The opinion of the court was delivered by: William Q. Hayes United States District Judge
Bankruptcy No. 08-06940-LT7
Bankruptcy Adversary No. 09-90584-LT
The matter before the Court is the appeal of the Bankruptcy Court's order granting summary judgment in favor of Appellees Mohammed Kaskas and United Family, LLC ("United Family"). (ECF No. 1).
On October 16, 2009, Appellant Joseph Fielding filed a Complaint against Kaskas and United Family in Los Angeles County Superior Court. (Compl., ECF No. 3-1 at 11).*fn1
A. Allegations of the Complaint
In March 2005, Fielding purchased a service station business located at 3401 Long Beach Boulevard in Long Beach, California from Josef S. Friwat.
On May 26, 2006, Fielding filed an action against Friwat and others for fraud and deceit in Orange County Superior Court.
In November 2006, "[b]ecause the business and its financial condition was misrepresented to Fielding by Friwat ..., Fielding turned the business back to Friwat." Id. ¶ 8.
On December 3, 2007, a jury returned a verdict in favor of Fielding, finding Friwat liable and awarding compensatory and punitive damages in the amount of $1,329,000.
On July 27, 2008, Friwat filed a voluntary Petition for Bankruptcy in the United States Bankruptcy Court, Southern District of California.
On December 10, 2008, Friwat filed a motion in his bankruptcy case for an order authorizing the sale of the subject property to Kaskas for $2,000,000, "which was far less than the market value and, also, less than the total value of the secured liens against the subject property." Id. ¶ 16.
On May 14, 2009, the bankruptcy court conducted an auction sale of the property. The high bidder at the auction was Ibrahim Guirges, who bid $2,700,000 for the property. The back-up buyer was Kaskas, "who was affiliated with Friwat as an undisclosed partner, or Kaskas's assignee, who bid the sum of $2,275,000." Id. ¶ 17. "The bankruptcy court ordered that Fielding's junior priority judgment lien attach to the net sales proceeds...." Id.
"Guirges could not obtain financing because, subsequent to May 14, 2009, Friwat presented false and misleading information to Guirges lender, Beach Business Bank, regarding alleged environmental contamination of the subject property. At the time ..., Kaskas was Friwat's partner." Id. ¶ 18.
On June 30, 2009, "Kaskas's nominee, Defendant [United Family], funded and closed the escrow for the sale of the subject property." Id. ¶ 19.
"Prior to the bankruptcy court ordered auction sale, Kaskas communicated with prospective bidders/purchasers of the subject property, advising these bidders/purchasers that the subject property had severe environmental problems, which statements were intended to and succeeded in dissuading potential bidders/purchasers from entering the bidding at the auction sale." Id. ¶ 20.
The Complaint alleges four causes of action: (1) intentional interference with economic relations; (2) negligent interference with economic relations; (3) conspiracy to defraud creditors; and (4) willful misconduct. In support of the first cause of action, the Complaint alleges:
As a direct and proximate result of the fraudulent conduct of Friwat and Defendants Kaskas [and United Family], the prospective buyer for the purchase of the subject property, Guirges, was unable to go forward with the purchase of the property. In addition, Defendants' fraudulent conduct dissuaded prospective bidders/purchasers from bidding on and purchasing the subject property.
Id. ¶ 22. In support of the second cause of action, the Complaint alleges that "when the Defendants made the aforementioned statements to Guirges' lender, Beach Business Bank and to prospective bidders/purchasers of the subject property at the bankruptcy court ordered auction sale, they had no reasonable ground for believing them to be true." Id. ¶ 26. In support of the third cause of action, the Complaint alleges that Defendants "conspired between themselves to hinder, delay and defraud [Fielding] in the collection of his claim and resulting judgment against Friwat." Id. ¶ 30. In support of the fourth cause of action, the Complaint alleges that Defendants committed "wilful misconduct" to damage Fielding. Id. ¶ 38.
B. Removal to Bankruptcy Court
On October 27, 2009, Kaskas and United Family removed the Complaint to the United States Bankruptcy Court for the Central District of California pursuant to 28 U.S.C. § 1441 and Federal Rule of Bankruptcy Procedure 9027-1. (ECF No. 3-1 at 87-91). The Notice of Removal states:
Joseph Fielding, the Plaintiff in the removed action, is a judgment creditor of Josef Friwat, the Debtor in a Chapter 11 case now pending in the Souther District of California, entitle In Re Josef Friwat, Case No. 08-06940-LT.... United Family LLC, the Defendant in the removed action, is the buyer of the Debtor Friwat's Real Property pursuant to 11 U.S.C. § 363. Mohammad Kaskas, the other Defendant in the removed action, is the managing director of United Family LLC. United Family LLC was the successful bidder for the Debtor's Real Property and purchased the same pursuant to an order of the bankruptcy court....
On December 23, 2009, the Complaint was transferred to the United States Bankruptcy Court for the Southern District of California, where it was assigned Adversary Proceeding No. 09-90584-LT, related to In Re Josef Friwat, Bankruptcy Case No. 08-06940-LT7.
On August 20, 2010, Kaskas and United Family filed a motion for summary judgment. (ECF No. 3-2 at 2-102).
On September 7, 2010, Fielding filed an opposition to the motion for summary judgment. ...