Reinert v. Bould (In re Reinert)
| Decision Date | 12 March 2015 |
| Docket Number | Adversary No. 14-02204-JAD,Bankruptcy No. 11-22840-JAD |
| Court | U.S. Bankruptcy Court — Western District of Pennsylvania |
| Parties | IN RE: GARY L. REINERT, SR., Debtor. GARY L. REINERT, SR., Plaintiff, v. ROGER M. BOULD, ESQ., OWEN W. KATZ, ESQ., FRED McMILLEN, and ROBERT SHEARER, ESQ. Defendants. |
The matter before the Court is a Motion to Dismiss filed by defendant Owen W. Katz, Esq. pursuant to Fed.R.Civ.P. 12(b)(1) and Fed.R.Civ.P. 12(b)(6), as incorporated into these proceedings by operation of Fed.R.Bankr.P. 7012(b). Similar motions or joinders to the Motion to Dismiss have been filed by the other defendants to this action. Thus, each of the requests for dismissal shall be treated the same by the Court, and shall be collectively referred to herein as the "Motion to Dismiss." For the reasons set forth below, the Motion to Dismiss shall be granted and an order shall be entered that dismisses this adversary proceedingwith prejudice.1
The plaintiff in this action is Mr. Gary Reinert. He and certain entities (collectively, the "Reinert Entities") which he owned and/or controlled are debtors in bankruptcy before this Court.2
By prior orders of this Court, Mr. Reinert has been denied a discharge as a result of his failure to cooperate (and his otherwise failure to fulfill the duties reposed in him to this bankruptcy estate) under applicable law including, withoutlimitation, those duties imposed by 11 U.S.C. § 521.
This adversary proceeding was commenced by Mr. Reinert on a pro se3 basis in the Court of Common Pleas of Allegheny County when Mr. Reinert filed a Praecipe for Writ of Summons on July 28, 2014. The writ was subsequently followed by a Complaint filed on September 16, 2014 and superceded by an Amended Complaint filed on October 3, 2014. Defendant Owen Katz then removed the action to this Court by way of a Notice of Removal filed on October 6, 2014.
The record reflects that a prior bankruptcy sale of Mr. Reinert's assets (as well as assets of the Reinert Entities) to an entity known as Metal Foundations Acquisition, LLC ("MFA") was approved by an order of this Court dated November 8, 2011. Mr. Reinert was present at the sale hearing, was represented by legal counsel at the sale hearing, and consented to entry of the sale order and never appealed it.
After the sale to MFA closed, Mr. Reinert's relationship with MFA either never materialized or became strained. The consequence of this is that litigation between MFA and Mr. Reinert ensued, in which Mr. Reinert disputed the bonafides of the sale of assets to MFA. Those efforts were unsuccessful as this Court, by Memorandum Opinion and Order dated October 15, 2012 (and entered on the docket on October 18, 2012) at Adversary No. 11-2656-JAD, enforced the sale of assets to MFA. This Court's order, findings and conclusions were subsequently affirmed on appeal by the United States District Court at Civil Action No. 2-12-cv-01752-DSC and by the United States Court of Appeals for the Third Circuit at No. 13-4299.
After the District Court affirmed this Court's order enforcing the MFA sale, but before the Third Circuit affirmed it, Mr. Reinert went on the offensive and filed his collateral litigation in the Court of Common Pleas. It is this collateral litigation that is now before this Court.
A fair reading of the Amended Complaint is that the Amended Complaint is a vehicle by which Mr. Reinert continues his after-the-fact challenges to the MFA sale. The target of Mr. Reinert's lawsuit is not expressly MFA. Rather, the targets are certain professionals who were employed by the bankruptcy estate(s) or were professionals employed by MFA in connection with the bankruptcy sale.
Specifically, the defendants are Mr. Robert Shearer, who is the former successor bankruptcy trustee in this case;4 Mr. Owen Katz, who was legal counsel to the former trustee; Mr. Fred McMillen, who is Mr. Reinert's son-in-law and who was specially employed as a financial professional by the former trustee(s) in thiscase; and Mr. Roger Bould, who served as counsel to MFA with respect to the sale of assets to MFA.
