Opinion
22-1045
10-26-2022
IN RE: CASE NO. 22-10140 v. RENEE MINER Defendant RENEE MINER Debtor JOSHUA CRADDOCK Plaintiff
DECISION AND ORDER GRANTING MOTION TO DISMISS
Robert E. Grant Chief Judge, United States Bankruptcy Court
The complaint in this adversary proceeding asks the court to declare that the debtor's obligation to the plaintiff is non-dischargeable under § 523(a)(2)(A) (fraud) and/or § 523(a)(6) (willful and malicious injury) of the United States Bankruptcy Code. Defendant responded with a motion to dismiss, arguing the complaint fails to state a claim upon which relief can be granted. Fed.R.Civ.P. Rule 12(b)(6). The matter is before the court to consider that question based upon the parties' briefs.
Plaintiffs complaint advances both fraud based (§523(a)(2)) and non-fraud based (§523(a)(6)) claims, each of which is subject to a different pleading standard. As for the non-fraud based claim, the general standard for a sufficient complaint requires that:
First, the complaint must describe the claim in sufficient detail to give the defendant "fair notice of what the . . . claim is and the grounds upon which it rests" . . . Second, its allegations must plausibly suggest that the plaintiff has a right to relief raising the
possibility above a "speculative level"; if they do not, the plaintiff pleads itself out of court. E.E.O.C. v. Concentra Health Services, Inc., 496 F.3d 773, 776 (7th Cir. 2007) (quoting Bell Atlantic v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1964 (2007))(internal citations omitted). See also, Ashcroft v. Iqbal 556 U.S. 662, 129 S.Ct. 1937, 1949-51 (2009); In re Eisaman, 387 B.R. 219, 222 (Bankr. N.D. Ind. 2008); In re Schmucker, 376 B.R. 256, 258 (Bankr. N.D. Ind. 2007).
As to Plaintiff's claim of fraud, there is a more rigorous standard that must be satisfied. "In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." Fed.R.Civ.P. Rule 9(b). This requires the complaint to state "the identity of the person making the misrepresentation, the time, place, and content of the misrepresentation, and the method by which the misrepresentation was communicated to the plaintiff." Bankers Trust Co. v. Old Republic Insurance Co., 959 F.2d 677, 683 (7th Cir. 1992) (quoting Sears v. Likens, 912 F.2d 889, 893 (7th Cir. 1990). See also, In re Rifkin, 142 B.R. 61, 67 (Bankr. E.D. N.Y. 1992). A complaint which fails to identify the fraudulent statements or the reasons why they are fraudulent does not satisfy the particularity requirement of Rule 9(b). Skycom Corp. v. Telstar Corp., 813 F.2d 810, 818 (7th Cir. 1987).
In response to the motion, the plaintiff acknowledges that Rule 9 provides a heightened standard for pleading certain matters, but then goes onto to discuss the standard for pleading under Rule 8 without making any distinction between the different claims it is asserting. Not only does this seem to conflate the two standards, but the standard plaintiff attributes to Rule 8 is not correct. The Supreme Court abandoned the "no set of facts" standard fifteen years ago. See, Bell Atlantic v. Twombly, 550 U.S. 544, 127 S.Ct. 1955 (2007). Both it and the Seventh Circuit have written extensively on the current standard associated with Rule 8 in the intervening years and how that standard is applied.
The operative facts contained in the present complaint say that, prior to the petition, the plaintiff sued the debtor in state court alleging that she was corporate representative of the Event Center and plaintiff discovered she was "engaged in a scheme of making malicious, false representations to consumers, accepting their own payments and subsequent payments for
venue/wedding services, and then disclaiming liability for performing" them, and that she did so with the plaintiff. As a result, an amended complaint was filed in filed in state court seeking damages for breach of contract, fraudulent inducement, Indiana Deceptive Consumer Sales Act, statutory fraud under Indiana law, conversion, violations of the Crime Victims Relief Act and punitive damages. It then goes on, in conclusory fashion, to claim the defendant made false representations of past or existing facts" upon which the plaintiff "rightfully and justifiably relied" resulting in non-dischargeable damages (Count I) and that the debtor's conduct was willful and malicious (Count II).
