Waldman, et al. v. Stone

Summarized by Thomas DeCarlo , John Steinberger & Associates, PC
10 years 11 months ago

Citation:

Case No. 13-5404 (6th Cir. March 19, 2015)

Tag(s):

Ruling:

District Court not required to take additional evidence when reviewing bankruptcy court proposed findings of fact and conclusions of law.

Procedural context:

After trial, the bankruptcy court entered proposed findings of fact and conclusions of law. The District Court reviewed the proposed findings using de novo standard and entered judgment accordingly. On review, the Sixth Circuit affirmed the District Court as to the procedures used for de novo review but reversed to correct amount of damages and to allocate damages between the two tortfeasors.

Facts:

Stone sued Waldman and Atherton alleging that Waldman and Atherton conspired to defraud Stone. When Stone filed bankruptcy, the Trustee commenced litigation against Waldman and Atherton for damages. After trial, the bankruptcy court initially entered a final judgment which was reversed on constitutional grounds, with the matter remanded to the bankruptcy court to enter proposed findings of fact and conclusions of law for de novo review by the district court. Waldman filed objections to come of the proposed findings and requested that the district court consider additional evidence. The district court declined to take additional evidence and entered final judgment in accordance with the proposed findings of fact and conclusions of law. Waldman appealed to the Sixth Circuit, arguing that the district court was required to take additional evidence on issues raised in objections. The Sixth Circuit concluded that de novo review requires only that the district court review the proposed findings without giving any deference to or presumption of correctness of the bankruptcy court's findings. Rule 9033 allows, but does not mandate, the district court to receive additional evidence if the district court deems that appropriate. In this case, the district court concluded that additional evidence was not required and entered its judgment, consistent with the requirements of Rule 9033. The Sixth Circuit also concluded that the district court incorrectly calculated damages suffered as a result of Stone's fraudulent conduct as those damages should have been measured by the "benefit of the bargain". Where the bargain involved Stone's intended acquisition of 40% of stock of company (that Waldman fraudulently induced) damages were based on 40% of value of company, not 100% as used by district court. Sixth Circuit also concluded that district court erred in failing to allocate damages between the two tortfeasors as required by Kentucky law. The Court remanded the matter to the district court for an amended final judgment correcting these two issues.

Judge(s):

Kethledge, Stranch and Gwin

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