Mouhtadi v. Shaikh (In re Shaikh), Case No.: 16-02765-5-JNC

IN RE: AHMAD SHAIKH, Debtor

MOSTAFA MOUHTADI and YOUNES KHALIOUI Plaintiffs v. AHMAD SHAIKH, Defendant

Case No.: 16-02765-5-JNC

Adversary Proceeding No.: 16-00164-5-JNC

UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF NORTH CAROLINA RALEIGH DIVISION

October 24, 2017

Chapter 7

ORDER GRANTING MOTION FOR SUMMARY JUDGMENT AND DENYING MOTION TO RECONSIDER

The matters before the court are the motion for summary judgment filed by the plaintiffs, Mostafa Mouhtadi and Younes Khalioui (the "Plaintiffs"), Dkt. 45, and a document filed by the defendant Ahmad Shaikh ("Mr. Shaikh" or the "Debtor") that the court construed as a motion for reconsideration, Dkt. 56. A hearing was held on the summary judgment motion in Raleigh, North Carolina on September 21, 2017, and the motion for reconsideration was heard on October 19, 2017, in Raleigh, North Carolina.¹ For the reasons discussed herein, the court grants the Plaintiffs' motion for summary judgment and denies Mr. Shaikh's motion for reconsideration.

PROCEDURAL POSTURE

Mr. Shaikh filed a voluntary petition for relief under chapter 13 of the Bankruptcy Code on May 25, 2016. On July 11, 2016, the chapter 13 case was voluntarily converted to a proceeding under chapter 7. Dkt. 13. In a related matter, and also on May 25, 2016, Millston Food Mart, Inc. ("Millston"), a North Carolina corporation, filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code, Case No. 16-02764-5-JNC. Mr. Shaikh is the president and sole shareholder of Millston.² On August 8, 2016, the corporate case was converted to a proceeding under chapter 7 of the Bankruptcy Code.

The complaint in this adversary proceeding was filed in Mr. Shaikh's individual case on October 11, 2016, asserting claims against him for (1) common-law fraud; (2) violations of the North Carolina Unfair and Deceptive Trade Practices Act (the "UDTPA"), N.C. Gen. Stat. §§ 75-1.1 to 75-145, and (3) seeking a determination that the debts related to the case were excepted from discharge pursuant to 11 U.S.C. §§ 523(a)(2) or (a)(4). After resolving service issues arising from an incorrect mailing address for Mr. Shaikh,³ an amended complaint was served upon him on February 10, 2017, Dkts. 22-23. The amended complaint is verified by virtue of the affidavit filed by Mr. Mouhtadi, Dkt. 46. Mr. Shaikh filed a handwritten answer to the amended complaint that the court construed as a general denial.⁴ Dkt. 25. Since then, Mr. Shaikh has remained largely absent from the case, as he did not participate with counsel for the Plaintiffs in submitting a pre-conference report, Dkt. 31, nor did he appear at the preliminary pretrial conference as noticed for and conducted in Greenville, North Carolina, on April 20, 2017.

More importantly, Mr. Shaikh has failed to respond to discovery requests from the Plaintiffs, resulting in the Plaintiffs' filing of a Motion to Compel and Motion for Sanctions on July 12, 2017 (Dkt. 37; the "Motion to Compel"). As a part of the Motion to Compel, Plaintiffs filed and provided the court with copies of Plaintiffs' First Set of Interrogatories and Requests for Production of Documents (Dkt. 38; the "Interrogatories and Requests for Production") and Plaintiffs' First Set of Requests for Admissions (Dkt. 39; the "Requests for Admission"). Counsel for the Plaintiffs represents that the Requests for Admission were served upon Mr. Shaikh at the address noted in the file on May 9, 2017.

Because Mr. Shaikh did not respond to or otherwise deny the Requests for Admission, pursuant to Federal Rule of Civil Procedure 36(a)(3) and Federal Rule of Bankruptcy Procedure 7036, all allegations in the Requests for Admission are deemed admitted. Mr. Shaikh did not file a response to the Motion to Compel, nor did he attend the hearing on that motion held in Raleigh, North Carolina on August 24, 2017. At that hearing, the court entered an order granting the Motion to Compel and directing Mr. Shaikh to respond to the Interrogatories and Requests for Production before September 14, 2017, Dkt. 52, which he failed to do.

