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In re Kupperstein

United States Court of Appeals, First Circuit

November 15, 2019

IRENE B. SCHALL, Personal Representative of the Estate of Fred Kuhn; EXECUTIVE OFFICE OF HEALTH AND HUMAN SERVICES, Appellees. DONALD C. KUPPERSTEIN, Appellant,


          David G. Baker for appellant.

          Roger Stanford, with whom Irene B. Schall and Moses, Smith, Markey & Walsh were on brief, for appellee Irene B. Schall.

          Paul T. O'Neill, Assistant General Counsel, for appellee Executive Office of Health and Human Services.

          Before Torruella, Thompson, and Barron, Circuit Judges.



         Five years ago, Thomas Sheedy bought Carol Thibodeau's house for a pittance and gave it to appellant Donald Kupperstein, an attorney licensed in Massachusetts. The state court reversed the sale, but Kupperstein kept collecting rent. These appeals are the latest round in his long fight to keep the money, which he now owes the Commonwealth of Massachusetts (we'll explain why). So far, he's defied seven state court orders, four arrest warrants, and a mountain of contempt sanctions. He filed bankruptcy to ward them off - hoping the Bankruptcy Code's "automatic stay" would stop the state court from enforcing its orders. But the bankruptcy court lifted the stay, so Kupperstein skedaddled while his lawyer appealed. Fed up, Massachusetts asked the judge to dismiss the appeal based on the "fugitive disentitlement doctrine" - the rule that a fugitive (usually a criminal one) forfeits the right to appeal the judgment (usually a conviction) he's fleeing. The district court agreed and dismissed the appeal.

         Kupperstein's serial misconduct and contempt for the state courts trouble us, too. And his victims argue (fairly) that the Bankruptcy Code doesn't shield him from his comeuppance. But the district court never reached that issue; it booted the appeal prematurely. Because we find this early dismissal was an abuse of discretion, we reverse and remand for a decision on the merits.

         HOW WE GOT HERE

         The House

         When her father died, Carol Thibodeau (Fred Kuhn's only child) was left with his only significant asset: a house at 346 Reservoir Street in Norton, Massachusetts. Unfortunately for Thibodeau, Kuhn's estate also owed approximately $191, 747 to the Massachusetts Office of Health and Human Services, more commonly known as "MassHealth."[1] (For the uninitiated, MassHealth can recoup paid benefits from a recipient's estate after he dies. See Mass. Gen. Laws ch. 118E, §§ 31, 32). The state had long ago placed a lien on Kuhn's house to secure the debt. After Kuhn passed, MassHealth planned to have Thibodeau, who was also the Estate's personal representative, sell the house (worth around $168, 000, per the probate court) to pay off the lien. It filed a petition in probate court to make that happen.

         Enter Kupperstein and his associate, Thomas Sheedy - who had other plans. In November 2014, they showed up at Thibodeau's home with a sales pitch. First, they had bad news: the Estate owed the Town of Norton $3, 379.13 in unpaid real estate taxes. Not to worry - they could help. All she had to do was hand over the house to Sheedy, who would take care of the taxes. Thibodeau promptly agreed. And so, without notifying the Estate's attorney (Austin McHoul), Kupperstein notarized a deed that conveyed the property to Sheedy (as trustee for the "Reservoir Street Realty Trust") in exchange for "less than $100" and "tax redemption of $3, 379.13."[2]

         Unbeknownst to Thibodeau, the deal was against the law (the probate court would later hold): she could not sell the house before paying MassHealth's six-figure claim. When McHoul discovered what happened, he (in the probate court's words) "requested Mr. Kupperstein and Mr. Sheedy return the property to the Estate of Mr. Kuhn due to the improper nature of the transaction." The duo refused.

         The State Court Cases

         So began the five-year campaign to wrest back control of the house from Sheedy and Kupperstein, who dug in their heels. When McHoul told MassHealth of the house swap, MassHealth sued the pair in Massachusetts state court. After a year of legal wrangling, [3] the probate court voided the transfer to Sheedy, restored the property to the Kuhn estate, and ordered its sale to pay MassHealth. The court also ordered that Kupperstein and Sheedy account for "any and all" rents they'd collected from the property and hand them over to MassHealth.[4]

         Easier said than done, it'd turn out. Within a few months of the probate court's decision (by December 2016), Sheedy had leased the house for around $1, 800 a month. Mid-way through 2017, Sheedy passed off his claimed ownership to Kupperstein (as the trustee and beneficiary of the "Norton Realty Trust"), who kept collecting rent. All in all, Sheedy and Kupperstein raked in at least $54, 750 from tenants. Despite the district court's order, they gave none of it to MassHealth or the Estate.

         And so, on August 4, 2017, the probate court held the two in contempt. To no effect. Less than a month later, Kupperstein had installed two new tenants, whose lease dubbed Kupperstein's trust "the fee owner of [the] property at 346 Reservoir Street" and charged them the same $1, 800 monthly. In answer, the probate court issued a decree making pellucid that "[n]either Thomas E. Sheedy nor Donald C. Kupperstein . . . shall execute or record any further documents concerning 346 Reservoir Street" and that any documents they executed were "without force or effect." Moreover, neither man, nor "anyone acting . . . at their direction(s)," was to "enter the property for any reason without further order."

         Unsatisfied with how the probate proceedings were going, Kupperstein sought a second opinion. He sued Thibodeau in the Massachusetts Land Court, asking it to declare him the house's rightful owner. In his filings, Kupperstein forgot to mention the probate court's decisions. Playing legal whack-a-mole, MassHealth intervened to educate the land court, which dismissed Kupperstein's complaint as "wholly insubstantial and frivolous . . . because he completely ignored" that the probate court had already "fully and finally adjudicated the title to the Property" against him. The court concluded that Kupperstein "brought [the case] in bad faith" and awarded MassHealth and Thibodeau over $9, 000 in attorneys' fees.

         The next day (December 22, 2017), the probate court doubled down, finding Sheedy and Kupperstein in contempt again and ordering them (again) to cough up the rent they'd collected. It also ordered them to "surrender all keys and any other means of access" to the house, along with "any documents, leases or other instruments," to the Estate by the close of business. And it threatened to jail them for 30 days unless they paid MassHealth $5, 400. In response, Kupperstein and Sheedy surrendered roughly $3, 000 in checks, but not the keys and leases. Losing patience (and without being asked), the court directed the pair to explain why it shouldn't impose the 30-day jail sentence. It scheduled the hearing for January 12, 2018.

         On January 11, 2018 - the day before the hearing - Kupperstein filed this case in the United States Bankruptcy Court for the District of Massachusetts, listing the Kuhn house as his own asset worth $350, 000.[5]

         Some background: a bankruptcy filing triggers an automatic stay that halts lawsuits against the debtor in other courts until a federal court ends the case or lifts the stay. See In re Soares, 107 F.3d 969, 975 (1st Cir. 1997)(citing 11 U.S.C. § 362(a)). The idea is to stop creditors from scrambling for "the lion's share of the debtor's assets" (so they can be divvied-up more fairly) and to give the debtor breathing room to manage his debts (so he can get a fresh start). Id. at 975, 977. At his hearing the next day, Kupperstein claimed that the automatic stay tied the state court's hands, so it could not sanction him for failing to produce the rents and keys. The probate court didn't see it that way. It held that Kupperstein had violated its orders a fourth time, locked him up in a holding cell for the rest of the day, then gave him another chance to give up the house keys (though Kupperstein ...

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