Fred Milani

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IT IS ORDERED as set forth below: Z\ im a fee

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Date: September 16, 2020 Wiledfry

Lisa RitcheyCraig

U.S. Bankruptcy Court Judge

—_——_——— ENFFED SFA FES BANKREPTFEY €OURTHH

NORTHERN DISTRICT OF GEORGIA

ATLANTA DIVISION

IN RE: * CASE NUMBER

*

FRED MILANI, * 15-54748-LRC

*

* PROCEEDINGS UNDER

*k CHAPTER 7 OF THE

Debtor *k BANKRUPTCY CODE

ORDER

Before the Court 1s the Motion to Defer or Deny Debtor’s Motion for

Summary Judgment or To Condition Consideration Upon Completion of Discovery

(Doc. 94, as amended by Doc. 106) (the “Motion”’), filed by Francis X. Moore and

FXM, P.C. (collectively, “Moore’’). The Motion arises out of the Motion for Entry

of an Order Compelling Frank X. Moore to Appear and Show Cause as to Why He

Should Not be Held in Contempt for Violation of the Discharge Injunction (the

“Contempt Motion”), filed by Fred Milani (“Debtor”). Debtor opposes the Motion

(the “Opposition”) (Doc. 108).

I. BACKGROUND

In the Contempt Motion, Debtor asserted that Moore violated the discharge

injunction of 11 U.S.C. § 524 when he filed a complaint (the “Complaint”) (Doc.

79-3, Exh. A) against Debtor in the Superior Court of Dekalb County, Georgia (the

“State Court Action”). Doc. 46. In the State Court Action, Moore accused Debtor

of engaging in a conspiracy that began prepetition and continued post-petition and

sought enforcement of his lien against property that he believes Debtor has acquired

an interest in post-petition. Moore asserts that the Complaint seeks damages arising

only from Debtor’s post-petition participation in the conspiracy or for enforcement

of his lien rights and, therefore, does not violate the discharge injunction.

This dispute stems from Moore’s legal representation of Debtor. According

to the Complaint, in 2010, Debtor hired Moore to defend against collection of loans

made to Debtor’s companies, Portofino at Lake Lanier, LLC (“Portofino”) and MHB

Homes, LLC (“MHB Homes”), and guaranteed by Debtor, which were used to

purchase land for a real estate development at Lake Lanier (the “Land”). Complaint,

¶¶ 1, 63-65. Debtor and Moore agreed to a contingency fee arrangement, whereby

Moore would receive 35% of any reduction in Debtor’s total liability (the “Fee

Agreement”). Id. ¶¶ 150-51. The lender claimed it was owed $14,888,267.03. Id.

¶ 160. Pursuant to a settlement agreement with Debtor, however, the lender agreed

to accept $1,200,000 as payment in full (the “Settlement”). Id. ¶ 161. Accordingly,

Moore claimed that he had reduced Debtor’s debt by $13,688,267 and was,

therefore, entitled to receive $4,790,893.46 under the Fee Agreement. Id. ¶ 163.

Debtor later offered to pay Moore only $250,000 for his attorney’s fee. Id.

¶ 165. Moore rejected the offer and, on October 10, 2013, filed an attorney’s lien

against the Land and certain dock permits (the “Attorney’s Lien”). Id., ¶¶ 5, 167.

After Moore filed the Attorney’s Lien, in and around December 2013 and January

2014, Debtor conspired with the lender to foreclose on the Land and offered to pay

the lender an extra $100,000 to conduct a “friendly foreclosure,” through which

Debtor would hire a third party to purchase the land at the foreclosure sale. Id. at

¶¶ 180-88. On February 2, 2014, the Land was sold for a total of $1,199,370, which

Moore claims was only a fraction of the Land’s actual value. Id. at ¶¶ 184-87. This

foreclosure effectively wiped out the Attorney’s Lien.1

Thereafter, the parties to this conspiracy carried out their prearranged plan.

Id. ¶¶ 190-93. As of July 31, 2014, Debtor and his co-conspirator, Xiangtong Lu,

1 The Complaint contained several allegations of what Moore describes as a similar conspiracy engaged in by Debtor,

using funds provided by Mr. Lu, to protect his personal residence from loss by foreclosure and to defraud junior lien

holders on his home. The purpose of these allegations appears to be to establish a pattern of past conduct that would

prove that Debtor engaged in a conspiracy to defraud Moore with regard to his Attorney’s Lien and the Land.

