Opinion
Case No. 14-56551 Adv. Pro. No. 14-2333
09-18-2017
In re: Dwayne Bodrick, and Kimberly Bodrick, Debtors. Dewayne M. Jennings, Plaintiff, v. Dwayne A. Bodrick, Defendant.
Copies to: Charles Smith, Jr., Attorney for Plaintiff (via CM/ECF) Michael Gunner, Attorney for Defendant (via CM/ECF)
Chapter 7 FINDINGS OF FACT , CONCLUSIONS OF LAW, AND MEMORANDUM OPINION
This cause came on for trial on March 15 and 16, 2017, upon Plaintiff Dewayne Jennings' Complaint for Exception to Discharge of Dwayne A. Bodrick and Kimberly Bodrick under 11 U .S.C. § 523 (Doc. #1) (the "Complaint"), and the Amended Answer of Defendandant [sic] Dwayne Bodrick to Complaint (Doc. #28) (the "Answer"). Present at the trial were Dewayne M. Jennings ("Plaintiff" or "Mr. Jennings"), counsel for Mr. Jennings, attorney Charles Smith, Jr., Dwayne A. Bodrick ("Defendant" or "Mr. Bodrick"), and Mr. Bodrick's counsel, attorney Michael Gunner. At the conclusion of the trial, the Court requested post-trial briefs from the parties. Defendant's post-trial brief was filed on April 7, 2017 (Doc. #84), and Plaintiff's post-trial brief was filed on April 17, 2017 (Doc. #85).
Mr. Bodrick was not present on March 16, 2017, but his counsel did not object to proceeding with the trial as scheduled.
In his post-trial brief, Plaintiff asserted for the first time that the debt due him by Defendant is nondischargeable under 11 U.S.C. § 523(a)(19). As Plaintiff failed to plead a cause of action under § 523(a)(19) in the Complaint, and has not obtained leave to amend the Complaint in accordance with Federal Rule of Bankruptcy Procedure 7015, the Court disregarded this additional theory.
The only remaining issues in this adversary proceeding are whether Plaintiff is entitled to a money judgment against Defendant, and if so, whether the judgment is nondischargeable under 11 U.S.C. § 523(a)(6). Although Plaintiff's bases for seeking a money judgment are not clearly set forth in the Complaint, Plaintiff contended at trial that Defendant is liable to Plaintiff in the amount of $52,750.00 for breach of a written and/or oral contract, violation of the Securities and Exchange Act of 1934, and/or perhaps for a claim sounding in tort. Defendant contends that no written contract exists between Plaintiff and Defendant, and that the applicable statutes of limitations bar all other claims asserted by Plaintiff that seek a money judgment. For the reasons stated below, the Court agrees with Defendant. Therefore, as Plaintiff does not have an enforceable debt against Defendant, Plaintiff's cause of action under 11 U.S.C. § 523(a)(6) is moot.
The Complaint was filed against Mr. Bodrick and Kimberly Bodrick, who is the co-debtor in Mr. Bodrick's Chapter 7 case, Case No. 14-56551. The Complaint sought a determination that the debt due Plaintiff was nondischargeable under 11 U.S.C. § 523(a)(2)(A), (a)(2)(B), and (a)(6). In the Order Granting in Part and Denying in Part Defendants' Motion To Dismiss (Doc. #19), the Court dismissed Plaintiff's causes of action under § 523(a)(2)(A) and (a)(2)(B) as to Mr. Bodrick, and dismissed the Complaint in its entirety as to Kimberly Bodrick.
The Complaint sought a money judgment in the amount of $175,000.00, which included a demand for punitive damages. At the trial, Plaintiff abandoned his demand for punitive damages and limited his request for a money judgment to $52,750.00.
I. Findings of Fact
The Court makes the following findings of based on the stipulations of the parties and the evidence adduced at trial, including the exhibits admitted into evidence and the testimony elicited from the witnesses:
The parties filed stipulated joint facts (Doc. #78) (the "Stipulation"), on March 13, 2017. Some of the statements set forth in the Stipulation did not recite facts relevant to this matter, but were declarations regarding previous testimony by the parties and other witnesses and how those persons would testify, if called as a witness. The parties did not provide transcripts of previous testimony to the Court. The Court disregarded such declarations.
