Essex Real Estate Partners LLC - Chapter 11 Distribution Ruling

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ESSEX REAL ESTATE PARTNERS, LLC

United States Bankruptcy Court, D. Nevada

• Citations: None known
• Docket Number: 19-51486

• Precedential Status: Unknown Status

• Opinion

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Trial Court Document

4 Se
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Honorable Gary Spraker ote
United States Bankruptcy Judge \Qy AS
LRICT ORNS
Entered on Docket
June 12, 2025

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEVADA
TK OOK OK OK OK OK
In re: )
) Case No.: 19-51486-gs
Chapter 11
DATE: March 21, 2025
ESSEX REAL ESTATE PARTNERS, LLC,) TIME: 9:30 a.m.
)
)
)
Debtor.

MEMORANDUM DECISION ON OBJECTIONS TO JOINT MOTION FOR ORDER
DIRECTING DISTRIBUTION OF REMAINING PROCEEDS
[Anthony Pusateri and Ronald Fadel (ECF No. 745);
Tenrab Limited Partnership and Resource Investors Capital Holdings LLC (ECF No. 821);
and Judy Johnston (ECF No. 774)]
George F. Holman, Sr., individually and in his capacity as Trustee of the MJH Irrevocable
Trust, and Martha Jane Holman, individually and in her capacity as Trustee of the GFH Irrevocable
Trust (collectively, Holmans), and Kirkland Development Associates LLC (Kirkland), have
moved for an order directing the disbursing agent under the confirmed plan of liquidation to
distribute the outstanding balance of funds held payable to equity interests in the debtor, Essex
Real Estate Partners, LLC (Essex). See Joint Motion for Order Directing Distribution of Remaining
Proceeds (Motion to Distribute). ECF No. 709. Objections were filed to the Motion to Distribute.
ECF Nos. 720-724.

On December 20, 2024, the court held its initial hearing on the Motion to Distribute. At
that hearing, the court stated its intention to grant the Motion to Distribute insofar as it requested
a general authorization to make distributions. But the court also noted that significant additional
information would be required before any distributions could be made. As a result of the hearing,
the court entered its Order (1) Conditionally Approving Motion to Distribute Funds and (2)
Continue Hearing, requiring the movants to provide a more detailed proposed distribution and
providing interested parties the opportunity to object. ECF No. 732.
On January 24, 2025, counsel for the Holmans filed two alternative proposed Findings of
Fact and Conclusions of Law detailing the proposed distribution to equity interest holders. ECF
Nos. 735-36. Numerous parties filed responses and objections.1 ECF Nos. 739-47. Anthony
Pusateri and Ronald Fadel, equity holders of Preferred A units in Essex, have objected to the
proposed Findings of Fact and Conclusions of Law. ECF No. 745.
The court heard oral arguments on the objections to the proposed Findings of Fact and
Conclusions of Law on February 21, 2025, including those filed by Pusateri and Fadel. The court
held a continued hearing on March 21, 2025. Additionally, Pusateri and Fadel have filed a
motion to stay any distribution of the estate’s remaining proceeds. The court has since denied
that motion as premature. ECF No. 824. However, the arguments and evidence submitted as part
of that briefing overlap with Pusateri’s and Fadel’s objections to the proposed distribution.
Therefore, the court considers those arguments and evidence as part of this decision.
The court will address the specific objections made by Fadel and Pusateri within this
order, leaving the other objections to be addressed in separate orders.
Facts Relevant to Pusateri and Fadel Objection
A. Capitalization of Essex and the events leading to bankruptcy.
Essex was formed under Nevada law in 2007, to own and develop real property. Section
2.01 of the Essex operating agreement (Operating Agreement) addresses the capitalization of the
entity and establishes Class A Common Units, Class B Non-Voting Common Units, and

1 Concurrent with entry of this memorandum and order, the court is entering a separate order addressing several of
these objections, leaving only the objections to Kirkland’s asserted interest remaining.
Preferred Units. Adv. ECF No.2 530-1 at 6. Section 6.01(a) of the Operating Agreement details
the distributions to unit holders. Id. at 13. The then-sole class of preferred unit holders (Preferred
A) were to receive “a Preferred Return on the Unreturned Issue Price for each such Units at a
rate of fifty percent (50%) per annum, cumulative to the extent not distributed in a given
year….” Id. To the extent any monies were available for distributions they were to flow as
follows:

(i) [Preferred A] Unit Holders, pro rata, in payment of the Preferred Return,
in an amount equal to the excess, if any, of (x) the cumulative Preferred
Return to the [Preferred A] Unit Holders over (y) the sum of all prior
distributions to the Series A Preferred Unit Holders….

(ii) Next to the [Preferred A] Unit Holders, pro rata, to the extent of
Unreturned Issue Price of each such [Preferred A] Unit Holder;

(iii) Then to the Common Unit Holders in proportion to their Common Unit
Percentage Interests.
Id. at 13-14, § 6.01(b)(i)-(iii).
The court has previously described Essex’s history in some detail in the Amended
Memorandum Decision on Motions for Summary Judgment (Adv. ECF No. 607) entered in
Pioneer Funding Group III, LLC, et al. v. Essex Real Estate Partners, LLC, et al., Adv. Case No.
21-05041-gs. In summary, the project was started on the cusp of the Great Recession and did not
go as expected. Though significantly undersecured, Essex’s secured lenders never foreclosed.
After a decade of no action, various persons realized that Nevada’s Ancient Mortgage statute
might apply to the benefit of Essex’s unsecured creditors and owners.
Royal Union Trust was one of those persons. Marlon Steele, Jr., the administrative trustee
for Royal Union Trust, testified that Vince Hesser came up with the idea to send Preferred A unit

