Wortley v. Chrispus Venture Capital, LLC (In re Global Energies, LLC)

• Citation: 763 F.3d 1341
• Decision Date: 15 August 2014
• Docket Number: No. 13–11666.,13–11666.
• Parties: In re GLOBAL ENERGIES, LLC, Debtor. Joseph G. Wortley, Interested Party–Appellant, v. Chrispus Venture Capital, LLC, Petitioning Creditor–Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

763 F.3d 1341

In re GLOBAL ENERGIES, LLC, Debtor.

Joseph G. Wortley, Interested Party–Appellant,

v.Chrispus Venture Capital, LLC, Petitioning Creditor–Appellee.

No. 13–11666.

United States Court of Appeals,Eleventh Circuit.

Aug. 15, 2014.

Robert J. Hauser, Beasley Hauser Kramer & Galardi, PA, Steven Sloane Newburgh, McLaughlin & Stern, LLP, West Palm Beach, FL, for Interested Party–Appellant.

Chad P. Pugatch, George Leo Zinkler, III, Rice Pugatch Robinson & Schiller, PA, Fort Lauderdale, FL, for Petitioning Creditor–Appellee.

Appeal from the United States District Court for the Southern District of Florida. D.C. Docket Nos. 0:12–cv–61483–KMW; 10–28935–BKC–RBR.

Before FAY, Circuit Judge, and HODGES ^* and HUCK,^** District Judges.

PER CURIAM:

Joseph G. Wortley appeals the district court's judgment affirming the bankruptcy court's summary denial of his motion for relief from judgment under Rule 60(b) of the Federal Rules of Civil Procedure. Wortley asserts that, under Rule 60(b), new evidence wrongfully withheld by opposing parties, misrepresentations made by opposing parties, or both, entitled him to relief from the bankruptcy court's earlier denial of his motion to dismiss the involuntary bankruptcy petition filed by Chrispus Venture Capital, LLC.

I.

Wortley, James Juranitch, and Richard Tarrant shared ownership in Global Energies, LLC before its bankruptcy. Wortley and Juranitch personally owned their stakes, while Tarrant held his through Chrispus, the appellee, in which he had a 93% ownership interest. The three partners formed Global to market a plasma technology that Juranitch had developed. In mid–2010, business disagreements undermined that partnership and resulted in Tarrant and Juranitch's developing a plan to wrest Wortley's interest in Global from him by having Chrispus file an involuntary bankruptcy petition against Global. ¹ That plan was hatched, or at least captured, in emails exchanged between Tarrant, Juranitch, and Chrispus's bankruptcy attorney, Chad Pugatch, in June 2010 (the “June 17–19 emails”). Writing to Tarrant on June 17, two weeks before Chrispus's bankruptcy petition was filed, Juranitch said:

The following is my humble attempt at presenting a strategy for Global Energies/Plasma Power starting next week. If you and Ron [Roberts, Chrispus's primary officer,] agree with the memo, I recommend we have Chad Pugatch review it, and add his insight. The plan is:

1. [Tarrant] communicates with [Wortley] on Tuesday when he is back, and requests a response on the offer that [Tarrant] extended Sunday night, which expired last Tuesday. [Tarrant] gives [Wortley] until the end of the business day.

2. If a meaningful response is received [Tarrant] and [Juranitch] start negotiating.... A two[-]day window is given to [Wortley] for a completed agreement.

3. If no meaningful response is received from [Wortley], Chrispus Ventures files for “Debtor in Possession” rights under Chapter 11 law on Wednesday....

....

6. ... Finally the [new company, Plasma Power LLC] may have to stand up to a legal battle from [Wortley] and needs to dot its I's and cross its T's....

7. I am not clear how the Debtor in Possession eradicates the $200k note to [Wortley] and how [Wortley's] stock is dissolved. If this is accomplished in a bidding war to buy the complete assets of Global including the patents by its debtors than [sic] that is clear. If on the other hand the Debtor in Possession is to dissolve the company as an end game then we need to start spinning Plasma Power at this time. It might also become Global Plasma Power etc. I think we need to have this memo reviewed and a conference call with [Pugatch] to fill in the blanks at this point.

Wortley's Mot. for Reh'g. for Newly Discovered Evidence (hereinafter “Wortley's Mot. for Reh'g”), Ex. D at 2. Tarrant replied: “I agree in general.... I suggest you and [Roberts] pursue this strategy.” Wortley's Mot. for Reh'g, Ex. F at 5. On June 19, Juranitch sent the plan to Pugatch who reviewed it and scheduled a time to discuss it with Juranitch, Roberts, and Tarrant. No agreement with Wortley was reached, and Chrispus filed an involuntary bankruptcy petition against Global on July 1, 2010.

