Carmelo v. Mickletz (In re Mickletz)

• Decision Date: 28 January 2016
• Docket Number: Adv. No. 15-87,Bky. No. 14–19375 ELF
• Citation: 544 B.R. 804
• Parties: In re: Anthony Mickletz, a/k/a Ed Mickletz, and Susan Mickletz, Debtors. John P. Carmelo, Plaintiff, v. Anthony Mickletz, a/k/a Ed Mickletz, Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

544 B.R. 804

In re: Anthony Mickletz, a/k/a Ed Mickletz, and Susan Mickletz, Debtors.John P. Carmelo, Plaintiff,

v.Anthony Mickletz, a/k/a Ed Mickletz, Defendant.

Bky. No. 14–19375 ELF

Adv. No. 15-87

United States Bankruptcy Court, E.D. Pennsylvania.

Signed January 28, 2016

Bruce L. Baldwin, Wolf, Baldwin & Associates, P.C., Pottstown, PA, for Plaintiff.

Joseph L. Quinn, The Law Office of Stephen Ross PC, Pottstown, PA, for Defendant.

OPINION

ERIC L. FRANK, CHIEF U.S. BANKRUPTCY JUDGE

I. INTRODUCTION

This adversary proceeding arises from an altercation between John Carmelo ("Carmelo"), and Anthony Mickletz ("the Debtor") in March 2006. At the time of the altercation, Carmelo was an employee of Famous Fat Freddie's Pizza, LLC ("the Restaurant"), a pizza restaurant owned and operated by the Debtor. Carmelo claims that the Debtor pushed him, causing him to fall and suffer injuries that have left him unable to work. The Restaurant did not have worker's compensation insurance coverage on the day of the altercation. The Debtor denies that he pushed Carmelo.

Three (3) separate legal proceedings resulted from the incident in 2006:

(1) a worker's compensation proceeding brought by Carmelo, that resulted in both:

(a) an administrative award of compensatory benefits and monetary penalties; and

(b) a judicial money judgment against the Restaurant (reassessed on June 7, 2011 in the amount of $279,723.98);

(2) a criminal proceeding against the Debtor in state court for operating a business without maintaining worker's compensation insurance, which resulted in the entry of a criminal restitution order against the Debtor in the amount of $45,200.88; and

(3) a civil action in state court, in which Carmelo sought to pierce the Restaurant's corporate veil and hold the Debtor personally liable for the Restaurant's worker's compensation liability, resulting in a settlement in which the Debtor accepted personal liability for that debt.

The Debtor has conceded that the debt attributable to the criminal restitution order is nondischargeable.

At issue is whether the debts arising from the worker's compensation proceeding are nondischargeable.

The parties have filed cross motions for summary judgment. The outcome of those motions turns largely on three (3) issues:

(1) whether issue preclusion applies to the factual findings made by the administrative law judge in the contested worker's compensation proceedings and precludes the Debtor from relitigating whether he injured Carmelo by pushing him to ground;

(2) if so, whether those findings support the entry of summary judgment in Carmelo's favor under 11 U.S.C. § 523(a)(6), which renders nondischargeable a debt that is for a willful and malicious injury; and

(3) even if issue preclusion applies and the prior factual findings support Carmelo's § 523(a)(6) claim, whether the Debtor's personal liability on the worker's compensation debt is nonetheless dischargeable because the debt is merely contractual in nature and not one for willful and malicious injury.

For the reasons set forth below, I conclude that;

1. the administrative law judge's material findings of fact in the worker's compensation proceeding are entitled to preclusive effect;

2. those findings support the entry of summary judgment under § 523(a)(6) with respect to most, but not all, of the worker's compensation debt;

3. the Debtor's assumption of the Restaurant's liability in settlement of the state court civil action does not alter the debt's nondischargeable status insofar as the compensatory component of worker's compensation award is concerned; and

4. the penalty component of the worker's compensation award is dischargeable under § 523(a)(6).

Therefore, each party's motion for summary judgment will be granted in part and denied in part.¹

II. FACTS

A. The March 12, 2006 Incident

1.

In March 2006, the Debtor owned and operated the Restaurant. Carmelo began working for the Restaurant in either 2003 or 2004 (FOF # 7a),² and was employed there in March 2006. He held various positions within the company, including delivery driver, manager, and general worker. (Id. # 7a).

On March 12, 2006, Carmelo was working as a delivery driver. (FOF # 7c). Carmelo finished his shift and went home for the day but the Debtor called him and asked him to return to the Restaurant. (FOF # 7c). The Debtor questioned Carmelo regarding delivery slips that had allegedly been found in the trash. He asked Carmelo whether he had stolen money from the deliveries. An argument ensued. Carmelo denied the accusations³ and tried to leave the Restaurant because the Debtor "was becoming irate." (FOF # 7c; Ex. 1–B, Carmelo Testimony at 29).⁴ At that point, the Debtor was "confrontational" and "enraged," and threatened to call local authorities regarding the alleged theft. (Ex. 1–C, Carmelo Dep. at 13). The Debtor blocked Carmelo from leaving the Restaurant and pushed him dead center of his chest with both hands. (Ex. 1–B, Carmelo Testimony at 29). Carmelo fell backwards hitting his back and head "pretty hard." (FOF # 7c; Ex. 1–B, Carmelo Testimony at 29–30).

