MT Tech. Enters., LLC v. Nolte (In re Nolte)
| Decision Date | 25 November 2015 |
| Docket Number | APN 15–03130,Case No. 14–36676–KRH |
| Citation | 542 B.R. 185 |
| Court | U.S. Bankruptcy Court — Eastern District of Virginia |
| Parties | In re: Bruce Bernard Nolte, Debtor. MT Technology Enterprises, LLC and Ronald D. Trice, Plaintiffs, v. Bruce Bernard Nolte, Defendant. |
Jonathan Michael Arthur, Thomas H. Roberts and Associates, P.C., Franklin Desean McFadden, Jr., Hull Street Law, Richmond, VA, for Plaintiffs.
Ronald Trice, pro se.
Paula S. Beran, David N. Tabakin, Lynn L. Tavenner, Tavenner & Beran, PLC, Richmond, VA, for Defendant.
Before the Court is (i) the complaint (the "Complaint") filed by plaintiff MT Technology Enterprises LLC ("MT") against the defendant, Bruce Bernard Nolte ("Nolte"), initiating this Adversary Proceeding (Case No. 15–03130–KRH, the "Adversary Proceeding"), and (ii) the objection of Nolte to the proof of claim filed by MT in Nolte's underlying Bankruptcy Case.1 The Complaint sought to have MT's $8,843,411.80 claim asserted against Nolte declared non-dischargeable under § 523(a)(6) of the Bankruptcy Code. On October 26, 2015, the Court commenced a trial in the Adversary Proceeding that was scheduled to proceed for five days.2 After considering the evidence presented during the trial in the context of the applicable statutory authority, the case law, the pleadings, and the arguments of counsel, the Court ruled that: (1) Nolte was collaterally estopped from re-litigating the issue of liability on MT's state court judgment; (2) no determination had been made in the state court regarding the amount of MT's damage claim; (3) MT failed to prove at trial that it had suffered any damages arising out of the state court judgment; (4) Nolte was not collaterally estopped from contesting the issue of dischargeability of MT's claim under § 523(a)(6) of the Bankruptcy Code ; and (5) MT failed to carry the burden of proof necessary to establish that it's claim for liability founded on the state court judgment was nondischargeable. Accordingly, the Court announced that it would enter judgment in the Adversary Proceeding in favor of Nolte. This Memorandum Opinion sets forth the Court's findings of fact and conclusions of law in accordance with Rule 7052 of the Federal Rules of Bankruptcy Procedure.3
A complaint to determine the dischargeability of a debt must be brought as an adversary proceeding under the Bankruptcy Code. See Fed. R. Bankr.P. 7001(6). An objection to the allowance of a Proof of Claim, while normally a contested matter, may be included in an adversary proceeding. See Fed. R. Bankr.P. 3007(b). The Court has subject matter jurisdiction over this Adversary Proceeding pursuant to 28 U.S.C. §§ 157 and 1334 and the General Order of Reference from the United States District Court for the Eastern District of Virginia dated August 15, 1984. This is a core proceeding under 28 U.S.C. § 157(b)(2)(B) & (I). Venue is appropriate in this Court pursuant to 28 U.S.C. § 1408. The plaintiff has consented to the jurisdiction of this Court by commencing this Adversary Proceeding and by filing its Proof of Claim herein. Plaintiff has alleged in paragraph one of the Complaint that this matter is a core proceeding. Defendant has admitted this allegation in his answer. Any Stern4 objections have been waived by the parties, and the Court has the authority to enter final judgment in this proceeding. See Wellness Int'l. Network, Ltd. v. Sharif, –––U.S. ––––, 135 S.Ct. 1932, 191 L.Ed.2d 911 (2015).
MT's dischargeability Complaint arises out of state court litigation that preceded Nolte's Bankruptcy Case. In December 2010, a jury trial was conducted in the Circuit Court for the City of Richmond, Virginia (the "Trial Court"). In that state court case, MT sued Cristol, LLC ("Cristol"), and four of its members, one of whom was Nolte, alleging claims arising out of a failed business venture under Virginia's business conspiracy statute.5 See Va.Code Ann. § 18.2–499 (West 2015). During the course of the State Court Litigation, MT propounded certain discovery requests to the state court defendants to which the state court defendants did not timely respond. The Trial Court imposed sanctions under Rule 4:12(b) of the Supreme Court of Virginia (the "Virginia Supreme Court"), which resulted in an order prohibiting the state court defendants from opposing the plaintiff's claims.
The only issue left for the jury was the amount of damages to which MT was entitled. The Trial Court prevented the state court defendants from cross-examining any of the plaintiff's witnesses during the damages phase of the trial. The jury returned a verdict in favor of the plaintiff against the state court defendants, including Nolte, in the amount of $6,636,468, plus interest at the legal rate, calculated from the date of the filing of the State Court Litigation, plus costs.
