Chowdary v. Ozcelebi (In re Ozcelebi)

640 B.R. 884

IN RE: Fatih OZCELEBI, Debtor.

K.V. Chowdary and Valley Gastroenterology Clinic, P.A., Plaintiffs,

v.Fatih Ozcelebi, Defendant.

CASE NO: 20-70295

ADVERSARY NO. 21-7001

United States Bankruptcy Court, S.D. Texas, McAllen Division.

Signed June 28, 2022

Nathaniel Peter Holzer, Corpus Christi, TX, for Plaintiff.

Miriam Goott, Walker & Patterson, PC, Houston, TX, Jarrod B. Martin, Chamberlain, Hrdlicka, White, Williams & Aughtry P.C., Houston, TX, for Defendant.

MEMORANDUM OPINION

Eduardo Rodriguez, United States Bankruptcy Judge

Fatih Ozcelebi, M.D. seeks a more definite statement pursuant to Rule 12(e), and, in the alternative, dismissal pursuant to Rule 12(b)(6). K.V. Chowdary, M.D., individually and doing business as and Valley Gastroenterology Clinic, P.A., however, responded by filing a motion pursuant to Rule 12(g)(2) seeking to preclude Fatih Ozcelebi, M.D.’s Rule 12(e) motion in addition to seeking, yet again, leave to amend their complaint.

For the reasons stated herein, K.V. Chowdary, M.D., individually and doing business as and Valley Gastroenterology Clinic, P.A.’s Rule 12(g)(2) motion is granted and Fatih Ozcelebi, M.D.’s Rule 12(e) motion is denied. Additionally, K.V. Chowdary, M.D., individually and doing business as and Valley Gastroenterology Clinic, P.A.’s leave to amend is granted for Counts A, B, D, and H. Fatih Ozcelebi, M.D.’s Rule 12(b)(6) motion is granted as to Counts C, E, F, I, and J and are dismissed with prejudice. Counts G and K are not dismissed and will proceed to discovery.

I. BACKGROUND

On January 11, 2021, K.V. Chowdary, M.D., ("Chowdary "), individually and doing business as and Valley Gastroenterology Clinic, P.A. ("VGC ") ( collectively "Plaintiffs ") filed a Complaint asserting that Plaintiffs’ non-appealable judgement, award of attorney's fees, and award of sanctions against Fatih Ozcelebi ("Defendant " or "Debtor ") should be excepted from discharge in Defendant's chapter 11 bankruptcy case under §§ 523(a)(2)(A), (a)(4), and (a)(6).¹ On June 29, 2021, Defendant filed his motion to dismiss.² On August 3, 2021, this Court, after a hearing, granted Defendant's motion in part and required Plaintiffs to amend their complaint no later than August 16, 2021.³

On August 16, 2021, Plaintiffs filed their "First Amended Complaint to Deny Discharge of Debt" ("First Amended Complaint ").⁴ On December 29, 2021, the Court sua sponte ordered Plaintiffs to file a more definite statement pursuant to Federal Rule of Civil Procedure ("Rule ") 12(e).⁵ On January 12, 2022, Plaintiffs filed "Second Amended Complaint to Deny Discharge of Debt."⁶ A corrected version was filed on January 18, 2022 ("Corrected Second Amended Complaint ")⁷ which contains eleven separate counts, to wit: (Count A) 11 U.S.C. § 523(a)(2)(A) property obtained by false pretenses, false representations, and actual fraud – stolen patients list; (Count B) 11 U.S.C. § 523(a)(2)(A) property obtained by false pretenses, false representations and actual fraud– employment contract; (Count C) 11 U.S.C. § 523(a)(2)(A) property obtained by actual fraud– fraudulent transfer scheme; (Count D) 11 U.S.C. § 523(a)(4) fraud or defalcation in a fiduciary capacity, embezzlement, and/or larceny – stolen patients list; (Count E) 11 U.S.C. § 523(a)(4) fraud or defalcation in a fiduciary capacity, embezzlement, and/or larceny – fraudulent transfers; (Count F) 11 U.S.C. § 523(a)(4) fraud or defalcation in a fiduciary capacity – conspiracy to defraud; (Count G) 11 U.S.C. § 523(a)(6) willful and malicious injury by the debtor to another entity or to the property of another entity – abusive litigation; (Count H) 11 U.S.C. § 523(a)(6) willful and malicious injury by the debtor to another entity or to the property of another entity – stolen patients list; (Count I) 11 U.S.C. § 523(a)(6) willful and malicious injury by the debtor to another entity or to the property of another entity – fraudulent transfers; (Count J) 11 U.S.C. § 523(a)(6) willful and malicious injury by the debtor to another entity or to the property of another entity – conspiracy to defraud; and (Count K) 11 U.S.C. § 523(a)(6) willful and malicious injury by the debtor to another entity or to the property of another entity – sanctions award.

