MINDY A. MORA, Bankruptcy Judge.
Immediately (one day) after the parties completed briefing upon the Converted Motion, Storick submitted a cross-motion for summary judgment (ECF No. 28) (the "
This opinion and order address the arguments raised in both the Converted Motion and the Cross-Motion. For the reasons stated herein, the Court grants the Converted Motion and denies the Cross-Motion.
Nine years before the filing of Storick's current bankruptcy case (Case No. 18-15728, the "
Shortly before the hearing (the "
Paragraph 4 of the Amended Settlement (the "
In addition to the Nondischargeability Provision, the Amended Settlement contained a provision (the "
On June 30, 2010, Judge Olson, the bankruptcy judge who presided over the 2009 Bankruptcy Case, entered an order approving the Amended Settlement and granting stay relief to CFG to pursue all available remedies in Delaware. See ECF No. 189 in the 2009 Bankruptcy Case, attached to the Joint Stipulation as Exhibit N (the "
On July 16, 2010, CFG sought a confessed judgment against Storick on account of the CFG Debt in the Superior Court of the State of Delaware in and for New Castle County (the "
On August 20, 2010, the Delaware Trial Court entered a final order of judgment (the "
Storick did not argue that the CFG Debt was or should have been discharged in the 2009 Bankruptcy.
While the Delaware Litigation remained pending, Storick filed a complaint (the "
Storick later amended the 2012 Complaint (the "
CFG moved to dismiss Storick's Amended 2012 Complaint. In a detailed seven-page order (the "
On January 31, 2013, the Eleventh Circuit Court of Appeals affirmed the District Court's dismissal of the 2012 Complaint, effectively rubber-stamping the Florida District Court's declination of jurisdiction over Storick's declaratory judgment action.
Storick did not appeal the Eleventh Circuit Opinion.
Approximately six months later, the Delaware Trial Court entered an order (the "
Storick moved for reconsideration of the Delaware Order, arguing that (i) Florida Statute § 222.11 should be applied extraterritorially to the Delaware Judgment,
Storick appealed the Delaware Order to the Delaware Supreme Court. On March 30, 2015, the Delaware Supreme Court entered a comprehensive 13-page order affirming the decision of the Delaware Trial Court.
There is no indication from the record that Storick ever argued in the Delaware Litigation or Florida Litigation that the CFG Debt was or should have been discharged in the 2009 Bankruptcy Case.
On May 12, 2018, Storick filed the bankruptcy case (the "
On November 21, 2018, Storick commenced this Adversary Proceeding seeking (i) declaratory relief stating that the CFG Debt was discharged in the 2009 Bankruptcy Case as count I of the complaint (the "
The Court entered an order directing briefing upon the Converted Motion, and the parties subsequently filed the Response and Reply, followed by the Cross-Motion, Cross-Response, and Cross-Reply. Upon receipt of all relevant briefing, the Court took the Converted Motion and the Cross-Motion under advisement.
The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334(b) and 28 U.S.C. § 157(b). This is a core proceeding under 28 U.S.C. §§ 157(b)(2)(I).
Pursuant to Federal Rule of Civil Procedure 56(a), made applicable to bankruptcy proceedings by Federal Rule of Bankruptcy Procedure 7056, the Court shall grant summary judgment "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." "When deciding summary judgment, the Court may look to materials in the record such as depositions, documents, affidavits or declarations, and admissions." Certain Interested Underwriters at Lloyd's, London v. AXA Equitable Life Ins. Co., 981 F.Supp.2d 1302, 1305-06 (S.D. Fla. 2013) (citing Fed. R. Civ. P. 56(c)). The Court "must view all the evidence and all factual inferences reasonably drawn from the evidence in the light most favorable to the nonmoving party." Stewart v. Happy Herman's Cheshire Bridge, Inc., 117 F.3d 1278, 1285 (11th Cir. 1997); Diaz v. Amerijet Int'l, Inc., 872 F.Supp.2d 1365, 1368 (S.D. Fla. May 25, 2012) (quoting same); see also Morton v. Kirkwood, 707 F.3d 1276, 1280 (11th Cir. 2013). Finally, the moving party "always bears the initial responsibility of informing the . . . court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (internal quotation marks omitted); see also Josendis v. Wall to Wall Residence Repairs, Inc., 662 F.3d 1292, 1314-15 (11th Cir. 2011) (quoting same).
