In re Abeyta

• Decision Date: 08 May 2008
• Docket Number: Adversary No. 06-1177 M.,Bankruptcy No. 11-06-11026 MA.
• Parties: In re Junior ABEYTA and D. Lee Abeyta, Debtors. Federal Trade Commission, Plaintiff, v. Junior Abeyta, Defendant.
• Court: United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of New Mexico

387 B.R. 846

In re Junior ABEYTA and D. Lee Abeyta, Debtors.

Federal Trade Commission, Plaintiff, v. Junior Abeyta, Defendant.

Bankruptcy No. 11-06-11026 MA.

Adversary No. 06-1177 M.

United States Bankruptcy Court, D. New Mexico.

May 8, 2008.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Julie Mack, Yaa A. Apori, Federal Trade Commission, Ramona D. Elliott, Executive Office for U.S. Trustees, Washington, DC, for Plaintiff.

Louis Puccini, Jr., Shay E. Meagle, Albuquerque, NM, for Defendant.

MEMORANDUM OPINION

MARK B. McFEELEY, Bankruptcy Judge.

THIS MATTER is before the Court on Plaintiff Federal Trade Commission's Motion for Summary Judgment ("Motion"). Plaintiff Federal Trade Commission ("FTC") obtained a $9,298,447.29 judgment against Defendant Junior Abeyta, a/k/a Patrick Abeyta and others¹ for restitution in accordance with 15 U.S.C. § 13(b), based on violations of Section 5 of the Federal Trade Commission Act ("FTC Act"). The Final Judgment and Permanent Injunction Order ("Judgment") was issued by the United States District Court, District of Nevada ("Nevada District Court") in Civil Action No. CV-S-05-160-RCJ-PAL ("District Court Action") along with Findings and Conclusions entered by the Nevada District Court on March 26, 2006 following a contested motion for summary judgment filed by the FTC. Defendant filed a voluntary petition under Chapter 11 of the Bankruptcy Code on June 15, 2006 as Case No. 11-06-11026MA.

FTC seeks to have the Judgment entered in the District Court Action declared non-dischargeable under 11 U.S.C. § 523(a)(2)(A) as a debt for money obtained by false pretenses, a false representation, or actual fraud, and asserts that the judgment serves to collaterally estop Defendant from re-litigating the same issues as part of this non-dischargeability proceeding. FTC further asserts that the Findings, and Conclusions entered by the Nevada District Court establish as a matter of law that the Judgment against Defendant Junior, Abeyta is nondischargeable under 11 U.S.C. § 523(a)(2)(A). Defendant opposes the Motion, asserting among other things, that the FTC is not the real party in interest and lacks standing to bring this nondischargeability action and that Defendant did not have a meaningful ability to litigate the issues in the District Court Action, having invoked his Fifth Amendment privilege on advice of his criminal counsel. See Defendant's Response in Opposition to the Federal Trade Commission's Motion for Summary Judgment ("Response")-Docket # 77.

Upon review of the Motion, the Findings and Conclusions, the Judgment, Defendant's Response, and the FTC's reply (See Docket # 78)², the Court finds that the Findings and Conclusions and the Judgment entered by the Nevada District Court sufficiently establish the elements necessary to the determination that the judgment is non-dischargeable under 11 U.S.C. § 523(a)(2)(A) and that all the remaining requirements for collateral estoppel have been met. Consequently, the Court will grant the Motion and enter summary judgment in favor of the FTC.

DISCUSSION

FTC's Standing to Bring a Non-Dischargeability Action.

As a preliminary matter, Defendant asserts that FTC has no standing to bring this action seeking a determination of non-dischargeability under 11 U.S.C. § 523(a)(2)(A), arguing that the individual consumers, rather than the FTC, are the real parties in interest. This argument lacks merit. As explained by the bankruptcy court in FTC v. Austin (In re Austin), 138 B.R. 898, 903 (Bankr.N.D.Ill. 1992), "the only standing requirement for a party seeking to have a debt declared nondischargeable under § 523(a)(2)(A) is that the party must have a right to receive payment on the debt in question." The FTC holds a judgment against the Defendant that it obtained before the Defendant filed his bankruptcy petition. Consequently the FTC holds a claim against the debtor and is a creditor as defined by 11 U.S.C. § 101(10)(A) with standing to bring an action under 11 U.S.C. § 523(a)(2)(A). Id. The Austin court further rejected the argument that the FTC lacks standing because it is bringing claims on behalf of injured consumers. Id. at 904 (stating that "[t]he FTC's status as a creditor is unaffected by the fact that the FTC seeks to recover money on behalf of defrauded consumers rather than on its own behalf.").³ This Court agrees with the reasoning of Austin, and finds that FTC has sufficient standing to bring this cause of action to determine the dischargeability of its judgment under 11 U.S.C. § 523(a)(2)(A).

