HeiTech Services, Inc. v. Rowe
Filing
4
MEMORANDUM OPINION. Signed by Judge George Jarrod Hazel on 10/24/2017. (tds, Deputy Clerk)
IN THF. UNITF.D STATES DISTI{ICT COURT
FOR THE J)JSTRICT OF MARYLAND
SO/lthem
HEITF.CH SF.RYICES, INC.,
D;I'i.\';o/l
CI.:-- .. ~
1:,/ r <..t.
'
~
*
Appellant,
*
v.
Case No.: G./I1-17-1319
Bank. Case No: T.JC-16-1151111
*
A TRON CARL ROWF.,
*
Appellee.
*
*
ZO/7 OCT 21.1 P 3: 40
*
*
*
*
*
*
*
MF.MORANDUM
Pending beforc thc Court is Appellant
Leave to Filc Interlocutory
*
Appellee
Judgmcnt.
HciTcch Scrviccs.
Appcal. ECF No. I. IlciTcch
no oral argumcnt
is necessary.
*
Inc.'s ("'l-IciTech's")
*
Motion for
sccKs to appcal an interlocutory
denying IleiTcch's
in which HeiTeeh sought to except from discharge
Atron Carl Rowc ("Rowc").
*
OPINION
the United States BanKruptcy Court for the District of Maryland
Summary
*
order of
Motion Il))"
a debt owed to it by
The motion has becn briefed. ECF No. I. ECF NO.2. and
Local Rule 105.6 (D. Md. 2016). For the reasons stat cd below.
Appcllant" s Motion is dcnied.
I.
BACKGROUND
I
Sincc 1997. Rowe was a part-owner
of Front Rowe. Inc. ("'FR!"'). a Virginia corporation.
ECF No. I at 102 On May I. 2012. FRI cntercd into a Primc Contract with the Unitcd States
Departmcnt
of Labor ("DOL"") lor documcnt
preparation
worK. Undcr the Prime Contract.
would pay FRI based on thc numbcr of pages that FRI scanned and digitizcd.
DOL
Ii/. T\Hl months
I The background
facts are taken from HciTech's j\'lotion and attached documents. ECF No. I and arc largely
uncontested. ECF No. 2 ~I I.
2 Pin cites to documents tiled 011 the Court's electronic tiling system (eM/EeF) refer 10 the page numbers generated
by that systelll.
later. on July L 2012. FRI entered into a Subcontractor
HeiTech. Under lhe Subcontract.
Agreement
(""the Subcontract")
FRI would receivc 51 % of the revenue received
1-leiTech would receive 49% of the revenue. based on the production
DOL. However.
undeITeporting
the Subcontract
with
from DOL and
output that FRI charged to
from July 2012 through May 2014. FRI sent I~llse invoices to IleiTech.
the revenues.
Id FRI additionally
was terminated
HeiTeeh subsequently
Illiled to pay ccrtain invoices to l-IeiTech. and
on March 3 I. 2014. Id at 10- I I.
sued FRI and Rowe (along with Rowe's co-owner)
States District Court I()r the Eastcrn District ofYirginia
(Cacheris.
in the United
J.) on .tunc 16. 2014.1d al9.
In that suit. HeiTcch brought a claim for breach of contract against FRI. and a claim of Ihlud
against all defendants.
Summary
It!. On December
19.2014 . .tudge Cacheris granted HeiTech's
.tudgment on the breach of contract claim. and entered ajudgment
Motion I(H'
in HeiTcch's
l~lVor
01'$505.758.63. 1d3 As to the Iraud claim . .tudgc Cacheris dcnied relief. reasoning that the li'aud
claim was based on the same harm as the contract claim. and would result in doublc rcc()\'ery. Id
In a subsequent
opinion on May 25. 2015 . .tudgc Cachcris determined
should be pierced and held that Rowe was individually
On Fcbruary
10.2016.
Id at 9. On March 17.2016.
of discharge
Rowe tiled a voluntary
\\'as entered on May 17.2016.
seeking to except the judgment
U.S.C. ~ 523(a)(2)(A)
and ~ 523(a)(6).
petition I(lr Chapter 7 bankruptcy
Court I()!' the District of Maryland
entered by .tudge Cacheris
and an order
li'om discharge
on
("Bankruptcy
under 11
It!. l-IeiTeeh tiled a Motion I()!' Summary .tudgment.
to establish
been determined
and that those determinations
.3
relief.