Plaintiff and Defendant grew up in the same neighborhood in Youngstown, Ohio. They attended the same high school, and Plaintiff played football with Defendant's younger brothers. In the late 1990s, Plaintiff and Defendant reacquainted when they ran into each other at a grocery store in New Albany, Ohio. At that time, Defendant advised Plaintiff that he was a financial advisor and owned a company called National Liberty Corporation. After several telephone conversations and meetings between Plaintiff and Defendant, Plaintiff decided to make an investment which Defendant had described to him as having a high interest rate and a guaranteed return.
Based on representations by Defendant, Plaintiff understood that his investment would contribute to the payment of taxes and other expenses of an estate of substantial size that was situated in Nigeria (the "Nigerian Estate"). Defendant explained to Plaintiff that an individual named Charles Pressley ("Mr. Pressley") was the beneficiary of the Nigerian Estate, and that, once the taxes and expenses were paid, the corpus of the Nigerian Estate would be released and the investors would realize a significant return on their investment. Prior to making any investment, however, Plaintiff requested documentation confirming the terms of the investment.
Some of the documents admitted as evidence refer to the estate as "the estate of Charles Pressley," and the parties occasionally referred to "the estate of Charles Pressley" at the hearing. Nonetheless, the parties clarified at the hearing that they understood Mr. Pressley to be the beneficiary of a decedent's estate, and any reference to "the estate of Charles Pressley" was imprecise.
On or around March 26, 2001, Defendant faxed Plaintiff a letter, which appears to be signed by one Patrick C. Nduka ("Mr. Nduka"), who is identified as the "Ag. Chief Accountant" of Union Bank in Nigeria, and details the terms of the investment (the "Nduka Letter"). The Nduka Letter reads - verbatim - as follows:
Attn: Mr. Dwayne Jennings
8922 LupineDr.
Reynoldsburg, Ohio 43068
Sir,
Please find the enclose letter regarding your assistance with the estate of Mr. Pressley. The total amount of the estate as at December 31st is US $24,613,000.00.
I have spoken to Mr. Bodrick and informed him that Union Bank along with the Federal Inland Revenue has and will receive over US $368,000.00 to pay legal, administrative and Tax expenses for this transfer with only US $28,500.00 to effect transfer of US $9,000,000.00 to Bank One NA 100 E. Broad Street Columbus, Ohio. 43271.
On February 21st 2001 our Telex Department through foreign operations has sent a release order to our correspondent Bank National Westminster Bank Plc. 6 International Trade and Banking Service overseas Branch Operations King Cross House 200 Pentvill Road London England, Phone # 011-44-207-726-1000.
For your assitance this document will act as an official letter of guarantee to pay you the sum of US $42,750.00 on or before April 15th 2001. Mr Bodrick has assigned power of Attorney of the US $9,000,000.00 to ensure all investors will be paid through Bank One NA.
This letter stands as a Promissory Note to you, and if you have any question or concern, please call my office. I will be more than glad to talk with you. Again, thank you for your assistance and I look forward to meeting you soon.
Sincerely Yours,
[Signature]
Patrick C. Nduka (Mr.)
Ag. Chief Accountant
Union Bank Nig. Plc.(Plaintiff's Exhibit A). Thus, Plaintiff believed that he was guaranteed a return of $42,750.00 on a $28,500.00 investment within a month after making the investment.
On March 30, 2001, Plaintiff and his wife met Defendant at a Bank One branch in Westerville, Ohio, where Plaintiff transferred $26,000.00 from his Bank One account to an account at "HSBC - Hong Kong Shanghai Bank Corp." in Taiwan. Defendant provided the wire transfer instructions directly to the banker assisting with the transfer. While at the bank, Plaintiff also delivered to Defendant an official check in the amount of $2,500.00 payable to "National Liberty Corp.," which was the fee that Defendant requested from Plaintiff for facilitating the investment. While including the fee in the calculation of the total investment is atypical, there is no dispute that Plaintiff's total remittance of $28,500.00 on March 30, 2001 (the "Initial Investment") met the terms of the Nduka Letter.
