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Chief Judge A. Benjamin Goldgar

Judge Jacqueline P. Cox

18 B 09130
The Federal Deposit Insurance Company objected to proofs of claim filed by attorneys who represented the Debtor’s spouse in a dissolution of marriage case. The state court awarded fees to the attorneys in connection with establishing support owed to the Debtor’s former spouse and their child. The state court defined the awards to the attorneys as non-dischargeable domestic support obligations. The FDIC argued that they were not domestic support obligations entitled to priority under Section 507 because they were payable to the attorneys, not to the Debtor’s former spouse or child.
The Seventh Circuit and other courts have found attorneys’ fee awards made in connection with dissolution litigation to be in the nature of domestic support obligations, not because a state court says they are domestic support obligations, but after analyzing the language and substance of the judgments in issue, the parties’ financial circumstances and the function served by the obligation.

The FDIC’s objections were overruled. The fee obligations were held to be domestic support obligations entitled to priority under section 507 of the Bankruptcy Code.

Judge Timothy A. Barnes

14bk41230, 16ap00465
On the defendant’s motion for summary judgment, seeking judgment in its favor on its good faith transferee for value defense under 11 U.S.C. § 548(c) to the trustee’s fraudulent transfer claims, held:  The defendant has established grounds for summary judgment under Federal Rule of Civil Procedure 56 as to the first element of its defense, that the transfers were received in good faith, but has failed establish grounds for summary judgment as to the second element of its defense, that the debtor received value in exchange for the transfers.  The defendant’s motion is, therefore, GRANTED IN PART and DENIED IN PART.

Judge Donald R. Cassling

20 B 05012

Judge Janet S. Baer

17 B 06666, 17 A 00424
Dimitri Karras filed an adversary complaint against Bryce Stirlen, seeking a determination that a debt owed to him by Stirlen was not dischargeable pursuant to §§ 523(a)(2)(A), (a)(4), and (a)(6). In response, Stirlen filed a counterclaim, asserting that he was entitled to set off the alleged debt pursuant to an asset purchase agreement (the “APA”) under which his company American Weapons Components, Inc. (“AWC”) acquired the assets of Lycurgan, Inc., a corporation owned by Karras. Subsequently, Karras filed two motions to dismiss the counterclaim under subsections (b)(1) and (b)(6) of Rule 12 of the Federal Rules of Civil Procedure. As to the Rule 12(b)(6) motion, Karras argued that Stirlen’s setoff defense failed because Karras had no personal liability under the APA since he executed the agreement as Lycurgan’s agent. Karras further argued that only AWC, Stirlen’s corporate principal, could assert a setoff defense. Finding that both Karras and Stirlen were guarantors under the APA and that AWC’s registration was suspended for failure to pay taxes, the Court observed that a guarantor may raise any defense available to its principal, as well as any defenses or setoffs that the principal could have asserted had it not been unable to defend itself by virtue of its suspension. Ultimately, the Court found that Stirlen’s setoff defense was pleaded sufficiently to survive the 12(b)(6) motion and thus denied Karras’s motion to dismiss for failure to state a claim upon which relief can be granted. In his 12(b)(1) motion, Karras argued that Stirlen had no standing to assert setoff because that right became estate property when Stilen filed for bankruptcy and only the chapter 7 trustee has standing to prosecute claims belonging to the estate. Karras further argued that the Court had no jurisdiction to decide the setoff defense because that defense constituted a common law breach of contract claim, a non-core matter under Stern v. Marshall, 564 U.S. 462 (2011). The Court found that Stirlen could pursue his setoff right as an affirmative defense existing under California law (which governed the interpretation of the APA); that the “heart” of the Stern decision went to a bankruptcy court’s ability to render a final judgment which was not a matter at issue; and that even if the Court did not have plenary authority over Stirlen’s defense, resolution of the matter would fall within the Court’s ancillary jurisdiction. As such, the Court denied Karras’s 12(b)(1) motion to dismiss.

Judge Jack B. Schmetterer

In re: Dionna D. Rice
April 21, 2020

18 B 08359

Judge Deborah L. Thorne

In re Ann Terrell
April 8, 2020


Judge LaShonda A. Hunt

Chapter 7 Trustee sought turnover of proceeds from debtors’ prepetition sale of their homestead, that they failed to reinvest before the one-year time limit expired.  Because the Trustee did not timely object to the exemption and the snapshot rule governs, the motion to compel turnover of funds is denied.

Judge Thomas M. Lynch

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.