R.L. LaRoche, Inc. v. Barnett Bank of South Florida, N.A.
| Decision Date | 20 September 1995 |
| Docket Number | No. 94-0212,94-0212 |
| Parties | 20 Fla. L. Weekly D2164 R.L. LaROCHE, INC., a Florida corporation; and Ronald L. LaRoche, Appellants, v. BARNETT BANK OF SOUTH FLORIDA, N.A.; Robert J. Grimmig, Jr.; Michael Sears; David L. Peterson; Ned R. Nashban; and Nancy Berz Colman, Appellees. |
| Court | Florida District Court of Appeals |
Marjorie Gadarian Graham of Marjorie Gadarian Graham, P.A., Palm Beach Gardens and Robert E. Geisler of Peterson, Bernard, Vandenberg, Fei & Martin, West Palm Beach, for appellants.
Nancy W. Gregoire and Mary F. April of Ruden, Barnett, McCloskey, Smith, Schuster & Russell, P.A., Fort Lauderdale, for appellees Barnett Bank of South Florida, N.A., Grimmig and Sears.
Alvin B. Davis, Lazaro Fernandez, Jr., and Eduardo I. Sanchez of Steel Hector & Davis, Miami, for appellees Peterson, Nashban and Colman.
The controversy at the heart of this appeal is whether a circuit court in Florida has subject matter jurisdiction over a debtor's common law abuse of process and malicious prosecution claims against his creditor for filing in bad faith an involuntary petition for relief under section 303 of the Bankruptcy Code. Viewed from the opposite end of the tunnel, the question is whether the United States Bankruptcy Court has exclusive jurisdiction of such claims, thereby ousting our circuit court. We hold that our circuit court does have jurisdiction and reverse the dismissal of the claim.
In broad brush, the facts are as follows. 1 Barnett Bank (creditor) had for many years made a line-of-credit loan to LaRoche (debtor), a general contractor in the construction industry. The debtor drew on the credit from time to time to bridge the gap between full performance and final payment of a contract. Debtor became a general contractor on a project as to which creditor was the construction lender. During the course of construction, the owner made many change orders, causing the project to exceed the construction loan budget. Creditor induced debtor to forego declaring a default from the owner's failure to pay draws as they became due, but the lack of payment forced debtor to draw on its line of credit when it would otherwise not have had to do so. Debtor and the owner were required to resolve their dispute through arbitration. Creditor refused to grant debtor an extension for payment on the line of credit loan account until the arbitration award became final.
During the course of negotiations to settle the dispute, creditor filed an involuntary petition in the United States Bankruptcy Court for the Southern District of Florida against debtor. See 11 U.S.C. Sec. 303(a). After creditor itself moved to voluntarily dismiss the bankruptcy petition, the bankruptcy court dismissed the title 11 case but reserved jurisdiction to assess costs, fees and punitive damages under section 303(i)(2) of the Bankruptcy Code for bad faith filing. 2
Debtor later filed a multicount complaint in the circuit court in Broward County suing creditor and several individuals for abuse of process, malicious prosecution and slander arising from the filing of the bankruptcy petition. All defendants moved to dismiss the action on the grounds that the Bankruptcy Court has exclusive jurisdiction over such claims. The circuit judge agreed with the defendants and dismissed the action. Hence the present appeal.
We begin by noting that no United States Supreme Court precedent directly decides the issue we confront. Nor are there any authorities in the United States Courts of Appeals. Actually only two of the circuits have even come close to the issue, and their decisions, though not directly on point, appear to suggest differing views. See Gonzales v. Parks, 830 F.2d 1033 (9th Cir.1987); and Paradise Hotel Corp. v. Bank of Nova Scotia, 842 F.2d 47 (3rd Cir.1988).
