Lentz v. Trinchard, Civil Action No. 02-1235
Decision Date | 02 August 2010 |
Docket Number | Civil Action No. 02-1235 |
Citation | 730 F.Supp.2d 567 |
Parties | Kimberly LENTZ, in her capacity as interim trustee of the bankruptcy estate of Gary Eugene Hale, v. Claire W. TRINCHARD, esq., et al. |
Court | U.S. District Court — Eastern District of Louisiana |
Bruce Arne Cranner, Benjamin Melvin Castoriano, Michael H. Pinkerton, Miles Paul Clements, Frilot L.L.C., New Orleans, LA, for Kimberly Lentz, in her capacity as interim trustee of the bankruptcy estate of Gary Eugene Hale.
Gustave A. Fritchie, III, Edward Winter Trapolin, McDonald Provosty, Irwin, Fritchie, Urquhart & Moore, LLC, Claire Willis Trinchard, James L. Trinchard, Trinchard & Trinchard, Ellis B. Murov, Deutsch, Kerrigan & Stiles, LLP, Paul C. Miniclier, The Law Office of Paul C. Miniclier, New Orleans, LA, Adam C. Armstrong, Neil F. Freund, Robert W. Young, Freund, Freeze & Arnold, Dayton, OH, Anne Burguieres Rappold, Anne R. Burguieres Rappold, Attorney at Law, Sun Prairie, WI, Brian S. Kaas, Max B. Chester, Foley & Lardner, LLP, Milwaukee, WI, Janice M. Culotta, Kean Miller, Baton Rouge, LA, David Scranton Daly, Allen & Gooch, Metairie, LA, John J. Kuzman, Jr., Kuzman Law Office, LLC, Liberty Township, OH, for Claire W. Trinchard, Esq., et al.
ORDER AND REASONS
Before the Court is a motion to dismiss or, alternatively, to stay the above-captioned case, filed by Armco Insurance Group, Inc., Armco Financial Services Corporation, AFSG Holdings Company, Inc., AKS Investments, Inc., and AK Steel Corporation ("AK defendants").1 Also before the Court is a motion to dismiss or, alternatively, to stay the above-captioned case filed by Northwestern National Insurance Company of Milwaukee, Wisconsin ("NNIC"). 2 The plaintiff has filed an opposition.3
The facts of this case are set forth in two opinions by the U.S. Court of Appeals for the Fifth Circuit, Stanley v. Trinchard, 500 F.3d 411 (5th Cir.2007) (" Trinchard I ") 4 and Stanley v. Trinchard, 579 F.3d 515 (5th Cir.2009) (" Trinchard II ").5 In the early 1980's, Gary Hale ("Hale"), a detective employed by the St. Tammany Parish Sheriff, was insured under a policy issued by American Druggists Insurance Company ("ADIC"). 6 NNIC reinsured ADIC and, by virtue of ADIC's insolvency, assumed responsibility under the policy issued to Hale.7 In 1991, Gerald Burge ("Burge") filed a lawsuit against Hale and the St. Tammany Parish Sheriff pursuant to 42 U.S.C. § 1983, stemming fromBurge's 1986 wrongful murder conviction ("Burge lawsuit").8 A multi-million dollar judgment against Hale forced him into involuntary bankruptcy in October 2001. 9
In 2002, the appointed trustee 10 of Hale's bankruptcy estate brought claims against NNIC under Louisiana law, alleging that in the course of defending and settling some of Burge's claims, NNIC breached a duty of good faith and fair dealing to Hale. The trustee also alleged that Hale's counsel committed legal malpractice.11
On December 16, 2009, the plaintiff filed a fifth amended complaint 12 and added allegations against NNIC and the newly added defendants,13 including the AK defendants. Plaintiff claims that NNIC "is merely an alter ego of one or more of" the AK defendants and that the AK defendants are "all alter egos of each other." 14 Alternatively, plaintiff asserts that NNIC and "one or more of" the AK defendants "operated as a single business enterprise." 15 Plaintiff further alleges:
The fifth amended complaint states that the AK defendants are also "liable" to Hale for all previously pled "breaches of professional and fiduciary duty, breach ofgood faith and fair dealing, and acts of conspiracy and fraud" attributable to NNIC.17 Plaintiff's fifth amended complaint also seeks to annul a transfer of funds, made pursuant to an order of a Wisconsin state court, from NNIC to AFSG Holdings, Inc.18
On January 27, 2009, the AK defendants filed a motion to dismiss plaintiff's claims, arguing that this Court lacks personal jurisdiction pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure and that plaintiff failed to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.FN19FN20 On February 18, 2010, NNIC filed a motion to dismiss the allegations in plaintiff's fifth amended complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.21 Alternatively, both NNIC and the AK defendants argue that the Court should stay plaintiff's claims against NNIC and the AK defendants, pending resolution of NNIC's state court rehabilitation proceedings in Wisconsin.22 The plaintiff has opposed the motions to dismiss and the motions to stay.23
It is undisputed that this Court has diversity jurisdiction in the above-captioned case. In response to the defendants' motions to dismiss or, alternatively, to stay, plaintiff argues for the first time that this Court also has federal subject matter jurisdiction because the above-captioned case relates to the Hale bankruptcy, a case under Chapter 7 of Title 11 of the United States Code, 11 U.S.C. §§ 101-1330 (as amended, the "Bankruptcy Code"). See In re Hale, Ch. 7 Case No. 01-55539 (Bankr.S.D.Miss. filed Oct. 16, 2001). Because whether this Court has bankruptcy jurisdiction affects the Court's personal jurisdiction analysis, this issue must be addressed first.
28 U.S.C. § 1334(b) grants the district courts original, but not exclusive, jurisdiction over "all civil proceedings arising under title 11, or arising in or related to cases under title 11." 28 U.S.C. § 1334(b); see also In re Wood, 825 F.2d 90, 92 (5th Cir.1987). A matter is "related to" a case under title 11 if "the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy." Wood, 825 F.2d at 93 (emphasis in original). "Certainty is unnecessary; an action is 'related to' bankruptcy if the outcome could alter, positively or negatively, the debtor's rights, liabilities, options, or freedom of action or could influence the administration of the bankruptcy estate." In re TXNB Internal Case, 483 F.3d 292, 298 (5th Cir.2007).
When plaintiff filed the above-captioned case in 2002, plaintiff expressly premised this Court's federal subject matter jurisdiction on diversity jurisdiction pursuant to 28 U.S.C. § 1332.24 Defendants argue that plaintiff has waived the right to assert "related to" bankruptcy jurisdiction at this stage in the litigation, nearly eight years after plaintiff filed the original complaint.
The Court has permitted plaintiff to amend her complaint to allege "related to" jurisdiction pursuant to 28 U.S.C. § 1334(b). The Court further finds that plaintiff's original complaint contains sufficient allegations to state a basis for "related to" bankruptcy jurisdiction. "[W]here a complaint fails to cite the statute alleging jurisdiction, the omission will not defeat jurisdiction if the facts alleged in the complaint satisfy the jurisdictional requirements of the statute." Hildebrand v. Honeywell, Inc., 622 F.2d 179, 181 (5th Cir.1980). Plaintiff's original complaint states that plaintiff is appearing in his capacity as "Trustee of the Bankruptcy Estate of Gary Eugene Gale, the adjudication of which is currently pending before the U.S. Bankruptcy Court for the Southern District of Mississippi, Southern Division, bearing Docket Number 01-55539 SEG with that court." 25 The original complaint describes the Hale bankruptcy and the trustee's commencement of the above captioned case as follows:
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