Saad Mohammed Fehad Buzwair Al Dosari v. McCormick (In re McCormick)

• Decision Date: 20 March 2020
• Docket Number: Adv. No. 19-00313,Case No. 19-16414-LSS
• Parties: In re: Brian Arthur McCormick Debtor. Saad Mohammed Fehad Buzwair Al Dosari, Plaintiff, v. Brian Arthur McCormick, Defendant.
• Court: U.S. Bankruptcy Court — District of Maryland

In re: Brian Arthur McCormick Debtor.

Saad Mohammed Fehad Buzwair Al Dosari, Plaintiff, v. Brian Arthur McCormick, Defendant.

Case No. 19-16414-LSS

Adv. No. 19-00313

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF MARYLAND at Greenbelt

Entered: March 23, 2020

March 20, 2020

Chapter 7

MEMORANDUM OPINION

Before the Court are Plaintiff's Motion for Judgment on the Pleadings [Dkt. No. 17] (the "Motion"), the Memorandum of Law in Support of Plaintiff's Motion for Judgment on the Pleadings [Dkt. No. 18], Defendant's Opposition to Plaintiff's Motion for Judgment on the Pleadings [Dkt. No. 27], Plaintiff's Reply to Defendant's Opposition to Plaintiff's Motion for Judgment on the Pleadings [Dkt. No. 37]; Defendant's Rebuttal to Plaintiff's Reply to Debtor's Opposition to Plaintiff's Motion for Judgment on the Pleadings [Dkt. No. 38], and Plaintiff's Response to Defendant's Rebuttal [Dkt. No. 39]. For the reasons that follow, the Court finds and concludes that the Motion for Judgment on the Pleadings should be denied.

This Court has jurisdiction to hear this matter, pursuant to 28 U.S.C. § 157 and 28 U.S.C. § 1334. This is a core proceeding, pursuant to 28 U.S.C. § 157(b)(2). Venue is proper in this district pursuant to 28 U.S.C. § 1409(a). The following constitutes the Court's findings of fact and conclusions of law in accordance with Federal Rule of Civil Procedure 52, made applicable to this adversary proceeding by Rule 7052 of the Federal Rules of Bankruptcy Procedure. To the extent appropriate, the following findings of fact shall be deemed conclusions of law and vice versa.

I. BACKGROUND.

Defendant was a real estate developer involved in a large construction project in Qatar. Defendant solicited and obtained a large investment from Plaintiff. Thereafter, Defendant's business ventures collapsed.

On August 30, 2012, a group of Defendant's creditors filed an Involuntary Chapter 7 Petition against Defendant in the United States Bankruptcy Court for the District of Maryland (the "2012 Bankruptcy"). See Case No. 12-25888, Dkt. No. 1. On May 22, 2013, Plaintiff filed a proof of claim in the 2012 Bankruptcy asserting a claim of $11,064,437.58. Eight days later, Plaintiff filed an adversary complaint against Defendant (the "2013 Adversary"). See Adversary Case No. 13-00325, Dkt. No. 1. After Defendant did not file a timely answer to the adversary complaint, Plaintiff sought and obtained a Clerk's Entry of Default. See Adversary Case No. 13-00325, Dkt. Nos. 6 & 7. Soon thereafter, Defendant filed an Answer and Demand for Jury Trial. See Adversary Case No. 13-00325, Dkt. No. 9. Within a month, Defendant filed an AmendedAnswer and Counter Complaint followed by his Rule 26(a)(1) disclosures. See Adversary Case No. 13-00325, Dkt. Nos. 14, 20, & 23.

On November 14, 2013, the United States District Court for the District of Maryland entered an Order granting Plaintiff's motion to withdraw the reference. See Adversary Case No. 13-00325, Dkt. No. 36. With leave of the court, Plaintiff filed an Amended Complaint (the "2013 Complaint") on January 20, 2015. See District Court Case No. 1:13-cv-023355, Dkt. Nos. 48 & 49. In the 2013 Complaint, Plaintiff alleged that Defendant operated an international criminal enterprise to defraud investors, including Plaintiff. Plaintiff alleged that Defendant violated the Federal wire fraud, money laundering, and RICO statutes in furtherance of defrauding Plaintiff. Plaintiff alleged that Defendant misrepresented, orally and in writing, his net worth, his ownership interest in the subject project, his experience in developing multi-billion-dollar real estate projects, and his ability to obtain bank financing. Further, Plaintiff alleged that Defendant used fake escrow arrangements for the purpose of misappropriating funds and presenting falsified and forged emails and documents to Plaintiff. Plaintiff asserted causes of action against Defendant for violation of RICO, common law fraud, unjust enrichment, breach of guarantee agreement, and nondischargeability under 11 U.S.C. §§ 523 (a)(3)(B), (a)(2), (a)(4), and (a)(6).

Defendant did not file a timely response to the 2013 Complaint and Plaintiff again obtained a Clerk's Entry of Default. See District Court Case No. 1:13-cv-023355, Dkt. No. 51. However, on Defendant's motion, the District Court set aside the Clerk's Entry of Default and Defendant filed his answer to the 2013 Complaint. See District Court Case No. 1:13-cv-023355, Dkt. Nos. 55 & 56.

