United States District Court, District of Columbia
In re Roberto Felice Donna, Debtor. JESUS VENTURA, et al, Plaintiffs-Appellants,
v.
ROBERTO DONNA, Debtor-Appellee. Adversary Proceeding No. 16-10026 Bankr. Appeal No. 17-2217 (TFH)
MEMORANDUM OPINION
Thomas
F. Hogan Senior United State District Judge.
Appellants
initiated an adversary proceeding against Roberto Donna in
the United States Bankruptcy Court for the District of
Columbia in September 2017. The Bankruptcy Court granted
summary judgment Mr. Donna on all of Appellants' claims,
and awarded him attorney's fees for his response to
Appellants' motion for a protective order. Appellants
have appealed the Bankruptcy Court's rulings.
I.
BACKGROUND
Roberto
Donna is a chef of Italian cuisine who has long worked in the
Washington, D.C. area. AA at 716. He was a majority owner of
the Italian restaurant Galileo from 1984 until it closed in
2006. AA at 717-18 [ECF No. 5-1]. In 2006, he opened the
restaurant Bebo Trattoria ("Bebo Trattoria" or
"Bebo") in Arlington, Virginia. AA at 718. Bebo
lost its lease and closed in April 2009. AA at 720.
Appellants
Jesus Ventura, Mohammed Douah, Arturo Ramos, Bisera Romic,
Carlos Sosaya, Dorde Milojevic, Igor Vuckovic, Marijana
Bosnjak, Tulga Dorjgotov and Elizabeth Scott ("the
Employees") were employees of Bebo Trattoria. They
worked at the restaurant for lengths of time varying from 5
to 23 months, spanning January 2007 to December 2008. AA at
1287;1293;1295;1298;1300; 1302;1305;1310;1312.
In
2008, a group of former Bebo Trattoria employees, including
most of the Employees here, sued Roberto Donna, Bebo Foods,
Inc. and RD Trattoria, Inc. for failing to pay minimum and
overtime wages in violation of the Fair Labor Standards Act
("FLSA") and the D.C. Wage Payment and Collection
Law ("DCWPCL") when they were employed at Bebo
Trattoria and Galileo. In 2010, the district court granted
summary judgment to the former employees, finding that Mr.
Donna violated the FLSA and the DCWPCL by failing to pay his
employees wages and overtime. Ventura v. Bebo Foods,
Inc., 738 F.Supp.2d 1, 5 (D.D.C. 2010) (Ventura
I). After holding two hearings on damages, the court
awarded the plaintiffs $526, 893.16, including liquidated
damages. Ventura v. Bebo Foods, Inc., 738 F.Supp.2d
8, 12 (D.D.C. 2010) (Ventura II). Mr. Donna was
pro se during both the summary judgment briefing and
the damages hearings.
Mr.
Donna filed for Chapter Seven bankruptcy on March 2, 2016. In
response, the Employees filed an adversary proceeding in the
United States Bankruptcy Court for the District of Columbia
seeking relief from the discharge of Mr. Donna's debts as
it relates to their damages award in Ventura II.
They sought relief pursuant to 11 U.S.C. § 526(a)(6),
which excludes from discharge debts "for willful and
malicious injury by the debtor to another entity," and
pursuant to 11 U.S.C. § 523(a)(2)(A), which excludes
from discharge debts "obtained by ... false pretenses,
false representation, or actual fraud."
The
Bankruptcy Court granted summary judgment for Mr. Donna,
finding that "the plaintiffs have not provided evidence
to support their claims that the debtor intended to defraud,
or knew any statements he made to the plaintiffs were false,
or that the debtor caused a willful and malicious injury to
the plaintiffs." Ventura v. Donna (In re
Donna), Bankr. No. 16-00091, Adv. No. 16-10026, 2017 WL
4457407, at *1 (Bankr. D.D.C. Sept. 27, 2017). The Employees
seek review of that ruling on the grounds there are genuine
disputes of material fact over whether Mr. Donna willfully
and maliciously injured his employees under 11 U.S.C. §
523(a)(6) when he failed to pay them wages, tips, and
overtime, and whether Mr. Donna's promises to pay his
employees' wages, tips, and overtime constituted
"false representations" under 11 U.S.C. §
523(a)(2)(A). They also seek review of the Bankruptcy
Court's order granting attorney's fees to Mr. Donna
for his response to their motion for a protective order in
the adversary proceeding. AA at 1552-1556.
II.
STANDARD OF REVIEW
A.
Summary Judgment
Summary
judgment decisions of the bankruptcy court are reviewed
de novo, United States v. Spicer, 57 F.3d 1152, 1159
(D.C. Cir. 1995), and that review extends to both questions
of law and fact, In re Capitol Hill Group, 447 B.R.