Complaint, ¶¶ 113-19.

through an entity known as Diamond Island, LLC, had acquired ownership of the

Land. Id. ¶ 193.

On December 16, 2014, Moore filed suit against Debtor for breach of contract.

Id. ¶ 196. That case was later stayed, however, when Debtor filed the instant Chapter

7 bankruptcy petition on March 12, 2015 (the “Petition Date”). Doc. 1. Moore did

not seek a determination of the dischargeability of any debt owed by Debtor and, on

July 8, 2015, the Court granted Debtor’s discharge. Doc. 33.

On September 28, 2017, Moore filed the Complaint. The Complaint asserted

that, after the filing of the bankruptcy petition, Debtor, in further conspiracy with

Mr. Lu, caused Portofino and MLB to transfer fraudulently to Debtor personal

property that had value to creditors of Portofino and MLB, including Moore.

Complaint, ¶¶ 205, 208. The Complaint specifically stated that Moore had “named

[Debtor] as a defendant solely for the purpose of recovering damages and obtaining

relief for Milani’s conduct, transactions or occurrences after March 12, 2015[,] or

for any conspiracy that he joined in, continued, or ratified on and after March 12,

2015[,] to the fullest extent permitted under applicable bankruptcy law.” Complaint,

¶ 200. In Count 2 of the Complaint, Moore further stated that, “[b]ecause [Debtor]

took actions after March 12, 2015[,] to participate, ratify, and gain the benefit of the

conspiracy that resulted in the wrongful and fraudulent foreclosures [Moore] seeks

a judgment against him personally to the fullest extent permitted under applicable

bankruptcy law.” Id. ¶ 222. Similar caveats were included in Counts 3-5. Id. ¶¶ 233,

247, 255. Counts 6 and 7 seek establishment or recognition of and enforcement of

liens or a constructive trust against the Land, rather than damages against any

individual, but implicate Debtor’s ownership of property through his alleged alter

egos. Id. ¶¶ 266-77. Count 8 seeks prospective relief against all defendants,

including Debtor, in the form of a protective order preventing harassment or other

injury to Debtor and his family members. Id. ¶¶ 278-82. In the prayer for relief,

Moore sought a “judgment and decree granting and awarding all equitable and

lawful relief, compensatory damages, punitive or exemplary damages, pre-judgment

interest, attorney’s fees and costs to which [Moore] is entitled and has requested

herein.”

Instead of answering the Complaint, Debtor moved to reopen this bankruptcy

case, alleging that the filing of the State Court Action violated the discharge

injunction imposed by § 524. On December 12, 2017, the Court granted Debtor’s

motion (Doc. 43), and Debtor filed the Contempt Motion. Despite Debtor’s filings

in this case, Moore moved for entry of default judgment in the State Court Action

on December 11, 2017. Doc. 79-3, Exh. C. To that motion, Moore attached a

proposed order that included a statement that: “The judgment against [Debtor] shall

not be for the purpose of collecting any debt owing by [Debtor] to [Moore] which

was discharged in [Moore’s] third personal Chapter 7 (liquidation) bankruptcy case

filed on March 12, 2015[,] . . . , but is for any and all liability for which [Debtor] is

liable based on his actions following March 12, 2015[,] to the fullest extent permitted

under applicable bankruptcy law without violating [Debtor’s] discharge in said

bankruptcy case.”

On December 18, 2017, Debtor raised the discharge injunction as a defense in

the State Court Action by filing a motion to open the default. Doc. 79-3, Exh. E.

Thereafter, Defendant twice amended the Complaint to include a further caveat,

explaining that he only sought whatever relief he was entitled to under the Attorney’s

Lien and did not intend to violate § 524 (the “First Amended Complaint” and the

“Second Amended Complaint”). Doc. 79-3, Exh. F (filed February 4, 2018); Exh.

G (filed March 8, 2018).

On August 13, 2018, Debtor moved for summary judgment on the Contempt

Motion (Doc. 79) (the “SJ Motion”). Moore failed to respond to Debtor’s motion.

When Defendant failed to respond to the SJ Motion within twenty-one days, Debtor

filed the affidavit of his attorney, Benjamin S. Klehr (the “Affidavit”), who testified

that, inter alia, (1) Moore’s deadline for responding to the SJ Motion expired no

later than September 7, 2018; (2) Moore had not responded to the SJ Motion; (3)

under the Court’s local rules “failure to file a response shall indicate no opposition

to the motion,” BLR 7007-1(c); and (4) by failing to file a response to the SJ Motion,

Moore has indicated he has no opposition to the SJ Motion, the Court should grant

the SJ Motion. Klehr Aff., Doc. 80, ¶¶ 12-15. Instead of responding to the SJ

Motion, Defendant filed a Motion to Strike the statements identified above (Doc.

