Opinion
CASE NO. C09-1425JLR
07-02-2014
JON MILLER, et al., Plaintiffs, v. MEDIA SERVICES ACQUISITION CORP., et al., Defendants.
ORDER GRANTING SUMMARY
JUDGMENT
I. INTRODUCTION
This matter comes before the court on Plaintiffs' unopposed motion for summary judgment against Defendants Adam Cohen and Jennifer Sultan. (See Mot. (Dkt. # 102).) Defendants have filed no response. (See generally Dkt.) Having considered the submissions of the parties, the balance of the record, and the relevant law, and deeming oral argument unnecessary, the court GRANTS Plaintiffs' motion for summary judgment.
II. BACKGROUND
The following facts are undisputed. Plaintiffs Jon Miller, Tyler Dary, Tim Fujita-Yuhas, Ian Garrison, Tim Hinderliter, Deidra Johnson, Pedro Margate, Steven Ohmert, Jeffery Payne, Stephen Speicher, and Charles Tso were formerly employed by defendant Media Services Acquisition Corporation ("Media Services"). (Am. Compl. (Dkt. # 4) ¶¶ 3.5-3.15.) Mr. Cohen and Ms. Sultan were officers of Media Services. (Id. ¶¶ 3.2, 3.3.) After Plaintiffs' employments at Media Services were terminated, they brought this suit against Media Services, Ms. Cohen, and Ms. Sultan for past due wages, deferred compensation, and the value of their paid time off balances. (Id. ¶ 4.11.) Plaintiffs' claims against Mr. Cohen and Ms. Sultan are brought pursuant to RCW 49.52.050. (Id. ¶¶ 7.2-7.5). This statute prohibits officers of a company from willfully withholding wages (or other compensation) from employees and holds officers personally liable for doing so. See RCW 49.52.050.
Defendant Media Services has since been dismissed from the suit. (See Dkt. # 103.)
After Mr. Cohen and Ms. Sultan filed a bankruptcy petition, this action was automatically stayed. (See Dkt. # 88.) The bankruptcy court consolidated their bankruptcy proceedings and appointed a Chapter 11 Trustee. (See Disclosure Statement (Dkt. # 102-3) ¶ C (In re Cohen, No. 10-16732, First Amended Disclosure Statement in Connection with Trustee's Joint Plan of Liquidation under Chapter 11 of the Bankruptcy Code (April 13, 2013)).) In the bankruptcy proceeding, Plaintiffs (with the exception of Tim Fujita-Yuhas) filed proof of their claims against Mr. Cohen and Ms. Sultan in the total amount of $391,757.98. (See Proof of Claims (Dkt. # 102-2) at 3-4.) The Proof of Claims breaks down the precise amount of each Plaintiff's individual claim for withheld compensation. (See id. at 4.) The total amount of the Plaintiffs' bankruptcy claim includes unpaid wages, double damages under RCW 49.52.070, prejudgment interest, and attorneys' fees and costs. (See id.) Neither Ms. Sultan nor Mr. Cohen objected to this claim in bankruptcy court. (Subit Decl. (Dkt. # 102-1) ¶ 7.)
Plaintiff Tim Fujita-Yuhas dismissed his claims against Ms. Sultan and Mr. Cohen in this case because he did not want to participate in their bankruptcy action. (See 6/10/11 Order (Dkt. # 96).)
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The Disclosure Statement filed by the Trustee includes Plaintiffs' claims, which the Disclosure Statement lists as "Class 3," "unsecured," and "contingent, unliquidated." (See Disclosure Statement Ex. C.) Originally, the Trustee's First Amended Joint Plan of Liquidation ("Plan") anticipated no distributions to Class 3 claims such as Plaintiffs' claims. (See Disclosure Statement Ex. B ¶ 4.3.) The bankruptcy court entered an order ("Confirmation Order") approving the Disclosure Statement and confirming the Trustee's Plan. (Confirmation Order (Dkt. # 102-4).) The Confirmation Order, however, amended the Plan to require "the amount of $60,000 to be distributed pro rata among the holders of Allowed Class 3 Claims." (Id. ¶ 9.) The Confirmation Order also directed that "to the extent that any holder of an Allowed Claim is impaired under the Plan, the unpaid balance of any such Allowed Claim following all Distributions under the Plan shall not be discharged." (Id. ¶ 12.)
