In re Leonelli-Spina, 050411 FED3, 10-2072

Docket Nº:10-2072
Opinion Judge:VANASKIE, Circuit Judge.
Judge Panel:Before: SCIRICA, AMBRO and VANASKIE, Circuit Judges.
Case Date:May 04, 2011
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit





No. 10-2072

United States Court of Appeals, Third Circuit

May 4, 2011


Submitted Under Third Circuit LAR 34.1(a) March 10, 2011.

On Appeal from the United States District Court for the District of New Jersey (D.C. Civil No. 02-09-cv-01864) District Judge: Honorable Peter G. Sheridan

Before: SCIRICA, AMBRO and VANASKIE, Circuit Judges.


VANASKIE, Circuit Judge.

This appeal concerns a March 16, 2009, Bankruptcy Court decision in an adversary proceeding granting summary judgment to creditor James R. Albro. The Bankruptcy Court determined that the doctrine of collateral estoppel applied to prevent Appellant/Debtor Vincenza Leonelli-Spina ("Leonelli-Spina") from defending the dischargeability of her debt to Albro. The District Court affirmed the decision of the Bankruptcy Court, and this appeal followed. Because there was no error in the application of the doctrine of collateral estoppel to preclude Leonelli-Spina from relitigating the questions of whether she had engaged in conduct constituting fraud and breach of fiduciary duties, we will affirm.


As we write only for the parties, who are familiar with the facts and procedural history of the case, we set forth only those facts necessary to our analysis. Leonelli-Spina was a New Jersey attorney, initially employed as an associate in the firm of John Feczko. In 1994, the firm undertook the representation of John R. Albro, a police officer who was filing suit against his employer. In the context of this suit, Albro directed that the proceeds of his pension checks should be held in trust by his attorneys.

Leonelli-Spina separated from the Feczko firm in 1996, and Albro remained as her client. Leonelli-Spina later claimed that she and Albro entered into an hourly fee arrangement. Albro, however, asserted that the representation was on a contingent fee basis.

Albro's case against his employer was finally settled in 2001. In addition to back wages and an increased pension as well as payment for sick leave and other benefits, Albro's employer paid him $270, 000 for the release of other claims and $165, 000 for attorneys' fees.

Albro understood that the fee portion of the settlement with his former employer satisfied his entire fee obligation to Leonelli-Spina. Subsequent to the settlement with his employer, however, Albro learned that Leonelli-Spina had accessed the trust account into which his pension payments had been deposited and withdrew funds for counsel fees. He also learned that the amounts withdrawn from his trust account were in addition to the $165, 000 allotted to fees in the settlement.

Albro eventually brought suit against Leonelli-Spina in New Jersey Superior Court. On September 10, 2007, the New Jersey Superior Court found that Leonelli-Spina had violated the rules of Professional Conduct in withdrawing the funds, had committed common-law fraud, tortiously converted Albro's funds, failed to pay Albro's taxes, and committed breach of contract and breach of fiduciary duty. Compensatory damages, including interest and penalties, totaling $486, 932.28 were awarded. Because of the death of the trial judge, an award of punitive damages was delayed until October 3, 2008, when they were assessed at $350, 000, together with $145, 297.85 in attorney's fees and $16, 305 in costs. See Albro v. Leonelli-Spina, No. A-2534-08T1, 2010 WL 3075616 ( N.J.Super. App. Div. Aug. 3, 2010) (awarding punitive damages), cert. denied, 12 A.3d 210 (N.J. Jan. 7, 2011).1

Leonelli-Spina filed for bankruptcy on November 1, 2007. On September 15, 2008, the Bankruptcy Court entered an order confirming her Chapter 11 Plan of Reorganization, and recognizing that the bankruptcy claim was filed in good faith. Within this context, Albro commenced an adversary proceeding and filed a motion for summary judgment in the Bankruptcy Court, requesting the court to find that the New Jersey judgment was not dischargeable in bankruptcy. This was so, he claimed, because the debt was incurred as a result of Leonelli-Spina's commission of fraud or defalcation while acting in a fiduciary capacity. The Bankruptcy Court agreed, finding that the question of whether Leonelli-Spina's actions were fraudulent had been litigated in the state court action and could not be relitigated in the bankruptcy proceeding.


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