In re Luppino
| Decision Date | 18 May 1998 |
| Docket Number | Bankruptcy No. 96 B 21601 (ASH),Adversary No. 97-5063A. |
| Citation | 221 BR 693 |
| Parties | In re Joseph LUPPINO, Debtor. NOVARTIS CORPORATION f/k/a Ciba-Geigy Corporation, Plaintiff, v. Joseph LUPPINO, Defendant. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
COPYRIGHT MATERIAL OMITTED
Piper & Marbury, L.L.P., by Andrew L. Deutsch, Christina L. Nargolwala, New York City, for Plaintiff-Creditor.
Massoud & Pashkoff, P.C., by Ahmed A. Massoud, New York City, for Defendant-Debtor.
DECISION ON DISCHARGEABILITY UNDER SECTIONS 523(a)(2), (4) AND (6)
On June 19, 1996 a judgment in the amount of $1,281,072.88 was entered in an action in Supreme Court of the State of New York, County of Westchester (the "State Court Action") in favor of plaintiff Ciba-Geigy Corporation, now known as Novartis Corporation ("Ciba-Geigy" or "Novartis") against debtor-defendant Joseph Luppino ("Luppino"). The judgment was entered on a special jury verdict finding Luppino liable for having committed acts of commercial bribe receiving and for having breached his duty of loyalty as an employee of Ciba-Geigy. Thereafter Luppino filed a petition in this Court under Chapter 13 which was converted to a Chapter 7 proceeding on September 17, 1996. Novartis commenced this adversary proceeding seeking a determination that the entire amount of the judgment is non-dischargeable under 11 U.S.C. § 523(a)(2), (4) and (6).
Novartis has moved for summary judgment, and Luppino has cross-moved for summary judgment. Both sides have submitted statements of undisputed facts pursuant to Local Bankruptcy Rule 7056-1, but neither side has controverted any of the facts claimed by the other to be undisputed, and neither side has argued that there is any genuine dispute as to a material fact requiring a trial.
Local Bankruptcy Rule 7056-1 provides as follows:
On any motion for summary judgment pursuant to Bankruptcy Rule 7056, there shall be annexed to the notice of motion a separate, short, and concise statement of the material facts as to which the moving party contends there is no genuine issue to be tried. Failure to submit the statement shall constitute grounds for denial of the motion. Papers opposing a motion for summary judgment shall include a separate, short, and concise statement of the material facts as to which it is contended that there is a genuine issue to be tried. All material facts set forth in the statement required to be served by the moving party shall be deemed admitted unless controverted by the statement required to be served by the opposing party.
One of the most critical and, at times, difficult determinations to be made on a motion for summary judgment is whether there exist any genuine issues of material fact requiring a trial. Local Rule 7056-1 is designed to facilitate that determination. The Rule requires the moving party to present a "short, and concise" statement of the facts on which the movant relies in seeking judgment. What is contemplated obviously is not a compendium of evidence in narrative form, but rather a concise distillation of those crucial facts which are truly determinative of the outcome of the case. In response, the opposing party is required by the Rule to show which of plaintiff's claimed undisputed facts are the subject of genuine dispute. To accomplish this objective, the Rule obviously contemplates that the opposing party will respond with particularity to each of plaintiff's claimed undisputed facts, demonstrating as to each fact why there is a genuine dispute if such is the claim. Of course, the opposing party is certainly free to present its own statement of facts, but it must respond with particularity to the movant's statement if it wants to controvert the movant's facts.
In its Rule 7056-1 Statement Novartis has set forth in simple, declarative sentences the matrix of facts which it contends are incapable of genuine dispute and entitle it to judgment as a matter of law. Luppino has made no attempt to comply with his obligation under Rule 7056-1 to submit a "short, and concise statement of the material facts as to which it is contended that there is a genuine dispute to be tried." Nowhere does Luppino address the factual recitations in Novartis' Statement or attempt to demonstrate on a paragraph-by-paragraph basis that there is any dispute as to the facts which are set forth in Novartis' Statement.
The consequence of Luppino's failure to controvert with particularity any of the facts in Novartis' Statement is set forth in Rule 7056-1. The Rule states in the last sentence:
All material facts set forth in the statement required to be served by the moving party shall be deemed admitted unless controverted by the statement required to be served by the opposing party. (emphasis supplied)
Accordingly, the facts in Novartis' Statement shall be "deemed admitted," and the Court will proceed on the assumption that there is no triable issue of fact with regard to the facts set forth in that Statement, since Luppino has provided no evidentiary basis to conclude otherwise.