387, 393 (D.D.C. 2011). "Summary judgment in bankruptcy
is governed by Bankruptcy Rule 7056, which incorporates the
standard of Rule 56 of the Federal Rules of Civil Procedure:
summary judgment may be granted only if there is no genuine
issue of material fact and the moving party is entitled to
judgment as a matter of law." Id.; see also
Fed. R. Bankr. P. 7056 ("Rule 56 F.R.Civ.P. applies in
adversary proceedings"); Local Bankr. R. 7056-1
(adopting major parts of LCvR 7(h)(1)).
The
movant "bears the initial responsibility of informing
the district court of the basis for its motion, and
identifying those portions of the pleadings, depositions,
answers to interrogatories, and admissions on file, together
with the affidavits, if any, which it believes demonstrate
the absence of a genuine issue of material fact."
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)
(internal quotation marks omitted). In response, the
nonmoving party must "go beyond the pleadings and by her
own affidavits, or by the depositions, answers to
interrogatories, and admissions on file, designate specific
facts showing that there is a genuine issue for trial."
Id. at 324 (internal quotation marks omitted).
At the
summary judgment stage, "the judge's function is
not... to weigh the evidence and determine the truth of the
matter but to determine whether there is a genuine issue for
trial." Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 249 (1986). Although "[t]he evidence is to be
viewed in the light most favorable to the nonmoving party and
the court must draw all reasonable inferences in favor of the
nonmoving party," Talavera v. Shah, 638 F.3d
303, 308 (D.C. Cir. 2011), "[i]f the evidence is merely
colorable ... or is not significantly probative . .. summary
judgment may be granted," Anderson, 477 U.S. at
249-50.
B.
Discovery Sanctions
Under
Rule 37 of the Federal Rules of Civil Procedure, "the
district court has broad discretion to impose sanctions for
discovery violations." Bonds v. District of
Columbia, 93 F.3d 801, 808 (D.C. Cir. 1996); see
also Fed. R Bankr. P. 7037 ("Rule 37 F.R.Civ.P.
applies in adversary proceedings.").
"[D]iscovery-related orders" are reviewed for
"abuse of discretion, a 'narrowly circumscribed'
scope of review." Parsi v. Daioleslam, 778 F.3d
116, 125 (D.C. Cir. 2015) (quoting Lee v. Dep't of
Justice, 413 F.3d 53, 59 (D.C. Cir. 2005)). In reviewing
discovery sanctions, the Court may reverse the Bankruptcy
Court "only if.. . its actions were clearly
unreasonable, arbitrary or fanciful." Bonds, 93
F.3d at 807 (internal quotation marks omitted).
III.
THE FACTS IN THE RECORD
A.
The Bankruptcy Court Did Not Have an Obligation to Review
the Entire District Court Record.
As a
preliminary matter, the Employees contend that the Bankruptcy
Court should have reviewed the entire record that was before
the district court in Ventura I and Ventura
II (the "District Court") when ruling on
Appellee's motion for summary judgment. Appellant Br. at
12 [ECF No. 5]. They note that the District Court conducted
three evidentiary hearings and heard testimony from Mr.
Donna, restaurant managers, and five of his employees, but
contend that the Bankruptcy Court "failed to consider
any of the facts from the District Court record which
contravened Mr. Donna's self-serving declaration."
Id. If the Bankruptcy Court had reviewed those
facts, the Employees claim that it would have found that
"Mr. Donna had not suffered from poor business
decision-making, but had willfully and intentionally engaged
in a pattern of wage theft, and then deliberately
misrepresented to his employees that he would pay them
...." Id.
To
support their argument, the Employees rely on In re
Makozy, which similarly involved an adversary proceeding
to block the discharge of debts stemming from an FLS A
judgment. The In re Makozy court "look[ed] at
the findings supporting the [d]istrict [c]ourt's
conclusion that the actions were 'willful' under the
FLSA" to determine whether the actions were willful
under 11 U.S.C. § 523(a)(6). Appellant Br. at 12;
United States v. Makozy (In re Makozy), Bankr. No.
13-25231, Adv. No. 13-2440, 2013 WL 9663062, *3 (Bankr. W.D.
Pa. Sept. 9, 2014). In re Makozy differed from this
case because there was no record before the In re
Makozy court. The summary' judgment filings did not
include record citations or an appendix; instead, they
referred entirely to the FLSA court's findings.
See Makozy Br. in Supp. Mot. Summ. J. [ECF No. 37]
& United States Br. in Supp. Mot. Summ. J. [ECF No. 39],
In re Makozy, Adv. No. 13-2440-CMB. In contrast, in
this case, there was a record before the Bankruptcy Court
containing evidence developed in both the adversarial
proceeding and the FLSA case. See, e.g., AA at
1062-1312.
