Gordon v. Rogich (In re Alpha Protective Servs., Inc.)

• Decision Date: 24 April 2017
• Docket Number: Case Number: 12–70482–JTL,Adversary Proceeding Number: 14–07033
• Citation: 570 B.R. 888
• Parties: IN RE: ALPHA PROTECTIVE SERVICES, INC., Debtor, Neil C. Gordon, Trustee, Plaintiff, v. Sigmund Rogich, Defendant.
• Court: U.S. Bankruptcy Court — Middle District of Georgia

570 B.R. 888

IN RE: ALPHA PROTECTIVE SERVICES, INC., Debtor,Neil C. Gordon, Trustee, Plaintiff,

v.Sigmund Rogich, Defendant.

Case Number: 12–70482–JTL

Adversary Proceeding Number: 14–07033

United States Bankruptcy Court, M.D. Georgia, Valdosta Division.

Signed April 24, 2017

Fife M. Whiteside, Fife M. Whiteside, PC, Columbus, GA, for Plaintiff.

John S. Choate, Jr., Choate & Company, P.C., St. Simons Island, GA, for Defendant.

MEMORANDUM OPINION

John T. Laney, III, United States Bankruptcy Judge

This Adversary Proceeding is before the Court on a Motion for Full or Partial Summary Judgment ("Motion") filed by the Plaintiff, the Trustee. The Court has carefully considered the pleadings and briefs, the parties' oral arguments, and the applicable statutes and case law. For the reasons set forth below, the Court will GRANT partial summary judgment for the Plaintiff.

Procedural History

This Adversary Proceeding arises out of the underlying bankruptcy case of Alpha Protective Services, Inc. (the "Debtor). On April 12, 2012, the Debtor filed for Chapter 11 bankruptcy relief (the "Petition Date"). (Petition, Lead Case ECF No. 1). On December 20, 2012, the Court converted the Debtor's Chapter 11 case to a Chapter 7 case. (Order on Conversion, Lead Case ECF No. 156). On April 1, 2014, the Trustee filed the above-captioned adversary proceeding against the Defendant, Sigmund Rogich ("Rogich"). (Compl., Adversary Proceeding ECF No. 1).¹ The Trustee filed the instant Motion on October 10, 2016. (Pl.'s Mo. for Full or Partial Summ. J., A.P. ECF No. 87). In his Motion, the Trustee seeks full or partial summary judgment on Count III of his complaint against Rogich.² In Count III, the Trustee seeks to avoid and recover a single payment of $100,000 made to Rogich pursuant to 11 U.S.C. § 544. On December 15, 2016, Rogich filed a Response with Opposition to the Trustee's Motion ("Response"). (Def.'s Resp. with Opp'n, A.P. ECF No. 96). On January 12, 2017, the Trustee filed a Reply Brief. (Pl.'s Reply Br., A.P. ECF No. 100). On January 13, 2017, the Court held oral argument on the Trustee's Motion and Rogich's Response.

Summary Judgment Standard

Pursuant to Federal Rule of Civil Procedure ("Rule") 56,³ the Court must "grant summary judgment if 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." The Court must view the evidence in the record "in the light most favorable to the non-moving party." Jordan v. Clifton , 74 F.3d 1087, 1090 (11th Cir. 1996). See also Info. Sys. & Network Corp. v. City of Atlanta , 281 F.3d 1220, 1224 (11th Cir. 2002) (noting that the court must "resolve all reasonable doubts about the facts in [the non-moving party's] favor"). Additionally, the Court must draw "all justifiable inferences" in the non-moving party's favor. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Under Rule 56(c), the party seeking summary judgment bears the burden of showing the bankruptcy court the basis for its motion and "identifying those portions of ‘the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,’ which it believes demonstrate the absence of a genuine issue of material fact" and warrant a judgment as a matter of law. Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

An issue of fact is material if it affects the outcome of the case as identified by substantive law. Anderson , 477 U.S. at 248, 106 S.Ct. 2505 ; Redwing Carriers, Inc. v. Saraland Apartments , 94 F.3d 1489, 1496 (11th Cir. 1996). Therefore, the court will focus its analysis solely on factual contentions that are relevant and necessary to the outcome of the case. Id. A genuine dispute exists if a reasonable fact finder could find in favor of the non-moving party based on the evidence. Anderson , 477 U.S. at 248, 106 S.Ct. 2505. A genuine dispute means that "more than ‘some metaphysical doubt [exists] as to the material facts.’ " Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ). If the nonmoving party "bear[s] the burden of proof at trial on a dispositive issue," the nonmoving party must "go beyond the pleadings and by [its] own affidavits, or by the ‘depositions, answers to interrogatories, and admissions on file,’ designate ‘specific facts showing that there is a genuine issue for trial.’ " Id. at 324, 106 S.Ct. 2548 (quoting Fed. R. Civ. P. 56(e) ).