2 Citations to the docket for related adversary proceeding Pioneer Funding Group III, LLC et al. v. Essex Real
Estate Partners, LLC et al., Adv. Proc. No. 21-05041-gs, are designated “Adv. ECF No.” throughout this decision.
Many of the exhibits presented in the briefing of Mr. Pusateri’s and Mr. Fadel’s objections were addressed in the
adversary proceeding as well. To the extent necessary, the court takes judicial notice of the pleadings on file in that
adversary proceeding. See Dunlap v. Neven, 2014 WL 3000133, at *5 (D. Nev. June 30, 2014) (citing Reyn’s Pasta
Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir.2006)) (“Courts routinely take judicial notice of their
own court records.”). Additionally, the court incorporates its Amended Memorandum Decision on Motions for
Summary Judgment (Adv. ECF No. 607) entered in Pioneer Funding Group III, LLC, et al. v. Essex Real Estate
holders a solicitation letter. Adv. ECF No. 530-12 at 12, Transcript, p. 45:5-9. On November 22,
2019, Steele signed and sent a solicitation letter (Solicitation Letter) to the Preferred A unit
holders. Adv. ECF Nos. 530-12 at 8, Transcript, p. 39:10-20; 530-13. The Solicitation Letter
attached a “Member Ballot 11/22/19” (Ballot), which provided two options: elect to approve the
filing of bankruptcy and cap Preferred A recovery at 20% of any recovery up to the payment of
their initial investment, or sell the recipient’s units. The Ballot also included representations,
including that the signatories “understand that Royal Union can rely on your approval of this
Ballot in connection with filing the bankruptcy, assignment of voting rights, [and] solely
managing the actions taken or to be taken related to the case.” Adv. ECF No. 530-13 at 4. Royal
Union explained that it was in a position to acquire the majority of the managing Common A
units and anticipated filing a bankruptcy to “negotiate with the lender,” but it would do so only if
it could rely on the Preferred A unit holders’ agreement to cap their interests or sell those
interests to Royal Union. Id. at 2.
Anthony and Linda Pusateri voted to agree to support a bankruptcy filing and cap their
recovery to the return of their initial investment. Adv. ECF No. 530-11 at 22.
B. The December amendments to the Essex Operating Agreement.
On December 17, 2019, George Holman signed a document entitled “Second
Amendment of the Operating Agreement of Essex Real Estate Partners, LLC,” as manager of
Essex (December 17 Amendment). ECF No. 768 at 86. This amendment revised Section 6 of the
Operating Agreement governing Debtor’s profits, losses, and distributions from operations or the
sale or refinancing of Debtor’s property. First, the December 17 Amendment revised § 6.01(a) to
insert a 20% cap on the preferred return to be paid to the Preferred A unit holders from any sale
or refinancing. Id. at 85. The December 17 Amendment also altered the distribution provisions
under § 6.01(b)(i) to reflect the cap on distributions to Preferred A members under revised
§ 6.01(a), and to eliminate § 6.01(b)(ii) and its pro rata distributions to Preferred A unit holders
“to the extent of Unreturned Issue Price of each such” Preferred A member. Id. at 85-86.
Importantly, § 6.01(b)(iii), which provided that distributions after payment to Preferred A would
go to Common unit holders “in proportion to their Common Unit Percentage Interests,” was not
revised. Id. The December 17 Amendment attached signatures of Preferred A unit holders DJIP,
LLC and the Pusateris. Steele also signed the document on behalf of Royal Union Trust as
successor in interest to Two Musketeers Revocable Trust Dated December 19, 2005 (Two
Musketeers). Id. at 87-90.
Another amendment to the Operating Agreement was adopted effective December 24,
2019 (December 24 Amendment) that also capped the distribution to Preferred A members. ECF
No. 774 at 6-14. Unlike the prior amendment, the December 24 Amendment created a new class
of 150 Preferred B units. Id. at 6-7. It further amended § 6.01(a) to establish that the Preferred
Return would accrue at 50% per annum based on “the total of all combined Preferred Unit
Capital Contributions.” Id. at 7. However, § 6.01(b)(i) was also restated and amended to split any
distribution first to 20% to “the Series A Preferred Unit Holders, pro rata, until the Series A
Preferred Unit Holders receive an amount equal to their Capital Contributions.” Id. The
remaining 80% was to be distributed to the newly created Preferred B members. Id. Sections
6.01(b)(ii) –(iii) then provided that, after the distributions were made under § 6.01(b)(i),
Preferred B unit holders would receive a distribution equal to “the total accrued Preferred
Return” and then distributions would flow to the Common unit holders. Id. The December 24
Amendment also revised §§ 8.04(c) and (d) governing distribution of proceeds in the event of
liquidation to provide that such a distribution would be consistent with § 6.01(b). Id.
Under § 11.04 of the Operating Agreement, amendments to §§ 2.01 and 8.04 required
“the consent of the holders of at least a Majority-in-Interest of the [Common A] Membership
Voting Interests.” Adv. ECF No. 530-1 at 33. Amendments to §§ 2.01 and 8.04, as well as 6.01,
also required the consent of “Members holding a majority of the [Preferred A] Units.” Id. The
December 24 Amendment was accompanied by signature pages of: Royal Union Trust as
successor to Preferred A members Robert and Breese Glennon, Valner and Dawn Johnson, and
Two Musketeers; Ronald Fadel; the Pusateris; Judy Johnston; DJIP LLC; and finally, Royal
Essex as the Preferred B unit holder. ECF No. 774 at 9-14. The executed signature pages are not