Such conclusory allegations do not even begin to satisfy the requirements of Bell Atlantic v. Twombly, 550 U.S. 544, 127 S.Ct. 1955 (2007) and Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949-50 (2009) ("A pleading that offers 'labels and conclusions' or 'a formulaic recitation of the elements of a cause of action will not do.' Nor does a complaint suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement'), much less the more rigorous requirements of Rule 9(b) of the Federal Rules of Civil Procedure for pleading fraud. See, In re Brown, 399 B.R. 44, 46 (Bankr. N.D. Ind. 2008); In re Eisaman, 387 B.R. 219, 222-23 (Bankr. N.D. Ind. 2008); In re Schmucker, 376 B.R. 256, 257-58 (Bankr. N.D. Ind. 2007); In re Chochos, 325 B.R. 780, 783 (Bankr. N.D. Ind. 2005).
Instead of defending the facts alleged in the complaint or explaining how those facts state an appropriate claim, plaintiff argues that "it is well established that a written instrument may be incorporated by reference in pleadings under Federal Rule of Civil Procedure 10(c);" so that the allegations in the amended state court complaint attached to the complaint filed in this court remedy any deficiencies that pleading may contain. This type of "pleading by exhibit" is not encouraged.
At best it is reluctantly tolerated. See, Grabill Painting & Drywall, Inc. v. Conkling (In re Conkling), 2010 Bankr. LEXIS 3257 (Bankr. N.D. Ind. 2010); In re Burkhardt, 2017 WL 10742582 (Bankr. N.D. Ind. Dec. 12, 2017) and In re Jewell, 554 B.R. 169 (Bankr. N.D. Ind. 2016). Nonetheless, for it to succeed, in response to a motion to dismiss, the plaintiff should identify any relevant facts contained in the attached exhibits and explain how they remedy the deficiencies in the complaint itself. See, Schaefer v. Rowland, 2015 WL 6083081 *4 (E.D. Cal. Oct. 15, 2015). It should not expect the court to wade through attached exhibits to determine whether or not plaintiff has stated a cognizable claim. Pogue v. Yates, 2008 WL 220138 *2 (E.D. Cal. Jan. 25, 2008). See also, United States v. Dunkel, 927 F.2d 955, 956 (7th Cir. 1991) ("Judges are not like pigs, hunting for truffles buried in briefs."). The plaintiff has not even attempted to do that; instead it does little more than rely upon the argument that the attachments made the debtor "well-aware of the basis for non-dischargeablity." Response to Motion to Dismiss, ¶ 10 (ECF No. 7). That is not nearly enough. To the extent Plaintiff claims Defendant's actions constitute a willful and malicious injury, the complaint fares no better, even though the requirements for pleading this claim are less rigorous. The plaintiff simply alleges that the defendant's actions constitute a willful and malicious injury, without alleging any facts that would plausibly suggest that might be so or what those action might have been. See, National Association of Systems Administrators, Inc. v. Avionics Solutions, Inc., 2008 U.S. Dist. LEXIS 2568 *45-49 (S.D. Ind. 2008). If "threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice," Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949-50 (2009), conclusory allegations alone will not.
Even if the court undertook such an effort, it would not succeed because the state court pleadings make few, if any, allegations as to what Renee Miner may have done. Most of the allegations refer collectively "the Defendants" (of which there were three).
The defendant's motion to dismiss is GRANTED. Plaintiff shall have fourteen (14) days from this date within which time to file an amended complaint. The failure to do so will result in this case being dismissed without further notice or hearing.
In his prayer, the plaintiff also requests an order granting relief from the automatic stay to permit him to continue his litigation against the debtor in state court. There is no reason do so and the Seventh Circuit has expressly stated a preference to the contrary. Matter of Hallahan, 936 F.2d 1496, 1508 (7th Cir. 1991) ("we think it preferable to allow bankruptcy courts ruling on the dischargeability of a debt to adjudicate the issues of liability and damages also."). See also, In re Collazo, 817 F.3d 1047 (7th Cir. 2016). Furthermore, relief from the stay may implicate the rights of the estate and/or the trustee which are not parties to this adversary proceeding. That is one reson why the bankruptcy rules have a different procedure for granting stay relief. See, Fed.R.Bankr.P. Rule 7001.
SO ORDERED.