Sutton v. BerkleySutton v. Berkley
- Reporters:
- ,
- Before:
- Suzana Krstevski Koch
IT IS SO ORDERED.
Dated: 5 February, 2025 11:54 AM
Suzana Krstevski Koch
United States Bankruptcy Judge
This cause is before the Court on Defendant-Thomas R. Berkley‘s (“Berkley“) Motion to Dismiss (the “Motion to Dismiss“) (ECF No. 6) Plaintiff-Trenton Sutton‘s (“Sutton“) Complaint (the “Complaint“) (ECF No. 1) and Motion in Support of Adversary Complaint (ECF No. 8) (the “Supplement” and together with the Complaint, the “Amended Complaint“). Sutton‘s Amended Complaint is made pursuant to
JURISDICTION
The Court has jurisdiction over Berkley‘s underlying Chapter 7 case and this adversary proceeding pursuant to
BACKGROUND
On October 18, 2024, Sutton filed his Complaint, alleging that Berkley owes him a debt arising out of a business relationship and that the debt should be excepted from Berkely‘s
Sutton‘s Complaint includes three attachments to support his assertions. The first and second attachments (“Exhibit A” and “Exhibit B“) are printouts of Gmail eCheck receipts confirming money sent by Sutton to Berkley Marketing Inc. The first, with the description “3 ATM automation package,” indicates that Sutton paid Berkley Marketing Inc. $10,000.00 on June 30, 2023. ECF No. 1, Ex. A. The second, with the description “Final Payment,” shows Sutton paid Berkley Marketing Inc. $9,000.00 on July 10, 2023. ECF No. 1, Ex. B.
The third attachment, entitled Service Agreement (dated June 27, 2023), outlines services Berkley Marketing, Inc. purportedly promised to render to an unnamed and unknown party. ECF No. 1 Ex. C. According to the Service Agreement, Berkley Marketing Inc. promised to, among other things, find suitable locations for ATMs and negotiate contracts with location owners and deliver ATMs to contracted locations. Id. The Service Agreement further established that the unknown party agreed to pay Berkley Marketing, Inc. $29,000.00 for training courses, mentorship, location scouting, and ATM placement services for four ATM locations.
On November 13, 2024, Sutton filed his Supplement. ECF No. 8. The Court construes the Supplement as an Amended Complaint “so as to do justice.”
As evidence of fraud and misrepresentation, Sutton points to the three exhibits included with his Complaint and reiterated that Berkley only delivered two of the three promised ATM machines. Id. at ¶ 2.
On November 18, 2018, Berkely filed his Motion to Dismiss, asking that the Amended Complaint be dismissed under Rule 12(b)(6) for failure to state a claim upon which relief can be granted, or in the alternative, require Sutton to provide a more definite statement, pursuant to Rule 12(e). ECF No. 6. On December 2, 2024, Sutton filed a Response to Berkley‘s Motion to Dismiss (“Response“), arguing that the Amended Complaint contains detailed allegations, and no basis exists for a motion for more definite statement. ECF No. 10, at Sec. III. On December 9, 2024, Berkley filed a Reply. ECF No. 11.
I. The Legal Standard for Dismissal Pursuant to Rule 12(b)(6)
A Rule 12(b)(6) motion to dismiss tests the sufficiency of a complaint. Berkley‘s motion to dismiss under Rule 12(b)(6) applies in this proceeding pursuant to Rule 7012 of the Federal Rules of Bankruptcy Procedure. In deciding a Rule 12(b)(6) motion to dismiss, “the court must construe the complaint in the light most favorable to the plaintiff, accept all factual allegations as true, and determine whether the complaint ‘contains enough facts to state a claim to relief that is plausible on its face.‘” United States v. Ford Motor Co., 532 F.3d 496, 502 (6th Cir. 2008) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 569 (2007). This standard established in Twombly is now comprehensively recognized as the “plausibility” standard. The United States Supreme Court concisely explained the “plausibility” standard in Ashcroft v. Iqbal:
A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a “probability requirement,” but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are “merely consistent with” a defendant‘s liability, it “stops short of the line between possibility and plausibility of ‘entitlement to relief.‘” . . . .