81).

The Court granted Moore’s Motion to Strike on December 20, 2018. (Doc.

90). In doing so, the Court agreed with Moore that BLR 7007-1(c) does not apply

to contested matters unless otherwise ordered by the Court and held that Moore had

been under no obligation to respond to the SJ Motion within twenty-one days. The

Court did, however, order that the provisions of BLR 7007-1(c) would, going

forward, apply to this contested matter and, if Moore chose to file a response to the

SJ Motion, the response was required within twenty-one days after entry of the

order—January 10, 2019.

On January 10, 2019, Moore filed the Motion, requesting the Court deny or

defer ruling on the SJ Motion and allow Moore an opportunity to obtain affidavits

and declarations or to take and complete discovery. According to Moore, Debtor

has refused to answer discovery propounded in the State Court Action on the theory

that the State Court Action violates Debtor’s discharge injunction, and has not

responded sufficiently to discovery served in this case to allow Moore to respond to

the SJ Motion. In addition to the Motion seeking a deferral of the Court’s

consideration of the SJ Motion, Debtor filed a preliminary response to the SJ Motion

on January 11, 2019 (the “Preliminary Response”) (Doc. 95).

II. DISCUSSION

“Under Rule 56(b), a summary-judgment motion can be filed ‘at any time

until 30 days after the close of all discovery,’” and “[t]here is no ‘blanket prohibition

on the granting of summary judgment motions before discovery’ has occurred.”

Estate of Todashev by Shibly v. United States, 2020 WL 3397655, at *4 (11th Cir.

June 19, 2020) (quoting Fed. R. Civ. P. 56(b); Reflectone, Inc. v. Farrand Optical

Co., 862 F.2d 841, 843 (11th Cir. 1989) (per curiam)). That being said, “‘summary

judgment should not be granted until the party opposing the motion has had an

adequate opportunity to conduct discovery.’” Id.

Rule 56(d) provides shelter against a premature motion for

summary judgment “when facts are unavailable to the

nonmovant.” Fed. R. Civ. P. 56(d). It qualifies Rule 56(c)’s

requirement that the non-moving party establish that a genuine

dispute of fact exists in cases “where the nonmoving party has not

had the opportunity to discover information that is essential to his

opposition.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250

n.5, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). If the nonmovant

“shows by affidavit or declaration that, for specified reasons, it

cannot present facts essential to justify its opposition,” the district

court may defer considering the motion, deny the motion, allow

additional time to obtain affidavits or declarations or to conduct

discovery, or issue another appropriate order. Fed. R. Civ. P.

56(d). Accordingly, Rule 56 provides a nonmoving party an

alternative avenue to stave off the granting of a motion for

summary judgment. The party can “produce[ ] affidavits or other

evidence contradicting the movants,” or the party can “explain[ ]

[its] failure to do so under subsection ([d]).” Wallace v. Brownell

Pontiac-GMC Co., 703 F.2d 525, 528 (11th Cir. 1983).

Id.; see also Garner v. City of Ozark, 587 F. App'x 515, 518 (11th Cir. 2014) (stating

that a Rule 56(d) motion “must be supported by an affidavit which sets forth with

particularity the facts the moving party expects to discover and how those facts

would create a genuine issue of material fact precluding summary judgment”) (citing

Harbert Int'l, Inc. v. James, 157 F.3d 1271, 1280 (11th Cir. 1998)); but see Frazier

v. Doosan Infracore Int'l, Inc., 479 F. App'x 925, 931 (11th Cir. 2012) (noting that

the failure to provide an affidavit is not always fatal when “justice requires

postponing a ruling”) (citing Fernandez v. Bankers Nat'l Life Ins. Co., 906 F.2d 559,

570 (11th Cir. 1999)).

