Corcoran v. McCabe (In re McCabe), Bankruptcy No. 13–19715–AMC

• Decision Date: 11 December 2015
• Docket Number: Adversary Proc. No. 14–00609,Bankruptcy No. 13–19715–AMC
• Parties: In re: Brian Richard McCabe, Debtor Conor Corcoran, Plaintiff v. Brian Richard McCabe, Defendant
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

543 B.R. 182

In re: Brian Richard McCabe, Debtor

Conor Corcoran, Plaintiff

v.Brian Richard McCabe, Defendant

Bankruptcy No. 13–19715–AMC

Adversary Proc. No. 14–00609

United States Bankruptcy Court, E.D. Pennsylvania.

Signed December 11, 2015

Joshua Z. Goldblum, Feasterville, PA, for Defendant.

J. Conor Corcoran, Law Office of J. Conor Corcoran, Philadelphia, PA, for Plaintiff.

OPINION

Ashley M. Chan, United States Bankruptcy Judge

I. INTRODUCTION

Conor Corcoran ("Corcoran") obtained a pre-petition judgment ("Judgment") against Brian McCabe ("Debtor") as a result of certain litigation filed by Corcoran against the Debtor in the Philadelphia Court of Common Pleas ("Pre–Petition Litigation"). After the Debtor filed a voluntary petition under Chapter 13 of the United States Bankruptcy Code ("Bankruptcy Code") and subsequently converted his case to Chapter 7, Corcoran initiated this adversary proceeding to have the Judgment deemed nondischargeable under § 523 and to deny the Debtor his discharge pursuant to § 727.

Corcoran has filed a motion for summary judgment ("Motion") invoking res judicata, equitable estoppel and judicial estoppel in connection with his claim that the Judgment was for a willful and malicious injury under § 523(a)(6) and therefore is nondischargeable. Corcoran also seeks summary judgment under his § 727 claims based upon the Debtor's inclusion of the Judgment in the Schedules and the Debtor's failure to file a confirmable plan.

As discussed below, res judicata does not apply to nondischargeability proceedings and neither equitable estoppel nor judicial estoppel apply because Corcoran has failed to identify any inconsistent positions taken by the Debtor. Finally, Corcoran's argument under § 727 fails because he has not demonstrated that the Debtor made any false oath or claim or withheld any recorded information. The Court accordingly will deny the Motion for Summary Judgment on all grounds.

II. FACTS AND PROCEDURAL HISTORY

In October 2005, Corcoran represented members of Ink & Dagger, a consortium of musicians including the Debtor's late brother, Sean McCabe, in a copyright infringement case. Debtor's Complaint ("Compl.") ¶¶ 8–9. The Debtor, as the executor of his brother's estate ("Estate"), served as the representative of the Estate. Id. ¶ 9. When the litigation settled in July 2006, the proceeds were deposited into Corcoran's IOLTA escrow account for distribution to the members of Ink & Dagger. Id. ¶¶ 10–11. Corcoran then began, on a pro bono basis, to complete "any and all registration and tax paperwork" ("Paperwork") necessary to distribute the Estate's portion of the proceeds. Id. ¶¶ 17, 20.

Corcoran alleges that he could not legally distribute the Estate's proceeds to the Debtor until he completed the Paperwork and that he advised the Debtor that it "would take as much as a year" because he was inexperienced in such work. Id. ¶¶ 16 and 18. The Debtor disputes these allegations. Answer of Debtor Brian Richard McCabe to Compl. of Conor Corcoran's Obj. to Discharge ("Answer") ¶¶ 16 and 18. It is undisputed that Corcoran completed the Paperwork and sent it to the Debtor for his signature in July 2007. Compl. ¶ 20, Answer ¶ 20. Corcoran alleges that, after the Debtor signed and returned the Paperwork, Corcoran submitted it to the appropriate authorities for approval. Comp. ¶ 21.

While the Paperwork was pending approval, the following post was published on the social networking website Myspace: "Bored? Call Connor [sic] Corcoran and ask him why Sean McCabe's share of the settlement went in his pocket. Neither Sean's family or his estate has received any money. It has been well over a year since suit was settled and the rest of the members received their share" ("Myspace Post").¹ Id. ¶ 22.

On November 29, 2007, the Paperwork submitted by Corcoran was approved and Corcoran immediately mailed a settlement check to the Debtor on account of the Estate's share of the settlement. Id. ¶ 26. On March 12, 2008, Corcoran filed the Pre–Petition Litigation against the Debtor for libel and false light invasion of privacy based upon the Myspace Post. Id. ¶¶ 27–32.

The Debtor's counsel failed to file a responsive pleading in the Pre–Petition Litigation and default judgment was entered against the Debtor on August 28, 2008. Answer ¶ 33. After a damages hearing during which "all parties were represented by counsel, all parties testified, and all parties were cross examined," the Philadelphia Court of Common Pleas ("CCP") entered an order ("Order") awarding Corcoran $50,000 in compensatory damages and $25,000 in punitive damages. Am. Br. p. 3; Compl. ¶¶ 34, 37. The CCP subsequently entered the Judgment against the Debtor. Id.

