Sanderson Farms et al v. Gasbarro et al

OCR transcription for search; preserved printed pages are authoritative

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UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF OHIO

EASTERN DIVISION
Inre Case No. 05-60538
Vincent J. Gasbarro
Debtor(s)
Sanderson Farms, Inc.
Plaintiff(s) : Adv. Pro. No. 05-2391

Desc Main

V. : Chapter 7 (Judge Caldwell)

Vincent J. Gasbarro

Defendant(s):

ORDER DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT (NO. 25)

On August 17, 2005, the above-captioned adversary proceeding was

commenced on behalf of Sanderson Farms, Inc. (“Plaintiff”) against the Debtor,

Vincent J. Gasbarro (“Defendant”). The Plaintiff seeks a determination of the

dischargeability of a judgment, pursuant to sections 523(a)(2)(A) and (6) of the

United States Bankruptcy Code (“Code”).

The dispute between the parties is based upon a Decision and Judgment Entry

issued by the Franklin County, Ohio Court of Common Pleas on March 6, 2001, and

April 27, 2001, respectively. The essential allegation was that meat processing

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products were ordered from the Plaintiff by an entity Midwest Farms, Inc.
(“Midwest”), that was controlled by the Defendant’s family members. It was alleged
that through a series of transactions Midwest was rendered insolvent and unable to
pay an outstanding balance of $118,214.50 to the Plaintiff. The Plaintiff now seeks
summary judgment only regarding its claim under section 523(a)(6) of the Code.'

On March 6, 2001, the Court of Common Pleas entered its Decision, that in
relevant part stated:

This Court is not convinced that any of the Defendants
intentionally defrauded the Plaintiff at the time the product
was ordered, however, Alio, Rocky and Vincent Gasbarro
knew or should have known that Midwest was in serious
financial straits at the time of the orders and that payment
to_the Plaintiff for the product was highly unlikely.
Furthermore, it is apparent to this Court that Midwest,
through the control of the Gasbarro’s transferred the
proceeds from the wholesale of the products to themselves
or to other corporate entities within their control. In
addition Midwest corporate assets that could have been
used to pay Plaintiff were transferred by various means to
other corporate entities dominated by the Gasbarro Family.

March 6, 2001, Decision, Page 3. (emphasis supplied)

' A similar adversary proceeding was commenced against the brother of the Defendant, Roch T. Gasbarro
( 02-2222). In that adversary the Court denied a summary judgment motion filed by the Plaintiff, and after trial this
Court issued an opinion finding that section 523(a)(6) of the Code is not applicable, and that the Plaintiff failed to sustain
its burden of proof regarding its claim under section 523(a)(2)(A) of the Code. That decision is currently on appeal.

2

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Approximately one month later, on April 27, 2001, a Judgment Entry was
entered by the Court of Common Pleas awarding to the Plaintiff $118,214.50 in
compensatory damages, $118,214.50 in punitive damages, $49,896.84 in legal fees,
and interest. On March 25, 2004, the Ohio Court of Appeals for the Tenth Appellate
District affirmed the compensatory damages award, but reversed and remanded with
reference to the punitive damages and associated legal fees. The Appellate Decision
was premised on the lack of supporting findings of fact. The Appellate Court
focused on the inconsistencies in the Ohio Common Pleas Court Opinion as detailed
above.

Specifically, the Appellate Court stated:
...(T)he trial court did not explain in its decision why it awarded punitive

damages, nor did the court...make a specific finding of malice. ..
(G)iven language in the trial court’s decision that it was not convinced

that appellants “intentionally defrauded” appellee at the time the product
was ordered, as well as the court’s failure to indicate a finding of malice
or to elaborate on why it awarded punitive damages, we are reluctant to

make the inference that the trial court fully considered the issue of
malice before imposing an award for punishment.

Appellate Decision, Paragraph 59. (emphasis supplied).

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In response to the Appellate Decision, on June 22, 2004, the Ohio Common
Pleas Court entered an additional Judgment Entry. According to Counsel for the
Plaintiff, this Entry was not based on the presentation of evidence, but rather was
accomplished through briefs. The Entry includes ten paragraphs that purport to be
findings of fact. Paragraph three even goes as far as to reference one of the
dischargeability provisions at issue in this case, section 523(a)(6) of the Code (willful
and malicious injury). The ten paragraphs do not, however, contain sufficient
references to facts that demonstrate intent or malice in order to support the award of
punitive damages and associated legal fees. Rather, each paragraph reaches a
conclusion, without sufficiently identifying the factual foundation.

An appeal of the June 22, 2004, Judgment Entry was not taken to test whether
it would pass muster with the Tenth District Appellate Court after it identified the
inconsistencies in the original Trial Court Decision. Its efficacy, however, is central
to the instant Motion for Summary Judgment, in which the Plaintiff seeks a ruling
that the Defendant is precluded from litigating before this Court the dischargeability
claim asserted under section 523(a)(6) of the Code. Specific facts are critical since
this Court is required to determine that, “...there is no genuine issue as to any material

fact...” before rendering summary judgment. FRCP 56(c).

