Case Summary:
The Minnesota Department of Labor and Industry ("MNDLI") is a state-based agency with the authority to license and regulate electrical contractors and electricians within Minnesota. In June 2018, MNDLI filed a civil lawsuit against the Defendant. A Minnesota state court granted summary judgment in favor of MNDLI and ordered the Defendant to pay the Restitution Judgment of $1,560,311.12. Defendant filed a voluntary Chapter 7 petition in October 2018. MNDLI filed this adversary seeking a nondischargeability determination for the Restitution Judgment under 11 U.S.C. §§ 523(a)(2) and/or 523(a)(6). Defendant's answer moved for dismissal without any statutory citations. The Court interpreted the Defendant's answer to move for dismissal under Federal Rule of Bankruptcy Procedure 7012(b), adopting Federal Rule of Civil Procedure 12(b)(6). The Court denied the motion to dismiss because MNDLI's complaint met the plausibility standard to overcome a 12(b)(6) motion.
Defendant also filed a counterclaim, seeking damages in the approximate amount of $7 million stemming from a host of torts he alleged MNDLI committed, including defamation. MNDLI moved to dismiss the counterclaim on three grounds: (1) the Court's lack of subject-matter jurisdiction under Rooker-Feldman; (2) principles of collateral estoppel and res judicata barred the re-litigation of issues in the counterclaim; and (3) Defendant failed to state a claim upon which relief can be granted.
The Court dismissed the Defendant's defamation counterclaim under Rule 12(b)(6) because the claim failed to state that the alleged defamatory statements were untrue. The Court also held it was barred from relitigating the remaining counterclaim allegations because of collateral estoppel and/or res judicata. Defendant had a full and fair opportunity to litigate the issues he presented in the counterclaim, however, he chose to not appear in the state court action. The Court further held that it lacked subject-matter jurisdiction under the Rooker-Feldman doctrine. The Court made no findings about the merits of MNDLI's nondischargeability action against the Defendant. This decision was merely a finding that the Court lacked subject-matter jurisdiction over the Defendant's counterclaim.
Statute/Rule References:
Fed. R. Bankr. P. 7012(b) -- Defenses and Objections
Fed. R. Civ. P. 12(b)(6) -- Motion to Dismiss for Failure to State a Claim
Key Terms:
Collateral Estoppel
Counterclaim
Motion to Dismiss
Nondischargeability
Res Judicata
Rooker-Feldman
Subject-Matter Jurisdiction
