Hough v. Margulies et al

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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In re: 	:
:
JOSHUA SIMON MARGULIES, 	: 	Chapter 7
: 	Case No.: 10-14012 (SMB)
Debtor. 	:
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DENNIS HOUGH, 	:
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Plaintiff, 	:
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‒ against ‒ 	: 	Adv. Proc. No. 10-04050
:
JOSHUA SIMON MARGULIES and 	:
USAA CASUALTY INSURANCE 	:
COMPANY, 	:
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Defendants. 	:
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MEMORANDUM DECISION AND ORDER DENYING
DEBTOR’S MOTION FOR RECONSIDERATION
A P P E A R A N C E S:
STANLEY K. SHAPIRO, ESQ.
225 Broadway, Suite 1803
New York, New York 10007
Attorney for Plaintiff Dennis Hough
OLSHAN GRUNDMAN FROME ROSENZWEIG
& WOLOSKY LLP
Park Avenue Tower
65 East 55th Street
New York, New York 10022
Thomas J. Fleming, Esq.
Fredrick J. Levy, Esq.
Howard J. Smith, Esq.
Of Counsel
‒ and ‒
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ROBERT M. SPADARO, ESQ.
17 Battery Place, Suite 1103
New York, New York 10004
Attorneys for Defendant USAA Casualty
Insurance Company
SHAFFERMAN & FELDMAN LLP
286 Madison Avenue, Suite 502
New York, New York 10017
Joel M. Shafferman, Esq.
Of Counsel
Attorneys for Defendant Joshua Simon Margulies
STUART M. BERNSTEIN
UNITED STATES BANKRUPTCY JUDGE:
The defendant Joshua Simon Margulies (“Margulies”) has moved to reargue former
Chief Bankruptcy Judge Gonzalez’s order that, inter alia, denied his motion for judgment on the
pleadings.1 (See Order Denying Motion for Judgment on the Pleadings and Summary Judgment
Dismissing the Complaint as to Joshua Simon Margulies, dated Mar. 1, 2012 (“March 1 Order”)
(ECF Doc. # 42).) The motion is denied for the reasons that follow.
BACKGROUND
The background to this adversary proceeding is described in the Court’s Memorandum
Decision Denying USAA Motion to Dismiss for Lack of Subject Matter Jurisdiction, for
Permissive Abstention, to Stay This Adversary Proceeding and to Dismiss for Failure to State a
Claim, dated Aug. 14, 2012 (“USAA Decision”) (ECF Doc. # 52.) The discussion under this
section of the decision is limited to what is necessary to explain the result.
1 	Judge Gonzalez retired from the bench on March 1, 2012.
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According to Hough’s complaint in this adversary proceeding,2 Margulies’ motor vehicle
struck the plaintiff, Dennis Hough (“Hough”), causing serious bodily injury. Margulies left the
scene of the accident, and subsequently pleaded guilty to misdemeanor assault in the third
degree.3 (Complaint at ¶¶ 16-17.) Hough recovered a default judgment against Margulies in the
approximate sum of $4.9 million (the “Judgment”), and sued Margulies’ liability insurer, USAA
Casualty Insurance Company (“USAA”), in state court, to recover the Judgment up to the policy
limits. (See id. at ¶¶ 22-24.) The state court action was pending on the petition date.
Once bankruptcy ensued, Hough commenced this adversary proceeding against
Margulies and USAA. The Complaint alleges alternative claims for relief in a single count. If
Margulies intentionally struck Hough with his motor vehicle, the Judgment is not dischargeable
under 11 U.S.C. § 523(a)(6). (See id. at ¶ 37.) On the other hand, if Margulies did not willfully
cause Hough’s injuries, Hough is entitled to a declaration that Margulies did not act intentionally
as well as a money judgment against USAA in the amount of the Judgment up to the policy
limits. (See id. at ¶¶ 38-39.)