The investment return date of April 15, 2001 came and went with without any payment materializing from Union Bank in Nigeria, the Nigerian Estate, or any other source. After April 15, 2001, Plaintiff sought an explanation from Defendant why he had not been paid, and continuously thereafter sought updates as to the status of the investment. The recurring explanation provided by Defendant was that expenses of the Nigerian Estate remained unpaid and that additional funds had to be raised to pay the expenses to effectuate the release of the corpus of the Nigerian Estate. On December 12, 2001, Defendant sent Plaintiff an e-mail (the "December 12, 2001 E-Mail") regarding the status of the investment, which reads - verbatim - as follows:
To: DeWayne Jennings:
Re: Funds
As discussed with you on 12/07/01 funds are currently with Union Bank Plc. until all requirements have been made regarding Marginal Fluctuation Rate to the Board of Inland Revenue. No monies will be paid to investors until this requirement has been made. Of the $123,000.00 due to the Federal Inland Revenue $83,700.00 has been paid since 11/20/01. With the remaining $39,300 that has to be raised, $25,900.00 has been committed to be sent leaving $13,400 remaining. Please refer to deed of agreement between Federal High Court and Union Bank Plc regarding international banking policy.(Plaintiff's Exhibit E).
In response to Plaintiff's request for another update regarding the status of the investment, Defendant sent Plaintiff the following letter by facsimile on January 29, 2002 (the "January 29, 2002 Fax"):
January 29, 2002(Plaintiff's Exhibit F).
To: DeWayne Jennings
From: Dwayne Bodrick
A summary of our morning discussion regarding Union Bank, I will contact John Uche acting attorney to the estate of Charles Pressley in reference to Union Banks transfer of funds to Global Securities U.K. and forwarding the remainder balance of $8300.00 to complete full Marginal Fluctuation Rate and transfer into Bank One. Will call Thursday 1/31/02 with time of phone conference.
Sincerely,
Dwayne Bodrick
From the December 12, 2001 E-Mail, the January 29, 2002 Fax, and several telephone conversations with Defendant, Plaintiff was led to believe that an additional $10,000.00 was needed to trigger release of the funds in the Nigerian Estate. So Plaintiff again met Defendant at a Bank One branch; Defendant again provided wire transfer instructions directly to the banker; and Plaintiff again wired funds - this time in the amount of $10,000.00 (the "Second Investment") - which Plaintiff again believed would be used to pay the taxes and expenses of the Nigerian Estate, and would result in the release of the funds in the Nigerian Estate and payment to investors. It is unclear exactly when Plaintiff made the Second Investment; however, the evidence suggests that it was made sometime within the first few months of 2002. Not surprisingly, Plaintiff never received any return on either investment.
At some point in 2003, Plaintiff, along with other investors, contacted various law enforcement authorities regarding the investment scheme perpetrated (or at least advanced) by Defendant. Thereafter, but also in 2003, the FBI issued a cease and desist order to Defendant with respect to his investment activities (the "Cease and Desist Order"). There was no further communication between Plaintiff and Defendant after the Cease and Desist Order was issued.
On March 17, 2009, Plaintiff initiated a lawsuit against Defendant in the United States District Court for the Southern District of Ohio, Case Number 09-CV-208, seeking redress for Defendant's actions described above (the "District Court Case"). On April 5, 2010, Defendant and his wife filed a petition for relief under Chapter 13 of the Bankruptcy Code in this Court, Case Number 10-53984 (the "2010 Bankruptcy"), which stayed the District Court Case. The 2010 Bankruptcy was dismissed on October 12, 2010, and the District Court Case was reactivated.
On January 6, 2011, Defendant and his wife again filed a petition for relief under Chapter 13 of the Bankruptcy Code in this Court, Case Number 11-50090 (the "2011 Bankruptcy"), which again resulted in a stay of the District Court Case. In the 2011 Bankruptcy, Plaintiff filed an adversary proceeding, Case Number 11-2162 (the "Previous Adversary"), asserting that the debt due him was nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A), (a)(2)(B), (a)(4), and (a)(6). After a trial on the merits, the Court found that Plaintiff's evidence did not satisfy all of the elements of any provision of § 523(a)(2) or (a)(4), and held that the debt owed to Plaintiff by Defendant was dischargeable. Jennings v. Bodrick (In re Bodrick), 509 B.R. 843 (Bankr. S.D. Ohio 2014). The Court further concluded that no cause of action to determine dischargeability of debt pursuant to 11 U.S.C. § 523(a)(6) is available to a creditor in a Chapter 13 case, and that claim was dismissed. Id. The Court entered judgment in favor of Defendant on April 18, 2014. The 2011 Bankruptcy was dismissed on August 19, 2014.
