requiring that Perez agree to reimburse the debtor for costs of defending itself whether Perez won forward “depends upon the condition that the debtor not be rendered personally liable by any action of the [clourt”
How later courts described this case
- requiring that Perez agree to reimburse the debtor for costs of defending itself whether Perez won forward “depends upon the condition that the debtor not be rendered personally liable by any action of the [clourt”
Written by the judges who cited it.
The opinion
STATE OF MAINE “.°... |. SUPERIOR COURT
CUMBERLAND, ss. Se _ CIVIL ACTION
oo ~ DOCKET NO. cv-o1gy7
BPP Spe Ay 99 la P mA Boe Oh Peg DQ
K.W. ENTERPRISES, INC., et al., Hue Eee
Plaintiffs
v. | ORDER ON PLAINTIFFS’
MOTION TO DISMISS
COUNTERCLAIM
TIMOTHY S. KEITER, et al.,
Defendants
The plaintiffs filed a motion to dismiss the defendants’ counterclaim, which
asserts that the plaintiffs’ complaint violates the bankruptcy discharge injunction,
and requests sanctions and other relief pursuant to 11 U.S.C. § 105(a). The plaintiffs
argue that the complaint does not violate the injunction to the extent that the only
recovery sought is funded by the proceeds of an insurance policy. Upon review of
the motions, opposition, and the applicable law, the motion to dismiss the
defendants’ counterclaim will be granted.
BACKGROUND
The plaintiffs’ retained defendant Timothy S. Keiter and his law firm,
defendant Timothy S. Keiter, P.A., to establish and franchise various corporate
entities, and protect intellectual property. The plaintiffs filed the underlying
complaint, asserting professional negligence (Counts I -V), and breach of fiduciary
duty (Count VI), in connection with the legal services provided by the defendants.
The defendants filed a counterclaim asserting that the underlying complaint
violated the bankruptcy discharge injunction and requesting sanctions, costs, and
other damages. 11 U.S.C. § 524. The defendants asserted, in their counterclaim, that
prior to the commencement of this civil action, defendant Timothy S. Keiter
received a discharge in bankruptcy pursuant to a petition filed under Chapter 7 of
the United States Bankruptcy Code. Defendants’ Answer and Counterclaim p. 11 1
1. The defendant Timothy S. Keiter was the sole shareholder of the defendant
Timothy S. Keiter, P.A., which has ceased to operate and has no assets. Defendants’
Answer p. 11 2. The plaintiffs did not obtain relief from the automatic stay.
Defendants’ Answer p. 11 { 3.
The plaintiffs assert that their complaint is not a violation of the bankruptcy
discharge because the’discharge of a debt of the debtor does not affect the liability of
any other entity on, or the property of any other entity for, such debt.” 11 U.S.C. §
524(e). The plaintiffs “seek to recover from [the defendant] Mr. Keiter personally
only to the extent to which such recovery is payable from any applicable insurance
policy or policies, and not otherwise.” Plaintiffs’ Amended Complaint p. 2 { 4.
DISCUSSION
This motion to dismiss tests the sufficiency of the counterclaim. Heber v.
Lucerne-in-Maine Village Corp., 2000 ME 137, J 7, 755 A.2d 1064, 1066. In ruling on
a motion to dismiss, the court “examine[s] the [counterclaim] in the light most
favorable to the [counterclaimant] to determine whether it sets forth elements of a
cause of action or alleges facts that would entitle the [counterclaimant] to relief
pursuant to some legal theory.” Id. (citations omitted).
Section 524(e) provides that “fe]xcept as provided in subsection (a)(3) of this
section, discharge of a debt of the debtor does not affect the liability of any other
entity on, or the property of any other entity for such debt.” 11 U.S.C. §524(e). This
section has “led the courts to conclude (virtually unanimously) that the debtor's
discharge does not affect such liability as his insurer may have on a discharged
obligation.” Doughty v. Holt (In re Doughty), 195 B.R. 1, 4 (Bankr. D.Me. 1996). In
addition, where the plaintiffs seek to recover under an insurance policy, a cause of
action is permitted even when it involves the debtor as a nominal defendant. Id.