The
Bankruptcy Court did not have an obligation to depart from
ordinary summary judgment procedures and review the parts of
the District Court record that the parties did not cite in
their summary judgment motions. See Jackson v. Finnegan,
Henderson, Farabow, Garrett & Dunner, 101 F.3d 145,
154; 151 (D.C. Cir. 1996) (stating in reference to Local
Civil Rule 7h, which the Local Bankruptcy Rules have adopted,
that the Court is "under no obligation to sift through
the record" on summary judgment, and that the burden is
"on the parties and their counsel, who are most familiar
with the litigation and the record, to crystallize for the
district court the material facts and relevant portions of
the record."). In their opposition to Mr. Donna's
motion for summary judgment, the Employees had the
responsibility to present all the evidence demonstrating a
genuine dispute of material facts to the Bankruptcy Court.
See Celotex, 477 U.S. at 324 (finding that Federal
Rule of Civil Procedure 56(e) requires "the nonmoving
party to "go beyond the pleadings and by [their] own
affidavits, or by the depositions, answers to
interrogatories, and admissions on file, designate specific
facts showing that there is a genuine issue for trial.")
(internal quotations omitted).
Although
the Bankruptcy Court did not include specific citations to
the record in its opinion, contrary to the Employees'
assertions, it based its decision on facts in the record
derived from the FLSA proceedings, including those
unfavorable to Mr. Donna. See, e.g., In re Donna,
2017 WL 2017 4457407, at *2 (noting that "the debtor did
not pay the plaintiffs all their wages, and often the
plaintiffs would receive unsigned checks, checks that were
postdated, or checks that would bounce .... When plaintiffs
would ask the debtor to pay them, he would tell them that the
company was having financial difficulty, but it was his
intent to pay them in full. Additionally, when employees
threatened to leave, the debtor would ask them to stay
promising to pay them when the restaurant had the
money.").
As Mr.
Donna argues, the Employees challenge the difference between
the District and Bankruptcy Courts' characterizations of
the evidence. They claim that the District Court found that
"Mr. Donna deliberately disregarded his legal
obligations to pay his employees and instead engag[ed] in a
widespread illegal pay practice," Appellant Br. at 21,
while the Bankruptcy Court disputed that finding and instead
concluded that Mr. Donna's "repeated and flagrant
violations" of D.C. and federal law were "simply a
failing business man unable to pay his debts." Id;
compare Ventura II, 738 F.Supp.2d at 12, 31 (describing
defendants' practice of "issuing checks without
signatures, issuing post-dated checks, and issuing checks
despite insufficient funds" as
'''persistent and widespread,
''' and finding, in relation to determining
money owed to Jesus Ventura from his time at Galileo, that
"[p]laintiffs .. ..have submitted ample evidence showing
that defendants deliberately disregarded their legal
obligations to pay their employees.") (emphasis added)
with In re Donna, 2017 WL 2017 4457407, at *7
(concluding that "[t]he plaintiffs do not show a
widespread illegal payment scheme.'") (emphasis
added). But they have not demonstrated why the Bankruptcy
Court should be bound by the District Court's
conclusions, especially given that the two courts were
considering different causes of action- violations of wage
laws versus exceptions to discharge under bankruptcy law. The
District Court's conclusion that Mr. Donna "took a
willful act to not pay the plaintiffs" does not equate
to "proof that the debtor caused a willful injury."
In re Donna, 2017 WL 2017 4457407, at *6; see
also Faria v. Silva (In re Silva), Bankr. No. 12-17413,
Adv. No. 12-1274, 2014 WL 217889, at *10 (D. Mass. Jan. 21,
2014) ("[B]reach of an employment contract through
failure to pay wages, by itself, is not enough to constitute
a willful injury."). Furthermore, Mr. Donna, who is now
represented by counsel, has adduced support for his case,
such as his inability to pay his employees, that may not have
been relevant to the District Court litigation. For these
reasons, the Bankruptcy Court did not err by relying only on
the record before it in the adversary proceedings.
B.
Material Facts to Which There is No. Genuine Dispute
Bebo
Trattoria paid its employees irregularly, and distributed
checks that were deficient in various ways-sometimes they
were postdated, unsigned, made for zero dollars, or did not
reflect the hours that employees worked. E.g., AA at
1077-79 (Ventura Test.) (testifying that sometimes employees
received paychecks every three weeks instead of every two
weeks, that checks were not signed, and that he was not paid
in total for about six weeks Of work); A A at 1287 (Ventura
Aff.) (paystubs did not reflect actual hours, check amounts
were zero, checks were often post-dated); AA at 1298 (Romic
Aff.) (paystubs did not reflect hours); AA at 1300 (Sosaya
Aff.) (same); AA at 1293 (Douah Aff.) (paystubs did not
reflect hours, check amounts were zero, checks were
postdated); AA at 1453 (Dorjgotov Dep.); AA at 1295 (Ramos
Aff). Employees were often unable to cash their paychecks due
to insufficient funds in Bebo's bank -account.
