United States District Court, E.D. Virginia, Alexandria Division
M. HILTON UNITED STATES DISTRICT JUDGE
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.
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.
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.
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
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
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.
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.
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.
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,
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.
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.
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.
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 ...