In re Hudson

• Decision Date: 17 November 2009
• Docket Number: Adversary No. 00-90091.,Bankruptcy No. 00-11683.
• Citation: 420 B.R. 73
• Parties: In re Paul S. HUDSON, Debtor. Washington 1993, Inc., Plaintiff, v. Paul S. Hudson, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of New York

Page 73

420 B.R. 73

In re Paul S. HUDSON, Debtor.

Washington 1993, Inc., Plaintiff, v. Paul S. Hudson, Defendant.

Bankruptcy No. 00-11683.

Adversary No. 00-90091.

United States Bankruptcy Court, N.D. New York.

November 17, 2009.

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Emery Celli Brinckerhoff & Abady, LLP, Sarah Netburn, Esq., New York, NY, for Debtor-Defendant.

ROBERT E. LITTLEFIELD, JR., Chief Judge.

The district court remanded this matter to evaluate the impact, if any, of its rulings in Corvetti v. Hudson and Hudson v. Corvetti on this court's decision to deny Paul S. Hudson, debtor-defendant, a discharge in bankruptcy. Before the court is Mr. Hudson's motion for vacatur of this court's August 21, 2001 decision denying his discharge.¹ The court, upon evaluating all of Mr. Hudson's arguments, determines that: (1) the district court's subsequent rulings in Corvetti v. Hudson and Hudson v. Corvetti do not impact its denial of Mr. Hudson's discharge, and (2) Mr. Hudson is not entitled to vacatur of the court's 2001 decision denying his discharge.

JURISDICTION

The court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157(a), 157(b)(1), 157(b)(2)(l), and 1334(b).

PROCEDURAL AND FACTUAL HISTORY

This case has a multifaceted and tortured history. Mr. Hudson, an attorney licensed to practice in New York, commenced the instant bankruptcy case by filing a Chapter 7 petition on November 12, 1999 in Maryland. (Case No. 00-11683 (the "Main Case") No. 1.) Mr. Hudson testified that he decided to file for bankruptcy because of several lawsuits pending in New York filed by Richard Corvetti or by Mr. Corvetti on behalf of Washington 1993, Inc. ("Washington 1993").² (Day 4 Trial Tr. 214, Oct. 26, 2000 (Adv.Pro. No. 00-90091, No. 45).) This included a lawsuit for fraudulent conveyance of the settlement money received by Mr. Hudson in an Ohio wrongful death lawsuit against Pan Am Airlines in connection with the death of his daughter in the Lockerbie, Scotland terrorist attacks (the "wrongful death case"). (Id.) By filing for bankruptcy, Mr. Hudson effectively stayed all proceedings in the New York courts. Mr. Hudson did not list these lawsuits on his Statement of Financial Affairs upon filing.

On January 12, 2000, Mr. Corvetti filed several motions in the Maryland bankruptcy court, including a motion for change of venue and three motions seeking relief from the automatic stay (Main Case Nos. 13, 14, 16, 18.) In the venue motion, Mr. Corvetti alleged that Mr. Hudson failed to disclose settlement proceeds to which Mr. Hudson was allegedly entitled in the wrongful death case and that Mr. Hudson had conveyed the suit to his sons. (Main Case No. 13.)

Meanwhile, Washington 1993 brought this adversary proceeding against Mr. Hudson objecting to his discharge pursuant to 11 U.S.C. § 727(a)(4)(A),³,⁴ relying primarily on Mr. Hudson's failure to schedule the transfers of $102,902.76 and $37,000 to his sons as assets/revocable transfers in his petition, and objecting to certain debts pursuant to § 523.⁵ (Adv Pro. No. 1.) Washington 1993 also alleged that Mr. Hudson's wrongful death claim against the government of Libya for the death of his daughter in the Lockerbie, Scotland plane crash resulting from terrorists attacks was worth more than the zero value that Mr. Hudson scheduled. (Id.)

On March 14, 2000, the Maryland court granted Mr. Corvetti's venue motion and transferred the Chapter 7 case and the adversary proceeding to this court. (Main Case No. 45.) Mr. Hudson, however, was not a stranger to this court, having filed two Chapter 11 petitions in 1995 on behalf of himself and a business entity he owned and operated, as well as a Chapter 7 petition on behalf of another business entity he owned and operated in 1999. (See Case Nos. 95-10607, 95-10609, 99-16518.) Mr. Hudson's individual Chapter 11 case was eventually dismissed. At the time of the dismissal, a motion filed by the trustee to convert the case to Chapter 7 on the grounds that Mr. Hudson failed to schedule an asset was pending.

On the same day Mr. Hudson's current case was transferred from the Maryland court, more than a month after the instant adversary proceeding was filed and served, over two months from the filing and service of the venue motion, and over four months from the petition date, Mr. Hudson filed his Second Amended Statement of Financial Affairs.⁶ (Main Case No. 39.) In this statement, Mr. Hudson listed the lawsuits involving himself and either Mr. Corvetti or Washington 1993, including the fraudulent conveyance action, which were pending when he filed his petition. (Id.)

