Ray's Servs., Inc. v. Cunningham (In re Cunningham)
| Decision Date | 08 April 2014 |
| Docket Number | Adv. Pro. No. 12-3201,Case No.: 12-34162 |
| Court | U.S. Bankruptcy Court — Northern District of Ohio |
| Parties | In Re: Solomon Ray Cunningham Debtor. Ray's Services, Inc. Plaintiff, v. Solomon Ray Cunningham Defendant. |
The court incorporates by reference in this paragraph and adopts as the findings and orders of this court the document set forth below. This document has been entered electronically in the record of the United States Bankruptcy Court for the Northern District of Ohio.
__________
Mary Ann Whipple
United States Bankruptcy Judge
(Successor Judge Docket)
SUCCESSOR JUDGE
MEMORANDUM OF DECISION AND ORDER REGARDINGThis adversary proceeding is before the court on the Motion for Summary Judgment filed by Plaintiff Ray's Services, Inc. [Doc. # 9]. Defendant Solomon Ray Cunningham filed a Response to the Motion for Summary Judgment [Doc. # 10], with Plaintiff then filing its Reply. [Doc. # 11]. In its Complaint commencing this adversary proceeding, Plaintiff seeks a determination of nondischargeability on the claim it holds against Defendant arising out of a state court judgment. Defendant is a debtor before this court, having filed a petition for relief under Chapter 7 of the United States Bankruptcy Code.
The district court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §1334(b) as a civil proceeding arising under Title 11 and arising in a case under Title 11. This proceeding has been referred to this court by the district court under its general order of reference. 28 U.S.C. § 157(a); General Order 2012-7 of the United States District Court for the Northern District of Ohio. Because this adversary proceeding involves a determination as to the dischargeability of a particular debt, this is a core proceeding that the court may hear and determine. 28 U.S.C. § 157(b)(1) and (b)(2)(I). For the reasons that follow, Plaintiff's Motion for Summary Judgment will be denied.
Plaintiff Ray's Service, Inc. is a corporation operating under the name of "Ray's Towing Service" ("Plaintiff"). In 2006, Plaintiff filed a complaint against the Defendant/Debtor Solomon Ray Cunningham ("the Debtor") in the Wood County, Ohio Court of Common Pleas, seeking damages and injunctive relief for trademark infringement. [Doc. # 11, Ex. 3]. In the state-court complaint, Plaintiff alleged that the Debtor had been operating an automotive repair and towing business, using the name "Ray's Towing Service," which the Plaintiff used as its trademarked name. [Doc. # 11, Ex. 3 at pp. 2-3]. Plaintiff's state court complaint as against Debtor set forth three claims: violations of the Ohio Deceptive Trade Practices Act, Ohio Rev. Code Chapter 4165; the Lanham Act, 15 U.S.C. § 1125; and an Ohio common law claim of unfair trade practices. [Doc. # 11, Ex. 3]. As to the Ohio statutory claim, Plaintiff also alleged that the Debtor's acts "were committed willfully, such that Plaintiff is further entitled to recover its attorney fees from Cunningham under Ohio Revised Code § 4165.03(B)." [Id. at p. 5, ¶ 15]. As to the Ohio common law claim, Plaintiff alleged that "Cunningham's actions were willful and malicious, or with utter disregard for the rights of Plaintiff, such that Plaintiff is further entitled to recover punitive damages and attorney fees from Cunningham." [Id. at p. 7, ¶ 29]. In its prayer for relief against Debtor in the state court complaint, in addition to injunctive relief, Plaintiff sought three times Cunningham's profits, "its reasonable attorney's fees and investigative fees pursuant to 15 U.S.C. § 1117," its costs and "such other and further relief that this Court deems legally and equitably appropriate." [Id., pp. 8-10]. Foreseeing where any state court judgment would end up, but also problematic from a jurisdictional standpoint, the state court complaint also asked the state court to order under 11 U.S.C. § 523(a)(6) that "Cunningham be prohibited from a discharge under 11 U.S.C. §727 for malicious, willful and fraudulent injury to Plaintiff." [Id., p.10, ¶ 8]. But see 11 U.S.C. § 523(c)(1), (d); Fed. R. Bankr. P. 4007(c).