After answering, Margulies moved for summary judgment and for judgment on the
pleadings. In support of the second part of his motion, Margulies argued that the Complaint
failed to allege any facts supporting the claim that he acted with certainty or the subjective
motive to harm Hough. (See Memorandum of Law in Support of Plaintiff’s Motion for Judgment
on the Pleadings or Summary Judgment, dated Nov. 23, 2011, at 4 (ECF Doc. # 23).) Hough
2 	See Complaint Objecting to Dischargeability Pursuant to 11 U.S.C. § 523(a)(6), for Judgment Pursuant to
Section 3420 of the New York State Insurance Law, and for Declaratory Relief Pursuant to 11 U.S.C. § 105(a),
dated Oct. 25, 2010 (“Complaint”), at ¶ 15 (ECF Doc. # 1).
3 	A person is guilty of misdemeanor assault in the third degree when he “recklessly causes physical injury to
another person.” See N.Y. P ENAL LAW § 120.00(2).
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opposed the relief, contending that the Complaint duly alleged that Margulies struck him with his
vehicle and acted with criminal intent. (See Plaintiff Dennis Hough’s Response and Opposition
to the Motion of the Defendant/Debtor’s Margulies’ Motion to [sic] Judgment on the Pleading
[sic] and Summary Judgment to Dismiss the Complaint, dated Jan. 18, 2012, at 10 (ECF Doc. #
29).) Hough also referred to the “undisputed” fact that the debtor willfully disobeyed the
flagman’s traffic direction to stop (Hough was apparently the flagman), (see id. at 10-11), but the
Complaint does not allege this, and the “undisputed” nature of this “fact” is not evident. Finally,
Hough maintained that malice could be imputed from the surrounding facts and circumstances.
(See id. at 12-13.)
Judge Gonzalez denied both prongs of Margulies’ motion. Addressing the motion for
judgment on the pleadings, he ruled: (1) the plaintiff generally alleged Margulies’ state of mind
in accordance with FED. R. CIV. P. 9(b); (2) malice could be imputed from the alleged intentional
conduct; and (3) pleading in the alternative was permissible. (See March 1 Order at 6-7.)
Margulies moved for reconsideration of the March 1 Order to the extent it denied his
motion for judgment on the pleadings. 	He submits, as he did in his original motion, that the
Complaint fails to allege any facts to support his ultimate contention that he acted with the
certainty or subjective motive to harm Hough. (See Application of Joshua Simon Margulies for
Reconsideration of that Portion of March 1, 2012 Order Denying Motion for Judgment on the
Pleadings Seeking Dismissal of the Complaint, dated Mar. 15, 2012, at ¶ 15 (ECF Doc. # 45).)
Margulies also discusses the pleading requirements for a claim of fraud under FED. R. CIV. P.
9(b), (see id. at ¶¶ 16-17), but Hough’s claim is not based on fraud. I assume Margulies means
that the Complaint does not include any facts supporting the general averment that he intended to
harm Hough — essentially the same argument discussed in the preceding sentence. In addition,
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Margulies asserts that Judge Gonzalez “committed clear error of law by sua sponte finding that
‘malice could be imputed from the alleged intentional conduct’ where the Complaint is devoid
of factual basis setting forth that the Debtor acted intentionally and that malice should be
imputed from the non-alleged intentional conduct.” (Id. at ¶ 18.) Finally, Margulies argues that
Judge Gonzalez committed clear error in relying on FED . R. CIV. P. 8(a)(3), apparently
contending that both alternatives must independently plead a legally sufficient claim. (See id. at
¶ 21.)
DISCUSSION
Local Bankruptcy Rule 9023-1(a), Bankr. S.D.N.Y.R. 9023-1(a), governs motions for
reargument,4 and imposes the same standards as motions to alter or amend judgments under FED.
