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In re Donna

United States District Court, District of Columbia

October 28, 2019

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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