Id HeiTech initiated an advcrsary procceding
arguing that all thc issues nccessary
by .tudge Cacheris.
veil
liable as well. Id at 12-13.
the Chapter 7 trustee entered a report of no distribution
March 18. 2016 in the United States Bankruptcy
Court").
that the corporate
that the debt is exceptcd
FRI did not contest the motion or the amount O\ved. EeF No. 18 at 13.
2
from discharge
had
were entitled to preclusive
elfect in the adversary proceeding. Ic/. at 8-9. Specilically. HeiTech argued that under the
Bankruptcy Code. a debt is not dischargeable to the extent that it was obtained by "false
pretenses. a false representation. or actual fraud:'
injury by the debtor:'
* 523(a)(2)(A).
* 523(a)(6) and that Judge Cacheris'
or by "willful and malicious
rulings had resolved these issues as it
related to its claim. The Bankruptcy Court applied federal collateral estoppel law. and Illlll1dthat
Judge Cacheris' decisions had not relied on Rowe's "intent to deceive" or "intent to injure" as
necessary parts of the decisions and noted that judgment on IleiTech' s Iraud claim had not been
granted: thus. the Bankruptcy Court ruled, Judge Cacheris' decision did not have a preclusive
effect requiring the Bankruptcy Court to except HciTcch'sjudgment
from dischargc. ECr No. I
at 17.
On May 15. 2017, IleiTech Iiled a Motion Illr Lcave to rile an Intcrlocutory Appeal with
this Court. ECl' No. I. which Rowe opposed on May 24. 2017. ECI' NO.2. IleiTcch asks this
Court to overrule thc Bankruptcy Court's denial of HeiTech's Motion Il)r Summary Judgmcnt.
arguing that Judge Cacheris' Iindings regarding Rowe's intent were "absolutcly essential" to its
holding. ECI' No. I at 5. Rowc. on thc othcr hand. argucs that HciTcch has not shO\\I1 that thcrc
is a "substantial ground for a dilference of opinion" on any relevant issuc. making an
interlocutory appcal improper. ECl' NO.2 at 3.
II.
STANDARD
OF REVIEW
Thc Court can hear a bankruptcy appcal pursuant to 28 U.S.c.
district courts jurisdiction to hear appcals "Irom linaljudgmcnts.
* 158(a), which givcs
ordcrs, and decrccs:' "Irom
interlocutory ordcrs and decrccs issucd under section 1121(d) of title II ... :' and "with leave of
thc court. Irom other interlocutory ordcrs and decrecs." Bankruptcy appeals "shall bc takcn in the
same manner as appeals in civil procecdings generally arc takcn to thc courts of appcals from the
district courts:' 28 U.S.c. ~ 158(c)(2). To seek an interlocutory appealli'om a bankruptcy
decision:
the appellant must demonstrate ..that exceptional circumstances justity a departure Irom
the basic policy of postponing appellate review until atier the entry of a lin'll judgment:'
Coopers & Lybrand \".Lil'esay. 437 U.S. 463 (1978) (citing Fisons. Lit!. \'. Uniled S/ales.
458 F.2d 1241. 1248 (7th Cir. I972)). When deciding whether to grant leave to appeal an
interlocutory order or decree of a bankruptcy court. the district court may employ an
analysis similar to that applied when certifying interlocutory review by the circuit court
of appeals under 28 U.S.c. ~ 1292(b). Allanlic Texlile Group. Inc. \'. Neal. 191 B.R. 652.
653 (E.D.Va.1996) (citations omitted). Under this analysis. leave to lile an interlocutory
appeal should be granted only when I) the order involves a controlling question of law.
2) as to which there is substantial ground I(lr a difference of opinion. and 3) immediate
appeal would materially advance the termination of the litigation.
In re Pawlak, 520 B.R. 177. 182 (D. Md. 2014). District courts will not hear an interlocutory
appeal when parties merely "disagree as to a Bankruptcy Court's interlocutory order. but rather
only where substantial ground fiJr disagreement exists as to the controlling issues of law that
infonned the order:' It!. (quoting In re Air Carpi. Inc.. No. CCI3-08-587. 2008 WL 2415039
(D. Md. June 11.2008)). "An issue presents a substantial ground for dilTcrence of opinion if
courts. as opposed to parties. disagree on a controlling legal issue:' Lynn \'. ,l/onarch ReCl"'(,/:l"
lvlgml.. Inc.. 953 F. Supp. 2d 612. 624 (D. Md. 2013).