. . .
Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not “show[n]“-“that the pleader is entitled to relief.”
Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 1949-50, 173 L. Ed. 2d 868 (2009).
Operating in harmony with Rule 12(b)(6), Rule 8(2)(a) of the Federal Rules of Civil Procedure provides that a claim for relief must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Even though Rule 8(a)(2) does not require a complaint to set out detailed factual allegations, mere “conclusory allegations or legal
Additionally, Rule 9(b) of the Federal Rules of Civil Procedure states that when alleging fraud (as is the case here), a party must state “with particularity the circumstances constituting fraud or mistake.”
Put together, the civil rules set a modest, but cogent, bar for a complaint raising § 523 matters. “At a minimum, the complaint must allege the time, place, and content of the alleged misrepresentation.” Harcourt v. Mallaley (In re Mallaley), No. 07-13346, 2008 Bankr. LEXIS 1098, at *2 (Bankr. S.D. Ohio 2008) (citing Walburn v. Lockheed Martin Corp., 431 F.3d 966, 972 (6th Cir. 2005)). In so doing, the Court “may consider only the facts alleged in the pleadings, documents attached as exhibits or incorporated by reference in the pleadings. . . .” Kuns Northcoast Sec. Ctr. LLC. v. Sharp (In re Sharp), No. 22-30854, 2024 Bankr. LEXIS 1293, at *5 (N.D. Ohio June 3, 2024) (citing 2 Moore‘s Federal Practice ¶ 12.34[2] (3d. ed).
Before examining the substance of the pleadings, the Court notes that Sutton represents himself as a pro se plaintiff, while counsel represents Berkley. The Court recognizes that pleadings filed by pro se litigants are to be “construed more liberally than pleadings drafted by lawyers.” Williams v. Browman, 981 F.2d 901, 903 (6th Cir. 1992). While pro se litigants are afforded this less stringent standard, “a litigant‘s pro se status does not excuse him from reading the Federal Rules of Civil Procedure.” In re Heyl, 609 B.R. 194, 202 (B.A.P. 8th Cir. 2019) (citing McNeil v. United States, 508 U.S. 106, 113 (1993) (“[W]e have never suggested that procedural rules in ordinary civil litigation should be interpreted so as to excuse mistakes by those who proceed without counsel.“).
II. The Debt Owed to Sutton
Before the Court can find that Sutton has plausibly stated any claims under § 523(a)(2)(A) for nondischargeability, there first must be a debt owed to him by Berkley. Sutton‘s Amended Complaint fails to allege any basis under which Berkley, in his individual capacity, would be liable to him for the debts claimed in the Amended Complaint. While the Amended Complaint alleges that “[Sutton] entered into a business agreement with Defendant, Thomas R. Berkley,” (ECF No. 8), the evidence Sutton provided in his pleadings demonstrate that an agreement, such that one existed between the parties, was between Sutton and Berkely Marketing Inc., not Thomas Berkley. As previously stated, the Gmail eCheck receipts provided
There were no claims in Sutton‘s Amended Complaint of piercing the corporate veil. Even if the Amended Complaint were to include a facial accusation of such, the pleadings lack substantive basis for such assertion.
“A corporation is a separate legal entity from its shareholders, even where there is but one shareholder.” LeRoux‘s Billyle Supper Club v. Ma, 77 Ohio App.3d 417, 602 N.E.2d 685, 687 (Ohio App. 6th Dist. 1991). Under Ohio law there are circumstances that exist where courts will disregard the corporate form and hold an individual shareholder liable for corporate misdeeds, known as piercing the corporate veil. The corporate entity and the individual shareholder are then treated as a single entity and the corporate liabilities become the liabilities of the individual shareholder.
The corporate form may be pierced, and individual shareholders may be held liable for corporate misdeeds when:
(1) control over the corporation by those to be held liable was so complete that the corporation has no separate mind, will, or existence of its own; (2) control over the corporation by those to be held liable was exercised in such a manner to commit fraud or an illegal act against the person seeking to disregard the corporate entity; and (3) injury or unjust loss resulted from such control and wrong.
