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Theokary v. Shay

United States District Court, Third Circuit

October 29, 2013

RAFAIL THEOKARY, Plaintiff-Appellant,
TOM SHAY, et al. Defendants-Appellees.


L. FELIPE RESTREPO, District Judge.

This appeal comes before the Court on Plaintiff-Appellant Rafail Theokary's certificates of appeal from the United States Bankruptcy Court for the Eastern District of Pennsylvania arising out of that Court's Orders and Opinions made in connection with Theokary's bankruptcy adversary case.[1] Theokary filed for Chapter 7 bankruptcy.[2] (R. 4 (Feb. 14, 2011 Order) at 1-2.) Subsequently, he filed an adversary proceeding against Defendants-Appellees Eric Abbatiello, Tom Shay, Showplace Farms ("Showplace") and Gaitway Farms, Inc. ("Gaitway") in the Bankruptcy Court, alleging that they willfully violated the automatic stay that arose upon Theokary's filing of his bankruptcy petition. (Id. at 1-2.) The Bankruptcy Court dismissed Showplace and Gaitway, upon determining that they did not violate the stay. (R. 3 (Feb. 14, 2011 Op.) at 33.) Then, finding that Theokary had in bad faith abused the judicial process, that Court, pursuant to its inherent power, dismissed Theokary's adversary proceeding, which was still pending against Defendants Shay and Abbatiello, with prejudice. (Id.)

Theokary's appeal arose in this Court under three separate civil actions. (Civ. A. No. 12-2844, Doc. No. 1 (Appeal Cert.); Civ. A. No. 11-3566, Doc. No. 1 (Appeal Cert.); and Civ. A. No. 10-0058, Doc. No. 1 (Appeal Cert.).) In those appeals, Theokary asserted that the Bankruptcy Court erred in ordering the dismissal of: (1) Showplace; (2) Gaitway; and (3) the adversary proceeding. (R. 1 (Notice of Appeal) at 1.)

As explained more fully below, the Court consolidated these three actions, see supra note 1, and for the reasons which follow, the Bankruptcy Court's April 10, 2012 Opinion dismissing the adversary proceeding is affirmed. This ruling moots Theokary's other grounds for appeal. Therefore, the Bankruptcy Court's February 14, 2011 Opinion is modified to dismiss the claims against Showplace and Gaitway as moot.


On June 1, 2005, Theokary leased two horses, Mac Only VP ("VP") and Mac's Emily BJ ("Emily"), for a 24-month term from McCord Farms. (R. 3 at 7.) He entered another 24-month lease with McCord Farms on July 23, 2005, for the horse named Mac's Derrick T ("Derrick"). (Id.) In January 2006, Theokary hired Shay to train Derrick and VP, and Abbatiello to train Emily. (Id. at 7-8.)

Initially, Shay boarded Derrick and VP at Showplace, and in May of 2006, he took them to another facility. In October of 2006, he took them to Magical Acres Farm, where they remained through February 18, 2007. (Id. at 8.) Abbatiello boarded Emily at Gaitway initially; in August 2006, he took Emily to another farm where Emily remained until February 18, 2007. (Id. at 9.) On that date, Abbatiello transported Emily to Gaitway for purposes of exposing the horse to a stableman's lien sale, then, after the sale, he took Emily back to the other farm. (Id.)

Theokary failed to pay Shay and Abbatiello for all of the training fees and failed to reimburse Showplace and Gaitway for all of the boarding costs that had come due. (Id.) As a result, on April 12, 2006, Shay and Abbatiello each separately filed, and, later on May 30, 2006, Showplace and Gaitway each separately filed a lawsuit in the Superior Court of New Jersey, Cape May County against Theokary and Brenda McCord for unpaid bills. (Id.)