Accordingly, to succeed on a Rule 56(d) motion, the movant must articulate

the “particular facts she expects to discover” and explain how the facts are relevant

to the resolution of the motion for summary judgment. Garner, 587 F. App'x at 518;

Nawab v. Unifund CCR Partners, 553 F. App'x 856, 859 (11th Cir. 2013) (even

where the interests of justice permit the court to waive the requirement of an

affidavit, movant must “specifically demonstrate how postponement of a ruling on

the [summary judgment] motion will enable them, by discovery or other means, to

rebut’” summary judgment by describing “what particular facts [are] sought, from

whom [they are] sought,” and how they would be used to rebut the respondent’s

arguments in support of summary judgment); see also In re Beaulieu Grp., LLC,

2020 WL 1456511, at *5 (Bankr. N.D. Ga. Mar. 20, 2020) (“[V]ague assertions of

the need for additional discovery do not support the protection of Rule 56(d).”).

When determining whether to grant a Rule 56(d) motion, the Court must

“balance the movant’s demonstrated need for discovery against the burden such

discovery will place on the opposing party.” Id. (citing Harbert, 157 F.3d at 1280).

In doing so, the Court considers such factors as whether the information necessary

to the movant’s ability to respond to a motion for summary judgment is within the

sole control of the respondent and whether movant’s failure to conduct discovery is

due to movant’s inactivity or delay. Estate of Todashev, 2020 WL 3397655, at *4.

Accordingly, the Court must first determine which facts and legal issues are

relevant to the claim upon which summary judgment is sought. Here, Debtor seeks

summary judgment on his claim that Moore violated the discharge injunction by

filing the State Court Action. “Section 524(a)(2) of the bankruptcy code provides

that a discharge of debt in a bankruptcy proceeding ‘operates as an injunction against

the commencement or continuation of ... an act ... to collect ... any such [discharged]

debt.’” In re Roth, 935 F.3d 1270, 1275–76 (11th Cir. 2019) (quoting 11 U.S.C. §

524(a)(2)). The discharge inunction “is enforced through section 105, whereby the

bankruptcy court ‘may issue any order, process, or judgment that is necessary or

appropriate to carry out the provisions of this title.’” Id. (quoting 11 U.S.C.

§ 105(a)). In this way, a bankruptcy court has “statutory contempt powers” that

authorize it to “impose civil contempt sanctions [for attempting to collect a

discharged debt] when there is no objectively reasonable basis for concluding that

the creditor’s conduct might be lawful under the discharge order.” Id. (quoting

Taggart v. Lorenzen, __ U.S. __, 139 S. Ct. 1795, 1801, 204 L.Ed.2d 129 (2019)).

This Court “‘may hold a creditor in civil contempt for violating a discharge order if

there is no fair ground of doubt as to whether the order barred the creditor’s

conduct.’” Id. (quoting Taggart, 139 S. Ct. at 1799) (emphasis in original). “The

plaintiff has the burden of proving by clear and convincing evidence that the

discharge injunction was violated.” In re Henriquez, 536 B.R. 341, 345 (Bankr.

N.D. Ga. 2015) (Sacca, J.).

The Court must first determine whether the action taken was debt collection.

Id. at 1276 (citing Taggart, 139 S. Ct. at 1799). If so, the Court “then evaluate[s]

whether that violation of the discharge injunction is sanctionable under section 105,

by determining if ‘there is no fair ground of doubt as to whether the order barred the

creditor’s conduct.’” Id.

As to the first requirement, the Court must find that the party accused of

violating the discharge injunction attempted to collect a prepetition debt as a

personal liability of the debtor. See In re Kalabat, 592 B.R. 134, 143 (Bankr. E.D.

Mich. 2018) (“Since post-petition debts are not discharged, the discharge injunction

does not bar efforts to collect post-petition debts.”); In re Davies, 577 B.R. 352, 361-

62 (Bankr. D. Idaho 2017) (holding that prosecuting a counterclaim for damages that

“clearly arose prior to the . . . petition date” violated the discharge injunction); In re

Zellner, 2020 WL 1181337, at *7 (Bankr. M.D. Pa. Mar. 11, 2020) (no violation of

the discharge injunction where action related to debtor's post-petition failure to

comply with state court orders). Debt collection may be found where the action has

the effect of pressuring the debtor to pay the debt. Green Point Credit, LLC v.

McLean (In re McLean), 794 F.3d 1313, 1321 (11th Cir. 2015).