The Debtor filed an answer to Plaintiff's state court complaint. [Doc. # 11, Ex.4]. Thereafter, during discovery, the Debtor failed to attend two scheduled depositions. [Doc. #11, Ex. 5, p.1]. Based upon hisnonattendance, Plaintiff filed a motion for discovery sanctions. [Doc. #11, Ex. 5]. Among the sanctions sought by Plaintiff was the entry of a default judgment against the Debtor. On December 11, 2006, the state court, finding that the Debtor "failed/refused" to appear at a duly noticed deposition, entered a judgment by default in favor of Plaintiff finding liability on all three claims against Debtor, including preliminary and permanent injunctive relief, and scheduling a hearing for an assessment of damages. [Doc. # 11, Ex. 6].
After holding an evidentiary hearing on the issue of damages, the state court entered judgment in Plaintiff's favor on the complaint on January 26, 2007. [Doc. # 1, Pt. 2; Doc. # 9, Ex.]. The entire state court Judgment Entry states as follows:
This cause came on for hearing before the Court on January 18, 2007, for an assessment of Plaintiff's compensatory, statutory, and punitive damages and attorney fees, against Defendant, pursuant to Count One, Two, and Three of the Complaint, and paragraph 1 of the Court's December 11, 2006 Judgment Entry.
Based upon the evidence adduced at hearing, and the argument of counsel, the Court finds that Defendant willfully, knowingly, fraudulently, deliberately, and maliciously infringed upon the Plaintiff's trade name and trademarks, and that plaintiff is entitled to an award of damages as follows:
IT IS THEREFORE ORDERED, ADJUDGED, AND DECREED, that judgment is hereby granted to Plaintiff against the Defendant, in the aggregate amount of a $250,188.09, plus costs.
On September 9, 2012, the Debtor filed his petition in this court for relief under Chapter 7 of the United States Bankruptcy Code, Case Number 12-34162. Plaintiff then timely filed this adversary proceeding against the Debtor, seeking to have its claim determined to be a nondischargable debt pursuant to 11 U.S.C. § 523(a)(6). [Doc. # 1]. Plaintiff now seeks summary judgment on its Complaint. [Doc. # 9].
Under Rule 56 of the Federal Rules of Civil Procedure, made applicable to this proceeding by Federal Rule of Bankruptcy Procedure 7056, summary judgment is proper only where "there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a).
In reviewing a motion for summary judgment, all inferences "must be viewed in the light most favorable to the party opposing the motion." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-88 (1986). The party moving for summary judgment always bears the initial responsibility of informing the court of the basis for its motion, "and identifying those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits if any' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).1 Where the moving party has met its initial burden, the adverse party "may not rest upon the mere allegations or denials of his pleading but . . . must set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A genuine issue for trial exists if the evidence is such that a reasonable factfinder could find in favor of the nonmoving party. Id.
As the statutory basis for its complaint to determine dischargeability, Plaintiff relies on § 523(a)(6). This provision excepts from discharge any debt caused by a debtor's willful and malicious conduct, providing:
In seeking to have its claim held nondischargeable under § 523(a)(6), Plaintiff bears the ultimate burdenof persuasion to establish, by at least a preponderance of the evidence, the provision's applicability. Grogan v. Garner, 498 U.S. 279, 291 (1991). In meeting this burden, the terms "willful" and "malicious" as used in § 523(a)(6) are distinct concepts, with Plaintiff needing to establish the existence of both elements to prevail on a claim of nondischargeability. Markowitz v. Campbell (In re Markowitz), 190 F.3d 455, 463 (6th Cir. 1999). In seeking summary judgment on its § 523(a)(6) claim, Plaintiff relies wholly on the state-court judgment for damages rendered in its favor and the application thereto of the legal doctrine of collateral estoppel, also referred to as issue preclusion.2
The doctrine of issue preclusion "precludes relitigation of issues of fact or law actually litigated and decided in a prior action between the same parties and necessary to the judgment, even if decided as part of a different claim or cause of action." Markowitz, 190 F.3d at 463 (6th Cir. 1999)(quoting Sanders Confectionery Prods., Inc. v. Heller Fin., Inc., 973 F.2d 474, 480 (6th Cir. 1992))(emphasis added)). "The purposes of collateral estoppel are to shield litigants (and the judicial system) from the burden of re-litigating identical issues and to avoid inconsistent results." Gilbert v. Ferry, 413 F.3d 578, 580 (6th Cir. 2005).
Issue preclusion applies in the context of...
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