On May 23, 2006, Theokary filed a chapter 13 bankruptcy petition in the United States Bankruptcy Court for the District of New Jersey. (Id. at 10.) Subsequently, all four of the aforementioned state court complaints were dismissed without prejudice. (Id.) On October 5, 2006, the New Jersey Bankruptcy Court dismissed the chapter 13 bankruptcy case "for bad faith filing" and barred Theokary from filing another chapter 13 bankruptcy case for 180 days from entry of that Court's Order. (Id.)[3]

Prior to October 31, 2006, McCord Farms transferred legal ownership of Derrick, VP and Emily (collectively, the "Horses") to The Highland Group, LLC. (Id. at 11.) Apparently to respond to the transfer, on October 31, 2006, The Highland Group, LLC and Theokary entered three leases, a separate lease for each of the Horses, that terminated on December 31, 2011. (Id.)

Shay and Abbatiello's attorney, Jeffrey R. Pocaro, placed notices in newspapers for two stableman's lien sales to be conducted on February 18, 2007, a sale of Derrick and VP at Magical Acres, and a sale of Emily at Gaitway. (Id.) On February 16, 2007, Theokary commenced a Chapter 7 bankruptcy case in which he disclosed a leasehold interest in the Horses. (Id. at 3.) That same day, Theokary's attorney contacted Pocaro and notified him of the bankruptcy filing and that the sales were stayed as a result of the filing. (Id. at 12.) Pocaro did not believe the stay applied to the sales because the sales were directed against the Horses' owner. (Id.) Therefore, Pocaro proceeded with the sales. (Id. at 12-13.) Shay purchased Derrick and VP, and Abbatiello purchased Emily. (Id.)

On February 20, 2007, Shay and Abbatiello filed motions in the New Jersey Superior Court to have the sales retroactively approved nunc pro tunc. (Id. at 14.) On March 27, 2007, that court denied their motions without prejudice explaining: "Theokary bankruptcy filed prior to sale and there may be a stay based on the lease." (Id.) On April 13, 2007, the chapter 7 Trustee informed Shay and Abbatiello that he did not intend to assume the leases. (Id.) Shay and Abbatiello, on April 19, 2007, again filed motions in the New Jersey Superior Court to have the sales retroactively approved nunc pro tunc. (Id.) Through two May 8, 2007 Orders, that court approved the sales and, as a result, Shay became the owner of Derrick and VP and Abbatiello became the owner of Emily. (Id. at 14-15.)

The chapter 7 Trustee filed a no-asset report on September 12, 2007, and on January 8, 2008, the trustee reported the meeting of creditors as "concluded." (Id. at 3.) On January 14, 2008, the Bankruptcy Court entered a chapter 7 discharge and ordered that the Clerk of Court close the case. (Id.) Three days later, the Clerk of Court closed the case. (Id.) On August 27, 2008, Theokary moved to reopen the case and the Bankruptcy Court granted his motion. (Id.) On February 20, 2009, Theokary filed an adversary proceeding complaint asserting that Abbatiello, Shay, Showplace and Gaitway (collectively "Defendants") violated the automatic stay during the course of his bankruptcy case. (R. 3, at 1, 4.) United States Bankruptcy Judge Eric L. Frank bifurcated the trial's liability and damages phases. (Id.)

Theokary's First Appeal

The trial began on November 9, 2009. (Id. at 4.) After Theokary completed his presentation, Defendants moved for entry of judgment in their favor. (Id.) Judge Frank orally granted the motion only as to Gaitway. (Id. at 4-5.) Judge Frank's order was memorialized in a written order that was entered on the docket on November 23, 2009. (Id. at 5; R. 10 (Bankr. Docket) at 7.) On December 7, 2009, Theokary appealed that order to this Court. (R. 3, at 5; R. 10, at 12.) The Clerk of Court filed that appeal under Civil Action No. 10-0058 (the "Gaitway Appeal"). (Civ. A. No. 10-0058, Docket No. 1.) On July 2, 2010, United States District Court Judge Gene E.K. Pratter remanded the appeal "for further findings of fact and conclusions of law." (Civ. A. No. 10-0058, Document No. 22, at 1-2.)