This Court has jurisdiction of this case under 28 U.S.C. §§ 1334(a) and 157(a). This is a core proceeding under 28 U.S.C. § 157(b).
The undisputed facts may be briefly summarized.
Luppino was employed by Ciba-Geigy from 1962 through October 15, 1990. From 1983 or 1984 through October 15, 1990 Luppino held the position of Director of Data Processing, a managerial level job one step below vice president. The Department of Data Processing was responsible for running the computer and telecommunications networks for the Corporation. From 1983 through 1990, due to rapid technological change in the computer industry Ciba-Geigy leased almost all of the computer equipment needed in its business. An important aspect of Luppino's duties as Director of Data Processing was to determine Ciba-Geigy's need for computer equipment and the terms of proposed computer leases, to evaluate competing bids from leasing companies and to make recommendations to senior Ciba-Geigy management regarding vendors and lease terms.
At all relevant times, Ciba-Geigy had a clear policy barring its employees from accepting, directly or indirectly, payment, services, loans, gifts, trips, entertainment or other favors from other persons or organizations with whom the Company did business, without the approval of a superior. As Director of Data Processing, Luppino supervised approximately 80 employees, and he was aware of Ciba-Geigy's policy banning acceptance of things of value from companies, persons or organizations with which the Company did business. Luppino was aware of this policy and that it applied to the 80 employees he supervised. He was also aware that the policy applied to him, and that as a manager he was obliged to terminate the employment of any subordinate employees who violated this company policy. Luppino knew it was morally wrong and against the law to accept a bribe or kickback from a vendor to Ciba-Geigy, as well as being against Ciba-Geigy policy.
In the summer of 1983 Charles Kessler ("Kessler"), the President of New England Financial Corporation ("NEFC"), approached Luppino regarding the possibility of doing business with Ciba-Geigy. Kessler proposed to Luppino that if Luppino helped NEFC to become an approved lessor of computer equipment to Ciba-Geigy, and NEFC succeeded in obtaining leases from Ciba-Geigy, NEFC would pay Luppino one-third of NEFC's profit on those leases. Luppino agreed to this scheme. At that time (summer 1983), NEFC was not on Ciba-Geigy's approved bidders list for computer equipment leases and was not active in the computer leasing market. Through Luppino's efforts, Ciba-Geigy put NEFC on its approved list of computer lease bidders in December of 1983. NEFC almost immediately began to bid, successfully, on Ciba-Geigy computer leases.
In 1984 Kessler, who was also a certified public accountant, recommended that Luppino form a personally-owned corporation to which NEFC would make its kickback payments. Such a corporation could shelter the income through tax write-offs, pay Luppino a salary and permit him to maintain a pension plan and write off an automobile as a corporate expense. Luppino agreed to this arrangement and organized DTA Consultants, Inc. ("DTA"). At all relevant times Luppino was the sole shareholder of DTA. Kessler set up DTA for Luppino and served as DTA's accountant through and including the time of trial in the state court.
From 1983 until he was terminated as a Ciba-Geigy employee in October 1990, Luppino recommended to his superiors that Ciba-Geigy accept many NEFC bids, and these recommendations were almost always accepted by his superiors. During this period, approximately 80% of NEFC's total leasing business came from Ciba-Geigy, for an approximate lease value total of $5 million. During this same period, Luppino, regularly provided NEFC with information, including "residual value forecasting services," which materially assisted NEFC in bidding and obtaining leasing business from Ciba-Geigy. NEFC won about 80% of the Ciba-Geigy leases on which it bid.
During the period from 1984 through October 1990, NEFC paid $117,317 to Luppino's corporation, DTA. This figure constituted one-third of the profits NEFC made on its leases with Ciba-Geigy.
At no time prior to his termination as an employee of Ciba-Geigy in October 1990 did Luppino disclose to Ciba-Geigy the existence or his ownership of DTA, his receipt of the payments totalling $117,317 from NEFC or any other facts concerning his personal arrangements with Kessler and NEFC. Ciba-Geigy did not learn about Luppino's secret arrangements with Kessler and NEFC and his ownership or the existence of DTA until after termination of Luppino's employment in October 1990.
In October 1990, after Ciba-Geigy management received a complaint for sexual harassment from a Company employee who was a subordinate of...
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