Because Storick's request for declaratory relief is equitable in nature, equitable defenses apply. Boone v. Corestaff Support Servs., Inc., 805 F.Supp.2d 1362, 1371 (N.D. Ga. 2011) (quoting Abbot Labs. v. Gardner, 387 U.S. 136, 155 (1967) (abrogated on other grounds)). The equitable doctrine of laches will bar a claim when (1) the claimant delayed in asserting the right or a claim; (2) the delay was not excusable; and (3) the party against whom the claim is asserted will suffer undue prejudice as a result. Venus Lines Agency, Inc. v. CVG Int'l Am, Inc., 234 F.3d 1225, 1230 (11th Cir. 2000).
Rarely has the Court seen a more clear-cut situation demanding the application of laches. Storick waited almost ten years before asserting that the CFG Debt was discharged in the 2009 Bankruptcy Case. During this time, he litigated vigorously against CFG in two different fora. There is no excuse for Storick's delay in challenging the dischargeability of the CFG Debt. There is no doubt that CFG has been (and continues to be) unduly prejudiced by Storick's ten-year delay in seeking declaratory relief that directly contradicts the explicit terms of the Amended Settlement.
Although the Court will not assign motive where it may not exist, the Complaint exhibits next-level gamesmanship. Storick's arguments have pivoted from garnishment to dischargeability, but the basis for the attempt remains fixed: avoidance of an obligation that Storick explicitly agreed to bear in the Amended Settlement. As a result of the passage of time and extensive litigation between the parties in which the non-dischargeability of the CFG Debt was never raised, the doctrine of laches firmly bars the relief sought in the Complaint.
Accordingly, the Court determines that the doctrine of laches bars summary judgment in favor of Storick and mandates summary judgment in favor of CFG. Other equitable defenses strongly support this conclusion.
Principles of "fair play and essential justice" dictate application of equitable estoppel to the allegations in Storick's Complaint. Starbuck v. R.J. Reynolds Tobacco Co., 349 F.Supp.3d 1223, 1228 (M.D. Fla. 2018) (citing Florida Dep't of Health & Rehab. Servs. v. S.A.P., 835 So.2d 1091, 1096 (Fla. 2002)). Equitable estoppel is appropriate when (1) a party makes a representation regarding a material fact that is contrary to a later-asserted position, (2) another party relies on that representation in good faith, and (3) the relying party experiences a detrimental change in position as a result of reasonable reliance upon the representation. Starbuck, 349 F. Supp. 3d at 1228.
Equitable estoppel is "designed to aid the law in the administration of justice where without its aid injustice might result." Deshong v. Seaboard Coast Line R.R. Co., 737 F.2d 1520, 1522 (11th Cir. 1984); Marine Transp. Servs. Sea-Barge Group, Inc. v. Python High Performance Marine Corp., 16 F.3d 1133, 1138 (11th Cir. 1994) (quoting same). Equitable estoppel may preclude a litigant who has made representations of fact through words or conduct from asserting rights that otherwise might have existed absent such words or conduct. Marine Transp. 16 F.3d at 1139 (quoting Oxford Shipping Co. v. New Hampshire Trading Corp., 697 F.2d 1, 4 (1st Cir. 1982)). Key to the Court's application of equitable estoppel is the reasonableness of the second party's reliance upon the representation in question. DeShong, 737 F.2d at 1522 ("[A] plaintiff should not be permitted to assert formally the existence of one state of facts in a claim against one party and accept benefits in satisfaction of that claim, and then maintain an action against another party on the ground that the facts first asserted did not exist.").
All elements of equitable estoppel are present. Storick's agreement to the inclusion of the Non-Dischargeability Provision in the Amended Settlement and his counsel's representations to the prior bankruptcy court at the Settlement Hearing unequivocally demonstrate that both parties knew and understood that the CFG Debt would be treated as non-dischargeable in the context of the 2009 Bankruptcy Case. See Exhibit M (Settlement Hearing Transcript).
In addition, the parties explicitly agreed that CFG would be granted relief from the automatic stay to pursue entry of the Delaware Judgment. See Exhibit N (Settlement Order), at ¶ 3; see generally Settlement Hearing Transcript. CFG subsequently petitioned the Delaware Trial Court precisely as anticipated in the Amended Settlement. Storick failed to contest entry of the Delaware Judgement and likewise neglected to raise the issue of dischargeability in either the Delaware Litigation or the Florida Litigation.