III. 11 U.S.C. § 523(a)(2)(A)
Sutton‘s Complaint sets forth a series of allegations he believes are grounds for a finding that Berkley‘s debt to him is is nondischargeable under § 523(a)(2)(A) because the debt was incurred by fraud, false pretenses, or misrepresentation. The relevant portion of § 523 provides:
(a) Discharge under [§ 727] does not discharge an individual debtor from any debt -
(2) For money . . . to the extent obtained by
(A) false pretenses, a fals representation, or actual fraud . . . ;
Under
In addition to “false representation” and “false pretenses,” the Supreme Court has held that § 523(a)(2)(A) also provides a cause of action for “actual fraud,” or fraud that “[does] not require a misrepresentation from a debtor to a creditor.” Husky Int‘l Elecs., Inc. v. Ritz, 578 U.S. 355, 361, 136 S.Ct. 1581, 1587 (2016); see also (In re Vitanovich), 259 B.R. at 877. “Actual fraud” includes fraudulent transfers and “fraudulent conduct” that deals in “acts of concealment and hindrance.” Husky Int‘l Elecs., Inc., 578 U.S. at 362. A finding of fraudulent intent may be made on the basis of circumstantial evidence or from the debtor‘s “course of conduct,” given that direct, express proof of intent is rarely available. Hamo v. Wilson (In re Hamo), 233 B.R. 718, 724 (B.A.P. 6th Cir. 1999) (quoting Hunter v. Sowers (In re Sowers), 229 B.R. 151, 159 (Bankr. N.D. Ohio 1998)).
In order to except a debt from discharge under
Construing the Amended Complaint in the light most favorable to Sutton, the Court cannot find that the Amended Complaint states a plausible claim for relief. Sutton‘s submissions are empty of any claimed misconduct or specific misrepresentation beyond general accusations such as: “[Berkley] knew or should have known that he did not intend to fulfill the
These are the kind of “legal conclusion[s] couched as a factual allegation[s]” that the Federal Rules of Civil Procedure seek to quell. See, e.g., In re Gumpher, 2017 Bankr. LEXIS at *6 (granting a defendant‘s Rule 12(b)(6) motion in a § 523(a)(2)(A) case and citing Rondingo, L.L.C. v. Township of Richmond, 641, F.3d 673, 680 (6th Cir. 2011) and Twombly, 550 U.S. at 555). Further, “[a] complaint which fails to identify the fraudulent statements or the reasons why they are fraudulent does not satisfy the particularity requirements of Rule 9(b).” Frank v. Dana Corp., 547 F.3d 564, 570 (6th Cir. 2008) (quoting Gupta v. Terra Nitrogen Corp., 10 F. Supp. 2d 879, 883 (N.D. Ohio 1998).
In his Complaint and Supplement, Sutton himself concedes that Berkely Marketing Inc. delivered two of the three promised ATM machines. ECF Nos. 1, 8. This fact, taken as true, does not lead the Court to infer any cause of action beyond a breach of contract. Sutton has not pled enough for the Court to make any further inference of fraud. See Iqbal, 556 U.S. 662, at 679 (“[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not ‘show[n]’ - ‘that the pleader is entitled to relief.‘“) (quoting Rule 8(a)(2)). The fact that Berkley, in his individual capacity, failed to fulfill the obligations of the purported agreement between Sutton and Berkely Marketing Inc., and the fact that Sutton relied on the promises of the agreement, is not enough to except a debt from a bankruptcy discharge pursuant to § 523(a)(2)(A) under the standards set in the Federal Rules of Civil Procedure. Therefore, Sutton does not advance a plausible § 523(a)(2)(A) claim.
CONCLUSION
For the foregoing reasons, Berkley‘s 12(b)(6) Motion to Dismiss is granted, and the Rule 12(e) motion is denied as moot.
IT IS SO ORDERED.