III.
DISCUSSION
HeiTeeh argues that the Bankruptcy Court should have given Judge Cacheris' rulings
estoppel effect and that ..[tJhere is substantial ground for difference of opinion on the issues of
whether a speeitic tactual Iinding was 'necessary to the judgment .... meriting an interlocutory
appeal. ECF No. I at 4 (quoting In re Microso!i Corp. Ami/rusl Ulig.. 274 F.Supp. 2d 741 (D.
Md. 2003)). The Fourth Circuit t(lilows a live-part test to determine whether a previously
litigated issue or fact has a eollateral estoppel elTect on subsequent cases: "( I) the issue or lact is
identical to the one previously litigated: (2) the issue or lilet was actually resolved in the prior
proceeding: (3) the issue or tact was critical and necessary to the judgment in the prior
4
proceeding:
(4) the judgment
in the prior proceeding
li)l"eclosed by the prior resolution
is final and valid: and (5) the party to be
of the issue or fact had a full and l~tir opportunity
to litigate the
111 Micnlsl!fi CO/jJ. /Imi'rusl I.ilig .. 355 F.3d 322. 326
re
issue or fact in the prior proceeding:'
(4th Cir. 2(04). The third element limns the crux of the disputc in this motion for interlocutory
appeal. Specifically.
the parties contest whether findings in Judge Caeheris'
FRl"s intent to injure and intent to deceive wcrc critical and neccssary
Only issues or facts which are "critical and necessary
litigation"
opinions
related to
to his rulings. "
to the judgmcnt
in the prior
are afforded an estoppel effect. It/. at 327. See also Wells Fargo Equil'mem Fillallce.
Illc. v. Aslerhadi. No. 15-1371. 2017 WL 818714. n.11 (D. Md. March 2. 2(17) (linding that
"collateral
necessary
estoppel does not apply" where party had "not shown that this fact was critical and
to the judgment
in the prior proceeding.").
lIeiTech
deceive and intent to injure were critical and necessary
should be given preclusive
523(a)(2)(A)
Cacheris
effect in establishing
and (a)(6). The Court disagrees.
concludcd
argues that Rowes'
to Judge Cacheris'
exemptions
rulings and thus
Irom discharge
pursuant to ~~
As the 13ankruptcy Court correctly notcd. "Judge
that HciTech was entitled to a judgment
as a maller of law on the breach of
contract claim against FRI" but "Ials to the ll.aud claim. thc court denied relicfto
because it would result in double recovery
Virginia law. the clements
for the samc hann:'
obligation
violation or breach of that obligation:
ofa defendant
and (3) rcsulting
seeking to except a debt from discharge
"intent to deceive:"
"llondischargcability
NU1111t!I:r \'. R01l11lree
takes a deliberate
(In
injury or harm to the plaintifC
ECF No.
Because neither intent to injure
lInder ~523(a)(2)(A) must prove. among olher elements.
I'll Roul11n:I!J,
or illlClltional
I(llllld had been mct.
to a plaintiff: (2) the defendant's
I at 29 (citing Filak \'. George. 594 S.E.2d 610. 614 (Va. 2(04).
~ A creditor
IlciTech
ECF No.1 at 11 -12. Under
of a brcach of contract. which Judge Cacheris
are: "(I) a legally enforccable
intent to
an
478 F.3d 215. 218 (41h Cir. 2007). Under ~ 513(a)(6}.
iJ{illl:l'. not merely
a deliberate
Of intentional
ael that leads 10
injury:" Kmnwuhau \'. Gl!i}{er. 523 U.S. 57 (1998) (emphasis in original). Thus. according to FRI. ireslOppcl effcct
were given to these issues of intent. they would
be entitlcd
to sUlllmary
5
judgment
on their claimed
cxception.
nor intent to deccivc was necessary
contract claim. the judgment
for Judgc Cacheris to enter judgment
is not entitled to preclusive
The same is true for Judge Cacheris'
finding individual
Cacheris
defendants
effect on those issues.
