United States District Court, S.D. Florida
ORDER ON BANKRUPTCY APPEAL
SMITH UNITED STATES DISTRICT JUDGE.
MATTER is before the Court on Nicholas Schiano's appeal
from two orders entered by the United States Bankruptcy Court
for the Southern District of Florida, which granted the
Chapter 7 Trustee's/Appellee's Motions to Approve
Stipulation of Settlement and Release and to Approve
Stipulation of Settlement as to Disposition of Domain Names.
Based on the existing appellate record,  the Court finds
that Mr. Schiano lacks standing to pursue this appeal.
preliminary matter, the Court addresses the Trustee's
Motion for Judicial Notice of Ruling by Eleventh Circuit
Court of Appeal or For Alternate Relief [DE 31] and the
Supplement to Appellee's Motion for Judicial Notice [DE
33]. In the Motion, the Trustee asks the Court to take
judicial notice of the Eleventh Circuit Court of Appeals'
recent rulings in Friedman v. Nicholas Schiano, et
al., No. 18-10742, which was filed on February 26,
2018. In the Friedman appeal, Mr.
Schiano challenged the district court's entry of default
judgment of approximately $1.3 million in favor of Judgment
Creditors Matthew Friedman and Scale Media, Inc. in another
case. Mr. Schiano has not filed any papers in opposition to
the Trustee's Motion for Judicial Notice.
‘may judicially notice a fact that is not subject to
reasonable dispute because it: (1) is generally known within
the trial court's territorial jurisdiction; or (2) can be
accurately and readily determined from sources whose accuracy
cannot reasonably be questioned.'” Collier HMA
Physician Mgmt., LLC v. NCH Healthcare Sys., Inc., No.
218CV408FTM38MRM, 2019 WL 277733, at *2 (M.D. Fla. Jan. 22,
2019) (citing Fed.R.Evid. 201(b)) (taking “judicial
notice of the subject matter of the state trial and appellate
court filings and recogniz[ing] the judicial acts each order
represents.”). Courts are therefore “free to take
judicial notice of subsequent developments in cases that are
a matter of public record and are relevant to the
appeal.” Rothenberg v. Sec. Mgmt. Co., 667
F.2d 958, 961 (11th Cir. 1982). This includes “judicial
notice of another court's order . . . for the limited
purpose of recognizing the judicial act that the order
represents or the subject matter of the litigation and
related filings.” In re Delta Res., Inc., 54
F.3d 722, 725 (11th Cir. 1995) (internal marks and citation
omitted) (taking judicial notice of bankruptcy court's
order and its findings as a matter of law); see also
McBride v. Crews, No. 3:14CV131/LAC/EMT, 2014 WL
4983501, at *1 (N.D. Fla. Oct. 6, 2014) (taking
“judicial notice of information available on the
database maintained by the Clerk of Court for the Eleventh
Circuit Court of Appeals,
https://ecf.call.uscourts.gov, ” that
“Petitioner filed an application for leave to file a
successive habeas petition” and the “Eleventh
Circuit denied the application on July 30, 2014.”).
Court takes judicial notice of the Friedman appeal
and the Eleventh Circuit's rulings in the case.
Developments in that case are a matter of public record and
are relevant to this appeal. Mr. Schiano has extensively
referenced the Friedman appeal in his papers and
throughout the record, and has not opposed the Trustee's
Motion. The Motion for Judicial Notice is granted.
genesis of this case lies in a business relationship gone
awry. Mr. Schiano owned a bar mitzvah entertainment company
and an internet marketing company. Appellant's Corrected
Br. (“Br.”) [DE 26] at 5. Judgment Creditor
Mathew Friedman worked for Mr. Schiano's bar mitzvah
entertainment company. Br. at 5. At some point, Mr. Friedman
opened his own internet marketing company. Br. at 5. Later,
Mr. Friedman and his company, Scale Media, Inc.
