Case 12-21642-PGH Doc 248 Filed 10/06/14 Page 1 of 20 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF FLORIDA WEST PALM BEACH DIVISION IN RE: EMANUEL L. SARRIS, SR., Case Number: 12-21642-PGH Debtor. Chapter 11 / DEBTOR S MOTION FOR APPROVAL OF STIPULATION FOR SETTLEMENT Any interested party who fails to file and serve a written response to this motion within 21 calendar days after the date of service stated in this motion shall, pursuant to Local Rule 9013-1(D), be deemed to have consented to the entry of an order in the form attached to this motion. Any scheduled hearing may then be cancelled. The debtor, Emanuel L. Sarris, Sr. (the Debtor ), by and through his undersigned counsel, pursuant to Fed. R. Bankr. P. 9019 and Local Rules 9013-1(D)(3)(b) and 9019-1, files this motion for approval of the Stipulation for Settlement Pursuant to Rule 9019 (the Stipulation ) between the (a) Debtor; (b) Sarris Financial Group, Inc. ( SFG ) and (c) Gary Goldman, individually and as Trustee of the Rachel Goldman Trust, Kevin Goldman Trust, Justin Goldman Trust, and Jessica Goldman Trust; Joan Goldman; Kenneth Goldman, as Trustee of the Kenneth S. Goldman Revocable Trust; Morton Goldman; Sandy Goldman; Goldman Family LP; Scott Goldman, individually and as Trustee of the Bone & Joint Disorders Defined Benefit Trust dated 12/30/04, the Jessica Goldman IRA Account, and the Kevin Goldman IRA Account; Fay Goldman; John E. Hill, Jr.; John E. Hill, III, individually as executor of the estate of John E. Hill, Jr.; Richard Mueller; David Carpenter and Sandra L. Carpenter, as Trustees of the David Michael Carpenter Living Trust; John J. Drammis Jr., individually and as Trustee of the John J. Drammis Jr. Revocable Trust; Burney W. Gibson; {1660/000/00231501} 1
Case 12-21642-PGH Doc 248 Filed 10/06/14 Page 2 of 20 Katherine A. Gibson; Katherine M. Gibson, individually and as Trustee of the Gibson Children s 2008 Trust, the Katherine A. Gibson Management Trust, the KMG QTIP Trust, and the Margaret M. Gibson Management Trust; Margaret M. Gibson; Leonard Waks; Russell Puschak; Michael Muratore; Colleen Muratore; William H. Page; Evelyn B. Page; American Endowment Foundation; Robert Bogle; Edward H. Arnold; Terrence L. Ganse; Karen A. Ganse; Lawrence R. Ganse; Dietz & Watson, Inc. Union Employees Pension Plan; Dietz & Watson Inc. Defined Benefit Pension Plan; Black Bear Enterprises, Inc.; Cindy Yingling; Stephen Yingling; Gregory Yingling; Timothy Yingling; Christopher Yingling; Louis Eni: Nina Eni; Christopher Eni; Jennifer Eni; Ruth Eni Christopher Eni, Jr.; Dylan Eni; Chase Eni; Lauren Eni; and Michael Eni (collectively, the Plaintiffs ), and in support thereof, respectfully states as follows: JURISDICTION 1. This Court has jurisdiction over the parties and subject matter pursuant to 28 U.S.C. 157 and 1334. Venue is proper pursuant to sections 28 U.S.C 1408 and 1409. This is a core proceeding pursuant to 28 U.S.C. 157(b)(2). 2. The procedural predicate for the requested relief is Fed. R. Bankr. P. 9019. BACKGROUND 3. In 2010, the Plaintiffs initiated a civil action by way of a complaint against the Debtor, SFG and several other defendants 1 in the United States District Court for the Northern District of Illinois, Easter Division (Case No. 10-3051) (the Lawsuit ). 1 The remaining defendants included the following: Daniel Spitzer; Alfred Gerebizza; Draseena Funds Group, Corp.; Kenzie Financial Management, Inc.; Kenzie Services, LLC; Aneesard Management LLC; Nerium Management Co.; DN Management Co., LLC; Arrow Fund, LLC; Arrow Fund II, LLC; Conservium Fund, LLC; Nerium Currency Fund, LP; Senior Strength Q Fund, LLC; SSecurity Fund, LLC; Three Oaks Advanced Fund, LLC; Three Oaks Currency Fund, LP; Three Oaks Fund, LP; Three Oaks Fund 25, LLC; Three Oaks Senior Strength Fund, LLC; USFirst Fund, LLC; Serrano Unifico (Investments) Ltd.; Capital Asset and Portfolio Managers, Inc.; Brian Donahue; First Financial Resources, LLC; and TLM Capital Corporation. {1660/000/00231501} 2