dated. Pusateri and Fadel do not dispute that they signed the December 24 Amendment.
C. The bankruptcy proceedings.
On December 27, 2019, Essex filed its chapter 11 bankruptcy petition. ECF No. 1. The
petition included a list of equity interests, including the Pusateris and Fadel as equity owners. Id.
at 6-7.
On November 5, 2020, the bankruptcy court approved the sale of Essex’s real property.
ECF No. 240. Five days later, the court approved Essex’s Disclosure Statement to begin the
confirmation process. ECF No. 252.
On December 4, 2020, Essex filed its Ballot Summary for the Second Amended Plan of
Reorganization (Second Amended Plan). ECF No. 324. The Ballot Summary includes ballots
accepting the proposed plan from both Fadel and the Pusateris. Id. Both Fadel and the Pusateris
also filed declarations in support of confirmation of the Second Amended Plan. ECF Nos. 427
(Pusateri Declaration); 428 (Fadel Declaration). These declarations reaffirmed their November
2019 ballots given to Royal Union as well as the December 24 Amendment, and stated their
opposition to the appointment of a trustee. Id.
On January 22, 2021, the court confirmed Essex’s revised Second Amended Plan
(Confirmation Order) and the sale of debtor’s real property. ECF Nos. 474 (sale) and 475
(confirmation of plan). The Confirmation Order revised the provision addressing Essex’s equity
interests and appointed William Noall as the “Remaining Distribution Agent” to hold the balance
of proceeds from the sale of Essex’s real estate after payments of all creditors. The Confirmation
Order anticipated that any distribution to equity owners would only be made upon entry of an
appropriate distribution order after the determination of any disputed interest “in an appropriate
forum separately from confirmation of the Plan.” ECF No. 475 at 3:7-26.
D. Payment and release agreements.
On March 26, 2021, the Pusateris signed their “Payment and Release Agreement” in
furtherance of their 2019 Ballot that authorized Essex to file for bankruptcy and their vote to
accept the proposed plan limiting their recovery to the return of their investment. ECF No. 608 at
17-19. Mr. Fadel signed his Payment and Release Agreement the same day. Id. at 14-16. The
Payment and Release Agreements recited that the December 24 Amendment was valid and
binding and that the “Investor agreed to accept 20% of the net cash recovery, up to a maximum
of Investor’s total principal investment (after payment of any and all expenses and costs incurred
by the Parties and affiliates ….” Id at 15 and 18. The respective Payment and Release
Agreements stated that the Pusateris would receive $147,869.00 and Mr. Fadel would receive
$36,967.00 “as full and final payment distribution due under the terms and conditions of the
Operating Agreement, approved Essex bankruptcy plan … and agreements between the Parties.”
Id.
E. Prior efforts to distribute the remaining sale proceeds.
Shortly after confirmation of Essex’s plan, on February 10, 2021, Royal Essex filed its
complaint against Further South and Joseph Genovese, Nevada District Court Case No. A-21-
829274, in the Nevada district court before the Hon. Nancy Allf. This began a litany of filings of
separate lawsuits for damages or determination of equity interests in Essex. See generally
Amended Memorandum Decision on Motions for Summary Judgment, Adv. ECF No. 606 at 36-
44.
Equity interest holders Pioneer Funding Group III, LLC and Pioneer Funding Group IV,
LLC (together, Pioneer) and Further South, LLC (Further South) filed their adversary proceeding
against Essex, Royal Union Trust and Royal Essex LLC (the Royal Entities), the Holmans, and
others on February 24, 2021, asserting claims for damages as well as equitable subordination and
disallowance. Adv. ECF No. 1. The court issued an order to show cause why it should not
abstain from hearing the claims asserted in the adversary proceeding pursuant to 28 U.S.C.
§ 1334 (c)(1). Adv. ECF No. 35. On July 12, 2021, the court entered its order partially abstaining
from hearing the adversary proceeding. Adv. ECF No. 66 (Abstention Order). Pursuant to the
Abstention Order, the court elected to abstain from hearing all but the cause of action for
equitable subordination and, to the extent it constituted a cause of action, equitable disallowance.
The court entered an order dismissing the claim for equitable disallowance, and subsequently
entered its memorandum and order resolving the subordination claim.
On August 6, 2021, Royal Essex filed its Motion for Order Authorizing and Directing the
Remaining Proceeds Distribution Agent to Release Funds. ECF No. 588. Royal Essex reasoned
that because Common unit holders would recover none of the Essex real property sale proceeds
under either the Operating Agreement or the December 24 Amendment, there was no basis to
further delay distributing the net sale proceeds to the Preferred A and Preferred B unit holders.
Mr. Noall, the Remaining Proceeds Distribution Agent, objected to the distribution motion. ECF
No. 604. The court denied Royal Essex’s distribution motion. ECF No. 623 at 47-48, Transcript,
pp. 47:19-48:9.
Almost exactly one year later, on August 11, 2022, Mr. Santacroce similarly filed a
Motion For Order Authorizing And Directing Remaining Proceeds Distribution Agent To
Release Undisputed Funds on behalf of Mr. Pusateri, Inspirada Investment Group, Tenrab
Limited Partnership, and Resource Investors Capital Holding, LLC (Resource Investors) (First
Pusateri Motion). ECF No. 632. The First Pusateri Motion sought an order authorizing the
Distribution Agent to distribute the balance of funds held under the confirmed plan of
reorganization. That motion recognized the effect and enforceability of the December 24
Amendment:

