ORDER DENYING PLAINTIFF'S MOTION FOR SUMMARY
JUDGMENT AND GRANTING DEFENDANTS' MOTION TO
DISMISS
Scott
M. Grossman, Judge United States Bankruptcy Court Judge
After a
jury trial in state court, Plaintiff Ali Panjwani obtained a
$1,704,987.39 final judgment against Defendant Aamir Khan and
a $1,655,353.10 final judgment
against Defendant Huma Aamir. Based entirely on collateral
estoppel - and without any additional material facts - the
Plaintiff seeks summary judgment determining that these debts
are excepted from the Defendants' discharges under
Bankruptcy Code sections 523(a)(2), (a)(4), and (a)(6).
Defendants Aamir Khan and Huma Aamir oppose summary judgment
and further argue that the Plaintiff's complaint should
be dismissed for failure to state a claim upon which relief
may be granted.
After
carefully considering the Plaintiff's Second Amended
Complaint to Determine Dischargeability of Debt Pursuant to
11 U.S.C. § 523[1] (the "Second Amended
Complaint"), the Defendants' Motion to Dismiss
Second Amended Complaint to Determine Dischargeability of
Debt[2] (the "Motion to Dismiss")
the Plaintiff's Response to Motion to Dismiss Second
Amended Complaint,[3] the Defendants' Reply
thereto,[4] the Plaintiff's Renewed Motion
for Final Summary Judgment[5] (the "Motion for
Summary Judgment"), the Plaintiff's Statement of
Material Facts in Support of Motion for Final Summary
Judgment,[6] the Defendants' Response
to the Motion for Summary Judgment,[7] the Defendants'
Statement of Material Facts,[8] and the
Plaintiff's Reply,[9] for the reasons discussed
below, the Court will deny the Motion for Summary Judgment
and grant the Motion to Dismiss.
I.
BACKGROUND AND MATERIAL FACTS
Defendants
Aamir Khan and Huma Aamir filed a joint chapter 13 bankruptcy
petition on November 7, 2018.[10] On June 12, 2019, they
filed a notice of voluntary conversion to chapter
7,[11] and their case was converted to
chapter 7 the next day.[12]
Less
than two weeks after they had filed for bankruptcy, the
Plaintiff (then in violation of the automatic stay) commenced
an action in state court against the Defendants, along with
co-defendants Faisal Khan, Asif Khan, Lucia Khan, and Sabeen
Khan, in connection with a dispute over an entity called
Alliance International Distributors, Inc.
("Alliance").[13] The Plaintiff alleged in the
state court action that both Aamir Khan and Huma Aamir:
• breached a guaranty agreement;
• fraudulently induced the Plaintiff to finance
$1,000,000.00 into Alliance;
• breached a contractual obligation to wind down
Alliance;
• converted funds invested by the Plaintiff in Alliance;
• were unjustly enriched by the Plaintiff's
investment in Alliance; and
• conspired with the other state court co-defendants to
deprive the Plaintiff of funds that he
invested.[14]
On
February 25, 2019, the Plaintiff then commenced this
adversary proceeding, seeking a determination that the
Defendants' debts to him were excepted
from discharge under Bankruptcy Code sections 523(a)(2) and
(a)(4).[15] Because the Plaintiff's
underlying claims had not yet been liquidated, and because
liquidation of those claims necessarily involved litigation
with other non-debtor parties, this Court later granted stay
relief, retroactive to the petition date, to allow the state
court litigation to proceed through judgment (but not
execution).[16] This Court then abated this
adversary proceeding pending the conclusion of the state
court litigation.[17]
The
state court litigation ultimately proceeded to a jury trial,
and on July 22, 2022, the jury returned a verdict in the
total amount of $2,582,618.00 in favor of the Plaintiff, Ali
Panjwani.[18] As to Defendant Huma Aamir, the jury
found as follows:[19]
• Breach of Guaranty: Huma Aamir failed
to pay all amounts owed to Ali Panjwani pursuant to the terms
of a personal guaranty and is liable for $375,000 in
damages for that breach of contract.
• Fraud in the Inducement: Huma Aamir
did not knowingly make false representations of
material facts to Ali Panjwani in order to induce his
investment into Alliance; Huma Aamir did not make
these representations with the intent to induce Ali Panjwani
to agree to invest in Alliance; and Ali Panjwani did
not rely on these false representations to invest in
Alliance.
• Breach of Agreement to Wind Down
Alliance: Huma Aamir did not materially
breach a "wind down" agreement with Ali Panjwani.
• Conversion: Huma Aamir did
not, as president of Alliance, misappropriate or
manipulate funds, income, revenue, and/or profit of Alliance,
including Ali Panjwani's funds; Huma Aamir did
not misuse her authority and control as president of
Alliance to divert Ali Panjwani's funds
to her own personal accounts, the accounts of her family
and/or relatives, and/or to other entities owned by her
family or relatives; and Huma Aamir's actions did
not deprive Ali Panjwani of those funds permanently or
for an indefinite time period.