Case 12-21642-PGH Doc 248 Filed 10/06/14 Page 3 of 20 4. The Plaintiffs alleged that the Debtor and other defendants committed securities fraud in violation of the Securities and Exchange Act of 1934 and the Illinois Securities Law of 1953, common law fraud and/or negligent misrepresentation, violated the Illinois Consumer Fraud and Deceptive Business Practices Act, and/or have breached their fiduciary duties to the plaintiffs and/or aided and abetted such breaches of fiduciary duty. 5. The plaintiffs alleged that the Debtor was employed by Kenzie Financial Management, Inc. beginning in 2003 and was one of its highest paid employees and that his salary was paid through investor contributions to the Draseena Defendants Ponzi scheme. The plaintiffs claim the Debtor induced them to invest in the Ponzi scheme and that he received a benefit therefrom. 6. On May 11, 2012, the Debtor filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code (the Petition Date ). 7. The Debtor is semi-retired and is a financial planner and investment advisor. 8. The Debtor filed for bankruptcy due to the overwhelming cost of defending three lawsuits and to handle the contested claims in one forum and in essence use the bankruptcy process to efficiently resolve all disputes relating to same. 9. The Plaintiffs total claims against the Debtor and SFG total approximately $24,826,714 (collectively, the Claims ). 10. The Plaintiffs contend their Claims against the Debtor are non-dischargeable under 11 U.S.C. 523. 11. The Parties have participated in good faith settlement negotiations and mutually desire to resolve their disputes in accordance with the terms of the Stipulation, which is attached {1660/000/00231501} 3
Case 12-21642-PGH Doc 248 Filed 10/06/14 Page 4 of 20 hereto as Exhibit A. The Debtor believes that, in light of the uncertainty of litigation and the concomitant expenses thereto, the Stipulation is in the best interest of the estate. MATERIAL TERMS OF THE STIPULATION 12. The Stipulation fully sets forth all of the terms of the agreement between the Parties. The pertinent terms of the Stipulation are set forth below for summary and notice purposes only, and to the extent any terms are inconsistent with the Stipulation, the Stipulation controls. a. Allowance of Claims: The Plaintiff s Claims shall be treated as allowed general unsecured claims in the aggregate amount of $24,826,714 (the Allowed Claims ). Attached as Exhibit A to the Stipulation is a spreadsheet detailing the amount of each Plaintiff s Allowed Claim. b. Settlement Amount: In full satisfaction, settlement, release and discharge of the Plaintiffs respective Allowed Claims against the Debtor and SFG, the Debtor shall pay the total sum of Thirty Thousand Dollars ($30,000) from his exempt IRA account (the Settlement Amount ) to counsel for the Plaintiffs, John M. George, Jr., Katten & Temple LLP, 542 South Dearborn St., 14 th Floor, Chicago, Illinois 60605, within ten (10) days of the entry of an Order approving this Stipulation. Upon receipt of the Settlement Amount, counsel for the Plaintiffs shall distribute the Settlement Amount pro rata to the Plaintiffs. c. Plan or Structured Dismissal: In consideration of the Settlement Amount and the Allowance of Claims, the Plaintiffs waive any right to object to the dischargeability of their Claims under 11 U.S.C. 523 and agree to either support any Plan of Reorganization filed by the Debtor so long as there is a distribution to holders of allowed general unsecured claims; or support a structured dismissal. In the event the Debtor files a Plan of Reorganization, the Plaintiffs agree to timely vote in favor of the Plan and not to object or otherwise contest confirmation of same so long as the Plan provides for a distribution to holders of general unsecured claims. Alternatively, in the event the Debtor proposes a structured dismissal, Plaintiffs agree to support same without the payment of any additional distribution. d. Mutual General Releases: i. In exchange for the Settlement Amount, the Plaintiffs and their officers, directors, agents, employees, representatives, attorneys, assignees, stockholders, members, and partners irrevocably and unconditionally waive, and forever release the Debtor, SFG, and any of their agents, representatives, attorneys, officers, directors, employees, stockholders, partners and assignees, from any and all claims, charges, complaints, counterclaims, actions, grievances for any act or omission up through the date of this Stipulation, whether known or unknown, excepting only the Parties obligations pursuant to this Stipulation. {1660/000/00231501} 4
