State v. Moran-Hernandez (In re Moran-Hernandez)

• Decision Date: 02 February 2016
• Docket Number: Adv. No. 15–02107,Case No. 15–17634
• Citation: 544 B.R. 796
• Parties: In re: Onilda E. Moran–Hernandez, Debtor. State of New Jersey, Department of Labor & Workforce Development, Office of Special Compensation Funds, Plaintiff, v. Onilda E. Moran–Hernandez, Defendant.
• Court: U.S. Bankruptcy Court — District of New Jersey

544 B.R. 796

In re: Onilda E. Moran–Hernandez, Debtor.

State of New Jersey, Department of Labor & Workforce Development, Office of Special Compensation Funds, Plaintiff,

v.Onilda E. Moran–Hernandez, Defendant.

Case No. 15–17634

Adv. No. 15–02107

United States Bankruptcy Court, D. New Jersey.

Signed February 2, 2016

Lance D. Brown, Esq., Lance Brown and Associates, LLC, 1898 Route 33, Hamilton, New Jersey 08690, Attorney for the Debtor/Defendant

Lawrence J. McDermott, Jr., Esq., Pressler and Pressler, L.L.P., 7 Entin Road, Parsippany, New Jersey 07054, Attorney for State of New Jersey, Office of Special Compensation Funds, Uninsured Employer's Fund

MEMORANDUM DECISION

MICHAEL B. KAPLAN, U.S.B.J.

I. INTRODUCTION

This matter is before the Court by way of Onilda E. Moran–Hernandez's ("Debtor" or "Defendant") motion ("Motion") to dismiss the adversary complaint ("Complaint") filed by the State of New Jersey, Office of Special Compensation Funds, Uninsured Employer's Fund (the "Department"). A hearing on the Motion was held on November 9, 2015 and, at the request of the Court, the parties filed supplemental submissions on December 2, 2015 and December 12, 2015. For the reasons expressed below, the Defendant's Motion is denied.

II. JURISDICTION

The Court has jurisdiction over this contested matter under 28 U.S.C. §§ 1334(a) and 157(a) and the Standing Order of the United States District Court dated July 10, 1984, as amended September 18, 2012, referring all bankruptcy cases to the bankruptcy court. This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(I). Venue is proper in this Court pursuant to 28 U.S.C. §§ 1408 and 1409.

III. GENERAL BACKGROUND

On April 24, 2015, the Debtor filed a voluntary Chapter 7 bankruptcy petition. Bunce Atkinson was appointed as Chapter 7 trustee on April 27, 2015 and a report of no distribution was filed on June 19, 2015. The Debtor then received a discharge on August 14, 2015 and the bankruptcy case was closed that same day.

Prior to discharge, on August 7, 2015, the Department filed its Complaint seeking a determination of non-dischargeability relating to a pre-petition judgment obtained by the Department in 2011, in the amount of $290,000.00, based upon a penalty assessed against the Debtor for failure to provide workers' compensation insurance coverage. Specifically, the Department asserts that the judgment is non-dischargeable pursuant to 11 U.S.C. § 523(a)(7). In lieu of an answer, the Debtor filed the within Motion on September 11, 2015, seeking dismissal of the Department's Complaint.

Upon careful review of the pre- and post-argument submissions of the parties, and after conducting independent research, the Court determines that the Department has set forth a plausible claim, with material issues of fact remaining unresolved. Accordingly, the Debtor's Motion is denied, as discussed in more detail below.

IV. STANDARD OF REVIEW

(i) 12(b)(6) Motion to Dismiss Standard

In Connelly v. Lane Constr. Corp., 2016 U.S.App. LEXIS 366 (3d Cir.Pa. Jan. 11, 2016), the Third Circuit Court of Appeals recently reaffirmed the standard of review when addressing a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), made applicable to bankruptcy through Federal Rule of Bankruptcy Procedure 7012(b) :

A complaint may be dismissed under Rule 12(b)(6) for "failure to state a claim upon which relief can be granted." But detailed pleading is not generally required. The Rules demand "only ‘a short and plain statement of the claim showing that the pleader is entitled to relief,’ in order to ‘give the defendant fair notice of what the ... claim is and the grounds upon which it rests.’ " Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 [127 S.Ct. 1955, 167 L.Ed.2d 929] (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) ). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 [129 S.Ct. 1937, 173 L.Ed.2d 868] (2009) (citation and internal quotation marks omitted). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. ; see alsoSheridan v. NGK Metals Corp., 609 F.3d 239, 262 n.27 (3d Cir.2010). Although the plausibility standard "does not impose a probability requirement," Twombly, 550 U.S. at 556 [127 S.Ct. 1955], it does require a pleading to show "more than a sheer possibility that a defendant has acted unlawfully," Iqbal, 556 U.S. at 678 [129 S.Ct. 1937]. A complaint that pleads facts "merely consistent with a defendant's liability ... stops short of the line between possibility and plausibility of entitlement to relief." Id. (citation and internal quotation marks omitted). The plausibility determination is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679 .