Summary Judgment Standards.

It is appropriate for the Court to grant summary judgment if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Rule 56, Fed.R.Civ.P., made applicable to bankruptcy proceedings by Rule 7056, Fed.R.Bankr.P. "[A] party seeking summary judgment always bears the initial responsibility of informing the ... court of the basis for its motion, and ... [must], demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In determining whether summary judgment should be granted, the Court will view the record in the light most favorable to the party opposing summary judgment. Harris v. Beneficial Oklahoma, Inc. (In re Harris), 209 B.R. 990, 995 (10th Cir. BAP 1997)(citing Wolf v. Prudential Ins. Co. of America, 50 F.3d 793, 796 (1995)(remaining citations omitted)). But in order to defeat a motion for summary judgment, the opposing party may not simply rest oh its pleading or denials of the allegations; rather, the opposing party must demonstrate that genuine issues of material fact require a trial. See Rule 56(e), Fed.R.Civ. P., made applicable to bankruptcy proceedings by Rule 7056, Fed.R.Bankr.P. (A party opposing a properly supported motion for summary judgment "may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial."). "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). Defendant did not submit any affidavits in defense of the Motion and has not, therefore, attempted to raise a genuine issue of material fact.⁴ Instead, Defendant asserts that the FTC is not entitled to summary judgment because the findings and conclusions from the District Court Action upon which FTC bases its Motion fail to establish a claim of non-dischargeability under 11 U.S.C. § 523(a)(2)(A).⁵

Collateral Estoppel Applies to Dischargeability Actions

The FTC asserts that the Judgment together with the Findings and Conclusions entered in the District Court Action serve to collaterally estop Defendant from re-litigating the factual issues that are identical to the issues relevant to this adversary proceeding. "Collateral estoppel, or issue preclusion, is a doctrine that prohibits the relitigation between the same parties of issues of ultimate fact that have been `determined by a valid and final judgment.'" In re Armstrong, 294 B.R. 344, 357 (10th Cir. BAP 2003), aff'd, 97 Fed. Appx. 285 (10th Cir.2004)(quoting Phelps v. Hamilton, 122 F.3d 1309, 1318 (10th Cir.1997)). The doctrine of collateral estoppel applies to dischargeability actions.⁶ Thus when the elements of a prior claim are identical to the elements required to establish an exception to discharge, it is appropriate for the Court to give collateral estoppel effect to those elements that "were actually litigated and determined in the prior action." Grogan v. Garner, 498 U.S. at 284, 111 S.Ct. 654. Summary judgment on a non-dischargeability claim may, therefore, be granted based on a prior judgment obtained outside of bankruptcy provided that the prior judgment establishes all elements necessary to the determination of non-dischargeability under the Bankruptcy Code.

In determining the preclusive effect of a prior judgment rendered by a federal court, the Court must apply federal principles of collateral estoppel.⁷ The federal common law of collateral estoppel requires a showing of the following elements: "`(1) the issue previously decided is identical with the one presented in the action in question, (2) the prior action has been finally adjudicated on the merits, (3) the party against whom the doctrine is invoked was a party or in privity with a party to the prior adjudication, and (4) the party against whom the doctrine is raised had a full and fair opportunity to litigate the issue in the prior action.'" Jordcma, 232 B.R. at 475-76 (quoting Frandsen v. Westinghouse Corp., 46 F.3d 975, 978 (10th Cir.1995)(quotation omitted)).

In this case three of the four elements required for collateral estoppel are clearly present. First, the Findings and Conclusions and the judgment entered in the District Court Action constitute a valid and final judgment. Second, the Defendant was a party to the District Court Action. Third, the Defendant had a full and fair opportunity to litigate the issues determined in the District Court Action. He actively contested the FTC's motion for summary judgment filed in the District Court Action. The Nevada District Court heard argument on FTC's motion for summary judgment, and affidavits were offered in support of the motion. A contested motion for summary judgment that results in the entry of summary judgment can satisfy the requirement that the opposing party had a full and fair opportunity to litigate the issues as well as the requirement that the prior matter be "actually litigated".⁸ In this...