In re Gordon

• Decision Date: 01 December 2003
• Docket Number: Bankruptcy No. 03-12444 ABC.,Adversary No. 03-1330 HRT.
• Citation: 303 B.R. 645
• Parties: In re Robert GORDON, Debtor. National Labor Relations Board, Plaintiff, v. Robert Gordon, Defendant.
• Court: U.S. District Court — District of Colorado

303 B.R. 645

In re Robert GORDON, Debtor National Labor Relations Board, Plaintiff, v. Robert Gordon, Defendant.

Bankruptcy No. 03-12444 ABC.

Adversary No. 03-1330 HRT.

United States District Court, D. Colorado.

December 1, 2003.

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James W. Bain, Greenwood Village, CO, Deanna L. Westfall, Denver, CO, for Defendant.

Ellen M. Kelman, Denver, CO, William W. Osborne, Jr., Washington, DC, for Intervenor.

William Mascioli, National Labor Relations Board, Washington, DC, Michael T. Pennington, Denver, CO, for Plaintiff.

ORDER DENYING MOTION FOR SUMMARY JUDGMENT AND DEFINING SCOPE OF TRIAL

HOWARD R. TALLMAN, Bankruptcy Judge.

This case comes before the Court on Plaintiff's Motion for Summary Judgment. Plaintiff seeks judgment on its lone claim: exception to discharge under § 523(a)(6). Plaintiff is the National Labor Relations Board ("N.L.R.B."), the agency charged with enforcement of the National Labor Relations Act ("NLRA"), 29 U.S.C. § 151 et seq. Defendant ("Gordon") is the Chapter 7 debtor and former principal of three companies, "I.W.G.," "Con-Bru" and "Arlene," that installed fire sprinklers. The Court has not yet held a Rule 16(b) status and scheduling conference in this case. No trial date has been set.

I. Facts and Procedural History

Following allegations that Gordon, individually and through his control of the three entities engaged in illegal labor practices, the N.L.R.B. pursued an administrative action (the "Prior Action") and ultimately obtained a judgment against Gordon in the amount of $821, 594.00 (the "Judgment"). The Prior Action involved a total of nine separate rulings,¹ spanning almost seven years from May, 1995, to April, 2002, as the case moved from an administrative law judge ("ALJ") to the N.L.R.B. to the Tenth Circuit Court of Appeals (and back and forth) before the Tenth Circuit ultimately entered the Judgment.

Specific findings of fact were made in the Second, Third and Fifth Rulings. Gordon actively defended in proceedings resulting in the First through the Third Rulings. In the Third Ruling, the Tenth Circuit enforced in part the N.L.R.B. order and remanded a portion of the order for further proceedings with respect to certain conclusions made by the ALJ and the N.L.R.B. in the First and Second Rulings. However, Gordon did not appear or defend in the remand proceedings or in subsequent proceedings that resulted in the ultimate entry of the Judgment.

In the Second Ruling (August 27, 1996), the N.L.R.B. made extensive findings of fact regarding Gordon's intent and actions. In finding Gordon liable, the N.L.R.B. ruled:

A. "Gordon's intent to evade his responsibilities under the Act could not be more clear." I.W.G., Inc., 322 N.L.R.B. 69, 71 (1996).

B. "Gordon's purpose in creating Con-Bru and then Arlene was to reduce his labor costs by skirting his collective-bargaining agreement with the Union .... Gordon created Con-Bru in the `attempt[] to achieve his expressed goal of "going nonunion" by laying off IWG's unit employees ... and transferring the remaining work ... to Con-Bru' and then created Arlene in a `continuing scheme to avoid IWG's contractual and statutory obligations to the Union and its employees.'" Id. at 72 (footnotes omitted).

C. "First, and most significantly, the fundamental purpose of Gordon's misuse of the corporations in this case was to promote his fraudulent scheme to conceal his ownership and control of each corporation and thereby evade his labor law obligations." Id. at 74.

On May 19, 1998, the Tenth Circuit affirmed in part and reversed in part (Third Ruling). Gordon's attorney actively argued prior to this ruling. The Tenth Circuit found that the issue of Gordon's liability as an alter ego of Arlene had not been pled, and consequently, had not been actually litigated. The court remanded the issue of Gordon's personal liability to the N.L.R.B. due to N.L.R.B.'s failure to provide adequate notice of the Arlene-alter ego claim.