Judge Frank issued a February 14, 2011 Opinion, to comply with Judge Pratter's mandate setting forth findings of fact and conclusions of law. (R. 3, at 1-34.) According to Judge Frank, Abbatiello "was sufficiently involved in the stableman's lien sale, with notice of the bankruptcy filing, to justify the finding that he violated the automatic stay." (R. 3, at 28-29.) Additionally, the Bankruptcy Court determined that, "Shay had granted Pocaro broad discretion in determining how to obtain payment of [Theokary's] unpaid bill" and "Pocaro... proceeded with the stableman's lien sale with full knowledge of the bankruptcy filing." (R. 3, at 29.) In Judge Frank's view, Shay was liable as a "creditor-principal... for the acts of [his] agent...." (R.3, at 29-30.) Moreover, the Bankruptcy Court found that, "[Theokary] presented no evidence that Gaitway took any action to enforce its lien after the commencement of [Theokary's] bankruptcy case...." (R. 3, at 30.) Furthermore, the Bankruptcy Judge wrote that: "Showplace did not interfere with any right [Theokary] may have had to take possession of the two horses. It follows that Showplace did not take any action to possess or control property of the bankruptcy estate...." (R. 3, at 33.) In conclusion, Judge Frank held that:

... I have determined that Shay and Abbatiello violated 11 U.S.C. § 362(a)(3)[, the automatic stay, ] and that Showplace and Gaitway have not violated the automatic stay. Therefore, I will hold enter [sic] judgment in the Debtor's favor against Shay and Abbatiello, conduct a damages hearing on the Debtor's successful claims and enter judgment in favor of Showplace and Gaitway and against the Debtor.

(R. 3, at 33-34.)

Subsequently, Judge Pratter permitted Theokary to file a brief in connection with the Gaitway Appeal. (Civ. A. No. 10-0058, Doc. No. 24.) Theokary and Gaitway filed their pleadings. (Civ. A. No. 10-0058, Doc. Nos. 26 (Appellant's Br.), 27 (Appellee's Br.).)

Theokary's Second Appeal and Subject Matter Jurisdiction

Meanwhile, on June 2, 2011, Theokary filed in this Court a second certificate of appeal from Judge Frank's February 14, 2011 Order in connection with his dismissal of Showplace. (Civ. A. No. 11-3556, Doc. No. 1 (Cert. of Appeal), Doc. No. 4 (Appellant's Br.) at 5.) The Clerk of Court filed that appeal under Civil Action No. 11-3556 (the "Showplace Appeal"). (Civ. A. No. 11-3556, Doc. No. 1.) On appeal, Theokary and Showplace filed their briefing. (Civ. A. No. 11-3556, Doc. Nos. 4 (Appellant's Br.), 6 (Appellee's Resp.), 8 (Appellant's Reply), 14 (Appellee's Supp. Br.), and 16 (Appellant's Supp. Br.).)

On November 21, 2011, Judge Pratter held a hearing wherein she identified a concern about the Court's subject matter jurisdiction over the Gaitway Appeal and Showplace Appeal. (Civ. A. No. 11-3556, Hr'g Tr. at 12:6-10, 17:9-12 (Nov. 21, 2011) (emphasis added).)[4] In response, Theokary, Showplace and Gaitway filed supplemental briefing regarding the Court's subject matter jurisdiction. (See Civ. A. No. 11-3556, Doc. Nos. 22 (Appellee's Br.), 24 (Appellant's Br.); Civ. A. No. 10-0058, Doc. Nos. 32 (Appellee's Br.), 33 (Appellant's Br.).)

Theokary's Expert Report[5]

On September 9, 2009, Theokary's attorneys, Kenneth Sandler and Michael J. Rutenberg, and Shay and Abbatiello's attorneys, Pocaro and Howard Taylor, filed a Joint Pretrial Statement ("JPS") in which Theokary identified Antonius Kimbrough as Theokary's only expert witness at trial. (R. 5 (Apr. 10, 2012 Op.) at 4-5.) Based on a damages memorandum (the "Guest Memo") created by an individual named Stan Guest and also based on telephone conversations with Theokary and Guest, Rutenberg prepared an itemized list of Theokary's alleged damages (the "Damages Section") that was incorporated into the JPS. (R. 5, at 5-6.)

The Damages Section is substantially similar to the Guest Memo, and several calculations in the documents are identical. (Id.) The Damages Section includes an erroneous assumption that, despite a gestation period of eleven months, a mare would bear seven foals per year. (R. 5, at 6-7 n.11.) Apparently, Rutenberg made an error in transposing information from the Guest Memo. (Id. at 7, n.12.)

