Pausch v. DiPiero (In re DiPiero)

• Decision Date: 05 July 2016
• Docket Number: No. 15 A 337,No. 15 B 5807,15 B 5807,15 A 337
• Citation: 553 B.R. 122
• Parties: In re: Todd DiPiero, Debtor. Lauren I. Pausch, Plaintiff, v. Todd DiPiero, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Illinois

553 B.R. 122

In re: Todd DiPiero, Debtor.

Lauren I. Pausch, Plaintiff

v.Todd DiPiero, Defendant.

No. 15 B 5807

No. 15 A 337

United States Bankruptcy Court, N.D. Illinois, Eastern Division.

Signed July 5, 2016

Attorney for plaintiff Lauren I. Pausch: Kyle A. Lindsey, Johnson Legal Group, LLC, Chicago, IL

Attorney for defendant Todd DiPiero: Stephen M. Komie, Komie and Associates, Chicago, IL

MEMORANDUM OPINION

A. Benjamin Goldgar, United States Bankruptcy Judge

Lauren Pausch alleges in this adversary proceeding that chapter 7 debtor Todd DiPiero sexually assaulted her, she obtained a $2.5 million judgment against him in Wisconsin state court, and his debt to her is non-dischargeable under section 523(a)(6) of the Bankruptcy Code

, 11 U.S.C. § 523(a)(6). In his answer, DiPiero neither admitted nor denied that Pausch's adversary proceeding is a core proceeding. He also asserted as affirmative defenses that the bankruptcy court lacked subject matter jurisdiction because the adversary proceeding is a “personal injury tort” claim under 28 U.S.C. § 157(b)(5), and the Wisconsin state court violated several of his federal constitutional rights. At the end of his answer, he demanded a jury trial.

Pausch has moved to strike the answer, these affirmative defenses, and the jury demand. For the reasons that follow, Pausch's motion will be granted in part and denied in part.

1. Jurisdiction

The court has subject matter jurisdiction of this case under 28 U.S.C. § 1334(b)

and the district court's Internal Operating Procedure 15(a). As explained below, this is a core proceeding. See 28 U.S.C. § 157(b)(2)(I) ; Wilson v. Walker (In re Walker), 515 B.R. 725, 740 (Bankr.W.D.Mo.2014).

2. Facts

The facts are taken from the complaint, the answer, the docket in this adversary proceeding (cited as “Adv. Dkt.”), and the docket of the Circuit Court of Milwaukee County, Wisconsin in Pausch v. Cormier, et al., No.2008CV017208 (cited as “Wis. Dkt.”).¹

Those facts are disturbing to say the least. In June 2007, Pausch alleges, DiPiero and two other men drugged her and took her to a hotel. (Compl.¶ 4). There, they physically and sexually assaulted her repeatedly. (Id. ). Not only did they gang-rape her, but they videotaped the “hours-long rape” and made a DVD of it. (Id. ¶ 29). They also used Pausch's own cell phone to take pictures during the ordeal, sending a picture of her face with a penis in her mouth to everyone on her cell phone's contact list. (Id. ).

In 2008, Pausch brought an action for damages in Wisconsin state court against DiPiero and his accomplices. (Id. ¶ 6). When DiPiero failed to answer or appear, Pausch moved for a default judgment. (Id. ¶ 7). On the date her motion was to be heard, DiPiero and the others appeared without an attorney and asked for time to retain one. (Id. ¶ 8). The court granted their request. (Id. ¶ 9). At the next hearing, however, only DiPiero appeared, no lawyer in tow. (Id. ¶ 10). The court therefore granted Pausch's motion for default judgment and set the matter for a prove-up of damages. (Id. ¶ 11). DiPiero and his co-defendants then retained lawyers and moved for relief from the judgment. (Id. ¶ 13). But the court denied the motion and proceeded to conduct the prove-up (id. ¶¶ 14–15), awarding Pausch $1 million in compensatory damages “joint and several as to all three defendants” and $500,000 in punitive damages “per defendant” (Wis.Dkt. No. 21).

DiPiero and the other defendants appealed. The Wisconsin Court of Appeals affirmed the judgment in part, finding the circuit court had not abused its discretion in refusing to vacate the default judgment and had properly awarded both compensatory and punitive damages. See Pausch v. Cormier, 337 Wis.2d 90, 2011 WL 3055347, at *2–5 (Wis.Ct.App. July 26, 2011)

. Because the court of appeals was uncertain whether the punitive damages award was joint and several, the matter was remanded to the circuit court for clarification. Id. at *5. DiPiero and the others could have petitioned for further review in the Wisconsin Supreme Court. See Wis. Stat. Ann. §§ 808.10(1), 809.62 ; see, e.g.,

Homm

e

l

v.

Hommel, 162 Wis.2d 782, 471 N.W.2d 1 (1991). They did not. (See Wis. Dkt. Nos. 31–46 (reflecting activity on remand immediately after the decision on appeal)).

On remand, the circuit court clarified that the defendants were jointly and severally liable for $1,000,000 in compensatory damages, $1,500,000 in punitive damages, and $30,847.59 in fees. (Wis.Dkt. No. 37). On April 17, 2012, separate judgments were against each defendant. (Id. Nos. 41–46). Judgment was entered against DiPiero for $2,531,630.49. (Id. No. 42). Neither DiPiero nor any of his co-defendants appealed. (See generally Wis. Dkt. (reflecting no entries after the judgments)).