Carmelo sought medical attention at Pottstown Hospital and later with his family physician. (FOF # 7d). Carmelo presented the testimony of his treating physician, Dr. Jeffery T. Lumley, D.O. ("Dr.Lumley") as to the extent of his injuries. Dr. Lumley treated Carmelo for approximately three (3) months. Upon his initial examination, Dr. Lumley concluded that Carmelo had strained his right hand, wrist, and lower back as a result of the fall, and had chronic cervical disc degeneration

with a possible acute exacerbation. (Id. # 12b). Dr. Lumley again saw Carmelo on April 3, 2006. Carmelo complained of shooting pain in his neck and lower back and needed a cane to walk. (Id. # 12c). Two weeks later, Carmelo complained of worsening of his left-sided numbness and weakness. (Id. # 12e).

The Debtor admitted that his conversation with Carmelo was heated and that he was yelling at Carmelo. (Id. # 8c). However, the Debtor testified that he did not push Carmelo and Carmelo did not fall. (Id. # 9b). According to the Debtor, he terminated Carmelo's employment, walked him out to his car and retrieved some pizza delivery bags. (Ex. 1–D, Mickletz Testimony at 46). Two (2) witnesses, both Restaurant employees, testified at the worker's compensation hearing. One (1) witness corroborated the Debtor's version of the events and the other witness initially did so as well, but later recanted his testimony and gave subsequent testimony that supported Carmelo's version of the events.⁵

2.

At the conclusion of the worker's compensation hearing, which was held on four (4) separate days between June 22, 2006 and January 11, 2007, (see Ex. 1–A), the administrative law judge ("the ALJ") resolved the conflicting testimony in favor of Carmelo.

The ALJ awarded Carmelo total disability benefits; reasonable, necessary and related medical expenses resulting from the injury; reasonable litigation costs; counsel fees; and statutory interest. The ALJ further ordered the Restaurant to pay a penalty of 50% of the indemnity plus interest⁶ (the compensatory award and penalty collectively, "the Comp. Award").

On August 24, 2007, the Comp. Award was entered as a judgment in the amount of $85,484.44 in the C.P. Court at No. 2006–16219 ("the Judgment"). Subsequently, the Judgment was reassessed upward, most recently on June 7, 2011 to the amount of $279,723.98.

B. The Restitution Order

77 P.S. 501(b) provides that an employer who fails to comply with his obligation to provide worker's compensation insurance coverage:

shall, upon conviction in the court of common pleas, be guilty of a misdemeanor of the third degree. If the failure to comply with this section is found by the court to be intentional, the employer shall be guilty of a felony of the third degree. Every day's violation shall constitute a separate offense. A judge of the court of common pleas may, in addition to imposing fines and imprisonment, include restitution in his order: Provided, That there is an injured employe who has obtained an award of compensation. The amount of restitution shall be limited to that specified in the award of compensation.

On March 13, 2007, the Debtor was charged criminally in the C.P. Court for operating a business without the required worker's compensation insurance coverage.⁷ The Debtor pled guilty on August 27, 2007 and on November 16, 2007, the C.P. Court issued a criminal restitution order requiring the Debtor to pay Carmelo $45,200.88, to be paid in monthly instalments ("the Criminal Restitution Debt").⁸

C. The Civil Action and the Forbearance Agreement

In March 2008, Carmelo filed a civil lawsuit in the C.P. Court, at No. 08–06290 ("the Civil Action"), seeking to pierce the veil of the Debtor and his wife's companies, and to hold the Debtor and his wife (Susan Mickletz) individually liable for the Comp. Award and related Judgment.

On May 19, 2010, Carmelo, the Debtor, Mrs. Mickletz and the Restaurant settled the Civil Action by entering into a forbearance agreement ("the Forbearance Agreement"). (Ex. 2A).⁹

The Forbearance Agreement provided, inter alia that:

• the Debtor, Mrs. Mickletz and the Restaurant acknowledged their liability for the Judgment;

• the amount due on the Judgment was $229,390.00;

• Carmelo would limit his recovery on the Judgment to $175,000.00;

• the Debtors would execute a judgment note ("the Judgment Note") in favor of Carmelo in the amount of $175,000.00

• Carmelo would forbear from collecting on the Judgment or exercising his rights under the Judgment Note, provided the Debtors made an initial payment of $3,000.00 followed by monthly payments of $350.00.

III. PROCEDURAL HISTORY

On November 26, 2014, the Debtors filed a voluntary joint chapter 7 bankruptcy case. The Debtors were granted a chapter 7 discharge on April 2, 2015.

On March 10, 2015, Carmelo filed this adversary proceeding seeking a determination that his claim against the Debtor, Anthony Mickletz, is nondischargeable...