MEMORANDUM OPINION ON REMAND

K. Rodney May, United States Bankruptcy Judge.

This adversary proceeding is before the Court after remand from the District Court, which vacated this Court's entry of a $44,953.93 judgment against pro se defendant Eric Moore ("Mr. Moore").1 This Court initially ruled that Mr. Moore had fraudulently induced the Debtor to enter into a Consulting Agreement, dated July 11, 2012.2 Thus, the Consulting Agreement was void and unenforceable. But, even if that agreement was valid, Mr. Moore was not entitled to a 17% fee on funds released to the Debtor from escrow shortly before her Chapter 11 case was filed.3 This Court's judgment was for $44,953.93, plus prejudgment interest.4 All of Mr. Moore's claims against the estate were disallowed (exceeding $10 million).5

The District Court affirmed the disallowance of Mr. Moore's claims, but vacated the money judgment.6 It remanded that piece of the lawsuit, with instructions that this Court consider three issues:

In response, the Debtor and Mr. Moore have filed additional papers and have presented their positions in oral argument.8 For the reasons set forth below, the Court again concludes that Debtor is entitled to a money judgment for Mr. Moore's unjust enrichment.

BACKGROUND FACTS

This Court has previously made detailed findings of fact regarding the Debtor's dealings with Mr. Moore.9 So, too, has the District Court. But, a brief review of how this proceeding developed is relevant to the remaining issues on remand.

The Debtor filed this adversary proceeding on March 14, 2014.10 Count I of the Debtor's complaint sought relief for fraud in the inducement, including the following allegations:

Debtor also averred that she had "entered into the Consulting Agreement in reliance on [Mr. Moore's] representations of his experience in the entertainment industry, unaware of the material omission."13

Count II set forth Debtor's claim for recovery for unjust enrichment, alleging that she had "never received any recovery as a `direct result' of [Mr.] Moore's services," and that he "harassed and threatened Plaintiff until she made a payment of approximately $45,000."14 Debtor further alleged that "Defendant demanded and obtained the benefit of approximately $45,000 that he was not entitled to receive from [Debtor], and under the circumstances, it would be inequitable for [Mr. Moore] to retain [those] funds."15

On March 25, 2014, the Court entered its Order Scheduling Pre-Trial Conference, which included the following notice:

Mr. Moore did not file an objection to entry of final judgment by the bankruptcy court. Instead, he filed an answer, on April 15, 2014, denying the allegations in Counts I and II, asking for a trial on those allegations, and stating affirmative defenses.17

Pre-trial conferences were held on April 17 and May 13, 2014. Mr. Moore attended, but did not raise any objection to entry of final judgment by this Court.18 The trial was scheduled to begin on May 22, 2014.

One week before trial, Mr. Moore filed a motion to dismiss the proceeding, arguing that he did not have a duty to disclose his 1999 conviction and that Debtor had not properly pleaded fraud in accordance with Federal Rule of Civil Procedure 9(b).19 Mr. Moore also argued that Count II should be dismissed because he had earned the $45,000 payment and because Debtor did not lack an adequate legal remedy. His motion did not contest this Court's authority to enter a final judgment.

Two days later, Mr. Moore filed a motion for summary judgment seeking this Court's validation of his analysis of documents and orders entered in 1997 in the Connecticut probate case of the estate of Debtor's late husband, musician Bernard Edwards.20 Mr. Moore asserted that the Debtor had acknowledged being in receipt of "recovered copyrights," and that the only real issue in dispute was whether he was the one who recovered them.21

At the beginning of the trial, on May 22, 2014, Debtor's counsel suggested that consideration of Mr. Moore's motions to dismiss and for summary judgment be deferred until conclusion of the trial.22 Mr. Moore did not object.23 The trial took place over six days, May 22 and 23, July 14-16, and 28, 2014. On July 7, 2014, mid-trial, Mr. Moore filed a "counterclaim" which essentially restated his pending claims against the estate and was treated as such.24

Mr. Moore actively participated in the trial. He gave testimony; he called and cross-examined witnesses, including the Debtor. Mr. Moore elicited credible testimony by the Debtor of unpleaded facts supporting her fraudulent inducement claim, as discussed later in this opinion.

After the trial, the parties submitted written closing arguments.25 In his, Mr. Moore addressed Debtor's count of fraud in the inducement, but argued only that he did not have a legal duty to reveal his prior conviction. He contested the claim for unjust enrichment as frivolous and lacking merit. He did not address the Rule 9(b) issue that he had raised on the eve of trial, nor did he object to entry of a final judgment by this Court.

