In re Waters, Bankruptcy No. 98-34649-JDL. Adversary No. 99-0042.

• Decision Date: 14 October 1999
• Docket Number: Bankruptcy No. 98-34649-JDL. Adversary No. 99-0042.
• Citation: 239 BR 893
• Parties: In re Larry Joseph WATERS, Debtor. Billie J. Metcalfe, Julia M. Metcalfe, and Johnny D. Metcalfe, Plaintiffs, v. Larry Joseph Waters, Defendant.
• Court: U.S. Bankruptcy Court — Western District of Tennessee

239 B.R. 893 (1999)

In re Larry Joseph WATERS, Debtor Billie J. Metcalfe, Julia M. Metcalfe, and Johnny D. Metcalfe, Plaintiffs, v. Larry Joseph Waters, Defendant.

Bankruptcy No. 98-34649-JDL. Adversary No. 99-0042.

United States Bankruptcy Court, W.D. Tennessee, Western Division.

October 14, 1999.

COPYRIGHT MATERIAL OMITTED

Austin B. Byrd, Memphis, Tennessee, for plaintiffs.

Paul E. Lewis, Millington, Tennessee, for defendants.

OPINION

JENNIE D. LATTA, Bankruptcy Judge.

In this adversary proceeding, the plaintiffs seek a determination that the debtor/defendant may not discharge a judgment awarded to them for punitive damages arising out of a legal malpractice case. The plaintiffs assert that the judgment is not dischargeable under any of three exceptions to discharge, 11 U.S.C. § 523(a)(2), (4), or (6). Plaintiffs have moved for judgment on the pleadings or in the alternative, for summary judgment. The defendant has not filed a counter-motion, but agrees that there are no disputed issues of fact and thus that the matter may be determined without trial. Neither party has introduced matters outside the pleadings for consideration by the court. The court concludes that judgment should be entered for the defendant on each of the Plaintiffs' theories of recovery. This is a core proceeding. 28 U.S.C. § 157(b)(2).

I.

The following factual allegations of the amended complaint are admitted in defendant's answer:

In September 1986, plaintiff Billie Metcalfe was 16 years of age when she was a passenger in a car that was involved in an automobile accident. She sustained injuries including a broken leg, a concussion, facial cuts and had a pin inserted in her hip. Plaintiff Billie Metcalfe and her parents, Plaintiffs Julia and Johnny Metcalfe hired Defendant Larry Waters to represent them in connection with the accident.

In September 1987, Defendant Waters filed a complaint on behalf of the Plaintiffs against the driver of the vehicle Billie Metcalfe had been riding in, the driver\'s parents, and several other defendants. On March 15, 1990, Defendant Waters non-suited the Complaint as he was not prepared on the day of trial. He refiled the Complaint on March 6, 1991, but he did not pay the filing fee or properly issue summons. The Complaint was dismissed by the trial court against some of the defendants in December 1992 due to the expiration of the statute of limitations. It was dismissed as to the remaining defendants on May 14, 1993, when Defendant Waters failed to appear for the trial.

Defendant Waters lied to the Plaintiffs about the status of the case for several months, telling them it was still pending even though he knew it had been dismissed. When he finally informed the Plaintiffs that the case had been dismissed, he did not state the reason for dismissal, but told them it was worth appealing.

The Plaintiffs initiated a legal malpractice suit in state court against Defendant Waters. A copy of the state court complaint is attached to the adversary complaint as Exhibit A.

In the amended answer to his complaint and in his testimony, Waters admitted that he failed to apprise the plaintiffs of the status of their case, failed to adequately prepare for trial, failed to refile suit properly after taking a non-suit, failed to file summons properly, failed to appear the second time the case was set for trial, and failed to file a notice of appeal on behalf of the plaintiffs. Defendant Waters conceded that his failure to inform the plaintiffs that the case had been dismissed was an intentional, fraudulent, malicious and/or reckless effort to conceal his mistakes. A copy of the amended answer filed in the state suit is attached to the adversary complaint as Exhibit B.

At trial, the court directed a verdict for the plaintiffs on liability. The jury returned a verdict against Defendant Waters and his co-defendant in the amount of $450,000 in compensatory damages. The verdict also included $100,000 punitive damages against Defendant Waters only. A copy of the Jury Verdict is attached to the adversary complaint as Exhibit C.

In denying defendants\' Motion for New Trial, Remittitur, and Protective Order, the trial court affirmatively approved the award of punitive damages against Defendant Waters finding that the conduct of Defendant Waters in not keeping Plaintiffs informed about the status of their case and of lying to the Plaintiffs about the dismissal was the gravamen of the punitive damages award. A copy of the Amended Order Denying Motion for New Trial, Remittitur, and Protective order is attached to the adversary complaint as Exhibit D.