On February 1, 2022, Defendant filed "Defendant Fatih Ozcelebi's Motion for a More Definite Statement, and in the Alternative, Motion to Dismiss Plaintiffs’ Corrected Second Amended Complaint to Deny Discharge of Debt"⁸ ("Motion "). Plaintiffs filed a response ("Response ") to the Motion on February 22, 2022.⁹ In the Response, inter alia, Plaintiffs moved under Rule 12(g)(2) and sought leave to amend the Corrected Second Amended Complaint. A hearing on the Motion, Plaintiffs’ Rule 12(g)(2) motion, and Plaintiffs’ request for leave to amend was held on May 26, 2022.¹⁰ The Court now issues the instant memorandum opinion.

II. JURISDICTION AND VENUE

This Court holds jurisdiction pursuant to 28 U.S.C. § 1334, which provides "the district courts shall have original and exclusive jurisdiction of all cases under [t]itle 11 or arising in or related to cases under [t]itle 11." An adversary proceeding falls within the Court's "related to" jurisdiction if the "outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy."¹¹ Section 157 allows a district court to "refer" all bankruptcy and related cases to the bankruptcy court, wherein the latter court will appropriately preside over the matter.¹² This Court determines that pursuant to 28 U.S.C. § 157(b)(2)(I) this adversary proceeding involves primarily core matters as it "concern[s] determinations as to the dischargeability of particular debts."¹³

Furthermore, this Court may only hear a case in which venue is proper.¹⁴ Pursuant to § 1409(a), "a proceeding arising under title 11 or arising in or related to a case under title 11 may be commenced in the district court in which such case is pending."¹⁵ Debtor's underlying chapter 7 case is presently pending in this Court and therefore, venue of this adversary proceeding is proper.

III. ANALYSIS

A. Rule 12(g) Motion

As a preliminary matter, the Court addresses Plaintiffs’ Rule 12(g)(2) motion. Rule 12(g)(2), in relevant part, states that "a party that makes a motion under this rule must not make another motion under this rule raising a defense or objection that was available to the party but omitted from its earlier motion."¹⁶ "The filing of an amended complaint will not revive the right to present by motion defenses that were available but were not asserted in timely fashion prior to the amendment of the pleading."¹⁷ Notably, this includes Rule 12(e) motions.¹⁸

Here, Defendant filed motions to dismiss pursuant to Rule 12(b)(6) as to both Plaintiffs’ Initial Complaint¹⁹ and the First Amended Complaint.²⁰ Critically, neither of the motions to dismiss were brought pursuant to Rule 12(e). On December 29, 2021, the Court sua sponte ordered Plaintiffs to replead their First Amended Complaint pursuant to Rule 12(e).²¹ Plaintiffs argue that Rule 12(g)(2) now bars Defendant from bringing a Rule 12(e) motion to the Corrected Second Amended Complaint because Plaintiffs failed to assert Rule 12(e) when it was previously available.²²

The Court agrees that the technical requirements of Rule 12(g) clearly bar Defendant's subsequently filed Rule 12(e) motion. In the Rule 12(g) context, the Southern District of Texas has echoed "[w]hen the Federal Rules govern, it is neither up to the parties nor up to this Court to determine what makes the best procedural sense."²³ Rather, this Court must follow the Federal Rules and deny the Rule 12(e) portion of Defendant's Motion as improper.

Accordingly, Defendant's Rule 12(e) motion is denied.

B. Leave to Amend

Plaintiffs’ Response also included a motion seeking, yet again, leave to amend the Corrected Second Amended Complaint.²⁴ In the Motion, Defendant undermines the Second Amended Complaint by highlighting a major contradiction between Plaintiffs’ Second Amended Complaint and Plaintiffs’ Exhibit E. In the Second Amended Complaint, Plaintiffs allege that the parties entered into an employment agreement in April 1997.²⁵ However, Defendant argues that Plaintiffs’ Exhibit E, a copy of a Texas Court of Appeals opinion, conflicts with these allegations. In Exhibit E, the Texas Court of Appeals found that Defendant started working at VGC in April 1996.²⁶

In their Response, Plaintiffs admit that "[the Employment Agreement] was signed on September 19, 1995, and Plaintiffs agree that the Defendant started work in 1996 as the Court of Appeals opinion found."²⁷ Notably, this date error occurs numerous times throughout the Corrected Second Amended Complaint and infects Counts A, B, D, and H.²⁸ Plaintiffs seek leave to amend and request permission to correct the Corrected Second Amended Complaint to assert the correct date of the employment agreement, and also to redraft any portions of their Corrected Second Amended Complaint that address issues arising from the proximity in time between the date of the employment agreement and certain conduct by the Defendant.²⁹

Although the Court believes that this mistake to be much more than a "typographical error" as described in Plaintiffs’ Response,³⁰ the Court will nevertheless grant a very limited leave to amend the Corrected Second Amended Complaint in order to rectify the date problems and also to redraft any portions of their Corrected Second Amended Complaint that address issues arising from the proximity in time between the date of the employment agreement and certain conduct by the Defendant.

Accordingly, Plaintiffs are granted leave to amend Counts A, B, D, and H as well as Paragraphs 9 through 25 of their Corrected Second Amended Complaint.

Since Counts C, E, F, G, I, J, and K are unimpacted by the leave to amend, the Court will next evaluate Defendant's 12(b)(6) Motion as it pertains to these counts below.

B. Standard of Review for Motions to Dismiss...