Under the pleading regime established by Twombly and Iqbal, a court reviewing the sufficiency of a complaint must take three steps. First, it must "tak[e] note of the elements [the] plaintiff must plead to state a claim." Iqbal, 556 U.S. at 675 [129 S.Ct. 1937]. Second, it should identify allegations that, "because they are no more than conclusions, are not entitled to the assumption of truth." Id. at 679 . See alsoBurtch v. Milberg Factors, Inc., 662 F.3d 212, 224 (3d Cir.2011) ("Mere restatements of the elements of a claim are not entitled to the assumption of truth." (citation and editorial marks omitted)). Finally, "[w]hen there are well-pleaded factual allegations, [the] court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Iqbal, 556 U.S. at 679 [129 S.Ct. 1937].

Connelly v. Lane Constr. Corp., 2016 U.S.App. LEXIS 366, *9–11 (3d Cir.Pa. Jan. 11, 2016).

(ii) Conversion of 12(b)(6) Motion to Dismiss to Summary Judgment

Federal Rule of Civil Procedure 12(b)(6) states if "matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided by Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56." Fed.R.Civ.P. 12(b)(6). "Generally, in ruling on a motion to dismiss, a ... court relies on the complaint, attached exhibits, and matters of public record." Sands v. McCormick, 502 F.3d 263, 268 (3d Cir.2007). Therefore, if the moving party presents or uses materials not contained in the four corners of the plaintiff's complaint, and the court relies on such materials, the summary judgment standard should be used.

Garlanger v. Verbeke, 223 F.Supp.2d 596, 605 n.4 (D.N.J.2002). Such a determination is left to the discretion of the court, but the parties must be given adequate notice of the conversion. Id.

While it may be possible to determine the present case based solely on the pleadings, this Court finds that the summary judgment standard is a more appropriate mechanism for making a determination. The applicability of N.J.S.A. §§ 34:15–79 and 34:15–120.10 is a matter of law, but requires the court to consider, as discussed below, the interplay of these statutes vis-à-vis New Jersey's Appropriations Act. In this regard, the Court has accepted and considered the parties' supplemental submissions, including the Department's certifications of Larry J. Crider, Administrator of the Department, and Joseph E. Latoof, Chief Financial Officer of the Department. These submissions, although outside of the four corners of the Complaint, serve to aid the Court in its analysis. Accordingly, the Court will treat the Debtor's Motion as a request for summary judgment with respect to the Department's claims.

(iii) Summary Judgment Standard

Summary judgment is appropriate where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a).¹ As the Supreme Court has indicated, "[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather an integral part of the Federal Rules as a whole, which are designed ‘to secure the just, speedy, and inexpensive determination of every action.’ " Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (citing Fed.R.Civ.P. 1 ). "In deciding a motion for summary judgment, the judge's function is to determine if there is a genuine issue for trial." Josey v. John R. Hollingsworth Corp., 996 F.2d 632, 637 (3d Cir.1993).

The moving party bears the initial burden of demonstrating the absence of a genuine dispute of material fact. Huang v. BP Amoco Corp., 271 F.3d 560, 564 (3d Cir.2001) (citing Celotex Corp., 477 U.S. at 323, 106 S.Ct. 2548 ). In determining whether a factual dispute warranting trial exists, the court must view the record evidence and the summary judgment submissions in the light most favorable to the non-movant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Disputed material facts are those "that might affect the outcome of the suit under the governing law." Id. at 248, 106 S.Ct. 2505. A dispute is genuine when it is "triable," that is, when reasonable minds could disagree on the result. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citations omitted).

Once the moving party establishes the absence of a genuine dispute of material fact, however, the burden shifts to the non-moving party to "do more than simply show that there is some metaphysical doubt as to the material facts."

Matsushi ta, 475 U.S. at 586, 106 S.Ct. 1348. A party may not defeat a motion for summary judgment unless it sets forth specific facts, in a form that "would be admissible...