Cent. Laborers' Pension Fund v. VanHuss (In re VanHuss)
| Decision Date | 27 October 2021 |
| Docket Number | Adv. No. 21-07009,Case No. 20-71280 |
| Citation | 633 B.R. 830 |
| Parties | IN RE Christopher M. VANHUSS, Debtor. Central Laborers’ Pension Fund, Plaintiff, v. Christopher M. VanHuss, Defendant. |
| Court | U.S. Bankruptcy Court — Central District of Illinois |
John A. Wolters, Cavanagh & O'Hara, Springfield, IL, for Plaintiff.
James R. Enlow, Gates Wise Schlosser & Goebel, Gordon W. Gates, Springfield, IL, for Defendant.
Before the Court is the Debtor's Motion to Dismiss the Second Amended Adversary Complaint. For the reasons set forth herein, the motion will be granted. The Second Amended Adversary Complaint will be dismissed without leave to replead. This adversary proceeding will be dismissed with prejudice.
Christopher M. VanHuss ("Debtor") filed his voluntary petition under Chapter 7 on December 2, 2020. The Debtor disclosed that he had been a shareholder, officer, and director of Custom Curbs, Inc. ("Custom Curbs"), which ceased doing business in January 2020. He listed more than two dozen different union funds as potential creditors on his schedules, marking each one as contingent and disputed. The Debtor also listed six pending lawsuits filed against him by various union funds to collect moneys owed by Custom Curbs to the funds.
Central Laborers’ Pension Fund ("Central Laborers’ ") filed an adversary complaint against the Debtor alleging that $9449.67 owed by Custom Curbs to Laborers’ Local 477 and to the Southern and Central Illinois Laborers’ Vacation Fund should be determined to be an obligation of the Debtor and excepted from his discharge. Because its initial complaint was improperly captioned, Central Laborers’ was required to file an amended complaint before summons issued.
In its Amended Adversary Complaint ("First Amended Complaint"), Central Laborers’ acknowledged that it had no direct interest in the funds but rather was the collection agent for the entities to whom the amounts were actually owed. Central Laborers’ claimed that the amounts due related to deductions taken from the gross pay of four employees of Custom Curbs and that the conduct of the Debtor in not forwarding payments to the entities to whom the money was owed was willful and malicious.
The Debtor filed a motion to dismiss the First Amended Complaint asserting that Central Laborers’ did not have standing to bring the complaint and had not stated a plausible cause of action to pierce the veil of Custom Curbs and except the debt from his discharge. After the issues were fully briefed, the motion to dismiss was granted in an oral decision.1 This Court found for the Debtor on all issues: Central Laborers’ did not have standing to file the proceeding and had not stated a plausible cause of action. Specifically, this Court found that the documents that Central Laborers’ relied on to assert standing did not sufficiently assign the debt to Central Laborers’ so that it could sue in its own name. To the contrary, the documents contemplated that if legal action were necessary for collection, Central Laborers’ was authorized to file suit in the name of the real parties in interest—the entities to whom the funds were actually owed. Further, Central Laborers’ failed to allege any facts to support a plausible basis to pierce the veil of Custom Curbs; pleading only that the Debtor was a shareholder, officer, and director of Custom Curbs who managed the day-to-day operations of the business was insufficient as a matter of law. Finally, pleading only that the Debtor's conduct was willful and malicious, without alleging any facts to support such a conclusion, did not state a plausible cause of action to except the debt from the Debtor's discharge; Central Laborers’ made no more than a formulaic recitation of the elements of its intended cause of action. The Court granted Central Laborers’ leave to file a second amended complaint but cautioned that it was unlikely, based on what had been presented so far, that a further amended complaint could survive another motion to dismiss. Central Laborers’ was admonished that a second amended complaint should not be filed unless there was "a whole lot more to the story" than had been included in the prior complaint.
Notwithstanding the admonishment, the Second Amended Adversary Complaint ("Second Amended Complaint") was filed with Jeff Arkebauer, Nicholas Clark, Ryan Lawton, and Christopher Raney identified as the Plaintiffs instead of Central Laborers’.2 The Second Amended Complaint was filed by the same attorney who had previously represented Central Laborers’, but leave to substitute parties was not requested before the filing. Although the four individuals were named in the caption and introduction to the Second Amended Complaint, the pleading was signed by the attorney on behalf of Central Laborers’ without reference to the individuals.
