Republic Bank, Inc. et al v. Nickless et al

United 	States Bankruptcy Court
District of Massachusetts
In re: 	) 	Chapter 11
Haverhill Technology Group, Inc., 	) 	Case No. 03-43988-JBR
Debtor 	)
REPUBLIC BANK, INC. and TETRA FINANCIAL )
GROUP, L.L.C.
PLAINTIFFS, 	)
v. 	) 	Adversary Proceeding 06-4197
DAVID M. NICKLESS, 	)
DEFENDANT. 	)
__________________________________________)
MEMORANDUM OF DECISION ON MOTION OF TETRA FINANCIAL GROUP,
L.L.C. FOR SUMMARY JUDGMENT [#106]
This matter came before the Court for hearing on the Motion of Tetra Financial group,
L.L.C. for Summary Judgment [#106] and the opposition of the Defendant, David M. Nickless
thereto [#122]. For the reasons set forth herein, Tetra’s motion for summary judgment on the
Defendant’s cross claim for contribution (Docket #90) is DENIED.
FACTS
The facts are more fully set forth in Memorandum of Decision on the Motion of Republic
Bank, Inc. For Summary Judgment issued contemporaneously herewith. For the purposes of this
decision it is sufficient to say that Tetra joined in Republic’s suit against the Defendant, who was
the Chapter 11 Trustee and now is the Chapter 7 Trustee of the above Debtor, alleging that the
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1As noted, Tetra’s motion turns solely on its interpretation of Utah law. There are no
material facts in dispute as the issue of whether Utah law applies is irrelevant to the decision.
2
Trustee violated his fiduciary duty to the Plaintiffs, was negligent in authorizing certain actions
which harmed the Plaintiffs, and converted the Plaintiffs’ property. The Trustee cross-claimed
against Tetra seeking contribution under M.G.L. c. 231B in the event that the Trustee were found
liable on the grounds that Tetra’s actions were the cause, or partially the cause, of any harm
suffered by Republic. Tetra filed its Motion for Summary Judgment, which may have more
correctly been denominated a motion to dismiss, on the basis that contribution among joint
tortfeasors is impermissible under Utah law, which Tetra alleges governs the contribution
question, and therefore the Trustee’s cross-claim must be denied. Tetra is wrong as a matter of
law. 1
DISCUSSION
DOES UTAH LAW APPLY?
Bankruptcy Courts apply the forum state’s choice of laws when underlying issues involve
questions of state law. Mercurius Inv. Holding, Ltd. v. Aranha, 247 F.3d 328 (1st Cir. 2001).
Massachusetts’ choice of laws turn on question of which jurisdiction has the “strongest interest”
in the issue presented, which in torts is generally, but not always, the place of injury. See
Schulhof v. Northeast Cellulose, Inc., 545 F. Supp. 1200 (D. Mass. 2000) (applied NH law where
parties were domiciled rather than Massachusetts law which is where the injury occurred).
Tetra argues that Republic was injured in Utah by, according to Nickless, Tetra’s failure
to investigate the transaction and both Republic and Tetra are Utah businesses. Nickless argues
Massachusetts law applies because Tetra and Republic assert tort claims arising under
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2Although the actually counts are silent as to whether the counts are based on Utah or
Massachusetts law, the prayer for relief for each of the 6 counts requests prejudgment interest
pursuant to Massachusetts law.
3
Massachusetts law, 2 against a Massachusetts resident for his conduct (all of which occurred here
in Massachusetts) as a bankruptcy trustee for a Massachusetts company in a Massachusetts
bankruptcy.
Although at first blush, there is a strong interest in applying Massachusetts law, which
clearly permits contribution among joint tortfeasors, M.G.L. c. 231B § 1 et seq., the Court need
not decide which law applies at this point in the litigation because Tetra is wrong in its
characterization of Utah’s law of contribution.
UTAH ALLOWS FOR CONTRIBUTION AMONG JOINT TORTFEASORS BY
APPORTIONING LIABILITY.
Utah is a comparative negligence state. U.C.A. 1953 § 78B-5-818 (formerly cited as UT
ST § 78-27-38). A defendant’s liability is limited to only his share of the fault and thus Utah
does not have contribution in the same manner as Massachusetts. U.C.A. 1953 § 78B-5-820
(formerly cited as UT ST § 78-27-40). But that does not mean that joint tortfeasors not named as
defendants in the underlying action are absolved from responsibility or that a named defendant
must shoulder the burden for all the joint tortfeasors. Tetra neglects to mention U.C.A. 1953 §
78B-5-821 (formerly cited as UT ST § 78-27-41) which expressly provides in pertinent part:
(1) A person seeking recovery, or any defendant who is a party to
the litigation, may join as a defendant, in accordance with the Utah
Rules of Civil Procedure, any person other than a person immune
from suit alleged to have caused or contributed to the injury or
damage for which recovery is sought, for the purpose of having
determined their respective proportions of fault.
Although Utah prohibits a separate action for contribution, Tetra may be joined in the
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underlying action to determine its degree of fault. U.C.A. 1953 § 78B-5-821(1) (formerly cited
as UT ST § 78-27-41(1)). See also National Service Indust., Inc. v. B.W. Norton Manufacturing
Co., 315 Utah Adv. Rep. 30, 937 P.2d 555 (Utah App. 1997). That is precisely what the
Defendant has done. He has cross-claimed against Tetra and asked this Court, should it reach
the merits of this action and determine that the Defendant is liable, to apportion fault as
appropriate between the Defendant and Tetra.
CONCLUSION
For the foregoing reasons, Tetra’s Motion for Summary Judgment is DENIED. A
separate Order will issue.
Dated: August 27, 2008
Joel B. Rosenthal
United States Bankruptcy Judge
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