“If a creditor had a lien to secure payment of a pre-petition debt before the

Chapter 7 bankruptcy, that lien survives, or ‘rides through’ the Chapter 7 bankruptcy

and bankruptcy discharge, unless the lien is avoided in the bankruptcy case,” such

that a “a creditor with such a lien may seek to enforce its lien rights and collect on

its secured claim, sometimes called its ‘in rem claim,’ after discharge, even if the

debtor's personal liability for the creditor's debt was discharged.” Id. By that same

logic, if the creditor seeks to enforce a lien in an in rem proceeding, a violation of

the discharge injunction may be found if the alleged lien is “extinguished, non-

existent, or invalid,” because “the liens could not secure a discharged personal

obligation on a prepetition debt.” In re Joseph, 584 B.R. 696, 702 (Bankr. E.D. Ky.

2018); see also In re Kellogg, 601 B.R. 537, 549 (Bankr. D. Colo. 2019) (holding

that, where creditor’s lien had expired prepetition due to creditor’s failure to renew

the lien, the creditor’s post-discharge attempts to obtain a new lien and its continued

demand for repayment of its judgment debt “violated the discharge injunction

because they were attempts to collect a discharged debt on an in personam basis

from the Debtor”).

As to the second, the Court must find that the party violated the discharge

injunction “with knowledge of the [discharge] order” and that “there is no fair

ground of doubt as to whether the order barred the party's conduct—i.e., no

objectively reasonable basis for concluding that the party's conduct might be lawful.”

In re City of Detroit, Michigan, 614 B.R. 255, 265-66 (Bankr. E.D. Mich. 2020). In

this regard, a subjective good faith belief that the action taken does not violate the

discharge injunction is not sufficient to avoid sanctions if such a belief is not

objectively reasonable. In re Jackson, 2020 WL 718609, at *4 (Bankr. D. Conn.

Feb. 12, 2020).

In the SJ Motion, Debtor asserts that he is entitled to judgment as a matter of

law because, under the undisputed facts, the State Court Action sought to collect a

prepetition, discharged debt from Debtor personally and Moore had knowledge of

Debtor’s discharge. Debtor submits that the facts are simple and not in dispute: (1)

Moore filed the State Court Action with knowledge of the bankruptcy discharge; (2)

the claims brought against Debtor were discharged; and (3) Debtor has incurred

substantial legal fees in responding to the State Court Action. Specifically, Debtor

contends that the Complaint seeks to establish and collect from Debtor personally a

prepetition debt because the damages claims are based on prepetition acts and are

asserted against Debtor and entities that Moore contends are Debtor’s alter egos.

Further, despite Moore’s inclusion of caveats designed to avoid violating the

discharge injunction by limiting Debtor’s liability to only damages caused by post-

petition acts, the Complaint contained “no facts . . . about [Debtor’s] alleged post-

petition acts to ‘participate, ratify, and gain the benefit of’ the alleged pre-petition

conspiracy.” As to the claims asserted against Debtor’s alleged alter egos, Debtor

asserts that all of the alter ego entities are defendants on eight counts in the

Complaint and that Moore appears to seek “a personal judgment against [Debtor]

for discharged debts by arguing that he is liable for the pre-petition debts of these

non-debtor entities, which is prohibited by Section 524(a)(2). See Yan v. Lombard

Flats, LLC (In re Lombard Flats, LLC), 2016 U.S. Dist. LEXIS 38112 at *25 (Cal.

N.D. 2016) (holding that post-petition lawsuit seeking to hold debtor liable for non-

debtor’s pre-petition debts under alter ego and reverse veil-piercing theory was a

violation of the discharge injunction of Section 524(a)(2)) when “all the material

facts alleged in the … complaint … giving rise to debtor’s liability as the alter ego

of [the non-party] were prepetition facts.”).”

With regard to the alleged post-petition conspiracy claims, Debtor argues that,

as a matter of fact, the Complaint failed to plead any specific facts showing any post-

petition fraudulent acts by Debtor and that the Complaint includes only one post-

petition allegation in the form of a “conclusory statement that [Debtor] ‘joined in,

continued or ratified’ a conspiracy on or after the Petition Date of March 12, 2015.”

As a matter of policy, Debtor urges the Court to find that the Complaint violated the

discharge injunction because, “[w]ithout an injunction on the claims, the Debtor

would be forced to litigate the accuracy and viability of pre-petition claims, which

contravenes the entire purpose of the discharge injunction.”

