ATLANTA — The U.S. Court of Appeals for the 11th Circuit has determined a debt owed between business partners cannot be discharged based on a bankruptcy claim.
David Beem and Gary Allan Ferguson have been in court for over 10 years after their business, Floors to Doors Inc., failed.
After Hurricane Andrew in 1992, the men joined forces to develop Floors to Doors, which sold discount home improvement and building supplies, according to appeal court documents.
The business fell apart in 2007 and the two men took their dispute to court.
“The parties admit that the business never thrived and, over time, the business relationship deteriorated,” according to court records.
Along the way, Ferguson made accusations in court that Beem had been embezzling funds, while Beem filed several counterclaims including defamation.
“Mr. Beem alleged that Mr. Ferguson engaged a ‘campaign of harassment and defamation’ against him and had filed numerous baseless complaints with government agencies to harm his reputation and ‘for the improper purpose of extorting [him] into selling FTD,'" the court wrote.
Beem was awarded summary judgment against Ferguson nine years ago for a claim of defamation.
However, Ferguson then filed for bankruptcy. Beem went to the court to try to have the debt declared non-dischargeable but his lawyer erred in the filing.
“Instead of filing a ‘complaint’ and initiating an adversary proceeding, Mr. Beem’s attorney filed an original and an amended ‘Motion to Dismiss or for Determination of Non-Dischargeability of His Debt’ on October 5 and 9, respectively. Then, apparently realizing his procedural mistake, Mr. Beem’s attorney filed an adversary complaint regarding dischargeability on October 17, 2012. Mr. Ferguson moved to dismiss the adversary complaint as untimely,” the appeals court decision stated.
Yet, the lower court found the application was timely as it could extend the deadline for "excusable neglect" and the application was timely but improperly filed.
“Mr. Ferguson appealed the bankruptcy court’s orders denying his motion to dismiss and granting Mr. Beem’s motion for summary judgment to the district court, which affirmed, ruling that Mr. Beem’s untimely adversary complaint related back to the timely motion and that summary judgment was appropriate.
“We have previously held that certain documents and filings were sufficient to constitute a ‘complaint’ under Rule 8, even though they were not labeled as such,” according to the opinion.
“Our sister circuits have done the same,” the opinion said.
“In our view, Mr. Beem’s timely filed ‘Motion to Dismiss or for Determination of Non-Dischargeability of His Debt’ satisfied the Rule 8 pleading requirements for a complaint,” according to the opinion.
“We recognize that Mr. Beem’s filing was denominated a ‘motion’ and not a ‘complaint.’ It also does not contain a caption indicating that Mr. Beem is the plaintiff in an adversary proceeding against the defendant, Mr. Ferguson. Rather, it contains the caption of the main bankruptcy case. But these technical deficiencies are not determinative, for we have refused to treat the caption of a complaint as determinative of the nature of the action,” the court decision stated.
The court agreed with the bankruptcy and district courts that Beem's motion, "although a deficient pleading, [was] sufficient to place the debtor on notice of the claim against him and substantially complie[d] with the notice pleading requirements of Rule 7008.”