Chutzpah: Fraud Perpetrator Tries to Use Court to Avoid Paying Judgment

Fraud Judgment for $45.657,401.01 Against Fraudster Seeks Bankruptcy Protection
Court Refuses to Allow Procedural Rules To Enable Fraud Perpetrator Lupolover To Manipulate the Federal Court to Avoid Paying The Judgment

Post 4904

Before the USDC, ED, New York was the motion of Non-Debtor Respondents Michael Lupolover and NJTM Ventures, LLC seeking reconsideration of the Court's July 29, 2024 Order establishing a temporary restraining order (TRO).

In Allstate Insurance Company, et al. v. Mark Mirvis, et al., No. 08-CV-4405 (PKC), United States District Court, E.D. New York (September 26, 2024) was compelled to continue jurisdiction of an October 2008 motion by Plaintiff Allstate Insurance Company after  Michael Lupolover's father, Mark Lupolover (“Lupolover”), and numerous other defendants, were found to be involved in a massive health insurance fraud scheme carried out by the defendants between 1995 and 2008.

FACTUAL BACKGROUND

In May 2015 Allstate obtained a default judgment against Lupolover and other defendants, jointly and severally, in the amount of $45,657,401.01.

After the judgment Lupolover continued sustained efforts to evade enforcement of the $45-million judgment. As a result the Court authorized Plaintiff to conduct ex parte discovery to identify and locate Lupolover's assets. To date, Lupolover has not paid anything toward the judgment.

On May 31, 2024, Plaintiff filed an ex parte motion for a temporary restraining order  to show cause, and/or preliminary injunction as to Lupolover and the Non-Debtor Respondents, which include Lupolover's wife and son-movant Michael Lupolover-as well as three corporate entities. Plaintiff sought a TRO freezing Lupolover's and the NonDebtor Respondents' assets.

Plaintiff presented evidence that Lupolover and his family had engaged in a years-long campaign to dissipate and conceal Lupolover's assets, in part, via the three corporate entities, and evade the $45-million judgment against him. On June 4, 2024, the Court granted the requested TRO and scheduled a show cause hearing for June 7, 2024. On June 6, 2024, the Non-Debtor Respondents requested an adjournment of the hearing “for about one month to allow sufficient time for discovery and briefing.” The request stated: “[The Non-Debtor Respondents] agree that the other terms of the Order, including but not limited to the . . . temporary restraining order restrictions (which shall remain in place until the conclusion of the to be scheduled new hearing date and the determination of [Plaintiff's] Order to Show Cause) would remain in effect during any adjournment.” On July 3, 2024, counsel for the Non-Debtor Respondents notified the Court that Lupolover had filed for bankruptcy that day and requested an automatic stay pursuant to Section 362 of the Bankruptcy Code.

ANALYSIS AND COURT ORDERS

On July 29, 2024, via docket order, the Court imposed the Section 362 stay and denied the Non-Debtor Respondents' request to lift the TRO because of the stay.

The court denied the request and stated an: “action to recover fraudulently transferred property is properly regarded as undertaken ‘to recover a claim against the debtor' and subject to the automatic stay pursuant to § 362(a)(1) E]ven when a creditor seeks to have fraudulently conveyed property returned to the debtor-transferor's estate, the creditor's action against the transferee remains an attempt to recover its claim against the debtor, if indirectly, and is stayed by [S]ection 362(a)(1).). Accordingly, this action is stayed as to Judgment Debtor Mark Lupolover and the Non-Debtor Respondents pending the resolution of Judgment Debtor's bankruptcy proceedings, and the hearing scheduled for 7/31/2024 is adjourned sine die... The Court shall modify the TRO to permit Judgment Debtor to comply with the bankruptcy court's orders, but otherwise, the TRO shall remain in effect pending the resolution of Judgment Debtor's bankruptcy proceedings. The Court finds that permitting the TRO to remain in effect, particularly as to the NonDebtor Respondents' assets, best furthers the public policy considerations behind the automatic stay provision, which is intended to maintain the status quo."

Particularly in the context of this case, where Plaintiff has put forth pages and pages of evidence indicating that Lupolover and the Non-Debtor Respondents are working together to evade a multi-million-dollar judgment, this sequence of events reeks of gamesmanship.

The Non-Debtor Respondents seek to use the automatic stay provision as both a sword and a shield by arguing that the provision precludes the Court from adjudicating Plaintiff's motion for a preliminary injunction and simultaneously requires the Court to lift the TRO on the Non-Debtor Respondents' assets, which notably are not part of the bankruptcy estate. But the Non-Debtor Respondents cannot have their cake and eat it too.

The USDC concluded: "This Court will not permit Lupolover and the Non-Debtor Respondents to improperly manipulate the federal procedural rules to enable Lupolover to avoid paying the judgment issued in this case. Accordingly, the Court denies the Non-Debtor Respondents' motion for reconsideration."

ZALMA OPINION

People who commit fraud have chutzpah (Yiddish for unmitigated gall) and even when they lose and are faced with a final judgment more than $45 million dollars they continue to have sufficient funds to hire lawyers to use the federal courts to avoid paying the judgment including trying to use the bankruptcy courts to hold off the judgment creditor, Allstate for many years resisting the purpose for which federal courts were created and avoiding legitimate judgments of the courts. Well done Pamela K. Chen, United States District Judge.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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