Popple v. Elliott Greenleaf & Siedzikowski, P.C. (In re Popple)
| Decision Date | 19 June 2015 |
| Docket Number | ADVERSARY NO. 5–15–ap–00050 RNO,CASE NO. 5–14–bk–05792 RNO |
| Parties | In re: Anthony R. Popple, Debtor Anthony R. Popple, Plaintiff v. Elliott Greenleaf & Siedzikowski, P.C., Defendant |
| Court | United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Middle District of Pennsylvania |
John H. Doran, Doran & Doran, P.C., Wilkes–Barre, PA, for Plaintiff.
Brian Richard Elias, Roger J. Harrington, Jr., Elliott Greenleaf and Siedzikowski, P.C., Blue Bell, PA, for Defendant.
The individual Chapter 11 Debtor filed an adversary proceeding against his former law firm. He alleges that the automatic stay was violated when the law firm sought discovery, post petition, from non-debtor, co-defendants in a pending state court action. The Defendant/law firm filed a Motion to Dismiss for failure to state a claim upon which relief can be granted. For the reasons stated below, I will grant the Motion to Dismiss the Complaint, but allow the Plaintiff/Debtor twenty-one days to file an amended conforming complaint.
The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334 and 157. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A) and (G).
Anthony R. Popple (“Debtor”) filed an individual Chapter 11 petition on December 17, 2014. The required schedules and statements have been filed, but no Chapter 11 plan has been filed as of this date. Based upon the scheduled liabilities, I find that the Debtor is not a “small business debtor” as defined in 11 U.S.C. § 101(51D)2 .
This adversary proceeding was commenced by an original Complaint filed on March 31, 2015. The Debtor alleges that his former law firm, Elliott Greenleaf & Siedzikowski, P.C. (“Elliott Greenleaf”) violated the automatic stay entitling him to an award of damages. The Complaint contains a total of twenty-one numbered paragraphs and includes four exhibits. On April 14, 2015, Elliott Greenleaf filed a Motion to Dismiss the Complaint averring that it failed to state a claim upon which relief can be granted. Briefs have been submitted in support of and in opposition to the Motion to Dismiss and oral argument was heard on June 11, 2015.
The Motion to Dismiss the Complaint alleges that the Debtor has failed to state a claim upon which relief can be granted. Federal Rule of Civil Procedure 12(b)(6) allows the defense of failure to state a claim upon which relief can be granted to be raised by motion. Rule 12(b)(6) is made applicable to bankruptcy adversary proceedings by Federal Rule of Bankruptcy Procedure 7012. In considering the subject Motion to Dismiss, I must determine, viewing the facts in a light most favorable to the Debtor, whether he has alleged a plausible claim for relief. Bell Atlantic Corp., et al. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1966, 167 L.Ed.2d 929 (2007).
It is important to remember that only the alleged facts are viewed in a light most favorable to the Debtor. Legal conclusions are not assumed to be correct at the motion to dismiss stage. Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). In Iqbal, Justice Kennedy wrote:
While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.
The United States Court of Appeals for the Third Circuit summarized the above points:
The District Court must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions. Second, a District Court must then determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a plausible claim for relief. In other words, a complaint must do more than allege the plaintiff's entitlement to relief. A complaint has to “show” such entitlement with its facts.
Fowler v. UPMC Shadyside, 578 F.3d 203, 210–11 (3d Cir.2009) (internal citations omitted). Also see, Tri–Valley Corporation, et al. v. DMJ Gas–Marketing Consultants, LLC, 2015 WL 110074, *2 (Bankr.D.Del., Jan. 7, 2015) ; In re Griffith, 2014 WL 4385743, *3 (Bankr.M.D.Pa., Sept. 4, 2014).
When a motion to dismiss is filed, I consider the complaint as well as attached exhibits and matters of public record. Pension Ben. Guar. Corp. v. White Consol. Industries, Inc., 998 F.2d 1192, 1196 (3d Cir.1993) ; Taylor v. Henderson, 2015 WL 452405, *1 (D.Del., Jan. 30, 2015). Further, at the motion to dismiss stage, I may consider an undisputably authentic document the defendant attaches as an exhibit to a motion to dismiss, if the plaintiff's claims are based on the document. Pension Ben. Guar. Corp., 998 F.2d at 1196. Also see, Miller v. Clinton County, 544 F.3d 542, 550 (3d Cir.2008).
