Zeigler v. Delph (In re Delph)
| Decision Date | 07 June 2021 |
| Docket Number | APN 19-07024-SCS,Case No. 19-72494-SCS |
| Court | U.S. Bankruptcy Court — Eastern District of Virginia |
| Parties | In re: CHRISTOPHER WAYNE DELPH, SARA FRANCES DELPH, Debtors. BRANDON ZEIGLER, SAGIE DORON, FIRST CLASS SHIPPING LOGISTICS, LLC, Plaintiffs, v. CHRISTOPHER WAYNE DELPH, Defendant. |
This matter came on for hearing on April 7, 2021, upon the Motion for Summary Judgment filed on October 18, 2020, by Brandon Zeigler, Sagie Doron, and First Class Shipping Logistics, LLC (collectively, the "Plaintiffs"), by counsel, and the response thereto filed by the Defendant, Christopher Wayne Delph, who is unrepresented in this adversary proceeding. Counsel for the Plaintiffs and Mr. Delph appeared at the hearing and presented their arguments. At the conclusion of the hearing, the Court took the matter under advisement. This Court has jurisdiction over this proceeding pursuant to 28 U.S.C. §§ 157(b)(2) and 1334(b). Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409(a). This Memorandum Opinion constitutes the Court's conclusions of law.
Christopher Wayne Delph and Sara Frances Delph (the "Debtors"), by counsel, filed a voluntary petition under Chapter 7 of the United States Bankruptcy Code on June 29, 2019. Clara P. Swanson, Esquire, was appointed to serve as the Chapter 7 Trustee. On October 5, 2019, the Plaintiffs, by counsel, timely filed a complaint seeking a determination of the dischargeability of debt (the "Complaint") owed to them by Mr. Delph (the "Defendant"). ECF No. 1 (hereinafter, "Complaint").1
Count I of the Complaint seeks judgment and a determination that such amount is nondischargeable pursuant to 11 U.S.C. § 523(a)(2) because Mr. Delph allegedly made materially false representations as to the financial condition of the corporate Plaintiff, First Class Shipping Logistics, LLC (which the Plaintiffs assert was an insider of Mr. Delph), to the two individual Plaintiffs, upon which the latter reasonably relied. Id. ¶¶ 76-80. The Complaint further asserts that Mr. Delph knew or should have known such representations would induce Plaintiffs' Zeigler's and Doron's reliance thereupon, and as a result, the individual Plaintiffs were harmed. Id. ¶¶ 81-82. The Plaintiffs seek a nondischargeable judgment for compensatory damages of $250,000.00. Id. at prayer.
Count II seeks a judgment for compensatory damages of $500,000.00 and a determination that such amount is nondischargeable pursuant to 11 U.S.C. § 523(a)(6) on the basis that Mr. Delph willfully and maliciously injured the corporate Plaintiff by purportedly utilizing its assets for noncorporate purposes and failing to perform proper maintenance on those assets. See id. ¶¶ 83-106, prayer. The Complaint further asserts that Mr. Delph's actions harmed the corporate Plaintiff's business and property. See id. at ¶ 106.
Count III seeks a determination that certain debts are nondischargeable pursuant to 11 U.S.C. § 523(a)(6) because Mr. Delph allegedly made false and malicious statements about the individual Plaintiffs to employees of the corporate Plaintiff. Id. ¶¶ 107-12. Further, the Complaint argues that Mr. Delph's willful and malicious statements harmed the corporate Plaintiff and its reputation. Id. ¶ 113. For these actions, the Plaintiffs seek a nondischargeable judgment for compensatory damages of $1,000,000.00. Id. at prayer. Regarding all counts, the Plaintiffs further seek the imposition of punitive damages and a declaration of the nondischargeability of such damages. Id.
The Court scheduled the Pretrial Conference in this proceeding for December 5, 2019, at 9:30 a.m. ECF No. 4. Mr. Delph, appearing pro se in this adversary proceeding, filed a response to the Complaint on November 5, 2019. ECF No. 6. The Clerk's Office issued a notice of deficient filing to Mr. Delph on November 6, 2019, because Mr. Delph failed to include with his response a certification pursuant to Local Bankruptcy Rule 2090-1. ECF No. 7. Mr. Delph re-filed his response and the required Local Bankruptcy Rule 2090-1 certification on November 21, 2019. ECF No. 11.
The Plaintiffs filed a Motion to Strike Responsive Pleadings pertaining to Mr. Delph's November 5, 2019 and November 21, 2019 responses on November 25, 2019, which was followed by a Corrected Motion to Strike Responsive Pleadings (the "Motion to Strike") on November 26, 2019. ECF Nos. 14, 16. The Court scheduled a hearing on the Plaintiffs' Motion to Strike for December 19, 2019, and continued the Pretrial Conference to the same date so as to coincide withthe hearing on the Motion to Strike. ECF No. 19. Mr. Delph responded to the Motion to Strike on December 9, 2019. ECF No. 22.
