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In re Invent Resources, Inc.

United States District Court, D. Massachusetts

September 29, 2014

In re Invent Resources, Inc. Urszula Hed, Executrix, Appellant,
v.
Harold Murphy, Chapter 7 Trustee Murphy & King, P.C., Appellees

Page 170

Bankruptcy Chapter 7. Case No. 10-14056-JNF.

For Urszula Hed, Appellant: Paul W. Pappas, LEAD ATTORNEY, Methuen, MA.

For Harold Murphy, Appellee: Christopher M. Condon, LEAD ATTORNEY, Murphy & King, Boston, MA; Harold B. Murphy, LEAD ATTORNEY, Murphy & King, PC, Boston, MA.

For Invent Resources, Debtor: Robert N. Meltzer, LEAD ATTORNEY, Attorney at Law, Framingham, MA.

Page 171

ORDER ON APPEAL FROM BANKRUPTCY COURT

TIMOTHY S. HILLMAN, DISTRICT JUDGE.

Nature of the Proceeding

This is an appeal from decisions in three orders of the United States Bankruptcy

Page 172

Court for the District of Massachusetts, in which the Bankruptcy Court approved payments of a trustee commission and certain legal fees to Appellees, and rejected Appellant's motion to recuse the Bankruptcy Judge.

Background

Invent Resources (" Invent" ), is a Massachusetts corporation founded in 1997 by Sol Aisenberg, George Freedman, Richard Pavelle, and Ze'ev Hed (" the Founders" ). The purpose of the company was to develop, license, and sell inventions or intellectual property. In 2008, Ze'ev Hed passed away and was survived by his wife, Urszula Hed (" Hed" ), who succeeded to her husband's interests as executrix of his estate. Hed is the Appellant.

Bankruptcy proceedings commenced on April 15, 2010, when Aisenberg and Freedman filed an involuntary petition under Chapter 7 of the Bankruptcy Code. Bankruptcy Judge Joan N. Feeney was assigned to the case. When no party answered the involuntary petition, an order for relief entered on May 14, 2010. On May 17, 2010, Attorney Harold Murphy (" Murphy" ) was appointed the trustee of Invent's bankruptcy estate. The Bankruptcy Court approved Murphy's retention of his law firm, Murphy & King, P.C., to perform legal work related to his trustee duties. Murphy & King, P.C., together with Murphy as an individual, are the Appellees.

Upon his appointment as trustee, Murphy examined the operating history, assets and liabilities of Invent and investigated the company's interest in certain intellectual property, including claims for royalties owed to Invent by Excel Dryer, Inc. (" Excel" ). Invent had executed a licensing agreement with Excel, in which Invent and the Founders licensed two patents to Excel in exchange for quarterly royalty payments. Excel had ceased making the royalty payments, and Murphy's investigation showed that royalties of approximately $700,000 were due to Invent and the Founders through the first quarter of 2011. Through arbitration, Murphy and Excel reached an agreement that Excel would purchase the intellectual property and pay royalties past due in the sum of $2,389,345. That sale was approved by the Bankruptcy Court on January 25, 2012.

During Murphy's investigation and the arbitration process with Excel, the Founders and Hed asserted that they were the true owners of the patents and that Invent's bankruptcy estate had no interest in the royalties or sale of the intellectual property.[1] In light of this dispute the Bankruptcy Court directed Murphy, on July 25, 2011, to file an adversary proceeding within 30 days to obtain a declaratory judgment regarding the rights of Invent, the Founders, and Hed in the intellectual property. See Bankruptcy Court Docket, In re Invent Resources, Inc., Case No. 10-14056-JNF, Docket No. 85. Pursuant to the court order, Murphy filed the adversary proceeding on August 24, 2011. See Bankruptcy Court Docket, No. 95.

Also during this time, Hed filed a claim against Invent's bankruptcy estate for $234,750 in unpaid wages owed to her deceased husband. Murphy filed an objection to that claim on December 20, 2011. See Bankruptcy Court Docket, No. 111.

Page 173

The court issued a pretrial order setting a discovery schedule and deadline for dispositive motions related to the claim. See Bankruptcy Court Docket, No. 148.

Murphy, the Founders, and Hed continued to negotiate regarding their respective rights to the intellectual property and Hed's claim for unpaid wages. In light of these negotiations, Murphy and Hed filed joint motions to extend the deadline for dispositive motions on Hed's unpaid wages claim, and a new deadline was set by the court for May 14, 2012. See Bankruptcy Court Docket, No. 160. Unable to reach an agreement by that date, Murphy filed a motion for summary judgment. See Bankruptcy Court Docket, No. 162. On July 2, 2012, Hed filed an opposition to Murphy's motion for summary judgment. See Bankruptcy Court Docket, No. 174. At the summary judgment hearing on July 9, however, Murphy and Hed reported to the Bankruptcy Court ...


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