CFG reasonably relied upon Storick's (i) agreement to the Amended Settlement (including the Non-Dischargeability Provision and Judgment Provision), (ii) joint request with CFG for court approval of the Amended Settlement, (iii) acquiescence to entry of the Delaware Judgment, and (iv) failure to challenge the dischargeability of the CFG Debt in either the Delaware Litigation or the Florida Litigation. CFG's reasonable reliance upon the provisions of the Amended Settlement and Storick's failure to question the non-dischargeability of the CFG Debt (until now) has resulted in detriment to CFG in the form of this Adversary Proceeding and undoubtedly saddled CFG with many years' worth of attorneys' fees from the Delaware Litigation and the Florida Litigation.
Accordingly, the Court finds and holds that Storick is equitably estopped from asserting that the CFG Debt was or should have been discharged in the 2009 Bankruptcy Case. Because other bases exist for summary judgment in CFG's favor, however, the Court will continue its analysis.
Res judicata principles prevent this Court from determining issues previously decided by a forum of competent jurisdiction. "The preclusive effect of a judgment is defined by claim preclusion
Claim preclusion bars a subsequent lawsuit where a court of competent jurisdiction has previously rendered a final judgment on the merits in a case involving identical parties and the same cause of action. Citibank, N.A. v. Data Lease Fin. Corp., 904 F.2d 1498, 1501 (11th Cir. 1990). Claim preclusion is broader than the closely related concept of "law of the case" in that it bars relitigation not only of the legal issues actually raised in an earlier proceeding, but also of claims that could have been raised in the prior litigation. Justice Oaks, 898 F.2d at 15 n.3.
The following elements must be present for claim preclusion to apply: "(1) there must be a final judgment on the merits, (2) the decision must be rendered by a court of competent jurisdiction, (3) the parties, or those in privity with them, must be identical in both suits; and (4) the same cause of action must be involved both cases." Citibank, 904 F.2d at 1501 (internal quotation marks and citation omitted). Claim preclusion operates to prohibit relitigation of the legal theories presented in the prior case as well as all legal theories and claims arising out of the same nucleus of operative facts. Seminole Tribe of Fla. v. Biegalski, 757 F. App'x 851, 856-57 (11th Cir. 2018).
The parties do not dispute that (1) the Settlement Order is final and non-appealable, (2) the United States Bankruptcy Court for the Southern District of Florida was a court of competent jurisdiction for the 2009 Bankruptcy Case, (3) the parties involved in the Amended Settlement (Storick and CFG) are identical to those involved in the present litigation, and (4) the Amended Settlement addresses the issue of the dischargeability of the CFG Debt. On the surface, it appears that all elements of claim preclusion are satisfied.
The difficult nuances arise from consideration of (i) whether the 2009 Bankruptcy Case and the 2018 Bankruptcy Case may be viewed as involving the "same" cause of action, and (ii) whether the Settlement Order suffices as a final determination on the merits of the factual underpinnings of non-dischargeability. As a result, the Court sets aside its analysis of claim preclusion and turns instead to application of issue preclusion.
"Collateral estoppel, or issue preclusion, bars relitigation of an issue previously decided in judicial or administrative proceedings if the party against whom the prior decision is asserted had a full and fair opportunity to litigate that issue in an earlier case." St. Laurent, 991 F.2d at 675 (internal quotation omitted). Issue preclusion is arguably even broader than claim preclusion because it prevents relitigation of the same issue in a different cause of action.
Under Florida law, the following elements must be met for collateral estoppel to apply: "(1) the issue at stake must be identical to the one decided in the prior litigation; (2) the issue must have been actually litigated in the prior proceeding; (3) the prior determination of the issue must have been a critical and necessary part of the judgment in that earlier decision; and (4) the standard of proof in the prior action must have been at least as stringent as the standard of proof in the later case." Id. at 676. Collateral estoppel principles apply in nondischargeability proceedings under 11 U.S.C. § 523(a). Id. at 675 (citing Grogan v. Garner, 498 U.S. 279, 285 n.11 (1991)).
Collateral estoppel applies to this Adversary Proceeding.
First, the issue presently at stake, the dischargeability of the CFG Debt, is identical to the issue determined in the 2009 Bankruptcy Case. The Non-Dischargeability Provision clarified that, by entering into the Amended Settlement, Storick agreed that the CFG Debt would be treated as non-dischargeable, even though he may have disputed the characterization of the obligation as one that was inherently non-dischargeable.
