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Solomons One, LLC v. Donnelly

United States District Court, D. Maryland

April 13, 2016

SOLOMONS ONE, LLC, Debtor-Appellee,
v.
V. CHARLES DONNELLY, pro se Appellant.

MEMORANDUM OPINION

PETER J. MESSITTE, UNITED STATES DISTRICT JUDGE

This case is on appeal from an Order of the United States Bankruptcy Court for this District. See Solomons One, LLC v. Donnelly, et al (In re Solomons One, LLC), Ch. 11 Case No. 13-24475, Adv. No. 13-580 (Bankr. D. Md.). Debtor-Appellee Solomons One, LLC (Solomons One) filed a Complaint against Appellant V. Charles Donnelly (Donnelly), seeking in part to recover damages from Donnelly for willful violations of the automatic bankruptcy stay. The Bankruptcy Court entered a Memorandum and Order granting summary judgment to Solomons One on this claim, then held a separate one-day bench trial on the calculation of appropriate damages - i.e., for attorney's fees and punitive damages. After the one-day trial, the Bankruptcy Court entered a Memorandum and Order concluding that Solomons One was entitled to $40, 092.00 in attorney's fees plus interest, but denying its request for punitive damages. Donnelly has appealed the Bankruptcy Court's Judgment awarding $40, 092.00 to Solomons One in attorney's fees. For the reasons that follow, the decision of the Bankruptcy Court is AFFIRMED.

I.

Solomons One is a limited liability company formed in 2005 under Maryland law. App. 572, ECF No. 8-1 - 8-14. It has six members: Dr. Alfred Greenberg and Halina Greenberg (the Greenbergs), Christine McNelis (McNelis), Catherine Erickson-File (Erickson-File), Deborah Steffen (Steffen) and Donnelly. Id. It was formed to acquire, purchase, lease, sell, and develop property located at 14538 Solomons Island Road, in Solomons One, Maryland (the Property) in order to build a commercial pier. Id. 1038. In August 2005, Solomons One entered into a joint venture agreement with McNelis and purchased the Property. Id.

In March 2012, Solomons One and Donnelly, who owns the land adjacent to the Property, submitted a joint application to the State of Maryland and Calvert County, Maryland, to build a commercial pier. Id. 1040. At the time, Donnelly, a Maryland attorney, was also serving as counsel for Solomons One. Id. 94-95. The State of Maryland and the Calvert County Board of Commissioners denied the application. Id. 95. Solomons One appealed to the Calvert County Board of Appeals.[1] Id.

A. The Pier Rights Litigation

While the appeal of the application decision was pending before the Calvert County Board of Appeals, Solomons One, Donnelly (who was still serving as Solomons One's counsel), and other plaintiffs commenced litigation in the Circuit Court for Calvert County, asserting the existence of their rights to build the commercial pier (the Pier Rights Litigation). Id. 96. On July 12, 2013, after a hearing on the plaintiffs' motion for summary judgment in the Pier Rights Litigation, the Circuit Court entered judgment in favor of Solomons One, Donnelly, and the other plaintiffs, declaring that they had contractual rights to construct piers on the Patuxent River and that the State and Calvert County's denial of their joint application constituted a breach of their contractual rights. Id. 70-73.

At some point during the Pier Rights Litigation, Donnelly and Steffen executed an assignment dated December 4. 2012 (the Assignment). Id. 485-88; 572. The Assignment purportedly assigned certain contract and pier rights from Solomons One to Donnelly, who not only drafted the Assignment, but executed it both in his capacity as member of Solomons One and as its attorney. Id. 485-88. The Assignment also transferred to Donnelly, as trustee, the litigation rights necessary to enforce the contract and pier rights. Id. The Assignment further provided that Donnelly was expressly assured of receiving the first proceeds from the Pier Rights Litigation to apply toward his fees. Id.

In late April or early May 2013, members of Solomons One other than Donnelly and Steffen discovered the Assignment. On May 17, 2013, all the members of Solomons One (including Donnelly) held a meeting, and by a majority vote terminated Donnelly as Solomons One's attorney. Id. 97; 572. The day prior to the meeting, however, Donnelly had recorded the Assignment without disclosing as such to the other members. Id. 98.

At another meeting held on August 21, 2013, a majority of the Solomons One Board voted to file a Chapter 11 bankruptcy petition. Id. 573. Donnelly attended the meeting and voted against the action, but on August 23, 2013, Solomons One filed a Chapter 11 Petition in the Bankruptcy Court. Id. 573.

