Texas bankruptcy court requires amendment of ‘shotgun pleading’ complaint

In Chowdary v. Ozcelebi (In re Ozcelebi), 2021 Bankr. LEXIS 3541, Case no 10-70295, Adv. no 21-7001 (Bankr. S.D. Tex. 29 December 2021) the Court ruled on a motion to dismiss a dischargeability complaint for violations of Fed. R. Civ. P. 8(a)(2), 9(b), and 10(b).  The complaint asserted that the debt to plaintiff should be excepted from discharge under 11 U.S.C. §§523(a)(2)(A), (a)(4), and (a)(6).  The Court described the problem as ‘shotgun pleadings’, e.g. imprecise complaints that fail to give defendants adequate notice of the claims against them and the grounds upon which each claim rests.¹  Allegations of fraud require a party to plead with particularity the who, what, when, where, and how of such fraud.²  Rule 10 Fed. R. Civ. P. requires a party to state its claims in numbered paragraphs, each limited to a single set of circumstances.

The 11th Circuit has identified four types of shotgun pleadings.  The most common is a multiple count complaint where each count adopts the allegations of all preceding counts, causing each to be a combination of the allegations in the preceding counts, resulting in a situation where most counts contain irrelevant factual allegations and legal conclusions.³   The second type of shotgun pleading is a complaint is full of conclusory, vague, and immaterial facts not obviously connected to any particular cause of action.⁴ The third is a complaint violating Rule 10(b) Fed. R. Civ. P. by failing to separate into a different count each cause of action or claim for relief.⁵   The last type is a complaint that includes multiple claims against multiple defendants without specifying which defendant is responsible for each act or omission.⁶   Shotgun pleadings unfairly burden the defendants and the courts by shifting to them the burden of identifying plaintiff’s genuine claims and determine which have legal support.

In examining the count 1 of the complaint under 11 U.S.C. 523(a)(2)(A), the Texas bankruptcy court found it violated Rule 9(b) by adopting the allegations of all preceding paragraphs (here seven pages of factual allegations), and Rule 10(b) by failing to separate each claim founded on a separate transaction into its own count.  Such 9(b) violations should only lead to dismissal of a complaint when the incorporation significantly impairs the defendant’s ability to determine the ground upon which the claim is being asserted.⁷  However the court found that it was unable to properly parse out which facts in the complaint actually align with the §523(a)(2)(A) claim.  The plaintiff also pled at least three claims arising from distinct transactions under the subsection entitled ’11 U.S.C. §523(a)(2)(A) property obtained by false pretenses, a false representation, and/or actual fraud.’  These include allegations related to obtaining a client list, allegations referencing an incident of theft, and multiple instances of bad faith litigation tactics, all of which appear to be separate transactions or occurrences.   Such lumping of transactions into a single count violates Rule 10(b).  The Court required an amended complaint under Rule 12(e).

In examining the §523(a)(4) count  the court noted that the section requires both fraud or defalcation, but that such fraud or defalcation be committed while the perpetrator was acting in a fiduciary capacity; or alternatively that the defendant’s actions constitute embezzlement or larceny.   Fraud theories must meet the heightened standard of Rule 9(b), while defalcation, embezzlement, and larceny theories must meet the standard of Rule 8(a)(2).  The Court found the same defects in this count as in the prior.  Plaintiff incorporated all prior factual allegations as well as all allegations in their §523(a)(2)(A) claim.  They also fail to separate each distinct transaction or occurrence into a different count as required by Rule 10(b).  Given that the fraud theories are subject to different pleading requirements an amended complaint was again required on these counts.

The §523(a)(6) claims had the same problems as the prior counts.  In the absence of a short and plain statement of why the plaintiffs are entitled to relief, the court found that they violate Rules 8(a)(2) and 10(b), and again required an amended complaint under Rule 12(e).

1 Fed. R. Civ.P. 8(a)(2)^↩

2 Benchmark Elecs. v. J.M.Huber Corp., 343 F 3d. 719, 724 (5th Cir. 2003.^↩

3 Weiland v. Palm Beach Cnty. Sheriff’s Office, 792 F.3d 1313, 1324 (11th Cir. 2015).^↩

4 Id, 792 at 1322.^↩

5 Id. 792 at 1323 n.13.^↩

6 Id. at 1323.^↩

7 Martinez v. Nueces Cty. No. 2:13-CV-178, 2013 U.S. Dist. LEXIS 168223 at *7 (S.D. Tax 2013).^↩