United States Bankruptcy Court for the District of Nevada - Hearing held 6/23/2016
In Re: Gholam Reza Jazi Zandian
Debtor in a Foreign Proceeding.
Case No.: bk-n-16-50644-btb
Chapter 15
This transcript was originally made by GoTranscript (www.gotranscript.com). There were some obvious errors that I corrected. There may still be some errors so always compare quotes to the audio recording of the hearing. JM
Judge: Um, next we have Patrick Canet. C-A-N-E-T. 1650644.
[pause 00:00:07]
Jeffery Hartman: Good morning, Your Honor, Jeff Hartman on behalf of Mr. Canet.
Steve Abelman: [unintelligible 00:00:21] Brownstein Hyatt Farber Schreck on behalf of Jed Margolin.
Judge: And this is an application for recognition of the Chapter 15? This is the case that's from France, is that correct?
Hartman: Yes, Your Honor. Um, if I may, to begin with, um, when the case was filed, there was a-a glitch in the filing system. And when I talked with Miss Gallagher about this, it- the case shouldn’t be designated as Mr. Canet 'cause he's the foreign representative who is seeking the order [unintelligible 00:00:57].
Judge: This would be for Mr. Zandian?
Hartman: Yes.
Judge: Okay.
Hartman: So, [unintelligible 00:01:01]--and I spoke with them regarding the issuance of the summons and we got that straightened out. Um, and I've read the opposition filed by, uh, counsel. And, uh, I-I'll certainly, the Court should hear from him, but, I think, based on lessening[?] opposition, my request would be to treat this as a status hearing and put burden on me to obtain an order from the court in Paris as to the status of that case and whether or not it's in fact, the intention of that court is that Mr. Zandian is also in a Chapter 15 in Paris. I cannot represent to you, Your Honor, that that is, in fact, the case. So. That's my position on behalf of Mr. Canet, as the representative of the Chapter 15 that’s pending in Paris.
Judge: As opposed to Mr. Zandian, who'd be actually the main debtor for the cross-border insolvency.
Hartman: Right, a-and th-the point taken in the opposition, i-it's, I understand the point, and that is that Mr. Canet was originally appointed, uh, in the Computer World bankruptcy case, if that's what they call it, or liquidation proceeding in Paris. I cannot answer the question honestly today, whether or not, uh, there has been a proceeding in Paris that was for the purpose of having the cross-border insolvency rules apply to Mr. Zandian individually as well. And, i-if the Court, uh, considers my request, I would- I would suggest that the burden be on me to provide information sometime in July because, in my past experience dealing with anybody in France in the month of August, it's almost impossible.
Judge: That's vacation month.
Hartman: That's vacation month.
Judge: In most of Europe, isn't it?
Hartman: Yes. And so--
Judge: They have a better system.
Hartman: Yeah, they- well, they have a different system.
Judge: Mr. Margolin?
Hartman: Thank you.
Judge: Sir?
Hartman: I don't think he's Mr. Margolin.
Judge: I'm sorry, I apologize.
Abelman: Steve Abelman on behalf of [unintelligible 00:03:15].
Judge: Mr. Abelman. My, my pro- my bad.
Abelman: Your Honor, uh, I've traveled here from- from Colorado, and, um, with your indulgence, I-I'd like to take the opportunity to elaborate upon Mr. Margolin's position without, um, duplicating the- the materials that we filed.
Judge: Certainly. Just go ahead.
Abelman: Um, Gholam Reza Zandian is a clever and- clever and practiced in the art of deception. His actions over the last eight and a half years, which I will highlight, reflect an astounding lack of respect for the United States Judici-Judicial System. He ignores court orders and discards his counsel as it suits his needs. That is why we implore this Court to zealously guard the integrity of the judicial system with regard to this Chapter 15 filing. Now, I want to be abundantly clear, while I believe Mr. Zandian is behind this Chapter 15 filing, nothing I say is intended to impugn the integrity of Mr. Hartman.
Judge: Thank you.
