In Re: Scott Bradley Meyrowitz
| Decision Date | 20 December 2010 |
| Docket Number | CASE NO. 06-31660-BJH-11,Adversary No. 10-03227 |
| Court | United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Northern District of Texas |
| Parties | In re: SCOTT BRADLEY MEYROWITZ, Debtor. BILL KIMPEL, KI MP EL'S JEWELRY & GIFTS, INC., and PROVIDENTIAL OPPORTUNITIES, INC., Plaintiffs, v. SCOTT BRADLEY MEYROWITZ, SCOTT MEYROWITZ, INC., MEYROWITZ INC., NUTRITOX, LLC, and CRAIG NEWBOLD,Defendants. |
The following constitutes the ruling of the court and has the force and effect therein described.
Before the Court is the Motion to Dismiss Original Complaint filed by Meyrowitz, Inc. ("MI") (the "MI Motion") and the Motion to Dismiss Complaint or, in the Alternative, for Abstention filed by Craig Newbold ("Newbold") (the "Newbold Motion") (collectively, the "Motions") in the above adversary proceeding. This Memorandum Opinion contains the Court's findings of fact and conclusions of law with respect to the Motions in accordance with Federal Rule of Bankruptcy Procedure 7052.
Plaintiff William R. Kimpel ("Kimpel") is an individual who resides in Columbiana, Ohio. Plaintiffs Providential Opportunities, Inc. ("Providential") and Kimpel's Jewelry & Gifts, Inc. ("Kimpel's Jewelry") are Ohio corporations owed by Kimpel.1 Kimpel filed his own case under chapter 7 of the Bankruptcy Code in the Northern District of Ohio on October 15, 2005-i.e., Case No. 05-49432. Kimpel's Jewelry filed its chapter 11 case on the same date in the same court-i.e., Case No. 05-49330. Kimpel received a discharge in his case on June 15, 2006. A plan was confirmed in the Kimpel's Jewelry case on May 23, 2007.
As relevant here, Kimpel has been involved in the jewelry business in Ohio for a number of years through Kimpel's Jewelry and Providential. According to Kimpel, he contacted and first met Scott Meyrowitz ("Meyrowitz") in 2002 when Kimpel was pursuing his idea of selling and marketing rare colored diamonds to hedge funds and/or private collectors. Meyrowitz allegedly told Kimpel that Meyrowitz had been entrusted with the brokering of a collection of colored diamonds. Although the allegations in the Complaint become fairly convoluted, in essence, the Kimpels allege that they went into business with Newbold and Meyrowitz (and various entities that Meyrowitz is alleged to have controlled) and that the various defendants failed to perform in accordance with their allegedagreements, converted cash and other items of the Kimpels, and engaged in various conspiracies and other fraudulent conduct.
Of course, in the midst of their various business relationships/transactions, Meyrowitz filed for chapter 11 relief in this Court. Meyrowitz's chapter 11 case has a bit of its own tortured history but, as relevant here, Meyrowitz failed to disclose his alleged business relationship with any ofthe Kimpels in his schedules or statement of financial affairs. Meyrowitz confirmed a plan of reorganization on June 27, 2008 (the "Meyrowitz Plan"). On August 10, 2010, the Kimpels filed a motion for leave to file late claims in Meyrowitz's bankruptcy case, which the Court granted on October 1, 2010 due to Meyrowitz's failure to give any of the Kimpels notice of his bankruptcy filing.2 Although the Meyrowitz Plan was confirmed, Meyrowitz has defaulted under its terms and has, in essence, disappeared. According to Meyrowitz's counsel, Meyrowitz is not (i) responding to his counsel's inquiries, and/or (ii) following his counsel's legal advice. After a second hearing on his counsel's motion to withdraw (at which Meyrowitz failed to appear or respond), the Court granted the motion and authorized his counsel's with drawal.
In sum, Meyrowitz has become unresponsive-to his former counsel, the Trustee created under the Meyrowitz Plan (who is responsible for collecting certain post-confirmation income from Meyrowitz and distributing it to creditors), his creditors, and this Court. In addition, while named as an individual defendant in this adversary proceeding, Meyrowitz has failed to file an answer or otherwise respond to the Kimpels' allegations in the Complaint. The Court anticipates that the Kimpels will seek the entry of a default judgment against Meyrowitz if the adversary proceeding remains pending here.
MI, a Georgia corporation with its principal place of business in Atlanta, Georgia, is allegedly owned by Meyrowitz's brother Barry. According to MI, "[f]or the last several years, MI has had no business associations with the Debtor [Meyrowitz], Scott Meyrowitz, Inc., or Nutritox, LLC." MI Motion at ¶ 3. In the MI Motion, MI contends that (i) this Court lacks jurisdiction over the claims asserted against MI, and (ii) the Kimpels have failed to state any claims against it due to the "broad, vague, conclusory allegations in violation of Federal Rules of Civil Procedure 8 and 9." Id. at ¶ 2.