The Federal Rules of Evidence apply to proceedings before United States bankruptcy judges. Fed. R. Evid. 1101(a). In re Barnes, 266 B.R. 397, 403 (8th Cir. BAP 2001). Federal Rule of Evidence 201 allows a federal court to take judicial notice of facts that are not subject to reasonable dispute. For example, a bankruptcy court may take judicial notice of the docket events in a case and the contents of the bankruptcy schedules to determine the timing and status of case events, as well as other facts not reasonably in dispute. In re Harmony Holdings, LLC, 393 B.R. 409, 413 (Bankr.D.S.C.2008) ; In re Paolino, 1991 WL 284107, *12, n. 19 (Bankr.E.D.Pa., Jan. 11, 1991). I will take judicial notice of the dockets in the Debtor's underlying Chapter 11 case and in this adversary proceeding. I also take judicial notice of the contents of the bankruptcy schedules and statements which are not in dispute.
Next, I will address the substance of the Motion to Dismiss the subject Complaint.
The Debtor's Complaint alleges that Elliott Greenleaf, his former law firm, violated the automatic stay. Specifically, it is alleged that, prior to his Chapter 11 filing, Elliott Greenleaf commenced an action in the Court of Common Pleas of Montgomery County (“Montgomery County Action”). Attached as Exhibit A to the Complaint is a docket sheet for the Montgomery County Action. It shows that the state court action was commenced on April 21, 2014, approximately eight months before the Debtor's Chapter 11 filing. The Montgomery County Action names ten defendants, one of whom is the Debtor.
The Complaint describes the Montgomery County Action as a claim against all of the defendants for pre-petition services provided by Elliott Greenleaf. Complaint for Violation of the Automatic Stay, ¶ 4–6, March 31, 2015, ECF No. 1.
The gravamen of the Complaint is contained in paragraph seven which states:
Despite the Debtor, Anthony R. Popple, having filed for relief under Chapter 11 EGS [Elliott Greenleaf] as Plaintiff in the Montgomery County action continues to press for discovery and depositions of other parties seeking to obtain information which would be used in prosecuting the claim against all the Defendants, including the Debtor.
Complaint for Violation of the Automatic Stay, ¶ 7, March 31, 2015, ECF No. 1.
The automatic stay goes into effect when a bankruptcy petition is filed. It provides a breathing spell to a debtor and protects creditors against one creditor unilaterally acting to the detriment of others. In re Vitale, 469 B.R. 595, 597 (Bankr.W.D.Pa.2012) ; In re Porter, 371 B.R. 739, 746 (Bankr.E.D.Pa.2007).
Section 362(a)(1) of the Bankruptcy Code stays the commencement or continuance of actions against a debtor that were, or could have been, commenced pre-petition to recover on a pre-petition claim against a debtor. The automatic stay has been described as “one of the fundamental debtor protections provided by the bankruptcy laws.” In re Krystal Cadillac Oldsmobile GMC Truck, Inc., 142 F.3d 631, 637 (3d Cir.1998) ; In re Miller, 501 B.R. 266, 277 (Bankr.E.D.Pa.2013).
The Third Circuit has held:
The scope of the automatic stay is broad and covers all proceedings against a debtor, including arbitration. Because the automatic stay serves the interests of both debtors and creditors, it may not be waived and its scope may not be limited by a debtor.
Acands, Inc. v. Travelers Cas. and Sur. Co., 435 F.3d 252, 259 (3d Cir.2006) (internal citations omitted).
When there is a willful violation of the automatic stay, an individual plaintiff can recover damages for the violation of the automatic stay. 11 U.S.C. § 362(k). It is a willful violation of the automatic stay, when a creditor violates the stay with knowledge that the bankruptcy petition has been filed. In re Lansdale Family Restaurants, Inc., 977 F.2d 826, 829 (3d Cir.1992) ; In re Nixon, 419 B.R. 281, 288 (Bankr.E.D.Pa.2009).
When a willful stay violation is shown, actual damages and attorneys fees can be awarded. Further, in appropriate circumstances, punitive damages may be awarded. Solfanelli v. Corestates Bank, N.A., 203 F.3d 197, 203 (3d Cir.2000) ; In re Iskric, 496 B.R. 355, 365 (Bankr.M.D.Pa.2013).
I recognize the importance of the automatic stay to the bankruptcy process and a reorganization effort such as the Debtor has undertaken. However, while the automatic stay is broad, it is not limitless.
First, for judicial proceedings to be stayed, the action must be against the debtor. All the proceedings in a single case should not be lumped together for purposes of automatic stay analysis. Within a single judicial proceeding, some actions may be stayed, others not. Maritime Elec. Co., Inc. v. United Jersey Bank, 959 F.2d 1194, 1204 (3d Cir.1991) ; In re Gronczewski, 444 B.R. 526, 530 (Bankr.E.D.Pa.2011) (); Matter of Safeguard Mfg. Co., 25 B.R. 415, 417 (Ban...
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