In re Domiano

• Decision Date: 28 December 2009
• Docket Number: Adversary No. 5-09-ap-49 RNO.,Bankruptcy No. 5-08-bk-51563 RNO.
• Parties: In re Louis J. DOMIANO, Jr. and Debra Domiano aka, Ann D. Domiano, Debtors. Louis J. Domiano, Jr. and Debra Domiano aka, Ann D. Domiano, Plaintiffs, v. Old Forge Bank, Defendants.
• Court: United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Middle District of Pennsylvania

422 B.R. 497

In re Louis J. DOMIANO, Jr. and Debra Domiano aka, Ann D. Domiano, Debtors.

Louis J. Domiano, Jr. and Debra Domiano aka, Ann D. Domiano, Plaintiffs, v. Old Forge Bank, Defendants.

Bankruptcy No. 5-08-bk-51563 RNO.

Adversary No. 5-09-ap-49 RNO.

United States Bankruptcy Court, M.D. Pennsylvania.

December 28, 2009.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Stephen G. Bresset, Bresset & Santora, LLC, Honesdale, PA, for Plaintiffs.

Rocco G. Haertter, Law Offices of Carl J. Greco, PC, Scranton, PA, for Defendants.

Opinion¹

ROBERT N. OPEL, II, Bankruptcy Judge.

Presently before this Court are Old Forge Bank's Motions to Dismiss under Fed.R.Civ.P. 12(b)(6), Motion for Abstention under 28 U.S.C. § 1334(C)(1) or (2), and in the Alternative, Motion to Strike Under Fed.R.Civ.P. 12(f) & Motion for a More Definite Statement under Fed. R.Civ.P. 12(e). For the reasons stated herein, the Motion to Dismiss is granted, and the Amended Complaint is dismissed.

I. Jurisdiction

The claims raised by the Complaint are non-core. Therefore, this Court only has "related to" jurisdiction as defined in 28 U.S.C. § 157(c).

II. Dismissal Standard

"... [O]n a Rule 12(b)(6) motion, the facts alleged must be taken as true and a complaint may not be dismissed merely because it appears unlikely that the plaintiff can prove those facts or will ultimately prevail on the merits." Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1964-1965, 1969 n. 8, 167 L.Ed.2d 929 (2007)). To survive a Rule 12(b)(6) motion, the pleadings must show plausibility. Id. at 234. "... [T]he `[f]actual allegations must be enough to raise a right to relief above the speculative level.'" Phillips, 515 F.3d at 234 (quoting Twombly, 127 S.Ct. at 1965).

"[The standard] `does not impose a probability requirement at the pleading stage,' but instead `simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of' the necessary element." Phillips, 515 F.3d at 234 (quoting Twombly, 127 S.Ct. at 1965 n. 3 (2007)). In reviewing the Complaint, the Court must "... read [the] allegations in the light most favorable to the plaintiff, and determine whether a reasonable reading indicates that relief may be warranted." Umland v. PLANCO Financial Services, Inc., 542 F.3d 59, 64 (3d Cir.2008) (referencing Phillips, 515 F.3d at 233).

III. Facts and Procedural Posture

Plaintiffs, Louis J. Domiano and Debra Domiano, (hereinafter collectively "the Domianos") filed for Chapter 11 relief on June 2, 2008. The Domianos filed a Complaint ("Original Complaint") commencing this adversary proceeding against one of their creditors, Old Forge Bank (hereinafter "Old Forge"), on February 17, 2009. Following Old Forge's first Motion to Dismiss filed on March 30, 2009, I rendered an Opinion finding that the Domianos had failed to state a claim upon which relief could be granted, dismissing all counts of the Original Complaint, and granting leave to file an amended complaint. The Domianos filed a new Complaint ("Amended Complaint") on July 20, 2009. In response, Old Forge filed the present Motions to Dismiss, Abstain, Strike, and for a More Definite Statement ("Motion").

IV. Discussion

The Motion by Old Forge for dismissal is pursuant to Federal Rule of Civil Procedure 12(b)(6), which is made applicable to adversary proceedings by Federal Rule of Bankruptcy Procedure 7012(b). In my previous Opinion, I observed that the Original Complaint had significant conclusory language and few facts to support a cause of action. That Opinion noted:

In reviewing the Complaint, this Court has had significant difficulty in locating factual allegations, as opposed to legal conclusions. "A pleading that offers `labels and conclusions' or `a formulaic recitation of the elements of a cause of action will not do.'" Ashcroft v. Iqbal, ___ U.S. ___, ___, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (U.S.2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 1965, 167 L.Ed.2d 929 (2007)). "... the pleading standard Rule 8 announces does not require `detailed factual allegations,' but it demands more than an unadorned, the-defendant-unlawfully harmed-me accusation." Ashcroft v. Iqbal, 129 S.Ct. at 1949 (referring to Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 1965, 167 L.Ed.2d 929 (2007)).

