Moss v. Gurbacki (In re Gurbacki)
| Decision Date | 30 March 2021 |
| Docket Number | Case No. BK20-81186,Adv. Pro. 21-8001 |
| Parties | In the Matter of: GREGORY LEONARD GURBACKI, Debtor. MARJORIE MOSS, Plaintiff, v. GREGORY LEONARD GURBACKI, Defendant. |
| Court | U.S. Bankruptcy Court — District of Nebraska |
This matter is before the court on the motion to dismiss plaintiff's amended complaint. (Doc. #9; Doc. #12). Andrew Wurdeman appeared for plaintiff Marjorie Moss. Kathryn J. Derr appeared for the defendant / debtor Gregory Gurbacki. For the reasons stated herein, debtor's motion is granted.
Findings of Fact
Debtor Gregory Gurbacki filed for Chapter 7 bankruptcy protection on September 28, 2020. (Doc. #1 ¶ 7). The deadline to object to Debtor's discharge was January 5, 2021. Plaintiff filed her complaint that day. (Doc. #1; BK20-81186 - Doc. #1; Doc. #21). According to the complaint and the attachments thereto:
1. Debtor and Chris Hallgren purchased Associated Underwriters, Inc. ("AU") in December 2007. Debtor bought out Hallgren in 2010. (Doc. #1, second ¶ 1; second ¶ 2; and Ex. A at 2).
2. Plaintiff was terminated from AU on February 3, 2009. In 2011 plaintiff sued AU for "employment discrimination." On June 22, 2015 she obtained a judgment. (Id. at second ¶ 2; and Ex. A at 1-2).
3. AU went out of business after debtor sold its assets for $400,000 in December 2015. Debtor owned other entities which he used to "manipulate funds" to avoid satisfying plaintiff's judgment. (Id. at second ¶ 3). Neither the "funds" nor the acts constituting manipulation are identified. The $400,000 in sale proceeds were paid to Security State Bank, which held a lien against all of AU's assets, which assets secured $4.2 million in debt AU owed the bank. (Ex. A at 4).
4. On October 27, 2016, plaintiff filed suit to pierce the corporate veil of AU and hold debtor personally liable regarding the employment claim. On March 20, 2019, plaintiff obtained a judgment against debtor, which the Nebraska Court of Appeals affirmed. (Doc. #1, second ¶¶ 4-5; ¶ 6). The March 2019 judgment and the decision of the Court of Appeals affirming it are attached to the complaint. The state courts found plaintiff established debtor "exercised such control to commit a fraud or other wrong in contravention of the plaintiff's rights" because at the relevant times, AU was grossly undercapitalized and insolvent; debtor diverted corporate funds for improper uses; and debtor disregarded the corporate entity, using AU as a facade for personal dealings. (Ex. A; Ex. B - Moss v. Associated Underwriters, Inc., 948 N.W.2d 273, 282-83 (Neb. App. 2020)).
5. Debtor filed for bankruptcy protection after plaintiff attempted to execute against debtor's personal assets. (Doc. #1, ¶ 7).
6. Plaintiff sought relief pursuant to 11 U.S.C. § 523(a)(2). Debtor knowingly and intentionally made material, fraudulent representations as to the "nature and extent of [his] assets" to avoid paying plaintiff's judgment. The "misrepresentations are the basis for" debtor's request for discharge. Under the circumstances, Plaintiff will be unfairly prejudiced if debtor's obligations were discharged "based upon the fraudulent misrepresentations and fraudulent actions of Defendant". (Id., ¶¶ 10-12). The representations are not specified.
7. Plaintiff also sought relief pursuant to 11 U.S.C. § 523(a)(6). Plaintiff restated the foregoing allegations, adding debtor purposefully injured plaintiff "in the form of having Defendant's obligations to the Plaintiff as a judgment debtor discharged in bankruptcy when Defendant is aware that he has sufficient assets to satisfy the Plaintiff's judgment." Debtor's fraudulent representations "were done with the intent to avoid the Defendant's satisfaction of the Plaintiff's judgment or to deprive Plaintiff of the ability to execute upon the Judgment and collect payment of the same." (¶¶ 16-18).1
Debtor filed a motion to dismiss the complaint for failure to state a claim (Doc. #5). On January 14, 2021, plaintiff filed an amended complaint, which contained the foregoing allegations, copies of the jury instructions and verdict form from her employmentlawsuit, and new facts. (Doc. #7). According to the amended complaint and the attachments thereto:
1. In her original lawsuit, plaintiff asserted claims against AU for age discrimination and retaliation. (Doc. #7, ¶¶ 7-8).
2. Debtor and Chris Hallgren were employed by AU as insurance agents. They both purchased AU in August 2007. Debtor became its President and Hallgren its Vice President. In August 2008, Hallgren met with plaintiff. He requested plaintiff withdraw from AU's health insurance plan and obtain Medicare or Medicaid. Plaintiff refused. Plaintiff was placed on 90-day probationary status. On January 28, 2009, plaintiff requested Dan Grasso2 remove her from probationary status. Mr. Grasso complied the next day. On February 3, 2009, "Grasso made the decision to terminate [plaintiff's] employment." (Ex. A, Jury Instruction No. 4, ¶¶ 2-5).
