In re McCabe Group

• Decision Date: 22 January 2010
• Docket Number: Bankruptcy No. 03-17429-WCH.,Adversary No. 07-1191.
• Citation: 424 B.R. 1
• Parties: In re THE McCABE GROUP, a Professional Corporation, Debtor. Joseph Braunstein, Chapter 7 Trustee, Plaintiff, v. Karren Kelly McCabe, Defendant.
• Court: U.S. Bankruptcy Court — District of Massachusetts

Page 1

424 B.R. 1

In re THE McCABE GROUP, a Professional Corporation, Debtor Joseph Braunstein, Chapter 7 Trustee, Plaintiff, v. Karren Kelly McCabe, Defendant.

Bankruptcy No. 03-17429-WCH.

Adversary No. 07-1191.

United States Bankruptcy Court, D. Massachusetts, Eastern Division.

January 22, 2010.

COPYRIGHT MATERIAL OMITTED

Paula R.C. Bachtell, Gary L. Donahue, Dept. of Justice, Boston, MA, for John Fitzgerald, Office of U.S. Trustee.

Joseph Braunstein, Riemer and Braunstein, LLP, Boston, MA, trustee.

Mark W. Corner, Kristin M. McDonough, Guy B. Moss, Riemer & Braunstein, Boston, MA, for trustee.

William J. Hanlon, Seyfarth Shaw LLP, Donna Brewer MacKenna, Casner & Edwards, LLP, David J. Reier, Posternak Blankstein & Lund LLP, Boston, MA, for debtor.

MEMORANDUM OF DECISION

WILLIAM C. HILLMAN, Bankruptcy Judge.

I. INTRODUCTION

The matters before the Court are the "Motion by Defendant, Karren K. McCabe for Summary Judgment Dismissing the Complaint" (the "Defendant's Motion") filed by Karren Kelly McCabe (the "Defendant"), the "Plaintiff's Cross-Motion for Summary Judgment" (the "Cross-Motion") filed by Joseph Braunstein (the "Trustee"), Chapter 7 trustee of the estate of The McCabe Group, A Professional Corporation (the "McCabe Group"), the "Plaintiff's Motion to Strike Defendant's Motion for Summary Judgment for Failure to Comply with MLBR 7056-1" (the "Motion to Strike"), the "Objection by Defendant Karren Kelly McCabe to [the Motion to Strike]" (the "Objection"), and "Karren K. McCabe's Opposition to [the Cross-Motion]" (the "Opposition"). Generally, this adversary proceeding arises out of a stipulation of settlement (the "Stipulation") approved in the consolidated cases of the McCabe Group, TMG Holdings, LLC ("Holdings"), a subsidiary of the McCabe Group, and Edwin A. McCabe, the Defendant's spouse and principal of the McCabe Group, prior to their conversion to Chapter 7 from Chapter 11 by which certain insurance companies setoff an amount owed to the McCabe Group for legal fees against a judgment owed jointly and severally by Holdings, Edwin McCabe, and the Defendant and deemed the balance satisfied. Through his Complaint, the Trustee seeks to equitably subrogate the McCabe Group to the right of the insurance companies to collect the judgment from the Defendant. Alternatively, the Trustee contends that the Defendant was unjustly enriched by the forgiveness of this debt to the detriment of the McCabe Group. Each party asserts the other's motion should be denied on procedural grounds and that judgment should enter in their favor as a matter of law. For the reasons set forth below, I will grant the Cross-Motion in part and deny it in part, grant the Defendant's Motion in part and deny it in part, and deny the Motion to Strike.

II. PROCEDURAL MATTERS

In many respects, the procedural disputes surrounding these matters are more convoluted than the substance of the cross-motions for summary judgment. Because these disputes implicate threshold issues, and because their resolution will impact the contents of the record before me, I will address them first before reciting the facts of this case.

