In Re Yaseen K. Odeh

• Decision Date: 06 July 2010
• Docket Number: Bankruptcy No. 09 B 03275.,Adversary No. 09 A 01094.
• Citation: 431 B.R. 807
• Parties: In re Yaseen K. ODEH, Debtor.Vivian Sierra Birriel, individually and as independent administrator of the Estate of Tony Birriel, deceased, Plaintiff,v.Yaseen K. Odeh, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Illinois

431 B.R. 807

In re Yaseen K. ODEH, Debtor.Vivian Sierra Birriel, individually and as independent administrator of the Estate of Tony Birriel, deceased, Plaintiff,v.Yaseen K. Odeh, Defendant.

Bankruptcy No. 09 B 03275.

Adversary No. 09 A 01094.

United States Bankruptcy Court,

N.D. Illinois,

Eastern Division.

July 6, 2010.

COPYRIGHT MATERIAL OMITTED

Miriam R. Stein, Robert A. McKenzie, Arnstein & Lehr LLP, Chicago, IL, for Debtor.

Clark Raymond, Raymond & Raymond, Schaumburg, IL, Abraham Brustein, Derek D. Samz, Dimonte & Lizak, LLC, Park Ridge, IL, for Vivian Sierra Birriel.

MEMORANDUM OF DECISION

EUGENE R. WEDOFF, Bankruptcy Judge.

The adversary proceeding now before the court arises in the Chapter 7 bankruptcy case of Yaseen Odeh, a medical doctor. The proceeding was brought by Vivian Birriel, both individually and as the administrator of the estate of her brother Tony Birriel. Vivian's adversary complaint alleges (1) that, after committing medical malpractice resulting in Tony's death, Odeh attempted to cover up his malpractice by altering Tony's medical records, and (2) that the cover-up generated a nondischargeable debt under § 523(a)(4), and (6) of the Bankruptcy Code (Title 11, U.S.C.). Odeh has moved to dismiss the complaint under Federal Rule of Bankruptcy Procedure 7012(b)-which makes Federal Rule of Civil Procedure 12(b)(6) applicable to adversary proceedings-for failure to state a claim on which relief can be granted.

As discussed below, the complaint fails to state a claim under § 523(a)(4) for fraud while acting in a fiduciary capacity because it does not allege an essential element under that provision-that the fraud involved misuse of property. However, the complaint does state a claim under § 523(a)(6) for a willful and malicious injury by alleging that Odeh, in violation of his fiduciary duties under Illinois law, altered Tony's medical records knowing that the alteration would harm Tony's estate. Accordingly, the motion will be granted in part and denied in part.

Jurisdiction

Under 28 U.S.C. § 1334(a), the federal district courts have “original and exclusive jurisdiction” of all cases under the Bankruptcy Code. However, the district courts may refer bankruptcy cases to the bankruptcy judges for their districts under 28 U.S.C. § 157(a), and the District Court for the Northern District of Illinois has made such a reference through its Internal Operating Procedure 15(a). When presiding over a referred case, a bankruptcy judge has jurisdiction under 28 U.S.C. § 157(b)(1) to enter appropriate orders and judgments as to core proceedings in the case. Proceedings to determine the dischargeability of debts are core proceedings. 28 U.S. § C. 157(b)(2)(I).

Allegations of the Complaint

A motion to dismiss under Rule 12(b)(6) accepts the plaintiff's factual assertions as true and requires all reasonable inferences to be drawn in the plaintiff's favor. See Reger Dev., LLC v. Nat'l City Bank, 592 F.3d 759, 763 (7th Cir.2010). Vivian's adversary complaint alleges the following facts. ( See Adv. Docket No. 1, the “Complaint.”)

On April 3, 2004, Tony was admitted to Norwegian American Hospital, where Odeh was the admitting physician. ( Id. ¶¶ 6-8.) From April 13 through April 15, while Tony was a patient at the hospital, he suffered myocardial ischemia and cardiac arrest. ( Id. ¶ 10.) The hospital did not have the facilities to treat this condition, and so, on April 15, Tony was transferred to another hospital. ( Id. ¶¶ 12-13.) He died three days later from complications of his prior myocardial injury. ( Id. ¶ 14.) During the period when Tony was receiving treatment at Norwegian American Hospital, General Star Indemnity Company provided Odeh with malpractice insurance. ( Id. ¶ 16.)

In August 2004, about four months after Tony's death, Odeh sought to avoid malpractice liability in connection with his treatment of Tony by altering Tony's medical records to present a false description of the treatment. ( Id. ¶¶ 18-19.) The alteration would prevent Tony's estate from obtaining a full recovery for Odeh's malpractice, either because, if the alteration were not discovered, Vivian would be unable to establish the malpractice, or because, if the alteration were discovered, Odeh's malpractice insurer would be able to deny coverage. ( Id. ¶ 21.)

