Willie Roman & Blackham, Roman, Greiner & Assoc., Inc. v. Greiner (In re Greiner)

In re: JEANE MARIE GREINER, Debtor.

WILLIE ROMAN and BLACKHAM, ROMAN, GREINER & ASSOC., INC., Plaintiffs, v. JEANE MARIE GREINER, d/b/a DIAMONDBACK LAND SURVEYING CO., Defendant.

No. 7-13-13698 JL

Adversary No. 14-1016 J

UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW MEXICO

November 18, 2014

MEMORANDUM OPINION

THIS MATTER is before the Court on the Plaintiffs' Motion for Leave to File First Amended Complaint ("Motion to Amend Complaint") - Docket No. 13. Plaintiffs' original complaint asserted non-dischargeability claims against the Debtor, Jeane Marie Greiner (sometimes called "Debtor"), under 11 U.S.C. § 523(a)(4).¹ See Complaint for Declaratory Judgment and for Rule 7001(f) Adversarial Proceeding to Preclude Discharge of Secured Debt Due to Defendant's Fraud and Embezzlement (the " original Complaint" or "Complaint") - Docket No. 1. Plaintiffs did not name Debtor's spouse, Kery Greiner, as a defendant in the original Complaint, though the original Complaint contains many factual allegations of Mr. Greiner's wrongful actions.

Plaintiffs seek to amend the Complaint to: 1) name Kery Greiner as a defendant; 2) amplify their existing non-dischargeability claims against Ms. Greiner; 3) add several state law claims against Debtor and Kery Greiner; 4) add a non-dischargeability claim against Debtor under § 523(a)(6); and 5) add a request for declaratory judgment under § 524(a)(3) determining that Plaintiffs' community claim is not subject to the discharge injunction against collection from community property acquired after the commencement of Debtor's bankruptcy case. Debtor opposes the Motion to Amend Complaint, asserting that the proposed amendments are time-barred and fail to satisfy the relation-back requirements for the Court to grant leave to amend under Fed.R.Civ.P. 15(c).² See Response to Motion to Amend - Docket No. 18.

At a status conference held August 1, 2014, the Court requested the parties to brief the following issues: 1) whether Rule 15(c) is implicated in this adversary proceeding with respect to adding the non-debtor spouse as a defendant; 2) whether Plaintiffs must seek to name the non-debtor spouse as a defendant within the time limit for filing complaints objecting to the dischargeability of debts in Debtor's bankruptcy case in order to prosecute a non-dischargeability claim based on the wrongdoing of the non-debtor spouse; and 3) whether the timely filing of the Complaint against Debtor is sufficient for purposes of applying § 524. See Order Resulting from Status Conference - Docket No. 20. The supplemental briefing was completed September 29, 2014.³

For the reasons explained more fully below, the Court will allow Plaintiffs to amend the Complaint to add a non-dischargeability claim against Debtor under an additional subsection of §523(a); to amplify their existing claims against Debtor; to add state law causes of action; and to include a request for a declaratory judgment under § 524(a)(3) determining whether Plaintiffs' community claim is subject to the community property discharge injunction. By timely filing a non-dischargeability action against Debtor that included allegations of the non-debtor spouse's wrongdoing, Plaintiffs have satisfied the requirements of Rule 4007(c). Plaintiffs need not name Mr. Greiner as a defendant in this adversary proceeding within the time specified in that Rule in order to obtain a determination of whether after-acquired community property is subject to § 524(a)(3)'s discharge injunction.

PROCEDURAL HISTORY

Debtor filed a voluntary petition under Chapter 7 of the Bankruptcy Code on November 14, 2013. See Case No. 7-13-13698 JL - Docket No. 1. Plaintiffs commenced this adversary proceeding on February 5, 2014. See Complaint - Docket No. 1. The original Complaint objects to the discharge of a debt under § 523(a)(4) and contains the following allegations.

Kery Greiner owned a surveying company known as Diamondback Land Surveying Co., a New Mexico corporation ("Diamondback"). Complaint, ¶¶ 8 and 9. Debtor was Diamondback's bookkeeper. Complaint, ¶ 6.c. With Debtor's knowledge and approval, Diamondback sold all of its assets to Blackham, Roman, Gunaji & Associates, Inc. Complaint, ¶¶ 9 and 13. After the sale, Kery Greiner became an employee, officer and director of Blackham, Roman, Gunaji & Associates, Inc., and the corporation changed its name to Blackham, Roman, Greiner & Associates, Inc. ("BRG"). Complaint, ¶ 10. Kery Greiner specifically promised he would provide his surveying services exclusively through BRG. Complaint, ¶ 11. After the sale, Kery Greiner, with Debtor's assistance, secretly continued to perform more than $1 million of surveying services for Diamondback, and issued invoices topractically all of their former clients through Diamondback. Complaint, ¶¶ 21 and 22. In 2009, BRG employed Debtor as its bookkeeper. Complaint, ¶ 20. While employed as BRG's bookkeeper, Debtor sent numerous emails from her BRG work email to surveying clients instructing them to pay Diamondback, not BRG. Complaint, ¶ 24.

