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Sopkin v. Mendelson

United States District Court, E.D. Virginia, Alexandria Division

April 27, 2017

JILL C. MENDELSON, Defendants.



         THIS MATTER comes before the Court on Defendants Jill C. Mendelson, as Executor of the Estate of Richard S. Mendelson ("Mendelson"), Deceased, Richard Mendelson Trust, H. Carter Land, III, and Land Clark Caroll Blair, P.C.'s ("the Mendelson Defendants") Motion to Dismiss the Amended Complaint; Defendant H. Jason Gold's Motion to Dismiss the Amended Complaint; Defendant Madeline Trainor's Motion to Dismiss the Amended Complaint; Defendant John Toothman's Motion to Dismiss the Amended Complaint; and Defendant Anne N. Kathan's Motion to Dismiss the Amended Complaint.

         Plaintiff Barbara Sopkin, a citizen of Israel, has filed this suit as assignee of Lucre Investments, Ltd. ("Lucre"). Lucre is the general partner of Interlase Limited Partnership ("Interlase"). Interlase was chartered as a Georgia limited partnership in 1996 and was primarily owned by Dr. Kenneth Fox and Dr. Arthur Coster. Dr. Fox was the primary inventor of certain laser technology medical devices, which were patented. Interlase licensed these medical device patents to several companies and received royalties arising out of the patenn licenses. Plaintiff, Lucre, Interlase, and the Defendants have been involved in different types of litigation over the past two decades. A brief account of the parties' relevant history follows.

         In 1996, Dr. Fox filed a divorce action against his wife in the Arlington County Circuit Court ("the Arlington Court"). The final divorce decree, entered on April 9, 1997, found that various entities, including Interlase, were sham entities fraudulently created by Dr. Fox to illegally hide his assets. In September 1998, Dr. Coster, as general partner of the Coster Family Limited Partnership, which held a 49% limited partnership interest in Interlase, filed a petition in the Arlington Court to have a Special Receiver appointed to take control of Interlase's assets.

         In mid-September 1998, the Arlington Court appointed Richard Mendelson as Special Receiver and ordered that Mendelson would be paid a reasonable fee for his services and recover costs incurred in the receivership ("the Arlington receivership case"). In December 1998, the Arlington Court directed Lucre, its officers, managers, and directors to deliver to Mendelson all Interlase assets within their possession.

         Mendelson retained three attorneys to represent him during his time as Special Receiver: Defendants John Toothman, Madeline Trainor, and Anne Kathan ("the Attorney Defendants"). The Attorney Defendants acted as Mendelson's counsel of record at different stages of the Arlington receivership case and-as explained below-in bankruptcy proceedings in the United States Bankruptcy Court. All of the fees and expenses incurred by the Attorney Defendants in connection with their representation of Mendelson were approved by the appropriate court.

         In July 1999-while the Arlington receivership case was still ongoing-Lucre, as purported general partner of Interlase, filed a voluntary petition for relief under Chapter 7 of the United States Bankruptcy Code in the United States Bankruptcy Court for the North District of Georgia, placing Interlase into Chapter 7 bankruptcy ("the Interlase bankruptcy case"). In October 1999, the Interlase bankruptcy case was transferred to the United States Bankruptcy Court for the Eastern District of Virginia ("the Bankruptcy Court"). Defendant H. Jason Gold was appointed Chapter 7 Trustee of Interlase's bankruptcy. In November 1999, the Bankruptcy Court entered an order suspending the bankruptcy proceedings and deferring to the Arlington receivership case.

         In February 2000, pursuant to an order by the Arlington County Circuit Court, Mendelson filed a summary of claims against Interlase's assets in the Arlington Court. Mendelson's summary of claims was filed after notice had been given to all known persons who had a substantial interest in Interlase. On March 20, 2000, the Arlington Court entered a final disbursement order approving Mendelson's report and providing that all claims to the assets of Interlase were rendered null and void, except for claims filed in Mendelson's report. Plaintiff did not file any claims with Mendelson.

         Throughout the Arlington receivership case, Mendelson filed reports with the Arlington County Circuit Court, informing the Court of his actions as Special Receiver, and he sought approval for disbursement of fees and expenses. The Arlington Court entered numerous orders approving Mendelson's fees and expenses. Mendelson acted as Special Receiver until the Arlington receivership case was closed in June 2009.

         On July 16, 2008, Plaintiff filed a Motion to Reinstate the bankruptcy proceedings in the Bankruptcy Court. Plaintiff argued that during the course of the receivership, Mendelson failed to increase the value of Interlase's assets by not renegotiating Interlase's licensing agreements and by not identifying additional licensing opportunities. Plaintiff also complained of not having received distributions made from the Special Receiver's collections of Interlase's assets. Defendant Gold, as Chapter 7 Trustee, filed an answer to Plaintiff's motion in August 2008, in which he stated that Plaintiff's allegations were unfounded and without merit. The Bankruptcy Court entered an order denying Plaintiffs Motion to Reinstate on October 6, 2008.

         In April 2009, the Bankruptcy Court vacated the Receivership, and determined that the assets of the estate should be vested in Gold, the Chapter 7 Trustee. The Bankruptcy Court reinstated the bankruptcy case and ordered that all further administration of Interlase's assets was to be conducted in the Bankruptcy Court. In August 2009, the Bankruptcy Court held an auction in open court for the sale of Interlase's assets. Plaintiff attended the auction and made bids. Interlase's assets were ultimately sold to Spectranetics for $105, 000, and the Bankruptcy Court approved the sale. Plaintiff, who did not appeal the Bankruptcy Court's order approving the auction sale, claims that the fair market value of these assets was $10 million.

         On March 3, 2010, Mendelson filed an application for compensation with the Bankruptcy Court, seeking the Court's approval for his final compensation. Plaintiff opposed Mendelson's request. The Bankruptcy Court approved Mendelson's fees on July 16, 2010.

         On March 16, 2010, Gold moved the Bankruptcy Court to adopt the Arlington County Circuit Court's March 20, 2000 Order approving Mendelson's summary of claims. Plaintiff filed an opposition to Gold's motion. The Bankruptcy Court granted Gold's motion to adopt the receivership order on September 25, 2010. Plaintiff did not appeal this order.

         On May 20, 2011, Gold filed his Final Report in the Bankruptcy Court, which detailed the assets of Interlase's estate and described how those assets should be distributed according to law. The Bankruptcy Court approved Gold's Final Report on June 21, 2011. On August 31, 2011, Gold filed his Final Account and Distribution Report and Application to be Discharged ("Final Account"). The Bankruptcy Court closed the Interlase bankruptcy case ...

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