On March 19, 2009, the Debtor appealed the Order. Compl. ¶ 35. On June 3, 2009, the CCP issued an opinion in support of the damages Order ("Opinion") pursuant to Pennsylvania Rule of Appellate Procedure 1925(a). The Opinion attributed the Myspace Post to the Debtor and stated that: "It is clear from these undisputed facts that the [Debtor's] statements were defamatory. [Corcoran] had acted properly in every way as an attorney for his clients, as well as for the Estate. The [Debtor] had no right to publish this defamatory statement." Id. Ex. C at 4. The CCP then concluded that the damages that were awarded were "fair and reasonable based on the evidence and should not be disturbed." Id. Ex. C at 5.

The Debtor's appeal ultimately was quashed by the Pennsylvania Superior Court because the Debtor failed to timely file the necessary post-trial motions after the Order was entered. Id. Ex. A at 10; Answer ¶ 39.

On November 5, 2013, the Debtor filed this bankruptcy proceeding under Chapter 13. The Chapter 13 Trustee, William C. Miller ("Trustee"), subsequently filed objections to confirmation of the Debtor's Chapter 13 Plan ("Plan") based upon the Debtor's failure to amend the Plan as directed at the § 341 meeting and the Plan's ambiguity regarding the treatment of secured and priority claims. Obj. of Chapter 13 Trustee to Confirmation of Plan of Debtor(s) ("First Trustee Obj.") 1 (Mar. 19, 2014); Obj. of Chapter 13 Trustee to Confirmation of Plan of Debtor(s) ("Second Trustee Obj.") 1 (Mar. 28, 2014). When the Debtor failed to cure those Plan defects, the Trustee moved to dismiss the bankruptcy for unreasonable delay.² Chapter 13 Standing Trustee's Mot. for Dismissal ("Mot. for Dismissal") 1.

On August 1, 2014, the Debtor voluntarily converted his case to Chapter 7. Corcoran filed the Complaint objecting to the discharge of the Judgment on October 31, 2014 and the Debtor subsequently filed an answer. On April 15, 2015, Corcoran filed the Motion for Summary Judgment ("Motion") and the Debtor filed an objection to the Motion. After a hearing on the Motion and at the Court's request, both parties filed briefs in support of their arguments. In Corcoran's brief ("Amended Brief"), Corcoran clarified that he seeks summary judgment on the dischargeability of the Judgment under § 523(a)(6) and is only objecting to the Debtor's general discharge pursuant to § 727(a)(4). The Court will now address these arguments.³

III. SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a).⁴ In reviewing a motion for summary judgment, a court views the facts and draws reasonable inferences "in the light most favorable to the party opposing the motion." United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962). "[W]here, as here, ‘the party moving for summary judgment is the plaintiff, or the party who bears the burden of proof at trial, the standard is more stringent.’ " In re Bath, 442 B.R. 377, 387 (Bankr.E.D.Pa.2010) (quoting Adams v. Consol Rail Corp ., 1994 WL 383633, at *1–2 (E.D.Pa. July, 22 1994) ). Under the more stringent standard, "the movant must ... show that, on all the essential elements of its case on which it bears the burden of proof at trial, no reasonable jury could find for the non-moving party." Id. (quoting Adams, 1994 WL 383633, at *1–2 ). If the moving party carries its burden, "it is entitled to summary judgment unless the nonmoving party, in response, comes forward with significant, probative evidence demonstrating the existence of a triable issue of fact." Id. (quoting Adams, 1994 WL 383633, at *1–2 ).

IV. DISCUSSION

A. Res Judicata Does Not Apply to Nondischargeability Proceedings

Corcoran argues that res judicata (or claim preclusion) arising from the Pre–Petition Litigation applies to the nondischargeability proceeding currently before this Court. Am. Br. p. 5–6. However, although the Judgment from the Pre–Petition Litigation establishes the existence of the Debtor's indebtedness to Corcoran, it is clear that the Judgment does not have a res judicata effect on such debt's dischargeability because "Congress intended to leave discharge questions in the exclusive jurisdiction of the bankruptcy courts." In re Graham, 973 F.2d 1089, 1091, 1095–96 (3d Cir.1992) (citing Brown v. Felsen, 442 U.S. 127, 136–37, 99 S.Ct. 2205, 60 L.Ed.2d 767 (1979) ); In re Jacobs, 381 B.R. 128, n. 26 (Bankr.E.D.Pa.2008) ("[I]t is well established that res judicata does not apply in a dischargeability proceeding in bankruptcy."); In re Hawkins, 231 B.R. 222, 231 (D.N.J.1999) ("[P]ursuant to 11 U.S.C.A. § 523(c), United States Bankruptcy Courts have the "exclusive jurisdiction" to determine the dischargeability of a debt ... Thus, a pre-petition state court judgment does not have a res judicata effect on a subsequent dischargeability proceeding in bankruptcy court.").

Specifically, § 523(c) establishes that bankruptcy courts have exclusive jurisdiction to determine nondischargeability disputes under § 523(a)(6).⁵ See, e.g., Judd v. Wolfe, 78 F.3d 110, 114 (3d Cir.1996) ; In re Granoff, 2006 WL 1997408, *5 (Bankr.E.D.Pa.2006). Therefore, Corcoran's res...