Creditor Glencove Holdings, LLC (“Glencove”) filed a Proof of Claim against Debtor Steven W. Bloom (the “Debtor”). The Debtor objected. Contemporaneously, Glencove initiated an Adversary Proceeding against the Debtor for nondischargeability of debt under 11 U.S.C. §§ 523(a)(2)(A) and (a)(6). The Debtor contested nondischargeability. The claim objection and nondischargeability issues were joined for trial.
The dispute between the Debtor and Glencove stemmed from the purchase of a private jet. The Debtor is an experienced aircraft broker. Glencove met the Debtor and retained one of the Debtor’s wholly-owned companies to act as its agent in buying an airplane. Glencove agreed to pay $120,000 as an “agent’s fee.” The Debtor found a jet for Glencove and helped Glencove make an initial multi-million dollar offer. The seller came back with a favorable counteroffer. At that point, the Debtor saw an opportunity to buy the airplane himself (through another wholly-owned company) at a lower price and then simultaneously resell it to Glencove at a higher price, all without disclosing the facts to Glencove. By engaging in a hidden back-to-back transaction, the Debtor orchestrated a complex scheme to take advantage of Glencove and effectively rob Glencove of the price differential.
In its Proof of Claim, Glencove asserted that the Debtor was liable for fraud by false representation and fraudulent concealment under Colorado state law. The Court engaged in extensive fact-finding and analysis of all of the elements of the underlying state law claims. The Debtor asserted a myriad of defenses. The Court ultimately concluded Glencove met its burden of establishing both fraud by false representation and fraudulent concealment. Thus, the Court allowed Glencove’s Proof of Claim in the amount of $458,470, plus post-judgment interest. In doing so, the Court decided that the Debtor was Glencove’s agent. The Court also rejected all of the Debtor’s many affirmative defenses including under the economic loss doctrine. The Court decided that the Colorado economic loss doctrine does not apply to intentional torts such as fraud by false representation and fraudulent concealment.
Having determined that the Debtor was indebted to Glencove, the Court considered nondischargeability. The Court concluded that no word other than “fraud” was more apt for what the Debtor did. Thus, the Court found that the debt was nondischargeable under 11 U.S.C. § 523(a)(2)(A) for false pretenses, false representation and actual fraud. The Court also decided that the Debtor’s fraudulent conduct amounted to willful and malicious injury under 11 U.S.C. § 523(a)(6) too.