Debtor contends that the claims asserted in the Complaint are prepetition

claims because they satisfy the “prepetition relationship test” used in the Eleventh

Circuit to determine when a claim arises. See Epstein v. Official Committee of

Unsecured Creditors of Estate of Piper Aircraft Corp. (In re Piper Aircraft Corp.),

58 F.3d 1573, 1577 (11th Cir. 1995); see also In re Krause, Inc., 2005 WL 6487214,

at *12 (Bankr. N.D. Ga. July 11, 2005) (Massey, J.) (“Any claim that Home Depot

holds for breach of an implied warranty of merchantability arose at the time of

sale.”). Under this test, a “claim” does not arise prepetition unless events occur

prepetition that “create a relationship, such as contact, exposure, impact, or privity,

between the claimant and the [debtor]; and (ii) the basis for liability is the debtor's

prepetition conduct.” Id. Application of the Piper test protects a claimant’s due

process rights because the requirement of a prepetition relationship ensures that the

debtor and the claimant will have some basis to identify the existence of contingent

and unmatured claims. See In re United States Pipe & Foundry Co., 577 B.R. 916,

924 (Bankr. M.D. Fla. 2017). “[F]or federal bankruptcy purposes, a pre-petition

claim may encompass a cause of action that, under the state law, is not cognizable

until after the petition is filed.” In re Pan Am. Hosp. Corp., 364 B.R. 839, 847 n.6

(Bankr. S.D. Fla. 2007); In re Wilbur, 237 B.R. 203, 209 (Bankr. M.D. Fla. 1999)

(“[U]nder federal law, an indemnity agreement creates a contingent claim as of the

date of the agreement.”).

In Debtor’s view, the claims in the Complaint all stem from a prepetition

relationship between Debtor and his related companies and Moore and are based

solely on Debtor’s prepetition conduct. Moore, on the other hand, submits that the

Complaint specifically included only claims that arose after Debtor filed his

bankruptcy case that were based on Debtor’s post-discharge conduct (although

alleged prepetition conduct may be relied upon to prove the post-petition acts) and

that he filed the State Court Action solely to collect from Debtor on those claims.

He argues that, if Debtor “rejoined” the prepetition conspiracy, he could be held

liable jointly and severally liable with his co-conspirators for the damages caused by

the entire conspiracy, but contends that such a result is consistent with case law on

the scope of the bankruptcy discharge. See, e.g., Kleen Prod. LLC v. Int'l Paper,

306 F.R.D. 585, 609 (N.D. Ill. 2015), aff'd sub nom. Kleen Prod. LLC v. Int'l Paper

Co., 831 F.3d 919 (7th Cir. 2016) (“Liability would be premised solely on [debtor’s]

post-discharge conduct. It only appears that [debtor] is being held liable for pre-

discharge conduct because of the joint and several liability rule, which makes

[debtor] on the hook for its co-conspirators' actions. But it is the co-conspirators'

liability that is based on pre-discharge conduct, not [debtor’s].”).

In the Preliminary Response, Moore notes the great pains he took to include

language in the Complaint, as well as the amended complaints and the proposed

order granting his default judgment motion, to clearly state that he was not seeking

a personal judgment against Debtor for any claims arising prior to the Petition Date.

Moore disagrees with Debtor’s contention that such language is ineffective

“boilerplate” that cannot excuse Moore’s violation of the discharge injunction. In

contradiction to Debtor’s statement that the Complaint included no specific

allegations of post-petition conduct in furtherance of a conspiracy to defraud, Moore

points to the allegation made in the Complaint regarding Debtor’s involvement in

transferring valuable personal property from Portofino and MHB Homes. Further,

Moore claims that Debtor has, in pleadings filed in the State Court Action,

referenced the existence of his “after acquired property” and corporate assets of Hadi

Homes, Inc., and that such references suggest that further discovery would lead to

evidence of post-petition acts of conspiracy in connection with the acquisition of

such property. Doc. 79-3, Exh. E. In short, despite Debtor’s denials, Moore believes

that Debtor committed post-petition, fraudulent acts to obtain an interest in and/or

control over the Land and personal property once owned by Portofino and MHB

Homes, entities against which Moore had a claim for his attorney’s fees.

Moore insists that he cannot prove Debtor’s post-petition actions without

discovery and, therefore, cannot adequately respond to the SJ Motion without such

discovery. He states that he served discovery in the State Court Action on all

defendants, but no discovery was provided. Additionally, he served discovery on

Debtor in this matter, beginning in January 2018, and took Debtor’s deposition on

February 20, 2018. Moore submits that the “paltry” discovery provided by Debtor

in this case has not been sufficient and Debtor did not testify truthfully at his

deposition. Consequently, he filed a motion to compel discovery (Doc. 65). When

Debtor obtained new counsel, Moore agreed to dismiss the motion to compel in

hopes that the parties would be able to resolve the discovery dispute at a meet and

confer session, but Moore reserved the right to refile it. (Doc. 67). Moore submits

that the meet and confer session was not productive and that the most current

responses to his interrogatories are false and incomplete. The Court notes that

several of Debtor’s responses appear to say that Debtor is not in a position to provide

all of the requested information because discovery is ongoing.