(collectively, “the Judgment Creditors”), filed
suit against Mr. Schiano for injunctive relief, defamation
per se, and violations of the Florida Deceptive and
Unfair Trade Practices Act. R. at 297-98, 323. The Judgment
Creditors alleged that Mr. Schiano published false and
damaging statements about them online to divert business away
from the Judgment Creditors to Mr. Schiano. Id. The
district court in that case entered default judgment against
Mr. Schiano for approximately $1.3 million. R. at 303-04,
Schiano subsequently filed for chapter 7 bankruptcy in the
United States Bankruptcy Court for the Southern District of
Florida. On November 16, 2018, the trustee appointed in the
bankruptcy case, Appellee Sonya Salkin, filed two motions
seeking approval of a settlement between the bankruptcy
estate and the Judgment Creditors. The first motion sought
the bankruptcy court's approval of a settlement involving
various internet domain names owned or controlled by Mr.
Schiano pre-petition, for which the Judgment Creditors
offered $15, 000 as consideration. R. at 22-31. In the second
motion, the Trustee asked the bankruptcy court to approve a
settlement pertaining to other issues between the bankruptcy
estate and the Judgment Creditors, including a claim for
slander and defamation against the Judgment Creditors which
Mr. Schiano had listed on Schedule A/B of his bankruptcy
petition. R. at 1, 25-36. As consideration for this second
agreement, the Judgment Creditors agreed to waive their claim
to garnished bank funds (a sum of $10, 840.72) and to pay an
additional sum of $5, 000 to the bankruptcy estate, and the
parties agreed to exchange releases. R. at 25-36. Mr. Schiano
failed to bid or out-bid the Judgment Creditors for these
assets. See Dec. 12, 2018 Hr'g Tr.
(“Tr.”) at 10-13, 22, 28-32, 35-36, 40-42, 44-45,
47, 51, 54-55, 59-62, 75-76.
Schiano objected to both settlement agreements and, on
December 12, 2018, the bankruptcy court held a hearing on the
objections and proposed settlements. Explaining his reasoning
on the record at the hearing, the bankruptcy judge found that
the settlements were in the best interest of the bankruptcy
estate and that the Trustee had exercised her reasonable
business judgment. Tr. at 40-42, 75:20-76; R. at 48-51,
58-59. At the hearing, and later in written orders, the
bankruptcy court approved both settlements. Id. The
bankruptcy court also found that Mr. Schiano lacked standing
to object to the settlements because he had no
“apparent economic interest in th[e] estate . . .
[which] is by all appearances hopelessly insolvent.”
Tr. at 82:14-19. This appeal followed.
Court consolidated Mr. Schiano's appeal of the order
approving the settlement concerning the domain names and the
appeal of the order approving the more general settlement.
See DE 12. Mr. Schiano argues on appeal that: (1) he
has standing to object to the settlements and to bring this
appeal; (2) the Trustee failed to present evidence, and the
bankruptcy court failed to make specific findings in its
orders, that the settlements were fair, equitable, and in the
best interest of the estate; (3) to the extent his defamation
claim against the Judgment Creditors may include an equitable
claim for injunctive relief, the defamation claim is not part
of the bankruptcy estate and the Trustee is therefore
prohibited from settling the claim; and (4) to prevent the
Judgment Creditors from using their default judgment as a
blocking position to chill open and competitive bidding, the
bankruptcy court should have stayed determination of the
propriety of the settlements until after the Eleventh Circuit
decided the Friedman appeal. Br. at 12-49; Am. Reply
Br. at 2-26.
appeal has been fully briefed, the Court has reviewed the
record, and this matter is ripe for adjudication.
STANDARD OF REVIEW
courts function as appellate courts in reviewing a bankruptcy
court's decision. Williams v. EMC Mortg. Corp.
(In re Williams), 216 F.3d 1295, 1296 (11th Cir.
2000). “A district court reviews a bankruptcy
court's legal conclusions de novo, and a bankruptcy
court's factual findings for clear error.” In
re Cummings, 381 B.R. 810, 822-23 (S.D. Fla. 2007)
(citation omitted). The appellant bears the burden of showing
that the bankruptcy court's factual findings are clearly
erroneous. Id. “A finding of fact is not
clearly erroneous unless this court, after ...