Pursuant to Fed.R.Civ.P. 56, summary judgment "shall be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law."¹ "A `genuine' issue is one supported by such evidence that `a reasonable jury, drawing favorable inferences,' could resolve it in favor of the nonmoving party."² Material facts are those having the potential to affect the outcome of the suit under the applicable law.³

The party seeking summary judgment "always bears the initial responsibility ... of identifying those portions of `the pleadings, depositions, answers to interrogatories, and admissions on filed, together with the affidavits, if any,' which demonstrate the absence of a genuine issue of material fact."<sup>4</sup> The nonmoving party must then "produce `specific facts, in suitable evidentiary form, to ... establish the presence of a trialworthy issue.'"⁵ A trialworthy issue cannot be established by "conclusory allegations, improbable inferences, and unsupported speculation."⁶ The Court must view the record in the light most favorable to the nonmoving party and draw all reasonable inferences in its favor.⁷

Much of the jurisprudence on Fed. R.Civ.P. 56(c) is derived from two cases decided by the Supreme Court of the United States on the same day, namely, Anderson v. Liberty Lobby, Inc.⁸ and Celotex v. Catrett.⁹ Although typically cited in unison, these cases are factually distinct and address two separate issues regarding motions filed under Rule 56(c). In Anderson, the Supreme Court considered the quantum of evidence required to oppose a motion for summary judgment where the petitioner supported his motion with an affidavit affirmatively producing evidence negating an essential element of the respondent's complaint.¹⁰ The Defendant refers to this as a "traditional" motion for summary judgment.

In contrast, Celotex involved a motion for summary judgment supported only by materials suggesting that the nonmoving party could not produce any evidence as to an essential element of its claim.¹¹ On appeal, the United States Court of Appeals for the District of Columbia Circuit stated that the motion was rendered "fatally defective" by the fact that the petitioner "made no effort to adduce any evidence, in the form of affidavits or otherwise, to support its motion."¹² The Supreme Court reversed, explaining:

In our view, the plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. In such a situation, there can be "no genuine issue as to any material fact," since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial. The moving party is "entitled to a judgment as a matter of law" because the nonmoving party has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof.

* * *

[W]e find no express or implied requirement in Rule 56 that the moving party support its motion with affidavits or other similar materials negating the opponent's claim. On the contrary, Rule 56(c), which refers to "the affidavits, if any", suggests the absence of such a requirement. And if there were any doubt about the meaning of Rule 56(c) in this regard, such doubt is clearly removed by Rules 56(a) and (b), which provide that claimants and defendants, respectively, may move for summary judgment "with or without supporting affidavits". The import of these subsections is that, regardless of whether the moving party accompanies its summary judgment motion with affidavits, the motion may, and should, be granted so long as whatever is before the district court demonstrates that the standard for the entry of summary judgment, as set forth in Rule 56(c), is satisfied.¹³

The Supreme Court held that "the burden on the moving party may be discharged by `showing' — that is, pointing out to the [trial] court — that there is an absence of evidence to support the nonmoving party's case."<sup>14</sup> After such a showing, "Rule 56(e) therefore requires the nonmoving party[, who will bear the burden of proof at trial on a dispositive issue,] to go beyond the pleadings and by [his or] her own affidavits, or by the `depositions, answers to interrogatories, and admissions on file,' designate `specific facts showing that there is a genuine issue for trial.'"¹⁵

In the present case, the Defendant's Motion is one relying on Celotex (a "Celotex Motion"), while the Cross-Motion is a "traditional" motion for summary judgment under Anderson. This distinction forms the basis of the dispute embodied in the Motion to Strike and the Objection thereto. Pursuant to Local Rule 56.1 of the United States District Court for the District of Massachusetts, adopted and made applicable to proceedings in the Bankruptcy Court by Massachusetts Local Bankruptcy Rule ("MLBR") 7056-1, motions for summary judgment must include "a concise statement of the material facts of record as to which the moving party contends there is no genuine issue to be tried, with page references to affidavits, depositions, and other documentation."¹⁶ Failure to include such a statement constitutes grounds for denial of the motion.¹⁷ Attached to the Defendant's Motion is a document titled "Local Rule 7056-1 Statement in Support of [the Defendant's Motion]" that merely states that a statement of undisputed material facts is unnecessary because, under Celotex, the absence of an essential element of the case renders all other facts immaterial. The Trustee moves to strike the Defendant's Motion, arguing that this does not comply with LR, D. Mass. 56.1. The Objection echoes the rationale offered in the statement at issue.

Based upon the above-cited passages from Celotex, I find the Objection well-taken. To reiterate, the Supreme Court expressly stated that "a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial."¹⁸ As such, the absence of any material fact obviates the need for a moving party filing a Celotex Motion to provide the statement of undisputed material facts required by LR, D. Mass. 56.1. Therefore, I will deny the Motion to Strike.

Through the Opposition, the Defendant similarly raises two procedural arguments seeking a denial of the Cross-Motion without further consideration on the merits. First, the Defendant asserts that the Trustee failed to confer with Defendant's counsel to determine whether the Cross-Moti...