On October 15, 2015, the bankruptcy court entered an order dismissing the 2012 Bankruptcy without a discharge. See Case No. 12-25888, Dkt. No. 87. Accordingly, Plaintiff abandoned his claims for non-dischargeability under 11 U.S.C. § 523 as moot.

A jury trial was scheduled in the 2013 Adversary for February 29, 2016. See District Court Case No. 1:13-cv-023355, Dkt. No. 84. On February 25, 2016, Defendant filed a Line Withdrawing his Answer and Counter Complaint as well as his Answer to the 2013 Complaint. See District Court Case No. 1:13-cv-023355, Dkt. No. 92. The following day, Plaintiff filed a Motion for Judgment, which the District Court granted on the same day. See District Court Case No. 1:13-cv-023355, Dkt. Nos. 94 & 95. In the Order granting Plaintiff's Motion for Judgment (the "Judgment Order"), the District Court held the following:

Inasmuch as the pleadings referred to set out in the Line [Docs. #9 and #49] extensively detail a series of frauds and other illegal activities carried out by the defendant Brian McCormick over an extended period of time beginning in 2008, the court finds ample evidence, which if presented at trial, would have been more than sufficient to warrant the entry of a judgment against the defendant on the counts One and Two in the [2013] Complaint against him based on violations of the Racketeer Influenced and Corrupt Organizations Act, Section 18 USC 196 et seq. In particular, the Court finds the allegation entirely sufficient to warrant the entry of a judgment against the defendant on an extended series of frauds as well as money laundering in violation of Title 18, Section 1956 as well as violations of Sections 2314 and 2315 of Title 18 relating to the transportation and interstate and foreign commerce or Foreign commerce of money in the value of $5,000 more and receiving such.

Accordingly, the Court orders the entry of a judgment against the defendant on Counts One and Two of the [2013] Complaint in the full amount of the total of the payments made by the plaintiff to the defendant as set forth in the [2013] Complaint in the table in paragraph 99 of the [2013] Complaint. That total is $11,064,437.58.

The Court orders that the Plaintiff submit within thirty (30) days of the entry of this Judgment evidence in affidavit form supporting the costs incurred by him in the prosecution of this case against the defendant, as permitted under 18 USC § 1964(c).

In addition, the Court finds the allegations set forth in the [2013] Complaint are more than sufficient to warrant the granting of relief pursuant to Count Three(common law fraud), Count Four (unjust enrichment) and Count Five (breach of guarantee agreement). The amounts awarded hereinunder Counts Three and Four are $11,064,437.58 on each count and, Count Five, $875,000.

Judgment Order, District Court Case No. 1:13-cv-023355, Dkt. No. 95.

On May 10, 2019, Defendant, acting pro se, filed a voluntary Chapter 7 Bankruptcy Petition thereby initiating the underlying bankruptcy case. See Case No. 19-16414, Dkt. No. 1. On Schedule F, Defendant listed an unsecured, nonpriority claim held by Plaintiff for $36,393,312.74. See Case No. 19-16414, Dkt. No. 1-1, p. 23.

On August 19, 2019, Plaintiff filed the Complaint to Determine Dischargeability of Debt [Dkt. No. 1] (the "Complaint"). Plaintiff asserts that his claim liquidated in the 2013 Adversary is nondischargeable under 11 U.S.C. § 523(a)(2)(A), (a)(2)(B), (a)(4), and (a)(6). Defendant filed a timely Answer to the Complaint [Dkt. No. 10], and, with leave of the Court, later filed an Amended Answer [Dkt. No. 35].

After the parties filed their initial pleadings, Plaintiff filed the Motion for Judgment. Plaintiff argues that Defendant was deemed to have admitted all allegations in the complaint based on Defendant's withdrawal of his answer in the 2013 Adversary. Plaintiff further argues that such deemed admission should extend to this adversary proceeding, and, based thereon, Plaintiff is entitled to judgment as a matter of law. Defendant responds that he did not actively participate in the 2013 Adversary and that, in any regard, the Judgment Order is not entitled to issue preclusion because it was not the result of actual litigation.

II. DISCUSSION.

A. Waiver.

Plaintiff correctly recites that "[a] waiver is an intentional and voluntary relinquishment of a known right." United States v. Ductan, 800 F.3d 642, 647 n. 1 (4th Cir. 2015), quoting United States v. Goldberg, 67 F.3d 1092, 1099 (3d Cir. 1995). However, the Court is not awareof, and Plaintiff did not cite, any case law holding that the withdrawal of an answer in a prior action equated to an enduring waiver of the defendant's right to contest the factual allegations in the complaint in the prior action. Such a rule would be an end run around the issue preclusion body of law discussed below. Further, nothing before the Court establishes that Defendant intended his withdrawal of his answer in the 2013 Adversary to be a waiver of his right to litigate the underlying factual issues in subsequent litigation. Accordingly, the Court concludes that Plaintiff has failed to establish that Defendant has waived his right to contest any factual issues pertaining to Plaintiff's nondischargeability claims.

B. The preclusive effect of a prior judgment in a dischargeability proceeding.

The body of law on the preclusive effect of prior judgments in dischargeability proceedings is a complex amalgamation of state and federal law, which the Court will...