In February 2015, DiPiero filed a chapter 7 bankruptcy case in this district. Pausch then commenced this adversary proceeding. Her complaint has a single count alleging that DiPiero's debt to her is non-dischargeable under section 523(a)(6)

because it arises from a willful and malicious injury.

DiPiero answered, demanding a trial by jury.² In his answer, DiPiero neither admitted nor denied Pausch's allegation that her adversary proceeding was a core matter, stating only “that 28 U.S.C. § 157(b)(2)

describes core proceedings as the allowance or disallowance of claims or determinations as to their dischargeability.” (Answer ¶ 2).

DiPiero also asserted five affirmative defenses.³ The first contests subject matter jurisdiction because 28 U.S.C. § 157(b)(5)

requires Pausch's claim to be tried in the district court rather than the bankruptcy court. (Answer ¶¶ 34–36). The second is that the complaint fails to state a claim on which relief can be granted. (Id. ¶ 37). The third defense is not entirely clear, but DiPiero appears to suggest that only the Wisconsin court's punitive damages award, not the award of compensatory damages, is potentially non-dischargeable under section 523(a)(6). (Id. ¶¶ 38–41). The fourth asserts that the Wisconsin court violated both DiPiero's Fourteenth Amendment right to due process and his Seventh Amendment right to a jury trial when the court entered a default judgment against him. (Id. ¶¶ 42–43). The fifth asserts that the Wisconsin court violated DiPiero's Fourteenth Amendment right to equal protection because the court was prejudiced against DiPiero, an Illinois resident. (Id. ¶ 44).

Pausch has moved to strike the answer as a whole on the ground that DiPiero's equivocal response to her allegation that this is a core proceeding fails to comply with Rule 7012(b) of the Federal Rules of Bankruptcy Procedure

, Fed. R. Bankr.P. 7012(b). Presumably in the alternative, she has moved to strike his first, fourth, and fifth affirmative defenses because they are insufficient as a matter of law, and she has moved to strike his jury demand because he has no right to a jury trial in this proceeding.

3. Discussion

Pausch's motion will be granted in part and denied in part. As to her request to strike the answer as a whole, the motion will be denied. Although Pausch is correct that DiPiero has not complied with Rule 7012(b)

, it is simple enough to determine whether this is a core proceeding. It is. The balance of her motion, however, will be granted. The three affirmative defenses are indeed insufficient as a matter of law, and DiPiero has no right to a jury trial in a proceeding to determine the dischargeability of a debt.

a. The Answer

The answer itself will not be stricken. Pausch is right that Rule 7012(b)

says a responsive pleading must “admit or deny an allegation that the proceeding is core or non-core.” See Fed. R. Bankr.P. 7012(b). She is right that Rule 7012(b) requires a party who says the proceeding is non-core to indicate whether he “does or does not consent to entry of final orders or judgments by the bankruptcy judge.” See id. And she is right that DiPiero has not complied with Rule 7012(b), since he has neither admitted nor denied her allegation but has simply acknowledged what section 157(b)(2) says about non-dischargeability proceedings. That is not enough. The rule calls for a party to state “its position on the matter,” not simply paraphrase the statute. Handy & Harman Ref. Grp., Inc. v. Handy & Harman, Inc. (In re Handy & Harman Ref. Grp., Inc.), 287 B.R. 598, 602 (Bankr.D.Conn.2003).

At this point, though, DiPiero has not been ordered to comply with Rule 7012(b)

. And although his compliance could be compelled, see, e.g.,

Official Comm. of Unsecured Creditors v. Conseco Fin. Serv., Corp. (In re Lois/USA, Inc.), Nos. 99 B 45910(REG), 99 B 11026, 99 B 11025, 00–2350, 2002 WL 31098548, at *1 (Bankr.S.D.N.Y. Sept. 10, 2002), and his answer stricken if he continued not to comply, there is an easier way. No matter what the parties do, section 157(b)(3) requires a bankruptcy court to determine whether a proceeding is core. See 28 U.S.C. § 157(b)(3). When parties fail to obey Rule 7012(b), courts sometimes proceed to make the determination themselves. See, e.g.,

Creditors' Comm. v. Fredericks (In re Gaslight Club, Inc.), 167 B.R. 507, 510 n. 1 (Bankr.N.D.Ill.1994). Rather than force the issue, the better course is to decide it now—because the decision is a simple one.

Pausch's non-dischargeability claim is plainly a core proceeding. That is obviously true under the statute. As even DiPiero seems to admit, section 157(b)(2)(I)

expressly defines core proceedings to include “determinations as to the dischargeability of particular debts.” 28 U.S.C. § 157(b)(2)(I). But the statute alone does not determine the matter. In Stern v. Marshall, 564 U.S. 462, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011), the Court explained that a bankruptcy court's power to enter a final judgment must also be consistent with Article III of the Constitution. Id. at 482, 131 S.Ct. 2594

. (Or as some courts put it, the proceeding must be “constitutionally core” as well as statutorily so. See, e.g.,

Sher v. JPMorgan Chase Funding, Inc. (

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