Defendant and his wife filed their present bankruptcy case under Chapter 7 of the Bankruptcy Code on September 16, 2014. Plaintiff filed the Complaint, thereby initiating this adversary proceeding, on December 22, 2014. To date, the District Court Case remains pending and no determination has been made with respect to Defendant's liability on the underlying causes of action. As noted above, the only remaining issues in this proceeding are (1) whether Defendant is liable to Plaintiff for breach of a written and/or oral contract, for violation of the Securities and Exchange Act of 1934, and/or for an intentional tort, and (2) whether such liability is nondischargeable under 11 U.S.C. § 523(a)(6).
II. Jurisdiction
The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334 and General Order 05-02 entered by the United States District Court for the Southern District of Ohio, referring all bankruptcy matters to this Court. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2). See also Longo v. McLaren (In re McLaren), 3 F.3d 958, 965 (6th Cir. 1993) ("[T]he bankruptcy court has jurisdiction to adjudge the validity and amount of a [creditor's] claim together with its dischargeability."); Lawson v. Conley (In re Conley), 482 B.R. 191, 207 (Bankr. S.D. Ohio 2012) (finding that the bankruptcy court "has the constitutional authority to enter a final judgment liquidating [a] debt under Ohio law").
III. Analysis
Prior to a debt being determined to be nondischargeable under any discharge exception set forth in 11 U.S.C. § 523(a), "the creditor first show the existence of [an enforceable] debt under [nonbankruptcy] law." Lawson v. Conley (In re Conley), 482 B.R. 191, 207 (Bankr. S.D. Ohio 2012). In many nondischargeability cases, a bankruptcy court is never tasked with making such a determination. For example, if the debt was liquidated prior to the debtor filing bankruptcy, or if the debtor does not otherwise dispute the validity of the particular debt, then the bankruptcy court may only have to determine whether that debt falls within a category of the nondischargeable debts set forth in 11 U.S.C. § 523(a). In the instant case, however, the debt owed by Defendant to Plaintiff, if any, has not been liquidated, and Defendant zealously disputes the existence of an enforceable debt. Accordingly, this Court - as the trier of fact - must first "look[] to [nonbankruptcy] law to determine whether there is liability and the amount of compensatory and punitive damages and then . . . determine[] whether that set of facts qualifies as a non-dischargeable claim under the bankruptcy law." Klause v. Thompson (In re Klause), 181 B.R. 487, 492 (Bankr. C.D. Cal. 1995).
A. Statute of Limitations
Asserting that the applicable statute of limitations has expired is an affirmative defense. "An affirmative defense, under the meaning of [Federal Rule of Civil Procedure] 8(c), is a defense that does not negate the elements of the plaintiff's claim, but instead precludes liability even if all of the elements of the plaintiff's claim are proven." Roberge v. Hannah Marine Corp., 124 F.3d 199, 1997 WL 468330, *3 (6th Cir. 1997). In the context of a nondischargeability action under 11 U.S.C. § 523(a), "[t]he only relevant question with respect to Ohio's statute of limitations [or any other applicable statute of limitations under nonbankruptcy law] is whether the plaintiffs sought to enforce their 'debt' against the debtor within the period prescribed by the statute of limitations." Spinnenweber v. Moran (In re Moran), 152 B.R. 493, 495 (Bankr. S.D. Ohio 1993) (emphasis in original). Thus, the relevant question for this Court is whether the statutes of limitations applicable to Plaintiff's various causes of action expired prior to Plaintiff filing the District Court Case to seek recompense from Defendant. If so, the debt owed Plaintiff by Defendant is not enforceable. Generally, the applicable statute of limitations is the statute in effect at the time the relevant action is commenced, and the burden is on the defendant to demonstrate that the statute of limitations has run. Owner Operator Indep. Drivers Ass'n, Inc. v. Comerica Bank (In re Arctic Express Inc.), 636 F.3d 781, 802 (6th Cir. 2011) (citing Campbell v. Grand Trunk Western R. Co., 238 F.3d 772, 775 (6th Cir. 2001)).
Federal Rule of Civil Procedure 8(c) is made applicable to adversary proceedings pursuant to Federal Rule of Bankruptcy Procedure 7008.
