Kondapalli v. DeMasi
Filing
13
ORDER: Plaintiff Ravi Kondapalli, M.D., individually, and Plaintiff Ravi Kondapalli, M.D., by and on behalf of Gulf Coast Digestive Health Center, PL's Motion for Leave to Appeal 3 is DENIED. The appeal is therefore DISMISSED as leave was not granted and the Court otherwise lacks jurisdiction to hear the appeal. The Clerk shall enter Judgment accordingly and CLOSE THIS CASE. The Clerk shall transmit a certified copy of this Order to the United States Bankruptcy Court Clerk's Office. Signed by Judge Virginia M. Hernandez Covington on 2/24/2015. (KAK)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
IN RE:
RONALD WILLIAM DEMASI and
SUSAN J. DEMASI,
Debtors.
________________________________/
RAVI
KONDAPALLI,
M.D.,
Individually and RAVI KONDAPALLI,
M.D., by and on behalf of GULF
COAST DIGESTIVE HEALTH CENTER,
PL,
Plaintiffs,
v.
Case No. 8:14-cv-2228-T-33
Bankr. No. 8:13-bk-8406-MGW
Adversary No. 8:13-ap-889-MGW
RONALD WILLIAM DEMASI and
SUSAN J. DEMASI,
Defendants.
________________________________/
ORDER
This matter comes before the Court pursuant to Plaintiff
Ravi
Kondapalli,
M.D.,
individually,
and
Plaintiff
Ravi
Kondapalli, M.D., by and on behalf of Gulf Coast Digestive
Health Center, PL’s Motion for Leave to Appeal. (Doc. # 3).
Kondapalli’s Motion was initially filed in the Bankruptcy
Court on August 6, 2014. The Motion was transmitted to this
Court on September 8, 2014.
On October 1, 2014, Defendant
Ronald William DeMasi filed a Response to the Motion for Leave
to
Appeal
in
which
he
proceedings. (Doc. # 7).
requested
an
abatement
of
the
On October 14, 2014, the Court
entered an Order staying the case and directing the parties to
each file a status report on December 15, 2014. (Doc. # 8).
On December 15, 2014, DeMasi filed a status report requesting
that the matter be stayed for an additional 60 days. (Doc. #
9). Kondapalli’s status report, on the other hand, requested
that the Court return the case to active status. (Doc. # 10).
On December 18, 2014, the Court lifted the stay of the
proceeding and directed DeMasi to file a response to the
Motion for Leave to Appeal. (Doc. # 11).
On January 5, 2015,
DeMasi filed a response to the Motion for Leave to Appeal.
For the reasons that follow, the Court denies the Motion for
Leave to Appeal.
I.
Background
A.
Gulf Coast Digestive State Court Action
This action takes root in the Amended Final Judgment of
the Circuit Court of the Twelfth Judicial Circuit in and for
Sarasota County, Florida, entered on December 7, 2012. (Doc.
# 1-2 at 14-55).
According to the State Court Judgment,
Ronald DeMasi (a physician and member of Gulf Coast Digestive
Health Center, P.L. (hereafter, “Gulf Coast Digestive” or
“GCDH”)) persuaded Gulf Coast Digestive to enter into a
management agreement with Surgical Synergies, Inc. in which
Surgical Synergies would furnish billing services for Gulf
Coast Digestive.
At that time, DeMasi was allegedly aware of
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serious performance issues with Surgical Synergies (including
unfavorable outside audits) but DeMasi did not share this
information with the other members of Gulf Coast Digestive –
rather, he incorrectly stated that Surgical Synergies was
doing a good job.
The State Court found DeMasi had an
undisclosed financial interest in a subsidiary of Surgical
Synergies.
undisclosed
The
State
relationship
Court
with
concluded
a
that
subsidiary
of
DeMasi’s
Surgical
Synergies led DeMasi to thwart Gulf Coast Digestive’s efforts
to terminate its management agreement with Surgical Synergies
after Gulf Coast Digestive discovered billing discrepancies.
