Chen v. Huang (In re Huang)

• Decision Date: 07 January 2014
• Docket Number: Bankruptcy No. 11–10416–HJB.,Adversary No. 12–01265–HJB.
• Citation: 509 B.R. 742
• Parties: In re WEN JING HUANG and Can Qi Liang, Debtors. Juan Juan Chen, Xing Hua Chen, Yan Xiong Chen, Shu Feng Gao, Chun Yan Guan, Carol Huang, Yat Man Law, Qiu Mei Li, Cai Mei Liu, Li Juan Liu, Mei Ying Mai, Zhu Lan Su, Connie Iok Wu, Nian Ci Xie, Shao Juan Zhong, and Mei Yan Zhou, Plaintiffs, v. Wen Jing Huang, Defendant.
• Court: U.S. Bankruptcy Court — District of Massachusetts

509 B.R. 742

In re WEN JING HUANG and Can Qi Liang, Debtors.

Juan Juan Chen, Xing Hua Chen, Yan Xiong Chen, Shu Feng Gao, Chun Yan Guan, Carol Huang, Yat Man Law, Qiu Mei Li, Cai Mei Liu, Li Juan Liu, Mei Ying Mai, Zhu Lan Su, Connie Iok Wu, Nian Ci Xie, Shao Juan Zhong, and Mei Yan Zhou, Plaintiffs,

v.Wen Jing Huang, Defendant.

Bankruptcy No. 11–10416–HJB.

Adversary No. 12–01265–HJB.

United States Bankruptcy Court,

D. Massachusetts,

Eastern Division.

Jan. 7, 2014.

Cynthia Mark, Greater Boston Legal Services, Boston, MA, Andrew M. Troop, Pillsbury Winthrop Shaw Pittman LLP, New York, NY, for Plaintiffs.

Richard N. Gottlieb, Alex R. Hess, Law Offices of Richard N. Gottlieb, Boston, MA, for Defendant.

MEMORANDUM OF DECISION

HENRY J. BOROFF, Bankruptcy Judge.

Before the Court is a “Motion for Partial Summary Judgment Confirming the Court's Ability to Enter Judgment Under the Massachusetts Wage Act or, in the Alternative, for Abstention on the Issue of Liability and Amount Due to Plaintiffs” (the “Summary Judgment Motion”) filed by the plaintiffs in this dischargeability action (the “Plaintiffs”) against the debtor, Wen Jing Huang (the “Debtor”).¹ The Plaintiffs have also filed a “Motion to Consolidate Adversary Proceeding and Objection to Proofs of Claim” (the “Consolidation Motion”). While the resolution of the Consolidation Motion is relatively straightforward, the disposition of the Summary Judgment Motion requires the Court to traverse rocky jurisprudential terrain. The question is whether the Court has the subject matter jurisdiction to determine the existence and scope of the Debtor's liability on the Plaintiffs' asserted state-law claims. Said otherwise, if the Court determines that the Debtor is liable to the Plaintiffs incident to this dischargeability action, can (or should) the Court enter a judgment in favor of the Plaintiffs that liquidates the underlying debt?

I. FACTS AND TRAVEL OF THE CASE

The Debtor filed a voluntary petition under Chapter 13 of the United States Bankruptcy Code (the “Bankruptcy Code” or the “Code”) ² on January 19, 2011. On the schedules filed with the petition, the Debtor disclosed her ownership of “Millennium Day Care Center” (“Millennium”) located in Boston, Massachusetts, noting that Millennium was also a debtor in a pending Chapter 11 case.³ The Debtor never achieved confirmation of a Chapter 13 plan and on May 12, 2011, the case was converted to one under Chapter 7 at the Debtor's request. On May 26, 2011, the Debtor filed a statement indicating that there were no postpetition creditors.

On May 27, however, Millennium filed an Amended Schedule E in its case (which had also been converted to one under Chapter 7) disclosing debts owed to various employees (the “Creditor Employees”) on account of asserted wage claims. Those Creditor Employees ultimately filed a motion in the Millennium case seeking allowance and payment of $52,573.40 in administrative wage claims (the “Administrative Claims Motion”), which they maintain accrued while Millennium operated in Chapter 11. The Chapter 7 trustee (the “Millennium Trustee”) opposed, primarily on the grounds that the Millennium estate had inadequate funds to pay the claims immediately and that Chapter 7 administrative expenses were likely to exhaust the projected available funds. The Millennium Trustee eventually reached a settlement with the Creditor Employees, agreeing that the administrative claims would be deemed allowed in the amounts claimed, but paid only if sufficient funds remained in the estate to make a distribution to the holders of Chapter 11 administrative expense claims. To date, no distribution in the Millennium case has been made.