On January 29, 2015, this Court issued a written opinion, consistent with an earlier bench ruling, stating that it was:

In addition, this Court concluded that it was Debtor's lawyers, not Mr. Moore, who had caused ASCAP to release $265,000 from escrow. Thus, Mr. Moore was not entitled to a 17% fee, even if the Consulting Agreement was enforceable. Accordingly, Mr. Moore had been unjustly enriched by the $45,000 payment.27

The District Court affirmed this Court's disallowance of Mr. Moore's claims against the bankruptcy estate. But, the District Court vacated the money judgment, concluding that this Court had:

DISCUSSION

A. Bankruptcy Court Jurisdiction

In Stern v. Marshall,30 the Supreme Court held that the unlimited scope of the statutory designation of "counterclaims" as "core" proceedings, in 28 U.S.C. § 157(b)(2)(C), was an unconstitutional infringement of the Article III judicial power. In doing so, the Court ruled that Article I bankruptcy courts could not enter final judgments on counterclaims unless they arise under the Bankruptcy Code or where the "action at issue stems from the bankruptcy itself or would necessarily be resolved in the claims allowance process."31

In 2014, the Supreme Court addressed the lingering procedural question of how bankruptcy courts should adjudicate so-called Stern claims, claims which are statutorily "core," but which may not be decided with finality by an Article I bankruptcy court. In Executive Benefits Insurance Agency v. Arkison,32 the Supreme Court held that Stern claims may be adjudicated in the same manner as non-core ("related to") claims, as provided in 28 U.S.C. § 157(c). Bankruptcy judges may conduct trials of Stern claims and then issue proposed findings of fact and conclusions of law to the district court, which may review both factual and legal issues de novo.33

Before this adversary proceeding was commenced, the District Court for the Middle District of Florida entered a general administrative order adopting the 28 U.S.C. § 157(c) procedure for Stern claims. The district court may "treat any order of the bankruptcy court as proposed findings of fact and conclusions of law in the event the district court concludes that the bankruptcy judge could not have entered a final order or judgment consistent with Article III of the United States Constitution."34

In Wellness International Network, Limited v. Sharif,35 the Supreme Court answered the significant issue remaining after Stern and Executive Benefits: "Article III permits bankruptcy courts to decide Stern claims submitted to them by [the litigants' implied] consent."36 When determining such consent, "[t]he key inquiry is whether the litigant or counsel was made aware of the need for consent and the right to refuse it, and still voluntarily appeared to try the case before the [bankruptcy court]."37

This Court's rulings on the Debtor's claims against Mr. Moore for fraud in the inducement and unjust enrichment were necessarily resolved in the claims allowance process, as contemplated by Stern. The adjudication of Mr. Moore's claims against the bankruptcy estate brought into question the validity and scope of the Consulting Agreement. In turn, this Court's interpretation of the scope of the Consulting Agreement was decisive as to whether Mr. Moore was entitled to any pre-petition compensation on the $265,000 that ASCAP released from escrow.

In addition, Mr. Moore consented to the entry of final judgment of this Court. He was given notice that the issue of jurisdiction must be raised by the "date first set for filing a motion or answer to the complaint." Mr. Moore did not object by that deadline. Instead, he filed an answer denying the Debtor's allegations and demanding that the issues of fraudulent inducement and unjust enrichment be tried. He filed a motion for summary judgment. He participated in the trial, developing the record on those issues. He submitted a post-trial brief. At no time prior to the entry of judgment did Mr. Moore raise the Stern issue. Based on his conduct in this proceeding, the Court concludes that Mr. Moore gave implied consent to the entry of a final judgment by this Court.38

B. Debtor's Fraudulent Inducement Claim

When Mr. Moore introduced himself to the Debtor, he knew that she was in financial distress.39 He touted his ability to find $500,000 for her quickly;40 he represented that he had previously worked with high profile clients in the entertainment industry and helped them find money.41 But, he did not disclose that he had been convicted of grand larceny in 1999 for a financial scam — taking investors' money on the false pretense of investing in a Prince concert.42 Debtor only learned about that conviction later through the work of a private investigator.43

Mr. Moore has not challenged the materiality of his 1999 conviction; he has not disputed that he built a relationship of trust with the Debtor. His principal contention is limited: he did not have a duty to disclose his criminal record because it was a matter of public record, citing to 1999 articles from the New York Times, MTV and People Magazine.44 Mr. Moore argues that it was Debtor's obligation to search the public record to find his conviction.

He relies on the case Pressman v. Wolf,45 decided in 1999 by the Third District Court of Appeals, which pronounced the rule that "[s]tatements concerning public record cannot form the basis for a claim of actionable fraud."46 But, that rule was rejected in 2002 by the Florida Supreme Court in M/I Schottenstein Homes, Inc. v. Azam.47 In that case, the seller of home lots claimed that it did not have a duty to disclose the zoning of adjacent land to purchasers because the zoning was a matter of contemporaneous public record.48 The Florida Supreme Court, rejecting Pressman's legal premise, held "that the question of whether a cause of action for fraudulent misrepresentation exists where the putatively misrepresented information is contained in the public record is one of fact...."49 The question "is whether the recipient of the misrepresentation is justified in relying upon its truth."50

For a claim of fraud or fraudulent inducement there must be a false statement regarding a material fact, or the omission or nondisclosure of a material fact.51 A duty to disclose material information arises when "[the defrauded] party has a right to know because there is a fiduciary or other relation of trust or confidence between the two parties"52 or when a party undertakes to disclose some, but not all, material information.53

Mr. Moore's criminal conviction was too distant to reasonably expect Debtor to have known of it, or to have discovered it on her own. Mr. Moore is not a public figure. The felony conviction occurred in another state, more than a dozen years before the Debtor and Mr. Moore met. There is nothing in the record to suggest that the Debtor ever read the magazines or the articles attached to his answer.

