Gallinghouse et al v. Black
Filing
9
ORDER denying 1 Motion for Leave to Appeal. Signed by Judge Nannette Jolivette Brown. (jrc)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
WALTER GALLINGHOUSE, et al.
CIVIL ACTION
VERSUS
CASE NO. 16-4261
WILLIAM MATTHEW BLACK
SECTION: “G” (5)
ORDER
Walter Gallinghouse, Joanne Gallinghouse, G & A Publishing, Inc., and Gallinghouse &
Associates, Inc. (collectively “Movants”) move for leave to appeal the April 21, 2016 order of the
United States Bankruptcy Court for the Eastern District of Louisiana denying their motion for
summary judgment. 1 Having reviewed the motion, the memoranda in support, the memorandum
in opposition, the record, and the applicable law, the Court will deny the motion.
I. Background
This case arises from a Chapter 11 bankruptcy filed by William Matthew Black (“Black”)
before the United States Bankruptcy Court for the Eastern District of Louisiana. 2 A civil judgment
was entered against Black in the 22nd Judicial District Court of Louisiana after the court
determined that Black had committed acts of conversion, civil conspiracy, and intentional
infliction of emotional distress against Movants. 3 Deborah Black, William Matthew Black’s exwife, was also found guilty of theft by the misappropriation or taking of property belonging to
Gallinghouse and Associates and G & A Publishing, and a Restitution Judgment was entered
1
Rec. Doc. 1.
2
Rec. Doc. 2-2 at 2.
3
Rec. Doc. 1-1 at 3.
1
against her on March 15, 2012. 4 Movants filed an Adversary Complaint in the Bankruptcy Court
to deny the discharge of Black’s debts pursuant to 11 U.S.C. § 523(a)(6) for “alleged willful and
malicious injury” and pursuant to 11 U.S.C. § 542 for “turnover of property.” 5 Both Black and
Movants filed motions for summary judgment before the Bankruptcy Court, and a hearing on the
motions was held on April 20, 2016. 6 The Bankruptcy Court denied both motions on April 21,
2016. 7
Movants filed the instant motion on May 6, 2016. 8 Black filed an opposition on May 20,
2016. 9 On May 24, 2016, Movants filed a reply with leave of Court. 10 Also on May 24, 2016, the
Court granted Movants’ motion for expedited hearing and set the instant motion for hearing,
without oral argument, on May 27, 2016. 11
II. Parties’ Arguments
A.
Movants’ Arguments in Support of Leave to Appeal
Movants seek leave to appeal the April 21, 2016 Order of the United States Bankruptcy
Court for the Eastern District of Louisiana. 12 Movants assert that they have filed three Proofs of
Claims in the Bankruptcy Court as a result of Black’s “personal and/or communal liability for a
4
Id. at 17.
5
Id.
6
Rec. Doc. 2-2 at 2.
7
Rec. Doc. 2-1.
8
Rec. Doc. 1.
9
Rec. Doc. 2.
10
Rec. Doc. 8.
11
Rec. Doc. 6.
12
Rec. Doc. 1.
2
Restitution Judgment rendered against Mr. Black’s former wife due to embezzlement as well as
other offenses.” 13 Movants contend that they sought summary judgment before the Bankruptcy
Court arguing that the state court civil judgments they obtained are the type that are usually nondischargeable pursuant to Section 523(a)(6) of the United States Bankruptcy Code. 14 Furthermore,
they contend that the state court findings that Black had committed acts of conversion and
intentional infliction of emotional distress are “dispositive of the dischargeability issues as such
Judgment must be given the effect of collateral estoppel in the bankruptcy proceeding.” 15 Movants
assert that the Bankruptcy Court denied summary judgment, expressing that the court would not
give the state court determination collateral estoppel effect and that “irrespective of the
determination of whether the restitution judgment is a community debt, [the court] would limit the
Gallinghouse entities’ recovery to Deborah Black’s portion of the community property when
Louisiana Community property law requires that each spouse remain liable for the entirety of the
community debts.” 16
In the instant motion, Movants seek leave to appeal the Bankruptcy Court’s Order and raise
the following issues: (1) whether the denial of summary judgment is proper considering the
Bankruptcy Court’s failure to recognize that Black’s debts arise from a trial judgment where the
state court concluded that Black committed conversion and intentional infliction of emotional
distress, and therefore the debts are non-dischargeable pursuant to Section 523(a)(6) of the
Bankruptcy Code; and (2) whether the denial of summary judgment is proper considering that the
13
Id. at 2.