Wortley took no initial action to oppose the bankruptcy petition and even approved the appointment of a trustee. He later began to suspect collusion by Tarrant and Juranitch, particularly when Chrispus showed interest in bidding on Global's assets at the bankruptcy sale. Acting on those suspicions, Wortley moved under 11 U.S.C. § 1112(b) to dismiss the bankruptcy petition as having been filed in bad faith.² The bankruptcy court held an emergency evidentiary hearing; at that point, Wortley could proffer only circumstantial evidence in support of his motion. Chrispus had not turned over the June 17–19 emails, despite Wortley's request for all documents containing communications about Global between Juranitch, Tarrant, and Pugatch.³ Pugatch, a recipient of some of the June 17–19 emails, represented to the bankruptcy court that “all responsive documents” had been produced. Wortley's Mot. for Reh'g, Ex. H. He asserted no privilege that would have allowed Chrispus to withhold the missing emails or put Wortley on notice that the emails existed.

Weakening Wortley's case further was the fact that Tarrant and Juranitch both gave sworn testimony denying their plan to file an involuntary bankruptcy petition. When asked under oath whether he had “any conversations with Juranitch about filing an involuntary [bankruptcy],” Tarrant answered “no.” Tarrant Dep. at 53. Juranitch similarly testified that he had not learned of Chrispus's plan to file an involuntary bankruptcy petition until “shortly after they filed it or right when they were going to do it.” Juranitch Dep. at 103. Pugatch, who is a partner in what Wortley admits is a “respected Ft. Lauderdale bankruptcy firm,” Appellants's Br. at 24, lent his weight to those statements before the bankruptcy court, saying “[t]hroughout the entire process, representatives of Chrispus ... [had] the stated purpose of trying to salvage [Global] ... all with the goal of saving the monetary investment,” Tr. of Evidentiary Hr'g (Nov. 10, 2010) at 62–63. Pugatch, of course, knew better. He knew Juranitch and Tarrant sought to “eradicate[ ]” Wortley's promissory note and “dissolve[ ]” his stock. Wortley's Mot. for Reh'g, Ex. D at 2. With no direct evidence for his claim, Wortley asked to withdraw his motion to dismiss, and the bankruptcy court granted that request without prejudice. Between the time when Wortley filed that motion and withdrew it, the trustee sold Global's assets to Chrispus; after the motion to dismiss was withdrawn, the bankruptcy court approved the sale.

About a year later, Wortley renewed his motion to dismiss the bankruptcy case based on new evidence. He had identified emails between Tarrant and Juranitch that appeared to show that they had colluded to do business without him before filing for bankruptcy. Those emails were not the ones from June 17–19, however, because those were still being withheld from Wortley, despite his earlier discovery requests. Like the evidence that Wortley had proffered earlier, the new emails, to which Wortley did have access, only circumstantially supported the claim that Chrispus had filed the involuntary bankruptcy petition in bad faith. Finding the evidence to be insufficient to support Wortley's claims, the bankruptcy court dismissed his motion with prejudice.⁴

Around that same time, in related state-court litigation, Wortley finally obtained the June 17–19 emails appearing to show both that Juranitch and Tarrant colluded in filing for involuntary bankruptcy and that they had testified falsely about that plan in their earlier depositions. Notably, the emails were produced not by Pugatch—who had received and known of them—but by the attorney who was defending Tarrant and the others against Wortley's state-law claims. Wortley then filed a Rule 60(b) motion for relief in the bankruptcy court based on those newly discovered emails. The bankruptcy court summarily denied that motion and decided that no remedy was available to Wortley. As grounds for that denial, the court noted that Wortley's evidence of bad faith “doesn't change anything,” the issue already had been raised, the “bankruptcy is done,” “Wortley had his day in court,” and, even if Chrispus had improperly withheld evidence from Wortley, it would not matter because “[Wortley] knew that [Juranitch, Tarrant, Roberts, and Pugatch] were all talking.” Tr. of Hr'g on Mot. to Reconsider (May 24, 2012) at 10, 18, 22. On appeal, the district court affirmed and reasoned Wortley's new evidence was insufficient to warrant Rule 60(b) relief. Wortley appeals the judgment of the district court.

II.

As the second court to review the judgment of the bankruptcy court, we review it independently of the district court. Senior Transeastern Lenders v. Official Comm. of Unsecured Creditors (In re TOUSA, Inc.), 680 F.3d 1298, 1310 (11th Cir.2012). We review the bankruptcy court's denial of a motion for relief from judgment under Rule 60(b) for abuse of discretion. See Frederick v. Kirby Tankships, Inc., 205 F.3d 1277, 1287 (11th Cir.2000). If the bankruptcy court “has made a clear error of judgment, or has applied the wrong legal standard,” we will conclude that it has abused its discretion in denying a Rule 60(b) motion. See Ameritas Variable Life Ins. Co. v. Roach, 411 F.3d 1328, 1330 (11th Cir.2005) (per curiam). Wortley cites two grounds on which he was entitled to relief under Rule 60(b): first, under Rule 60(b)(2), he had discovered new evidence of the bad-faith filing; second, under Rule 60(b)(3), he was entitled to relief from the judgment as a result of fraud, misrepresentation, or misconduct by Chrispus. Regarding Rule 60(b)(2), Wortley needed to demonstrate that (1) the new evidence was discovered after the judgment was entered, (2) he had exercised due...