JAMES T. TRIMBLE, JR., District Judge.
Before the court is an appeal from a decision of the Bankruptcy Court in this case. Lee Roy Joyner, M.D. is an unsecured creditor in a Chapter 7 proceeding involving the defendants, Samuel F. Liprie ("Liprie"), S.F.L. & S.I.L., LLC, ("SFL") Deutsche Bank Florida, N.A. ("Deutsche Bank"), Shawn Bray Liprie Inter Vivos Trust No. 1 ("Liprie Trust"), Wilma D. Liprie, Jon C. Liprie and Mary L. Rahaim. Dr. Joyner appeals the rulings of the Bankruptcy Judge in a Memorandum Opinion issued April 4, 2012 and order issued July 17, 2012.
Defendants SFL, the Liprie Trust, Wilma D. Liprie, Jon C. Liprie and Mary L. Rahaim are non-debtor defendants which Dr. Joyner contends received profits from a joint venture in which he owned a 25% interest. Samuel F. Liprie is the debtor and also a 75% owner of the joint venture. In his second amended complaint, Dr. Joyner seeks to recover assets stolen from him and he also seeks damages against the non-debtor defendants for their participation and/or compliance with a fraudulent scheme to conceal and remove stolen assets and/or profits of the joint venture from Dr. Joyner's reach. Dr. Joyner's amendedcomplaint includes numerous Louisiana state law claims.
In the bankruptcy proceeding, non-debtor defendants, Deutsche Bank and SFL filed motions to dismiss
Dr. JOyner makes the following allegations in his second amended complaint. In the 1980s, Samuel F. Liprie, a nuclear pharmacist and inventor, invented technology
In Liprie I. a case filed in a Louisiana state court, the court held that Liprie defrauded Dr. Joyner in a 1993 convertible debentures transaction. In February, 1996 Dr. Joyner was awarded $267,990.71.
In 1994, Dr. Joyner, a pulmonologist and medical researcher, Liprie, and Mark Harrison, M.D. entered into a joint business venture to develop and market a heart catheterization system known as intra coronary radiation therapy (referred to as the "Angiorad" technology).
After many months of work funded by Drs. Joyner and Harrison, Liprie devised a much improved, safer version of the catheter; testing proved to be highly successful.
Shortly thereafter, Liprie, through his attorneys, demanded that Dr. Joyner not attend the American College of Cardiology convention that would publish the successful test results for the catheter, and refrain from mentioning his interest in the Angiorad venture. Dr. Joyner arranged for the study to be published in February 1995 in the Journal for the American College of Cardiology. Liprie threatened to sue Dr. Joyner if he did not comply with these demands. At the convention, one of the Venezuelan doctors that had tested the technology spoke about the highly successful test results.
On March 14, 1995, Liprie advised Dr. Joyner that he was expelled from the business
The matter proceeded to jury trial in October 2008. The jury found that the three doctors entered into an oral agreement which provided Dr. Joyner with a 25% ownership interest in the Angiorad joint venture, that Liprie had defrauded Dr. Joyner out of his 25% share of profits, and that Liprie had breached his fiduciary duties as Dr. Joyner's partner.
On April 28, 2004, the Liprie I trial court found that Liprie had defrauded Dr. Joyner in the debenture transaction referred to herein above.
Shortly thereafter, in 2005, Liprie began creating and organizing entities wherein he transferred the profits from the joint venture.
Deutsche Bank was aware of Dr. Joyner's pending fraud suits against Liprie;
Even though as SFL's manager, Stulb had the discretion to make distributions, he did not have the authority to loan any SFL proceeds to anyone, including members. Stulb apparently had control of Liprie's employer (P.E.T. Imaging) and salary.
Deutsche named Liprie as co-fiduciary of the Liprie Trust.
During the pendency of Liprie II, and up until March 13, 2009, the date the judgment against Liprie became subject to execution, Liprie concealed the fact that he had placed Dr. Joyner's property (the Angiorad proceeds) into the entities; these entities are named defendants herein.