• Unjust Enrichment: Huma Aamir had
access to the funds, income, revenue, and profit of Alliance,
including Ali Panjwani's funds; Huma Aamir did
not, as president of Alliance, misappropriate or
manipulate funds, income, revenue, and/or profit of Alliance,
including Ali Panjwani's funds; Huma Aamir did
misuse her authority and control as President of Alliance to
divert Ali Panjwani's funds to her own personal accounts,
the accounts of her family and/or relatives, and/or to other
entities owned by her family or relatives; Huma Aamir
did voluntarily accept and retain these benefits; it
would be inequitable for Huma Aamir to retain these benefits;
and Huma Aamir was unjustly enriched at the expense
of and/or to the detriment of Ali Panjwani; but the jury
awarded $0.00 in damages to Ali Panjwani because of
Huma Aamir's unjust enrichment.
• Civil Conspiracy: Huma Aamir (along
with Aamir Khan, and state court co-defendants Faisal Khan,
Asif Khan, Lucia Khan, and Sabeen Khan) conspired to
defraud Ali Panjwani and convert all or part of Ali
Panjwani's investments into Alliance; Huma Aamir (along
with Aamir Khan, and state court co-defendants Faisal Khan,
Asif Khan, Lucia Khan, and Sabeen Khan) engaged in overt
acts (including, but not limited to, manufacturing
fraudulent invoices, initiating wire transfers,
processing fraudulent invoices, and transferring
funds to themselves or third-party entities owned by them or
their families), in furtherance of the conspiracy; and that
Huma Aamir (along with Aamir Khan, and state court
co-defendants Faisal Khan, Asif Khan, Lucia Khan, and Sabeen
Khan) was liable for $1,000,000 in damages for civil
conspiracy.
As to
Defendant, Aamir Khan, the jury found as
follows:[20]
• Fraud in the Inducement: Aamir Khan
did not knowingly make false representations of
material facts to Ali Panjwani in order to induce his
investment into Alliance; Aamir Khan did not make
these representations with the intent to induce Ali Panjwani
to agree to invest in Alliance; and Ali Panjwani did
not rely on these false representations to invest in
Alliance.
• Breach of Agreement to Wind Down
Alliance: Aamir Khan materially breached a
"wind down" agreement with Ali Panjwani and owes
him $218,809 in damages for that breach.
• Conversion: Aamir Khan had
access to the funds, income, revenue, and profit of
Alliance, including Ali Panjwani's funds; Aamir Khan
misused his access to these funds to divert Ali
Panjwani's funds to his own personal accounts, the
accounts of his family and/or relatives, and/or to other
entities owned by his family or relatives; Aamir Khan's
actions deprived Ali Panjwani of those funds
permanently or for an indefinite period; and Aamir Khan owes
Ali Panjwani $25,000 in damages for conversion.
• Unjust Enrichment: Aamir Khan had
access to the funds, income, revenue, and profit of
Alliance, including Ali Panjwani's funds; Aamir Khan
did misappropriate or manipulate funds, income,
revenue, and/or profit of Alliance, including Ali
Panjwani's funds; Aamir Khan did misuse his
access to Alliance to divert Ali Panjwani's funds to his
own personal accounts, the accounts of his family and/or
relatives, and/or to other entities owned by his family or
relatives; Aamir Khan did voluntarily accept and
retain these benefits; it would be inequitable for Aamir Khan
to retain these benefits; and Aamir Khan was unjustly
enriched at the expense of and/or to the detriment of
Ali Panjwani; and Aamir Khan owes Ali Panjwani $172,500
in damages for unjust enrichment.
• Civil Conspiracy: Aamir Khan (along
with Huma Aamir, and state court co-defendants Faisal Khan,
Asif Khan, Lucia Khan, and Sabeen Khan) conspired to
defraud Ali Panjwani and convert all or part of Ali
Panjwani's investments into Alliance; Aamir Khan (along
with Huma Aamir, and state court co-defendants Faisal Khan,
Asif Khan, Lucia Khan, and Sabeen Khan) engaged in overt
acts (including, but not limited to, manufacturing
fraudulent invoices, initiating wire transfers,
processing fraudulent invoices, and transferring
funds to themselves or third-party entities owned by them or
their families), in furtherance of the conspiracy; and that
Aamir Khan (along with Huma Aamir, and state court
co-defendants Faisal Khan, Asif Khan, Lucia Khan, and Sabeen
Khan) was liable for $1,000,000 in damages for civil
conspiracy.
In
summary, as to Defendant Aamir Khan, the jury found that he
was liable to Ali Panjwani for breach of contract
conversion, unjust enrichment, and civil conspiracy, and
awarded damages to Ali...