Abelman: I-I-I-I have no re- no reason to believe that he is a knowing participant in, what I believe is- is a- is a fraud- uh, is an attempt to perpetrate a fraud upon the Court. Um, and- and, again, Mr. Zandian has a long history of uti-utilizing attorneys for his own purpose. Um, while Chapter 15 is designed to provide a mechanism for dealing with transnational insolvency cases, its purpose is primarily to encourage cooperation, where a citizen is sought in the United States by a foreign court or a foreign representative in connection with a foreign proceeding. And I would- I would bring this Court's attention to the definition of foreign proceeding, which is found at, um, uh, 11 USC section 101 sub 23. And there's primarily three elements. There's a collective- there must be a collective judicial or administrative proceeding in a foreign country. [crosstalk] [unintelligible 00:05:41]--
Judge: Is that the case here?
Abelman: I-I would submit no.
Judge: Okay. So explain- explain that to me, if you would.
Abelman: Uh, um. I-If I may just finish the definition--
Judge: Sure, sure, sure.
Abelman: --and then I'll come back and- and- and raise the point as- as you requested. So, there- there needs to be a collective judicial or administrative proceeding in a foreign country. Number one. Two, under a law relating to insolvency or adjustment of debt. I-I-I'm not sure about when that implies. And three, in which proceeding the assets and affairs of the debtor are subject to the control or supervision by a foreign court for the purpose of reorganization or liquidation.
So, quite simply, these- these defined elements are not supported by the materials we have, and I think Mr. Hartman has acknowledged that today. Element number one is for foreign proceedings, so our position is, there's no evidence of a pending administrative or judicial proceeding in France for Zandian. The judgment is a judgment, uh, for the outside- out of an insolvency of Computer World. And apparently, Zandian was a principal of Computer World. But there is not-- to our knowledge, a pending insolvency action for Zandian.
Um, there is- there is evidence that 18 years ago, Mr. Canet, um, obtained a judgment against Zandian on behalf of Computer World. And that judgment was for upwards of twen- 20 million francs. And as my papers pointed out, um, there's no- there's no bank that even deals in the currency of francs. Uh, that ended, um, four or five years ago.
Judge: Maybe coming back, depending on the Brexit play today.
Abelman: [laughs] Well, actually, Great Britain has always [crosstalk], but- but France did not. France went to euro. Um. So, then element number three, there's no support that there is currently or there has ever been a French proceeding in which the Nevada assets owned by Zandian-- and then this is- this is the- the- the quote from- from the definition, "are subject to control or supervision by a French court, for the purpose of reorganization or liquidation."
So, th-the assets-- there are assets that are in play, that are- that's real property in this state, and my point is that none of these assets have ever been part of any liquidation proceeding, that we are aware of, in France. Now, the objection that I filed references Zandian's role in forging documents, attempted bribery, fraudulent conveyance. These provide the Court with some perspective of what Zandian is capable, and why this petition must be subjected to a greater than normal scrutiny. And, um, what I'd like to do is just summarize the context that this Chapter 15 arises.
Judge: Please.
Abelman: Okay. Um, so, the initial lawsuit was in the United States District Court for the District of Arizona before Judge Raner Collins. And it was case number CD-00588. And in December 2007, uh, Reza Zandian forged patent assignment documents, which were then filed with the US Patent and Trademark Office.
Judge: Forged hack designer patents?
Abelman: Forged- he forged patent assignment documents-
Judge: -I'm sorry.
Abelman: So documents that purported to assign patents that belong to Mr. Margolin or his entities and he filed it with the US Patent Office to reflect that the patents were- were assigned to entities controlled by Zandian.
That resulted in litigation which culminated in a judgment against the Zandian entities in August of 2008. So that was lawsuit number one. Lawsuit number two is here in Nevada. And it's case number 09-0, uh, 09-OC-00579 and it's in front of Judge James Russel, First Judicial District Court. And I have a -- I'd like you -- I would like this court to take judicial notice of it-- of this case and it's, it's clear and I have a docket sheet here.
Judge: Can I- can I see that. I apologize. I can't get to my docket here, so-
Abelman: Okay.
Judge: You have them? Okay. So could you give a copy for Mr. [unintelligible 00:11:14] to Mr. Hartman. Yes, please mark this. I'm just going to mark this as an exhibit to this hearing so I can keep track of it.