R. CIV. P. 59(e), which is made applicable to this adversary proceeding by FED. R. BANKR. P.
9023. See In re Bressler, No. 06-11897, 2007 WL 951661, at *1 (Bankr. S.D.N.Y. Mar. 27,
2007); cf. Greenwald v. Orb Commc’ns & Mktg., Inc., No. 00 Civ. 1939 (LTS), 2003 WL
660844, at *1 (S.D.N.Y. Feb. 27, 2003) (“The standards governing motions to alter or amend
judgments pursuant to Rule 59(e) and motions for reconsideration or reargument pursuant to
Local Rule 6.3 are the same.”) 5 ; Interbank Funding Corp., No. 07-1482 (BRL), 2007 WL
2080512, at *2 n.5 (same); Randall’s Island Family Golf Ctrs., 290 B.R. at 61 n.4 (same). The
4 	Local Bankruptcy Rule 9023-1(a) states:
A motion for reargument of a court order determining a motion shall be served within 14
days after the entry of the Court's order determining the original motion, or in the case of a court
order resulting in a judgment, within 14 days after the entry of the judgment, and, unless the Court
orders otherwise, shall be made returnable within the same amount of time as required for the
original motion. The motion shall set forth concisely the matters or controlling decisions which
counsel believes the Court has not considered. No oral argument shall be heard unless the Court
grants the motion and specifically orders that the matter be re-argued orally.
5 	Local Bankruptcy Rule 9023-1(a) is an adaptation of District Court’s Civil Rule 6.3. See In re Interbank
Funding Corp., No. 07-1482 (BRL), 2007 WL 2080512, at *2 n.5 (Bankr. S.D.N.Y. July 19, 2007); Family Golf
Ctrs., Inc. v. Acushnet Co. (In re Randall’s Island Family Golf Ctrs., Inc.), 290 B.R. 55, 61 n.4 (Bankr. S.D.N.Y.
2003); see also Local Bankruptcy Rule 9023-1 cmt.
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movant must show that the court overlooked controlling decisions or factual matters “that might
materially have influenced its earlier decision.” In re Best Payphones, Inc., No. 01-15472
(SMB), 2008 WL 2705472, at *3 (Bankr. S.D.N.Y. July 3, 2008)(quoting Anglo Am. Ins. Group.,
P.L.C. v. CalFed Inc., 940 F. Supp. 554, 557 (S.D.N.Y. 1996)); accord Banco de Seguros del
Estado v. Mut. Marine Offices, Inc., 230 F. Supp. 2d 427, 428 (S.D.N.Y. 2002), aff’d, 344 F.3d
255 (2d Cir. 2003); Griffin Indus., Inc. v. Petrojam, Ltd., 72 F. Supp. 2d 365, 368 (S.D.N.Y.
1999); Farkas v. Ellis, 783 F. Supp. 830, 832–33 (S.D.N.Y. 1992), aff’d, 979 F.2d 845 (2d Cir.
1992). “Alternatively, the movant must demonstrate the need to correct a clear error or prevent
manifest injustice.” Griffin Indus., 72 F. Supp. 2d at 368 (internal quotation marks and citations
omitted); accord Banco de Seguros del Estado, 230 F. Supp. 2d at 428.
“The rule permitting reargument is strictly construed to avoid repetitive arguments on
issues that the court has already fully considered.” Best Payphones, Inc., 2008 WL 2705472, at
*3; accord Griffin Indus., 72 F. Supp. 2d at 368; Monaghan v. SZS 33 Assocs., L.P., 153 F.R.D.
60, 65 (S.D.N.Y. 1994); Farkas, 783 F. Supp. at 832. In addition, parties cannot advance new
facts or arguments because a motion for reargument is not a mechanism for “presenting the case
under new theories, securing a rehearing on the merits, or otherwise taking a ‘second bite at the
apple.’” Best Payphones, Inc., 2008 WL 2705472, at *3 (quoting Sequa Corp. v. GBJ Corp.,
156 F.3d 136, 144 (2d Cir. 1998) (discussing Rule 59)); accord Griffin Indus., 72 F. Supp. 2d at
368 (discussing motions for reargument).
Much of Margulies’ motion for reconsideration simply repeats, in one form or another,
arguments he made in his original motion that Judge Gonzalez considered and rejected.
Specifically, he unsuccessfully contended that the Complaint failed to allege any facts suggesting
he acted with the certainty to harm Hough or with the subjective motive to harm him. Margulies
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has not identified any controlling law that Judge Gonzalez overlooked, and the motion for
reconsideration is not the appropriate vehicle to recycle these contentions. Furthermore, Judge
Gonzalez did not sua sponte conclude that he could impute malice; Hough raised the very
argument in his opposition.