Dr. Joyner alleges that Liprie has removed funds from both the Liprie Trust and SFL in the pretext of a loan.
Dr. Joyner alleges that while Liprie had the right to place assets belonging to himself into the Liprie Trust and SFL, Liprie had no right to place any funds belonging to Dr. Joyner in any trust or company. Dr. Joyner asserts a claim for unjust enrichment and seeks to disgorge assets including civil fruits.
Dr. Joyner alleges that Deutsche Bank has in its possession approximately $12 million in trust funds (in cash or cash equivalents), of which $9 million belongs to him. Dr. Joyner seeks a judgment ordering
Dr. Joyner alleges the following with respect to Liprie's series of transactions that involved the profits from the Angiorad technology:
Dr. Joyner alleges that when he filed for bankruptcy, Liprie's debtor schedules show him to have a net worth, exclusive of non-exempt assets, of zero with an annual salary between $51,000 to $90,000 plus dividend income.
Dr. Joyner asserts that the non-debtor defendants knew or should have known that Liprie took these steps to place the proceeds from the Angiorad technology out of Dr. Joyner's reach, thereby insulating them from a Liprie II judgment and preserving the corpus for Liprie until after Liprie's bankruptcy. Dr. Joyner complains that he was unaware of where the Angiorad assets were until he began conducting the judgment debtor discovery after Liprie II was final.
Dr. Joyner alleges in his amended complaint that Louisiana law allows a victim to recover property that has been stolen.
In his second amended complaint, Dr. Joyner alleges the following causes of action: (1) single business enterprise, (2) alter ego (and related veil-piercing theories), (3) simulation and related Guillot claims, (4) aiding and abetting debtor's fraud, (5) aiding and abetting breach of fiduciary duty, (6) aiding and abetting conversion of Dr. Joyner's funds, (7) management of affairs of another, (8) payment of thing not owed-quasi-contractual action and reimbursement, (9) unjust enrichment (10) revendicatory action, (11) revocatory action, (12) nullity for breach of public policy, (13) Racketeering under Louisiana Revised Statute 15:1352, (14) accounting, (15) resulting and constructive trust, and (16) injunctive relief.
A district court hearing an appeal from bankruptcy court reviews a bankruptcy court's findings of fact for clear error and conclusions of law de novo.
Property of the estate includes "all legal or equitable interests of the debtor in property as of commencement of the case."
Whether a particular state law claim belongs to the bankruptcy estate depends on whether under applicable state law the debtor could have raised the claim as of the commencement of the case.
It is entirely possible for a bankruptcy estate and a creditor to own separate claims against a third party arising out of the same general series of events and broad course of conduct.
Dr. Joyner, the appellant, posits that taking the allegations of his First Supplemental and Amending Restated Complaint to Original State Court Petition (the "Amended Complaint") as true, title to Dr. Joyner's ownership interest in 25% of Angiorad and upon its dissolution, 25% of its assets, never transferred to Liprie. Consequently, the appointed Bankruptcy Trustee does not have the right to assert Dr. Joyner's claims for the estate because under Louisiana law the assets were never owned by Liprie.
Dr. Joyner complains that the bankruptcy court relied on cases that failed to address the issue — specifically, whether claims to recover assets that never belonged to the estate may be brought by the person from whom those assets were taken. Dr. Joyner maintains that the assets he seeks to recover his 25% ownership in the Angiorad technology translated into a $4.3 million judgment with interest and attorney fees via a jury award — are assets that never belonged to Liprie's estate. Dr. Joyner posits that because Liprie stole his profits and transferred them into the various entities out side of the reach of Dr. Joyner, these assets do not belong to the
The instant lawsuit was originally filed in state court. After defendant Liprie filed for bankruptcy, defendants removed the suit to this court, contemporaneously filing a motion to refer the civil action to the Bankruptcy Court. After hearing oral arguments, the undersigned referred the action to the Bankruptcy Court pursuant to 28 U.S.C. 157(a) and Local Rule 43.4.1.
