23bk07879, 23ap00285
On a complaint by the Illinois Department of Employment Security seeking a determination of nondischargeability under 11 U.S.C. § 523(a) on a debt arising out of allegedly improperly paid employment benefits, held:  Prior to commencing her bankruptcy case, the Debtor was eligible for state unemployment benefits from the State of Illinois.  Those benefits were provided by the state in an amount reduced by her income earned during the periods in question.  For that period—more than a year—the Debtor underreported her income to the Illinois Department of Employment Security.  The result of that underreporting was the Debtor receiving unemployment benefits at a level more than her actual, legal entitlement.  The Debtor now owes that overpayment to the State, which results in a debt and makes the Illinois Department of Employment Security a creditor of the Debtor in her case.  The Illinois Department of Employment Security has asked that this court determine that the debt is nondischargeable.  After a trial on the merits of the matter, the court agrees with the Illinois Department of Employment Security.  The debt in question is for money obtained by a series of false representations and the debt is nondischargeable under 11 U.S.C. § 523(a)(2)(A).  Judgment will be entered in favor of the Illinois Department of Employment Security.

19bk06255, 19ap00684
Upon a motion to certify a putative class of claimants asserting claims for unlawful deprivation of motor vehicles by the City of Chicago from debtors in chapter 13 bankruptcy cases and a related motion to exclude from that consideration the testimony of the plaintiffs’ expert, held:

As to the motion to exclude, the plaintiffs’ expert and his testimony meet the required standards under Federal Rules of Evidence 702 and 703 and the standards set forth by the Supreme Court in Daubert.  The expert and his testimony have the requisite qualifications and experience, reliability and relevance.  The expert’s proposed use is as to his specialized knowledge and experience and will assist the court as the trier of fact.

As to the motion for certification, the plaintiffs have demonstrated that they meet the requirements for representative parties under Federal Rule of Civil Procedure 23(a), in that the class is so numerous that joinder of all members is impracticable, there are questions of law or fact common to the class, the claims or defenses of the representative parties are typical of the claims or defenses of the class and the representative parties will fairly and adequately protect the interests of the class.  The court further finds under Federal Rule of Civil Procedure 23(b)(1) that prosecuting separate actions by or against individual class members would create a risk of inconsistent or varying adjudications with respect to individual class members that would establish incompatible standards of conduct for the party opposing the class or adjudications with respect to individual class members that, as a practical matter, would be dispositive of the interests of the other members not parties to the individual adjudications or would substantially impair or impede their ability to protect their interests.  The court further finds under Federal Rule of Civil Procedure 23(b)(3) that questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.

As a result, the motion to exclude the plaintiffs’ expert and his testimony will be DENIED and the motion to certify the class will be GRANTED, each as set forth herein, subject to a further order of the court setting forth the specific requirements of Federal Rule of Civil Procedure 23(c).

21bk05434, 21ap00117
On a creditor’s complaint seeking a determination of nondischargeability under 11 U.S.C. § 523(a) on a debt arising out of a contract dispute with an entity controlled by the debtor over renovations that entity had or should have performed, held: The creditor has failed to elevate its complaint beyond that of a simple contract dispute. The obligations owed by the creditor were ones pursuant to a contract, the propriety of which the creditor does not challenge. Payments made by the creditor were pursuant to that contract. While it does appear that the debtor and the debtor’s entity thereby made certain misrepresentations in the course of the contract, payments were not obtained by such misrepresentations so as to satisfy 11 U.S.C. § 523(a)(2)(A). Nothing in the Supreme Court’s recent decision of Bartenwerfer v. Buckley, 598 U.S. 69 (2023), upsets the case law in this regard. Further, the creditor has failed to establish the elements of 11 U.S.C. § 523(a)(4). While the court does not condone the sloppy business practices of the debtor and the puffery engaged in in his business relationship with the creditor, those alone are not enough to satisfy the statute. As a result, judgment in favor of the debtor will be entered on all existing counts of the complaint.

20bk21625
The matter before the court consists of four independent, but inter-related disputes.  The Debtor seeks both to have his plan of reorganization confirmed and retroactive approval of postpetition transfers of estate assets.  The official committee of unsecured creditors seeks to have the case converted or dismissed.  The United States Trustee seeks to have a chapter 11 trustee appointed.  For the reasons explained in the Memorandum Decision but mostly centered around the Debtor’s good faith, the court denies both of the Debtor’s requests and grants the United States Trustee’s.  Having granted that latter request, the court moots the committee’s request.