On December 24, 2019, the Operating Agreement was amended to revise Sections
2.01, 6.01 and 8.04… The Second Amendment amended Section 6.01(b)(i-iii) of
the Operating Agreement by breaking down and splitting the already accrued
Preferred Return. Under the amendment, existing Series A Preferred Unit holders
agreed to receive 20% of any money available for distributions by Debtor up to
their original investment. The remaining 80% of the Preferred Return is paid to
new Series B Preferred Units up to the total required Preferred Return. The
creation of the new Series B Preferred Units was expressly authorized by
§4.02(a)(iv) of the Operating Agreement and 86.296. The Second Amendment did
not change the original Operating Agreement provisions providing that Common
Units only receive a distribution after the total Preferred Return was distributed to
Preferred Unit holders.
ECF No. 632 at 6.
The First Pusateri Motion specifically requested an allocation from the remaining
proceeds to pay the Preferred A unit holders their initial investments. Through his motion, Mr.
Pusateri sought to recover the $147,869.00 he originally invested in Essex. Id. at 12. The First
Pusateri Motion also allocated $36,967.00 to pay Fadel his original investment. Id. at 13. The
motion noted that the capped amounts sought were “not subject of any debate or any current or
foreseeable claim.” Id. at 3. It was accompanied by a request for a hearing on shortened notice,
which the bankruptcy court denied. ECF No. 644.
Rather than setting a hearing on regular notice, on December 16, 2022, Pusateri and
Inspirada Investment Group, LLC filed a substantially similar motion to compel payment of
$147,869.00 to Pusateri and $36,967.00 to Fadel on account of their original investments
pursuant to the December 24 Amendment (the Second Pusateri Motion). ECF No. 658. The
Second Pusateri Motion, however, was not filed by Mr. Santacroce but by different counsel. The
bankruptcy court denied the Second Pusateri Motion after full briefing and a hearing. ECF No.
688.
F. The adversary proceeding.
As noted above, on February 24, 2021, Pioneer and Further South filed their adversary
action against Royal Essex and other defendants asserting multiple causes of action for damages
and equitable relief. Kirkland filed its motion to intervene as a plaintiff on March 19, 2021. Adv.
ECF No. 17. Kirkland’s intervention motion was granted on September 30, 2021. Adv. ECF No.
82.
On May 9, 2022, the court entered its order granting Two Musketeers’ motion to
intervene as a plaintiff. Adv. ECF No. 176.
The parties to the adversary proceeding agreed on a scheduling order and amended
scheduling order to close discovery on October 10, 2023. The parties further extended the
deadline for dispositive motions until November 13, 2023, and set the case to begin trial on
January 17, 2024. The parties began filing motions for summary judgment on April 28, 2023.
Cross-motions soon followed.
On October 26, 2023, Mr. Santacroce, representing Mr. Pusateri, Inspirada Investment
Group, Tenrab Limited Partnership, and Resource, filed a Motion to Intervene in the adversary
proceeding. Adv. ECF No. 479. After a hearing on November 9, 2023, the court entered its Order
Denying Motion To Intervene. Adv. ECF No. 518.
On August 30, 2024, the court entered its memorandum decision granting in part and
denying in part the cross-motions for summary judgment on the claims for equitable
subordination. Adv. ECF No. 603. The court subsequently amended its memorandum decision
(Adv. ECF No. 607) and denied Further South’s motion for reconsideration. Adv. ECF No. 753.
The court’s decision is currently pending appeal.
G. The current Motion to Distribute.
A couple months after the court entered its memorandum decision in the adversary
proceeding, the Holmans and Kirkland moved for an order directing the disbursing agent under
the confirmed plan of liquidation to distribute the outstanding balance of funds held payable to
equity interests. See Motion to Distribute, ECF No. 709. Objections to the Motion to Distribute
were timely filed by Azteca Real Estate Partners, LLC, Danon Blea, Breese Glennon, Robert
Glennon, Dawn Johnson, Valner Johnson, Pioneer, and Two Musketeers (ECF No. 720); Royal
Essex LLC, Marlon Steele, Jr., as Trustee of the Royal Union Trust, and Royal Union Properties,
LLC (ECF No. 710); and Judy Johnston (ECF No. 722). William M. Noall, the Remaining
Proceeds Distribution Agent, also filed a response. ECF No. 723.
On December 20, 2024, the court held its initial hearing on the Motion to Distribute. At
that hearing, the court stated its intention to grant the Motion, adding that significant additional
information would be required before distributions could be made. As a result of the hearing, the
court entered its Order (1) Conditionally Approving Motion to Distribute Funds and (2) Continue
Hearing (ECF No. 732), requiring the movants to provide a more detailed proposed distribution
by January 24, 2025, and providing interested parties the opportunity to object by February 7,
2025.
On January 24, 2025, counsel for the Holmans filed two alternative proposed Findings of
Fact and Conclusions of Law detailing the proposed distribution to equity interest holders.
Numerous parties filed responses and objections. ECF Nos. 735-36. Both proposals provided for
payment to Pusateri and Fadel in the amount of their original investments, together with the other
Preferred A unit holders. The movants have since withdrawn the alternative proposed Findings
of Fact and Conclusions of Law, and have filed an amended proposed Findings of Fact and
Conclusions of Law. ECF No. 820. The current amended proposed Findings of Fact and
Conclusions of Law does not alter or affect Mr. Pusateri’s or Mr. Fadel’s pending objections.
Mr. Pusateri and Mr. Fadel did not object to the original Motion to Distribute, or appear
at the initial December 20, 2024 hearing thereon. They did, however, file their Joint Objection
To [Proposed] Findings Of Fact, Conclusions of Law and Order Granting Motion Directing
Distribution of Remaining Proceeds (Joint Objection). ECF No. 745. The Joint Objection argues
that the proposals were fatally flawed because:

(1) They contradict rulings made by the Nevada Supreme Court in a final and
binding order on state law matters germane to distribution.

(2) They violate the bankruptcy court’s Confirmation Order and Order of
Abstention mandating the effectuation of this distribution in a manner
comporting with Nevada state law as dictated by a final unappealable order.

(3) They violate the Essex Operating Agreement, the relevant operational terms
of which the Nevada Supreme Court has clarified in the above-mentioned
ruling, the only final and unappealable order now in effect.
Id. at 1-2.
Several days later, on February 11, 2025, Mr. Santacroce filed his own declaration in
support of the Joint Objection. ECF No. 752.
The court heard oral arguments on all objections to the proposed Findings of Fact and
Conclusions of Law on February 21, 2025, and continued the hearing to March 21, 2025, to
permit the parties to further explore settlement of the disputes surrounding distribution of the
remaining proceeds.
The day before the continued hearing on March 21, 2025, Mr. Santacroce filed an
unauthorized Supplement in Support of Objection to Proposed Distribution Plans asserting that
he had newly obtained evidence establishing that the December 17 Amendment to the debtor’s
Operating Agreement was unauthorized. ECF No. 768. Attached to the supplement was an
electronically signed declaration from David Johnson stating that he is a partner in the entity
serving as manager for Resource Investors, a Preferred A unit holder. Mr. Johnson states that he
has recently become aware that an amendment signed by Mr. Holman may have lacked the
required consent of Essex’s members. He also states that he was recently informed that Kamela
Nielson may have signed “documentation” as a representative of Resource Investors. The
declaration states that Kamela Nielson, signatory to the December 17 Amendment on behalf of
Resource Investors, was not authorized to represent his entity or Resource Investors. Id. at 22.
Attached to Mr. Johnson’s declaration is an undated version of the December 17 Amendment
signed by Mr. Holman and including a signature page in the name of Resource Investors that
bears the electronic signature of Kamela Nielson. Id. at 23-25.
The unauthorized supplement also includes an electronically signed declaration from
Kamela Nielson dated October 26, 2023, acknowledging that Inspirada Investment Group LLC,
a Preferred A unit holder in which she and her husband were members, had approved and signed
the December 24 Amendment, but not the December 17 Amendment. Id. at 28-29. She further
stated that her signature on any other amendment than the December 24 Amendment was “a
misuse of my explicit approval and authorization.” Id. at 28. Also, due to concerns that false
assertions were being made, she states she retained Mr. Santacroce as well. Id. at 29.
The court heard oral arguments on the proposed Findings of Fact and Conclusions of
Law, and the associated objections at the March 21, 2025 hearing. At the conclusion of the
hearing, the court scheduled a status conference for April 18, 2025, which status conference was
continued to May 22, 2025. On May 20, 2025, two days before the court’s May 22, 2025 status
conference on the Motion to Distribute, Preferred A unit holders Tenrab Limited Partnership
(Tenrab) and Resource Investors filed their joint Objection to Holman Parties’ Proposed
Distribution of Remaining Proceeds (ECF No. 821). The objection did not state with any
specificity whether Tenrab and Resource Investors object to the Motion to Distribute or to the
Proposed Findings of Fact and Conclusions of Law, or both. Regardless, it was filed too late for
consideration.3

3 The Motion to Distribute was conditionally approved on January 15, 2025. ECF No. 732. That
order set a deadline of February 7, 2025, for objections to the Proposed Findings of Fact and
Conclusions of Law, and was served electronically on Mr. Santacroce, who is counsel for Tenrab
and Resource Investors. Although supplemental briefing and other documents related to the
Proposed Findings of Fact and Conclusions of Law have been filed at the court’s request after
the deadline for oppositions expired, the court will not consider the joint opposition filed without
court authorization by Tenrab and Resource Investors over three months after the opposition
deadline passed.
H. The motion to stay distribution.
On April 7, 2025, Mr. Pusateri and Mr. Fadel filed their joint Motion For Order Staying
the Distribution of Remaining Proceeds Pending Resolution of Legal Challenges to Void
December 17 Amendment (Motion to Stay). ECF No. 782. The Motion to Stay sought an order
under Rule 8007(a) of the Federal Rules of Bankruptcy Procedure staying the distribution of the
remaining proceeds pending resolution of legal challenges to the December 17 Amendment to
the Operating Agreement. Mr. Holman opposed the motion to stay. ECF No. 805. Further South
joined in the opposition. ECF No. 806. As noted above, the court denied the motion as
premature. ECF No. 824.