Case 12-21642-PGH Doc 248 Filed 10/06/14 Page 5 of 20 ii. Likewise, in exchange for the Plaintiffs agreement to support either any Plan of Reorganization or a structured dismissal and the Plaintiffs waiver of objecting to the dischargeability of their Claims, the Debtor, SFG, and their agents, representatives, attorneys, officers, directors, employees, stockholders, partners, and assignees, irrevocably and unconditionally waives and forever releases the Plaintiffs and their officers, directors, agents, employees, representatives, attorneys, assignees, stockholders, members, and partners from any and all claims, charges, complaints, counterclaims, actions, grievances for any act or omission up through the date of this Stipulation, whether known or unknown, excepting only the Parties obligations pursuant to this Stipulation. iii. The aforementioned releases, however, in no way releases, discharges or waives any prospective or new claims arising from any breach of this agreement, or that may arise from future transactions between the Parties and does not release ability to receive a prompt distribution of any payment to general unsecured creditors. iv. Nothing herein shall release these Plaintiffs claims against any person or entity other than the Debtor and SFG, including without limitation claims based on theories of agency and joint tortfeasor liability, nor shall these releases waive Plaintiffs right to seek courtordered restitution from Debtor or any other person or entity pursuant to the Victim and Witness Protection Act, 18 U.S.C. 3663, et seq or other applicable provision. BASIS FOR RELIEF REQUESTED 13. Through this motion, the Debtor requests that this Court enter an Order approving the Stipulation to permit the parties to amicably resolve their disputes. 14. It is generally recognized that the law favors compromise of disputes over litigation for litigation sake. In re Bicoastal Corp., 164 B.R. 1009, 1016 (Bankr. M.D. Fla. 1993). Rule 9019(a) grants the bankruptcy court the power to approve settlements. GMGRSST, Ltd. v. Menotte (In re Air Safety Int l, L.C.), 336 B.R. 843, 852 (S.D. Fla. 2005). 15. Pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure, the Court may approve a compromise or settlement after notice and a hearing. Fed. R. Bankr. P. 9019. Accordingly, it is within the scope of this Court s authority to grant this motion. 16. When considering settlements for approval, the bankruptcy court is to determine whether the proposed settlement is fair and equitable. In re Air Safety Int l, L.C., 336 B.R. at {1660/000/00231501} 5
Case 12-21642-PGH Doc 248 Filed 10/06/14 Page 6 of 20 852. The Eleventh Circuit Court of Appeals has set forth factors to assist bankruptcy courts in determining whether a settlement proposal meets the appropriate standard. Id. These factors are as follows: (a) the probability of success in the litigation; (b) the difficulties, if any, to be encountered in the matter of collection; (c) the complexity of the litigation involved, and the expense, inconvenience and delay necessarily attending it; and (d) the paramount interest of the creditors and a proper deference to their reasonable views in the premises (the Justice Oaks Factors ). See Wallis v. Justice Oaks II, Ltd., 898 F.2d 1544, 1549 (11th Cir. 1990); see also Romagosa v. Thomas, 236 Fed. Appx. 498, 504 (11th Cir. 2007) (setting forth Justice Oaks Factors and affirming bankruptcy court s approval of settlement agreement). Moreover, [t]he bankruptcy court is not required to rule on the merits, and must look only to the probabilities. Id. Settlements or compromises should be approved unless they fall below the lowest point in the range of reasonableness. In re Bicoastal Corp., 164 B.R. at 1016. 17. In the instant case, the Justice Oaks Factors weigh in favor of approving the terms of the Stipulation. In negotiating the terms of the Stipulation, the Debtor and his counsel carefully evaluated the costs and risks of litigation and the defenses that could be raised in his sound business judgment. 18. The Stipulation will avoid the necessity of further litigation and avoid the concomitant fees and costs. The Debtor recommends approval of the Stipulation because it is fair, reasonable and in the best interest of the Debtor s estate and his creditors. {1660/000/00231501} 6