On remand, Gordon did not appear or defend. He now contends, among other things, that he was never properly served and had no notice. The N.L.R.B. disagrees, stating the ALJ specifically found that Gordon had been properly served. I.W.G. Inc., 1999 WL 33453665 (N.L.R.B. Div. of Judges 1999) (Fifth Ruling). The ALJ also determined that the "supplemented record" is essentially the same record that was before the Board in reaching its initial decision, that is, the factual record for the Fifth Ruling was essentially the same as it was for the Second Ruling. Id. Subsequent rulings affirmed this decision without additional findings of fact. Ultimately, the Tenth Circuit entered the Judgment against Gordon.

The N.L.R.B. asserts that collateral estoppel from the Prior Action compels summary judgment against Gordon. Gordon contends that the Prior Action was invalid and that the Judgment should not be given preclusive effect.

II. Discussion

A. Jurisdiction and Summary Judgment

This Court has jurisdiction over this adversary proceeding under 28 U.S.C. § 1334(b) as a matter arising under the Bankruptcy Code. This adversary is a core proceeding under 28 U.S.C. §§ 157(b)(2)(1). Venue is proper pursuant to 28 U.S.C. § 1409(a).

FED. R. CIV. P. 56, as applied to bankruptcy cases by FED. R. BANKR. P. 7056, dictates the standard which this Court must use in ruling on a motion for summary judgment. Summary judgment is proper only "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." FED. R. CIV. P. 56. The burden is on the moving party to show that no genuine issue of material fact is in dispute. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986).

This Court exercises great circumspection in the granting of a motion for summary judgment. There should always be a natural preference for allowing the parties to proceed to a trial on the merits where there is any factual matter subject to a bona fide dispute which bears on the ultimate resolution of the controversy. Associated Press v. U.S., 326 U.S. 1, 6, 65 S.Ct. 1416, 1418, 89 L.Ed. 2013 (1945) ("Rule 56 should be cautiously invoked to the end that parties may always be afforded a trial where there is a bona fide dispute of facts between them"). "Where it appears however that there is no genuine issue as to any material fact upon which the outcome of the litigation turns, the case is appropriate for disposition by summary judgment and it becomes the duty of the court to enter such judgment." Whelan v. New Mexico Western Oil and Gas Company, 226 F.2d 156, 159 (10th Cir.1955).

The standard of proof in dischargeability matters under 11 U.S.C. § 523 is the preponderance of the evidence standard. Grogan v. Garner, 498 U.S. 279, 286, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991). Furthermore, "exceptions to discharge are to be narrowly construed, and because of the fresh start objectives of bankruptcy, doubt is to be resolved in the debtor's favor." Cundy v. Woods (In re Woods), 284 B.R. 282, 288 (D.Colo.2001) (citing Bellco First Federal Credit Union v. Kaspar (In re Kaspar), 125 F.3d 1358, 1361 (10th Cir.1997)).

B. Collateral Estoppel

The preclusive effect given in federal court to a prior federal decision is subject to federal law. Semtek Int'l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 507, 121 S.Ct. 1021, 1027, 149 L.Ed.2d 32 (2001). Administrative proceedings are entitled to collateral estoppel effect. Astoria Federal Sav. and Loan Ass'n v. Solimino, 501 U.S. 104, 107, 111 S.Ct. 2166, 2169, 115 L.Ed.2d 96 (1991).

Pursuant to Dodge v. Cotter Corp., 203 F.3d 1190 (10th Cir.2000), collateral estoppel applies to prevent relitigation of the issues decided in a federal court where:

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.

Id. at 1197-98.

There is no dispute that Gordon is the same party as the party in the Prior Action and that, on its face, the Judgment, and the antecedent rulings show that the Prior Action was finally adjudicated on the merits. The Court will address Gordon's dispute that the Judgment relied upon by the N.L.R.B. is a valid and final judgment. Since the Judgment at issue was entered in the absence of Gordon's active participation in the proceedings after the Third Ruling was entered, the Court must also determine whether Gordon received a full and fair opportunity to litigate the issues in that case. Finally, the Court must determine whether the determination in the Prior Action that Gordon unlawfully terminated his union employees is identical to the issue presented in this dischargeability action of whether Gordon inflicted willful and malicious injury upon those employees.

1. The N.L.R.B. Judgment is a Valid and Final Judgment

As an initial matter, the Court will address Gordon's contention that the Judgment relied upon by N.L.R.B. is an invalid judgment and, consequently, is not entitled to collateral estoppel effect. Gordon bases his argument primarily on lack of notice of the proceedings. According to Gordon, he maintained a post office box until "sometime in 1999." He believes that notices of some of the hearings and proceedings were mailed to this post office box after he discontinued its use.

There is no dispute by Gordon that he received notice of and actively participated in the first three proceedings which culminated in the Tenth Circuit Court of Appeals' order of May 18, 1998, enforcing the initial N.L.R.B....