Abelman: So if I may-
Judge: One second. [background conversation] [unintelligible 00:11:40] going to do. Okay, thanks. All right. Thank you. Okay, go ahead.
Abelman: I just want to take you through the highlights.
Judge: Sure.
Abelman: Um, and you can see that in, in- in March of 2011-- uh, okay, as a result of the litigation in Arizona Mr. Margolin initiated a lawsuit here pursuing Mr. Zandian for damages. And in March of 2011, he obtained a default judgment against Zandian.
Judge: Okay. That's a- 3-1-11. is that correct, uh?
Abelman: Uh- Yes.
Judge: All right.
Abelman: In June, Zandian filed a motion to dismiss on special appearance claiming improper service because he no longer resided at an address as it had been pro- pro- provided in Fair Oaks, California.
Judge: And who did he-- did he file that pro se or did he have a counsel?
Abelman: He had counsel.
Judge: Who is this counsel?
Abelman: His counsel was, uh, John Peter Lee who I think is now deceased. Um, so the court granted in part that motion and entered an order, setting it by the default but deny the motion to dismiss and granting an extension of time for service. But-
Judge: But that was-- that was a motion that serves by publication is that correct?
Abelman: It, it, resulted in that. So, that was in August and then Mr. Zandian's counsel, Mr. Lee to declined to provide-- declined to accept service of process. And declined to provide an address. So, Mr. Margolian went back to the court and asked permission to serve by publication, the court granted that in September of 2011.
Judge: One second. Okay. 9-27-11, correct?
Abelman: Right. Um, the following March law firm number one, Mr. Lee, filed a motion to withdraw. And in the motion to withdraw he provided a San Diego address for Zandian. And, um, ultimately in-- on October 31st of 2012, default judgment again, entered against Zandian.
Judge: Okay. What- what was the date again? I'm sorry.
Abelman: I believe it's October 31st of 2012.
Judge: Lots of activity before in the interim. So, October 31st, that's the -- that's the judgment?
Abelman: Uh, default judgment, yes.
Judge: Okay. Right.
Abelman: And I'm, I'm not going to go-- I'm not going to bore you with all the- all the excruciating details, but just the highlights.
Judge: All right.
Abelman: In- a- a- about a year and-- a year a- quarter later in December of 2013, law firm number two filed a motion to set aside the default judgment--
Judge: And wh- what law firm was that?
[pause]
Abelman: Um, um, your honor, I don't -- I don't have that in my notes.
Judge: That's okay.
Abelman: Okay. Filed a motion to satisfy the default judgment, number two, maintaining that the address provided by Mr. Lee was inaccurate.
Judge: But there wasn't any address provided by Mr. Lee.
Abelman: And he provided an address when he filed his motion to withdraw.
Judge: Okay.
Abelman: As you know, when you file a motion to withdraw you have to certify that you have informed-
Judge: Notified your coun- your client.
Abelman: So, that's the address that he utilized; a San Diego address.
Judge: Okay.
Abelman: Um, but he had- he had previously declined to provide an address for service or of service of process. So law firm number two filed a motion to set aside the- the default. Claiming that the San Diego address was no good. At the same time, Mr. Margolin obtained documents from third parties through the discovery process, through banks, showing that Zandian maintained the San Diego address at least through January of 2013.
At the same time he was claiming that, he too was getting checks and banks were sending correspondence to him at the San Diego address at the very time that he was moving to set aside the default judgment claiming he had never received-- things that were sent to that-
Judge: And now with Mr. Margolin's opposition to motion to set aside of January 9th of 14, is that what I received?
Abelman: Yes.
Judge: Okay. Thank you.
Abelman: Um, in January of 2014 the court, mis-jud-- the honorable Russell-- Judge Russell entered an order granting Mr. Margolin's motion for a debtor's exam and to produce documents, okay? And it required Zandian to show up on February 11th, Mr. Zandian did not show up for his debtor's exam and Mr. Zandian did not provide any documents.
Judge: So, there was then-- I'm guessing, that not- I mean that date is not on the docket, but there was a motion for contempt, that was filed February 12th, would that be, where that's detailed?
Abelman: Yes.
Judge: Okay.
Abelman: In the interim, law firm number two withdrew.
