Von Kahle v. Roemmele (In re Roemmele)

• Decision Date: 14 March 2012
• Docket Number: Adversary No. 01–1252.,Bankruptcy No. 01–32044–ELF.
• Parties: In re Bernard A. ROEMMELE, Debtor.Philip J. Von Kahle, Successor Receiver on behalf of Professional Resources Systems International, Inc., a/k/a PRSI, Inc., Plaintiff, v. Bernard A. Roemmele, Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

466 B.R. 706

In re Bernard A. ROEMMELE, Debtor.Philip J. Von Kahle, Successor Receiver on behalf of Professional Resources Systems International, Inc., a/k/a PRSI, Inc., Plaintiff,

v.Bernard A. Roemmele, Defendant.

Bankruptcy No. 01–32044–ELF.

Adversary No. 01–1252.

United States Bankruptcy Court, E.D. Pennsylvania.

March 14, 2012.

David A. Scholl, Law Office of David A. Scholl, Philadelphia, PA, for Debtor.

Bernard A. Roemmele, pro se.

MEMORANDUM

ERIC L. FRANK, Bankruptcy Judge.

I. INTRODUCTION

In this more than decade old adversary proceeding, Plaintiff Philip J. Von Kahle, the court-appointed Receiver (the “Receiver”) for Professional Resources Systems International, Inc. (“PRSI”) ¹ seeks a determination that the debt of Defendant Bernard Roemmele (“the Debtor”) is nondischargeable pursuant to 11 U.S.C. § 523(a)(4).

On October 11, 2011, I ruled on the parties' cross-motions for summary judgment. In the accompanying opinion, I explained that the Receiver had not come forward with evidence supporting certain essential elements of his § 523(a)(4) claim, thereby failing to meet the evidentiary burden under Fed. R. Bankr.P. 7056 and Fed.R.Civ.P. 56 borne by a responding party who bears the burden of proof on the claim at issue. Consequently, I entered summary judgment in favor of the Debtor and against the Receiver. See In re Roemmele, 2011 WL 4804833 (Bankr.E.D.Pa. Oct. 11, 2011).

Presently before the court is the Receiver's motion for reconsideration (“the Motion for Reconsideration”) of the October 11, 2011 order insofar as it granted the Debtor's motion for summary judgment (“the Debtor's 2008 MSJ”). ² The Receiver's primary contention is that the court failed to afford appropriate weight to the Debtor's criminal conviction and thereby erred in allowing the discharge of a debt to an individual who is not an “honest but unfortunate” debtor.³ The Debtor contests the Motion.

I will deny the Receiver's Reconsideration Motion because it is “too little, too late.”

II. BACKGROUND

The prior opinion set out the factual and lengthy procedural background in this adversary proceeding. The complete details need not be repeated here. The discussion is aided, however, by a review of certain parts of the procedural history.

A. The Debtor's Bankruptcy and Adversary Proceeding

The Receiver filed this adversary proceeding on December 26, 2001, requesting both a determination of dischargeability under 11 U.S.C. § 523(a) and the denial of the Debtor's discharge under 11 U.S.C. § 727(a). In general terms, the Receiver asserted that the Debtor, acting in his capacity as Chief Executive Officer of CitX Corporation (“CitX”) and through a series of contracts between CitX and PRSI, fraudulently induced PRSI to pay CitX $700,000.00 or otherwise misappropriated that sum.

The parties filed their first cross-motions for summary judgment in April 2004 (Doc. # s 110 and 114). On February 17, 2005, the court denied the Receiver's request for summary judgment in its entirety and granted the Debtor's request in part, dismissing one (1) of the Receiver's § 523(a) claims. Through the same order, by agreement of the parties, the court dismissed two (2) of the Receiver's § 727(a) claims. (Doc. # 156). Shortly thereafter, on March 30, 2005, at the parties' joint request, the court stayed this adversary proceeding pending resolution of the Debtor's criminal trial in the United States District Court for the Southern District of Florida (“the Florida Criminal Proceeding”). (Doc. # 168). In September 2006, after a status hearing,⁴ this court issued a new pretrial order, which effectively put the adversary proceeding back on track.

On January 12, 2007, the Receiver filed a second motion for summary judgment, to which the Debtor responded (“the Receiver's 2007 MSJ”). (Doc. # 's 184 and 209). After a hearing on the Receiver's 2007 MSJ and consideration of two (2) letters the Receiver sent to the court (Doc. # s 218 and 221), the court entered an Order on August 27, 2007:

(1) dismissing the remaining § 727 claims at the Receiver's request (leaving the § 523(a)(4) claim as the last remaining claim in the adversary proceeding); and

(2) staying the adversary proceeding pending the outcome of the Debtor's appeal of his conviction in the Florida Criminal Proceeding.

(Doc. # 222).