I. The continuing state court litigation and arbitration request involving
Pusateri and Fadel.
Mr. Pusateri, again acting through Mr. Santacroce, sued George Holman and Two
Musketeers in the Eighth Judicial District Court, Clark County, in 2024. Pusateri v. Las Vegas
Development Associates, LLC, et al., Case No. A-24-888762-B. Mr. Pusateri asserted claims
against Two Musketeers for declaratory relief, fraud, violation of Nevada Securities Laws,
breach of contract, unjust enrichment, breach of fiduciary duty, fraudulent inducement, negligent
misrepresentation, deceptive trade practices, and conspiracy to commit fraud. ECF No. 755 at 52.
The Hon. Joe Hardy dismissed Mr. Pusateri’s complaint with prejudice for a variety of reasons.
Relevant to the current issues before the court, Judge Hardy held that Mr. Pusateri had released
any claims by executing his Payment and Release Agreement dated March 26, 2021, and was
barred by his prior judicial admissions from challenging his proposed distribution. As a result,
the court recognized that Mr. Pusateri could assert no damages against the Mr. Holman or Two
Musketeers.
Sometime in 2025, Mr. Santacroce filed another action for Mr. Pusateri and Mr. Fadel,
suing Essex and others in Pusateri, et al. v. Essex Real Estate Partners, LLC, et al., Case No. 25-
912201. The exact nature of this action is unclear. However, on March 20, 2025, Mr. Santacroce
voluntarily dismissed this action without prejudice. The Notice of Voluntary Dismissal stated:
“Plaintiffs have elected to invoke their right to arbitrate their claims as allowed in the Operating
Agreement of Essex Real Estate Partners, LLC.” ECF No. 805-6.
Shortly before dismissing the state court action, Mr. Santacroce sent an Arbitration
Notice and Demand to the unit holders of Essex. ECF No. 805-3. George Holman responded,
denying arbitration was applicable. ECF No. 805-4.
Analysis
A. The validity of the December 17, 2019 Amendment to Essex’s Operating
Agreement is immaterial to the proposed distribution.
The above detailed factual discussion demonstrates that Mr. Pusateri has been actively
involved in Essex’s financial resurrection since Royal Essex’s first solicitation of interest of the
Preferred A unit holders in November 2019. Mr. Fadel’s first activity appears to have begun with
the signing of the December 24 Amendment, which Pusateri also signed. Both documents
committed them to capping their recovery of any proceeds payable on account of their Preferred
A interests to the amount of their original investments. Since then, both Mr. Pusateri and Mr.
Fadel actively supported Essex’s subsequent bankruptcy. Both submitted declarations approving
the December 24 Amendment and Royal Essex’s Preferred B membership in Essex, and also
acknowledged the cap on their distribution.
Both also confirmed their agreement to the capped distribution when they executed the
March 26, 2021, Payment and Release Agreements with Essex and Royal Essex. The Payment
and Release Agreements specified that the Pusateris would receive $147,869 on account of their
Preferred A interest in Essex. Adv. ECF No. 568 at 870. Mr. Fadel’s agreement specified that he
would receive $36,967 on account of his Preferred A interest in Essex. Id. at 864. Both Mr.
Pusateri and Mr. Fadel then supported Royal Essex’s motion to disburse these amounts to them
from the remaining proceeds. After the court denied Royal Essex’s motion to disburse the
remaining proceeds, Mr. Fadel and Mr. Pusateri filed not one, but two of their own motions to
compel payment to them in these exact amounts.
The proposed Findings of Fact and Conclusions of Law provide payments to Mr. Pusateri
and Mr. Fadel in the exact amounts they have sought since the commencement of the bankruptcy
proceedings. They now object to the same distribution they have sought based on an argument
that the December 17 Amendment may be invalid. This argument is immaterial to their
distribution. They have admitted that they voluntarily executed the December 24 Amendment
which caps their distributions at the amount of their original investments - the same amounts Mr.
Pusateri and Mr. Fadel have sought for years and the amount proposed to be distributed to them.
Mr. Pusateri and Mr. Fadel have not provided any factual or legal analysis to establish the
consequence of invalidating the December 17 Amendment. The later December 24 Amendment
recast the obligation to the Preferred A members and limited that distribution to repayment of the
original investments. On that basis, Essex was placed into bankruptcy, the real property was sold,
the settlement with the creditors was reached, and a plan was confirmed.
Furthermore, on January 26, 2022, the Hon. Nancy Allf of the Nevada district court
entered her Order Granting Plaintiff’s Motion for Summary Judgment in Royal Essex, LLC v.
Further South, LLC, Case No. A-21-829274-B. Adv. ECF No. 465 at 44-48. Pertinent to the
current Motion to Distribute, the court found that “[t]he preferred A members agreed to split
their distributions with the preferred B member (Plaintiff) in accordance with the Second
Amendment to the Operating Agreement, and executed Payment and Release Forms.” Id. at ¶ 15.
The court included a distribution schedule as to the Preferred A members. According to that
decision, Mr. Pusateri and Mr. Fadel were entitled to $147,869 and $36,967, respectively, on
account of their interests. Id. at ¶ 16. The Nevada Supreme Court has affirmed Judge Allf’s
decision.
Royal Essex was scheduled to receive $16,048,154 under Judge Allf’s decision applying
the December 24 Amendment. Id. Subsequent to Judge Allf’s decision, however, the Hon. Mark
Denton issued his ruling in Royal Essex, LLC, et al. v. Azteca Real Estate Partners, LLC et al.,
Case No. A-21-829278-B, in which the court ruled that Royal Essex’s membership interest in
Essex was void. Id. at 54. That decision is currently on appeal to the Nevada Supreme Court.
This court’s decision in Pioneer’s and Further South’s adversary proceeding to equitably
subordinate any interest held by Royal Essex was entered subsequent to both Judge Allf’s and
Judge Denton’s decisions.
The court suspects that Mr. Pusateri and Mr. Fadel would simply prefer that the monies
that were to be paid to Royal Essex should go to them because they are Preferred A members.
But they have provided no argument or discussion, factual or legal, that suggests such a result is
proper.4 The Preferred A members capped their recovery. The proposed Findings of Fact and
Conclusions of Law apply the revised, capped distribution to Preferred A members provided by
the December 24 Amendment and otherwise agreed to by Mr. Pusateri and Mr. Fadel. In this
regard, the earlier December 17 Amendment is wholly irrelevant. Despite their ongoing filings
beyond the objection deadline, Mr. Pusateri and Mr. Fadel have provided nothing to suggest that
the December 17 Amendment affects the proposed distribution. As such, their argument
regarding the December 17 Amendment fails to state a valid objection to either the proposed
Findings of Fact and Conclusions of Law or to the proposed distribution.5
B. The Confirmation Order does not prohibit the proposed distribution.
Mr. Pusateri and Mr. Fadel also argue that “[d]istribution of the Remaining Proceeds is
conferred on the discretion of the Remaining Proceeds Distribution Agent.” ECF No. 745 at 3.
They base this argument on the language in the Confirmation Order that: “The Distribution