On June 28, 2005, Vivian commenced a malpractice action against Odeh in the Circuit Court of Cook County, Illinois, seeking damages under various theories. ( Id. ¶ 19.) During a deposition in the state court action, Odeh admitted falsifying Tony's medical records. ( Id. ¶ 20.) Thereafter, based on the falsification, General Star filed an action in the United States District Court seeking a declaration that it has no duty to defend or indemnify Odeh. ( Id. ¶ 22.)

Vivian's complaint in this court alleges that Odeh breached his fiduciary duties to Tony by altering the medical records, and that this breach damaged her by, among other things, causing her to incur the costs of investigating Odeh's attempted cover-up and potentially preventing her from recovering any insurance proceeds from General Star. Count I seeks to have this debt held nondischargeable under § 523(a)(4) of the Bankruptcy Code on the ground that Odeh committed fraud while acting in a fiduciary capacity, and Count II asserts that the debt should be nondischargeable pursuant to § 523(a)(6) as arising from a willful and malicious injury.

Conclusions of Law

Section 727(a) of the Bankruptcy Code makes the pre-bankruptcy debts of an individual Chapter 7 debtor like Odeh subject to a broad discharge, defined by § 524(a) of the Code. However, some types of debt-those listed in § 523(a)-are excepted from the discharge. Establishing an exception to discharge under § 523(a) is a two-part exercise. First, the creditor must prove a “debt” under applicable non-bankruptcy law.¹ Second, the creditor must show that the debt falls within one of the categories listed in § 523(a). See WISH Acquisition, LLC v. Salvino (In re Salvino), 373 B.R. 578, 584 (Bankr.N.D.Ill.2007). Odeh's motion to dismiss asserts that Vivian's complaint satisfies neither of these requirements.

The Supreme Court recently redefined the standard for surviving a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure: “[A] complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, ---U.S. ----, ----, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)); accord Reger Dev., LLC v. Nat'l City Bank, 592 F.3d 759, 764 (7th Cir.2010). Under this standard, “ ‘a plaintiff must provide only enough detail to give the defendant fair notice of what the claim is and the grounds upon which it rests, and, through his allegations, show that it is plausible, rather than merely speculative, that he is entitled to relief.’ ” Reger, 592 F.3d at 764 (quoting Tamayo v. Blagojevich, 526 F.3d 1074, 1083 (7th Cir.2008)).

In this case, Vivian's complaint provides fair notice of her claim that Odeh's breach of fiduciary duty gives rise to a nondischargeable debt, and it plausibly alleges facts supporting both elements of a nondischargeability claim: a debt under applicable non-bankruptcy law and nondischargeability under § 523(a)(6).

1. Debt under applicable non-bankruptcy law

Vivian asserts that Odeh's alteration of medical records constituted a breach of fiduciary duty under Illinois law and that this breach inflicted an injury upon her. Illinois law generally recognizes a cause of action for damages arising from a breach of fiduciary duty. See, e.g., Doe v. Roe, 289 Ill.App.3d 116, 123, 224 Ill.Dec. 325, 681 N.E.2d 640, 646 (1st Dist.1997) (upholding a client's breach of fiduciary duty claim against her attorney). This cause of action has three elements: “[1] that a fiduciary duty exists, [2] that the fiduciary duty was breached, and [3] that such breach proximately caused the injury of which the plaintiff complains.” Neade v. Portes, 193 Ill.2d 433, 444, 250 Ill.Dec. 733, 739 N.E.2d 496, 502 (2000) (citing Martin v. Heinold Commodities, Inc., 163 Ill.2d 33, 53, 205 Ill.Dec. 443, 643 N.E.2d 734, 744 (1994)). The facts alleged in the adversary complaint meet these requirements.

(a) Claim for a physician's breach of fiduciary duty under Illinois law

There appears to be no reported Illinois decision in which a physician has been found subject to a claim for breach of fiduciary duty. Indeed, in Neade v. Portes, the Illinois Supreme Court declined to approve such a cause of action, holding that the claim for breach of fiduciary duty in that case would be duplicative of a traditional medical malpractice claim. Neade, 193 Ill.2d at 440-450, 250 Ill.Dec. 733, 739 N.E.2d at 500-06. Odeh argues that Neade makes it impossible for Vivian to assert a debt for breach of fiduciary duty based on his alleged record alteration.

Neade, however, is not applicable here. In determining that the plaintiff's claims for breach of fiduciary duty and malpractice were duplicative, the Illinois Supreme Court in Neade examined the “operative facts together with the injury.” Id. at 443, 250 Ill.Dec. 733, 739 N.E.2d at 502. The court found that the same asserted facts-that the defendant withheld treatment that another physician would have provided-gave rise to the plaintiff's claims for both medical malpractice and breach of fiduciary duty. See id. at 444-45, 250 Ill.Dec. 733, 739 N.E.2d at 502-03.² The central issue for both claims was whether the defendant complied with the applicable standard of medical care. Id. The plaintiff also complained of identical injuries and sought identical damages for each claim. Id. at 445-46, 250 Ill.Dec. 733, 739 N.E.2d at 503. Accordingly, the Supreme Court held that, “under the facts in the case at bar,” the breach of fiduciary duty claim duplicated the medical negligence...