In his affidavit in support of the Motion, Moore details the discovery that he

seeks: (1) entity formation and government documents; (2) Debtor’s bank records;

(3) Debtor’s financial statements; (4) contracts and agreements; (5) communications

between Debtor and his co-defendants in the State Court Action; (6) telephone

records; (7) statements; (8) regulatory filings; (9) accounting records; (10) tax

returns for Debtor and his entities; (11) real estate development and marketing

documents; (12) Debtor’s loan applications; (13) appraisals for the Land; (14)

documents regarding dock permits (15) computers; (16) passport; and (17) anything

that would tend to prove a post-petition conspiracy to defraud Moore. Although the

affidavit does not state the specific facts Moore believes the discovery will

illuminate and does not explicitly explain how those facts are relevant to the

resolution of the SJ Motion, the Court can infer that Moore believes further

discovery will produce evidence that Debtor owns or controls Diamond Island, LLC,

that Diamond Island, LLC now owns the Land and personal property required to

develop a subdivision; that Debtor acted in concert with the other defendants in the

State Court Action to gain control of such property after the Petition Date and with

intent to defraud Moore; and these post-petition acts would render his damages post-

petition claims outside the ambit of the discharge and justify Moore’s filing of the

Complaint.

In the Opposition, Debtor asserts three reasons why Moore is not entitled to

additional time to respond to the SJ Motion: (1) Moore had a reasonable time to

conduct discovery in this matter; (2) additional discovery is unnecessary due to

factual admissions Moore has made; and (3) the discovery disputes Moore claims

have prevented his discovery are “baseless.” In the event the Court defers

consideration of the SJ Motion to resolve the discovery dispute, Debtor requests the

Court enter a scheduling order that will ensure a prompt resolution.

First, Debtor notes that Moore has been engaged in the discovery process for

over a year and has not diligently sought to resolve the discovery dispute. In fact,

since the Court struck Moore’s second motion to compel discovery (Doc. 86), Moore

has not refiled a request to bring the discovery dispute before the Court. While

considerable time has passed, it appears to the Court, based on its involvement in

several hearings and the timing of the various matters, that Moore has remained quite

active throughout the time period at issue. It also seems reasonable that Moore did

not refile his motion to compel discovery, as he instead filed a motion to reconsider

the Court’s order striking the motion to compel, and it took some time for the Court

to resolve that motion. While the Court certainly agrees that Moore has

overcomplicated the issues, it does not appear that he has been less than diligent in

his pursuit of discovery.

Second, Debtor argues that Moore should be found to have admitted the facts

contained in Debtor’s filed Statement of Undisputed Facts because he did not file a

separate, numbered statement as to whether he disputes each fact, as required by

BLR 7056-1. Once deemed admitted, Debtor contends, these facts would permit the

Court to resolve the SJ Motion in Debtor’s favor without the need for further

discovery. While the Court questions whether that is the case, the Court declines to

deem the facts admitted. Moore filed the Motion and a preliminary response, clearly

putting Debtor on notice that he was seeking relief under Rule 56(d) and that his

response was not intended to be a full response. Deeming the facts admitted under

these circumstances would be unfair.

Third, as to whether the alleged discovery dispute is baseless, the Court is not

prepared at this time to determine the merits of Moore’s contentions. Moore claims

that Debtor has documents and information that he has not produced. Debtor claims

otherwise. The Court cannot determine the truth based on what is before it.

The Court is sympathetic to Debtor’s position. If a debtor is required to spend

significant time and resources to litigate the question of whether a debt is a

prepetition debt and, thus, discharged, the discharge has far less value to the debtor.

Nonetheless, in certain circumstances, whether a claim is a pre- or post-petition

claim is not clear and does require fact finding and legal analysis. In such cases, the

bankruptcy court may be tasked with conducting such a review to ensure that all

parties are treated fairly. While the discharge ensures debtors a fresh start, it is not

a pass that allows a debtor to engage in post-petition conduct that injures others.