The Virginia Supreme Court awarded the state court defendants an appeal. On June 7, 2012, the Virginia Supreme Court affirmed the trial court's ruling as to liability, but remanded the issue of damages for reconsideration. See Nolte v. MT Tech. Enters., LLC (Nolte I), 284 Va. 80, 726 S.E.2d 339 (2012).
The second trial on damages resulted in a mistrial. On December 17 and 18, 2013, a third trial was held on damages in the Trial Court. The limited evidence offered by the plaintiff at the third trial consisted of reading the prior testimony of the plaintiff's damages expert and of one other witness from the transcript of the first trial. Again the state court defendants were not allowed to introduce any evidence, nor were they permitted to cross-examine the proffered witnesses. The case went to the jury, which once again returned a verdict in favor of the plaintiff. The Trial Court entered judgment plus interest from June 2, 2009, the date the State Court Litigation was filed.
On December 15, 2014, the Virginia Supreme Court granted a Certificate of Appeal on six assignments of error.6 On May 8, 2015, the Virginia Supreme Court reversed the Trial Court's judgment on damages and remanded the matter back to the Trial Court, requiring that the "parties begin anew." Nolte v. MT Tech. Enters., LLC (Nolte II) , No. 140979, 2015 Va. Lexis 94 at *5 .
On December 16, 2014 (the "Petition Date"), the Debtor filed a voluntary petition under Chapter 11 of the Bankruptcy Code (the underlying "Bankruptcy Case"). On March 27, 2015, Ronald Trice ("Trice") and MT filed the Complaint initiating this Adversary Proceeding. The Complaint was prepared and filed by the law firms of Fisher Clarke PLLC located in Chesterfield County, Virginia, and Stewart Occhipinti LLP located in New York, New York (the "Occhipinti Firm").7
On April 22, 2015, MT filed its proof of claim (designated as claim number 2 in the Court's claims docketing system) in the Bankruptcy Case (the "MT Proof of Claim"). The MT Proof of Claim was predicated upon the prior state court judgment. Trice filed a separate claim (designated as number 3 in the Court's claims docketing system) in the Bankruptcy Case (the "Trice Proof of Claim"). The Trice Proof of Claim mirrored a state court lawsuit Trice had filed in the Circuit Court of Chesterfield County, Virginia, which had not yet gone to trial.
On May 6, 2015, this Court conducted its initial pretrial conference (the "Pretrial Conference") in this Adversary Proceeding as noticed by the summons plaintiffs had issued to and duly served upon the defendant. Nolte did appear at the Pretrial Conference with his counsel. Plaintiffs also appeared, but they appeared without the benefit of counsel.8 Trice spoke at the Pretrial Conference on his own behalf, and he attempted to speak on behalf of MT.9 At the Pretrial Conference, the Court advised Trice that he was permitted to represent himself as a pro se litigant but that he could not represent MT, as it was a corporation. See Local Bankruptcy Rule 9010–1.10 Trice was instructed, in no uncertain terms, "there needs to be counsel for the corporation." Pretrial Conference Transcript at 5, MT Tech. Enters., LLC v. Nolte (In re Nolte), No. 15–03130, (Bankr.E.D.Va. Oct. 8, 2015), ECF No. 21. During the Pretrial Conference, the Court reserved five days for the trial, beginning October 26, 2015. On May 8, 2015, the Court subsequently issued a Pretrial Order in the Adversary Proceeding, which (among other things) established a schedule for conducting the Adversary Proceeding and confirmed the trial dates.
On May 7, 2015, Trice, proceeding pro se, filed a motion seeking to dismiss Nolte's underlying Bankruptcy Case (the "Motion to Dismiss Bankruptcy Case"). On June 3, 2015, the Court conducted an evidentiary hearing to consider Trice's Motion to Dismiss Bankruptcy Case. At the hearing, the Court encouraged Trice once again to retain counsel on his own behalf, and it reminded Trice of the imperative need for MT to retain counsel. On July 21, 2015, the Court entered an order denying Trice's Motion to Dismiss Bankruptcy Case.
On August 10, 2015, Nolte served Trice with the defendant's first set of interrogatories, first request for production of documents, and first requests for admission (the "Trice Discovery"). On the same day, Nolte served MT with the defendant's first set of interrogatories, first request for production of documents, and first requests for admission (the "MT Discovery"). Counsel for Nolte received an incomplete, partial response to the Trice Discovery from Trice, pro se, on September 21, 2015.
On September 28, 2015, Jonathan M. Arthur of Thomas H. Roberts & Associates, PC and Franklin D. McFadden, Jr., of Hull Street Law each filed separately a notice of appearance dated September 25, 2015 on behalf of MT (together, "Arthur and McFadden"). MT thereupon served untimely responses to the MT Discovery (the "MT Discovery Response"). On September 28, 2015, MT filed a motion to approve...
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