Defendants, Deutsche Bank and S.F.L. filed motions to dismiss arguing that Dr. Joyner's claims are estate claims that can only be asserted by the appointed Chapter 7 Trustee, Rudy O. Young. After hearing oral arguments, the court granted the motions to dismiss finding that Dr. Joyner lacked standing to bring the claims asserted because the appointed trustee had the exclusive standing to bring said claims.
In his amended complaint, Dr. Joyner seeks to recover profits from the Angiorad joint venture through a revendicatory action; he also seeks to impose a resulting or constructive trust on the proceeds of the joint venture. A revendicatory action is an action brought by the owner of a corporeal movable for the recognition of his ownership and delivery of possession. "The owner of a thing is entitled to recover it from anyone who possesses or detains it without right and to obtain judgment recognizing his ownership and ordering delivery of the thing to him."
The Bankruptcy Judge noted that Dr. Joyner had alleged that he had an ownership interest in the Angiorad proceeds allegedly transferred to the non-debtor defendants because these proceeds represented Dr. Joyner's share of the Angiorad profits stolen by Liprie.
In the instant suit (Liprie III), Dr. Joyner alleges that the assets transferred to the non-debtor defendants were his stolen property which cannot be estate property and recoverable by the Trustee. Dr. Joyner relies on Succession of Onorato,
The Bankruptcy Judge then determined that because Dr. Joyner was awarded a money judgment, and neither the judgment nor the jury's verdict granted Joyner an ownership interest in any of the proceeds that Liprie allegedly transferred to the non-debtor defendants, the money judgment did not "automatically give a prevailing party a direct ownership interest in the specific property that is the subject of the lawsuit."
The Bankruptcy Judge further concluded that Dr. Joyner's request to impose a resulting or constructive trust suffered from a similar flaw in that Dr. Joyner did not obtain relief from any court imposing a constructive trust on any of the property in the possession of any of the defendants before the bankruptcy case was filed.
However, we respectfully disagree with the Bankruptcy Judge's conclusion that Dr. Joyner has failed to allege an ownership interest in the property he seeks to recover. The Bankruptcy Judge relies on the Judgment awarding Dr. Joyner $4,300,000. The Judge remarked that there was nothing in either the judgment or the jury verdict which granted Dr. Joyner an ownership interest in any of the proceeds that Liprie allegedly transferred to the non-debtor defendants. In a footnote, he remarked that the "present action focuses on the transfer of proceeds from the joint venture, not a transfer of Joyner's ownership interest in Angiorad."
Partnership shares or joint venture interests are incorporeal movables.
The Amended Complaint alleges that Liprie "hired skilled professionals to begin placing his Angiorad joint venture assets, including the assets Liprie fraudulently misappropriated from Dr. Joyner, into various entities Liprie created in an attempt to place them beyond the reach of Dr. Joyner."
We recognize that the judgment awards Dr. Joyner a money judgment. However, the Jury Verdict Form concluded that Dr. Joyner was entitled to a 25% ownership interest in the joint venture.
1. Do you find more likely than not, Dr. Joyner, Dr. Harrison and Sam Liprie entered into a joint venture agreement to develop and market medical technology?
2. Do you find that Dr. Joyner met his obligations under the joint venture agreement so as to entitle him to any ownership interest in any such joint venture?
3. What percentage of the joint venture do you find Dr. Joyner is more likely than not entitled to?
7. What amount of damages, if any, is Dr. Joyner entitled to recover from Sam Liprie?
The Judgment made the Jury Verdict Form "the judgment of the court."
Taken as true, we find that the allegations in the amended complaint allege an ownership interest in the Angiorad joint venture. At no point in any of the litigation between Dr. Joyner and Liprie, is the court aware of any dispute by Liprie that Dr. Joyner owned a 25% interest in the joint venture. Liprie bought Dr. Harrison's 25% interest and then negotiated
As to the nature of the injury, plaintiff alleges that Liprie took profits that represented Dr. Joyner's 25% ownership interest in the Angiorad joint venture and attempted to conceal and place these profits out of Dr. Joyner's reach. We find that, if proved, such actions caused a direct injury to Dr. Joyner. We fail to see how this could have injured Liprie and thus made Dr. Joyner's claims derivative of an injury to Dr. Joyner given that Liprie would be the wrongdoer.