second ruling. piercing the corporate
perpetrate
and (ii) that the individual
used the corporation
between the individual
fi'aud or a crime. to commit an injustice. or to gain an unfair advantage:'
2011)). As to the second factor. Judge Cacheris determined
FRI to evade personal
obligations
and to gain anunlilir
made no Iinding as to the perpetration
and the
/IIC .•
ECF NO.1 at
650 F.3d 423. 434 (4111 Cir.
that ..the individual
advantage:'
to
dclendants
uscd
ECF No. I at 46. Judge
of a fraud and any Iindings in the fact section of
the opinions
that plausibly
or necessary
to the decision to pierce the corporate
related to FIU's intcnt to injure or intent to deceive were not critical
1IeiTech directs the Court to
//1
veil and do not merit preclusive
re A1icro,\'o/i Corp. Al7lilrusll.ilig.
(D. Md. 2003). in support of its position that there is a substantial
ground
opinion as to this issue. In that case. the district court (Motz . .I.) certilied
interlocutory
veil. Judge
to cvade a personal obligation.
43 (citing Ne\!pOrl ""reII'SHoldillg.I' Corp. \'. Virtual Cily Visioll.
Cacheris
v'eil and
liable. EC.'!' NO.1 at 38. In order to pierce the corporate
needed to find "(i) a unity of intcrest and ownership
corporation.
on the breach of
effect.
274 F. Supp. 2d 741
I()f
a difference
of
its ruling f()r an
appeal to the Fourth Circuit. !d. At issue was whether certain factual lindings from
a previous
case in the United States District Court for the District of Columbia
"necessary
to the judgment"
that there was a "substantial
so as to trigger a "collateral
ground fl\!' difference
estoppel effect." !d. at 742. In finding
of opinion"
rclied heavily on the fact that the United District Courtl()r
Kotelly . .I.) had come to a decision contrary to his regarding
tilct entered by Judge Jackson
in Ulliled Slaies
1',
(,
(.iackson . .I.) were
on that question.
Judgc Motz
the District of Columbia
the preclusive
(Kollar-
effect of lindings of
.\!icl'llso/i. 87 F. Supp. 2d 30 (D.D.C. 2(00). !d.
As two courts had reached di fferent opinions as to the preclusive
effect of Judge Jackson's
findings of fact. Judge Motz certified his opinion for interlocutory
not direct the Court to any cases finding that Judge Cacheris'
entitled to preclusive
majority
effect rcgarding
**
523(a)(2)(A)
appeal. Ilcrc, IlciTcch docs
ruling (or a similar ruling) is
and (a)(6). Instead, HciTcch spends thc
of its Motion merely arguing that the Bankruptcy
Court was wrong. See ECr No. I at 5.
But HeiTech must show that "courts, as opposed to parties, disagree on a controlling
And to the extent HeiTech may rely on Judge Motz's decision in Microso/i
proposition
detennining
that the Court there noted that there was confusion
collateral
estoppel.
or "essential"'
Although
to a court's
Judge Cacheris
regarding the standard
upon in finding Rowe liable for breaching
to Judge Cacheris'
appeal ofthc
opinions.
Rowe's
fraudulcnt
and werc not rclied
his contract with HeiTech or picrcing the corporate
veil. These factual findings are not entitled to a preclusive
bring an interlocutory
that
prior judgment).
intent. none of these findings was necessary
of opinion"
on thc appcal of
effects. such findings must have becn "critical and
made a number of f[lctual findings regarding
ground for difference
for
Uti)!,., 355 F.3d 322, 327 (4th Cir. 2(04) (reasoning
for factual findings to be given preclusive
necessary"
fi.Jrthe general
the Fourth Circuit resolved any such confusion
that case. 111 Micro.\',!/i Corp. Alltitrust
re
legal issue:'
warranting
efrect. and there is no "substantial
an interlocutory
Bankruptcy
Court's
Judgment.
7
appeal. Thcreftll'c,
IlciTech
denial of its Motion ftl[ Summary
cannot
IV.
CONCLUSION
For the foregoing
reasons. IleiTech's
Motion for Leave to File Interlocutory
Appeal. lOCI'
NO.1. is hereby denied. A separate Order shall issue.
Date: Oetober"2.
&E--
i.
20 17
'GEORGE.I.
HAZEL
United States Distriet .Iudge
8
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