Subscribe to All Opinions17 B 07037, 17 A 00319
Plaintiff and judgment creditor Nick Boscarino filed an adversary complaint against debtor-defendant Lewis J. Borsellino, seeking (1) a determination that the debt owed to him by Borsellino was not dischargeable pursuant to § 523(a)(6), and (2) denial of Borsellino’s bankruptcy discharge pursuant to § 727(a)(2)(A). Boscarino subsequently filed a motion for summary judgment, arguing that principles of claim and issue preclusion precluded Borsellino from relitigating the factual issues decided in prior state court proceedings. According to Boscarino, the state court found that (1) Borsellino was the owner of a boat which was subject to Boscarino’s citation lien at the time it was sold, and (2) Borsellino committed perjury in his state court trial testimony and backdated an agreement to shield ownership of the boat. In response, Borsellino argued that neither of those issues had been decided by the state court and claimed that he did not own the boat, as it had been transferred to an LLC that he managed. After reviewing the state court record and considering the elements of the statutory provisions at issue, the Court concluded that the necessary facts had been previously decided in Boscarino’s favor to support his § 523(a)(6) claim. Specifically, the Court held that the record established that (1) Borsellino had intentionally transferred the boat in violation of the citation lien, (2) the transfer caused injury to a property interest held by Boscarino, and (3) the transfer was made without just cause or excuse. Thus, summary judgment was granted as to the § 523(a)(6) count. The Court further held that, although the state court found that Borsellino owned the boat at the time of the transfer, it did not find that he had fraudulently created the agreement or committed perjury. As such, summary judgment was denied on the § 727(a)(2)(A) count.
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Judge Janet S. Baer
September 24, 2020
Judge Thomas M. Lynch
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.
September 1, 2020
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.
Judge Timothy A. Barnes
September 2, 2020
19bk31162, 20ap00074
Upon the debtor’s motion to dismiss a single-count adversary complaint brought under 11 U.S.C. § 523(a)(2)(A) for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), held: As is required, the court draws all reasonable inferences in the favor of the plaintiff. As a result, the complaint states a claim for relief, though only just. Were it not for the liberal pleading standards for intent set forth in Federal Rule of Civil Procedure 9(b), the complaint would fail to rise above mere speculation. But for the plaintiff’s speculation as to the debtor’s intent, the plaintiff pleads a case that is merely breach of contract, not false pretenses, false representation, or actual fraud. Given the sophistication of the plaintiff and the plaintiff’s extensive experience bringing matters such as this to this court, the court would otherwise expect more so as to demonstrate that the complaint is not being brought for improper purposes. As it stands, however, despite the narrowness of this ruling, the motion to dismiss must be denied.
August 25, 2020
18bk24763
On the chapter 7 trustee’s objection to the secured status and amount of a claim for fees and costs of counsel for the plaintiff in a prepetition action against the debtor, held: The claim for attorney’s fees and costs is unsecured as the order awarding such fees and costs in the underlying prepetition action was not recorded and the amount of such claim is limited to amount of fees awarded in the prepetition lawsuit. The trustee’s objection is, therefore, SUSTAINED.
July 21, 2020
07bk12776
Upon the motion for relief from the automatic stay brought by certain asbestos claimants, alleging cause exists for relief from the automatic stay to pursue only available insurance coverage, held: The movants have met the cause requirement under 11 U.S.C. § 362(d)(1). Though the Seventh Circuit’s Fernstrom factors are not clearly applicable, they are instructive nonetheless. All three factors thereunder weigh in favor of the claimants. The movants have also established that the debtor lacks equity in the subject property under 11 U.S.C. § 362(d)(2), the sole showing required for such relief in a chapter 7 case. The motion is, therefore, GRANTED as set forth in the attached Memorandum Decision.
Judge Deborah L. Thorne
Judge David D. Cleary
July 31, 2020
16 B 25958
Chapter 13 debtor requested a hardship discharge. The parties agreed that her failure to complete plan payments was due to circumstances for which she should not justly be held accountable. Held: her case would have been a no-asset under chapter 7, the debtor sought relief quickly after falling drastically ill, and modification was not practicable even if she became eligible for Social Security benefits. Therefore, the debtor was eligible for a hardship discharge.
Judge Jacqueline P. Cox
July 27, 2020
19 B 08032 and 19 B 08037; 19 A 00740 (Consolidated with 19 A 00741)
Debtors Pramod Patel and Ankit Shah worked for several years for Plaintiff M S International, Inc. They left to work for their former employer’s competitor. They were found liable in a civil action in a California federal court for stealing their former employer’s trade secrets, based on their violations of two penal code provisions and fraud and deceit. They filed chapter 7 bankruptcy cases a few months later. M S International filed adversary complaints seeking to have the debts established in the prior litigation excepted from discharge under 11 U.S.C. section 523(a)(2)(A). Collateral estoppel was applied to bar relitigation of the prior court’s factual findings.
Summary judgment was entered by the bankruptcy judge in favor of Plaintiff M S International, Inc. The debts were found to be non-dischargeable actual frauds.