In
particular,
the
State
Court
found
that
DeMasi
misrepresented to the other members of Gulf Coast Digestive
that Surgical Synergies threatened to sue Gulf Coast Digestive
if
it
terminated
the
management
agreement
with
Surgical
Synergies. The State Court ultimately concluded that DeMasi’s
undisclosed interest in Surgical Synergies’s subsidiary and
DeMasi’s misrepresentations caused Gulf Coast Digestive to
incur damages.
The State Court entered a final judgment in favor of
Gulf Coast Digestive on its claims for breach of the duty of
loyalty under Chapter 608 of the Florida Statutes, breach of
the duty of care under Chapter 608 of the Florida Statutes,
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breach of the duty of good faith under Chapter 608 of the
Florida Statutes, breach of Gulf Coast Digestive’s operating
agreement,
and
fraud.
$411,428.93 in damages.
The
State
Court
initially
awarded
However, since the damages were for
the benefit of Gulf Coast Digestive, and DeMasi and Kondapalli
were the only two shareholders of Gulf Coast Digestive, the
State Court reduced the damages by one half – $205,714.47.
The
State
Court
did
not
individual causes of action.
apportion
damages
between
the
On June 18, 2012, Kondapalli,
individually and by and on behalf of Gulf Coast Digestive,
filed a motion for attorney’s fees and costs in State Court
pursuant to the terms of Gulf Coast Digestive’s Operating
Agreement and § 608.601(6) of the Florida Statutes.
On
October 1, 2014, the Second District Court of Appeal of
Florida affirmed the Amended Final Judgment in favor of
Kondapalli. (Doc. # 10-1).
B.
The DeMasi Bankruptcy Case and Adversary Proceeding
As a result of the State Court Judgment, among other
reasons, DeMasi and his spouse filed a voluntary petition for
relief under Chapter 11 of the United States Bankruptcy Code
on June 26, 2013. (Case No. 8:13-bk-8406-MGW). Thereafter, on
September 9, 2013, Kondapalli, individually, filed a proof of
claim which asserts an unsecured claim (Claim 10) against the
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Bankruptcy Estate in the amount of $379,586.12.
DeMasi
presumes the proof of claim is for attorney’s fees incurred in
the Gulf Coast Digestive State Court Action. (Doc. # 7 at 4).
On September 30, 2013, Kondapalli initiated an adversary
proceeding against DeMasi by filing a Complaint to Determine
Non-Discharageability of Debtor Ronald DeMasi pursuant to 11
U.S.C. § 523(a)(2), (4) and (6) (Adv. No. 8:13-ap-889-MGW).
Kondapalli
asserted
that
the
following
claims
were
nondischargeable in bankruptcy:
Kondapalli, by and on behalf of GCDH, holds a
liquidated claim for damages against the estate in
the amount of $205,714.47, and an unliquidated
claim for damages against the estate in at least
the amount of $361,698.77, plus prejudgment
interest. Kondapalli, individually and by and on
behalf of GCDH holds an unliquidated claim against
the estate for attorney’s fees and costs.
(Doc. # 3 at 3).
On November 4, 2013, DeMasi filed a Motion to Dismiss the
Adversary Proceeding, asserting, among other things, that any
attorney’s fees claimed by Kondapalli were discharagable in
bankruptcy. (BR Doc. # 7). On December 2, 2013, the Bankruptcy
Court conducted a hearing on the Motion to Dismiss. (BR Doc.
# 15).
On June 20, 2014, the Bankruptcy Court entered an
Order dismissing the nondischargeability action to the extent
it is based on the claim of Kondapalli, individually and by
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and on behalf of Gulf Coast Digestive, for attorney’s fees and
costs. (BR Doc. # 26).
that
Kondapalli
failed
The Bankruptcy court also determined
to
state
a
claim
under
sections
523(a)(4) and (6) of the Bankruptcy Code and dismissed those
counts of the Adversary Complaint in their entirety.
