12 B 18946, 23 A 00361
Plaintiff sued Defendant in state court in 1999, alleging breach of contract and fraud.  The parties resolved the lawsuit with a consent judgment in which the state court entered judgment in a certain amount in favor of Plaintiff and dismissed the fraud count with prejudice.  Defendant filed for relief under the Bankruptcy Code in 2012 and did not provide notice to Plaintiff.  In November 2023, Plaintiff brought a motion to reopen that 2012 bankruptcy case, and then filed an adversary proceeding seeking relief under 11 U.S.C. §§ 523(a)(2) and (a)(3).  Defendant brought a motion to dismiss, arguing that res judicata (claim preclusion) barred Plaintiff from pursuing a nondischargeability claim based on fraud.  Plaintiff opposed the motion on the grounds that there was no identity of cause of action, as required by Illinois law to apply claim preclusion.  HELD: Plaintiff’s assertion was correct – dismissal of the fraud claim in state court, even through the mechanism of a consent judgment, did not preclude Plaintiff from bringing a claim under § 523(a)(2).  Courts are generally in agreement that claim preclusion does not prevent a state court plaintiff from litigating dischargeability in bankruptcy court, because it is a different cause of action that could not have been litigated in a prior lawsuit.