Verde filed an adversary proceeding, seeking preliminary and permanent injunctive relief related to its claims for false advertising under federal and state law. C2R responded with a motion to dismiss Verde’s Count II, relating to claims for false advertising under Wisconsin Statute section 100.18—the Deceptive Trade Practices Act (DTPA). The Court concluded that Verde, as a competitor of C2R, is not a member of “the public” and, therefore, not eligible to bring a sec. 100.18 claim. The Court also ruled that Verde was not induced to act based on any statements or representations by C2R, a second element of a claim under sec. 100.18. Accordingly, the Court granted C2R’s motion to dismiss Count II of the adversary complaint with prejudice.
In re C2R Global Manufacturing, Inc., Case No. 18-30182-beh, -- WL -- (May 2020) -- Judge B.E. Hanan
In approving the parties’ settlement of their patent infringement lawsuit (waged as a claim objection proceeding) the Court vacated its February 20, 2020 decision construing the parties’ disputed patent claim terms.
In re Gentry, Case No. 15-20990-beh, 2020 WL 2479662 (Bankr. E.D. Wis. May 13, 2020) (May 2020) -- Judge B.E. Hanan
Four years after his plan was confirmed, a debtor objected to the State of Wisconsin’s proof of claim for overpayment of ChildCare benefits. The debtor argued that the Seventh Circuit’s recent decision in In re Dennis, 927 F.3d 1015 (7th Cir. 2019) (holding that overpayments were not domestic support obligations) is controlling and warrants the reclassification of the claim as a general nonpriority unsecured claim. The Court rejected the State’s arguments that res judicata and collateral estoppel relating to the confirmed Chapter 13 plan precluded the debtor from bringing the objection. Rather, the Court determined that deadlines set by statute and rule, plus law of the case and judicial estoppel governed the Court’s analysis. In doing so, the Court sustained the debtor’s objection, found that the Court is bound to follow In re Dennis and will do so here because the debtor’s case is still open.
DeWitt v. Jacob (In re Jacob), Case No. 18-26186-beh, Adv. No. 18-02217-beh, 2020 WL 696795 (February 2020) -- Judge B.E. Hanan
A creditor sought a determination that a portion of the state court money judgment against both the debtors and a non-debtor was non-dischargeable under 11 U.S.C. § 523(a)(6), based on the debtors’ conduct during their tenancy in the creditor’s home. The Court disregarded the debtors’ attempt to deny the existence of the debt as well as their inapplicable affirmative defenses. Where the creditor established by a preponderance of the evidence that the debtors caused willful and malicious injury, the Court determined that the damages flowing therefrom were non-dischargeable. The damages ranging from routine wear and tear to gross uncleanliness are dischargeable.
CQM, Inc. v. Vandenbush (In re Vandenbush), Case No. 18-31066, Adv. No. 19-02041, 2020 WL 609609 (February 2020) -- Judge B.E. Hanan
Creditors holding a large judgment debt against the debtor’s now ex-wife, attributable to the ex-wife’s theft-by-fraud, sought to retain their ability to collect the debt against the marital property the debtor retained in the parties’ subsequent divorce, and filed an action premised on 11 U.S.C. §§ 523(a)(2)(A) and (a)(15). The parties cross-moved for summary judgment. The Court granted summary judgment in favor of the debtor-defendant because (1) the complaint’s allegations under section 523(a)(2)(A) were premised solely on fraud committed by the debtor’s ex-wife, which could not be imputed to the debtor, and (2) the underlying judgment, which was assigned to the debtor’s ex-wife in the divorce, was not a debt owed to a spouse, former spouse or child, nor was it created by the parties’ divorce.
The Court also rejected a new factual theory that the creditors raised for the first time in their brief opposing the debtor’s motion for summary judgment—that the debtor engaged in a post-judgment fraudulent transfer scheme through the parties’ marital property division. First, the Court noted that it is improper for parties to raise new factual, rather than legal, theories in opposition to summary judgment briefing. Then, the Court rejected the new theory on the merits because it did not link the underlying judgment debt that the creditors sought to except from discharge to the later asserted fraudulent conduct. Finally, to the extent the plaintiffs were attempting to invoke their rights under 11 U.S.C. § 524(a)(3) to collect against post-petition martial property, that section of the Code did not apply because the debtors were no longer married and thus there could be no non-exempt post-petition marital property from which to collect.
Layng v. Pansier (In re Pansier), Adv. No. 18-2222, Case No. 18-22297, 2020 WL 268582 (January 2020) -- Judge B.E. Hanan
The U.S. Trustee filed a complaint to deny the discharges of a married debtor couple, based on their conduct in creating several trusts and entities into which they transferred their home, personal property and income, while continuing to live in the home and retaining control over the alleged trust property. The U.S. Trustee asserted causes of action under 11 U.S.C. sections 727(a)(2) (concealment of assets), (a)(3) (failure to maintain adequate books and records), (a)(4)(A) (false oaths), and (a)(5) (failure to explain a loss or diminution of assets), and sought summary judgment on all four causes of action. The Court granted summary judgment on two of those causes of action, denying the debtors’ discharges under sections 727(a)(2) and (a)(4)(A).