Newbold, an Ohio resident, denies that the causes of action asserted against him in the Complaint constitute core proceedings and refuses to consent to the entry of a final judgment by this Court. Newbold Motion at ¶ 1. Moreover, in the Newbold Motion, he contends that (i) this Court lacks jurisdiction over the claims asserted against him; (ii) these claims were not "specifically and unequivocally preserved" in the plan confirmed in the Kimpel's Jewelry bankruptcy case (the "KJ Plan") such that the claims are barred by the doctrine of res judicata3and (iii) in the alternative, this Court should abstain from hearing this adversary proceeding in the interests of justice and comity, citing 28 U.S.C. § 1334(c)(1).4
In response, the Kimpels contend that (i) this Court has "related to" jurisdiction over theclaims asserted in the Complaint; (ii) all claims asserted by Kimpel's Jewelry were sufficiently preserved in the KJ Plan; (iii) the claims are sufficiently pled in the Complaint against both MI and Newbold, but if the Court disagrees, leave to amend should be given to them; and (iv) abstention is not appropriate.
Moreover, apparently anticipating the Court's rulings on the MI Motion regarding the sufficiency of the Complaint, on November 29, 2010 (the eve of the hearing on the Newbold Motion (the "Newbold Hearing")), the Kimpels filed, without leave to amend having been granted to them, their First Amended Complaint. The Kimpels argued at the Newbold Hearing that leave to amend was not required. Both MI and Newbold disagreed, arguing that the Kimpels had no right to amend without first having obtained their consent or the Court's leave in accordance with Federal Rule of Civil Procedure 15(a)(2).
The parties have a threshold disagreement over which complaint the Court should evaluate when considering the Motions.5 For the reasons explained more fully below, the Court concludes that the Kimpels did not have a right to amend the Complaint because they never obtained leave to amendnor did they receive the consent of MI or Newbold. See Fed. R. Civ. P. 15(a)(2). Accordingly, the First Amended Complaint will be stricken, and the Court will proceed to evaluate the Motions against the claims as pled in the Complaint. See Hunter v. Martinez, No. 3-08-CV-893-B, 2008 WL 3895969, at *2 n.2 (N.D. Tex. Aug. 20, 2008) ().
While neither party briefed this issue, the Kimpels appear to be relying upon the now-defunct Rule 15(a)-i.e., the Rule that was in effect prior to December 1, 2009-for their position. That Rule did indeed state that "[a] party may amend its pleading once as a matter of course before being served with a responsive pleading." However, that Rule was replaced with new language, which became effective on December 1, 2009. The language that is applicable to this adversary proceeding provides that "[a] party may amend its pleading once as a matter of course within: (A) 21 days after serving it, or (B) if the pleading is one to which a responsive pleading is required, 21 days after service of a responsive pleading or 21 days after service of a motion under Rule 12(b), (e), or (f), whichever is earlier." Fed R. Civ. P. 15(a)(1).
Application of Rule 15(a)(1)(A) works against the Kimpels here because the Complaint was filed on August 10, 2010. Thus, the Complaint could be freely amended within 21 days of August 10, 2010-i.e., by August 31, 2010. Yet the First Amended Complaint was not filed until November 29, 2010-i.e., almost three months after the deadline.
Likewise, application ofRule 15(a)(1)(B) works against the Kimpels because MI filed the MI Motion on October 11, 2010 and Newbold filed the Newbold Motion on October 12, 2010. There is no question that the Motions are brought pursuant to Rule 12(b); therefore there is no question thatthe Kimpels had 21 days from those dates within which to amend their claims against them-i.e., by October31, 2010(astoMI)andNovember1, 2010(astoNewbold). Yet, as noted above, the First AmendedComplaintwasnotfileduntilNovember29, 2010-i.e., atleast28daysafterthedeadline.
For these reasons, the Kimpels were not at liberty to freely amend when they filed the First Amended Complaint on November 29, 2010 and that complaint is stricken from the record.
The parties also have a threshold disagreement with respect to this Court's subject matter jurisdiction. While all parties agree that this Court's jurisdiction is, at best, premised upon "related to" jurisdiction under 28 U.S.C. § 1334, MI and Newbold contend that the traditional test for "related to" jurisdiction-i.e., a proceeding is "related to" a bankruptcy case if it could conceivably have an effect on the bankruptcy estate being administered-is...
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