18bk24763
On the remand from the District Court of the court’s disallowance of a claim for attorney’s fees and costs arising from a prepetition judgment against the debtor and upon further briefing and fully competing claims brought by the judgment creditor (the attorney’s prepetition client), held:  Having been given an unwarranted second chance to submit a sufficient claim in the chapter 7 case, the attorney/claimant has established that he has an unsecured claim against the debtor’s estate.  The evidence submitted to the court is not in dispute, though is insufficient to establish a secured claim against the debtor or the bankruptcy estate.  The claim of the judgment creditor is, on the other hand, fully secured.  As a result, the attorney’s claim is allowed solely as an unsecured claim and the judgment creditor’s is allowed as a secured one, in the amounts set forth in the Memorandum Decision.

21bk03589, 22ap00001
Upon the objection to the debtor’s exemption claimed in his home, the adversary complaint seeking to avoid fraudulent transfer of the debtor’s home and to sell the debtor’s spouse’s interest in the home and the motion to reopen evidence to take judicial notice, all brought by the chapter 7 trustee, held:  The chapter 7 trustee has proven that the debtor’s prepetition transfer of his interest in his home from joint tenancy to tenancy in the entirety was fraudulent and thus judgment is entered in favor of the trustee and the transfer is avoided.  The debtor’s claim of 100% exemption in his home based on holding tenancy in the entirety is thus not proper and the trustee’s objection to the debtor’s exemption in his home is sustained.  The trustee’s motion to reopen evidence to take judicial notice is granted; however, with the additional evidence, the trustee’s claim in the adversary to sell the debtor’s spouse’s interest still fails because the trustee has failed to satisfy all elements of 11 U.S.C. § 363(h) and judgment is entered in favor of the Defendants with respect to the trustee’s request to sell the debtor’s spouse’s interest therein.

23bk03279, 23ap00127
Upon the debtor/defendant’s motion to dismiss a complaint seeking a determination of nondischargeability of alleged debt under three different theories under 11 U.S.C. § 523(a)(2) against a corporate subchapter V debtor, held:  Section 523(a) does not apply to corporate debtors proceeding under subchapter V of chapter 11.  Such corporate debtors are treated no different than corporate debtors proceeding under the remainder of chapter 11.  Inartful language by Congress and supposition as to congressional intent is not sufficient to enact a major change in the handling of cases under the Bankruptcy Code.  As a result, the complaint fails to state a claim upon which relief may be granted and must be dismissed, with prejudice.  The debtor/defendant’s motion to dismiss is therefore GRANTED.

22bk06249
On the motion of a postpetition recipient by assignment of delinquent tax claim against property of the above-captioned debtor’s bankruptcy estate, said motion seeking to vacate confirmation of the debtor’s chapter 13 plan alleging that no notice thereof was given to the recipient, held:  Despite an attempt by the recipient to characterize this matter as a constitutional notice one, this matter is more characterized by a creditor’s failure to notify the debtor or the court of a change in ownership of a claim.  Neither the debtor nor the court can reliably ensure the rights of a party who fails to safeguard the same.  The recipient is charged with the notice given to the assignor and, absent acting to either file a notice of transfer of claim or a claim in its own right, has no reasonable expectation that a debtor will know of such transfers and be able to revise notices to accommodate the same.  

For these reasons, the motion is DENIED.

20bk21625
On the Official Unsecured Creditors’ Committee’s objection to the claim of Matthew Spiegel, held: Matthew Spiegel as the claimant failed to satisfy his burden of entitlement to a general unsecured claim of $475,000.00 from the debtor’s (his father) estate. At the evidentiary hearing, Matthew Spiegel did not demonstrate an express contract, contract implied in fact or contract implied in law existed and no other equitable ground was applicable to support an obligation to repay the amount allegedly loaned to the debtor prepetition. For these reasons, the Committee’s objection is SUSTAINED.

14bk36072
On the City of Chicago’s objection to the chapter 7 trustee’s final report, held:  Despite a provision in title 28 defining “the legal rate” as the federal judgment rate, the legal rate for postpetition interest in bankruptcy matters is that prescribed by bankruptcy law under title 11.  Legislative history and long-extant bankruptcy law known as the solvent debtor exception indicates that using a contractually agreed upon interest rate or the applicable state interest rate is the proper interest rate for postpetition interest to a creditor in bankruptcy matters.  The adoption of the Bankruptcy Code did not change that prior practice.  For these reasons, the City’s objection is SUSTAINED.

14bk41230, 16ap00394
Upon crossing motions for summary judgment in an adversary proceeding seeking fraudulent transfer and other relief from the prepetition management and owners of the debtor, held:  The plaintiff/trustee failed to establish grounds for summary judgment in his favor on the sole legal issue on which it was sought—whether a finding of no value in a bankruptcy sale order as to an asset was preclusive on the value of the asset prepetition for the purposes of establishing the elements of a fraudulent transfer.  The defendants fare better, having shown that the plaintiff/trustee has offered no golden creditor on which to predicate state law avoidance of transfer earlier than captured by bankruptcy avoidance.  In all other respects, the defendants’ motion fails.  The plaintiff/trustee’s motion is therefore DENIED.  The defendants’ motion is GRANTED in part, but otherwise DENIED.

