Lee v. Daniel (In re Daniel)
| Decision Date | 25 May 2017 |
| Docket Number | Adversary Proceeding No. 14–01041,Case No. 13–16365–MSH |
| Citation | 568 B.R. 162 |
| Parties | IN RE: Jane DANIEL, Debtor Vera Lee, Plaintiff v. Jane Daniel, Defendant |
| Court | U.S. Bankruptcy Court — District of Massachusetts |
Frank J. Frisoli, Jr., Cambridge, MA, for Plaintiff.
Peter R. Kaplan, Salem, MA, for Defendant.
In this adversary proceeding, the plaintiff, Vera Lee, a creditor of the defendant, Jane Daniel, the debtor in the main case, has moved for summary judgment on all counts of her four-count complaint. Ms. Lee seeks a judgment that the debt owed to her by Ms. Daniel be excepted from discharge under subparts (a)(2), (a)(4), and (a)(6) of Bankruptcy Code § 523 and that Ms. Daniel be denied a discharge altogether under subparts (a)(3) and (a)(4) of § 727 of the Code.1
The facts relevant to a determination of Ms. Lee's summary judgment motion are drawn from findings set forth in my February 23, 2017 Memorandum and Order on Debtor's Emergency Motion to Enforce the Automatic Stay in the main case (the "Stay Ruling"), In re Daniel, No. 13-16365-MSH, 2017 WL 727540, at *1 (Bankr. D. Mass. Feb. 23, 2017), the findings of the jury and the judge in Lee v. Mt. Ivy Press, L.P. & Others , Middlesex County Superior Court, CA No. 98–2456 (opinion at 2002 WL 31482112, Mass. Super., Jan 14, 2002), as well as the Superior Court's docket in that proceeding, Ms. Lee's Statement of Undisputed Facts,2 and pleadings in the main case of which I may take judicial notice.
Ms. Lee's claims against Ms. Daniel arose from a book publishing project involving a Holocaust survivor's memoir entitled Misha: A Memoir of the Holocaust Years. The subject of the memoir was Misha Defonseca, who claimed her parents were deported by the Nazis during World War II when she was a child of seven, leaving her to survive the War alone under harrowing circumstances including living in the forest while under the protection of a pack of wolves. Ms. Defonseca's incredible story3 came to the attention of Ms. Daniel, who held herself out as an experienced book publisher and operator of a publishing company, Mt. Ivy Press, L.P.4 Ms. Daniel, who ran her publishing enterprise out of the basement of her home in Newton, Massachusetts, convinced Ms. Defonseca that she could turn her memoir into an international best-seller. Ms. Defonseca agreed to let Ms. Daniel publish her work. Ms. Daniel then enlisted Ms. Lee to work with Ms. Defonseca to ghostwrite the book, promising to give Ms. Lee co-authorship credit and put her name on the book's cover.5
In 1995, Ms. Daniel, Ms. Defonseca and Ms. Lee entered into a publishing agreement with respect to the creation, publication, marketing and profit sharing with respect to Ms. Defonseca's memoir. The parties agreed that Ms. Lee and Ms. Defonseca would share the copyright to the work but that Ms. Defonseca would retain exclusively the rights to the French version of her memoir. Ms. Defonseca and Ms. Lee executed their own collaboration agreement in which they agreed to create Misha together and share authorship credit on the book's cover.
During the process of writing and publishing Misha, Ms. Daniel engaged in a determined campaign to deprive Ms. Lee and Ms. Defonseca of various rights and royalties to which they were entitled under their agreements. For example, as Misha neared publication in April of 1997, Ms. Daniel coerced Ms. Lee, through various threats, into entering into an agreement that gave Mt. Ivy half of Ms. Lee's copyright interest in the book. At or about the same time, Ms. Daniel tricked Ms. Defonseca, who was not a native English speaker, into signing a memorandum with respect to the French version of the book granting the copyright to Mt. Ivy. Once the book was published, Ms. Daniels employed a variety of scams and schemes to deprive both Ms. Lee and Ms. Defonseca of revenues generated by the book.
When Misha debuted in 1997, it became a best-seller in Italy, France and Quebec, Canada. It never took off in the U.S., however. Despite Ms. Daniel's representations, relied on by Ms. Lee and Ms. Defonseca, that she was an experienced and adequately capitalized publisher, she lacked both the financial wherewithal to publish sufficient copies of the book in its first U.S. printing and the marketing skill to generate the necessary publicity for the book.
The book was published without Ms. Lee's name on the cover and this last straw caused Ms. Lee to initiate the Middlesex County Superior Court lawsuit that ultimately resulted in her judgment against Ms. Daniel.