Notably, the Receiver sought a stay of the proceedings in August 2007 because he discovered that the Debtor had been convicted of certain crimes (discussed below) in the U.S. District Court for the Southern District of Florida on August 15, 2006 (the “Florida Criminal Proceeding”). (Doc. # 221). The criminal conviction resulted in the entry of an order on January 26, 2007 requiring the Debtor to pay in excess of $14 million in criminal restitution and the forfeiture of $480,000.00 in assets. See U.S. v. Roemmele, 2011 WL 4625348, at *1 (S.D.Fla. Oct. 3, 2011). The Debtor appealed his conviction. In requesting the stay, the Receiver suggested to the court that if the criminal conviction and the restitution/forfeiture order were affirmed on appeal, he was unlikely to continue pursuing his § 523(a)(4) claim in this court.⁵

On July 31, 2008, notwithstanding the August 27, 2007 stay order, the Debtor filed his second motion for summary judgment, ( i.e., the Debtor's 2008 MSJ, subsequently granted by the order that is the subject of the Receiver's Motion for Reconsideration). (Doc. # 227). The court then entered an order holding the Debtor's 2008 MSJ in suspense until the existing stay was lifted. (Doc. # 230).

On March 28, 2011, upon motion of the Debtor, the court terminated the stay of this adversary proceeding. The March 28, 2011 Order also established a schedule to permit the parties to supplement their pending motions ( i.e., the Receiver's 2007 MSJ and the Debtor's 2008 MSJ) and set a briefing schedule, for what was now, the second round of cross-motions for summary judgment (“the Second Cross–Motions”).

On October 11, 2011, the court granted the Debtor's 2008 MSJ and denied the Receiver's 2007 MSJ, entering final judgment in favor of the Debtor.

B. The Debtor's Criminal Conviction and Appeals

One final piece of background information requires mention. Because the Motion focuses on the Debtor's criminal conviction, it is helpful to review briefly some of the history of the Florida Criminal Proceeding.

The Debtor's August 15, 2006 conviction in the Florida Criminal Proceeding was for:

(1) conspiracy to commit RICO;

(2) conspiracy to commit mail and/or wire fraud;

(3) conspiracy to commit money laundering; and

(4) stock fraud.

(Exh. J to Doc. # 184); see also U.S. v. Roemmele, 2011 WL 4625357, at *1.

The Debtor's conviction was affirmed on appeal by the Eleventh Circuit, although his sentence was vacated and remanded. U.S. v. Hein, 395 Fed.Appx. 652 (11th Cir.2010). (the “11th Cir. Decision”). However, the Debtor's appeal is not final.⁶ For some reason, the Debtor has a second appeal of his conviction pending before the 11th Circuit, as well as a pending petition for a writ of certiorari concerning the 11th Cir. Decision. ( See Letter from Debtor, Doc. # 262).⁷ Further, for an unknown reason, on July 22, 2011, the 11th Cir. recalled its mandate. See U.S. v. Roemmele, 2011 WL 4625348, at *1.

III. DISCUSSION

A. The October 11, 2011 Decision

After reviewing the pleadings and evidentiary record submitted by the parties in connection with the Second Cross–Motions, I concluded that the Debtor was entitled to summary judgment because the Receiver had not met his burden under § 523(a)(4) with respect to any of the three “prongs” of § 523(a)(4): (a) fraud or defalcation while acting in a fiduciary capacity; (b) embezzlement and (c) larceny. I reached this result because:

(1) the Receiver did not produce or reference any evidence that established an express or technical trust between the Debtor or CitX Corporation and PRSI under the “fiduciary prong” of § 523(a)(4);

(2) the Receiver failed to meet his burden with regard to two (2) of the required elements for finding embezzlement under § 523(a)(4): misappropriation and fraudulent intent; and,

(3) the findings in a prior state court judgment against the Debtor ⁸ through application of collateral estoppel did not establish the elements of larceny under § 523(a)(4).

B. Legal Standard

Federal Rule 59(e), made applicable to this proceeding by Bankruptcy Rule 9023, allows a judgment to be altered or amended only if the moving party shows at least one of the following grounds: “(1) an intervening change in the controlling law; (2) the availability of new evidence that was not available when the court granted the motion for summary judgment; or (3) the need to correct a clear error of law or fact or to prevent manifest injustice.” Blystone v. Horn, 664 F.3d 397, 415 (3d Cir.2011) (emphasis removed); accord Max's Seafood Café ex rel. Lou–Ann, Inc. v. Quinteros, 176 F.3d 669, 677 (3d Cir.1999); Intermec Tech. Corp. v. Palm, Inc., 2011 WL 6356619, at *2 (D.Del. Dec. 19, 2011) (citing Max's Seafood ).

It is well established that a litigant moving for reconsideration must overcome a “high burden” in meeting the above standard. ABS Brokerage Servs., LLC v. Penson Fin. Servs., Inc., 2010 WL 3257992, at *5 (D.N.J. Aug. 16, 2010); see also Blystone, 664 F.3d at 404 (“the scope of a motion for reconsideration ... is extremely limited”); Fanelli v. Continental Cas. Co., 2006 WL 3387187, at *2 (M.D.Pa. Nov. 21, 2006) (“reconsideration of judgment is an extraordinary remedy, and such motions should be granted sparingly”) (citation omitted); Conway v. A.I. duPont Hosp. for Children, 2009 WL 1492178, at *2 (E.D.Pa. May 26, 2009) (“Parties may not use rule 59(e) motions as a vehicle to ask ... courts to rethink what they have already thought through—rightly or wrongly”) (internal citations and quotations omitted); In re Kuhar, 2007 WL 2245912, *2 (Bankr.E.D.Pa. Aug. 1, 2007) (“courts should grant such motions sparingly because of their strong interest in...