22bk04449
On the debtor’s motion seeking an order compelling the chapter 13 trustee to refund to the debtor the full amount of payments made by the debtor on his chapter 13 plan prior to the dismissal of the case prior to confirmation of the plan, held:  The trustee is not authorized to deduct from held plan payments her statutory fee if a chapter 13 case is dismissed without having a plan confirmed.  As a result, the trustee is required to return to the debtor all payments not excluded from such return under 11 U.S.C. § 1326(a)(2).  The motion is, therefore, GRANTED.

20ap00246, 18bk20215
Upon the motion for summary judgment, brought by the defendant, alleging that the plaintiff has failed to provide any evidence to support two of the elements of fraudulent transfer counts—that the transfer the plaintiff seeks to avoid was property of the debtor and that the debtor was insolvent at the time of the transfer—and, in the alternative, that the defendant should be granted summary judgment with respect his good faith for value defense, held:  The defendant has not satisfied his burden in demonstrating that the material facts are undisputed and thus the defendant is entitled to summary judgment in his favor on the fraudulent transfer claims or on his good faith for value defense.  The motion is, therefore, DENIED as set forth in the attached Memorandum Decision.

22ap00178, 16bk36530
Upon the motion to dismiss, brought by the defendant, alleging that the court should apply a five-year statute of limitations under limitations borrowing for actions under 11 U.S.C. § 362(k), held:  The defendant has failed to present binding or even persuasive case law that supports limitation borrowing for actions under 11 U.S.C. § 362(k).  Further, the binding Seventh Circuit case law declines to apply a statute of limitations in similar actions.  The motion is, therefore, DENIED as set forth in the attached Memorandum Decision.

15bk13819
Upon the motion the request of the counsel to the foreign representative in a foreign main proceeding recognized pursuant under chapter 15 of the Bankruptcy Code, held: a foreign representative has a duty to his or her counsel in the United States and to the United States Bankruptcy Court to remain in contact during the duration of a chapter 15 case and to arrange for the proper closure of the case when it is no longer needed.  Here, the foreign representative in the Korean foreign main proceeding recognized by this court neglected all contact with his counsel and the court over an extended period of more than five years.  As a result of the foreign representative’s counsel understandably seeking to withdraw, the court issued a show cause order requiring all interested parties, including but not limited to the foreign representative, to appear and show cause why the case should not be dismissed.  Further, the court attempted under section 1525(b) of the Bankruptcy Code to contact the foreign representative and/or the judges in the main proceeding in Korea.  With the assistance of a Korean judge unaffiliated with the case, the court determined that the foreign main proceeding had been concluded.  Only the foreign representative’s counsel appeared at the show cause hearing, having had no further communication from their client.  As a result, the chapter 15 case was closed and counsel was relieved from their representation.  Further, the foreign representative has been disqualified from appearing before the court in future matters.  He may only act as a foreign representative in further matters before the court upon an application demonstrating his understanding of and commitment to fulfilling his obligations to the court as a petitioner in such matters and upon an order of the court finding such conditions to be met.

17bk03367
On the competing motions of the chapter 13 trustee to dismiss a debtor’s case for failure to make plan payments and the debtor’s motion to modify his plan to allow it to complete without further payment, held:  Both the debtor’s defense to the trustee’s motion and the debtor’s motion addresses the understandable confusion that arises when a chapter 13 trustee neglects over an extended period of time to act in a way consistent with a debtor’s plan obligations.  While the debtor correctly contends that the trustee should be estopped from enforcing conditions that the trustee has neglected, that contention ignores the fact that the underlying default to the plan remains even with the motion to dismiss denied.  The debtor is in an unfortunate position—a plan that cannot be extended and obligations that cannot be met by an elderly debtor on fixed retirement income within the time of the plan—through actions not entirely of his own making.  Though it is unlikely Congress anticipated these exact circumstances, this is the type of conundrum that Congress and the United States Supreme Court have empowered the court to resolve when the former granted the court broad-sweeping authority under 11 U.S.C. § 105(a) and the latter empowered the court to address the equitable enforcement of its orders under Rule 60(b)(5) of the Federal Rules of Civil Procedure.  As a result, the court exercises that authority to determine that the debtor has fulfilled all the conditions of the plan that he might reasonably be required to perform under the circumstances and vacates the debtor’s confirmation order as to any remaining unfulfilled condition in it.  The debtor’s plan is therefore complete.  As a result, the trustee’s motion is DENIED and the debtor’s motion is GRANTED, insofar as it is necessary to effectuate that relief.

