In Re: Jack Weichman

• Decision Date: 30 September 2010
• Docket Number: ADVERSARY NO. 09-2095,CASE NO. 08-23482 JPK
• Parties: IN RE:JACK WEICHMAN, Debtor. DOMENICO LAZZARO, MD, JOSEPH PABON M.D. and ASSOCIATED PATHOLOGISTS OF MUNSTER INDIANA, P.C., Plaintiffs, v. JACK WEICHMAN, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Indiana

IN RE: JACK WEICHMAN, Debtor.

DOMENICO LAZZARO, MD, JOSEPH PABON M.D. and

ASSOCIATED PATHOLOGISTS OF MUNSTER INDIANA, P.C., Plaintiffs,

v.JACK WEICHMAN, Defendant.

CASE NO. 08-23482 JPK

ADVERSARY NO. 09-2095

UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF INDIANA

HAMMOND DIVISION

Dated: September 30, 2010.

MEMORANDUM OF DECISION/ORDER CONCERNING

MOTION TO DISMISS AMENDED COMPLAINT FOR

DETERMINATION OF DISCHARGEABILITY UNDER

11 U.S.C. § 523 ("MOTION")

By order entered on January 21, 2010, the court granted the defendant's motion to dismiss the plaintiffs' original complaint. The granting of that motion was without prejudice to the plaintiffs' filing of an amended complaint, which by the terms of the January 21, 2010 order was due to be filed by February 18, 2010. The amended complaint was filed on February 19, 2010, ¹ and the Motion and a memorandum in support thereof was filed on March 10, 2010.²The plaintiffs filed a response to the Motion, in the form of a legal memorandum, on April 9, 2010. Pursuant to the court's order entered on April 13, 2010, the defendant filed a legal memorandum in reply to the plaintiffs' response on May 10, 2010.

There has been no objection to the court's exercise of jurisdiction. The court has jurisdiction of this adversary proceeding pursuant to 28 U.S.C. § 1334(b), 28 U.S.C. § 157(a) and (b), and N.D.Ind.L.R. 200.1. This adversary proceeding is a core proceeding under 28 U.S.C. § 157(b)(2)(I).

I. ISSUE BEFORE THE COURT

The issue before the court arising from the Motion is whether the plaintiffs' amended complaint should be dismissed pursuant to Fed.R.Bankr.P. 7012(b)/Fed.R.Bankr.P. 12(b)(6). No materials outside of the record established by the pleadings have been filed, and the Motion is therefore to be determined strictly pursuant to the provisions of Rule 12(b)(6).

II. ANALYSIS

As was true with the original complaint, the amended complaint seeks to assert actions against the defendant pursuant to 11 U.S.C. § 523(a)(2), 11 U.S.C. § 523(a)(4) and 11 U.S.C. § 523(a)(6). The defendant asserts that the amended complaint fails to assert claims for relief cognizable under applicable law and rules against him. The plaintiffs assert that the amended complaint sufficiently asserts claims against the defendant.

The format of the amended complaint is in a pattern all too familiar to the court, and one which the court does not endorse. The complaint begins with a required statement of the court's jurisdiction, which is fine. The complaint then proceeds to identify the parties, which is fine. The complaint then states a lengthy recitation of "Facts" which do not form a part of any asserted count, but rather apparently are deemed to state underlying facts necessary for all of the designated counts in the complaint. The complaint then has three designated counts-one under each of the above-designated exceptions to discharge provided by the Bankruptcy Code-which consecutively incorporate by reference all of that which preceded them in the complaint, including rhetorical paragraphs 1-53. Most woefully, each succeeding count incorporates each preceding count's averments. Some of these incorporated allegations arepertinent to certain of the causes of action alleged subsequently, but some of them are only pertinent to a specific count. This form of pleading is obnoxious, in that it causes the court to review facts which are not pertinent to a particular Count and sort those facts out, as one would grain from chaff, to determine whether a particular Count actually asserts a claim cognizable under applicable law. Fed.R.Bankr.P. 7008(a) incorporates the provisions of Fed.R.Civ.P. 8 into adversary proceedings. Fed.R.Civ.P. 8(a)(2) requires that a pleading "must contain... a short and plain statement of the claim showing that the pleader is entitled to relief". Fed.R.Civ.P. 8(d)(1) requires that "(e)ach allegation must be simple, concise and direct". Incorporating an omnibus statement of facts and averments of preceding counts into various counts violates both of these rules, and is simply not an appropriate manner in which to plead a federal complaint. That being said, the court will review the complaint in the manner in which it has been submitted, with a caution to the plaintiffs' attorney to do better in the future.

