Grant, Konvalinka & Harrison, P.C. v. Leroy (In re McKenzie)
| Decision Date | 30 September 2011 |
| Docket Number | No. 08-16378,No. 11-1110,08-16378,11-1110 |
| Parties | In re: STEVEN McKENZIE a/k/a Toby McKenzie Debtor; GRANT, KONVALINKA & HARRISON, P.C., Plaintiff, v. F. SCOTT LEROY d/b/a LEROY & BICKERSTAFF, F. SCOTT LEROY, LEROY & BICKERSTAFF,PLLC, LEROY, HURST & BICKERSTAFF, PLLC and C. KENNETH STILL Defendants. |
| Court | United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Eastern District of Tennessee |
Shelley D. Rucker
UNITED STATES BANKRUPTCY JUDGE
MEMORANDUMDefendants F. Scott Leroy d/b/a LeRoy & Bickerstaff, F. Scott LeRoy; LeRoy & Bickerstaff, PLLC; LeRoy, Hurst & Bickerstaff, PLLC; and C. Kenneth Still, trustee (collectively "Defendants") move this court to dismiss the complaint of Plaintiff Grant, Konvalinka &Harrison, P.C. ("GKH" or "Plaintiff") in this adversary proceeding. [Doc. Nos. 18, 21].1 Plaintiff opposes the motions of the Defendants. [Doc. No. 23].
The court has reviewed the briefing filed by the parties, the pleadings at issue, and the applicable law and makes the following findings of fact and conclusions of law pursuant to Fed. R. Bankr. P. 7052.
The court has summarized facts involving these same parties in several other memoranda filed in both the main bankruptcy case and in a separate adversary proceeding involving similar allegations. See e.g. [Adv. Proc. 11-1016, Doc. No. 68; Bankr. Case No. 0816378, Doc. Nos. 1199, 1354, 1388]. However, for ease of reference, the court will resummarize the background facts here.
The record reveals that the Plaintiff filed its complaint ("Complaint") on July 22, 2011. [Doc. No. 1]. The Complaint asserts that GKH is a law firm located in Chattanooga, Tennessee. Defendant F. Scott LeRoy is an attorney. He was formerly a general partner with the law firm of LeRoy & Bickerstaff. The Complaint asserts that Mr. LeRoy became a member of a professional limited liability company known as LeRoy & Bickerstaff, PLLC around July 28, 2010, and that the company is now called LeRoy, Hurst & Bickerstaff, PLLC. Defendant C. Kenneth Still is the trustee ("Trustee") in the debtor ("Debtor") Steve McKenzie's main bankruptcy case. See Complaint, ¶¶ 1-3.
On November 20, 2008 a group of petitioning creditors filed an involuntary petition in bankruptcy in this court against the Debtor. See [Bankruptcy Case No. 08-16378, Doc. No. 1]. On December 20, 2008 the Debtor filed a Chapter 11 voluntary petition for bankruptcy,Bankruptcy Case No. 08-16987. On January 16, 2009 this court consolidated the two bankruptcy cases. [Bankruptcy Case No. 08-16378, Doc. No. 33].
The court held a hearing on the U.S. Trustee's motion to appoint a trustee on February 19, 2009. [Bankr. Case No. 08-16378, Doc. Nos. 135, 101]. The U.S. Trustee filed a notice appointing Mr. Still Chapter 11 trustee for the Debtor on February 19, 2009, and the court issued an order granting the U.S. Trustee's motion to appoint a Chapter 11 Trustee on February 20, 2009. [Bankruptcy Case No. 08-16378, Doc. Nos. 130, 140]. The court converted the case to a Chapter 7 case on June 14, 2010, and Mr. Still continued as the Chapter 7 trustee. [Bankruptcy Case No. 08-16378, Doc. No. 789].2
On April 3, 2009 the court granted the Trustee's application to employ F. Scott LeRoy as his Chapter 11 counsel. [Bankruptcy Case No. 08-16378, Doc. No. 238]. He was reappointed as Chapter 7 counsel on March 8, 2011, nunc pro tunc to July 1, 2010. [Bankruptcy Case No. 08-16738, Doc. No. 1069].3
On August 5, 2010 the Trustee filed an adversary proceeding against GKH seeking turnover of documents alleged to be property of the estate pursuant to 11 U.S.C. § 542. See [Case No. 10-ap-1397, Doc. No. 1 ("Turnover Complaint")]. On November 5, 2010, this court dismissed that adversary proceeding based on an agreed order of dismissal submitted by theparties. [Adv. Proc. No. 10-ap-1397, Doc. No. 37]. The Turnover Complaint against GKH is at the heart of the claims of GKH against the Defendants outlined in the Complaint at issue here.
GKH's Complaint provides a detailed account of the litigation proceedings that occurred following the Trustee's filing of the Turnover Complaint. This court has already reviewed substantially similar allegations as made in the briefing and evidence filed in support of GKH's motion for leave to file an action in Hamilton County, Tennessee ("Motion for Leave") that was filed in the main bankruptcy case. See [Bankr. Case No. 08-16378, Doc. Nos. 1031, 1243, 1243-1 through 1243-22, 1306, 1354]. The Complaint asserts claims of malicious prosecution and abuse of process against the Defendants.