Judge: All right.
Abelman: Law firm number three is Kaempfer Crowell, okay. In February of 2014, Kaempfer Crowell filed an appeal of the order denying the motion to set aside as a default. And also opposed the pending motion to show cause why Mr. Zandian shouldn't be held in contempt. Okay. Um, eight, nine months later in October of 2015, the Supreme Court for this state affirmed the district court on Zandian's appeals.
Judge: Hang on for one second, um, it's October you said?
Abelman: October 19th of 2015.
Judge: Okay. Hang on, let me get to that. That's records over the performance of the defaulter basically, and they were [unintelligible 00:18:44]?
Abelman: Right.
Judge: Okay.
Abelman: And I know we're skipping around here, but-
Judge: That's all right.
Abelman: In Decem-- in the December of 2015, lawfirm number three, Kempfer Crowell filed its motion to withdraw.
Judge: Uh, okay.
Abelman: Now, I just want to bring your attention and I have a copy of the motion to withdraw which, which I'm happy to share with you. It says in this case defendant has not only substantially failed to fulfill his obligations to Kaempfer Crowell regarding his services, but also insists upon taking actions that the lawyer considers to be repugnant or with which the lawyer has a fundamental disagreement, probably should have been "and with" rather than "or with". But, um, and so, your honor I- I have a copy of that-
Judge: Yes. You have a copy for Mr. Hartman. We will mark this as exhibit two, and I'm going to leave these as exhibits two with my notes on them which is- which are just basically checkpoints. But, may I see this?
?Speaker: Yes, your honor.
Judge: Let me take a look. Give me a moment.
Abelman: And- and the quote is on page 3 line-- uh-
Judge: Is it line seven, furthermore--
Abelman: 18 to 22.
Judge: Okay. [pause] Okay. And the repugnancy language is on lines 7 and 8? Okay?
Abelman: Yes. At and uh-- Yeah- at- It's on seven and eight and 18 to 22.
Judge: Okay.
Abelman: So, as of December 2015 fast forward February 2016, um-- Judge Russell issued an order holding Mr. Margolin-- It’s a warrant of arrest.
Judge: For Mr. Margolin?
Abelman: I'm- I'm sorry. It's- It's for Mr. Zandian-
Judge: Okay. Let me put it-
Abelman: -in regards to failure to appear, at the-- and I have a copy of that if-- if can-
Judge: I'd like to see it. I'm- I'm familiar with-- I know there's such a thing as a writ of civil arrest, but I don't think I've ever seen one. [pause] Thank you.
Judge: Alright--Thank you.
Abelman: Um- On May 3rd, 2016 Mr. Margolin filed a motion to void deeds. And that- that--
Judge: I don't think I have that.
Abelman: I- I-
Judge: I only go through 3, 4, 16.
Abelman: Three, four--
Judge: Yeah. The last thing I have says order dispositional.
Abelman: Oh. Um. I- That was-- I believe it's a separate action. It's appended to my objection-
Judge: Okay.
Abelman: -as an exhibit.
Judge: Just wait a second, I can't pull that up. Could we see his objection? Do I have this here? Okay, sorry. Pardon me. Alright- uh- is that exhibit three you said?
Abelman: Ah- I didn't say.
Hartman: I think it's exhibit B.
Judge: I'm sorry. Thank you. Quite a day.
[pages turning]
[0:23:41]
Judge: So, Mr. Hartman I just have a question-
Hartman: Yes, your honor.
Judge: Who- Who have you been retained by in this?
Hartman: Uh- Mr. Canet.
Judge: Okay.
Hartman: I- I pronounce Canet.
[pause]
Judge: Well let me ask you this my-- you- you suggested at one point in your earlier argument whether Mr. Zandian does not have property in the State of Nevada.
Abelman: No, he does.
Judge: Yeah, okay.
Abelman: Well, he has property that he has-
Judge: Transferred to somebody else-
Abelman: -Conveyed-
Judge: Improperly.
Abelman: -to his family and friends.
Judge: Okay.
Abelman: And that's the subject of the motion to void deeds.
Judge: I've never seen the term dirtied title before either.