In re Jones, Case No. 19-31539-beh, 2019 WL 7342455 (December 2019) -- Judge B.E. Hanan
The Chapter 13 debtor originally filed his bankruptcy petition without identifying a spouse, but eleven days later, he filed an “amended petition” to include a joint debtor spouse. Though Federal Rule of Bankruptcy Procedure 1009(a) allows a debtor to amend his or her petition “as a matter of course at any time before the case is closed,” the Rule does not trump the plain text prescriptions for filing joint cases under 11 U.S.C. section 302(a). Accordingly, the Court struck the amended petition and related documentation including the spouse.
In re Kielman, Case No. 19-21900-beh, 2019 WL 6880082 (December 2019) -- Judge B.E. Hanan
The Chapter 13 debtor inadvertently failed to provide notice of her bankruptcy case to a creditor, the lender on her non-filing husband’s vehicle. As a result, the creditor filed its proof of claim after the bar date and the Court disallowed the claim as untimely. Later, upon default of post-petition payments, the creditor moved for relief from the automatic stay and co-debtor stay. In resolving the motion, the creditor and the debtor stipulated to allow the post-petition arrearage to be paid through the plan pursuant to a claim under 11 U.S.C. § 1305. The Court determined that post-petition default on a pre-petition car loan did not constitute consumer debt arising after the date of the order for relief, as required to constitute a claim under § 1305. The Court also declined to reconsider the prior disallowance of the creditor’s proof of claim, noting that the debtor’s invocation of 11 U.S.C. § 521(j) at a hearing was not procedurally proper, nor was it likely to succeed on the merits. Alternatively, the Court noted that an option not yet pursued by the parties was for the debtor to seek an extension of the deadline to file a claim under Rule 3004, which may be enlarged under Rule 9006(b)(1).
In re Zoromski, 19-20752-beh, 2019 WL 6869628 (December 2019) -- Judge B.E. Hanan
After the Chapter 7 debtors received their discharges, and before the assets of the estate were fully administered, the debtors moved to convert their case to a Chapter 13. The Court ordered the debtors to file a supporting brief establishing their right to convert in the circumstances. The debtors then moved to vacate the discharge order under Civil Rule 60(b). The debtors asserted, among other things, that their attorney’s failure to stipulate to an extension of the deadline to object to their discharge for a third time—and thus to prevent the entry of the discharge order—amounted to excusable neglect. The debtors wished to save their non-exempt vacant land, which was appraised post-petition at a value much higher than they anticipated, by paying unsecured creditors in full through a Chapter 13 plan. After weighing the equitable factors identified in Pioneer Inv. Servs. v. Brunswick Assocs., Ltd. P’ship, 507 U.S. 380, 395 (1993), the Court concluded that excusable neglect existed and granted the motion.
Braun v. U.S. Dep’t of Educ. (In re Braun), Case No. 18-23655-beh, Adv. No. 18-02184-beh, 2019 WL 6463254 (November 2019) -- Judge B.E. Hanan
Chapter 7 debtors filed an adversary proceeding seeking to discharge $9,558.66 in student loan debt under 11 U.S.C. § 523(a)(8) because excepting such debt from a discharge would impose an undue hardship on them. Debtor Robert Braun had co-signed the loans for the benefit of the debtors’ son. The U.S. Department of Education (“DOE”) moved for summary judgment, arguing that the debtors could not meet the second prong of the undue hardship test set out in Brunner v. New York State Higher Educ. Servs. Corp., 831 F.2d 395 (2d Cir. 1987), as adopted by In re Roberson, 999 F.2d 1132 (7th Cir. 1993), and somewhat softened by Krieger v. Educational Credit Mgmt. Corp., 713 F.3d 882 (7th Cir. 2013).
Applying the second Brunner prong, the Court considered whether additional circumstances exist to indicate that the debtors’ inability to pay while maintaining a minimum standard of living is likely to persist for a significant portion of the repayment period. Shortly after filing their bankruptcy case, the debtors signed three reaffirmation agreements to maintain loans on two vehicles. By the time they filed this adversary proceeding, they had satisfied one of the car loans. Moreover, debtors anticipated fully repaying the second loan within seven months, and repaying the third within fourteen months. This progress will, at the fourteen-month point, allow the debtors to enjoy a net monthly income of more than five times the monthly amount due on the student loans. These impending improved circumstances allowed the Court to confirm that the debtors can repay the loan during the repayment period while maintaining at least a minimum standard of living. Based on the debtors’ failure to meet their burden to establish that the obligation to pay the son’s student loans would impose an undue hardship under 11 U.S.C. § 523(a)(8), the Court granted the DOE’s motion for summary judgment.