20bk21625
On a debtor’s objection to the claim of the issuing bank which holds a letter of credit to back the debtor’s appeal of litigation sanctions against, held: The debtor argues that the terms of the letter of credit should be strictly enforced against the issuing bank, while not challenging that the overall circumstances regarding the draw on the appellate bond had been met. As the debtor believes the bank’s honoring of the letter of credit was inappropriate, the debtor presumes that such strict enforcement results in the denial of the bank’s claim. The debtor, however, has failed at the most basic level to show how the letter of credit’s own language favors the debtor’s interpretation, which the court finds to be unreasonable. The letter of credit is not ambiguous, it is imprecise. Further, the debtor has failed to account for application of relevant Illinois statutes, the state whose law governs the letter of credit. Taken together with the terms of the letter of credit, that law permits the bank to honor letter of credit draws that appear valid, which is what the bank did here. Accordingly, even if the debtor were successful with its strict compliance argument, the debtor has failed to carry its burden to rebut the presumed allowance of the filed claim.  As a result, the objection to the claim is OVERRULED.

15bk12654
Following the debtor’s reopening of a discharged, no asset chapter 7 case nearly six years after the case’s first closure and on the debtor’s motion seeking avoidance of a previously unavoided judgment lien, held:  While the avoidance of a lien might be considered ordinary under other circumstances of another case, under the circumstances of this case, the relief is both extraordinary and problematic.  The debtor previously reopened the case and sought avoidance of the same lien four years after the case first closed.  Though that motion went through a complicated procedure in part due to the debtor’s previous counsel’s errors, it was ultimately heard on its merits and denied.  No reconsideration was sought or appeal taken.  It is now nearly two years later and too late under Fed. R. Civ. P. 60(c)(1) to seek relief under Fed. R. Civ. P. 60(b)(1), which rule appears to otherwise apply.  Because Fed. R. Civ. P. 60(b)(1) applies, relief under Fed. R. Civ. P. 60(b)(6) is also unavailable.  While the court might be able to entertain the request as an independent action under Fed. R. Civ. P. 60(d)(1), the debtor has failed to demonstrate that the court should ignore the law of this case to do so.  As a result, the motion to avoid the lien is DENIED.

19bk06255, 19ap00684
Upon the motion to dismiss the plaintiffs’ complaint, brought by the defendant for failure to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6), held:  the motion to dismiss is largely predicated on the belief that the Supreme Court’s ruling in City of Chicago v. Fulton, — U.S. —, 141 S. Ct. 585 (2020), forecloses the plaintiffs’ claims for violation of the automatic stay under sections 362(a)(4), (6) and (7) of the Bankruptcy Code.  Fultonwas, however, expressly limited to section 362(a)(3) of the Bankruptcy Code.  As a result, Fulton does not directly foreclose claims under sections 362(a)(4), (6) and (7) and the court declines to extend Fulton as requested by the defendant.

As to the sufficiency of the counts pled, the plaintiffs have sufficiently alleged violation of sections 362(a)(4), (6) and 542(a), but have failed to do so with respect to section 362(a)(7).  As a result, the plaintiffs’ claim under section 362(a)(7) will be dismissed as insufficiently pled but without prejudice and with leave to amend, while claims under sections 362(a)(4), (6) and 542(a) survive the motion.

The motion to dismiss also raises the propriety of imposing punitive damages against a municipality.  In this regard, the motion is well taken and the plaintiffs’ request for punitive damages is dismissed.  Section 106(a)(3) of the Bankruptcy Code governs, and the abrogation of sovereign immunity contained therein expressly omits immunity from punitive damages.  The motion to dismiss will be granted in this respect.

Finally, the defendant seeks to dismiss the plaintiffs’ request for class certification.  Class certification is a matter of consideration in a separate motion and not properly the subject of a motion to dismiss.  The defendant’s motion to dismiss is thus denied in this respect.  The court will set a separate deadline for a motion to certify the class and any opposition thereto.

The defendant’s motion to dismiss is, therefore, GRANTED IN PART AND DENIED IN PART.

20bk17679, 20ap00426
Upon the complaint, brought by plaintiff/trustee, objecting to the defendant/debtor’s discharge under 11 U.S.C. § 727(a)(5) based on the debtor’s failure to satisfactorily explain the dissipation of $70,159.22 in the year prior to filing for bankruptcy, following trial, held:  The plaintiff has made a prima facie showing that, prior to the commencement of the debtor’s chapter 7 case, the debtor had funds sufficient to satisfy the $51,617.00 in unsecured claims that he now seeks to discharge and that the debtor has, despite his claims of gambling losses, failed to sufficiently explain the dissipation of the funds.  Judgment is, therefore, entered in favor of the plaintiff.