4 Judy Johnston, another Preferred A unit holder, filed a Supplement to Opposition of Certain Current and Former
Interest Holders to Motion for Order Directing Distribution of Remaining Proceeds. ECF No. 720. This Supplement
addressed the absence of any distribution to Common B members. That issue has subsequently been resolved by
agreement of the parties. Johnston did file a later Supplement Clarifying Relevance of December 17 Amendment.
ECF No. 774. In her second Supplement, Johnston states “under the December 24, 2019 version, the Preferred
Return would be calculated at a rate of 50% per annum and distributions would be made on an 20/80 split between
the Series A Preferred Unit Holders and the Series B Preferred Unit Holders, without a cap as to the distributions to
the Series A Preferred Unit Holders.” ECF No. 774 at 3 (emphasis added). But the 20/80 split in the December 24
Amendment expressly limits the 20% to the Preferred A members: “First, twenty percent (20%) to the Series A
Preferred Unit Holders, pro rata, until the Series A Preferred Unit Holders receive an amount equal to their Capital
Contributions.” Adv. ECF No. 568 at 109 (emphasis added). This is consistent with the motion to disburse filed by
Royal Essex in the first instance, as well as the two motions filed by Mr. Pusateri. And it is consistent with the
distribution set forth in Judge Allf’s distribution schedule to the Preferred A members.

5 Whether under the doctrine of issue preclusion or the independent application of judicial estoppel, the court agrees
with Judge Hardy’s assessment of Mr. Pusateri’s actions since 2019. Though Mr. Fadel’s actions differ slightly, the
substantive effect of his actions is the same. Both are bound by their actions and agreements capping their
distribution from the remaining sale proceeds of Essex’s real property. See ECF No. 774 (signed December 24
Amendment); 608 at 14-16 (Fadel’s Payment and Release Agreement); 608 at 17-19 (Pusateris’ Payment and
Release Agreement). For the reasons stated above, the court finds that Mr. Pusateri and Mr. Fadel have not
demonstrated that any dispute concerning the December 17 Amendment presents a material objection to distribution.
However, their prior actions and agreements preclude them from raising any such arguments to alter their
distribution either under the doctrine of issue preclusion, or if not applicable, under judicial estoppel based on the
record presented.
Order shall be in the form reasonably acceptable to the Remaining Proceeds Distribution Agent
and explicitly describe to whom, at what address and what amounts all of the Remaining
Proceeds are to be distributed.” ECF No. 475 at 3. This language confirms only that the court’s
order approving any distribution must be in a form acceptable to the Distribution Agent so that
he has all the necessary information to make the approved distribution.6
Nothing in the Confirmation Order vests authority in the Distribution Agent to decide the
underlying distribution.7 Indeed, the Distribution Agent has previously disagreed with Mr.
Pusateri’s and Mr. Fadel’s reading of the Confirmation Order:
It is not the role of the Distribution Agent to support or oppose any equity security
holder’s position with respect to who owns Debtor’s equity securities and in what
quantities and the priority of those interests. That determination is for the courts.
However, Debtor’s confirmed Plan calls for this Court to enter a Distribution
Order. To argue otherwise, or to seek vesting of funds in another forum is a
collateral attack on a final order of the Court, the Plan Confirmation Order.
ECF No. 747 at 2.
The Confirmation Order anticipated that the rights of the putative equity owners, and the
ultimate distribution, would be “determined in an appropriate forum separately from
confirmation of the plan.” Id. That has now happened sufficiently to permit the proposed
distribution to proceed.
C. The Abstention Order does not prohibit the proposed distribution.
Mr. Pusateri and Mr. Fadel raise this court’s prior Abstention Order in opposition to the
proposed Findings of Fact and Conclusions of Law. They argue “that resolution of litigation over
the rights and composition of Class 3 interest holders was a necessary prerequisite to entry of a
Distribution Order.” ECF No. 745 at 4. However, the rights and composition of the Class 3

6 The Distribution Agent previously provided his comments to the Proposed Findings of Fact and Conclusions of
Law. ECF No. 747. No party has objected to those revisions, which are not directed at the substance of the proposed
distribution to the parties identified in the Proposed Findings of Fact and Conclusions of Law.