The continuation of the suit, even if the result is a determination that the debtor is
liable, does not impact the debtor’s fresh start because the debtor will not be
personally liable. Id. The continuation of the suit, even if the insurer will not
defend the action, does not impact the debtor’s fresh start because the debtor will not °
be personally liable. Id. The insurer may, after a determination in the plaintiffs
favor, elect to challenge its liability on state law grounds. Doughty, 195 B.R. at 4; but
see, Perez v. Cumberland Farms, Inc., 213 B.R. 622 (D.Mass. 1997) (requiring that
Perez agree to reimburse the debtor for costs of defending itself whether Perez won
forward “depends upon the condition that the debtor not be rendered personally
liable by any action of the [clourt”).
Here, the plaintiffs are only seeking to recover to the extent that such
recovery is funded by the proceeds of an insurance policy or policies. The defendant
Mr. Keiter will not be personally liable, regardless of the outcome of the underlying
cause of action. In order to more fully ensure that the defendant Mr. Keiter will not
bear any personal liability, the court will order that the plaintiffs indemnify Mr.
Keiter for any insurance policy deductible that may apply in this cause of action.
The entry is
The plaintiffs’ motion to dismiss the defendants’ counterclaim is GRANTED;
and
The plaintiffs are ordered to indemnify the defendants for any deductible for
which the defendants become liable under any of defendants’ insurance policies in
connection with this cause of action.
aD
Dated at Portland, Maine this pad day of April 2002.
KM.
Robert E. Crowley
Justice, Superior Court
Date Filed 6-22-01 CUMBERLAND Docket No. __CV01=337
County
Action DAMAGES
K.W. ENTERPRISES INC, f/k/a RENT-A-HUSBAND INC. TIMOTHY S. KHITER
KAILE R. WARREN, JR TIMOTHY S. KEITER, P-.A.
ERIKA L. KENNEDY
VS.
Plaintiff's Attomey Defendant’s Attorney
Roy Pierce, Esq. .
Jonathan Piper Esq. Erika Frank (Kennedy) Pro-Se
P.O. Box 9546 840 Roosevelt Trail
Portland, ME 04112 Windham, ME 04062 892-8484
Tacodore “Ho Minchnes —(heiter 30TH idrawn)
Portlemd; Meine -04+12-4600
207-774-7000 .
Harold J. Friedman, Esq. (Keiter, BOTH)
Date of Evan Smith, Esq. P.O. Box 4726 ©
Entry Portland, Maine 04112 761-0900
2001, .
June 25 Received 6-22-01.
Summary Sheet filed.
uu Complaint with exhibit A filed.
uu Plaintiff's Motion to Stay Issuance of Scheduling Order with Incorporated
Memorandum of Law filed.
un Proposed Order filed.
July 11 Received 07-11-01:
Summons filed showing officer's return of service on 07-09-01 upon Erika
Frank.
" " Summons filed showing officer's return of service on 07-03-01 upon
Timothy Keiter.
" " Summons filed showing officer's return of service on 07-03-01 upon
Timothy S. Keiter, P.A. to Timothy S, Keiter.
" " Summons filed showing officer's return of service on 06-26-01 upon
Timothy S. Keiter, P.A. to Norman Berlanger.
" " Transcript of Hearing On Motion for Relief from Automatic Stay filed.
July 30 | Received 07-30-01:~
Copy of Letter From Jonathan S. Piper, Esq. to Debra L. Brown, Esq. stating
he has not been able to finalize a position with his client relative to
the claims against Mr. Keiter and the Firms as he will be out of town next
week and he is going to extend the date in which an Answer or other response
is required until Friday, August 10, 2001 filed.
July 31 Received 7-31-01:
Defendant Erika Frank's Answer filed.
Aug. l Received 7-30-01.
Scheduling Order, filed. (Crowley, J.)
Scheduling Order filed. Discovery deadline is April 1, 2002.
Copies mailed Jonathan Piper, Esq., Erica Frank, 840 Roosevelt Trail,
Windham, ME 04062, Timothy Keiter, P.A., 25 Long Creek Drive, South
Portland and Timothy Keiter, 178 Middle Street, Portland, ME 04101 on
8-1-0O1.