Following entry of the order on the Motion to Compel and the failure of Mr. Shaikh to respond to any discovery, Plaintiffs filed a motion for summary judgment on August 31, 2017 (Dkt. 45; the "Motion for Summary Judgment"), relying upon the uncontested facts established in the deemed admitted Requests for Admission and the failure of the defendant to offer any sworn statements of fact disputing the facts asserted in the verified amended complaint.⁵ In addition to being served with the Motion for Summary Judgment, Mr. Shaikh was served with a Memorandum by the Clerk of Court explaining his procedural rights and the consequences of failing to respond to a motion for summary judgment, Dkt. 48. A hearing was noticed for and held on the Motion for Summary Judgment in Raleigh, North Carolina, on September 21, 2017, and notice of the hearing was sent to Mr. Shaikh. He did not file a response to the Motion for Summary Judgment, nor did he request a continuance of the hearing. Counsel for Plaintiffs appeared at the hearing as noticed and presented argument based on the uncontested facts. Mr. Shaikh did not attend the hearing. Upon consideration, the court granted the Plaintiffs' Motion for Summary Judgment from the bench.

Five days after the hearing on the Motion for Summary Judgment, and prior to the entry of a written order on the Motion for Summary Judgment, on September 26, 2017, Mr. Shaikh filed a handwritten document (Dkt. 56; the "Motion to Reconsider"), in which he explained that he was absent from the hearing because he had a hearing in state court on the same day. However, Mr. Shaikh failed to notify the court of this scheduling conflict before the hearing date, and he did not request a continuance. The Motion to Reconsider sought a new hearing in which Mr. Shaikh proposed to voice his objections to the amounts sought by the Plaintiffs.

In the Motion to Reconsider, Mr. Shaikh states that he missed the September 26, 2017 hearing on the Motion for Summary Judgment because he was "in district court in Room 403 until court finished." Dkt. 56 at 1. In support of this assertion, Mr. Shaikh attached a partial printout that appears to be from the North Carolina Court Information System reflecting that case number 16-CR-217917, in which Mr. Shaikh is apparently a defendant, was continued on September 21, 2017 to October 20, 2017. Id. at 2. However, because of the partially obscured nature of the printout, it is unclear if that state court case was called or if a hearing otherwise occurred in it on September 21, 2017. At any rate, his request for a hearing in this matter was granted on September 29, 2017 (Dkt. 57) and a hearing on the Motion to Reconsider was noticed for Raleigh, North Carolina on October 19, 2017.

Prior to the hearing on the Motion to Reconsider, on October 18, 2017, counsel for Plaintiffs filed a Memorandum of Law in opposition to Mr. Shaikh's Motion to Reconsider (Dkt. 61), as well as an Affidavit in support of the Memorandum (Dkt. 62). The Affidavit, sworn by Mr. John S. Austin, counsel for the Plaintiffs, recounts the numerous failures of Mr. Shaikh to participate in the case, respond to discovery, or attend hearings in the case. Further, the Affidavit states that the Wake County Clerk of Court's office "could not find any calendar on September 21, 2017 in which [Mr. Shaikh] had charges." Dkt. 62 at 3.⁶

Mr. Shaikh appeared at the October 19, 2017, bankruptcy court hearing (albeit forty-three minutes late), having still not responded to the discovery served on him some five (5) months before. The court nevertheless allowed him to present oral argument, and he attempted to argue specific facts that were not in the record and were not sworn. He did not address the failure to respond to discovery other than to make an unsubstantiated claim that he did not receive the documents at the mailing address he listed in the case until two days before the responses were due. At the conclusion of the hearing, the court ruled that Mr. Shaikh had not made a viable argument to support setting aside the admitted Requests for Admission or otherwise presented compelling reasons to set aside the prior oral ruling granting summary judgment for the Plaintiffs.⁷

DISCUSSION

I. THE STANDARD FOR SUMMARY JUDGMENT

A party is entitled to summary judgment if the indisputable facts presented in a case "show there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); Fed. R. Bankr. P. 7056; Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). "The court must consider whether a reasonable jury could find in favor of the non-moving party, taking all inferences to be drawn from the underlying facts in the light most favorable to the non-movant . . . ." Humboldt Express, Inc. v. The Wise Co. (In re Apex Express Corp.), 190 F.3d 624, 633 (4th Cir. 1999) (citations omitted). The party seeking summary judgment has the initial burden of proving the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. If the initial burden is met, the opposing party must respond and show factual disputes sufficient to advance a genuine issue to trial. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986). The court can then decide if "the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986).

Further, "Rule 36 admissions are conclusive for purposes of the litigation and are sufficient to support summary judgment." United States v. Renfrow, 612 F. Supp. 2d 677, 682 (E.D.N.C. 2009) (quoting Adventis, Inc. v. Consol. Prop. Holdings, Inc., 124 F. App'x 169, 173 (4th Cir. 2005)). "A party's failure to respond to a request for admissions under Federal Rule of Civil Procedure 36 may...