14
Id.
15
Id. at 3.
16
Id. at 4.
3
Bankruptcy Court failed to recognize that the state court’s determination that Black had
participated in civil conspiracy is dispositive of whether the Restitution Judgment against Deborah
Black represents a community debt for which Black remains personally liable. 17 Movants assert
that the failure of the Bankruptcy Court to recognize controlling legal authority on issue preclusion
and community property law “dooms the Gallinghouse entities to retry a case, in its entirety, that
has already been tried.” 18
Movants assert that a court may grant leave to appeal from an interlocutory order where
“an immediate appeal from the order may materially advance the ultimate termination of the
litigation.” 19 Movants contend that immediate review and success on appeal will obviate the need
to retry the entirety of the state court case in a bankruptcy proceeding and may resolve the majority,
if not all, of the issues. 20 Movants assert that even if an evidentiary hearing is necessary regarding
the extent to which the Restitution Judgment is a community debt, immediate review will benefit
the parties in refining the issues remaining to be tried. 21 Finally, Movants contend that granting
review at this point may avoid wasteful litigation and expense, will afford Movants relief from
years of hardship, emotional distress and continuing financial hardship, and will advance the
termination of litigation. 22
17
Id.
18
Id. at 6.
19
Id. (citing 28 U.S.C. § 1292(b)).
20
Id. at 7.
21
Id.
22
Id.
4
B.
Black’s Arguments in Opposition to Motion for Leave to Appeal
In opposition, Black contends that the Bankruptcy Court’s order is not a final order
appealable as of right pursuant to 28 U.S.C. § 158(a)(1) because the denial of a motion for
summary judgment is interlocutory in nature. 23 Black asserts that the Court may exercise
jurisdiction over an interlocutory appeal, in its discretion, in exceptional circumstances. 24
However, Black contends that Movants have not offered any compelling reason to depart from the
principles of finality, particularly in light of the fact that a trial on the merits is scheduled before
the Bankruptcy Court in less than three weeks. 25
Black asserts that the state court’s finding that he committed intentional infliction of
emotional distress does not mean that he has committed a “willful and malicious injury” pursuant
to 11 U.S.C. § 523(a)(6), making the debt non-dischargeable. 26 Black contends that courts have
held that in order to be a non-dischargeable debt, the individual must have deliberately or
intentionally caused the injury, rather than merely performing a deliberate or intentional act that
leads to an injury. 27
Black contends that interlocutory appeals are not favored and leave to appeal should only
be granted in exceptional situations where allowing an appeal would avoid protracted and
expensive litigation. 28 Black asserts that although the Bankruptcy Code does not provide a
23
Rec. Doc. 2-2 at 3 (citing In re Smith, 735 F.3d 459, 461 (11th Cir. 1984)).
24
Id. (citing 28 U.S.C. § 158(a)(3)).
25
Id.
26
Id. at 8.
27
Id. (citing Kawaauhau v. Geiger, 523 U.S. 57 (1998)).
28
Id. at 15 (citing In re Cent. La. Grain Co-op, Inc., 489 B.R. 403, 408 (W.D. La. 2013)).
5
standard for determining whether to grant leave to hear an interlocutory bankruptcy appeal, district
courts generally apply the standard set forth in 28 U.S.C. § 1292(b), pursuant to which appellate
review of interlocutory orders is limited to orders that “involve a controlling question of law as to
which there is substantial ground for difference of opinion,” and where an immediate appeal “may
materially advance the ultimate termination of the litigation.” 29 Black asserts that this case does
not involve a controlling question of law because the Bankruptcy Court’s summary judgment
ruling is based upon a question of fact, and resolution of the issues raised in this appeal would not
materially advance the end of litigation. 30 According to Black, the potential for delaying
administration of the bankruptcy case and needlessly expending limited judicial resources weighs
strongly against discretionary interlocutory review in this case. 31
C.
