Judge Thomas M. Lynch - Opinions

Judge Thomas M. Lynch

In re Osvaldo Amaro
September 30, 2020

In this chapter 7 case, the United States Trustee filed two motions to dismiss pursuant to sections 707(b)(2) and 707(b)(3) of the Bankruptcy Code. The Debtor objected to the motions and argued, as a preliminary issue of law, that the “means test” in section 707(b)(2) does not apply to cases like his that were commenced under chapter 13 and later converted to chapter 7. After reviewing a split in the authority over the meaning of the phrase “a case filed by an individual debtor under this chapter whose debts are primarily consumer debts” found in section 707(b)(1), the court agreed with the majority approach and concluded that a case originally filed under chapter 13 and subsequently converted to chapter 7 is subject to section 707(b) of the Bankruptcy Code. Declining the Debtor’s invitation to adopt the minority view, the court determined that approach would create “an enormous loophole to the means test” by limiting section 707(b) only to cases that were originally filed as chapter 7 cases.

19-82505, 20-96020
The court denied the Defendants’ motion to dismiss the adversary complaint filed by the chapter 7 trustee, which sought, pursuant to 11 U.S.C. § 544(b) and 735 ILCS 5/12-112, to avoid the Defendants’ transfer of their joint tenancy interest in their residence to a newly formed trust for which they are trustees and hold beneficiary interests in tenancy by the entirety. The complaint alleged that the transfer was done with the sole intent to avoid payment to a creditor. The court recognized that, as a matter of Illinois law, the actual intent standard of the Fraudulent Transfer Act, 740 ILCS 160/5, does not apply to property transferred by the entirety, and that the trustee was not incorrect to bring its action under 735 ILCS 5/12-112 by means of section 544(b) of the Bankruptcy Code. The court further found that the trustee’s complaint sufficiently pleaded facts to state a claim that is plausible on its face.

In re Thomas G. Gialamas
September 21, 2020

18-13341 (Western District of Wisconsin)
Prior to this bankruptcy case, a Wisconsin circuit court had appointed F. John Stark, III as the supplemental receiver in a post-judgment enforcement action by creditor Erick Hallick against the Debtor. The confirmed chapter 11 plan of reorganization proposed by a creditor provided in that plan’s section 6.13(a) that several lawsuits pending against the Debtor, including the state court “Receivership Action,” are “resolved” and the judgments docketed against the Debtor and orders “affecting the Debtor’s assets in favor of Hallick” in those cases, “shall be satisfied.” After failing to timely object to the plan at confirmation, despite notice, the receiver filed a Rule 60(b) motion to vacate the confirmation order, arguing that this court lacked subject matter jurisdiction, at least as to section 6.13(a) and its treatment of the Receivership Action. The receiver further argued that section 6.13(a) did not provide for payment of his fees in the Receivership Action, which he claimed was subject to the jurisdiction of the Wisconsin circuit court. The court denied the Rule 60(b) motion, finding that it had clear jurisdiction to confirm the Plan, including section 6.13(a). Noting that vacatur under Rule 60(b) is an extraordinary remedy granted only in exceptional circumstances, the court then held that the receiver did not meet his burden. Among other things, the court found that the receiver’s fees were to be paid from the Debtor’s interest in the creditor or its proceeds, which became property of the estate when the case commenced, and that the receiver fit the definition of a “custodian” under 11 U.S.C. § 101(11) but failed to comply with section 543, under which the court could consider a request to compensate the receiver for his services.

19-82505, 20-96006
The court denied the Defendant’s motion to dismiss the adversary complaint, which sought a denial of discharge pursuant to section 727(a)(2)(A) of the Bankruptcy Code. The court determined that the Defendant’s timeliness argument was not appropriate under Rule 12(b)(6) because the complaint was not required to plead around potential affirmative defenses. The court also concluded that the allegations in the complaint were sufficient to state a plausible claim for relief under section 727(a)(2)(A), noting among other things that under Rule 9(b) fraudulent intent may be alleged generally.

18-82365, 19-96005
In adversary proceeding brought following Plaintiff’s ouster from retail joint venture, judgment entered in favor of Debtor following trial on objections to discharge under § 523(a)(2)(A) and § 523(a)(6) after finding, among other things, that (1) Plaintiff did not establish a debt owed to her by Debtor individually, as opposed to a potential claim against the limited liability company established by Debtor; (2) Plaintiff did not show either justifiable reliance on any alleged misrepresentation made by the Debtor or actual fraud with respect to their business venture; and (3) Plaintiff failed to demonstrate a willful and malicious injury attributable to the Debtor.

In re Donna J. Neely
September 30, 2019

Debtor’s objection to a claim alleging breach of fiduciary duty with respect to various family trusts was sustained in part and overruled in part following trial, finding that Claimants: (1) had standing as contingent trust beneficiaries to bring their claim; (2) failed to meet their burden pursuant to nonbankruptcy substantive law to show that certain of the challenged actions of the Debtor were contrary to the terms of the trust and partnership instruments; and (3) made a sufficient evidentiary showing to maintain a portion of their contingent claim relating to Debtor’s pre-petition transfer of partnership interests to herself for no consideration. Based on the evidence submitted, the court then determined the value of the disputed partnership interests. The Claimants’ post-trial request for leave to conduct third-party discovery and amend their claim was denied.

In re Thomas G. Gialamas
September 3, 2019

18-13341 (Western District of Wisconsin)
Creditor’s motion for relief from the automatic stay and to abandon property is denied because Creditor failed to show that he held a lien against property of the bankruptcy estate on the basis of a state court order for supplementary proceedings under chapter 816 of the Wisconsin Code.

In re Samuel T. Rowell
August 29, 2019

Debtor’s objection to claim asserted by former tenants sustained in part and overruled in part. Claim for unjust enrichment based on Claimants’ contribution to purchase of property allowed; remainder of claim barred by the statute of frauds or the terms of the lease agreement and disallowed.

18-80357, 18-96014
Judgment entered in favor of Debtor on objection to discharge under § 523(a)(6) after finding that Plaintiff did not meet his burden of proving that the Debtor was liable for a debt for willful and malicious injury arising out of a motorcycle accident.

18-13341 (Western District of Wisconsin)
Debtor’s opposed first motion under section 1121 to extend the exclusivity periods to file and obtain acceptance of a chapter 11 plan of reorganization granted based in part on pending cross-motions for summary judgment in a preference action asserted to be fundamental to the Debtor’s formulation of a plan. Rejecting suggestion that litigation must be resolved before a plan can be proposed or creditors provided adequate information to decide whether to accept or reject it, here the litigation may have a drastic impact on assets available to fund reorganization and on the allocation of payments to creditors. Finding further that objector failed to show that the extension request was made for dilatory purposes or to obtain undue leverage or that creditors’ interests are not adequately protected.