He sought out the Debtor, then made selective representations of his background to convince her of his skill and trustworthiness. His duty to disclose the 1999 conviction arose after he provided selective parts of his background to impress the Debtor and build her trust.

Withholding the fact of his 1999 conviction was a pertinent omission that was essential to Mr. Moore's campaign to get Debtor to trust him and execute the Consulting Agreement. In the absence of disclosure of the 1999 conviction, the Debtor reasonably relied on Mr. Moore's other representations of skill and trustworthiness to find new royalty sources. The Debtor made the decision to pay Mr. Moore a 17% fee on such new, additional royalty income. She had no reason to suspect that Mr. Moore would demand a fee on the historical royalties that her lawyers were working to recover from escrow.54 Such a suspicion might well have arisen, however, if Mr. Moore had disclosed his criminal record. The fact of this non-disclosure is sufficient to conclude that the Debtor was defrauded.

Moreover, Mr. Moore developed the trial record of his false representation that he had found $500,000 that could be quickly recovered. First, he published his own email to Kendall Minter, one of Debtor's former lawyers, and then queried the Debtor about how she was defrauded:

And:

Mr. Moore consented to the inclusion in the record of the unpleaded fact of his false representation to the Debtor of being able to find $500,000 quickly. This fact was properly relied on by this Court, in accordance with Federal Rule of Civil Procedure 15(b)(2),59 in finding that the Debtor was fraudulently induced to sign the Consulting Agreement.

C. Debtor's Unjust Enrichment Claim

A finding of unjust enrichment requires proof that: (1) the plaintiff has conferred a benefit on the defendant; (2) the defendant voluntarily accepted and retained that benefit; and (3) the circumstances are such that it would be inequitable for the defendant to retain it without paying the value thereof.60 The remedy for an unjust enrichment is "to prevent the wrongful retention of a benefit, or the retention of money or property of another, in violation of good conscience and fundamental principles of justice or equity."61

This equitable remedy is not available, however, where adequate legal remedies exist, such as a claim for breach of contract.62 Mr. Moore argues that because he and Debtor were parties to the Consulting Agreement, she had a contractual remedy that bars her from the unjust enrichment claim.63

But, the Debtor did not have an adequate legal remedy. The Consulting Agreement was either unenforceable or, if valid, did not provide for a fee to Mr. Moore on account of ASCAP's release of the escrowed funds.64 Debtor credibly testified that she paid Mr. Moore only because he harassed her by multiple demands for payment of a 17% commission on that $265,000.65 The record also supports the inference that the Debtor made the payment so as not to alienate Mr. Moore, whom she believed had the ability to find additional, but unknown, sources of copyright and other royalties.66

Mr. Moore received some $44,953.93 to which he was not entitled. The payment was outside the scope of any contract. It would be inequitable for Mr. Moore to retain that payment. Thus, the Debtor has established a claim for unjust enrichment.67

CONCLUSION

Mr. Moore procured the Debtor's execution of the Consulting Agreement through actual falsehood and material omission. He promised a quick recovery of $500,000, an unpleaded fact which he later introduced into the record. He provided only an edited portrait of his background, including his confidential work for high-profile people in the music industry, to build a relationship of trust with the Debtor. Thus, he had a duty to disclose another material piece of his background, the 1999 grand larceny conviction.

Mr. Moore did not cause ASCAP to release $265,000 from escrow. Nevertheless, he repeatedly demanded that Debtor pay a 17% fee on those funds. He was unjustly enriched by receipt of that payment, but she has no legal remedy.

The Court again concludes that it is appropriate to enter judgment for unjust enrichment against Mr. Moore in the principal sum of $44,953.93, together with prejudgment interest from September 7, 2012 at the rate of 5.05% in the amount of $10,859.51, totaling $55,813.44, on which interest will accrue at the federal rate.68 The Court has authority to enter the judgment because the Debtor's claim for recovery was necessarily resolved in the adjudication of Mr. Moore's claims against the estate. Further, Mr. Moore is deemed to have consented to this Court's entry of a final judgment by his failure to timely raise the issue. Accordingly, a Final Judgment is due to be entered. Nevertheless, to the extent necessary and appropriate, this ruling shall be deemed to be a report and recommendation to the District Court.

For the reasons stated in this Memorandum Opinion, the Court will enter separate orders regarding the pending motions referenced in footnote 8.

ORDERED.