United States District Court, D. South Carolina, Charleston Division
MICHELLE L. VIEIRA, as Ch. 7 bankruptcy trustee for debtors Ken C. Goss and Gretchen G. Goss, Plaintiff,
MARK SIMPSON, CHRISTY A. SIMPSON, SIMPSON FAMILY HOLDINGS INC., AARON L. SILVERMAN, and JONES SIMPSON & NEWTON PA, Defendants.
C. NORTON, UNITED STATES DISTRICT JUDGE
matter is before the court on a motion to alter or amend
judgment filed by plaintiff Michelle L. Vieira, as bankruptcy
trustee for debtors Ken and Gretchen Goss
(“Vieira”). Vieira seeks reconsideration of the
court's March 28, 2016 order (“March 2016
Order”) in which the court reconsidered its July 23,
2015 order (“July 2015 Order”) and granted
defendants Mark Simpson (“Mark”) and Jones,
Simpson & Newton, P.A.'s (“JS&N, ”
together with Mark, the “JS&N defendants”)
motion for summary judgment as to Vieira's claims for
legal malpractice and equitable subordination. For the
following reasons, the court refers the instant motion and
the remainder of this action to the United States Bankruptcy
Court for the District of South Carolina (the
case arises out of a loan transaction between Ken and
Gretchen Goss (“Ken” and “Gretchen, ”
together “the Gosses”) and Simpson Family
Holdings, Inc. (“SFH”). In June 2007, Ken, a
residential home builder, contacted Mark, an attorney who had
performed a number of real estate closings for Ken in the
past, to ask whether Mark knew of any investors willing to
make a loan that would allow the Gosses to finish a
remodeling project on Hilton Head Island, South Carolina.
Sometime later, Mark informed Ken that he had found an
investor willing to make such a loan. Mark instructed the
Gosses to meet with him and the lender at the law offices of
JS&N, where Mark is a partner. Once they arrived at
JS&N's offices, the Gosses learned that the
prospective lender was SFH, a corporation owned by Mark's
wife, defendant Christy Simpson
(“Christy”). Mark was SFH's vice president,
though he did not disclose this fact at the time and did not
advise the Gosses to seek independent legal counsel.
terms of the loan were set out in a note which the Gosses
Dated: June 29, 2007 (the “Note”). ECF No.
62-2. The Gosses consented to JS&N
representing both parties to the transaction. ECF No. 62-10.
The Note was modified either four or five times between June
29, 2007 and August 25, 2009. ECF Nos. 62-13-62-15; ECF No.
72-9 at 5. Each modification extended the maturity date of
the loan and adjusted the premium due at maturity. ECF Nos.
62-13-62-15; ECF No. 72-9 at 5. Mark signed the modifications
as vice president of SFH. ECF Nos. 62-13-62-15; ECF No. 72-9
August 3, 2009, SFH sued the Gosses in the South Carolina
Court of Common Pleas for nonpayment of the Note. ECF No.
62-16. The case settled, resulting in the final modification
of the Note, which extended the maturity date to August 30,
2010. ECF No. 62-1 at 4; see also ECF No. 62-17,
Final Modification. In connection with this final
modification, the Gosses signed a document titled
“Collateral Assignment of Limited Partnership
Interest” (the “GFLP Assignment”), which
assigned the Gosses' right to receive payments from their
interest in the Goss Family Limited Partnership
(“GFLP”) to SFH in the event the Gosses defaulted
on the loan. ECF No. 62-18. After a series of subsequent
assignments, the parties eventually held the following
relative interests in the note, mortgage, and the GFLP
Assignment: defendant Aaron L. Silverman
(“Silverman”) held 36.01%, SFH held 30.86%, Mark
and Christy held 18.52%, PENSCO A held 7.41%, and PENSCO
held 7.20%. ECF No. 72 at 3.
January 25, 2012, the Gosses filed for Chapter 7 bankruptcy.