Movants’ Arguments in Further Support of Leave to Appeal
Movants contend that the claims against Black have been pending for more than half a
decade and arise not only from a theft from Movants, but also actions taken to shield the stolen
money from recovery. 32 Movants assert that although Black argues that a trial is required to
determine if the acts found to have constituted intentional infliction of emotional distress and
conversion by the state court were “willful” pursuant to Section 523(a)(6) of the Bankruptcy Code,
federal courts have held that a civil award for intentional infliction of emotional distress is nondischargeable. 33 Movants contend that although the Bankruptcy Court has recently indicated that
29
Id.
30
Id.
31
Id. at 16.
32
Rec. Doc. 8 at 1.
33
Id. at 2–3.
6
it intends to retry only the issue of non-dischargeability, it is precisely because the torts are nondischargeable that the failure to grant summary judgment was in error. 34 Movants assert that the
refusal to recognize the state court’s judgment as controlling is violative of the requirement that
federal courts give full faith and credit to state court judgments pursuant to 28 U.S.C. § 1738. 35
III. Law and Analysis
A.
Legal Standard
Pursuant to 28 U.S.C. § 158(a), district courts have jurisdiction to hear appeals, with leave
of the court, from interlocutory orders and decrees of bankruptcy courts. Section 158 does not
indicate the standard a district court should use in determining whether to grant leave to appeal. 36
The Fifth Circuit, however, has held that the decision to grant or deny leave to appeal a bankruptcy
court’s interlocutory order is committed to the district court’s discretion. 37 The vast majority of
district courts have adopted the standard under 28 U.S.C. § 1292(b) for interlocutory appeals from
district court orders. 38 This standard contains three elements that must be met in order for a court
to permit an interlocutory appeal: “(1) a controlling issue of law must be involved; (2) the question
must be one where there is substantial ground for difference of opinion; and (3) an immediate
appeal must materially advance the ultimate termination of the litigation.” 39
34
Id. at 4.
35
Id. (citing In re Nourbakhsh, 67 F.3d 798 (9th Cir. 1995)).
36
Matter of Ichinose, 946 F.2d 1169, 1176 (5th Cir. 1991).
37
In re O’Connor, 258 F.3d 392, 400–01 (5th Cir. 2001).
38
Id. at 1177.
39
Id.
7
B.
Analysis
Bankruptcy interlocutory appeals are generally disfavored because they disrupt the
bankruptcy proceedings. 40 The Fifth Circuit has held that “[t]he purpose of § 1292(b) is to provide
for an interlocutory appeal in those exceptional cases” where the three part test is satisfied. 41 The
parties represent that the trial of the adversarial proceeding is scheduled to begin on June 6, 2016. 42
Movants represent that the claims against Black have been pending for more than half a decade. 43
Given that the trial date is fast-approaching and the parties would still have to fully brief their
appeal in order for this Court to consider it, the Court concludes that granting Movants leave to
appeal the denial of their motion for summary judgment would delay, rather than materially
advance, the ultimate termination of the litigation. Accordingly, the Court denies Movants’ request
for leave to appeal the order of the Bankruptcy Court.
IV. Conclusion
Based on the foregoing,
IT IS HEREBY ORDERED that Movants’ “Motion for Leave to Appeal” 44 is DENIED.
27th
NEW ORLEANS, LOUISIANA, this ______ day of May, 2016.
.
________________________________
NANNETTE JOLIVETTE BROWN
UNITED STATES DISTRICT JUDGE
40
In re Searex Energy Servs., Inc., No. 09-5817, 2009 WL 2868243 (E.D. La. Sept. 1, 2009) (Engelhardt,
41
United States v. Garner, 749 F.2d 281, 286 (5th Cir. 1985).
42
Rec. Doc. 5-1 at 1.
43
Rec. Doc. 8 at 1.
44
Rec. Doc. 1.
J.).
8
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