In Taylor v. First Resolution Invest. Corp, the Ohio Supreme Court noted that "[s]tatutes of limitations are remedial in nature[,]" and that "laws of a remedial nature providing rules of practice, courses of procedure, or methods of review are applicable to any proceedings conducted after the adoption of such laws." Taylor v. First Resolution Invest. Corp., 72 N.E.3d 573, 589 (Ohio 2016) (citations omitted).
i. Contract
Pursuant to Ohio Revised Code § 2305.07 , "an action upon a contract not in writing, express or implied, or upon a liability created by statute other than a forfeiture or penalty, shall be brought within six years after the cause thereof accrued." Ohio Rev. Code § 2305.07. At the time the District Court Case was commenced, "an action upon a specialty or an agreement, contract, or promise in writing" had to "be brought within fifteen years after the cause thereof accrued." Ohio Rev. Code § 2305.06 (effective July 1, 1993 through September 27, 2012). A cause of action on a contract claim accrues when "the complaining party suffers actual damages as a result of the alleged breach." Columbus Green Bldg. Forum v. State of Ohio, 980 N.E.2d 1 (Ohio Ct. App. 2012) (quoting Kincaid v. Erie Ins. Co., 944 N.E.2d 207, 210 (Ohio 2010)).
Ohio Revised Code § 2305.07 has remained unchanged since July 1, 1993. Thus, the current version of the statute was in effect at the time the District Court Case was filed.
At the hearing and in the post-trial briefs, the parties mistakenly stated that the applicable statute of limitations for written contracts is eight (8) years, which is the case under the current version of the statute.
In the present case, the only alleged contract between Plaintiff and Defendant relates to the Initial Investment. Plaintiff contends that, after Plaintiff made the Initial Investment of $28,500.00, Defendant was contractually obligated to pay Plaintiff a return of $42,750.00 on or before April 15, 2001. Assuming arguendo that such a contract existed under Ohio law between Plaintiff and Defendant, the contract was breached and Plaintiff was injured on April 16, 2001 - the day after Plaintiff was to receive his return. Thus, any cause of action based on an oral contract is time barred, as the District Court Case was filed more than six (6) years after the cause of action accrued.
Perhaps recognizing that the statute of limitations clearly bars any action based on an oral contract, Plaintiff contends that the Nduka Letter serves as a written contract and that the statute of limitations set forth in Ohio Revised Code § 2305.06 should apply to his contract claim. To fall within "an agreement, contract, or promise in writing" within the meaning of Ohio Revised Code § 2305.06, the "written instrument [must] clearly define[] the obligations of the parties without implying terms and without referring to supplemental evidence to establish the express terms of the agreement." Rayess v. Educ. Comm. for Foreign Med. Graduates, 983 N.E.2d 1267, 1272 (Ohio 2012). The Nduka Letter, however, was not signed by Defendant, and does not, on its face, obligate Defendant to pay Plaintiff any sum of money. Instead, the Nduka Letter purports to be a written promise by Union Bank of Nigeria and/or Mr. Nduka to pay Plaintiff $42,750.00 on or before April 15, 2001. Accordingly, the Court finds that the obligations of Plaintiff and Defendant (as Plaintiff alleges them to be), are not clearly defined in the Nduka Letter, or any other document admitted as evidence.
Plaintiff did not assert that any other document satisfies the requirements of a written contract. Nonetheless, the Court conducted an independent review of each document admitted as evidence, including the December 12, 2001 E-Mail and the January 29, 2002 Fax, and determined that no document satisfies the requirements described in this section.
Plaintiff additionally alleged at the trial that Mr. Nduka does not exist, and that the signature on the Nduka Letter was actually affixed to the document by Defendant. As a result, Plaintiff contends, the Nduka Letter should be construed as a written contract between Plaintiff and Defendant. There was little to no evidence adduced at the trial suggesting that the existence of Mr. Nduka was contrived by Defendant, as opposed to Mr. Nduka being an actual participant in the Nigerian investment scheme, or an alias of an actual participant (other than Defendant) who was involved in the Nigerian investment scheme. Nonetheless, the Court requested post-trial briefing from the parties regarding Plaintiff's proposition. In his post-trial brief (Doc. #85), Plaintiff asserts that Defendant is an "unauthorized signer" of the Nduka Letter within the meaning of Ohio Revised Code § 1303.43, and that section mandates the liability of Defendant under the terms thereof. The Court disagrees.