In addition, there was no clear error. The Complaint joins Margulies and his indemnitor,
USAA, in a single action based on the same conduct; it alleges that Margulies ran into Hough
with his car. Margulies either acted intentionally or he did not—Margulies has not suggested
any other possibility—and the Court has already concluded that that the intentional nature of the
conduct under state law and the willful and malicious nature of the conduct under bankruptcy
law pose the same question. (See USAA Decision at 11 (“In short, in light of the circumstances
of this case, the definition of ‘willful and malicious’ injuries under bankruptcy law and
‘intentional’ injuries under state insurance law appear to be identical, and USAA has not pointed
to the language of the Policies or anything else that suggests the contrary.”) (footnote omitted).
If Margulies acted intentionally, the Judgment will be non-dischargeable but if he did not, USAA
will have to pay the Judgment on his behalf to Hough, up to the limits of the policies, to the same
extent that it was obligated to indemnify Margulies. The allegations of the Complaint plainly
imply these alternatives, and one of the alternatives must reflect the true state of facts.
In any event, dismissal of the Complaint is foreclosed by the USAA Decision. Under
FED. R. CIV. P. 8(d)(2)6 , a party may include two or more alternative claims in a single count,
and “[i]f a party makes alternative statements, the pleading is sufficient if any one of them is
sufficient.” Accord Deston Therapeutics LLC v. Trigen Labs Inc., 723 F. Supp. 2d 665, 673 (D.
Del. 2010) (denying a motion to dismiss a claim for false advertising where an alternative and
6 	In 2007, Rule 8(e)(2) was renumbered as 8 (d)(2).
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inconsistent claim for patent infringement was adequately pleaded); New Yuen Fat Garments
Factory Ltd. v. August Silk, Inc., No. 07 Civ. 8304 (JFK), 2009 WL 1515696, at *6 (S.D.N.Y.
June 1, 2009) (concluding that the proposed claim was not futile because an alternative statement
of the claim was sufficient to withstand a motion to dismiss, rendering the entire claim
sufficient); Taylerson v. American Airlines, Inc., 183 F. Supp. 882, 884 (S.D.N.Y. 1960) (“A
complaint which contains alternative statements of the claim, some of which are insufficient, will
not be dismissed if any one alternative statement supports the claim.”) (footnote omitted); see
Technical Tape Corp. v. Minnesota Mining & Mfg. Co., 200 F.2d 876, 877 (2d Cir. 1953) (“Even
assuming that one of the disjunctive allegations of jurisdiction was insufficient while the other
was not, Rule 8(e) 2 of the Federal Rules, 28 U.S.C.A., contemplates such alternative allegations,
and provides that no dismissal is to be granted if one of them is sufficient.”) (footnote omitted);
but see Allied Vision Group, Inc. v. RLI Prof’l Techs., Inc., 916 F. Supp. 778, 782 (N.D. Ill.
1996) (explaining that Rule 8(e)(2) does not permit inconsistent pleading within the same count).
Here, the Court has concluded that the claim against USAA is legally sufficient, (see
USAA Decision at 16-17), and the pleading will, therefore, survive dismissal. It is true that
Hough has alleged only one claim against each defendant, and if the claim against Margulies is
legally insufficient, there is no alternative, sufficient claim alleged against Margulies to rescue it.
Nevertheless, Rule 8(d)(2) does not expressly require that an alternative pleading include at least
one legally sufficient claim against each defendant; it permits alternative claims in the same
count and explains that the “pleading” is sufficient if any one of the alternatives states a claim.
Moreover, Rule 8(d)(2) is not confined to pleading alternative claims against a particular
defendant. In this case, Hough is entitled to prevail under his Complaint against Margulies or
USAA, but not both, based on the same occurrence. He has a single cause of action against each
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defendant based on alternative theories, and is entitled to the opportunity to prove his case with
both defendants present in the same action.
For all of the foregoing reasons, the motion for reconsideration is denied. The parties are
directed to contact chambers to schedule a pre-trial conference. So ordered.
Dated: New York, New York
August 31, 2012
/s/ Stuart M. Bernstein
STUART M. BERNSTEIN
United States Bankruptcy Judge
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