After a lengthy jury trial, on August 20, 2001, the jury rendered its verdict in favor of Ms. Lee on all of her claims against Mt. Ivy and Ms. Daniel.6 The jury found, among other things, that Ms. Daniel had interfered with Ms. Lee's contractual relations and fraudulently induced her to give up various rights in connection with the agreements regarding the publication of Misha. The jury also found that Ms. Daniel had willfully and knowingly committed unfair and deceptive acts against Ms. Lee in violation of Massachusetts General Laws Chapter 93A.7 On April 12, 2002, the superior court judge issued her findings of fact and rulings of law on Ms. Lee's Chapter 93A claims. Adopting the jury's findings, the superior court judge concluded that certain of Ms. Daniel's conduct was a "scam orchestrated by Ms. Daniel solely to withhold monies lawfully owed by Mt. Ivy to Lee and Defonseca" and that she engaged in deceptive business dealings "clearly outside the penumbra of any established concept of fairness." Lee v. Mt. Ivy Press, No. MICV1998–02456, 2002 WL 33956822 (Mass. Super. Apr. 12, 2002). She elaborated:
This court characterizes the totality of the defendants' conduct as having been infused with a high enough level of rascality to have raised an eyebrow, even to those inured to the ‘rough and tumble’ of the marketplace. Levings v. Forbes & Wallace, Inc. 8 Mass.App.Ct. 498, 504, 396 N.E.2d 149 (1979). Mt. Ivy Press, through Daniel, fraudulently pilfered copyrights and monies owed to two women. It set up a sham company, ignored contractual obligations, and intentionally failed to promote the Work domestically, all to defraud Defonseca and Lee of their livelihoods and gain additional copyright interests. Mt. Ivy also ignored contractual agreements with Lee, Daniel's long-time friend and neighbor, and lied to her to gain additional copyright interest in the book. Daniel also intentionally disregarded its contractual obligation to Lee, when she falsified complaints about the quality of Lee's work, in order to gain a tactical advantage. The deceptive conduct on the part of both Daniel and Mt. Ivy caused both Lee and Defonseca to act differently than they would have otherwise acted. From any vantage point, it is clear that any reasonable businessperson would find Daniel and Mt. Ivy's conduct reprehensible. Thus, each clearly violated G.L. c. 93A.
Lee v. Mt. Ivy Press, No. MICV1998–02456, 2002 WL 33956822 (Mass. Super. Apr. 12, 2002).
On April 17, 2002, the Middlesex Superior Court entered judgment in favor of Ms. Lee and against Ms. Daniel in excess of $11 million. This amount was arrived at by the judge's trebling the jury's damage calculation. By the time the judgement became final on June 15, 2005, after all appeals had been exhausted and accrued interest added, the judgment had swollen to more than $21 million.
As outlined in the Stay Ruling, Ms. Daniel managed to keep Ms. Lee at bay for years, doing her utmost to evade the day of reckoning as to Ms. Lee's judgment. Finally, on October 13, 2014, having run out of further delaying tactics, Ms. Daniel filed her bankruptcy petition in this court.
On Schedule B—Personal Property of the schedules of assets and liabilities filed in support of Ms. Daniel's bankruptcy petition, Ms. Daniel listed as an asset a one-third beneficial interest in the Daniels [sic] Family Trust having an unknown value. On Schedule D—Creditors Holding Secured Claims Ms. Daniel listed Emigrant Mortgage Company twice. Both entries listed Emigrant as holding claims of $325,000 secured by mortgages but the loan account numbers were different reflecting that these were separate mortgage claims.
In fact, on the date of her bankruptcy filing Ms. Daniel was the beneficiary of three trusts and owed only one mortgage debt to Emigrant Mortgage Company. After being made aware of these errors by Ms. Lee's counsel, Ms. Daniel amended her Schedule B to list her beneficial interest in the three trusts and her Schedule D to reflect only a single mortgage debt to Emigrant.
On August 31, 2015, while her bankruptcy case was pending, Ms. Daniel, through the law firm of Orlando & Associates, sent a demand letter to Ms. Defonseca asserting a Chapter 93A claim against her for conduct relating to revenue generated by Misha from 2001 and after. Ms. Daniel's Chapter 93A claim was not listed as an asset on her schedules, nor were the schedules ever amended to reflect the claim.
In this adversary proceeding, on June 30, 2015, Ms. Lee promulgated a discovery request upon Ms. Daniel for the production of documents including personal income tax returns, personal financial statements, business records, business and personal bank statements, and business and personal income records.8 Ms. Daniel responded late, with a single document, a 2012 federal income tax return.9 Subsequent to responding, Ms. Daniel, through her attorney, stated in December of 2015 "...if you are able to allow me a few more days, I will put [together] and send you any of [Ms. Daniel's] financial documents that are presently in my possession...there are some bank statements that should be helpful to you in assessing the average income and expenses that [Ms. Daniel] has in relation to her business and personal needs."10 When no further documents were forthcoming, Ms. Lee...
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