3. The jury rejected plaintiff's age discrimination claim but awarded damages for the retaliation claim. The jury found AU acted willfully. (Doc. #7, ¶¶ 7-8). The jury instructions provide retaliation was willful "if it has been proved that, when the Defendant discharged the Plaintiff, the Defendant knew the discharge was in violation of the federal law prohibiting retaliation or acted with reckless disregard of that law." (Ex. A, Jury Instruction No. 12).
4. Plaintiff now seeks relief pursuant to 11 U.S.C. § 523(a)(6) because debtor deliberately and intentionally violated plaintiff's legal rights by firing her in retaliation for engaging in legally protected activity. "This conduct was targeted specifically at Plaintiff and was sure to cause her harm as a result of losing her employment." The jury's finding of willfulness "brings Debtor's debt to Plaintiff within the purview of 11 U.S.C. § 523(a)(6)." Because a court of equity disregarded AU's corporate identity, AU's retaliation was the act of the debtor. (Doc. #7, ¶¶ 17-19).
5. Plaintiff, for the first time, seeks relief pursuant to 11 U.S.C. § 727(a)(5). Debtor is diverting income to his spouse through C-Tek Insurance Agency, Inc., which debtor controls. Debtor has not accounted for the "drastic change in income" in his schedules and his 2018 tax returns, a second house titled in his wife's name, unspecified personal property, and membership interests in EFGroup ATL, LLC and OmaStings, LLC, which he owned in 2018. (Id., ¶ 22-26).
Conclusions of Law
Willful and Malicious Injury § 523(a)(6)
Debtor asserts that plaintiff's claims are time-barred. The deadline to file a complaint objecting to discharge or to dischargeability of a particular debt is sixty days after the date first set for the meeting of creditors. See Fed. R. Bankr. P. 4004(a) (); Fed. R. Bankr. P. 4007(c) (). "These rules are analogous to statutes of limitations and are strictly construed." KBHS Broad. Co. v. Sanders (In re Bozeman), 226 B.R. 627, 630 (B.A.P. 8th Cir. 1998).
The purpose for requiring creditors to file objections to discharge or complaints to determine dischargeability within sixty days of the meeting of creditors is to further the "fresh start" goals of bankruptcy relief by requiring creditors to promptly join their exceptions to discharge of debt so a petitioning debtor will enjoy finality and certainty and relief from financial distress as quickly as possible.
Matter of Podwinski, No. BK19-41937-TLS, 2021 WL 371769, at *7 (Bankr. D. Neb. Feb. 2, 2021) (citing Industrial Fin. Corp. v. Falk (In re Falk), 96 B.R. 901, 905 (Bankr. D. Minn. 1989) (citation omitted)). The deadline to file a complaint was January 5, 2021. Plaintiff filed her amended compliant on January 14, 2021.
Plaintiff asserts that her complaint is timely because it relates back to the original complaint, which was timely filed. See Fed. R. Bankr. P. 7015 (). Under Federal Rule 15 an amended pleading relates back to the original pleading when the amendment "asserts a claim or defense that arose out of the conduct, transaction, or occurrence set out — or attempted to be set out — in the original pleading." Fed. R. Civ. P. 15(c)(1)(B). For a claim to arise out of the same conduct, transaction, or occurrence it must be "tied to a common core of operative facts." Dodd v. United States, 614 F.3d 512, 515 (8th Cir. 2010).
In analyzing relation back, the court must balance the strict construction of Bankruptcy Rules 4004 and 4007 against the lenient standard allowing litigants to amend pleadings. See In re Bozeman, 226 B.R. at 630-31.
The right to file amended complaints, however, is not unqualified. At some point, a deadline for discovering unknown or overlooked claims must be set. If not, parties are free to bring entirely new causes of action without consideration for time limits. "Rule 15(c) does not permit lawyers to endlessly answer the question: How many causes of action can you find in this fact situation?" Defendants should not have to guess which claims plaintiffs will ultimately attempt to prove.
Id. at 631 (citing Marsman v. Western Electric Co., 719 F. Supp. 1128, 1143 (D. Mass. 1988)).
Plaintiff's complaint and amended complaint assert an exception to discharge under 11 U.S.C. § 523(a)(6).3 The section excepts from discharge debts "for willful and malicious injury by the debtor to another entity or to the property of another entity." 11 U.S.C. § 523(a)(6). Plaintiff originally alleged debtor misrepresented his assets and debtor knew his fraudulent representations would injure plaintiff because he would obtain a discharge when he had assets to pay the judgment. The original claims are based upon a fraudulent representation of assets, which are not covered by § 523(a)(6). Plaintiff's original complaint failed to state a claim under § 523(a)(6) upon which relief could be granted.
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