Because we find that Dr. Joyner had an ownership interest in the joint venture, (which the Jury Verdict Form made the Judgment of the court also concluded), Dr. Joyner's factual allegations would establish the elements of a revendicatory action. We find it of no moment that the jury awarded Dr. Joyner a money judgment given the fact that Liprie had sold the Angiorad technology licensing to various medical entities, such as USSC, and received over $17 million in profits. Liprie allegedly took these profits, 25% of which, according to the jury verdict form and jury award, rightfully belonged to Dr. Joyner and transferred them into the various entities in order to fraudulently misappropriate the profits. Pursuant to the revendicatory action, Dr. Joyner would have a legal right to be placed in possession of the profits from the Angiorad technology. Liprie's alleged theft of Dr. Joyner's 25% interest in the Angiorad joint venture would be a direct injury to Dr. Joyner. While this cause of action arises out of the same general series of events and broad course of conduct, the estate cannot assert this cause of action. This cause of action is entirely independent of any cause of action the trustee might bring to benefit the estate and/or creditors of the estate. However, we make this conclusion taking the allegations as true and without deciding the merits of the claim.
"An obligee has a right to annul an act of the obligor, or the result of the failure to act of the obligor, made or effected after the right of the obligee arose, that causes or increases the obligor's insolvency."
In this cause of action, Dr. Joyner alleged that Liprie's transfer of assets to the various entities were sham transactions subject to nullification under In re Guillot.
Dr. Joyner remarks that SFL argues that Dr. Joyner does not have standing to bring this action because if the donations were nullified, the property would revert back to Liprie, and then ultimately the estate. Dr. Joyner maintains that he is seeking the return of
The Bankruptcy Judge concluded that this cause of action sought to avoid a fraudulent conveyance that could be brought only by the Trustee because Dr. Joyner failed to allege a sufficient basis for a direct ownership interest in the property transferred to the non-debtor defendants. Thus, the Judge determined that this was an estate claim that could only be brought by the trustee. Again, for the reasons previously mentioned, we find that the amended complaint, taken as true sufficiently alleges a direct ownership interest in the Angiorad joint venture and that this state law cause of action can be brought by Dr. Joyner.
In his amended complaint, Dr. Joyner alleges that the non-debtor defendants aided and abetted Liprie's fraudulent conduct towards Dr. Joyner. He seeks not only rescission of the donations/transfers, but also damages for the non-debtor defendants' conduct. Dr. Joyner asserts these claims based on Louisiana's law on conspiracy which imposes in solido liability on the conspirators.
The Bankruptcy Judge determined that this claim was grounded on alleged fraudulent conveyances recoverable solely by the Trustee for the benefit of the estate because the amended complaint did not allege a basis for damages resulting from a direct injury to Dr. Joyner that is separate and independent from the Trustee's claims. For the reasons already stated we respectfully disagree and find that Dr. Joyner may assert this cause of action.
In this cause of action, Dr. Joyner alleges that Liprie and his hired professionals created a series of entities or enterprises, including non-debtor defendants. He remarks that neither Dr. Joyner nor Liprie owed the enterprises any money and that Liprie transferred Dr. Joyner's money in bad faith. Dr. Joyner maintains that because the non-debtor defendants have been enriched without cause and at his expense, such transfers are null for breach of public policy and the non-debtor defendants must restore and/or account for the transfers plus pay all damages, interest, civil fruits and attorney fees.
To support this cause of action, Dr. Joyner cites Louisiana Civil Code article 2030 which provides that "[a] contract is absolutely null when it violates a rule of public order, as when the object of a contract is illicit or immoral."