Samuel Paparo did not contribute to drafting the Damages Section and was not identified as a potential expert witness in the JPS. (Id. at 7.) On September 27, 2009, Rutenberg, Theokary and Paparo met to discuss Paparo's possible retention as an expert witness. (Id.) On October 7, 2009, Rutenberg sent Paparo a letter in which Rutenberg requested that Paparo provide a resume and an expert's report. (Id. at 7-8.) Subsequently, Paparo advised Rutenberg that he was not willing to be an expert witness, and Paparo did not prepare a report. (Id. at 8.)

On March 10, 2011, the Bankruptcy Court, extended the deadline to conduct witness discovery and the expert witness identification deadline to April 22, 2011. (R. 5, at 9.) On April 21, 2011, Theokary delivered to Sandler an expert report having a redacted signature (the "Redacted Report") and an expert's curriculum vitae having redacted identifying information (the "Redacted CV"). (Id. at 9.) Sandler provided Shay and Abbatiello's counsel with these redacted materials. (Id.) On April 22, 2011, Sandler, who did not know the expert's identity, moved for a protective order limiting the disclosure of the expert's identity. (Id. at 9-10.)

On April 29, 2011, Judge Frank denied the motion for a protective order and ordered Theokary to produce an unredacted report (the "Report") and curriculum vitae ("CV"). (Id. at 10.) During a May 13, 2011 telephone conference, Pocaro stated that the Report bore a striking similarity to the Damages Section. (Id.) He requested an opportunity to examine the Report and CV's metadata to determine when they were prepared and whether they were prepared on Paparo or Theokary's computer. (Id. at 11 n.19.) Judge Frank ordered that Theokary produce the Report and CV in an electronic form in original, word processing format and prior to Paparo's May 19, 2011 deposition. (Id. at 10-11.)

Pocaro told Sandler that the Report contained an error regarding the number of foals that a mare could bear over a five year period. (Id. at 12.) Sandler spoke with Theokary about the error. (Id.) Prior to the start of Paparo's deposition, Paparo handed Pocaro a CD containing a PDF version of an amended Report. (Id.) The amended Report corrected the error that Pocaro identified. (Id. at 13) On May 24, 2011, Shay and Abbatiello filed a motion in limine and to dismiss. (Id. at 2 & 13.) The motion disputes that Paparo genuinely drafted the expert report. (Id. at 2.) Shay and Abbatiello moved to: (i) "bar Paparo from testifying as an expert witness;" and (ii) "dismiss the adversary proceedings" on the basis that Theokary "could not prove his alleged damages without an expert." (Id.) The Bankruptcy Court deferred ruling on the motion until after the trial on damages. (Id. at 13.)

Judge Frank commenced the damages trial on June 13, 2011. (Id. at 14.) The Bankruptcy Court permitted Shay and Abbatiello to call their expert out of sequence. (Id.) Subsequently, Theokary called Paparo as an expert, and, after voire dire, Judge Frank determined that Paparo was not qualified to testify as an expert witness. (Id. at 15.) On July 26, 2011, the Bankruptcy Court granted Theokary's motion to proceed pro se. (R. 10, at 22, Doc. No. 234.)

The Bankruptcy Court's April 10, 2012 Opinion

Judge Frank issued an Opinion on April 10, 2012, in which he determined in relevant part that:

• Paparo did not author the Report or the amended Report;
• Theokary prepared the Report and the amended Report by plagiarizing the Damages Section;
• Theokary, knowing that Paparo did not draft the Report and the amended Report, attempted to "pass off" those documents as Paparo's work product; and
• "Theokary attempted to commit a fraud on the court by knowingly and in bad faith offering this evidence under false pretenses."


The Bankruptcy Court found that the similarities between the Guest Memo, the Damages Section, the Report and the amended Report could not be a coincidence and that "[t]he evidence is clear and convincing that the author of the [Report and amended Report] plagiarized the JPS Damages Section." (Id. at 16.) In the Opinion, the Bankruptcy Court considered whether a benign explanation existed for the plagiarism, but concluded that the record did not support such an explanation. (Id. at 16-21.) Additionally, ...

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