Abelman: I'm-- I had never either. I just assumed it was a- part of the ver -- vernacular in this state. Um- um-
Judge: Thankfully not yet. [laughs]
Abelman: I'll have to ask my- my co-counsel-- my colleague where he came up with that.
Judge: Okay.
Abelman: Okay. So the motion to void deeds was filed by Mr. Margolin. Um. So. He's been chasing after Zandian, for now, eight and a half years. And he's located a property that Mr. Zandian owned in Nevada for up to 10 years.
Judge: Now let me ask you this has he filed a lis pendens against the property?
Abelman: I don't specifically know. I-
Judge: He probably ought to that if um-
Abelman: -I would agree.
Judge: if he hasn't.
Abelman: I would agree. Okay-- Um- Now this is what's very suspicious. The chapter 15 petition was filed on May 19, really two weeks after the motion to void deeds was filed. So, you have this judicial liquidator this purported-- purportedly Mr. Canet in-- in France who has done nothing, that we know of, that we can find, to further this -- to further collection efforts against Zandian in Nevada for 18 years, even though Zandian was on title to property here, for over 10 years.
And then two weeks after we filed this action to chapter 15. So, is fine. It- It seems extremely suspicious. Now M- Mr. Hartman acknowledged earlier the-- that there are some questions that he agreed that he would take the burden of answering. I- I would suggest that the questions may be a little bit more far reaching and it would help all- all concerned to have these questions answered. An- and that would include: if the judgment-- The- the chapter 15 preceding is premised upon what the um-- English translation says judgment of three April 1998. It-- So, question number 1 is that still viable under French law?
Judge: Or even US law?
Abelman: Or even US law? Right. Two is there a French insolvency preceding pending with regard to Zandian? Or is it merely a judgment that Mr. Canet is trying to collect against Zandian? In which case he- he should have no higher priority than any other judgment creditor. Is there a French insolvency preceding wherein the real estate in this state is being administered? I- I don't know French insolvency law.
Judge: Nor do I. And I don't speak French. So, that can be more of a problem.
Abelman: I - I speak [foreign language] a little, not enough to- to be able to uh- be of any utility. But you would think that there would be some schedules some pleading that referenced what assets of Zandian are being administered in that action. So, there should be something in here less than 18 years old and better yet current, docking sheets, schedules that shows both that Zandian is a debtor in that, not just the judgment-- not just a judgment debtor, but part of an insolvency proceeding. And two that that insolvency preceding somehow incorporates the assets in the real property that is the subject of the of- of the current motion to void liens. Okay?
So that-- Those are questions that we believe need to be answered by this court for a chapter 15 to proceed and just to clarify if Mr. Canet just wants to participate in um- participate in litigation in this state as a judgment creditor. Then we don’t necessarily oppose that as long as Mr. Canet is who he purports to be. We're not trying to prevent him from exercising whatever right he may have as a judgment creditor. What we don't-- what we're trying to prevent is that somehow our action to recover assets fraudulently conveyed is stopped by a- by a Manchurian bankruptcy.
Judge: Okay, thank you. I have a couple of questions is that I'm trying to sort through this. Um, do we know-- I mean Mr. Hartman do you know if Mr. Canet has a judgment?
Hartman: I cannot personally tell your Honor the answer to that question.
Judge: I- I understand um- and I actually can't get to my docket so I can’t look at it but the only other cross-border insolvency case I had I got a- some pleadings from the whatever b- her-- His Majesty's Court in Canada, which-- it certainly has the world’s biggest stamp on it of authenticity. With me, that's the most biggest and certainly it was the biggest one I've ever seen. Is there anything similar in this case that we have?
Hartman: The only thing that I have in my possession is the English and French document that I attached to the, the petition.
Judge: Okay, you may well be right. I'm going to give Mr. Hartman some time to figure out where he stands. I mean he may be as much of a victim of um, this individual as anybody else Mr. Zandian but I'm going to continue this for 30 days um, I will make a decision at that point. Mr. Hartman I am sorry.
Hartman: Sure your honor. And thank you um, and I think that’s probably the first time that Manchurian Bankruptcy term has been coined. And- [crosstalk]
Judge: Yes.
Hartman: -with that term-
Judge: And dirty-izing property. [laughs] Is also a first for me.