Dr. Joyner alleges that the non-debtor defendants are liable under Louisiana Civil Code article 2295 to the extent that they managed his assets without his authority. Code article 2295 provides that "[t]he manager must exercise the care of a prudent administrator and is answerable for any loss that results from his failure to do so." In dismissing this claim, the Bankruptcy Judge reasoned that the claim was dependent on Dr. Joyner's allegation that the Angiorad proceeds transferred to the non-debtor defendants were his property. As such, he concluded that the amended complaint failed to support his claim of "direct ownership interest in the Angiorad proceeds based on the Liprie I[sic] judgment."
Dr. Joyner asserts a violation of Louisiana Revised Statute 14:67 which constitutes racketeering activity under Louisiana Revised Statute 15:1352. Dr. Joyner alleges that over a three year period, Liprie's repeated violations of Louisiana Revised Statute 14:67 constituted a pattern of racketeering which included breaches of fiduciary duties, intentionally defrauding Dr. Joyner out of the Angiorad profits, fraudulently concealing those profits and placing them in a series of enterprises, including non-debtor defendants.
Louisiana Revised Statute 15:1352(A) provides:
Predicate offenses that support a racketeering claim include theft under Louisiana Revised Statute 14:67 which states that:
The Bankruptcy Judge determined that this cause of action must be dismissed because the factual basis arises from the same transaction or series of transactions
Generally res judicata bars relitigation of a final judgment between the same parties. Dr. Joyner maintains that Louisiana law provides the res judicata principles governing this case relying on Lafreniere Park Found. v. Broussard.
Dr. Joyner asserts that the parties in the suit (Liprie III) are different than the parties in Liprie II. Liprie II included Dr. Joyner and Liprie. In both the common law and the civil law, in order for a second suit to be barred by the doctrine of res judicata, the parties must appear in the same capacities in both suits.
Dr. Joyner next maintains that the operative facts in Liprie II are not the same as in the instant suit. In Liprie II. Dr. Joyner sued Liprie for breach of fiduciary duty in the late 1990s. However, the instant suit, while related involves transactions that happened years later. Dr. Joyner remarks that he did not even learn about the transactions until after Liprie II was final; he discovered the transactions during the discovery phase of the debtor examination. Liprie II involves Dr. Joyner's claims of breach of fiduciary duty to establish his ownership interest in the joint venture whereas, Liprie III involves claims against Liprie and the non-debtor defendants for the return of stolen property (the profits from the joint venture), its civil fruits and attorney fees. We find merit to Dr. Joyner's argument and find that res judicata does not apply to bar Dr. Joyner's racketeering claims.
Next, the Bankruptcy Judge concluded that the amended complaint does not support an ownership interest and thus the recovered property constitutes property of the bankruptcy estate under 11 U.S.C. § 541(a)(3), and/or are grounded on fraudulent conveyance allegations that are derivative of the trustee's rights and remedies under sections 544(b) and 550(a). We respectfully disagree and find that the amended complaint does allege an ownership
Dr. Joyner asserts that Liprie and the non-debtor defendants were a single business enterprise and that the non-debtor defendants were alter egos of the debtor. The Bankruptcy Judge determined that these claims, like Joyner's other claims, are grounded in alleged fraudulent transfers, the recovery of which are reserved for the Chapter 7 Trustee. For the reasons already given, the court finds that Dr. Joyner has sufficiently alleged his ownership interest and can assert this state law cause of action.
Dr. Joyner asserts that Liprie's donations to the various enterprises (non-debtor defendants) were fraudulent and in bad faith. Dr. Joyner maintains that because these non-debtor defendants have been enriched without cause at Dr. Joyner's expense, they must restore and/or account for his interest in the profits of the joint venture, under their quasi-contractual duties, plus pay all damages, interest, civil fruits, and attorney fees. Louisiana Civil Code article 2303 which provides that "[a] person who in bad faith received a payment or thing not owed to him is bound to restore it with its fruits and product." If the thing transferred no longer exists, "[a] person who received the thing in bad faith is bound to restore its value even if the loss was not caused by his fault."