Ohio Revised Code § 1303.43 codifies § 3-403 of the Uniform Commercial Code (the "U.C.C."). Article 3 of the U.C.C. applies only to negotiable instruments. Ohio Rev. Code § 1303.02.
(A) "[N]egotiable instrument" means an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it meets all of the following requirements:
(1) It is payable to bearer or to order at the time it is issued or first comes into possession of a holder.
(2) It is payable on demand or at a definite time.
(3) It does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, but the promise or order may contain any of the following:
(a) An undertaking or power to give, maintain, or protect collateral to secure payment;
(b) An authorization or power to the holder to confess judgment or realize on or dispose of collateral;
(c) A waiver of the benefit of any law intended for the advantage or protection of an obligor.
Ohio Rev. Code § 1303.03 (emphasis added).
(B) "Instrument" means a negotiable instrument.
. . .
(E)(1) "Note" means an instrument that is a promise.
Although the Nduka Letter states that it is a "Promissory Note," and Plaintiff refers to the Nduka Letter as a promissory note, the Nduka Letter is not a negotiable instrument, as defined by Ohio Rev. Code § 1303.03. Particularly, the Nduka Letter states several additional undertakings of Union Bank of Nigeria - the purported obligor on the "note" - and does not contain the magic words: "pay to bearer" or "pay to the order of." See U.C.C. § 3-104, comment 2 (discussing that, under U.C.C. § 3-104(c), checks are excepted from such requirement, but notes are not); Sirius LC v. Erickson, 156 P.3d 539, 542 (Idaho 2007) (construing Idaho's codified version of Article 3 of the U.C.C., and stating "[n]otes payable simply to a specific payee, and not 'to the order of the payee' or 'to the payee or order,' are non-negotiable"). Ohio Revised Code § 1303.43 is thus inapplicable to the Nduka Letter. Moreover, even if the Nduka Letter was a negotiable instrument under Ohio Revised Code § 1303.03, any action thereon would be time barred. Ohio Revised Code § 1303.16, which has been in effect since August 19, 1994, expressly states that "an action to enforce the obligation of a party to pay a note payable at a definite time shall be brought within six years after the due date or dates stated in the note[.]" Ohio Rev. Code § 1303.16(A).
The statutes in Idaho that define "negotiable instrument" and the terms "payable to bearer" and "payable to order" are the same or substantially similar to the Ohio statutes. Compare Ohio Rev. Code § 1303.03 with Idaho Code § 28-3-104; Ohio Rev. Code § 1303.10 with Idaho Code § 28-3-109.
For the reasons stated above, the Court finds that the applicable statute of limitations on Plaintiff's contract claim is set forth in Ohio Revised Code § 2305.07, and Plaintiff's contract claim is therefore time barred.
ii. Securities and Exchange Act of 1934
Plaintiff also contends that Defendant is liable for violating the Securities and Exchange Act of 1934 (the "SEC Act"), particularly 15 U.S.C. § 78j and 17 C.F.R. § 240.10b-5. Section 78j of Title 15 of the United States Code provides, in pertinent part:
It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange—
15 U.S.C. § 78j(b). Similarly, Rule 10b-5 under the SEC Act provides:. . .
(b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, or any securities-based swap agreement any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.
It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,
17 C.F.R. § 240.10b-5.
in connection with the purchase or sale of any security.
Assuming arguendo that the "investments" sold by Defendant were "securities" within the meaning of the SEC Act, or that Defendant's activities were otherwise subject to the SEC Act, the District Court Case (which was filed in 2009) was not brought within the applicable limitations period for bringing such actions. Section 1658 of Title 28 of the United States Code provides, in pertinent part:
28 U.S.C. § 1658 has remained unchanged since July 30, 2002, and thus, the current version of the statute was in effect at the time the District Court Case was filed.
(b) Notwithstanding subsection (a), a private right of action that involves a claim of fraud, deceit, manipulation, or contrivance in contravention of a regulatory requirement concerning the securities laws, as defined in section 3(a)(47) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(47)), may be brought not later than the earlier of—
28 U.S.C. § 1658 (emphasis added).(1) 2 years after the discovery of the facts constituting the violation; or
(2) 5 years after such violation.