The Plaintiffs' claim was designated as an "Allowed Claim" under the Plan. The Trustee's Post-Confirmation Report states that "[o]n October 23, 2012, the Trustee distributed the Class 3 Carve-out in the amount of $60,000 pro rata to the holders of Allowed Class 3 Claims." (Post-Confirmation Report (Dkt. # 102-5) ¶ 7.) The list of Allowed Claims included in the Post Confirmation Report shows that Plaintiffs received $11,624.68—or 2.96731 % of their total Allowed Claim of $391,757.98. (Post-Confirmation Report Ex. B at 4 ("Claim 0022"). On June 3, 2014, the bankruptcy court entered a Final Decree closing Mr. Cohen and Ms. Sultan's bankruptcy case. (Final Decree (Dkt. # 102-6).) Plaintiffs' now move for summary judgment, arguing that the bankruptcy court's allowance of their claim in the bankruptcy proceedings constitutes res judicata with respect to their claims in this action. (See Mot.)
III. ANALYSIS
To begin, because the bankruptcy court has entered a Final Decree closing Mr. Cohen and Ms. Sultan's bankruptcy proceeding, the court ORDERS that the stay entered in this case (Dkt. # 88) is lifted.
A. Summary Judgment Standard
Federal Rule of Civil Procedure 56 permits a court to grant summary judgment where the moving party demonstrates (1) the absence of a genuine issue of material fact and (2) entitlement to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); see also Galen v. Cnty. of L.A., 477 F.3d 652, 658 (9th Cir. 2007). The moving party bears the initial burden of production of showing an absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. If the moving party will bear the ultimate burden of persuasion at trial, it must establish a prima facie showing that it is entitled to judgment as a matter of law. UA Local 343 v. Nor-Cal Plumbing, Inc., 48 F.3d 1465, 1471, 1473 (9th Cir. 1994). The burden then shifts to the non-moving party to designate specific facts demonstrating the existence of genuine issues for trial. Celotex, 477 U.S. at 324. If the nonmoving party fails to carry that burden, summary judgment for the moving party is proper. Nissan Fire & Marine Ins. Co., Ltd., v. Fritz Cos., Inc., 210 F.3d 1099, 1106 (9th Cir. 2000).
B. Res Judicata
Res judicata "provides that a final judgment on the merits of an action precludes the parties from re-litigating all issues connected with the action that were or could have been raised in that action." Rein v. Providian Fin. Corp., 270 F.3d 895, 898-99 (9th Cir. 2001). Res judicata is appropriate where: "(1) the parties are identical or in privity; (2) the judgment in the prior action was rendered by a court of competent jurisdiction; (3) there was a final judgment on the merits; and (4) the same claim or cause of action was involved in both suits." Id. (citing Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 713 (9th Cir. 2001)).
