Guardian Alarm Servs. Inc. v. Rossman (In re Rossman)
| Decision Date | 24 July 2019 |
| Docket Number | Case No. 17-51160,Adv. Pro. No. 18-05010 |
| Court | U.S. Bankruptcy Court — District of Connecticut |
| Parties | In Re: Robert Rossman, Debtor Guardian Alarm Services Inc., Plaintiff v. Robert Rossman, Defendant |
Scott M. Charmoy
Charmoy & Charmoy
1700 Post Road, Suite C-9
Fairfield, CT 06824
James M. Nugent
Harlow, Adams, and Friedman
One New Haven Ave, Suite 100
Milford, CT 06460
In this adversary proceeding, Guardian Alarm Services, Inc. ("Guardian"), seeks to have a debt owed to it by Robert Rossman, (hereinafter the "Debtor" or "Rossman"), declared nondischargeable pursuant to 11 U.S.C. §§ 523(a)(2)(A), 523(a)(4) and 523(a)(6). Guardian moved for summary judgment on two counts of its complaint in reliance upon the allegedly preclusive effect of a jury verdict rendered in the Connecticut Superior Court. Rossman also filed a Motion for Summary Judgment with respect to the first count of the complaint. For the reasons discussed below, Guardian's motion is GRANTED and Rossman's motion is DENIED.
The United States District Court for the District of Connecticut has jurisdiction over the instant proceeding pursuant to 28 U.S.C. § 1334(b). The Bankruptcy Court derives its authority to hear and determine this matter pursuant to 28 U.S.C. §§ 157(a) and (b)(l) and the Order of Reference of the United States District Court for the District of Connecticut dated September 21, 1984. This is a "core proceeding" pursuant to 28 U.S.C. § 157(b)(2)(I).
On September 22, 2017, Rossman filed a voluntary Chapter 7 petition. On March 8, 2018, Guardian initiated this adversary proceeding by filing a three-count complaint (the "Complaint"). The Complaint seeks a determination that Rossman's debt to Guardian is nondischargeable, in whole or in part, under the provisions of 11 U.S.C. §§ 523(a)(2)(A), 523(a)(4) and or 523(a)(6).
On August 3, 2018, Guardian filed a Motion for Summary Judgment and supporting documents with respect to Counts One and Three of the Complaint, including a Local Civil Rule of the United States District for the District of Connecticut ("D. Conn. L. Civ. R.___") 56(a)(1) Statement. On August 31, 2018, Rossman filed an Objection to Guardian's Motion for Summary Judgment, but did not file a D. Conn. L. Civ. R. 56(a)(2) Statement. On August 31, 2018, Rossman also filed a Motion for Summary Judgment seeking summary judgment onCount One of the Complaint and a D. Conn. L. Civ. R. 56(a)(1) Statement. On September 14, 2018, Guardian filed a response to Rossman's Motion for Summary Judgment, including the required D. Conn. L. Civ. R. 56(a)(2) Statement.
On November 7, 2018, a hearing was held on Guardian's Motion for Summary Judgment and Rossman's Motion for Summary Judgment. Due to certain issues raised during the hearing, the parties were invited to file supplemental briefs to address the potential collateral estoppel effect of the verdict entered in the Connecticut Superior Court. On December 7, 2018, Guardian filed a response brief and on January 7, 2019, Rossman filed a reply brief. Because Rossman did not comply with D. Conn. L. Civ. R. 56(a)(2) in response to Guardian's Motion for Summary Judgment, the Court entered an order granting Rossman leave to submit a D. Conn. L. Civ. R. 56(a)(2) Statement by February 11, 2019. Instead of filing a D. Conn. L. Civ. R. 56(a)(2) statement, Rossman refiled his D. Conn L. Civ. R. 56(a)(1) Statement on February 11, 2019.
A review of Guardian's Motion for Summary Judgment and documents appended thereto, Rossman's Motion for Summary Judgment and documents appended thereto, the parties' 56(a) Statements, the supplemental briefs, and the examination of the record in this bankruptcy case and adversary proceeding, establishes the following undisputed facts for the purposes of the pending Motions for Summary Judgment:
1. On or about April 2007, Rossman filed a Superior Court case against Guardian and other defendants, captioned Rossman v. Morasco, FST-CV01-0183603. The case was later assigned to the complex litigation docket, docket number X05-0183603-S (hereinafter "Superior Court Action"). Guardian filed counterclaims in the Superior Court Action assertingloss of assets and tortuous [sic] interference, unjust enrichment, and violations of the Connecticut Unfair Trade Practices Act ("CUTPA").
2. The claims and counterclaims in the Superior Court Action arose out of the business relationships among Rossman, Jerome Terracino, and Guardian, and were tried to a jury in July of 2005.