In the recent case Ashcroft v. Iqbal, the Supreme Court elaborated on the standards of pleading and the plausibility requirement set forth in the Twombly decision:

Two working principles underlie our decision in Twombly. First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.... Second, only a complaint that states a plausible claim for relief survives a motion to dismiss.

Ashcroft v. Iqbal, 129 S.Ct. at 1949-1950 (internal citations omitted). In further defining plausibility, the Court stated that, "[w]here a complaint pleads facts that are `merely consistent with' a defendant's liability, it `stops short of the line between possibility and plausibility of entitlement to relief.'" Ashcroft v. Iqbal, 129 S.Ct. at 1949 (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 557, 127 S.Ct. 1955, 1966, 167 L.Ed.2d 929 (2007)).

Domiano v. Old Forge Bank (In re Domiano), Ch. 11 Case No. 5-08-bk-51563RNO, Adv. No. 5-09-ap-00049RNO, 2009 WL 1941901, slip op. at 1-2 (Bankr. M.D.Pa. July 6, 2009).

In the present case, the Domianos' Amended Complaint contains many of the same paragraphs as the Original Complaint.² In the Domianos' Memorandum of Law in Opposition to Motion to Dismiss of Old Forge Bank, the Domianos argue that this Court can supplement the Complaint with judicial notice. Pls.' Mem. of Law p. 18. Specifically, the Domianos make reference to testimony presented by both parties at a relief from stay hearing which was part of the Domianos' underlying bankruptcy proceeding, not this adversary case. Pls.' Mem. of Law p. 18.

As a legal basis for this argument, the Domianos reference two cases, Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 127 S.Ct. 2499, 2509, 168 L.Ed.2d 179 (2007) and Pension Ben. Guar. Corp. v. White Consol. Industries, Inc., 998 F.2d 1192, 1196 (3d Cir.1993). The problem with this approach is the preliminary nature of a relief from stay hearing. The Third Circuit recently recognized this in In re Mullarkey, 536 F.3d 215 (3d Cir. 2008). "The hearing on a motion for relief from stay is meant to be a summary proceeding, and the statute requires prompt action by the bankruptcy court." In re Mullarkey at 226. In Mullarkey, the Third Circuit found that previous relief from stay proceedings did not have preclusive effect on a subsequently filed adversary complaint. Id.

In the present case, the scenario is slightly different. Rather than arguing any preclusive effect, the Domianos seek that I take judicial notice of the "facts" of the relief from stay hearing to supplement the Amended Complaint. Fed.R.Evid. 201(d) requires a court to take judicial notice if "requested by a party and supplied with the necessary information." Fed.R.Evid. 201(b) describes the kinds of facts that may be judicially noticed:

(b) Kinds of facts. A judicially noticed fact must be one not subject to reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned.

Additionally, the Third Circuit has previously noted that "... a bankruptcy judge deciding an adversary proceeding, which is an independent litigation, and an appellate court reviewing that decision, cannot properly use documents filed only in the underlying bankruptcy case unless that use can be justified under the judicial notice doctrine." In re Indian Palms Associates, Ltd., 61 F.3d 197, 204 (3d Cir.1995) (citing In re Aughenbaugh, 125 F.2d 887, 889 (3d Cir.1942)). In Indian Palms, the Third Circuit also noted that "`[j]udicial notice may be taken at any stage of the proceeding,' ... as long as it is not unfair to a party to do so and does not undermine the trial court's factfinding authority." In re Indian Palms Associates, Ltd., 61 F.3d at 205 (citing Fed.R.Evid. 201(f) in reference to the district court's decision to take judicial notice of the documents submitted in connection with the motion for relief from stay).

While Indian Palms is helpful, the case is also distinguishable in that judicial notice was taken in the context of an appeal from the disposition of a relief from stay motion. Id. at 201-202. As the present case involves an adversary proceeding, it is more helpful to refer to the case which Indian Palms relied upon and discussed in footnote 12, In re Aughenbaugh, 125 F.2d 887 (3d Cir.1942). In Aughenbaugh, the Third Circuit found that it was inappropriate for the bankruptcy referee to have considered documents such a bankruptcy schedules, appraisals, and proofs of claim in the underlying bankruptcy case that had not been admitted as evidence in the preference avoidance action. In re Indian Palms Associates, Ltd., 61 F.3d at 204 n. 12; In re Aughenbaugh, 125 F.2d at 890. In Aughenbaugh, Third Circuit concluded that while the relevant papers:

... would have been admissible as court records without other proof and would if offered in evidence have constituted some evidence of the facts to which they related. But the facts to which they related, being disputed in the very controversy under consideration, were not the sort of facts of which the referee was entitled to take judicial notice.

In re Aughenbaugh, 125 F.2d 887, 890 (3d Cir.1942).

In the present case, it is not apparent that the Domianos are...