing, nor take any position in any legal matter concerning Jacob on one side and P&S and S&P on the other side, unless required to do so by court order or subpoena. 5

6 e. Admission of Liability. The Parties agree that nothing contained in the Jacob Settlement Agreement shall be deemed an admission or concession of liability, wrongdoing, or any other form of admission with respect to any matter, thing, or dispute whatsoever. f. Resignation. Jacob has not been involved in the administration or management of SPJ Investments, Ltd.; JS&P Associates General Partnership; and Guardian Angel Trust, LLC (collectively, the Partnerships ) since turnover of those entities to the Conservator on or about December, Steven Jacob resigns from all positions with the Partnerships. Steven Jacob shall have no responsibility to the Partnerships and shall have no authority over the Partnerships. Jacob shall have no liability for errors, omissions or acts of negligence of the Partnerships or the Conservator occurring on and after December 20, g. Attorneys Fees. Each side shall bear its own attorneys fees and costs. 8. The Conservator seeks authority through this Motion to enter into the Settlement Agreements to resolve the claims between the Parties. 9. The Conservator submits the Settlement Agreements are in the best interest of the Conservatorship and, in turn, will allow for the greatest distribution to creditors. 10. In the Conservator s business judgment, the proposed Settlement Agreements represent a reasonable settlement of the disputes between the Parties given the likely defenses, risks, and costs necessarily attendant to litigation. 11. The Avellino and Bienes Settlement Agreements avoid the expenses of a trial, including attendant judicial resources, and accelerate the appellate ruling on the Summary Judgment Order. 6

7 12. The Jacob Settlement also avoids trial and resolves approximately two hundred twenty five thousand dollars ($225,000) of claims against the Conservatorship by payment of seventy five thousand ($75,000) a reasonable business decision. 13. Simply put, years ago on January 17, 2013, Conservator was appointed to preside over the Conservatorship Partnerships. At the time, the partners of the Conservatorship Partnerships were suing each other in litigation spawning four lawsuits, all pending in the Circuit Court of the Seventeenth Judicial Circuit, in and for Broward County, Florida, styled as follows: a. Matthew Carone, et al. v. Michael D. Sullivan, individually, Case No (the Conservator Lawsuit ); b. P&S Associates, General Partnership and S&P Associates General Partnership, v. Roberta P. Alves, et al., Case No (the Interpleader Lawsuit ); c. Philip J. von Kahle, as Conservator of P&S Associates, General Partnership and S&P Associates, General Partnership v. Janet A. Hooker Charitable Trust, et al., Case No (the Net Winner Lawsuit ); and d. Philip J. von Kahle, as Conservator of P&S Associates, General Partnership and S&P Associates, General Partnership v. Michael D. Sullivan, et al., Case No (the Insider Lawsuit ). 14. Taken together, the Settlement Agreements, if approved by this Court, resolve all litigation involving the Conservatorship at the trial level, leaving the Conservator with the duties of: (a) collecting distributions from Irving Picard as Trustee of the Bernard L. Madoff Investment Securities LLC and the Madoff Victims Fund; (b) answering any questions associated with the Conservatorship; (c) tax and partnership work associated with the Conservatorship; and (d) appeal of the Summary Judgment Order and Dismissal Order. WHEREFORE, Conservator respectfully requests this Court enter an order: (i) authorizing Conservator to enter into the Settlement Agreements; (ii) approving the Settlement Agreements; (iii) authorizing Conservator to take any and all action necessary to 7

8 effectuate the terms of the Settlement Agreements; (iv) finding (1) that Conservator has exercised sound business judgment by entering into the Settlement Agreements and (2) that the Settlement Agreements are in the best interest of creditors; and (v) granting such other and further relief as this Court deems just and proper. Respectfully submitted this 9 th day of October, MESSANA, P.A. Attorneys for Conservator 401 East Las Olas Boulevard, Suite 1400 Fort Lauderdale, FL Telephone: (954) Facsimile: (954) By: /s/ Thomas M. Messana, Esq. Thomas M. Messana, Esq. Florida Bar No

9 Exhibit A Bienes Settlement Agreement

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20 Exhibit B Avellino Settlement Agreement

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31 Exhibit C Jacob Settlement Agreement

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