3. Guardian's counterclaims included a number of allegations, including allegations that Rossman made misrepresentations to steal Guardian's customers and divert sales opportunities to his own company, stole computer codes from Guardian to convert Guardian's customer accounts, obtained and used confidential customer lists for his own company, and falsely advised Guardian's customers to breach service contracts and switch to his company.
4. On all counts except for the breach of fiduciary duty count against Jerome Terracino, the jury returned a verdict against Rossman (the "Superior Court Verdict").
5. On the third, fourth, and sixth counterclaims, the jury returned a verdict in favor Guardian and against Rossman and awarded the following compensatory damages: $25,000.00 for the count of loss of assets and tortuous [sic] interference; $25,000.00 for the count of unjust enrichment; and $75,000.00 for the CUTPA count.
6. In reaching the Superior Court Verdict, the jury completed jury interrogatories, a judicial form on which the jury records the basis for its conclusions and verdict in a given case (the "Jury Interrogatories"). The Jury Interrogatories and the Superior Court Verdict were both appended to Guardian's Motion for Summary Judgment and their authenticity, accuracy, and admissibility are not disputed by the parties.
7. On January 6, 2006, Guardian moved for an award of attorney's fees pursuant to CUTPA as well as punitive damages and a constructive trust.
8. On July 31, 2006, the Superior Court issued a "Memorandum of Decision Re: Post Verdict Issues" and a final judgment (collectively, the "Superior Court Judgment"). The Superior Court Judgment awarded $125,000 in compensatory damages entered in accordance with the verdict and awarded Guardian $42,539.18 in attorney's fees and $25,000 in punitive damages.
9. Rossman appealed the Superior Court Verdict and the Superior Court Judgment in three separate appeals, bearing the docket numbers AC-27290, AC 279070, and AC 28442. In each appeal, the Appellate Court affirmed the decision in favor of Guardian.
10. Rossman filed a Chapter 7 case with this court on September 22, 2017. Guardian commenced this Adversary Proceeding on March 8, 2018.
The Superior Court Verdict resulted in a judgment in favor of Guardian on its loss of assets and tortious interference claim, its unjust enrichment claim, and its CUTPA claim. Guardian was also awarded punitive damages and attorney's fees in connection with the CUTPA claim. Guardian asserts that under collateral estoppel principles, summary judgment should enter in its favor on Counts One and Three of the Complaint due to the Superior Court Verdict and the Superior Court Judgment. Rossman asserts that summary judgment in favor of Guardian is not appropriate and that summary judgment should be granted in his favor because: (i) no cause of action for fraud existed in the Superior Court Action and any such claim is time barred; and (ii) the Superior Court Judgment lacks specific findings on Rossman's subjective intent. The Court will address each of the parties' arguments and responses to those arguments as they relate to the legal standards and allegations.1
"Under the judicially-developed doctrine of collateral estoppel, once a court has decided an issue of fact or law necessary to its judgment, that decision is conclusive in a subsequent suit based on a different cause of action involving a party to the prior litigation." United States v. Mendoza, 464 U.S. 154, 158 (1984); see also Ball v. A.O. Smith Corp., 451 F.3d 66 (2d Cir 2006). "It is well settled that preclusion principles apply in bankruptcy proceedings." Evans v. Ottimo, 469 F.3d 278, 281 (2d Cir. 2006); In re Thompson, 511 B.R. 20, 24 (Bankr. D. Conn. 2014).
"When determining the preclusive effect of a state court judgment, a court must apply the preclusive law of the rendering state." Thompson, 511 B.R. at 26 (quoting Faraday v. Blanchette, 596 F. Supp. 2d 508, 514 (D. Conn. 2009)). Under Connecticut law, "collateral estoppel means simply that when an issue of ultimate fact has once been determined by a valid and final judgment, that issue cannot again be litigated between the same parties in any future lawsuit . . . Issue preclusion arises when an issue is actually litigated and determined by a valid and final judgment, and that determination is essential to the judgment." Cumberland Farms, Inc. v. Town of Groton, 262 Conn. 45, 57-58 (2002). To be subject to collateral estoppel, an issue must have been (1) "fully and fairly litigated," (2) "actually decided," (3) "necessary to the judgment" in the first action, and (4) "identical" to the issue to be decided in the second action. See Faraday, 596 F. Supp. 2d 508, 515 (citing State v. Joyner, 255 Conn. 477, 490 (2001); Lighthouse Landings, Inc. v. Conn. Light & Power Co., 300 Conn. 325, 343 (2011). "As the Supreme Court observed, relitigation will be barred where 'the issues presented by this litigation are in substance the same as those resolved' in the prior case." Guo Zhong Wu v.Qiao Lin (In re Qiao Lin), 576 B.R. 32, 59 (Bankr. E.D.N.Y 2017) (quoting Montana v United States, 440 U.S. 147,...
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