755 F.3d 1285 (11th Cir. 2014), 13-10560, In re Kane
| Citation | 755 F.3d 1285, 25 Fla.L.Weekly Fed. C 9 |
| Opinion Judge | MARCUS, Circuit Judge: |
| Party Name | In re: HARLEY N. KANE, Debtor. v. STEWART TILGHMAN FOX & BIANCHI PA, TODD S. STEWART, P.A., WILLIAM C. HEARON, P.A., Defendants - Appellees HARLEY N. KANE, CHARLES J. KANE, Plaintiffs - Appellants, |
| Attorney | For Harley N Kane, Charles J. Kane, Plaintiffs - Appellants: Stephen B. Rakusin, Joseph Scott Van de Bogart, The Rakusin Law Firm, PA, Fort Lauderdale, FL. For Stewart Tilghman Fox & Bianchi PA, Todd S. Stewart, P.A., William C. Hearon, P.A., Defendants - Appellees: Charles Throckmorton, Kozyak T... |
| Judge Panel | Before MARCUS, Circuit Judge, and PROCTOR[*] and EVANS,[**] District Judges. |
| Case Date | June 26, 2014 |
| Court | United States Courts of Appeals, U.S. Court of Appeals — Eleventh Circuit |
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Appeal from the United States District Court for the Southern District of Florida. D.C. Docket No. 9:12-cv-80750-KMM, Bkcy No. 09-01839-EPK.
OPINION
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This bankruptcy appeal concerns whether two debtors (Charles Kane and Harley Kane) may discharge in Chapter 7 bankruptcy a $2 million judgment entered by a Florida state court in favor of the creditors (Stewart Tilghman Fox & Bianchi, P.A., William C. Hearon, P.A., and Todd S. Stewart, P.A.). The case requires us to answer two questions. First, Charles Kane and Harley Kane appeal the district court's order affirming the bankruptcy court's judgment excepting the state court judgment from discharge under 11 U.S.C. § 523(a)(6). According to the appellants, the bankruptcy court mistakenly characterized the state court judgment as a nondischargeable debt " for a willful and malicious injury by the debtor." Separately, Harley Kane appeals the denial of his discharge by joint application of 11 U.S.C. § 727(a)(7) and 11 U.S.C. § 727(a)(2), arguing that the bankruptcy court erroneously found that he transferred or concealed the property of an " insider" entity with the intent to hinder, delay, or defraud the appellees. Finding no error, we affirm.
I.
In a bankruptcy appeal, we review a bankruptcy court's fact-finding for clear error only. See In re Piazza, 719 F.3d 1253, 1260 (11th Cir. 2013). " When the district court has affirmed the bankruptcy court's findings . . . we will apply the clearly erroneous doctrine with particular rigor." In re Jennings, 533 F.3d 1333, 1338 (11th Cir. 2008) (quoting In re Wines, 997 F.2d 852, 856 (11th Cir. 1993)). Additionally, when we examine the facts adduced at trial, generally we will not disturb a bankruptcy court's credibility determinations. See In re Englander, 95 F.3d 1028, 1030 (11th Cir. 1996) (requiring a reviewing court to " give due regard" to a bankruptcy court's credibility judgments); see also United States v. Peters, 403 F.3d 1263, 1270 (11th Cir. 2005) (recognizing that " [a]ssessing witness credibility is uniquely the function of the trier of fact" ). Here, to the extent the appellants dispute the relevant facts, they rely exclusively on evidence drawn from their own testimony, which the bankruptcy judge expressly disbelieved. Notably, at this stage, the appellants have provided us with no basis for disturbing the bankruptcy court's assessment of their credibility. Thus, in summarizing the essential facts developed over the course of a six-day hearing in the bankruptcy court, we accept as we must the bankruptcy court's factual findings in light of its credibility judgments.
A.
The essential facts and procedural history are straightforward. The appellants, Charles Kane and his son, Harley Kane, are attorneys licensed to practice in Florida. They were the only partners in a law firm formed as a general partnership and known as Kane & Kane (the " Kane Firm" ). Before 2002, the Kanes and the Kane Firm, in collaboration with attorneys Laura
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Watson, Darren Lentner, Amir Fleischer, and Gary Marks, and their respective law firms (all of the foregoing, together with the Kanes, the " PIP Lawyers" ), filed thousands of claims (collectively, the " PIP Litigation" ) in Florida on behalf of an estimated 441 healthcare provider clients (the " PIP clients" ) against the Progressive Insurance Companies (" Progressive" ) under the personal injury protection (" PIP" ) provisions of many policies issued by Progressive. All of the PIP Lawyers, including the Kanes, were jointly retained by all of the plaintiffs in the PIP Litigation on a contingent-fee basis.
