Kaushas v. Popple Constr., Inc. (In re Kaushas)

616 B.R. 57

IN RE: Edward James KAUSHAS, Debtor(s)

Edward James Kaushas, Plaintiff(s)

v.Popple Construction, Inc., Raymond Wendolowski, Esq., and Bruce Phillips, Esq., Defendant(s)

Case Number: 5:18-bk-03293-RNO

Adversary Number: 5:19-ap-00108-RNO

United States Bankruptcy Court, M.D. Pennsylvania.

Signed June 2, 2020

David J. Harris, Wilkes-Barre, PA, for Defendants.

Nature of Proceeding: Motion to Dismiss Adversary Proceeding

OPINION ¹

Robert N. Opel, II, Bankruptcy Judge (BI)

Plaintiff filed an Amended Adversary Complaint alleging Defendants willfully violated the automatic stay. Subsequently, Movants filed a Motion to Dismiss. For the reasons stated below, the Motion to Dismiss will be denied.

I. JURISDICTION

The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334. This is a core proceeding under 28 U.S.C. § 157(b)(2)(G).

II. FACTS AND PROCEDURAL HISTORY

Bruce Phillips, Esquire ("Phillips"), now deceased, represented Robert F. Brannon ("Brannon") and Brannon's company, Contractors, Surveyors, and Engineers, Inc. ("CSE"), in two civil cases in the Luzerne County Court of Common Pleas ("State Court Actions"). The first case, Popple Construction, Inc. v. Robert Brannon, was filed on January 26, 2010, (2010-cv-1109) ("First State Court Action"). The second case, Contractors, Surveyors, and Engineers, Inc. v. Popple Construction, Inc., was filed on April 7, 2010, (2010-cv-4342) ("Second State Court Action"). In both cases, Raymond Wendolowski, Esquire ("Wendolowski") represented Popple Construction, Inc. ("Popple") (collectively with Wendolowski, "Movants").

In January of 2018, Phillips began working with Edward J. Kaushas, Esquire ("Plaintiff") on both of the State Court Actions. On March 20, 2018, Plaintiff, on behalf of CSE, entered a Default Judgment of $140,000.00 in favor of CSE and against Popple in the Second State Court Action ("Default Judgment").

On July 24, 2018, Brannon and CSE assigned the Default Judgment to Plaintiff ("Assignment"). Soon thereafter, Plaintiff filed the Assignment with the Prothonotary of the Court of Common Pleas of Luzerne County.

On August 4, 2018, Plaintiff filed his voluntary Chapter 13 bankruptcy case (5:18-bk-3293).

On September 13, 2018, Wendolowski, on behalf of Popple, filed a Petition to Strike and/or Open Default Judgment, to Strike Garnishment, to Enforce Settlement Agreement, and for Sanctions Due to Bad Faith, Obdurate and Vexatious Behavior of Plaintiff ("State Court Petition"). On September 28, 2018, the court in the Second State Court Action entered an order striking the Default Judgment, striking and lifting the garnishment, validating the mutual settlement agreement, and sanctioning Plaintiff in the amount of the attorneys' fees incurred by Movants in pursuit of the State Court Petition ("State Court Petition Order").

On October 28, 2019, Plaintiff commenced an adversary proceeding (5:19-ap-108). On the same day, Plaintiff filed a two-count Amended Adversary Complaint ("Amended Adversary Complaint") against Movants and Phillips (collectively, "Defendants"). Count I alleges Movants willfully violated 11 U.S.C. § 362(a)(1) & (3)² which permits Plaintiff to recover actual damages pursuant to § 362(k). Count II alleges Phillips willfully violated § 362(a)(3), and therefore, Plaintiff is entitled to recover actual damages pursuant to § 362(k).³

On December 12, 2019, Movants filed a Motion to Dismiss ("Motion to Dismiss") Count I of the Amended Adversary Complaint. After multiple continuances, a hearing was held on the Motion to Dismiss on April 9, 2020 ("Hearing").

Briefs have been filed in support of, and in opposition to, the Motion to Dismiss. The Motion to Dismiss is now ripe for decision.

