Plantation-based law firm Moffa & Breuer has filed four separate motions appealing bankruptcy court orders, arguing against a joint plan that was approved by U.S. Bankruptcy Judge Raymond B. Ray on Aug. 7 and in favor of a “better” plan filed by Moffa’s client.
Two of the appeals came from the firm and two were filed on behalf of J.J. Risell, a trust operated by attorney John A. Moffa, who represents Broward company Fisherman’s Pier Inc.
The parties are squabbling over whether the court should have confirmed the plan, whether Moffa & Breuer can represent the trust, and whether it’s entitled to fees for its representation of the debtor in possesion.
Though all creditors have now been paid, the appeals are the latest move in a lengthy string of filings in litigation over family infighting.
Brothers Spiro and Elias Marchelos were joint owners of Fisherman’s Pier Inc., which controlled a fishing pier at Lauderdale-by-the-Sea, and various restaurants.
Things turned sour on Apr. 16, 2014, when Elias Marchelos suffered a stroke and was unable to continue running the business, so a new shareholder entered the arena. His wife, Martha Marchelos, took over as joint shareholder, and from there began a yearslong battle with brother-in-law Spiro Marchelos.
“There’s a lot of bad blood between Elias’ power of attorney and Elias’ brother. That was a problem that started years ago, but I tried not to have that affect what we did for the company and what we did for Elias,” Moffa said.
According to Glenn J. Waldman of Waldman Trigoboff Hildebrandt & Calnan in Fort Lauderdale, who took care of all state court litigation in the case, “The issue was mainly that (Martha) disagreed with the manner and method by which Spiro was managing the affairs of the business.”
A bitter ownership battle ensued, and the pier was shut down at one point.
Waldman entered the scene in December 2015 and made a successful attempt to enforce a settlement agreement between the shareholders, after Martha, acting as Elias’ power of attorney, reneged.
In January 2016, Broward County Court Chief Judge Jack Tuter enforced the agreement, which confirmed Spiro Marchelos’ co-ownership and also stated that he had the right and authority to act as the president of the company.
According to Moffa, “At that point, there not only were fights between shareholders, there was also a ballooning mortgage, some properties that were owned by both shareholders that weren’t paying fair market rent, and there weren’t commercially viable leases that a bank could look at to lend money against these properties.”
Moffa also alluded to the existence of an affidavit that allegedly shows shareholder Elias Marchelos didn’t deposit all the money his company received into his bank account.
“I wanted accountability for the cash at the pier, which we don’t have any control over at this point,” Moffa said.
In October 2017, Fisherman’s Pier Inc. filed for bankruptcy, and in walked bankruptcy attorney Thomas R. Lehman of Levine Kellogg Lehman Schneider & Grossman in Miami.
Lehman represents Spiro Marchelos, who argued that the Chapter 11 bankruptcy was filed without his permission.
“Martha Marchelos had filed it without proper corporate authority, because a Chapter 11 bankruptcy voluntary petition cannot be filed by a corporation unless the president who signs the petition is authorized by the company,” Lehman said.
Lehman filed an emergency motion.
“However, in the interim there were a number of hearings in which it became clear to the judge that the case was a shareholder dispute, that there was a fight,” Lehman said.
This led to the appointment of a trustee on Dec. 14, Soneet Kapila of Kapila & Co., who acted as manager of Fisherman’s Pier while the case traveled through bankruptcy court.
“That changed the entire complexion of the case, as it meant there was somebody there to build a case. Now, we had fighting shareholders, neither of whom were in management,” Lehman said.
Trustee Kapila’s attorney Chad P. Pugatch, of Rice Pugatch Robinson Storfer & Cohen in Fort Lauderdale, teamed up with Spiro Marchelos to create the joint reorganization plan, which was recently approved.
Despite the fighting, Pugatch felt the case was “very successful.”
“I think the trustee did a great job of taking a very bad situation, where these shareholders had been fighting for years and ended up with litigation that spilled over into bankruptcy court, and figuring out which was the best way to approach it, teaming up with one shareholder. We ended up confirming a plan that pays all creditors in full and basically restores the company to a situation where it can get out of bankruptcy and be profitable again,” Pugatch said.
But the way Moffa sees it, his client’s plan would have done “everything that their plan did, except we were also going to infuse money.”
“What their plan did that I don’t think is fair and equitable is their plain makes the one shareholder the sole manager the sole manager, and gives the other shareholder no say in how the property is run. We lost where Spiro gained,” Moffa said.
Either way, Waldman sees this case as a lesson to family business owners.
“Intra-family disputes are far too commonplace and often draw an interest,” he said. “Because they do afford a lesson learned as to how even family members who are in business together need to document their business affairs in advance of a potential dispute.”