Kondapalli v. DeMasi

Filing 8

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 HELD IN ABEYANCE. This case is STAYED AND ADMINISTRATIVELY CLOSED until and including December 15, 2014. The parties are directed to file a status report on December 15, 2014. Unless the parties report that a further abatement is required, the Court will return the case to active status on December 16, 2014, by directing the Clerk to reopen the case, reactivate the Motion for Leave to File an Interlocutory Appeal 3 , and will direct DeMasi to respond to the merits of the Motion for Leave to Appeal within 14 days. Signed by Judge Virginia M. Hernandez Covington on 10/14/2014. (AKH)

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 Plaintiffs’ Motion
for Leave to Appeal. (Doc. # 7). For the reasons set forth
below, the Court stays, administratively closes, and otherwise
holds the matter in abeyance for 60 days.

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

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, DeMasi 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. The State Court concluded that DeMasi’s undisclosed
relationship with a subsidiary of Surgical Synergies led
DeMasi to thwart Gulf Coast Digestive’s efforts to terminate
its management agreement with Surgical Synergies after Gulf
Coast

Digestive

discovered
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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

misrepresentations

Synergies’s

caused

Gulf

subsidiary

Coast

and

Digestive

DeMasi’s
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,
breach of the duty of good faith under Chapter 608 of the
Florida Statutes, breach of
agreement,

and

fraud.

The

Gulf Coast Digestive’s operating
State

$411,428.93 in damages to GCD.

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 apportion damages

between the individual causes of action.

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
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State Court pursuant to the terms of Gulf Coast Digestive’s
Operating Agreement and § 608.601(6) of the Florida Statutes.
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
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

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.

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were

(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.

On

December

2,

2013,

the

Bankruptcy

conducted a hearing on the Motion to Dismiss.

Court

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 and on behalf of Gulf
Coast Digestive, for attorney’s fees and costs. The Bankruptcy
Court also determined that Kondapalli failed 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. According to Kondapalli, “the Order had the effect
of denying Kondapalli’s entire individual claim.” (Doc. # 3 at
3) (emphasis in original). On June 27, 2014, Kondapalli filed
a Motion for Rehearing.

At a hearing held on July 7, 2014,

the Bankruptcy Court denied the Motion for Rehearing.
Thereafter, on August 6, 2014, Kondapalli filed a Motion
for Leave to File an Interlocutory Appeal. (See Doc. # 3).
frames the

issues

as

(1)

“whether

a member’s

claim

He
for

attorney’s fees incurred as a result of prosecuting a member’s
derivative action under Section 608.601, Florida Statutes, may
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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
debtor.” (Id. at 4).
Court

“(1)

to

Kondapalli seeks an Order from this

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

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district courts to the courts of appeals. In re The Charter
Co., 778 F.2d 617, 620 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).
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.
III. Analysis
DeMasi

contends

that

resolution

of

an

interlocutory

appeal at this time will not materially advance the ultimate
termination of the litigation.

Among other arguments, DeMasi

explains that cross-motions for summary judgment are presently
pending in the Adversary Proceeding with respect to the sole
remaining count of the Adversary Proceeding under Section
523(a)(2) of the Bankruptcy Code. The Bankruptcy Court has
scheduled oral argument on the cross motions for summary
judgment for October 16, 2014. DeMasi indicates:

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There is a reasonable likelihood that to the extent
the Bankruptcy Court grants summary judgment in
favor of one party based on the collateral estoppel
effects of the GCDH Final Judgment (or otherwise)
that the losing party will appeal the summary
judgment order. Assuming the losing party took an
appeal of any summary judgment order, the appeal
would likely be consolidated with the appeal of the
Dismissal Order’s determination that Kondapalli’s
Attorney Fee Claim is dischargeable.
(Doc. # 7 at 6).
In addition, DeMasi informs the Court that the State
Court’s Final Judgment is on appeal at the Second District
Court of Appeal. According to DeMasi, oral argument was
conducted on September 30, 2014, and a decision will likely be
issued in the next two to eight weeks. (Id. at 3).
DeMasi suggests that “an interlocutory appeal may be
proper

after

the

Second

DCA

issues

a

decision

and

the

Bankruptcy Court disposes of the summary judgment motions, but
. . . the [present] request for an interlocutory appeal is
premature.” (Id.).

Rather than the denial of the Motion for

Leave to Appeal, DeMasi suggests that the Motion be abated for
60 days.

The Court tends to agree with DeMasi that a

temporary abatement of this action is appropriate in light of
recent

developments

in

the

Florida

appellate

court

and

scheduled oral argument on related motions for cross summary
judgment in the Adversary Proceeding.

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The Court accordingly

stays and administratively closes this matter for a period of
60 days, until and including December 15, 2014.

The parties

are directed to file a status report on December 15, 2014,
advising

the

Court

as

to

the

resolution

of

the

Florida

appellate proceedings and the disposition of the cross motions
for summary judgment in the Adversary Proceeding.

Unless the

parties report that a further abatement is required, the Court
will return the case to active status on December 16, 2014,
by directing the Clerk to reopen the case, reactivate the
Motion for Leave to File an Interlocutory Appeal (Doc. # 3),
and will direct DeMasi to respond to the merits of the Motion
for Leave to Appeal within 14 days.
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 HELD IN ABEYANCE.
2.

This case is STAYED AND ADMINISTRATIVELY CLOSED until

and including December 15, 2014.
3.

The parties are directed to file a status report on

December 15, 2014.

Unless the parties report that a further

abatement is required, the Court will return the case to
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active status on December 16, 2014, by directing the Clerk to
reopen the case, reactivate the Motion for Leave to File an
Interlocutory Appeal (Doc. # 3), and will direct DeMasi to
respond to the merits of the Motion for Leave to Appeal within
14 days.
DONE and ORDERED in Chambers, in Tampa, Florida, this
14th day of October, 2014.

Copies to:
Michael G. Wiliamson, United States Bankruptcy Judge
Clerk, U.S. Bankruptcy Court
Counsel of Record

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