Hartman: Um, I've written down the questions that Abelman presented and that should be answered and let’s assume for a moment that everything he has said about Mr. Zandian is accurate and knowing Judge Russell as I do, I believe there's probably a legitimate basis for everything that Judge Russel did. Um-
Judge: Judge Russell was Mr. Hartman’s brother's partner for 30-
Hartman: For many, many years and the only-- What I like to place on the record and draw the Court's attention to is docket entry five. I know you don’t have the docket up.
Judge: I'm sorry.
Hartman: And it would be pages 11 and 12 and it’s um- and I don’t know what terminology to use for this but it says at the bottom of the page-- docket entry page 11. "Uh, the court may open judicial re-organization um, or liquidation proceedings with regards to managers whose liability etcetera. Whereas the court considers it appropriate to apply- to apply the provisions of the above-mentioned extra law and open judicial liquidations proceedings against Mr. Zandian with all the legal consequences there are."
I cannot tell you if that, in fact, happened at the, contemporaneous at the time that this order was entered but I owe it to your honor and to Mr. Abelman and his client to find out that information which I will do. So I will communicate with my co-counselor in Paris um, very shortly and pose these questions and ask them to produce whatever documentation they have that either supports Mr. Canet’s position with respect to Mr. Zandian or not. And I will file it with the court and certainly provide counsel with a copy. And if, if there are no further need for a hearing then I certainly don’t want one.
Judge: Certainly.
Hartman: But I just-- I don't have enough information to inform your honor about the status of the proceeding in Paris.
Judge: Okay, so what do we have in about 30 days? I'm assuming it’s not going to be, well, I know that the French also do electronic transmission of stuff, I'm guessing, but um, it usually takes more than a day or two to get information-
Hartman: Yes.
Judge: From people from courts Um so 30 days-
Female Speaker: Your Honor, we can do um- August 10th, in the afternoon and I'll block the rest of the afternoon.
Judge: Okay.
Female Speaker: 2:00pm. we have a couple of motions, we have Yellow Tab confirmation, but that will probably be confirmed. so um-
Judge: Um- August what?
Female Speaker: 10th, it’s a Wednesday at 2:00 pm and we’ll block the afternoon for you.
Hartman: What I would propose your honor is that I have a deadline in advance of that-
Judge: Yes
Hartman: -date so that Abelman doesn’t have to make arrangements to come.
Judge: No, no. So let’s, let’s set your response date 7 days prior. I know that’s a little short but um, you can respond to that. Obviously, if there’s nothing going to happen or nothing you need to add, Mr. Abelman, or you can certainly appear by phone. I don’t want you running around for no purpose um, even though Nevada is a lovely place. Um, but um, so given the um, what you told us about Mr. um, Zandian um, if they have-- it may well be that we don’t ultimately need a hearing. But um, um let's set the hearing then, let’s set your response seven days prior to the hearing, um, you can file your opposition if any one day prior to the hearing.
Um, but in them-- Well two days prior the hearing so I'll also have the chance to look at it so that would we Monday prior to the hearing that you would need to file it. Um, and we’ll just go from there.
Hartman: And if I can get the answers to these questions much earlier than that I’ll certainly provide them the answers.
Judge: Yeah.
Hartman: And if there's no need for a hearing I'll certainly let the court know.
Judge: And I certainly can’t tell from what we’ve got whether or not there is a French judicial proceeding or not because I don’t know enough about French insolvency law and I don’t read French.
Hartman: Thank you, your honor.
Judge: Thank you very much. You think there'd be some sort of stamp?
Hartman: Right as some sort of what?
Judge: Some sort of seal or stamp like the British do. Maybe the French aren't as good at stamping things as the British.
Hartman: Well maybe they need to learn from the Canadians right.
Judge: And they build from the Canadians. Well, they don't consider themselves British but they seem that we are.
Hartman: Or French.
Judge: Or French. Um, thank you very much for coming. Hope the trip wasn’t too difficult for you. So thank you, nice having you and I will see you guys in about a month.
Both Counsel in unison: Thank you, your honor.
Judge: Thank you very much.
[00:37:41] [END OF AUDIO]