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Turning to the applicable dischargeability standard, courts have held that
injuries that are recklessly or negligently inflicted are insufficient to establish willful
and malicious injury pursuant to section 523(a)(6) of the Code. Instead, there must
be a showing of intent to cause harm, or that the harm was substantially certain to
follow. Kawaauhau v. Geiger, 523 U.S. 57, 61-64 (1998); Markowitz v. Campbell
(In re Markowitz), 190 F.3d 455, 463-466 (6™ Cir. 1999); Salem Bend Condo. Assoc.
v. Bullock- Williams (In re Bullock-Williams), 220 B.R. 345, 347 (6" Cir. BAP 1998);
Beard v. Devore (In re Devore), 282 B.R. 643, 645-646 (Bankr. S.D. Oh. 2002).

In view of this stringent standard, this Court is concerned, given the lack of a
clear factual foundation, that the use of the language, “knew or should have known”,
in the original Decision of the Ohio Common Pleas Court constitutes a finding of
mere negligence, rather than a finding of the requisite deliberate acts.

Regarding issue preclusion in Ohio, three elements must be established: (1)
the fact or issue was actually and directly litigated in the prior action; (2) the fact or
issue was passed upon and determined by a court of competent jurisdiction; and, (3)
the party against who the doctrine is asserted was a party in privity in the prior action.
Corzin v. Fordu (In re Fordu), 201 F.3d 693,704 (6" Cir. 1999), Based upon a

review of the June 22, 2004, Judgment Entry of the Ohio Common Pleas Court along

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with the requisite elements of section 523(a)(6) of the Code detailed above, this
Court is not persuaded that issue preclusion is applicable.

Specifically, the first two criteria detailed above prove the most difficult for
the Plaintiff, because the relevant facts must have been “litigated” and “determined”
by the prior court. Indeed the Tenth District Appellate Court reversed and remanded
regarding the findings of intent and malice that are required to support the
assessment of punitive damages and associated legal fees. This action was taken
because the original Trial Decision appeared inconsistent.

The June 22, 2004, Judgment Entry expresses conclusions, but does not
sufficiently identify facts to bar the instant litigation. It remains unclear to this
Court whether there was any finding that the Defendant, as opposed to his family
members, intended to cause harm, rather than being merely negligent. Negligence is
not sufficient to except a judgment from discharge under section 523(a)(6) of the
Code.

In addition to these factors the Defendant has filed an affidavit in response to
the Motion for Summary Judgment that states in relevant part as follows:

1. He is the brother of Rocky Gasbarro and son of Alio Gasbarro and
was involved with both Rocky and Alio in the poultry business in 1996.

2. His role was as a salesman for the companies and those to whom it
provided products.

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3. He had nothing to do with ordering chicken from Sanderson Farms
nor did he have anything to do with paying the bill of Sanderson Farms.

4. He never did or said anything that indicated he intended to cause
injury or damages to Sanderson Farms nor did he cause any damage or
injury to Sanderson Farms.

This affidavit appears to suggest that the Defendant, unlike his brother, was not
actively involved in the management of the business and the financial relationship
with the Plaintiff, including payment. On this basis, additional questions of material
fact are raised that must be resolved at trial regarding the scope of the Defendant’s
involvement in the business and the financial relationship with the Plaintiff.

For all of these reasons, the Court has determined that the Plaintiff is not
entitled to summary judgment, and must produce evidence to support its claims,
including those falling under the willful and malicious injury provision of the Code.

Finally, as indicated during the pre trial conferences, the parties should
consider requesting a settlement conference to be conducted by another judge from
this Court. The underlying events occurred more than ten years ago, and one critical

witness is deceased. The parties have been involved in a trial and remand proceeding

before the Ohio Common Pleas Court, an appeal before the Ohio Tenth District, and

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two bankruptcy cases and adversary proceedings in this Court. The legal fees and
expenses incurred to date most likely meet or exceed the amount originally at issue.
IT IS SO ORDERED.

Date: Lerpuat$ 290") be métad!

Charles M. Caldwell
United States Bankruptcy Judge

Copies to:

Nora E. Jones, Esq.

Gamble Hartshorn & Johnson, LLC
1 East Livingston Ave.

Columbus, Ohio 43215-5700
Attorney for the Plaintiff

Michael T. Gunner, Esq.

3535 Fishinger Blvd., Ste. 220
Hilliard, Ohio 43026
Attorney for the Defendant

Sanderson Farms, Inc.

P.O. Box 988

225 North 13" Avenue

Laurel, Mississippi 39441-0988
Plaintiff

Vincent J. Gasbarro
4069 Clarke-Shaw Road
Powell, Ohio 43065
Defendant