The Creditor Employees, however, also maintain that the Debtor is individually liable for the unpaid wages under Massachusetts General Laws (“MGL”) ch. 149, §§ 148 and 150 (the “Massachusetts Wage Act”). In the Debtor's individual Chapter 7 case, 12 of the 16 Creditor Employees filed proofs of claim for those unpaid wages (the “Claimants”). And on October 5, 2012, the Creditor Employees (here, the Plaintiffs) filed the instant complaint (the “Complaint”; the “Adversary Proceeding”) against the Debtor, objecting to the dischargeability of their wage claims under § 523(a) on grounds that the Debtor fraudulently induced them to work for Millennium postpetition, and then failed to pay their wages despite having the financial means to do so. ⁴ The Debtor filed an answer (the “Answer”) to the Complaint, denying personal liability under the Massachusetts Wage Act for any unpaid wages. She further disputed the amounts of the alleged debts, maintaining that all or part of the wages had been paid.

On April 9, 2013, the Debtor filed an objection to the Creditor Employees' proofs of claim (the “Claims Objection”). In the Claims Objection, the Debtor again argued that she is not personally liable for any unpaid wages under the Massachusetts Wage Act and again disputed the scope of any unpaid wages, maintaining that all or part of each claim was satisfied by Millennium. The Claimants have responded in opposition to the Claims Objection, and the matter remains pending.

Presently before the Court are two motions filed by the Plaintiffs. In the Consolidation Motion, the Plaintiffs have asked that the pending Claims Objection be consolidated with the Adversary Proceeding. And in the Summary Judgment Motion, the Plaintiffs seek a determination as to the scope of this Court's subject matter jurisdiction with regard to the liquidation of their claims under the Massachusetts Wage Act. The Debtor objected to both motions, and the Court took the matters under advisement.

II. POSITIONS OF THE PARTIESA. Consolidation

The Plaintiffs first request consolidation of the Claims Objection and the Adversary Proceeding pursuant to Federal Rule of Civil Procedure (the “Federal Rules”) 42, made applicable to these proceedings by Federal Rule of Bankruptcy Procedure (the “Bankruptcy Rules”) 7042. Noting that the Claims Objection challenges proofs of claim filed by 12 of the 16 Plaintiffs, which proofs of claim represent the same debts alleged to be nondischargeable in this Adversary Proceeding, the Plaintiffs maintain that the factual and legal questions at issue in the two matters overlap—i.e., both require a determination of the Debtor's liability under the Massachusetts Wage Act and the extent to which any debt has been satisfied.

The Plaintiffs argue that the benefits of consolidation outweigh any potential costs, as consolidation will avoid re-litigation of the Debtor's liability and the amount of outstanding unpaid wages, and will allow discovery to proceed more efficiently by avoiding separate discovery processes and schedules. Furthermore, the Plaintiffs maintain that, because both the Claims Objection and the Adversary Proceeding are in their preliminary stages, there will be no delay occasioned by consolidation and no prejudice to the Debtor.

The Debtor, however, attempts to distinguish the issues raised in the Claims Objection from those raised in the Adversary Proceeding, maintaining that consolidation is not appropriate because the matters involve separate legal and factual issues. According to the Debtor, while the existence and amount of liability are at issue in the Claims Objection proceeding, the dischargeability questions in the Adversary Proceeding involve different factual and legal determinations regarding the Debtor'sconduct. In addition, the Debtor says, consolidating the proceedings would cause unnecessary expense and delay.

B. Jurisdiction

Through the Summary Judgment Motion, the Plaintiffs seek a determination that this Court has subject matter jurisdiction to determine not only the dischargeability of the Massachusetts Wage Act claims against the Debtor, but also to liquidate the amount of those claims and enter judgment accordingly. Recognizing the jurisprudential split on the question of whether a bankruptcy court has subject matter jurisdiction to liquidate a debt in the context of an adversary proceeding challenging the dischargeability of that debt, the Plaintiffs urge this Court to adopt the majority position and hold that it does, indeed, possess the requisite jurisdiction.

The Debtor opposes, arguing that this Court does not have subject matter jurisdiction to enter a money judgment in connection with a nondischargeability proceeding brought under 11 U.S.C. § 523(a). The Debtor urges the Court to reject the majority position and instead follow the reasoning of the Bankruptcy Appellate Panel for the First Circuit (the “BAP”) articulated in Cambio v. Mattera (In re Cambio), 353 B.R. 30 (1st Cir. BAP 2004), and conclude that the Court does not have jurisdiction to determine the Debtor's liability or to liquidate the Plaintiffs' claims under the Massachusetts Wage Act. Relying on Cambio, the Debtor contends that, in the context of a dischargeability proceeding, the bankruptcy court has jurisdiction only to decide the discrete issue of dischargeability, and not to determine the totality of the claims, counterclaims, and defenses that could be asserted under nonbankruptcy law.

In response, the Plaintiffs attempt to differentiate Cambio by noting that, in Cambio, the facts relevant to the dischargeability of the debt were not “inextricably intertwined” with the facts relevant to the legitimacy or amount of that debt. June 11, 2013 Hr'g Tr. 6:11–7:23, ECF No. 88. The Plaintiffs would further have the Court distinguish Cambio on grounds that in this case, unlike the case before the BAP, there may be assets recoverable for distribution, since the Complaint also alleges that the Debtor used assets of her individual bankruptcy estate and the Millennium estate without Court authorization. Therefore, according to the Plaintiffs, a determination of the amount of the underlying claims may have some impact on the bankruptcy estate and thus falls within the Court's subject matter jurisdiction.⁵

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