The Bankruptcy Judge determined that the allegations for these claims did not support a separate and independent claim for an injury to Dr. Joyner that is not derivative of the estate's claims under §§ 544 and 550. Dr. Joyner argues that these claims are not properly brought by the Bankruptcy Trustee because they concern property which never belonged to Liprie's estate and because Dr. Joyner seeks damages stemming from tortious activity by the non-debtor defendants. We agree and find that Dr. Joyner may assert these state law claims.
Dr. Joyner maintains that the Bankruptcy Judge erred in finding that these causes of action are "derivative of his substantive claims discussed above."
Dr. Joyner asserts that the state law claims which were originally filed in state court are exclusively based on state law; consequently, because the subject property is not part of the bankruptcy estate and does not arise in or under Bankruptcy Law, the instant suit should be remanded back to the state court for further adjudication. Finding that Dr. Joyner had failed to allege sufficient facts to establish a direct ownership interest, the Bankruptcy Judge concluded that all of Dr. Joyner's claims were claims that could only be asserted by the Bankruptcy Trustee,
Federal courts must be assured of their subject matter jurisdiction at all times and may question it sua sponte at any stage of judicial proceedings.
In the instant matter, there is a dispute as to property (the Angiorad profits Dr. Joyner alleges were stolen from him as part of his ownership interest in the joint venture) that is not currently property of the bankrupt estate — property that is in the Liprie Trust and SFL as well as assets purchased with money from the Angiorad joint venture. If Dr. Joyner succeeds on the merits of his claims, and any of the transactions are rescinded, that property would then potentially be returned to its alleged rightful owner; it would never become part of Liprie's bankrupt estate.
The non-debtor defendants maintain that under 11 U.S.C. § 544, the Trustee has exclusive standing to recover fraudulently transferred estate property. However, Dr. Joyner's state law claims, if successful, would preclude that particular property from ever becoming
Dr. Joyner argues that res judicata and the full faith and credit principles would prohibit the bankruptcy court from looking behind the state law issues decided by the state court judgment. Specifically, a successful state court judgment would prohibit the Trustee from utilizing 11 U.S.C. § 544 to avoid Liprie's transfer of Dr. Joyner's assets because Dr. Joyner's assets were never the assets of Liprie's estate.
Dr. Joyner submits that he is the only creditor of the estate. Therefore, he argues that his actions against SFL and Deutsche could not, practically speaking, affect the administration of the debtor's estate. Dr. Joyner's claims for damages
Dr. Joyner cites several cases wherein it was held that a bankruptcy court lacked jurisdiction to hear claims that are not the property of the estate.
Dr. Joyner's claims are not core proceedings, therefore the Bankruptcy Judge cannot enter a final judgment, but may only make proposed findings of fact and conclusions of law. Dr. Joyner argues that in his original state court petition, he requested a jury trial and it would be unconstitutional to allow the matter to proceed before the bankruptcy court because he would be deprived of his right to a jury trial. A Bankruptcy court lacks authority under Article III to enter a final judgment for claims that arise under state law.
We find that the we lack subject matter jurisdiction over the state law causes of action, therefore, the Bankruptcy court also lacks subject matter jurisdiction. Accordingly, we will vacate our previous order referring the matter to the Bankruptcy court and remand the matter to the state court.
Because we find that Dr. Joyner's claims are non-core proceedings, we consider the Bankruptcy Judge's Memorandum Opinion as a report and recommendation under 28 U.S.C. § 157(c)(1). Based on the foregoing, the court finds that Dr. Joyner has alleged sufficient facts to establish state law claims that are separate and independent claims and not derivative of the estate claims under 11 U.S.C. §§ 544 and 550. Therefore, we find that Dr. Joyner has standing to assert the claims in the amended complaint. However, we adopt the recommendation of the bankruptcy judge and dismiss with prejudice Dr. Joyner's claims of a resulting or constructive trust.
The Court is of the opinion that the decision rendered in this matter involves a controlling question of law as to which there is substantial ground for difference of opinion, and that an immediate appeal
The remand of this matter will be delayed for a period of 10 days, after which, if no appeal is taken, the clerk of court will be directed to remand the proceeding to the state court.
