UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF FLORIDAFORT LAUDERDALE DIVISIONwww.flsb.uscourts.gov

In re: CASE NO. 08-19067-BKC-JKOCREATIVE DESPERATIONS, INC., CHAPTER 7a/k/a PETER LETTERESE & ASSOCIATESDebtor.____________________________/

CHAPTER 7 TRUSTEE’S OMNIBUS REPLY TO OBJECTIONS TO MOTION FORAUTHORITY TO DISMISS PARTIES AND ABANDON CLAIMSMARIKA TOLZ

, as chapter 7 trustee (the “Trustee”) for the bankruptcy estate of Creative Desperation, Inc. (f/k/a Peter Letterese & Associates, Inc.)(the “Debtor”), by andthrough undersigned counsel, hereby files her omnibus reply to (i) the Church of ScientologyInternational and Bridge Publications, Inc. (collectively, the “Scientology Group”) PreliminaryObjection to Trustee’s Motion for Authority to Dismiss Parties and to Abandon CertainLitigation Claims; and (ii) Limited Objection to Trustee’s Abandonment (the “AbandonmentMotion”) of Claims to Creative Desperation, Inc., and Request for §725 Disposition of ClaimsAgainst Dr. Douglas G. Ness, Dr. Marc A. Schwartz, Schwartz Dental Practice, Dr. L. ScottBrody, Edwards Angell Palmer & Dodge LLP, Simeon Brier, Antoinette Theodossakos and GaryWoodfiled (collectively, the “EAPD Group”), and therefore states:

Introduction

Two objectors to the Abandonment Motion pursue the same objective. Each contendsthat the litigation involved are mertiless, yet each contends that the trustee has an obligation notto abandon, but rather dismiss with prejudice. At issue is whether the Trustee should be

The Scientology Group and the EAPD Group shall collectively be referred to as the “Objecting Creditors.”

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2conscripted into litigating the long standing lawsuits between the Objecting Creditors and theDebtor’s former principal, Peter Letterese (“Letterese”). The Objecting Creditors ignore theplain language of the Bankruptcy Code, by objecting to the Trustee’s proposed abandonment of certain litigation which the Objecting Creditors themselves claim are meritless, and of inconsequential value to anyone, including the Debtor’s bankruptcy estate. The ObjectingCreditors propose that the Trustee, without any assets to fund litigation, investigate the factualbasis of these claims and conclude that they are both factually and legally meritless, and thendismiss those actions with prejudice. The Trustee’s counsel, who has advised the Trustee, hastestified that the legal claims asserted may be deficient as presently framed, but that does notmean that the Trustee could conclude that there are no facts to support other legal claims in thesame actions. The Objecting Creditors, however, do not propose any source of funding for theTrustee to accomplish the investigation of underlying factual issues. Instead, the ObjectingCreditors propose that the Trustee simply dismiss all claims with prejudice, and then brace forpotential objections and appeals that the Objecting Creditors believe that Letterese willperpetuate. The Objecting Creditors fail to state any colorable basis for imposing such a burdenon the Trustee and the Debtor’s bankruptcy estate. Accordingly, the Trustee respectfullyrequests that the Court enter an Order authorizing the Trustee to dismiss certain parties from thelitigation claims, and abandon the balance of those claims pursuant to Section 554 of theBankruptcy Code.

II.

Background

The Debtor filed a voluntary petition from relief under Chapter 11 of Title 11 of theUnited States Code (“Bankruptcy Code”) on June 30, 2008 [C.P. 1]. Pursuant to the ScientologyGroup’s Motion to Convert to Chapter 7 Proceeding [C.P. 50], the case was converted to aproceeding under Chapter 7 of the Bankruptcy Code by this Court’s Order dated September 9,

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32008 [C.P. 89] (the “Conversion Order”). The Conversion Order also denied as moot a Motionto Dismiss [C.P. 50] that had been filed by the Debtor on August 15, 2008. Thereafter, MarikaTolz (the “Trustee”) was appointed as the duly acting Chapter 7 trustee for the Debtor’sbankruptcy estate (the “Estate”) [C.P. 90].Shortly after the Conversion Order, the Trustee retained undersigned counsel and beganadministering the Debtor’s estate, which has been administratively insolvent since its inception.On October 9, 2008, the Trustee filed a Motion to Enforce the Automatic Stay [C.P. 129], inpart, to preserve the many litigation claims that had been scheduled by the Debtor. OnNovember 13, 2009, the Court entered an Order granting the Motion to Enforce the AutomaticStay (the “Stay Relief Order”) [C.P. 168], requiring, among other things, that any party thatsought to take any action in any litigation involving the Debtor was required to obtain stay relief from the Bankruptcy Court.Since the entry of the Stay Relief Order, the Trustee has examined the many litigationclaims scheduled by the Debtor and, in particular, has evaluated the claims commonly known asthe Rico Case, the Due Process Case, and the Bankruptcy Due Process Case (the “SubjectLitigations”).

At trial on the Trustee’s Motion for Sanctions and Contempt against Charles D. Franken,the Trustee’s counsel stated that, after having spent months trying to negotiate a sale of theLitigation Claims to Letterese or the Scientology Group, such efforts were not successful.Indeed, the Scientology Group, through its counsel, has advised for at least eight months that aproposal for a global settlement of all claims, or a purchase of these claims would beforthcoming. Worse, at the request of the Scientology Group, the Trustee delayed the

See

Chapter 7 Trustee’s Motion for Authority to Dismiss Parties and Abandon Certain Litigation Claims [C.P.265].

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