The Pretrial Conference and a hearing on the Motion to Strike was held on December 19, 2019; counsel for the Plaintiffs and Mr. Delph appeared. The Court advised the parties that the relief sought by the Plaintiffs in Count III of the Complaint constituted a personal injury claim under Virginia law, which the Court does not have jurisdiction to liquidate under 28 U.S.C. § 157. See ECF No. 80, Dec. 19, 2019 Pretrial Conference Transcript, at 3 (hereinafter, "Dec. 19, 2019 Transcript"); see, e.g., Ayers v. U.S. Dep't of Def. (In re Ayers), 581 B.R. 168, 175 (Bankr. W.D. Va. 2018) ( ) (citing 28 U.S.C. § 157(b)(5)), aff'd, Civil Action No. 7:18-cv-00032, 2019 WL 4145240 (W.D. Va. Aug. 30, 2019); see also Gilmore v. Jones, 370 F. Supp. 3d 630, 664 (W.D. Va. 2019) (); Breckenridge v. Albemarle Cnty. Police Dep't, Civil Action No. 7:07-cv-00326, 2007 WL 2029305, at *2 (W.D. Va. July 10, 2007) (citations omitted) ("[D]efamation, libel, and slander are tort claims traditionally governed by state law.").
Upon the Court's inquiry, the parties confirmed that they were engaged in litigation pre-petition on the Plaintiffs' claims of fraud, constructive fraud, conversion, civil and statutory civil conspiracy, and defamation per se, which matter remained pending in, but had been stayed by, the Circuit Court for the City of Norfolk, Virginia. Id. at 3-4; see ECF No. 27, Order Allowing Parties to Litigate in State Court to Judgment All Claims and Counter-Claims, entered Jan. 24, 2020 (hereinafter, "Jan. 24, 2020 Order"). Without objection by the parties, the Court determined that justice would be better served by deferring both the claim asserted in Count III as well as theremaining counts of the Complaint to the state court for liquidation purposes, with the parties thereafter returning to this Court for the determination of dischargeability. Dec. 19, 2019 Transcript, at 4. The Court's ruling was memorialized by order entered January 24, 2020. See generally Jan. 24, 2020 Order.2 The Court scheduled a Status Hearing for May 21, 2020. Id. at 2; Dec. 19, 2019 Transcript, at 6.
The Status Hearing was continued twice while the matters were litigated in state court. ECF Nos. 34, 41 (). The Court held the Status Hearing and a continued Pretrial Conference telephonically on October 8, 2020, at which counsel for the Plaintiffs appeared; Mr. Delph did not appear. Based on the representations of Plaintiffs' counsel, a hearing on the Motion to Strike was scheduled for November 5, 2020, and the Pretrial Conference was continued to the same date. ECF No. 47, Order Continuing Pretrial Conference, entered Oct. 14, 2020.
On October 18, 2020, the Plaintiffs filed the Motion for Summary Judgment currently under consideration by the Court. ECF No. 49 (hereinafter, "Motion"). The Court conducted the continued Pretrial Conference and a hearing on the Motion to Strike telephonically on November 5, 2020. Once again, counsel for the Plaintiffs appeared, but Mr. Delph did not. For the reasons stated on the record, the Court found that Mr. Delph's responses to the Complaint failed to satisfy the requirements of Federal Rule of Civil Procedure 7008, granted the Plaintiffs' Motion to Strike, and ordered Mr. Delph to file an answer to the Complaint within twenty-one (21) days of entry ofthe order memorializing the ruling. ECF No. 57, Order Granting Motion to Strike, entered Nov. 30, 2020. The Court continued the Pretrial Conference to allow Mr. Delph the opportunity to file his answer. ECF No. 55, Order Continuing Pretrial Conference, entered Nov. 9, 2020; ECF No. 59, Notice of Continued Pretrial Conference, filed Dec. 1, 2020.3
The continued Pretrial Conference was conducted remotely via Zoom on January 14, 2021; Mr. Delph and counsel for the Plaintiffs appeared. Upon inquiry by the Court, Mr. Delph confirmed that he did not timely file an answer as required by the November 30, 2020 order and further represented that his address had changed; as a result, Mr. Delph did not receive all communications from the Court or from opposing counsel. See ECF No. 64, Order Continuing Pretrial Conference, entered Jan. 19, 2021. Upon consideration of Mr. Delph's representations, the Court ordered Mr. Delph to file an answer and change his address with the Court within ten (10) days of January 14, 2021, and continued the Pretrial Conference to January 28, 2021. Id. Mr. Delph filed his answer and exhibits thereto on January 26, 2021. ECF Nos. 68, 69.
Counsel for the Plaintiffs and Mr. Delph appeared at the January 28, 2021 continued Pretrial Conference, at which time the Court again ordered Mr. Delph to provide his updated address to the Court and further ordered Plaintiffs' counsel to re-serve the Plaintiffs' Motion for Summary Judgment on Mr. Delph at his updated address. See ECF No. 71, Order Establishing Deadlines on ...
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