In the Second Amended Complaint, the Plaintiffs allege that they worked for Custom Curbs as laborers and that deductions taken from their gross pay for union dues and vacation pay were never forwarded to the union or the vacation fund. They claim that Custom Curbs was a party to a collective bargaining agreement that required Custom Curbs to make deductions from their pay and forward the funds deducted to the union or the appropriate benefit fund. They admit, however, that they were not parties to the collective bargaining agreement and that they, in fact, do not have standing to enforce that agreement. Notwithstanding their admitted lack of standing, the Plaintiffs claim that not only Custom Curbs but also the Debtor, individually, violated the collective bargaining agreement and caused them damages for which they seek both compensation and a judgment of nondischargeability. They claim that the Debtor is personally liable because he was an officer, director, and shareholder of Custom Curbs and because he received payments from "his business bank accounts" during the same time period when the payments were not made by Custom Curbs to the union and the vacation fund. They assert that the debt is nondischargeable because, in their view, the nonpayment constituted willful and malicious conversion.
The Debtor filed a motion to dismiss the Second Amended Complaint alleging that the Plaintiffs lack standing and that they failed to state a plausible cause of action to pierce the corporate veil of Custom Curbs and except the debt from his discharge. Prior to responding to the motion to dismiss, the Plaintiffs filed a motion seeking leave to amend their complaint to correct the signature of the attorney to reflect that it was made on behalf of the new Plaintiffs rather than Central Laborers’. The Court declined to grant the motion, instead taking it under advisement with the motion to dismiss.3 The parties have now fully briefed the issues, and the motion to dismiss is ready for decision.
This Court has jurisdiction over the issues before it pursuant to 28 U.S.C. § 1334. All bankruptcy cases and proceedings filed in the Central District of Illinois have been referred to the bankruptcy judges. CDIL-Bankr. LR 4.1; see 28 U.S.C. § 157(a). The determination of the dischargeability of a particular debt is a core proceeding. 28 U.S.C. § 157(b)(2)(I). The issues here arise from the Debtor's bankruptcy itself and from the provisions of the Bankruptcy Code and may therefore be constitutionally decided by a bankruptcy judge. See Stern v. Marshall , 564 U.S. 462, 499, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011).
To survive a motion to dismiss, a complaint must allege enough factual allegations to plausibly suggest a claim for relief. Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A complaint must (1) provide a defendant with fair notice of the claim that is made against him and the grounds for the relief requested and (2) "plausibly suggest that the plaintiff has a right to relief, raising that possibility above a speculative level[.]" EEOC v. Concentra Health Servs., Inc. , 496 F.3d 773, 776 (7th Cir. 2007) (internal quotation marks omitted) (citing Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ); see also Fed. R. Civ. P. 8(a) ; Fed. R. Bankr. P. 7008. The fair notice requirement means, "[a] plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly , 550 U.S. at 555, 127 S.Ct. 1955. Twombly "demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citations omitted). While detailed specifics may not be required, there must be some facts alleged to support each element of the cause of action. Iqbal , 556 U.S. at 678-79, 129 S.Ct. 1937 ; see also Olson v. Champaign Cty. , 784 F.3d 1093, 1098-99 (7th Cir. 2015).
As for the plausibility requirement, "[a] claim has facial plausibility ‘when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.’ " Bissessur v. Indiana Univ. Bd. of Trustees , 581 F.3d 599, 602 (7th Cir. 2009) (quoting Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 ). When ruling on a motion to dismiss, a court must accept as true all well-pleaded factual allegations contained within a complaint. Iqbal , 556 U.S. at 678, 129 S.Ct. 1937. Those well-pleaded facts, however, must "permit the court to infer more than the mere possibility of misconduct[.]" Id. at 679, 129 S.Ct. 1937.
The Debtor says that the Plaintiffs have failed to plausibly state a cause of action to pierce Custom Curbs’ corporate veil and find that the Debtor converted funds of the Plaintiffs. Further, the Debtor asserts that the Plaintiffs have made no plausible claim that they have standing to bring this proceeding. In response, the Plaintiffs argue, correctly...
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