United States District Court, E.D. Virginia, Richmond Division
ROMAN J. KOROPEY, Appellant,
PENN VIRGINIA CORPORATION, Appellee.
A. Gibney, Jr. United States District Judge.
pro se appellant, Roman Koropey, owned stock in the
Penn Virginia Corporation prior to the company filing for
Chapter 11 bankruptcy and restructuring its stock ownership.
In the bankruptcy proceeding below, appellant Roman Koropey
filed an adversary complaint in which he claimed that Penn
Virginia defrauded its investors and asked the Bankruptcy
Court to revoke its approval of the proposed Chapter 11
bankruptcy plan. The Bankruptcy Court dismissed Koropey's
adversary proceeding, and Koropey has appealed. The Court
affirms the Bankruptcy Court and dismisses the appeal because
Koropey's adversary complaint fails to allege that Penn
Virginia engaged in any fraud that warranting revocation of
the Bankruptcy Court's approval order.
12, 2016, Penn Virginia and each of its debtor affiliates
(collectively, "Penn Virginia") filed for Chapter
11 bankruptcy in the Bankruptcy Court for the Eastern
District of Virginia. (Case No. 16-32390.) The Bankruptcy
Court eventually confirmed a reorganization plan (the
the Plan, Penn Virginia generated $50 million in cash, in
part from a stock offering (the "Rights Offering").
Under the Plan, new "Backstop Parties" could
purchase new common stock at a set price of $3.18 per share.
To encourage investment in the surviving entity, the Plan
gave the Backstop Parties a "Commitment Premium" of
additional shares. The Plan authorized an aggregate
Commitment Premium of $3, 000, 000 to be paid to the Backstop
Parties as new common stock based on the initial offering
price. The stock purchase turned into a very profitable
investment because when the Backstop Parties' shares
began trading on the open market, the value of the new common
stock skyrocketed to $42-$50 per share.
February 7, 2017, Koropey filed an adversary complaint in the
Bankruptcy Court (Case No. 17-03030, Appendix 000010A) to
revoke the Confirmation Order pursuant to 11 U.S.C. §
1144. Penn Virginia moved to dismiss Koropey's complaint,
which the Bankruptcy Court granted. In dismissing
Koropey's complaint, the Bankruptcy Court found that
Koropey failed to "identify any particular statement or
act" constituting fraud by Penn Virginia, and therefore
failed to sufficiently plead fraud under the heightened
pleading standard of Federal Rule of Civil Procedure Rule 9
and Bankruptcy Rule 7009. (Appendix 000144A.) The Bankruptcy
Court also found Koropey's complaint time barred.
appeal, Koropey argues that Penn Virginia fraudulently
misrepresented (1) the value of the common stock issued to
the Backstop Parties and (2) the value of the Commitment
Premium paid to the Backstop Parties. In essence, Koropey
says Penn Virginia undervalued the stock in the Rights
Offering. In support of his claims, Koropey points to the
initial purchase price of $3.18 for stock that later traded
on the open market for $42-$50 per share. He also says that
the Backstop Parties should have received no more than $3,
000, 000 as a premium but received more because of the
increase in the shares' value.
STANDARD OF REVIEW
courts have appellate jurisdiction to hear bankruptcy
appeals. See 28 U.S.C. § 158(a) (granting the
district courts jurisdiction to hear appeals "from final
judgments, orders, and decrees ... of bankruptcy judges
entered in cases and proceedings referred to the bankruptcy
judges under section 157 of this title."). "On
appeal from the bankruptcy court, the district court acts as
an appellate court and reviews the bankruptcy court's
findings of fact for clear error and conclusions of law
de novo." In re Birmingham, 846 F.3d 88, 92
(4th Cir. 2017).
noted above, the Bankruptcy Court decided this case by
granting Penn Virginia's motion to dismiss. The
Bankruptcy Court's procedures adopt the pleading standard
from the Federal Rules of Civil Procedure. Fed. R. Bank. P.
7012. A motion to dismiss gauges the sufficiency of a
complaint without resolving any factual discrepancies or
testing the merits of the claims. Republican Party of
N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992). In
considering the motion, a court must accept all allegations
in the complaint as true and must draw all reasonable
inferences in favor of the plaintiff. Nemet Chevrolet,
Ltd v. Consumeraffairs.com, Inc., 591 F.3d 250, 253 (4th
Cir. 2009) (citing Edwards v. City of Goldsboro, 178
F.3d 231, 244 (4th Cir. 1999)). The principle that a court
must accept all allegations as true, however, does not apply
to legal conclusions. Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009). To survive a motion to dismiss, a complaint
must state facts that, when accepted as true, state a claim
to relief that is plausible on its face. Id. "A
claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged." Id. (citing Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 556 (2007)).
Court liberally construes pro se plaintiffs'
complaints. See Beaudett v. City of Hampton, 115
F.2d 1274, 1278 (4th Cir. 1985). This principle of liberal
construction, however, has its limits. Id. at 1276;
see Laber v. Harvey, 438 F.3d 404, 413 n.3 (4th Cir.
2006) ("In interpreting a pro se complaint, the
court's task is not to discern the unexpressed intent of
a plaintiff, but what the words in the complaint
to 11 U.S. Code § 1144, an interested party can move to
revoke a bankruptcy court's prior order confirming a
Chapter 11 reorganization if the debtor procured the order by
fraud. Under Federal Rule of Civil Procedure Rule 9 and
Federal Rule of Bankruptcy Procedure Bankruptcy Rule 7009, a
party alleging fraud must "state with particularity the
circumstances constituting fraud...." At a minimum,
these "circumstances" must include "the time,
place, and contents of the false representations, as well as
the identity of the person making the misrepresentation and
what he obtained thereby." United States ex rel.
Owens v. First Kuwaiti Gen'l Trading & Contracting
Co., 612 F.3d 724, 731 (4th Cir. 2010). A plaintiff may
plead fraudulent intent generally. Harrison v.
Westinghouse Savannah River Co., 176 F.3d 776, 784 (4th
case, Koropey failed to plead sufficient facts demonstrating
that either the value of the Backstop Parties' shares or
the value of the Commitment Premium was procured by fraud.
Koropey merely points to the rise the stock price and claims
that because the price increased, Perm Virginia must have
fraudulently created the $3.18 price. He does not point
either to any potential fraud in the process by which the
debtors determined the initial offering price or any facts to
show that they intended to come to a deflated price. He also
does not allege anything showing that the $3.18 price was too
low based on the facts known at the time. Finally, he does
not show any way in which Perm Virginia could gain from
generating less capital than they could have by selling the
stock at a higher price. As the Bankruptcy Court properly
noted, Koropey's argument rests on the fallacy that a
temporal relationship proves a causal relationship. This
tenuous claim falls far short of the heightened pleading
standard for fraud, ...