The Amended Complaint is essentially a "fleshed out" version of the original complaint in which certain specific allegations have been added in an attempt to comply with Fed.R.Civ.P. 8(a) and Fed.R.Civ.P. 9(b), both of which are applicable to adversary proceedings by provisions of the Federal Rules of Bankruptcy Procedure. The January 21, 2010 order noted the deficiencies in the original complaint, and many of the rhetorical paragraphs of the original complaint reappear in the amended complaint. For the purposes of differentiating the material manner in which the amended complaint differs from the original complaint, the court notes the following with respect to additions made by the amended complaint:

A. With respect to the generic statement of facts [rhetorical paragraphs 6-53 in the amended complaint]-the following material provisions have been inserted into the amended complaint:

13. Lazzaro was committed to his medical practice and the long hours of work necessitated by that practice. He, therefore, employed Weichman, a professional accountant, to oversee hisfinancial affairs. It was reasonable, under those circumstances, for Lazzaro to rely and depend on Weichman to act professionally and in Lazzaro's best financial interest.

17(g). U.S. 30 Restaurant Partnership was a corporation whose shareholders included Drs. Ashbach, Pascale, De La Paz, Lazzaro and Jack Weichman.

18. Lazzaro invested approximately $97,000 in U.S. 30 Building Partnership based upon Weichman's advice, made on or near February 9, 1989, at Weichman's office, that U.S. 30 Building Partnership would be a profitable entity. Weichman controlled the check book for U.S. 30 Building Partnership. Weichman called no partnership meetings and maintained no meeting minutes. Weichman never provided Lazzaro with monthly reports or other regular updates as to U.S. 30 Building Partnership's status. Lazzaro earned nothing on his investment in U.S. 30 Building Partnership and lost every dollar of his initial investment in the business. To date, the only holding remaining in the U.S. 30 Building Partnership is land in Hammond, Indiana.

19. Lazzaro also invested approximately $67,000 in U.S. 30 Restaurant, Inc., based upon Weichman's advice, made on or near April 11, 1989, at Weichman's office, that it would be a profitable investment. Again, Weichman never provided Lazzaro with monthly reports, balance sheets, or ledgers. And, again, Lazzaro earned nothing on his investment in U.S. 30 Building Partnership and lost every dollar of his initial investment in the business.

20. Lazzaro invested approximately $35,000 in Landings, Inc., based upon Weichman's advice, made on or near May 5, 1990, at Weichman's office, that it would be a good and profitable investment. Weichman controlled the check book for Landings, Inc. Weichman provided no monthly reports; he provided no income statements; he provided no balance sheets. Lazzaro earned nothing on his investment in Landings, Inc., and lost every dollar of his initial investment in the business.

21. Lazzaro invested approximately $98,500 in the Dunes on Weichman's advice, made on or near August 2, 1989, at Weichman's office, and projections that it would be profitable. Weichman maintained full control over the Dunes business. Weichman controlled the Dunes' check book. Lazzaro received absolutely nothing back on his investment in the Dunes, and he lost every dollar of his initial investment in that business.

22. When Lazzaro invested in Broadmoor, Inc., on or about May 13, 1986 and again on December 31, 1986, Lazzaro believedthat Weichman guaranteed a profit on that business. Lazzaro invested approximately $505,500 in the business, because Weichman, at Weichman & Associates' office, had presented Broadmoor to him as a good investment that would be profitable and grow in value over time. Weichman's representations to Lazzaro to encourage him to invest his money in Broadmoor were either knowingly false or made to Lazzaro with reckless disregard for the truth as, on information and belief, Weichman was advising other investors in Broadmoor and the other investment entities, at or near the same time that the above-described representations were made to Lazzaro, that Broadmoor and other entities, was only to be a tax shelter and not designed to be profit making. Again, Lazzaro was not kept apprized of Broadmoor's financials by Weichman, who retained near, if not, total control over the business. With that control, Weichman unilaterally made the decision to and did use the Broadmoor entity to employ himself and entities that he owned or had an ownership interest in paying from the Broadmoor account to himself or his entities approximately $1,250, 826. Lazzaro had no knowledge of these transactions and self-dealing by Weichman of approximately $100,000 until after the underlying matter was filed.

23. Associated Pathologists invested pension plan money in Broadridge based upon representations made by written correspondence from Weichman, at Weichman & Associates to Lazzaro at his home address, in St. John, Indiana, on or about July 7, 1988, as to its profitability. (See attached Exhibit "E"). Again, despite repeated requests from the Lazzaros, on behalf of Associated Pathologists, Weichman refused or neglected to provide financial information about the investment.

24. Overall, through the entire period in issue, Weichman actively sought to mislead, confuse, and/or falsely represent the financial position of the various entities to secure added capital from the Lazzaros and to permit the entities to continue in existence for the purpose, in whole or in part, of regularly securing payments from the investment

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