In order to increase their leverage against Progressive in the PIP Litigation, the PIP Lawyers decided to pursue derivative claims grounded in Progressive's alleged bad faith refusal to settle the PIP claims (the " Bad Faith Litigation" ). Lacking relevant experience and resources, the PIP Lawyers could not press these bad faith claims on their own. The PIP Lawyers therefore sought help from Stewart Tilghman Fox & Bianchi, P.A., William C. Hearon, P.A., and Todd S. Stewart, P.A. (collectively, the " appellees" or the " Stewart Firms" ), whose members, including lead attorney Larry Stewart, would pursue the Bad Faith Litigation on a parallel front along with the PIP Litigation.
The PIP Lawyers jointly drafted a contingent fee agreement with the Stewart Firms. Initially, and in writing, the parties specifically limited the scope of the Stewart Firms' involvement to the Bad Faith Litigation alone. The parties agreed that the Stewart Firms would receive sixty percent of all attorneys' fees collected from the Bad Faith Litigation. Over time, the Stewart Firms and the PIP Lawyers entered into engagement agreements with approximately thirty-six plaintiffs in the Bad Faith Litigation. As Larry Stewart testified in bankruptcy court, however, the plan had always been to " add plaintiffs in . . . the future." Thus, the bankruptcy court found that the Stewart Firms " effectively represented the interests of all of the clients in the PIP Litigation." In fact, as the bankruptcy judge observed, the evidence " overwhelmingly" established that the Kanes and the Stewart Firms treated the PIP Litigation and the Bad Faith Litigation as being " inextricably intertwined."
From 2002 to 2004, the Stewart Firms vigorously litigated the bad faith claims and obtained several favorable rulings. According to the bankruptcy court, the favorable rulings in the Bad Faith Litigation motivated Progressive to consider settling all of the bad faith claims held by all of the plaintiffs in the PIP Litigation. On January 21, 2004, Larry Stewart made an offer to Progressive to settle the universe of potential bad faith claims for $20 million. Later, Progressive countered at $2 million. Ultimately, Progressive and the Stewart Firms scheduled a formal mediation for April 2004.
Progressive hoped for a sweeping mediation. Before the scheduled date, Progressive requested that the parties discuss at mediation not only the existing and potential bad faith claims, but also the PIP claims presented in the PIP Litigation. Though the Stewart Firms had until that time prosecuted only the bad faith claims, Larry Stewart agreed to address the PIP claims too, subject to obtaining: (1) authority from the PIP Lawyers, and (2) an agreement from Progressive to discuss the bad faith claims first. Stewart insisted on this sequence in part to avoid a conflict of interest between the clients and their counsel. The PIP Litigation and the Bad Faith Litigation involved substantially different contingent fee structures: the clients would receive only about ten percent of any recovery in the PIP Litigation, while they were entitled to sixty percent of any recovery on the bad faith claims.
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On April 13, 2004, shortly before the mediation with Progressive, Larry Stewart met with the Kanes to strategize. At that meeting, the Kanes authorized Stewart to discuss with Progressive all of the claims held by all of the clients in the PIP Litigation, including both the PIP claims and any existing or potential bad faith claims. In consideration of the Stewart Firms' newly expanded authority, the PIP Lawyers, including the Kanes, agreed in writing to modify the Stewart Firms' compensation structure. Under the original fee agreement, the Stewart Firms were entitled to twenty-four percent of any recovery on the bad faith claims (sixty percent of the forty percent allocated to attorneys' fees), while the PIP Lawyers would receive sixteen percent of any bad faith recovery. After April 13, 2004, the Stewart Firms were entitled to thirty percent of any recovery on the bad faith claims (seventy-five percent of the attorneys' fees), while the PIP Lawyers were set to receive only ten percent of that recovery. By contrast, at all relevant times, the PIP Lawyers were entitled to ninety percent of any proceeds derived from the PIP Litigation, the PIP clients were set to receive ten percent of any PIP recovery, and the Stewart Firms would earn nothing from the PIP claims.
At the April 19, 2004 mediation, which Larry Stewart handled for the PIP clients, Progressive offered to settle the universe of existing and...
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