In a 9-page opinion issued in the Syntax-Brillian case on May 11, 2016, Chief Judge Brendan L. Shannon lays out three principles of law that all litigants should know (if they don’t already). A copy of the Opinion is available on the Court’s website: Here. The Opinion was issued as a ruling on the motion of Alan Levine for relief from the order accepting the first-day-declaration of Gregory F. Rayburn.
As Judge Shannon provides in the Opinion, it appears that Mr. Levine filed his motion under the belief that if the first day declaration was found to be fraudulent, that all the relief provided in the bankruptcy case would be undone. Opinion at *6. This leads to lesson #1. Judge Shannon quickly puts this misbelief to rest, stating “Striking or vacating the First Day Affidavit, even if ordered by this Court, will not affect or unwind these steps and transactions.” Id.
Mr. Levine supports his motion by arguing that new evidence has come to light. Judge Shannon recently denied a motion to dismiss an adversary complaint filed by the Liquidating Trustee, holding that he was required to treat all pleadings as true for the purpose of ruling on a motion to dismiss, including allegations of fraud. Mr. Levine argued that this ruling was tantamount to the Court finding that there was fraud, which should result in the reversal of all orders which were entered in reliance on that fraud. This leads to lesson #2. Judge Shannon made clear the difference between a ruling on a motion to dismiss and one made after a full trial. Opinion at *8. “When the Court stated in the Rule 12(b) Decision that “it accepts as true” the allegations made in the Trustee’s complaint, it does not mean that the Trustee has conclusively proven such allegations.” Id.
Mr. Levine also requested to be able to seek discovery. The Liquidating Trustee argued vigorously against such relief, claiming that opening this door would create excessive costs for the Trust. This brings us to our final lesson. Judge Shannon held that because “there is no pending proceeding before this Court to which the Movant’s document request would relate” he would deny the request. Opinion at *9
We can learn this lessons from others or experience them ourselves. The former is far less costly.