Handler v. Moore (In re Moore)
| Citation | 620 B.R. 617 |
| Decision Date | 02 September 2020 |
| Docket Number | Case No. 19bk31162,Adv. No. 20ap00074 |
| Parties | IN RE: Emily MOORE, Debtor. Joel F. Handler, Plaintiff, v. Emily Moore, Defendant. |
| Court | United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Illinois |
Plaintiff, pro se: Joel F. Handler, Chicago, IL
Attorney for Debtor/Defendant: Justin R. Storer, Lakelaw, Chicago, IL
Timothy A. Barnes, United States Bankruptcy Judge The matter before the court arises out of a Motion to Dismiss [Adv. Dkt. No. 6] (the "Motion") brought by defendant/debtor Emily Moore (the "Debtor"), in which the Debtor seeks dismissal of the single-count Complaint for Declaratory Judgment Objecting to the Discharge of a Particular Debt Pursuant to 11 U.S.C. § 523(a)(2)(A) [Adv. Dkt. No. 1] (the "Complaint") brought by plaintiff Joel F. Handler (the "Plaintiff").
The Complaint alleges that the Debtor, inter alia , incurred legal services from the Plaintiff, an Illinois attorney, without making the commensurate payment for the same, falsely represented to the Plaintiff the Debtor's ability and intent to pay for such services and, ultimately, incurred the obligation under false pretenses as the Debtor never intended to pay for them.
When, as is required, the court draws all reasonable inferences in the favor of the Plaintiff, the Complaint states a claim for relief, but only just. But for the Plaintiff's speculation as to the Debtor's intent, the Plaintiff pleads a case that is merely breach of contract, not false pretenses, false representation, or actual fraud. While inferring intent where the facts otherwise are silent is not reasonable, the rules of pleading permit it. As a result, the Complaint states a claim upon which relief may be granted and the Motion must be denied.
Given the sophistication of the Plaintiff and the Plaintiff's extensive experience bringing matters such as this to this court, the court cautions the Plaintiff that more will be expected of the Plaintiff at the later stages of this adversary proceeding, so as to demonstrate that the Complaint was not brought with knowledge of deficiencies, solely on the chance of winning by default or procuring a nuisance settlement.
The federal district courts have "original and exclusive jurisdiction" of all cases under title 11 of the United States Code, 11 U.S.C. §§ 101, et seq. (the "Bankruptcy Code"). 28 U.S.C. § 1334(a). The federal district courts also have "original but not exclusive jurisdiction" of all civil proceedings arising under the Bankruptcy Code or arising in or related to cases under the Bankruptcy Code. 28 U.S.C. § 1334(b). District courts may refer these cases to the bankruptcy judges for their districts. 28 U.S.C. § 157(a). In accordance with section 157(a), the District Court for the Northern District of Illinois has referred all of its bankruptcy cases to the Bankruptcy Court for the Northern District of Illinois. N.D. Ill. Internal Operating Procedure 15(a).
A bankruptcy judge to whom a case has been referred has statutory authority to enter final judgment on any proceeding arising under the Bankruptcy Code or arising in a case under the Bankruptcy Code. 28 U.S.C. § 157(b)(1). Bankruptcy judges must therefore determine, on motion or sua sponte , whether a proceeding is a core proceeding or is otherwise related to a case under the Bankruptcy Code. 28 U.S.C. § 157(b)(3). As to the former, the bankruptcy court may hear and determine such matters. 28 U.S.C. § 157(b)(1). As to the latter, the bankruptcy court may hear the matters, but may not decide them without the consent of the parties. 28 U.S.C. §§ 157(b)(1), (c). Absent consent, the bankruptcy court must "submit proposed findings of fact and conclusions of law to the district court, and any final order or judgment shall be entered by the district judge after considering the bankruptcy judge's proposed findings and conclusions and after reviewing de novo those matters to which any party has timely and specifically objected." 28 U.S.C. § 157(c)(1).