7 The first sentence in the revised Plan section titled “Class 3 [Equity Interests of Debtor”], prior to the one quoted
by Mr. Pusateri and Mr. Fadel, clarifies the distribution process: “After payment of the Class 1, Class 2 and Class 4
allowed Creditors’ claims as set forth in the Plan, the sale proceeds remaining in the Debtor’s estate (the ‘Remaining
Proceeds’) shall be held by William Noall, Esq., (the ‘Remaining Proceeds Distribution Agent’) attorney for
Proponent of the Plan in an interest bearing trust/deposit account established by him or his law firm at Nevada State
Bank pending further order of the Court setting forth how the Remaining Proceeds shall be distributed (the
interest holders have been determined. Indeed, they fail to identify any pending matter, including
any appeal, that would affect their proposed distribution.
Mr. Pusateri and Mr. Fadel seek to delay any distribution until every possible litigation is
exhausted through appeal. The court has explained previously that it believes all relevant
decisions have now been made in the numerous related cases in the Nevada courts and this court.
Several of these decisions are now on appeal. However, the appeals do not affect the finality of
those decisions. Tripati v. Henman, 857 F.2d 1366, 1367 (9th Cir. 1988) (“The established rule
in the federal courts is that a final judgment retains all of its res judicata consequences pending
decision of the appeal.”) [internal quotation omitted]. Rather, those decisions are operative and
enforceable absent a stay pending appeal. In re RW Meridian LLC, 2017 WL 6045220, at *3
(B.A.P. 9th Cir. Dec. 6, 2017) (citing Bennett v. Gemmill (In re Combined Metals Reduction
Co.), 557 F.2d 179, 190 (9th Cir. 1977)) (“While an appeal is pending, federal judgments and
orders are fully effective and enforceable absent a stay pending appeal.”). No party in interest
has advised this court of any stay pending appeal. All parties in interest have had considerable
notice and opportunity to obtain a stay pending a specific appeal. The pending Motion to
Disburse was filed on November 11, 2024. ECF No. 709. And the court entered its Order (1)
Conditionally Approving Motion to Distribute Funds and (2) Continuing Hearing on January 15,
2025. ECF No. 732. Yet, no stay pending any appeal has been entered to stay the distribution
process. Accordingly, the pending appeals do not affect the court’s consideration of the Motion
to Distribute.
D. The Royal Essex v. Further South decision.
Mr. Pusateri and Mr. Fadel continue the argument raised by Royal Essex that Judge
Allf’s decision in Royal Essex v. Further South, Nevada District Court Case No. A-21-829274,
precludes any distribution to Further South. The court has previously addressed this argument in
the above discussion, as well as in the Amended Memorandum Decision on Motions for
Summary Judgment entered in Pioneer Funding Group III, LLC, et al. v. Essex Real Estate
Partners, LLC, et al., Adv. Case No. 21-05041. The court incorporates those discussions by
reference.
In short, the court is not contravening Judge Allf’s contractual analysis. However, at a
minimum, Judge Allf’s decision did not preclude this court’s consideration of equitable
subordination in the adversary proceeding. Mr. Pusateri and Mr. Fadel have not offered any
argument or reason to the contrary and the proposed distribution to them is consistent with her
rulings.
E. Recent litigation and the Arbitration Demand.
In their Supplement filed on March 20, 2025, Mr. Pusateri and Mr. Fadel raise their
demand for arbitration for the first time. The Supplement refers to a pending arbitration
supported by Resource Investors and Inspirada Investment Group and commenced by Mr.
Pusateri and Mr. Fadel “to ensure lawful, proper and question distribution in accordance with the
valid Essex Operating Agreement.” ECF No. 768 at 4. However, there is no evidence that any
arbitration has been actually opened, or any arbitrators appointed. Rather, eight days before he
filed the Supplement, Mr. Santacroce sent an Arbitration Notice and Demand to Essex’s
members and managers giving “notice of their right to submit the dispute concerning an alleged
‘Fictitious Amendment’ of the Operating Agreement to arbitration.” ECF No. 805-3. The next
day counsel for the Holmans responded to Mr. Santacroce that the arbitration demand was
“futile,” because § 11.02 of the Operating Agreement vested exclusive jurisdiction over disputes
over amendments to the Operating Agreement in the state and federal courts in Las Vegas,
Nevada. ECF No. 805-5. Mr. Santacroce disputed the Holmans’ reading of the Operating
Agreement in an email dated March 17, 2025. ECF No. 805-6.
The dispute to be arbitrated remains the validity of the December 17 Amendment. For the
reasons discussed above this issue does not affect the proposed distribution. Moreover, Mr.
Pusateri, Mr. Fadel, and Mr. Santacroce have had almost six years to litigate the validity of the
December 17 Amendment. Instead, they waited until eight days before the continued hearing on
the Motion to Disburse to raise the issue. And still, they fail to explain how invalidating the
December 17 Amendment will affect the distribution in the very same amounts they have
advocated for several years – and which Judge Allf ordered.
Neither the validity of the December 17 Amendment, nor the prospect of an arbitration
on that issue, presents a valid objection to either of the proposed Findings of Fact and
Conclusions of Law addressing the proposed distribution. That Mr. Pusateri and Mr. Fadel have
filed, or may file, some proceeding in the future is insufficient to further delay the proposed
distribution.
Conclusion
For the reasons stated above, the court concludes and finds that Mr. Pusateri and Mr.
Fadel have failed to state a valid objection to the proposed distribution as set forth in the
movants’ Proposed Findings of Fact and Conclusions of Law. Accordingly, the court overrules
those objections and shall enter a separate order consistent with this decision.

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