Attached to the Complaint are numerous exhibits that all relate to the parties' disputes arising in the Turnover Complaint. The exhibits include email messages between Richard Banks, an attorney for the Debtor, Scott LeRoy, and John Konvalinka pertaining to the retrieval of files pertaining to the Debtor or companies in which the Debtor had an interest maintained at GKH's offices. The email exchanges discuss whether those files were property of the Debtor or the estate or GKH. [Doc. Nos. 1-1, 1-2]. Exhibit 3 is a copy of the Turnover Complaint. [Doc. No. 1-3]. Exhibit 4 is the transcript of a hearing held in this court before Judge Cook relating to the dismissal of adversary proceeding 10-1407 on December 16, 2010. [Doc. No. 1-4]. Exhibit 5 is the transcript of Mr. Konvalinka's testimony in a hearing before this court on May 25, 2010. [Doc. No. 1-5]. At that time Mr. Konvalinka testified that he would allow the Trustee and Mr. LeRoy to take the records pertaining to the estate and retained by GKH to a copier service to be duplicated. Id. at pp. 10-11. The exhibits also provide GKH's answer to the Turnover Complaint and a letter from Mr. Konvalinka to Mr. LeRoy offering to allow him, Mr. Banks, and Mr. Still to inspect the requested files and to have them copied by a copy service. [Doc. Nos. 1-6, 1-7]. Exhibit 9 is a letter from Mr. Konvalinka to Mr. LeRoy informing him that GKH's position regarding the merits of the Turnover Complaint had not changed. [Doc. No. 1-9]. GKH alsosupplied a copy of a videotaped deposition transcript of the Trustee, as well as the motion for entry of an agreed protective order and the agreed protective order pertaining to the Turnover Complaint. [Doc. Nos. 1-8, 1-14, 1-16]. Exhibit 15 is a motion for entry of an agreed order of dismissal of the Turnover Complaint. [Doc. No. 1-15].
GKH also provided the court with the transcript from the pre-trial conference held in this court on October 28, 2010. [Doc. No. 1-10]. Exhibit 11 is an exchange of emails regarding the resolution of the Turnover Complaint sent after the final pre-trial conference. [Doc. No. 1-11]. Exhibits 12 and 13 are an exchange of email messages pertaining to the agreed protective order filed in the turnover case. [Doc. No. 1-12, 1-13]. Exhibit 17 is the agreed order of dismissal that resolved the Turnover Complaint "without prejudice." [Doc. No. 1-17].
GKH's Exhibit 18, consists of a copy of a transcript of a hearing held in this court on February 15, 2011. [Doc. No. 1-18]. During the hearing the Trustee testified regarding the results obtained by proceeding with the turnover action. The following exchange occurred between Mr. Konvalinka, who was cross-examining the Trustee, and the Trustee:
+-----------------------------------------------------------------------------+
¦Mr. ¦You filed a turnover lawsuit and you, you don't have the records ¦
¦Konvalinka:¦today, even though you filed that lawsuit and even though you've ¦
¦ ¦non-suited it, isn't that right? ¦
+-----------+-----------------------------------------------------------------¦
¦Mr. Still: ¦I think that may be right. ¦
+-----------+-----------------------------------------------------------------¦
¦Mr. ¦All right. Did Mr. LeRoy ever tell you that he was offered to ¦
¦Konvalinka:¦come and look at the records at my office that I had prior to the¦
¦ ¦lawsuit ever being filed? ¦
+-----------+-----------------------------------------------------------------¦
¦ ¦I don't recall whether it was before or after the lawsuit being ¦
¦Mr. Still: ¦filed, but I recall he did tell me that you said we could come do¦
¦ ¦that. ¦
+-----------+-----------------------------------------------------------------¦
¦Mr. ¦Do you realize that he did not come to my office at any time ¦
¦Konvalinka:¦prior to the filing of the lawsuit to look at any records? ¦
+-----------+-----------------------------------------------------------------¦
¦Mr. Still: ¦That's correct. Because they were our records and we wanted them.¦
+-----------+-----------------------------------------------------------------¦
¦Mr. ¦And you didn't get them, right? ¦
¦Konvalinka:¦ ¦
+-----------+-----------------------------------------------------------------¦
¦Mr. Still: ¦No. You never would let us have them. ¦
+-----------------------------------------------------------------------------+
[Doc. No. 1-18, Ex. No. 18, p. 19]. The final exhibit, Exhibit 19, is an email message from Mr. Banks to Mr. Konvalinka dated April 28, 2010 that pertains to a confidential settlement proposalof the Debtor's claims against GKH. [Doc. No. 1-19].
The court has had a prior opportunity to examine these exhibits in detail as most of the exhibits filed with the Complaint were provided to the court prior to a hearing on May 18, 2011 relating to GKH's Motion for Leave. See [Bankr. Case No. 08-16378, Doc. Nos. 1243-1 through 1243-22]. Many of the issues discussed in the court's memorandum issued in conjunction with its denial of the Motion for Leave are relevant to this memorandum....
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