On April 22, 2013, Vieira filed this action in the bankruptcy
court alleging the following causes of action: fraud,
negligence, and breach of fiduciary duty against Mark;
malpractice against Mark and JS&N; breach of fiduciary
duty against JS&N; violation of the Fair Debt Collection
Practices Act (“FDCPA”) against SFH, Mark, and
Christy; and civil conspiracy/joint enterprise, disgorgement
of ill-gotten gain, and equitable subordination against all
defendants. ECF No. 1-1, Compl. ¶¶ 64-119. On
September 6, 2013, Mark and JS&N moved for an order
withdrawing reference of this proceeding from the Bankruptcy
Court. ECF No. 1. The matter was transferred to this court on
September 25, 2013. On July 24, 2014, the JS&N defendants
moved for summary judgment. ECF No. 62. The court granted the
JS&N defendants' motion for summary judgment on March
23, 2015,  ECF No. 102, but on July 23, 2015, the
court reconsidered its decision and denied summary judgment
to the extent Vieira alleged that the JS&N defendants
committed legal malpractice with respect to the GFLP
Assignment. ECF No. 116. The July 2015 Order also held
Viera's equitable subordination claim against the
JS&N Defendants in abeyance. Id. at 4. On March
28, 2016, the court reconsidered its July 2015 Order and once
again granted the JS&N defendants' motion for summary
judgment on all claims. ECF No. 123. The court reasoned that,
even if the JS&N defendants breached a duty owed to the
Gosses, there was no evidence that this breach caused the
Gosses any damages. Id. at 4-7.
filed the instant motion on April 25, 2016, arguing that the
court's most recent order-the March 2016
Order-incorrectly granted the JS&N defendants summary
judgment on Vieira's equitable subordination claim. The
JS&N defendants filed a response on May 12, 2016. The
court held a hearing on July 15, 2016. The matter is now ripe
for the court's review.
the court could address the merits of the underlying motion
for summary judgment for a fourth time-or emphasize the
impropriety of raising new arguments on a Rule 59(e)
motion-it strikes the court that the only remaining issues in
this action pertain to a claim that arises under 11 U.S.C.
§ 510(c) of the Bankruptcy Code. The original reasons
for withdrawing this action's reference to the Bankruptcy
Court no longer apply. In these circumstances, the court
finds it appropriate to exercise its discretion to refer this
matter back to the Bankruptcy Court.
to 28 U.S.C. § 157(a), district courts are authorized
“to refer bankruptcy matters at their discretion to
bankruptcy courts.” In re Grewe, 4 F.3d 299,
304 (4th Cir. 1993). This grant of authority extends to
“any or all cases under title 11 and any or all
proceedings arising under title 11 or arising in or related
to a case under title 11.” 28 U.S.C. § 157(a).
Though courts rarely provide any analysis when exercising
their authority under § 157(a),  this court's decision is
guided by decisions in this circuit referring cases to the
Bankruptcy Court in the first instance.
Vieira v. AGM, II, LLC, another court in this
district addressed a motion to refer a bankruptcy
trustee's action against a creditor to the Bankruptcy
Court. 363 B.R. 746 (D.S.C. 2007). The trustee alleged that
the defendant had effectively inserted certain individuals
into the debtor's business who made decisions that
benefited the creditor and harmed the debtor. Id. at
749. The debtor was forced into bankruptcy under Chapter 7 of
the Bankruptcy Code, and the trustee brought claims for
breach of fiduciary duty to creditors, breach of fiduciary
duty to the debtor, constructive trust, and accounting in the
district court. Id.
AGM, II court applied the framework originally set
forth in Travelers Ins. Co. v. Goldberg, 135 B.R.
788 (D. Md. 1992), which provides as follows:
In deciding whether to refer this case, the Court must first
determine (1) whether this action is sufficiently
“related to” the bankruptcy cases to permit a
referral under § 157(a), and (2) whether and to what
extent a referral is permissible at all in light of the
plaintiffs' jury demand. If, after these issues are
resolved, the Court finds that it has the discretion to grant
defendants' motion [to refer the case], it must still
decide whether a referral would be of practical benefit to
the administration of the action.
AGM, II, LLC, 363 B.R. at 749 (alterations in
original) (quoting Travelers Insurance Co., 135 B.R.