(Id.).
According to Kondapalli, “the Order had the effect of denying
Kondapalli’s
entire
individual
(emphasis in original).
claim.”
(Doc.
#
3
at
3)
On June 27, 2014, Kondapalli filed a
Motion for Rehearing. (BR Doc. # 28). At a hearing held on
July 7, 2014, the Bankruptcy Court denied the Motion for
Rehearing. (BR Doc. # 32).
On August 6, 2014, Kondapalli filed a Motion for Leave to
File an Interlocutory Appeal. (BR Doc. # 39). He frames the
issues as (1) “whether a member’s claim for attorney’s fees
incurred as a result of prosecuting a member’s derivative
action
under
Section
608.601,
Florida
Statutes,
may
be
nondischargeable under 11 U.S.C. § 523(a)(2)(A) where the
derivative action arises out of fraud by the debtor” and (2)
“whether a member’s or limited liability company’s claim for
attorney’s fees awardable as a prevailing party pursuant to
the
terms
of
the
company’s
operating
agreement
may
be
nondischargeable under 11 U.S.C. § 523(a)(2)(A) when the
breach of the operating agreement is by acts of fraud by the
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debtor.” (Doc. # 3 at 4). Kondapalli seeks an Order from this
Court
“(1)
to
reverse
the
bankruptcy
court’s
Order
on
Defendant’s Motion to Dismiss to the extent it dismisses
Kondapalli’s complaint to determine the nondischargeablity of
Kondapalli’s claim for attorney’s fees and costs incurred in
the GCDH Litigation; and (2) hold as a matter of law that the
claims, if proved, are not dischargeable.” (Id.).
II.
Interlocutory Appeals from the Bankruptcy Court
A
district
court
has
jurisdiction
to
consider
interlocutory appeals from the orders of a bankruptcy court if
the district court grants leave.
28 U.S.C. § 158(a)(3).
Because the statute does not provide criteria for determining
whether a district court should exercise its discretionary
authority to grant leave, courts look to 28 U.S.C. § 1292(b),
which governs discretionary interlocutory appeals from the
district courts to the courts of appeals.
In re The Charter
Co., 778 F.2d 617, 620 at n.5 (11th Cir. 1985).
The pertinent factors under 28 U.S.C. § 1292(b) are
whether the order involves a controlling question of law as to
which there is substantial ground for difference of opinion
and whether an immediate appeal from the order may materially
advance the ultimate termination of the litigation. McFarlin
v. Conseco Servs., 381 F. 3d 1251, 1264 (11th Cir. 2004).
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However, even when these factors are present, whether to grant
or deny leave to appeal is within the sound discretion of the
district
court,
and
leave
should
be
granted
only
in
exceptional circumstances. Id. As stated in Coopers & Lybrand
v. Livesay, 437 U.S. 463, 475 (1978), the moving party has
“the
burden
of
persuading
the
court
that
exceptional
circumstances justify a departure from the basic policy of
postponing appellate review until after the entry of final
judgment” and “district courts should allow interlocutory
bankruptcy appeals sparingly since interlocutory bankruptcy
appeals should be the exception, not the rule.” In re Lorenzo,
No. 13-23688, 2014 U.S. Dist. LEXIS 8820, at *5 (S.D. Fla.
Jan. 24, 2014).
III. Analysis
A.
Controlling Question of Law
In McFarlin, the Eleventh Circuit specified that the
“question of law used in § 1292(b) has reference to a question
of the meaning of a statutory or constitutional provision,
regulation,
or
common
law
doctrine.”
381
F.3d
at
1258.
Further, a § 1292(b) “question of law” is not “the application
of settled law to fact” or “any question the decision of which
requires rooting through the record in search of the facts.”
381 F.3d at 1258.
Instead, the McFarlin court clarified,
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“what the framers of § 1292(b) had in mind is more of an
abstract legal issue or what might be called one of pure law,
matters the court of appeals can decide quickly and cleanly
without
having
to
study
the
record.”