The case was appealed and the Court of Appeals reversed the punitive damages award. The Tennessee Supreme Court granted Plaintiffs\' application for permission to appeal. See Metcalfe v. Waters, No. 02A01-9510-CV-11236, 1996 WL 622696 (Tenn.Ct.App. Oct. 29, 1996) .

A copy of the opinion of the Tennessee Supreme Court in Metcalfe v. Waters, 970 S.W.2d 448 (Tenn.1998), is attached to the adversary complaint as Exhibit E. The defendant admits that the opinion is attached, but does not admit the plaintiffs\' characterization of the opinion.

The issue of compensatory damages was remanded to the trial court. The trial court entered an Order Reinstating the Jury Verdict; however, the Plaintiffs have entered an Order nonsuiting the claims against Defendant Waters A copy of the Order Reinstating Jury Verdict is attached to the adversary complaint as Exhibit F.

On October 21, 1998, Defendant Larry Waters filed a Chapter 7 petition commencing the above-referenced case. Defendant Waters listed Billie J. Metcalfe as an unsecured creditor and listed the debt as a civil judgment in the amount of $450,000. As Plaintiffs have non-suited their remaining claims against Defendant Waters, the only debt at issue is the $100,000 punitive damages award.

This court's review of the opinions of the Tennessee Court of Appeals and the Tennessee Supreme Court reveals that the court of appeals felt that a remittitur of the compensatory damages award to $100,000 would be appropriate on the record established at trial. Realizing that a remittitur from $450,000 to $100,000 would in effect destroy the jury's verdict, the court instead vacated the jury verdict and remanded the case for new trial on the issue of damages. Metcalfe v. Waters, 1996 WL 622696, *4 (Tenn. Ct. App.1996). Further, the court of appeals vacated the jury verdict for punitive damages and directed a verdict for the defendant on the basis that the egregious conduct that led to the award of punitive damages was not contemporaneous with the negligent conduct that warranted the award of compensatory damages. Id. at *5.

The Tennessee Supreme Court reversed the decision of the court of appeals in part reinstating the jury's verdict as to punitive damages. The court found, "There was clear and convincing evidence of intentional, fraudulent, malicious, or reckless conduct on the part of Waters, and there is no requirement that attempts to conceal be contemporaneous with the original wrongdoing." Metcalfe v. Waters, 970 S.W.2d 448, 452 (Tenn.1998). The court remanded the case to the trial court for a new trial solely on the issue of compensatory damages. Id.

Upon remand, it appears that the plaintiffs took a voluntary nonsuit as to the defendant Waters only. TENN.R.CIV.P. 41.01 provides that a plaintiff has a right, under certain conditions, to take a voluntary nonsuit to dismiss an action without prejudice before the conclusion of trial.¹ The plaintiffs and defendant apparently agree that the effect of the plaintiffs' voluntary nonsuit was to dismiss the plaintiffs' claim for compensatory damages as to Waters, but to leave intact the judgment for punitive damages as reinstated by the Tennessee Supreme Court.

II.

The court determines a motion for judgment on the pleadings under FED.R.CIV.P. 12(c) FED.R.BANKR.P. 7012(c) in the same manner as a motion to dismiss under Rule 12(b)(6). Grindstaff v. Green, 133 F.3d 416, 421 (6th Cir.1998); Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 n. 1 (6th Cir.1988). The court must construe the facts presented in the pleadings and the inferences to be drawn therefrom in the light most favorable to the non-moving party. 5A WRIGHT & MILLER, FEDERAL PRACTICE AND PROCEDURE, 2D ED., § 1368 (West 1990). In addition, the court may consider matters of public record, and authentic documents upon which the complaint is based if attached to the complaint or as an exhibit to the motion. Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1391 (3d Cir.1994); Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196-97 (3d Cir. 1993), cert. denied, 510 U.S. 1042, 114 S.Ct. 687, 126 L.Ed.2d 655 (1994). The movant must clearly establish that no material issue of fact remains to be resolved and that he is entitled to judgment as a matter of law. WRIGHT & MILLER, § 1368. "The plaintiff may not secure a judgment on the pleadings when the answer raises issues of fact that, if proved, would defeat recovery." Id.

In the alternative, the plaintiff prays for summary judgment. FED.R.CIV.P. 56. Federal Rule of Bankruptcy Procedure 7056 mandates the entry of summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." On a motion for summary judgment, the movant has the initial burden of showing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265 (1986) ("the burden on the moving party may be discharged by `showing' . . . that there is an absence of evidence to support the non-moving party's case"). Under FED.R.CIV.P. 56(e), the burden shifts to the non-movant to "go beyond the pleadings and by . . ....