Factual Background

Rogich is the president of Rogich Communications Group ("RCG"), which specializes in crisis management, public relations, and business facilitation. He has 25 years of experience in the crisis-management-communication business. Prior to starting RCG, he served in many roles in American politics, namely director of advertising for former President George H. W. Bush during the 1992 presidential election, manager of former President Ronald Reagan's advertising campaigns during the 1980 and 1984 presidential elections, and assistant to former President George H. W. Bush. In 1992, he was appointed as the United States Ambassador to Iceland, his native country. Rogich first learned of the Debtor and its business when one of his former White House employees contacted him for the purpose of acquiring financing and securing new business for the Debtor. It was around this time that Rogich also met Paul Hackenberry ("Hackenberry") in connection with the Debtor's business. After meeting what Rogich characterized as a "first class team of security professionals," he decided to work with the Debtor's CEO and at the time 51% owner, Jeffrey Brinson, to assist Brinson in obtaining financing to buy out his minority partner, James Harrison. (Rogich Aff. ¶¶ 1–7, A.P. ECF No. 98). His involvement in the operations of the Debtor consisted of assisting the Debtor in obtaining financing and securing new business. (Id. ¶ 9). This involvement eventually lead to him being named to the Debtor's board of directors. (Id.).

Beginning in February 2011, the Debtor used two Bank of America accounts; one account was its general operating account and the other was its payroll account. (Schedules & Statement of Financial Affairs, Lead Case ECF No. 48). At some point prior to the Debtor's filing of its petition, Bank of America froze the Debtor's general operating account due to a garnishment from Omniplex World Services Corporation ("Omniplex"). (Rule 2004 Examination Tr. Vol. I. 51:10–21, Lead Case Docket 654–1). The basis for the garnishment was a judgment for $1,863,221.32 entered by the United States District Court of the Middle District of Georgia on March 23, 2011. (Edwards Aff. Ex. E, A.P ECF No. 89–5). By the end of 2010, the Debtor owed the Internal Revenue Service ("IRS") $168,984.80 in Federal Insurance Contributions Act ("FICA") and withholding taxes. (Edwards Aff. Ex. C, IRS Proof of Claim, A.P. ECF No. 89–3). By March 31, 2011, the Debtor owed the IRS an additional $419,035.81 in such taxes. (Id.).

On January 25, 2011, Hackenberry advanced $110,000 to the Debtor to help the Debtor payroll for February 2011. On February 11, 2011, the Debtor repaid Hackenberry the full amount of the cash advance. (Hackenberry Dep. 63:9–13, A.P. ECF No. 79–1). On January 27, 2011, Rogich advanced $100,000 to the Debtor to help the Debtor payroll for March 2011. On March 11, 2011, the Debtor repaid Rogich the full amount of the cash advance. (Rogich Aff. ¶ 12, A.P. ECF No. 98; Rogich Dep. 44:5–6, 152:8–15, A.P. ECF No. 73).

Discussion and Conclusions of Law

I. Section 544 and App licability of the Federal Debt Collections Procedures Act

Pursuant to § 544(b)(1), "the trustee may avoid any transfer of an interest of the debtor in property or any obligation incurred by the debtor that is voidable under applicable law by a creditor holding an unsecured claim that is allowable under [§] 502."

11 U.S.C. § 544(b)(1) (2017). The burden is on the trustee to prove the existence of an actual creditor who holds an unsecured claim against the debtor. 5 Collier on Bankruptcy ¶ 544.06 (Alan N. Resnick & Henry J. Sommer eds., 16th ed.) ( In re 9281 Shore Rd. Owners Corp. , 187 B.R. 837, 852 (E.D.N.Y. 1995) ; Bakst v. Probst (In re Amelung) , 436 B.R. 806, 809 (Bankr. D.S.C. 2010) (citing Collier); In re Int'l Loan Network, Inc. , 160 B.R. 1, 18 n.30 (Bankr. D. Colo. 1993) (citing Collier)). The trustee must also identify such creditor who would have had standing to sue the debtor to avoid the transfer on the date the debtor filed its bankruptcy petition. 5 Collier on Bankruptcy ¶ 544.06 [1] (citing In re Petters Co. , 495 B.R. 887, 896–901 (Bankr. D. Minn. 2013) ). The phrase "applicable law" in § 544(b)(1) allows the trustee to utilize federal and state non-bankruptcy laws providing rights to pursue fraudulent or preferential-transfer actions. Id.

The Trustee in the instant case has identified the IRS as a creditor with an unsecured claim against the Debtor. (See Compl. ¶¶ 24–25, A.P. E.C.F. No. 1; IRS Proof of Claim). The applicable non-bankruptcy law under which the Trustee is basing his claim is 28 U.S.C. § 3304(a)(2), which is a subsection of the Fair Debt Collections Procedures Act ("FDCPA"). He argues that the IRS would have had standing to bring an insider-preference claim against Rogich for the $100,000 transfer pursuant to 28 U.S.C. § 3304(a)(2), which states that

(a) ... a transfer made ... by a debtor is fraudulent as to a debt to the United States which arises before the transfer is made ... if ...

(2)(A) the transfer was made to an insider for an antecedent debt, the debtor was insolvent at the time; and

(B) the insider had reasonable cause to believe that the debtor was insolvent.

28 U.S.C. § 3304(a)(2) (2017).

In Gordon v. Harrison (In re Alpha Protective Services, Inc.) , this Court determined that the FDCPA was applicable law under which the Trustee may avoid...