In addition to the foregoing considerations, a bankruptcy judge must also have constitutional authority to hear and determine a matter. Stern v. Marshall , 564 U.S. 462, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011). Constitutional authority exists when a matter originates under the Bankruptcy Code or, in noncore matters, where the matter is either one that falls within the public rights exception, id. , or where the parties have consented, either expressly or impliedly, to the bankruptcy court hearing and determining the matter. See, e.g. , Wellness Int'l Network, Ltd. v. Sharif , 575 U.S. 665, 135 S. Ct. 1932, 1939, 191 L.Ed.2d 911 (2015) (); Richer v. Morehead , 798 F.3d 487, 490 (7th Cir. 2015) ().
The sole count of the Complaint is based on section 523(a)(2)(A) of the Bankruptcy Code. Section 523 is unequivocally a bankruptcy cause of action. While such actions may turn on state law, determining the scope of a debtor's discharge is a fundamental part of the bankruptcy process. See Deitz v. Ford (In re Deitz ), 469 B.R. 11, 20 (B.A.P. 9th Cir. 2012). As observed by one bankruptcy court, "there can be little doubt that [a bankruptcy court], as an Article I tribunal, has the constitutional authority to hear and finally determine what claims are non-dischargeable in a bankruptcy case." Farooqi v. Carroll (In re Carroll ), 464 B.R. 293, 312 (Bankr. N.D. Tex. 2011) ; see also Deitz , 469 B.R. at 20 ; Dragisic v. Boricich (In re Boricich ), 464 B.R. 335, 337 (Bankr. N.D. Ill. 2011) (Schmetterer, J.). It follows that a motion to dismiss such an action is also a matter within the court's constitutional authority. Further, no party has objected to the court entering final orders on the Motion and thus all parties have impliedly consented to this court's jurisdiction. See Wellness , 135 S. Ct. at 1939 ; Richer , 798 F.3d at 490.
Accordingly, determination of the Motion is within the scope of the court's jurisdiction and statutory and constitutional authority.
The Complaint sets forth the relationship of the parties, as follows:
As set forth in the Complaint, the parties' relationship deteriorated to a point where the Plaintiff withdrew from his representation of the Debtor in the state court proceedings.2
On October 31, 2019, more than two years after the Plaintiff withdrew from his representation of the Debtor, the Debtor commenced the above-captioned chapter 7 bankruptcy case. After the Plaintiff filed the Complaint commencing this adversary proceeding, the Debtor filed the Motion at bar. In response, the court entered an order scheduling briefing on the Motion. Order [Scheduling Motion to Dismiss] [Adv. Dkt. No. 9]. In accordance with the Order, the Plaintiff filed Adversary Plaintiff's Memorandum in Opposition to the Adversary Defendant's Motion to Dismiss [Adv. Dkt. No. 10] (the "Response") and the Debtor filed her Reply in Support of Motion to Dismiss [Adv. Dkt. No. 11] (the "Reply").
On June 1, 2020, the court conducted a hearing on the fully-briefed Motion (the "Hearing"), at which time the matter was taken under advisement for later oral or written ruling. Since that time several status hearings have been continued while the court has worked on this Memorandum Decision.
The court has reviewed the Complaint, the Motion, the Response and the Reply, including all exhibits attached thereto,3 and has taken into account the parties' statements at the Hearing. Though the foregoing items do not constitute an exhaustive list of the filings in this adversary proceeding, the court has taken judicial notice of the contents of the docket in this matter. See Levine v. Egidi , Case No. 93C188, 1993 WL 69146, at *2 (N.D. Ill. Mar. 8, 1993) (); In re Brent , 458 B.R. 444, 455 n.5 (Bankr. N.D. Ill. 2011) (Goldgar, J.) (recognizing same).
The sole count of the Complaint asserts a claim under section 523(a)(2)(A) of the Bankruptcy Code. This count alleges that the Debtor's statements to the Plaintiff constitute misrepresentations. Specifically, the Plaintiff alleges that the Debtor repeatedly and falsely promised to pay for the services rendered by the Plaintiff and that such misstatements indicate that the Debtor entered into her contractual relationship with the Plaintiff without an intent to perform, thus fraudulently inducing the Plaintiff to perform.
Section 523 enumerates specific, limited exceptions to the dischargeability of debts. Section 523(a)(2)(A) provides, in relevant part, that an individual debtor is not discharged from any debt:
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