Case 12-21642-PGH Doc 248 Filed 10/06/14 Page 7 of 20 WHEREFORE, the Debtor respectfully requests that the Court enter an Order substantially in the form attached hereto as Exhibit B : (i) granting the instant motion; (ii) approving the terms of the Stipulation; (iii) retaining jurisdiction over the terms of the Stipulation and the parties thereto to interpret and enforce the Stipulation; and (iv) granting such other relief as the Court deems just and proper. Respectfully submitted: SHRAIBERG, FERRARA & LANDAU, P.A. Attorneys for Debtor 2385 NW Executive Center Drive, #300 Boca Raton, Florida 33431 Telephone: 561-443-0800 Facsimile: 561-998-0047 By: /s/ Bradley S. Shraiberg Bradley S. Shraiberg Florida Bar No. 121622 bshraiberg@sfl-pa.com Lenore M. Rosetto Parr Florida Bar No. 064448 lrosettoparr@sfl-pa.com {1660/000/00231501} 7
Case 12-21642-PGH Doc 248 Filed 10/06/14 Page 8 of 20 ATTORNEY CERTIFICATION I HEREBY CERTIFY that I am admitted to the Bar of the United States District Court for the Southern District of Florida, and I am in compliance with the additional qualifications to practice in this Court as set forth in Local Rule 2090-1(A). CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing was served this 6 th day of October, 2014, via CM/ECF to all parties registered to receive such notice via electronic filing. SHRAIBERG, FERRARA & LANDAU, P.A. Attorneys for Debtor 2385 NW Executive Center Drive, #300 Boca Raton, Florida 33431 Telephone: 561-443-0800 Facsimile: 561-998-0047 By: /s/ Bradley S. Shraiberg Bradley S. Shraiberg Florida Bar No. 121622 bshraiberg@sfl-pa.com Lenore M. Rosetto Parr Florida Bar No. 064448 lrosettoparr@sfl-pa.com {1660/000/00231501} 8
Case 12-21642-PGH Doc 248 Filed 10/06/14 Page 9 of 20 EXHIBIT A {1660/000/00231501} 9
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Case 12-21642-PGH Doc 248 Filed 10/06/14 Page 19 of 20 EXHIBIT B UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF FLORIDA WEST PALM BEACH DIVISION IN RE: EMANUEL L. SARRIS, SR., Case Number: 12-21642-PGH Debtor. Chapter 11 / ORDER GRANTING MOTION FOR APPROVAL OF STIPULATION FOR SETTLEMENT THIS MATTER came before the Court to consider Emanuel L. Sarris, Sr. s (the Debtor ) Motion for Approval of Stipulation for Settlement Pursuant to Rule 9019 [ECF No. ] (the Motion ) and the Certificate of No Response and Request for Entry of an Order Approving the Motion (the Certificate of No Response ) [ECF No. ]. Through the Motion, the Debtor requests that the Court approve and effectuate the terms of a particular Stipulation of Settlement (the Stipulation ) between the Debtor, SFG and the Plaintiffs 2. The Court has reviewed the Motion and the Certificate of No Response, the Stipulation and the 2 All capitalized terms shall have the meaning ascribed to them in the Stipulation, unless otherwise indicated herein. {1660/000/00231501} 10
Case 12-21642-PGH Doc 248 Filed 10/06/14 Page 20 of 20 record, considered argument of counsel, and determined that good cause exists for granting and effectuating the relief. IT IS ORDERED AND ADJUDGED as follows: A. The Motion is granted and the Stipulation is approved in all respects. B. The terms of the Stipulation are incorporated by referenced herein. C. The Bankruptcy Court shall retain jurisdiction over the Parties, subject matter, interpretation, effectuation, and enforcement of the terms of the Settlement and this Order. Submitted by: Bradley S. Shraiberg, Esq. SHRAIBERG, FERRARA & LANDAU, P.A. Attorneys for the Debtor 2385 NW Executive Center Drive, #300 Boca Raton, Florida 33431 Tel.: 561-443-0800 Facsimile: 561-998-0047 Email: bshraiberg@sfl-pa.com ### Bradley S. Shraiberg, Esq. is directed to serve copies of this Order upon all interested parties and to file a certificate of service with the Court. {1660/000/00231501} 11