The Ninth Circuit has long held that "the allowance or disallowance of a claim in bankruptcy is binding and conclusive on all parties or their privies, and being in the nature of a final judgment, furnishes a basis for a plea of res judicata." Siegel v. Fed. Home Loan Mortgage Corp., 143 F.3d 525, 529 (9th Cir. 1998) (quoting United States v. Coast Wineries, 131 F.2d 643, 648 (9th Cir. 1942)); see also Wright v. Wells Fargo Bank, N.A., No. 11-00212SOM-RLP, 2012 WL 2973202, at *4-8 (D. Haw. July 19, 2012) (holding that bankruptcy court's overruling of objections to a proof of claim constituted res judicata); Bronson v. Green Tree Servicing, LLC, No. 2:03-CV-1611 JAM RRB, 2009 WL 546159, at *4-6 (E.D. Cal. Mar. 4, 2009) (holding that the bankruptcy court's previous disallowance of the plaintiffs proof of claims constituted res judicata). Moreover, even absent a separate formal order of allowance by the bankruptcy court, a proof of claims that is "deemed allowed" under 11 U.S.C. § 502(a) due to a lack of objection constitutes a final judgment for purposes of res judicata. Id. at 529-30 (granting summary judgment due to res judicata by bankruptcy proceedings). "Of course, if the court formally actually allows the claim, there can be little doubt about the ultimate res judicata effect of that allowance." Id.; see also EDP Med. Computer Sys., Inc. v. United States, 480 F.3d 621, 625 (2d Cir. 2007) (agreeing that a bankruptcy court's allowance of an uncontested proof of claim is a final judgment for res judicata purposes).
C. Plaintiffs' Claims
Plaintiffs' claims in this action meet all four of the criterion for res judicata. The claims in this case and the claims advanced in the bankruptcy proceeding involve identical parties. (Compare Proof of Claims and Disclosure Statement Ex. C with Am. Compl.) There is no dispute that the bankruptcy court is a court of competent jurisdiction. See Rein, 270 F.3d at 899. The same cause of action—a claim for wrongfully withheld compensation under RCW 49.52—is at issue in both proceedings. (Compare Proof of Claims and Disclosure Statement Ex. C with Am. Compl.)
Finally, the bankruptcy court rendered a final judgment on the merits. Neither Ms. Cohen nor Mr. Sultan objected to the Proof of Claims. (Subit Decl. ¶ 7.) The bankruptcy court's Confirmation Order directed that a sum of $60,000.00 would be distributed among the Allowed Class 3 Claims. (See Confirmation Order ¶ 9.) The Post-Confirmation Report by the trustee shows that the Plaintiffs' claim for $391,757.98 was determined to be an Allowed Class 3 Claim. (See Post-Confirmation Report Ex. B at 4.) On June 3, 2014, the bankruptcy court entered a Final Decree closing Mr. Cohen and Ms. Sultan's bankruptcy proceeding. (Final Decree (Dkt. # 102-6).) Accordingly, under Siegel, "there can be little doubt about the ultimate res judicata effect" of the bankruptcy court's allowance of Plaintiffs' claim. See 143 F.3d at 529; see also Wright, 2012 WL 2973202, at *4-8; Bronson, 2009 WL 546159, at *4-6.
The Post-Confirmation Report further shows that Plaintiffs received only $11,624.68—or 2.96731%—toward their total Allowed Claim. (Post-Confirmation Report Ex. B at 4 ("Claim 0022"). The remainder of their Allowed Claim was not discharged. (Confirmation Order ¶ 13 ("[T]o the extent that any holder of an Allowed Claim is impaired under the Plan, the unpaid balance of any such Allowed Claim following all Distributions under the Plan shall not be discharged.") Therefore, Defendants remain liable to Plaintiffs for the outstanding $380,133.30 in unpaid wages, other compensation, and attorneys' fees. The Proof of Claims that Plaintiffs filed in the bankruptcy proceedings specifies the amount of each Plaintiff's individual claim, and the court incorporates that schedule of distribution by reference in this order. (See Proof of Claims at 4.) Because the facts are not in dispute, and because res judicata applies to Plaintiffs' claims as a matter of law, summary judgment in Plaintiffs' favor is appropriate. See Celotex, 477 U.S. at 322.
IV. CONCLUSION
For the following reasons, the court GRANTS Plaintiffs' motion for summary judgment (Dkt. # 102). Defendants Adam Cohen and Jennifer Sultan are jointly and severally liable to Plaintiffs for $380,133.30 as set forth in Plaintiffs' Proof of Claims (Dkt. # 102-2).
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JAMES L. ROBART
United States District Judge