In Gonzales, the debtors filed a petition under chapter 11 of the Bankruptcy Code just before a foreclosure sale was about to be held on their house. While the bankruptcy case was pending, the foreclosing mortgagee filed an action in the state court against the debtors claiming that the bankruptcy filing was an abuse of process. The debtors failed to answer the state court pleading, and a default judgment was entered against them. Instead, the debtors filed an action in the bankruptcy court seeking relief from the state court judgment. The bankruptcy court entered a summary judgment against the mortgagee for violating the automatic stay provision of section 362 of the Bankruptcy Code, declaring the state court judgment void. The bankruptcy court then vacated that judgment but awarded attorney's fees to the debtors. On appeal, the mortgagee argued that the automatic stay did not apply to its abuse of process claim arising from the debtors' voluntary filing because the claim arose after the filing and not before it.
The Ninth Circuit rejected that argument, holding that the bankruptcy court had exclusive jurisdiction over the matter. Although the court could have held that the state court action was a violation of the automatic stay, it specifically rejected that conclusion. Instead it reasoned as follows:
830 F.2d at 1035. Although not expressly stated by the Ninth Circuit, an important part of its conclusion was undoubtedly that it was the debtors themselves who sought relief in the bankruptcy court, as they were entitled to do, rather than being dragged there by a petitioning creditor. While its opinion is not explicitly limited to abuse of process claims brought by creditors against the debtor while his voluntary bankruptcy case was still pending, it is difficult to read the holding beyond that factual circumstance. Here, of course, it is the creditor who filed an involuntary petition against a debtor who had no intention of exercising any right to petition for relief under the bankruptcy laws.
In contrast Paradise Hotel actually involves an involuntary filing by a petitioning creditor and the debtor's later claims against that creditor predicated on the contention that the involuntary petition was in bad faith. The similarity to the present case, however, does not go beyond that bare circumstance. The bank holding the mortgage on the debtor's hotel filed an involuntary petition against the debtor, seeking a liquidation under chapter 7. In response, the debtor moved to stay the involuntary proceeding while it petitioned for itself to reorganize under chapter 11. The debtor contended that the bank's filing of an involuntary petition was improper, however, because it was then paying its obligations as they became due but that the bank's filing had the effect of causing it to become insolvent and unable to pay creditors. The bankruptcy court granted the stay, and over the next two years the debtor successfully worked out a reorganization plan that paid off all of its creditors. When that was done, the debtor then filed an action in the federal district court seeking damages from the bank for the bad faith filing.
On appeal after the district court dismissed the action, the Third Circuit concluded that the debtor had stated a claim on which relief could be granted. The court expressly upheld as valid claims based on malicious prosecution, abuse of process, false representation, and intentional interference with business relationships. It upheld the dismissal of an attempted RICO claim, however, and another for breach of trust. There is no discussion of any jurisdictional issue; nor can we ferret out from the discussion whether any question of jurisdiction was even raised. In allowing the claims at all after the completion of the bankruptcy case, however, there is an implied rejection of the notion that such claims would be left solely to the bankruptcy court.
It should be said, therefore, that neither Circuit Court of Appeals decision is directly on point. One bankruptcy court has directly confronted the issue. In the Matter of Emerald City Records Inc., 9 B.R. 319 (Bankr.N.D.Ga.1981), held on indistinguishable pleading facts that the bankruptcy court had original, but not exclusive, jurisdiction to consider the claim; but the court abstained and remanded the case to state court for a determination. Of equal significance is its holding that the state courts have concurrent jurisdiction over such claims, which are not barred by bankruptcy law, as the Ninth Circuit suggested. Emerald City, however, predates Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982), and 1984 amendments to the jurisdictional provisions of the new Bankruptcy Code, about which more in a moment. There being no clear authority in the federal courts directly on point, therefore, we must necessarily decide this case--as we did in Wylie v. Investment Management & Research Inc., 629 So.2d 898 (Fla. 4th DCA 1993)--in the same way we believe the United States Supreme Court would do so.
The circuit court in Florida is a court of general jurisdiction. Although it shares some subject matter with the county court, it is the primary trial...
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