E.g., AA at 1124 (Scott Test.) ("We would all
go to the bank and stand in line and be told that our checks
couldn't be cashed."); AA at 1380 (Sosaya Dep.)
(testifying that employees had to "wait in line"
and "whoever cash[ed] the check[s] first g[o]t the
money. The rest of the people has[sic] to wait for probably
one week, two weeks ... Basically this happens most of the
time, all the time."); AA at 1097 (Vuckovic Test.); AA
at 1287 (Ventura Aff); AA at 1293 (Douah Aff); AA at 1453-54
(Dorjgotov Dep.). Employees did not receive some overtime
payments, and some of their tip wages. E.g., AA at
1300 (Sosaya Aff); AA at 1302 (Milojevic Aff).
When
employees asked about their missing wages, Mr. Donna promised
to pay them their full wages, but did not do so.
E.g., AA at 1296 (Ramos Aff. ¶¶ 14-15)
("During one conversation we had, Roberto Donna told me
he was going to apply for a loan to pay everyone he owed
unpaid wages. I don't know if he applied for or received
the loan. Roberto Donna would promise to pay me my wages in
5-7 days or in a couple of weeks; sometimes he would pay me
part of my wages but never the entire amount."); AA at
1298 (Romic Aff.) ("Roberto Donna said he had to pay
Bebo's bills and was behind with payments; he promised to
pay us in a few weeks but he never did"); AA at 1300
(Sosaya Aff. identical); AA at 1302 (Milojevic Aff.
identical); AA at 706 (Ramos Test.) (agreeing that Mr. Donna
explained to Mr. Ramos that business was bad and there was
not enough money to pay the employees). Mr. Donna also stated
that when "employees complained to me about the delay in
payment or difficulty cashing certain checks, I acknowledged
that Bebo had cash flow difficulties, that [Bebo] needed to
pay the operating expenses of the restaurant, and that it was
my intention that they receive their payments when funds
became available." AA at 720 (Donna Decl.)
According
to Arturo Ramos, who worked in a variety of positions at the
restaurant, when he tried to work fewer shifts so that he
could obtain employment elsewhere, one of the
restaurant's managers, Corrado Bonino, told him that the
restaurant would "pay only to the people who work full
time here, not who works[sic] part time." AA at 1405;
1407-08 (Ramos Dep.). Ms. Scott, Bebo's director of
marketing who also served as Mr. Donna's personal
assistant, testified that Mr. Donna would threaten to
"ruin [the] careers" of individuals who left the
restaurant, and that he threatened to "pull
[employees'] green cards or call immigration if they quit
on him." AA at 1437-38 (Scott Dep.).
In
order to finance Bebo, RD Trattoria, an entity Mr. Donna
formed to operate the restaurant, obtained "hi-cost
financing for working capital in the form of cash advances on
future credit card sales." AA at 718 (Donna Decl.). The
restaurant took out a "lump sum loan for working
capital" from a financing company that managed the
restaurant's credit card processing systems. Id.
The financing company typically deducted 20% off the top of
all credit card sales as payment towards the loan.
Id. Within a few months after Bebo opened, Mr. Donna
and his wife stopped receiving salaries from the restaurant.
Id. at 719. He and his wife supported themselves by
teaching cooking classes, cashed out their life insurance
policies, and drew down their savings. Id. In the
summer of 2007, Mr. Donna "obtained additional borrowed
funds to help pay Bebo's debts by pledging [his]
residence as collateral for an additional loan to RD
Trattoria." Id. at 720 (Donna Dec). Despite his
"efforts to make Bebo a financial success, in April
2009, Bebo lost its lease and closed. By the time Bebo
closed, its business had declined approximately 40% from its
peak. Many of the business's records were lost when the
landlord seized the premises." Id. By 2010, Mr.
Donna had "lost [his] home and [his] Dupont Circle
apartment based upon [his] personal guaranty of Bebo's
business debts. [His] automobile had been repos[essed]."
Mr. Donna and his wife moved in with his in-laws.
Id.
In
November of 2010, the State of Virginia filed a complaint
against Mr. Donna, alleging that from November 2006 to
approximately April 2009, Mr. Donna "withheld taxes from
his employees and charged and collected the sales tax and
held the money in trust for the Commonwealth of Virginia but
used the money for his own purposes." AA at 1317-18. He
pled guilty to the charge, and was ordered to pay restitution
to the Commonwealth of Virginia Department of Taxation of
$375, 439.56, plus interest at 8% per year. AA at 1319-1322.
IV.
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