Second, the dischargeability of the CFG Debt was clearly a point of contention in the 2009 Bankruptcy Case. Although CFG never filed an adversary proceeding to determine whether the CFG Debt was dischargeable, the parties agreed to extend the time for CFG to do so while they negotiated a consensual resolution of that and other issues. The parties' agreement to and presentation of the Amended Settlement to the bankruptcy court for approval in the 2009 Bankruptcy Case obviated the need for CFG to file an adversary proceeding seeking relief under 11 U.S.C. § 523.
Third, the prior determination of the non-dischargeability of the CFG Debt, by virtue of the parties' agreement to the Non-Dischargeability Provision, was a critical and necessary part of the Settlement Order.
Finally, the standard of proof regarding non-dischargeability at the time of the 2009 Bankruptcy Case was identical to the present standard of proof. Grogan, 498 U.S. at 289 (1991) (preponderance of the evidence standard applies in 11 U.S.C. § 523 nondischargeability actions).
All elements of collateral estoppel are met, and the Court concludes that summary judgment should be granted in CFG's favor. In light of the complexity attendant to any determination regarding non-dischargeability, however, the Court will address Storick's procedural arguments.
Storick strenuously argues that CFG's failure to insist upon the formality of an adversary proceeding in the 2009 Bankruptcy Case transforms entry of the Settlement Order into "legal error." On that basis, Storick further contends that the 2018 CFG Claim is presently dischargeable.
In the context of the CFG Debt and the many years of litigation that have transpired since entry of the Settlement Order, the Court must disagree. If the Court were to insist upon the existence of a prior adversary proceeding in the 2009 Bankruptcy Case at this juncture it would elevate form over substance. Although the Court can envision circumstances where a debtor might unwittingly or unknowingly agree to the characterization of a debt as non-dischargeable, that is simply not the case here.
Storick is the quintessential "sophisticated" litigant. He has, over the course of nearly a decade, employed several different attorneys with one goal: contest the enforceability of the CFG Debt. Every attorney employed by Storick since the 2009 Bankruptcy Case has merely attacked the means of collection upon the agreed-upon CFG Debt originally solidified by approval of the Amended Settlement.
Storick's contention, that failure to reaffirm the CFG Debt via the mechanisms established by 11 U.S.C. § 524 renders the debt dischargeable, is disingenuous and fails to consider the reason why Congress established reaffirmation standards. The procedural safeguards required for reaffirming a debt are not absolute. The primary reason for court inquiry is simply to ascertain whether the debtor has knowingly and willingly agreed to reaffirm the obligation in question. Where a debtor is represented by counsel, and counsel represents to the court that a proposed reaffirmation does not present an undue hardship, the court does not undertake an extensive fact-based presentation to verify the attorney's representation. Instead, the Court accepts counsel's proffer as an officer of the court and proceeds accordingly.
In the context of the 2009 Bankruptcy Case, Storick's bankruptcy counsel indicated that entry into the Amended Settlement was Storick's desire and that approval of the Amended Settlement was in Storick's best interests. The court in the 2009 Bankruptcy Case evaluated all facts, representations, and circumstances at that time and determined that approval of the Amended Settlement satisfied the appropriate legal standards. See Exhibit M (Settlement Hearing Transcript); see also ECF No. 171 in the 2009 Bankruptcy Case (Transcript of May 8, 2010 Hearing), at pp. 16:16-17:8, 18:6-13, and 24:14-17. This Court cannot (and will not) look behind the Settlement Order to determine whether Storick's counsel's representations were accurate or, in the alternative, whether the prior bankruptcy court committed "legal error". The time for appeal of the Settlement Order has passed, and this Court is not the appropriate venue for such inquiry.
The non-dischargeability of the CFG Debt has been determined by prior court order and confirmed by Storick's conduct over the course of many years of complex litigation in two states. A businessman who willingly entered into a settlement negotiated by experienced counsel of his choosing, Storick has employed every tool in his arsenal to distance himself from the impact of his own court-approved agreement. Although he has led CFG on a merry chase over many years, deftly side-stepping the non-dischargeability of an obligation that he explicitly agreed to, the dance ends here. The Delaware Judgment is a valid judgment. Based upon all facts and circumstances, the Court finds and determines that the CFG 2018 Claim is and remains non-dischargeable in this Bankruptcy Case.
Accordingly, the Court, having considered all relevant pleadings, including but not limited to the Converted Motion, Response, Joint Stipulation, Reply, Cross-Motion, Cross-Response, Cross-Reply, and all supplemental briefing submitted by Plaintiffs and Defendants, the record of this Adversary Proceeding, the record of both of Storick's bankruptcy cases, and being otherwise fully advised in the premises,