Before the commencement of the Ms. Greiner's bankruptcy case, Plaintiffs filed a lawsuit against Jeane Greiner, Kery Greiner and Diamondback in the Third Judicial District Court as Case No. CV-2012-2930. A copy of that state court complaint ("State Court Complaint") is attached as Exhibit H to the original Complaint filed in this adversary proceeding. The State Court Complaint asserted claims for breach of contract, breach of fiduciary duty, conversion, tortious interference with prospective contractual relations, prima facie tort, negligent supervision, aiding and abetting a breach of fiduciary duty and fraudulent misrepresentation. See Complaint, ¶ 26.

The discovery completion deadline in this adversary proceeding was June 24, 2014. See Order Resulting from Scheduling Conference - Docket No. 8. On April 4, 2014, the Debtor filed a Motion to Dismiss under Rule 12(b)(6) ("Motion to Dismiss"). Plaintiffs filed their Motion to Amend Complaint shortly after the completion of the briefing on the Motion to Dismiss. The parties agreed to stay discovery pending disposition of the Motion to Dismiss. See Stipulated Order Granting Unopposed Motion to Stay Discovery - Docket No. 15. The Court decided to defer its ruling on the Motion to Dismiss until after ruling on the Motion to Amend Complaint. As a result, discovery is still stayed. The docket reflects than none of the parties have taken any discovery.

DISCUSSION

A. Whether Plaintiffs may amend the Complaint to add a claim against Debtor under Section 523(a)(6), to amplify the claims already asserted against Debtor, and to add a request for declaratory judgment with respect to the Debtor under Section 524(a)(3)

Rule 15, made applicable to adversary proceedings by Rule 7015, governs amendments to complaints. Leave to amend should be freely given when justice requires. See Fed.R.Civ.P. 15(a)(2)("[t]he court should freely give leave when justice so requires." ). However, Rule 15 will not permit a plaintiff to add a claim otherwise barred by an applicable statute of limitations unless the original pleading sufficiently put the opposing party on notice of the claims in the amendment such that the new claim relates back to the claims raised in the original pleading. See Fed.R.Civ.P. 15(c); 6A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 1497, at pp. 97-99 (2010)(explaining that "[o]nly if the original pleading has [put the opposing party on notice of the claim], which typically will be the case if the letter of the test set forth in Rule 15(c) is satisfied, will the amendment be allowed to relate back to prevent the running of the limitations period in the interim from barring the claim or defense."). Amendment without relation-back would be futile because the amended complaint would subsequently be dismissed as time-barred. The relation-back provisions of Rule 15(c) apply to amendments of non-dischargeability complaints. See First Nat'l Bank in Okeene v. Barnes, 956 F.2d 277 (10^th Cir. 1992)(Unpublished)(reviewing plaintiff's request to amend its complaint to add a claim under § 523(a)(6) under the relation-back requirements of Rule 15).

With one exception not applicable here, whether a proposed claim against an existing party to the action relates back to the original complaint "depends on the existence of a common 'core of operative facts' uniting the original and newly asserted claims." Mayle v. Felix, 545 U.S. 644, 659, 125 S.Ct. 2562, 2572, 162 L.Ed.2d 582 (2005)(quoting Clipper Exxpress v. RockyMountain Motor Tariff Bureau, Inc., 680 F.2d 1240, 1259, n.29 (9^th Cir. 1982)(remaining citation omitted)). See also, Rule 15(c)(1)(B) ("An amendment to a pleading relates back to the date of the original pleading when . . . the amendment asserts a claim . . . that arose out of the conduct, transaction, or occurrence set out—or attempted to be set out—in the original pleading."). "[T]he 'bottom line' under Rule 15(c) is the notice given to the opposing party." Columbia State Bank, N.A. v. Daviscourt (In re Daviscourt), 353 B.R. 674, 683 (10^th Cir. BAP 2006). See also, Santamarina v. Sears, Roebuck & Co., 466 F.3d 570, 573 (7^th Cir. 2006)("The criterion of relation back is whether the original complaint gave the defendant enough notice of the nature and scope of the plaintiff's claim that he shouldn't have been surprised by the amplification of the allegations of the original complaint to the amended one.")(citations omitted). In the context of a non-dischargeability complaint, an amended complaint that adds a claim under an additional subsection of § 523(a) relates back to the original complaint if the new claim is based on a core of operative facts alleged in the original complaint such that the original complaint gave fair notice to the defendant of the conduct, transactions and occurrences that form the basis of the new claim. See ZVI Constr. Co., LLC v. Huggard (In re Huggard)...