While not a model of clarity, Mr. Reinert alleges in his Amended Complaint that the defendants engaged in a coordinated "scam" to deprive the bankruptcy estate(s) of assets, which in-turn prevented Mr. Reinert from reorganizing his affairs and paying creditors in full. See Amended Complaint at ¶65.
In support of these allegations, Mr. Reinert appears to allege that the sale to MFA was unreasonable, that the defendants' failed efforts to compromise any challenges to the sale was improper, that conversion of this case to a chapter 7 was improper because the schedules of assets and liabilities on file were fraudulent and because Mr. Reinert allegedly was denied sufficient access to records necessary for him to complete his own bankruptcy schedules. See Amended Complaint at ¶¶ 57, 58, 60, 62, 65-68, and 78-84.
In light of these accusations, Mr. Reinert's Amended Complaint suggests that he is asking that the Court revisit its prior orders relating to the sale to MFA. In addition, Mr. Reinert is asking that the Court award damages in favor of Mr. Reinert and against the defendants under various legal theories such as claims arising under the Racketeer Influence and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962, state law racketeering, and other claims sounding in fraud.
The defendants have now filed a Motion to Dismiss, contending that the Amended Complaint is an ultra vires filing in contravention to the Barton Doctrine. As a result, the defendants contend that the Amended Complaint should bedismissed for want of subject-matter jurisdiction.
In addition, the defendants contend that the Amended Complaint should be dismissed because the Amended Complaint fails to state a claim for which relief could be granted. In this regard, the defendants contend, among other things, that the claims of Mr. Reinert are barred by prior orders of this court and/or that he has not stated a prima facie claim for the commercial torts he has asserted. In addition, the defendants contend that the causes of action asserted by Mr. Reinert, to the extent they exist, are property of the bankruptcy estates and Mr. Reinert lacks standing to prosecute them. These items in the Motion to Dismiss shall be addressed ad seriatim below.
Fed.R.Civ.P. 12(b)(1) directs that a complaint shall be dismissed if the Court lacks the requisite subject-matter jurisdiction. Defendants Shearer, Katz and McMillen ask that this Court dismiss the above captioned lawsuit for want of subject-matter jurisdiction under the so-called "Barton Doctrine."
The Barton Doctrine arises out of the United States Supreme Court case of Barton v. Barbour, 104 U.S. 126, 128 (1881). In Barton v. Barbour, the Supreme Court held that "before suit is brought against a receiver leave of the court by which he was appointed must be obtained." Id.
Although Barton involved a receiver in state court, the doctrine has long been applied to trustees in bankruptcy. See Richardson v. Monaco (In re SummitMetals, Inc.), 477 B.R. 484, 495 (Bankr. D. Del. 2012). It has also been applied to protect professionals retained to assist with the trustee's duties. See Falck Props., LLC v. Walnut Capital Real Estate Servs., Inc. (In re Brownsville Prop. Corp.), 473 B.R. 89, 91 (Bankr. W.D. Pa. 2012). As such, to the extent the Barton Doctrine is applicable, Mssrs. Shearer, Katz and McMillen are protected by it.
The Barton Doctrine requires leave of the appointing court before litigation can be commenced against bankruptcy estate representatives in an another forum. That a non-bankruptcy forum has no jurisdiction over such claims absent prior approval of the appointing court avoids the potential for a state court decision to overturn or conflict with a bankruptcy court decision. See In re VistaCare Group, LLC, 678 F.3d 218, 228 (3d Cir. 2012).
No doubt, Mr. Reinert is seeking to overturn this Court's prior decisions relating to the MFA sale, which is precisely why the Barton Doctrine should apply to this case. However, the record reflects that, without leave of this Court, Mr. Reinert's civil action was filed in state court and that it was subsequently removed to this Court.
Does this procedural posture, i.e., that the civil action was removed, obviate the application of the Barton Doctrine? Stated in other words, does the mere fact that the action was removed to the appointing court eliminate any infirmity under the Barton Doctrine? The answer is "no" it does not.
There is no controlling law in the Third Circuit as to the issue of whether removal cures a defective filing in violation of the Barton Doctrine. While there isno controlling case from the Third Circuit Court of Appeals, this Court finds persuasive the opinion of U.S. Bankruptcy Judge Kevin Carey in In re Summit Metals, Inc., where he wrote:
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