After transfer of the case and adversary proceeding to this court, Washington 1993 filed a motion for partial summary judgment in the adversary proceeding. (Adv. Pro. No. 12.) Washington 1993 alleged that Mr. Hudson's failure to list any pending litigation he had involving either Washington 1993 or Mr. Corvetti in the answer he gave to Question 4(a) on his original Statement of Financial Affairs amounted to fraud under § 727(a)(4)(A). (Id.) In his opposition to the summary judgment motion, Mr. Hudson pointed out that the § 727(a)(4)(A) cause of action stated in the complaint did not allege a failure to list lawsuits on the Statement of Financial Affairs. (Adv.Pro. No. 18.) As a result, Mr. Hudson argued that because the complaint did not allege that particular failure he lacked notice and that § 727(a)(4)(A) relief could not be granted on those grounds. (Id.) Mr. Hudson further alleged that any failure to list the lawsuits on his Statement of Financial Affairs was a clerical error, and he attached the affidavit of his former counsel, James Greenan, Esq., explaining the omission of the lawsuits. (Id.) The court ultimately denied summary judgment, finding that questions of fact existed and informed both parties that it wanted to hear Mr. Hudson's explanation regarding his failure to list the lawsuits that Washington 1993 and Mr. Corvetti had pending against him.

Extensive testimony was proffered at the seven-day trial in October 2000. Mr. Greenan testified that he had advised Mr. Hudson that Maryland was a proper venue for his case and subsequently filed a "bare bones" petition on November 12, 1999. (Day 6 Trail Tr. 121, Oct. 30, 2000 (Adv. Pro. No. 52).) Mr. Greenan explained that a bare bones petition provides the debtor's name, address, and a list of creditors, but not lawsuits, and that he and Mr. Hudson decided to file in such a manner to stay a trial on the following Monday involving Washington 1993. (Id. at 122-23, 129; Day 4 Tr. 214.) Mr. Hudson faxed Mr. Greenan information for his bankruptcy filing, including a two page list of lawsuits, which included the lawsuits involving Mr. Corvetti and Washington 1993 (Day 6 Tr. 123, 127.) Mr. Greenan did not need the list for filing the bare bones petition and, thus, did not use it. (Id. at 123.)

After the bare bones petition was filed, Mr. Greenan sent Mr. Hudson a questionnaire his firm required its bankruptcy clients to fill out with all the information necessary for filing their petition and Statement of Financial Affairs. (Id. at 129.) Mr. Greenan did not use the list of lawsuits faxed by Mr. Hudson before filing the bare bones petition to prepare the Statement of Financial Affairs because he had requested that Mr. Hudson provide the information on the questionnaire. (Id. at 129-30.) Mr. Greenan further testified that Mr. Hudson provided him with a "less complete" list of pending lawsuits in his responses to the questionnaire, omitting all the suits involving Mr. Corvetti and Washington 1993. (Id. at 130.) As a result, they were not included in the Statement of Financial Affairs by Mr. Greenan, and were not added by Mr. Hudson after he spent several hours reviewing it. (Id. at 174.) Mr. Hudson later testified that he had provided an additional page with his questionnaire that listed the missing lawsuits. (Id. at 174.)

2001 Littlefield Decision

Upon consideration of the voluminous pre-trial submissions, trial testimony, documentary evidence, and post-trial memoranda, the court denied Mr. Hudson a discharge pursuant to § 727(a)(4)(A) (the "2001 Littlefield Decision"). Washington 1993, Inc. v. Hudson (In re Hudson), No. 00-11683, Adv. Pro. No. 00-90091 (Bankr. N.D.N.Y. Aug. 21, 2001) (Adv.Pro. No. 62). Specifically, the court found that

[Mr. Hudson] had intentionally failed to include the information regarding the wrongful conveyance lawsuit on his bankruptcy schedules in order to prevent the Trustee, and thus Debtor's creditors, from realizing any of the potential money from that lawsuit. The [court] based his decision primarily on: 1) Hudson's knowledge of the filing requirements for a bankruptcy petition as shown by his previous bankruptcy filings; 2) Hudson's failure to include the lawsuit in his Statement of Financial Affairs and schedules; 3) Hudson's failure to amend his financial statement following three "stay relief motions" by Corvetti which included specific allegations regarding the unlawful conveyance lawsuit; and 4) Hudson's failure to amend his financial statement after Corvetti began an adversary proceeding in February 2000 which included various allegations regarding Hudson's failure to schedule the transfers as assets, including a claim under 11 U.S.C. § 727(A)(4) which again specifically referenced the lawsuit.

Hudson v. Washington 1993, Inc., No. 3:01-CV-1474, slip op. at 2-3 (N.D.N.Y. Sept. 27, 2002) (Adv.Pro. No. 77). As the court ultimately denied Mr. Hudson's discharge, the § 523 causes of action were rendered moot. 2001 Littlefield Decision, No. 00-11683, Adv. Pro. No. 00-90091, slip op. at 24 (Bankr.N.D.N.Y. Aug. 21, 2001).

2002 McAvoy Affirmance

Mr. Hudson appealed the 2001 Littlefield Decision denying his discharge to the district court (Adv.Pro. No. 66), which affirmed it by written decision (the "2002 McAvoy Affirmance"). Hudson v. Washington 1993, Inc., No....