It is apparent that Plaintiff knew or discovered the facts constituting Defendant's violation of the SEC Act at least by 2003 - when Plaintiff and the other investors contacted the FBI regarding Defendant and the FBI issued the Cease and Desist Order. Thus, any action under the SEC Act had to be initiated sometime in 2005. Even if Plaintiff never discovered the necessary facts to trigger the statute of limitations under 28 U.S.C. § 1658(b)(1), as the Initial Investment and Second Investment were made in 2001 and 2002, respectively, any action under the SEC Act is likewise barred by the five (5) year limitation under subsection (b)(2).
iii. Intentional Tort
It is unclear what claim, if any, Plaintiff is asserting based in intentional tort. Nonetheless, the Court will briefly address whether any such claim is barred by the statute of limitations.
Section 2305.09 of the Ohio Revised Code appears to set forth the applicable limitations period for any potential claim Plaintiff may have under an intentional tort theory, including fraud and conversion. The version of Ohio Revised Code § 2305.09 in effect at the time the District Court Case was filed provided:
Judge Buchanan determined in the Previous Adversary that Plaintiff failed to demonstrate that the debt due him was obtained by fraud under 11 U.S.C. § 523(a)(2)(A). Jennings v. Bodrick (In re Bodrick), 509 B.R. 843, 854-58 (Bankr. S.D. Ohio 2014). Thus, any claim of Plaintiff based on fraud may also be foreclosed on the basis of collateral estoppel and/or res judicata.
See Blank v. Securx, Inc., 704 N.E.2d 21, 24 (Ohio Ct. App. 1997) (applying Ohio Revised Code § 2305.09 to a conversion claim).
Except as provided for in division (C) of this section, an action for any of the following causes shall be brought within four years after the cause thereof accrued:
(A) For trespassing upon real property;
(B) For the recovery of personal property, or for taking or detaining it;
(C) For relief on the ground of fraud, except when the cause of action is a violation of section 2913.49 of the Revised Code, in which case the action shall be brought within five years after the cause thereof accrued;
(D) For an injury to the rights of the plaintiff not arising on contract nor enumerated in sections 1304.35, 2305.10 to 2305.12, and 2305.14 of the Revised Code;
(E) For relief on the grounds of a physical or regulatory taking of real property.
Ohio Rev. Code § 2305.09 (emphasis added) (effective September 1, 2008 through September 14, 2014). Under the statute, a cause of action for fraud accrues when the fraud is discovered; however, Ohio courts have occasionally applied this "discovery rule" to other causes of action as well. See, e.g., Mattress Matters, Inc. v. Trunzo, 74 N.E.3d 739 (Ohio Ct. App. 2016) (applying the "discovery rule" to the plaintiff's conversion claim, as well as the fraud claim).
If the action is for trespassing under ground or injury to mines, or for the wrongful taking of personal property, the causes thereof shall not accrue until the wrongdoer is discovered; nor, if it is for fraud, until the fraud is discovered.
As noted above, the Court finds that the latest that Plaintiff discovered any fraud or other wrongdoing by Defendant was sometime in 2003 - when Plaintiff and the other investors contacted the FBI, which resulted in the FBI issuing the Cease and Desist Order. Thus, any cause of action based upon fraud, conversion, or any other tort covered by Ohio Revised Code § 2305.09, had to be initiated by sometime in 2007. The District Court Case was not filed until March 17, 2009, and the statute of limitations had run on any such causes of action.
Having determined that Plaintiff claims against Defendant are barred by the applicable statutes of limitations, and thus unenforceable, Plaintiff's cause of action under 11 U.S.C. § 523(a)(6) is moot. See Gen. Elec. Credit Corp. v. Dunn (In re Dunn), 50 B.R. 664, 666 (Bankr. W.D.N.Y. 1985) (stating, "[the debtor's] obligation, if any, to [the creditor] is not a 'claim' or 'debt' to which an objection to discharge may be made under 11 U.S.C. § 523 since such a claim is not enforceable and not in need of discharge").
IV. Conclusion
For the foregoing reasons, the Court finds that Plaintiff is not entitled to a judgment on any pending claims set forth in the Complaint. A separate final judgment will be entered in accordance with this opinion.
This document has been electronically entered in the records of the United States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
/s/ _________
C. Kathryn Preston
United States Bankruptcy Judge
Dated: September 18, 2017
Copies to: Charles Smith, Jr., Attorney for Plaintiff
(via CM/ECF) Michael Gunner, Attorney for Defendant
(via CM/ECF)