III. DISCUSSION

A. Standards of Review for a Motion to Dismiss Pursuant to Federal Rule of Bankruptcy Procedure 7012(b)(1) & (6).

1. Federal Rule of Bankruptcy Procedure 7012(b)(1) Standard of Review.

Federal Rule of Bankruptcy Procedure ("F.R.B.P.") 7012(b) makes Federal Rule of Civil Procedure ("F.R.C.P.") 12(b)–(i) applicable to bankruptcy adversary proceedings. F.R.C.P. 12(b)(1) requires dismissal of a complaint if the bankruptcy court lacks subject matter jurisdiction. In re Schatz , 452 B.R. 544, 551 (Bankr. M.D. Pa. 2011). The plaintiff bears the burden of proof that jurisdiction does, in fact, exist. Mortensen v. First Fed. Sav. & Loan Ass'n , 549 F.2d 884, 891 (3d Cir. 1977) (citations omitted). Additionally, the Mortensen court provided:

Because at issue in a factual 12(b)(1) motion is the trial court's jurisdiction its very power to hear the case there is substantial authority that the trial court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case. In short, no presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims. Moreover, the plaintiff will have the burden of proof that jurisdiction does in fact exist.

Id. at 891.

A court's subject matter jurisdiction can be attacked either facially or factually. Schatz , 452 B.R. at 551. When weighing a facial challenge, "the court must only consider the allegations of the complaint and documents referenced therein and attached thereto, in the light most favorable to the plaintiff." Gould Elecs. Inc. v. United States , 220 F.3d 169, 176 (3d Cir. 2000) (citations omitted). When weighing a factual challenge, "the court may consider evidence outside the pleadings." Id. (citations omitted).

2. Federal Rule of Bankruptcy Procedure 7012(b)(6) Standard of Review.

F.R.B.P. 7012(b) makes F.R.C.P. 12(b)–(i) applicable to bankruptcy adversary proceedings. F.R.C.P. 12(b)(6) requires dismissal of a complaint which fails to state a claim upon which relief can be granted. Generally, a complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). However, the Supreme Court heightened this pleading standard by holding that for a complaint to withstand a motion to dismiss, a claim must be more than possible, it must be plausible. Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S. Ct. 1955, 1973, 167 L. Ed. 2d 929 (2007). Additionally, Twombly advises that while detailed factual allegations are not required in a complaint, "a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. at 555, 127 S. Ct. 1955. Two years later, the Supreme Court went further to define "facial plausibility":

A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief.

Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009) (internal citations and quotations omitted).

At the motion to dismiss stage, only well pled facts are viewed in the light most favorable to the non-moving party, in this case, the Plaintiff. Alternatively, legal conclusions are not assumed to be correct at the motion to dismiss stage. In Iqbal , Justice Kennedy wrote:

While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.

Iqbal , 556 U.S. at 679, 129 S.Ct. 1937. The Third Circuit has also provided guidance on the differing standards regarding a complaint's alleged facts and legal conclusions at the motion to dismiss stage:

The District Court must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions. Second, a District Court must then determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a plausible claim for relief. In other words, a complaint must do more than allege the plaintiff's entitlement to relief. A complaint has to "show" such entitlement with its facts.

Fowler v. UPMC Shadyside , 578 F.3d 203, 210–11 (3d Cir. 2009) (internal citations omitted). When deciding a motion to dismiss, the court may consider the complaint as well as attached exhibits and matters of public record. Pension Ben. Guar. Corp. v. White Consol. Industries, Inc. , 998 F.2d 1192, 1196 (3d Cir. 1993) ; Taylor v. Henderson , 2015 WL 452405, *1 (D. Del., Jan. 30, 2015). Additionally, the court may consider an indisputably authentic document which a defendant attaches as an exhibit to a motion to dismiss, if the plaintiff's claims are based on the document. Pension Ben. Guar. Corp. , 998 F.2d at 1196 ; see also , Miller v. Clinton County , 544 F.3d 542, 550 (3d Cir. 2008).

Furthermore, the Federal Rules of Evidence ("F.R.E.") apply to proceedings before United States Bankruptcy Judges. Fed. R. Evid. 1101(a) ; In re Barnes , 266 B.R. 397, 403 (8th Cir. BAP 2001). F.R.E. 201 allows a federal court to take judicial notice of facts that are not subject to reasonable dispute. A bankruptcy court may take judicial notice of the docket events in a case, contents of the bankruptcy schedules to determine the timing and status of case events, as well as other facts not reasonably in dispute. In re Harmony Holdings, LLC , 393 B.R. 409, 413 (Bankr. D.S.C. 2008) ; In re Paolino , 1991 WL 284107, *12 n. 19 (Bankr. E.D. Pa., Jan. 11, 1991).

B. Movants' Motion to Dismiss for Failure to State a Claim upon Which Relief Can Be Granted...