The opinion of the court was delivered by: JOANNA SEYBERT, District Judge
Pending before this Court is an appeal arising from a Chapter 7
bankruptcy action filed in the United States Bankruptcy Court for
the Eastern District of New York by Debtor Randall S. Appel
("Debtor"). Appellees, Norman Bard and Shirley Bard, filed an
adversary proceeding against Debtor, seeking a declaration that
the Debtor was not entitled to discharge under § 523 of the
Bankruptcy Code. Debtor appeals from that portion of the Order of
the Honorable Dorothy Eisenberg, U.S.B.J., dated October 2, 2003,
which granted Appellees motion for summary judgment and declared
that the Debtor was not entitled to a discharge under § 523 of
the Bankruptcy Code (the "Bankruptcy Order").
Debtor represented the Appellees as their registered investment
advisor. Appellees, an elderly couple, entrusted Debtor to
conservatively manage their life savings. Debtor instead placed
Appellees' funds into a series of high-risk investments, while
receiving enormous commissions, "kickers" and other bonuses from
the companies he recommended. The Appellees' investments ended in
an incredible loss of their life savings.
The Appellees then commenced an arbitration proceeding against
Debtor and his entities encaptioned Norman Bard and Shirley Bard
v. Randall S. Appel, Appel Financial Planning, Ltd., Strategic
Assets, Inc. and Ameriprop, Inc., National Association of
Securities Dealers (NASD) Arbitration No. 00-01340, in Boca
Raton, Florida on or about March 27, 2000 ("Arbitration
Proceeding"). Appellees sought recovery against Debtor on claims
for breach of contract, violations of Sections 517.01 and 517.301
of the Florida Securities and Investor Protection Act, breach of
fiduciary duty, breach of duty of loyalty, violation of SEC Rule
10b-5 and Section 10(b) of the Securities and Exchange Act of
1934, negligence and common law fraud.
On October 23, 2001, the eve of trial in the Arbitration
Proceeding, Debtor and his entities filed voluntary petitions
under Chapter 7 of the Bankruptcy Code. Thereafter, the Appellees
obtained relief from the automatic stay from the Bankruptcy Court
for leave to prosecute the Arbitration Proceeding. Debtor failed
to comply with at least three orders previously entered in the
Arbitration Proceeding. Due to Debtor's failure to comply, he was
precluded from presenting testimony and cross-examining witnesses
at the Arbitration Proceeding. Debtor was, however, permitted to
appear at the Arbitration Proceeding and the Arbitration Panel
did read and consider Debtor's answer. The Arbitration Panel
issued an award on or about December 5, 2002 against Debtor and
in favor of Appellees. Debtor never appealed the award.
On January 17, 2002, the Appellees commenced an adversary
proceeding in the United States Bankruptcy Court for the Eastern
District of New York seeking a ruling that Debtor's liability to
them was non-dischargeable under Sections 523(a)(2), 523(a)(4)
and 523(a)(6) of the United States Bankruptcy Code. On October 2,
2002, the Bankruptcy Court entered the Bankruptcy Order which
granted Appellees' motion for summary judgment and stated that
Debtor was collaterally estopped from relitigating the issues
that were previously determined after years of litigation in the
Arbitration Proceeding. Debtor now appeals the Bankruptcy Order.
STANDARD OF APPELLATE REVIEW
Under Rule 8013 of the Federal Rules of Bankruptcy, "on an
appeal the district court . . . may affirm, modify, or reverse a
bankruptcy judge's judgment, order, or decree or remand with
instructions for further proceedings." FED. R. BANK. P. 8013. The
court's "finding[s] of fact, whether based on oral or documentary
evidence, shall not be set aside unless clearly erroneous. . . ."
Id.; see also In re Momentum Mfg. Co., 25 F.3d 1132, 1136
(2d Cir. 1994); In re PCH Assoc., 949 F.2d 585, 597 (2d Cir.
1992). The bankruptcy court's legal conclusions are evaluated
de novo. See In re Momentum Mfg. Co., 25 F.3d at 1136.
A court may properly grant summary judgment only "if the
pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that
the moving party is entitled to judgment as a matter of law."
FED. R. CIV. P. 56(c). The burden of proof is on the moving party
to show that there is no genuine issue of material fact, Gallo
v. Prudential Residential Servs., L.P., 22 F.3d 1219, 1223 (2d
Cir. 1994) (citing Heyman v. Commerce & Indus. Ins. Co.,
524 F.2d 1317, 1320 (2d Cir. 1975)), and "all ambiguities must be
resolved and all inferences drawn in favor of the party against
whom summary judgment is sought." Id. (citing Eastway Constr.
Corp. v. City of New York, 762 F.2d 243, 249 (2nd Cir. 1985));
See also Hayes v. New York City Dept. of Corrs.,
84 F.3d 614, 619 (2d Cir. 1996). "Factual disputes that are irrelevant or
unnecessary will not be counted." Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 247 (1986) (citing 10A Charles A. Wright,
Arthur R. Miller, & Mary Kay Kane, Federal Practice and
Procedures § 2725, at 93-95 (1983)).
A party opposing a motion for summary judgment "may not rest
upon the mere allegations or denials of his pleadings, but . . .
must set forth specific facts showing that there is a genuine
issue for trial." Anderson, 477 U.S. at 248 (quoting First
Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 288-89 (1968)).
Under the law of the Second Circuit, "when no rational jury could
find in favor of the nonmoving party because the evidence is so
slight, there is no genuine issue of material fact and a grant of
summary judgment is proper." Gallo, 22 F.3d at 1224 (citing
Dister v. Continental Group, Inc., 859 F.2d 1108, 1114 (2d Cir.
1988)). Mere conclusory allegations, speculations or conjecture
will not avail a party opposing summary judgment. Kulak v. New
York, 88 F.3d 63, 71 (2d Cir. 1996).
"`The relief of discharge is a cornerstone of the debtor's
"fresh start" in bankruptcy. It enables the debtor to begin his
post-bankruptcy life with a clean slate vis-à-vis his
creditors.' Such relief, however is a privilege not a right and
should inure only to the benefit of the honest Debtor." In re
Pimpinella, 133 B.R. 694, 697 (Bankr. E.D.N.Y. 1991) (internal
citations omitted). The provisions of the Bankruptcy Code which
pertain to exceptions to discharge state:
§ 523. Exceptions to Discharge.
(a) A discharge under section 727, 1141, 1228(a),
1228(b), or 1328(b) of this title does not discharge
an individual debtor from any debt
. . .
(2) for money, property, services, or an extension, renewal, or
refinancing of credit, ...