381
F.3d
at
1258
(internal citations and quotation marks omitted).
The
fact-intensive
nature
of
the
issues
presented
precludes any conclusion that there is a “controlling question
of law” to be decided.
It should be noted that this appeal
involves complex factual allegations that are arrayed in state
court, a pending bankruptcy case, and no less than three
related adversary proceedings.1 This Court accordingly cannot
evaluate the arguments asserted “quickly and cleanly” without
delving into the record.
After due consideration, the Court
determines that Kondapalli has failed to present a controlling
question of law for this Court’s determination.
B.
Substantial Ground for Difference of Opinion
In addition, Kondapalli has not persuaded the Court that
there is a substantial ground for difference of opinion
regarding the dischargeability of attorney’s fees under § 523
1
The Court notes that, in addition to the adversary
proceeding in which this appeal arises (8:13-ap-889-MGW) there
are presently at least two other adversary proceedings related
to the DeMasi Bankruptcy case, with intertwined factual
allegations. (See 8:13-ap-858-MGW and 8:13-ap-890-MGW).
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of the Bankruptcy Code.
As stated in Figueroa v. Wells Fargo
Bank, N.A., 382 B.R. 814, 824 (S.D. Fla. 2007), “to satisfy
the second element, [a]ppellant must show that at least two
courts interpret the relevant legal principle differently.”
Here, in an effort to demonstrate that a substantial ground
for difference of opinion exists, Kondapalli references Cohen
v. de la Cruz, 523 U.S. 213 (1998), USAA Casualty Insurance
Co. v. Auffant, 268 B.R. 689 (Bankr. M.D. Fla. 2001), and
Florida Cardiology, P.A. v. Al-Suleiman, 461 B.R. 893 (Bankr.
M.D. Fla. 2011).
However, Kondapalli has not provided any
analysis as to why these opinions are in discord with Judge
Williamson's
determines
challenged
that
the
order.
cases
Without
Kondapalli
more,
the
references
Court
do
not
establish a substantial ground for difference of opinion with
respect to the manner in which Judge Williamson decided the
issues in the challenged order.
C.
Material Advancement of the Litigation
As a final consideration, the Court does not find that
allowing an interlocutory appeal will advance the ultimate
resolution of the litigation.
In Figueroa, 382 B.R. at 825,
the court explained that “the third requirement for granting
leave to appeal is met if resolution of the controlling
question of law substantially reduces the amount of litigation
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left in the case.” And, “the most compelling grounds for
granting interlocutory appeals exist when reversal of the
issue on appeal would dispose of the entire bankruptcy case.”
Id.
There is no indication that resolution of the issues
raised by Kondapalli at this juncture will dispose of, or
significantly advance the resolution of, the entire bankruptcy
case or any adversary proceeding.
“Interlocutory
review
is
As stated in Figueroa,
generally
disfavored
for
its
piecemeal effect on cases.” Id. at 823. The Court declines to
further
protract
these
interlocutory appeal.
proceedings
by
allowing
an
Thus, the request for leave to appeal
is denied.
Accordingly, it is
ORDERED, ADJUDGED, and DECREED:
1.
Plaintiff Ravi Kondapalli, M.D., individually, and
Plaintiff Ravi Kondapalli, M.D., by and on behalf of Gulf
Coast Digestive Health Center, PL’s Motion for Leave to Appeal
(Doc. # 3) is DENIED.
2.
The appeal is therefore DISMISSED as leave was not
granted and the Court otherwise lacks jurisdiction to hear the
appeal.
The Clerk shall enter Judgment accordingly and CLOSE
THIS CASE.
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3.
The Clerk shall transmit a certified copy of this
Order to the United States Bankruptcy Court Clerk’s Office.
DONE and ORDERED in Chambers, in Tampa, Florida, this
24th day of February, 2015.
Copies to:
Michael G. Williamson, United States Bankruptcy Judge
Clerk, U.S. Bankruptcy Court
Counsel of Record
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