635 B.R. 467
Bankr. S.D. Tex.2021Background
- Plaintiffs K.V. Chowdary, M.D. and Valley Gastroenterology Clinic, P.A. filed an adversary complaint seeking to except a debt (over $2,000,000) from Fatih Ozcelebi's Chapter 11 discharge under 11 U.S.C. §§ 523(a)(2)(A), (a)(4), and (a)(6).
- After the Court partially granted an earlier motion, Plaintiffs filed a First Amended Complaint on August 16, 2021; Defendant moved to dismiss that amendment under Rule 12(b)(6).
- At a November 22, 2021 hearing the Court took the matter under advisement and subsequently concluded the First Amended Complaint suffers from shotgun pleading defects.
- The Court found the pleading violated Rules 8(a)(2), 9(b), and 10(b) by (a) incorporating broad prior allegations without citation, (b) failing to plead fraud with particularity, and (c) lumping separate transactions/claims into single counts.
- Rather than resolving the merits on a 12(b)(6) motion, the Court denied the motion as moot and, sua sponte, ordered Plaintiffs to file a more definite statement (an amended complaint) under Rule 12(e) by January 12, 2022.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Adequacy of §523(a)(2)(A) (fraud/false pretenses/actual fraud) pleading | Ozcelebi obtained Plaintiffs' client list by false pretenses/representations and/or actual fraud (several discrete transactions alleged) | First Amended Complaint fails to meet Rule 9(b) particularity and Rule 8 notice requirements | Complaint contains shotgun pleading errors; violates Rules 8(a)(2), 9(b), 10(b); must be repled with a more definite statement under Rule 12(e) |
| Adequacy of §523(a)(4) (fiduciary fraud/defalcation, embezzlement, larceny) pleading | Defendant committed fraud/defalcation while acting in a fiduciary capacity or engaged in embezzlement/larceny in obtaining/using client list and in subsequent conduct | Allegations join multiple theories (some requiring Rule 9(b), others Rule 8) without separating transactions or identifying which theory applies | Claims violate Rules 8(a)(2), 9(b), and 10(b); Plaintiffs must file an amended complaint clarifying theories and facts under Rule 12(e) |
| Adequacy of §523(a)(6) (willful and malicious injury) pleading | Defendant willfully and maliciously injured Plaintiffs or their property (various acts alleged) | Pleading lumps different occurrences together and fails to state short, plain claims or separate counts per transaction | Violates Rules 8(a)(2) and 10(b); must be repled by amended complaint per Rule 12(e) |
| Motion to dismiss under Rule 12(b)(6) | Plaintiffs opposed dismissal and filed a response | Defendant moved to dismiss First Amended Complaint for failure to state a claim | Motion to dismiss denied as moot; Court instead ordered a more definite statement under Rule 12(e) so the claims can be properly pleaded and adjudicated |
Key Cases Cited
- Weiland v. Palm Beach Cnty. Sheriff's Office, 792 F.3d 1313 (11th Cir. 2015) (defines and categorizes "shotgun pleadings" and their defects)
- Husky Int'l Elecs., Inc. v. Ritz, 136 S. Ct. 1581 (2016) (clarifies §523(a)(2)(A) actual fraud/false pretenses paths)
- Wood v. Wood (In re Wood), 825 F.2d 90 (5th Cir. 1987) (standards for "related to" jurisdiction in bankruptcy)
- Miller v. J.D. Abrams, Inc. (Matter of Miller), 156 F.3d 598 (5th Cir. 1998) (discusses §523(a)(4) concepts such as embezzlement/defalcation)
- Scheuer v. Rhodes, 416 U.S. 232 (1974) (explains the limited purpose of Rule 12(b)(6) inquiry)