After considering the papers and arguments of both parties, it appears to the

Court that the threshold issue is whether the Complaint asserts against Debtor only

post-petition claims. Debtor argues that the Complaint does not and cannot assert

such claims because he did not engage in any wrongful conduct post-petition and,

therefore, the Complaint is an elaborate smoke screen to hide Moore’s true

purpose—to collect a discharged debt. Given Moore’s clear, multiple attempts to

put the state court and Debtor on notice that he is not seeking a judgment against

Debtor for prepetition claims and the references, although often somewhat vague, to

post-petition participation in a continuing scheme to defraud Moore, the Court can

only conclude that there remains a possibility that Moore did not violate the

discharge injunction.

The Court agrees that this litigation has been unnecessarily complicated and

time consuming for all parties and the Court. Although Debtor understandably

wishes to resolve this matter as expeditiously as possible, the Court cannot conclude

that the Complaint was a disguised attempt to collect discharged debt without

deciding whether Debtor has engaged in any post-petition conduct that would have

justified the filing of the Complaint with the caveats included by Moore. Debtor

asks the Court to do so on summary judgment, but Moore has not had sufficient

opportunity to discover if his theory of a post-petition conspiracy is more than just a

“conspiracy theory.” That, the Court cannot do.

Moore has demonstrated that he has made attempts to obtain the discovery he

believes he needs and that he has not obtained what he has requested from Debtor or

other sources. The parties, of course, disagree on whether additional discovery is

relevant and whether Debtor such additional information and documents even exist.

The only way to move forward in this case is to resolve the discovery issues. The

Court recognizes that an evidentiary hearing will likely be required to determine the

appropriate scope of the relevant discovery and whether Debtor in fact has

documents and information that he is not producing,

To that end, the Motion will be granted, and the Court will defer ruling on the

SJ Motion until it has resolved the parties’ long-standing discovery dispute. Once

the discovery dispute has been resolved, the Court will address the timing of Moore’s

additional response to the SJ Motion and how the Court will proceed to resolve the

SJ Motion.

III. CONCLUSION

For the reasons stated above,

IT IS HEREBY ORDERED that the Motion to Defer or Deny Debtor’s

Motion for Summary Judgment or To Condition Consideration Upon Completion of

Discovery (Doc. 94, as amended by Doc. 106) is GRANTED;

IT IS FURTHER ORDERED that, on or before October16, 2020, Moore

shall serve Debtor with any additional interrogatories or requests for documents he

deems necessary (the “Additional Requests”);

IT IS FURTHER ORDERED that Debtor shall have thirty (30) days from

the date of the service of the last of the Additional Requests to respond to all such

requests and to update his responses to any prior requests (the “Prior Requests”);

IT IS FURTHER ORDERED that, on or before January 8, 2021, Moore

shall file either a motion to compel compliance with the Additional and Prior

Requests that does not exceed twenty-five (25) pages, but may refer to and

incorporate any pleading already on the docket, including Docket Number 86, but

shall include no attachments or exhibits, as any evidence needed to support the

motion to compel, if necessary, will be presented at a hearing to be scheduled by the

Court, or a statement that Debtor has responded sufficiently to the Additional and

Prior Requests;

IT IS FURTHER ORDERED that Debtor shall have thirty (30) days from

the date of the filing of the motion to compel, if any, to respond, and any response

shall be limited to twenty-five (25) pages, without attachments or exhibits;

IT IS FURTHER ORDERED that Moore shall have fourteen (14) days from

the date of the filing of Debtor’s response, if any, to file a reply, which shall also be

limited to twenty-five (25) pages and shall include no attachments or exhibits;

IT IS FURTHER ORDERED that Moore shall not attempt to take Debtor’s

further deposition without either the express permission of Debtor’s counsel or the

Court and any request to do so will be made only after the deadline for Debtor’s

responses to the Additional and Prior Requests has passed.

END OF DOCUMENT

DISTRIBUTION LIST:

Francis X. Moore

Frank X. Moore Law

730 E 2d Street, Suite 106

Blue Ridge, GA 30513

Anna M. Humnicky, Esq.

Benjamin S. Klehr, Esq.

Small Herrin, LLC

Two Paces West, Suite 200

2727 Paces Ferry Road

Atlanta, GA 30339

Fred Milani

2267 Echo Trail NE

Atlanta, GA 30345

M. Denise Dotson, Chapter 7 Trustee

M. Denise Dotson, LLC

PO Box 435

Avondale Estates, GA 30002