Despite the fact that the bankruptcy petition had been filed, on September 3, 2013 Donnelly filed a Notice to Substitute V. Charles Donnelly [himself], Trustee, as the Proper Party-Plaintiff instead of Solomons One, LLC (the Substitution Notice) in the Pier Rights Litigation. Id. 441-46, 573. The Substitution Notice sought to effectively remove Solomons One, LLC - by now a Chapter 11 debtor - from the Pier Rights Litigation and to insert Donnelly in its place. Id. On September 13, 2013, Solomons One's new counsel, attorneys from the law firm of Whiteford, Taylor & Preston, LLP, informed Donnelly by letter that the Substitution Notice and underlying Assignment constituted violations of the automatic bankruptcy stay and requested his cooperation. Id. 573. Despite their efforts, Donnelly failed to withdraw the Notice of Substitution. Id.

In response, on September 30, 2013, Solomons One filed a Motion to Strike Appearance of V. Charles Donnelly as Counsel for Plaintiff Solomons One, LLC and as Substituted Party in Place of Solomons One, LLC (the Motion to Strike Donnelly's Appearance). Id. 447-88, 573. On September 30, 2013, Donnelly filed an opposition to the Motion to Strike Donnelly's Appearance and filed his own motion to strike Whiteford, Taylor & Preston LLP as Solomons One's counsel in the Pier Rights Litigation (the Motion to Strike Whiteford, Taylor's Appearance). Id. 573. Solomons One filed a Combined Reply and Opposition on October 11, 2013. Id. The Circuit Court held a hearing on the Motion to Strike Donnelly's Appearance and various other pleadings on October 16, 2013. Id. Donnelly attended the hearing and argued that the Assignment was valid and that he was still proper counsel for Solomons One. Id.

B. The Bankruptcy Adversary Proceeding

On October 4, 2013, Solomons One filed a Complaint against Donnelly and Solomons One Board Member Steffen, initiating the Adversary Proceeding from which this Appeal arises. Id. 18-84. In its Complaint, Solomons One sought, among other things, to recover damages from Donnelly and Steffen for willful violations of the automatic bankruptcy stay. Count 8 of the Adversary Complaint (Count 8). Id. 35-36. In the course of the Adversary Proceeding, Donnelly and Steffen filed a Motion to Dismiss and Solomons One filed an Opposition to the Motion to Dismiss and a Motion for Partial Summary Judgment on Count 8. Id. 1-17. The parties thereafter filed various responses. Id.

On July 7, 2014, the Bankruptcy Court entered a Memorandum and Order Granting Partial Summary Judgment on Count 8 to Solomons One. Id. 92-103. In the Memorandum, the Bankruptcy Court concluded that Donnelly had willfully violated the automatic bankruptcy stay when he filed the Notice. Id. at 101-02. In particular, the Bankruptcy Court concluded that "'Donnelly knew of the bankruptcy filing when he filed the Substitution Notice" and "that the filing of the Notice [was] an intentional act." Id. at 100. Further, the Bankruptcy Court determined that, because certain "filings and arguments have not been put in the record, " it would set in for trial the issue of whether Donnelly further violated the automatic bankruptcy stay by opposing the Motion to Strike and by appearing and arguing at the hearing thereon. Id. 102. The Bankruptcy Court also set for determination the issue of damages, including attorney's fees and punitive damages. Id. 102-03.

The Bankruptcy Court held a one-day trial on these remaining issues on December 10. 2014. Id. 296-410. At trial and over Donnelly's objection, the Bankruptcy Court admitted into evidence the time records of Solomons One's counsel for time expended related to Donnelly's violations of the automatic stay. Id. 331-33. The Bankruptcy Court also granted Solomons One's request for time to submit a supplemental bill to include time expended on the pre-trial and trial matters in the adversary proceeding. Id. 380-81. Accordingly, on December 15, 2014, Solomons One filed a Line Filing (i) Updated Time Records of Whiteford, Taylor & Preston, LLP, as Counsel for the Debtor, for Services Rendered and Expenses Incurred Defending V. Charles Donnelly's Violations of the Automatic Stay and Prosecuting Count Eight of the Adversary Complaint with Respect Thereto; and (ii) the Declaration of Susan Jaffe Roberts in Support of an Award of Damages on Count Eight of the Adversary Complaint (Roberts Declaration). Id. 521-39. Due to an error in the time records submitted, Solomons One filed a corrected ...


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