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The Colorado Department of Labor and Employment (the “State”) sued the Debtor seeking a determination that a debt for an overpayment of unemployment benefits, a 65% statutory penalty, and a 25% collection fee should be excepted from the Debtor’s discharge pursuant to 11 U.S.C. §§ 523(a)(2)(A) and 523(a)(7).  The Debtor used the State’s “CUBLine” automated phone system to apply for weekly benefits and to certify his eligibility for the unemployment benefits.  The State contended that the Debtor had lied during the telephone calls by misrepresenting his income and employment.
After a trial, the Court found that the State failed to prove its case under Section 523(a)(2)(A). The State was unable to prove that the Debtor made any specific representations during the telephone calls.  And, even if the Debtor had lied about his income and employment, such representations would have been statements “respecting the debtor’s financial condition”; and thus, not actionable under Section 523(a)(2)(A) pursuant to the recent decision of the United States Supreme Court in Lamar, Archer & Cofrin, LLP v. Appling, 138 S. Ct. 1752 (2018).  For that reason, the Court held that the debt for the overpayment of unemployment benefits was dischargeable.
With respect to the State’s Section 523(a)(7) claim, the Court determined that the 65% statutory penalty assessed by the State was nondischargeable.  However, the debt for the overpayment of unemployment benefits and the 25% collection fee was dischargeable because that part of the debt was not “a fine, penalty, or forfeiture” within the meaning of Section 523(a)(7).

Debtors Badlands Prod. Co. and Badlands Energy, Inc. (together, “Badlands”), a consolidated natural gas and petroleum exploration, development and production company, owned oil and gas assets in the Uintah Basin, Utah (the “Riverbend Assets”).  In the Chapter 11 cases, the Court authorized the sale of the Riverbend Assets to Wapiti Utah, LLC, f/k/a Wapiti Newco, LLC (“Wapiti”).  The sale was free and clear of all liens, claims, encumbrances and interests pursuant to Section 363(f) of the Bankruptcy Code, but as stated in the Sale Order, the sale was subject to the outcome of certain claims brought by Monarch Midstream, LLC (“Monarch”) in the adversary proceeding.

Monarch is a midstream provider of gas gathering, processing, and saltwater disposal services.  Monarch sued Badlands and Wapiti seeking a determination its midstream agreements with Badlands were covenants running with the land under Utah law.   Monarch also sought to hold Wapiti liable for Badlands’ prepetition default under those agreements, in the amount of approximately $1.2 million.

Applying Utah law, the Court held Monarch’s midstream agreements with Badlands constituted covenants running with the land.  Accordingly, Wapiti took the Riverbend Assets subject to those agreements notwithstanding Section 363(f).  The Court held all of the requirements for a covenant to run with the land under Utah law were met:  the covenants “touched and concerned” the land; the parties intended for the covenants to run with the land; and privity was satisfied.  Although the respective interests of the parties did not fall within the traditional paradigm for mutual privity, to the extent Utah law requires mutual privity, the Court found it was satisfied by the mutual property interests of the parties within the “area of mutual interest” (AMI), including the dedicated oil reserves dedicated by Badlands to Monarch for processing pursuant to the agreements.  In reaching its decision, the Court distinguished the contracts from those at issue in In re Sabine Oil & Gas Corp., 547 B.R. 66 (Bankr. S.D.N.Y. 2016), aff’d, 567 B.R. 869 (S.D.N.Y. 2017), aff’d, 734 Fed. Appx. 64 (2nd Cir. 2018), which involved dedications of produced gas and application of Texas law.

The Court further held Wapiti was not liable for Badlands’ prepetition defaults under the agreements, however.  Once the covenants were breached, they became causes of action.  Under Section 363(f), the Riverbend Assets were sold free and clear of such claims.

After he received his Chapter 7 discharge, the debtor, certain business entities in which he had an interest, and other defendants were sued in state court by the State of Colorado, alleging violations of  the Colorado Consumer Protection Act (“CCPA”) and the Colorado Fair Debt Collection Practices Act (“CFDCPA”). After a bench trial, the state court found in favor of the State, imposed civil penalties on the defendants, and awarded the State attorney’s fees and costs. In a post-trial motion, the debtor moved to amend the findings and conclusions and accompanying judgment to bar the State’s recovery of attorney’s fees and costs against him personally, based upon his bankruptcy discharge. The state court declined to address his argument, finding that the debtor presented no evidence of his bankruptcy during trial, and determined the amount of the fees judgment.

The debtor appealed the fees judgment to the Colorado Court of Appeals, arguing that although the bankruptcy discharge did not preclude the award of civil penalties issued in the underlying judgment, it did preclude the fees judgment against the debtor personally. The State argued that the fees judgment was non-dischargeable under 11 U.S.C. § 523(a)(7), as a debt for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, that is not compensation for actual pecuniary loss. Assuming that the debtor properly preserved the consideration of the effect of his bankruptcy discharge on the fees judgment during trial, the Court of Appeals reached the merits of the debtor’s argument, affirmed the state court in a 19-page opinion, and explicitly found that the fees judgment was non-dischargeable under 11 U.S.C. § 523(a)(7). The Court of Appeals relied on In re Jensen, 395 B.R. 472 (Bankr. D. Colo. 2008), to conclude that the fees judgment awarded under the CFDCPA and the CCPA was sufficiently penal to constitute a fine, penalty, or forfeiture under 11 U.S.C. § 523(a)(7). The debtor declined to seek rehearing or appeal the fees judgment to the Colorado Supreme Court, and the Court of Appeal’s order became final.

Thereafter, the debtor filed an adversary proceeding, seeking a determination that the fees judgment was dischargeable under 11 U.S.C. § 523(a)(7). The State moved to dismiss, arguing that the Rooker-Feldman Doctrine barred the debtor’s request for a determination of the dischargeability of the fees judgment by the bankruptcy court. The debtor responded, asserting that a dischargeability determination under 11 U.S.C. § 523 is an “independent claim” for relief that arises exclusively under the Bankruptcy Code, such that the Rooker-Feldman Doctrine was not implicated.

After hearing oral argument and receiving post-hearing briefs, the Court found in favor of the State and dismissed the adversary proceeding with prejudice. The Court noted that state courts have concurrent jurisdiction over most claims to determine the dischargeability of particular debts, including claims under 11 U.S.C. § 523(a)(7). The Court found that, because the Court of Appeals considered the debtor’s arguments, reached the merits, and concluded in an exercise of its concurrent jurisdiction that the fees judgment was non-dischargeable under 11 U.S.C. § 523(a)(7), the Rooker-Feldman Doctrine deprived it of subject matter jurisdiction to review the Court of Appeals’ non-dischargeability determination.

Plaintiffs and Debtor/Defendant had been embroiled in litigation over family trusts in which the Debtor served as trustee. On the eve of a scheduled deposition, the Debtor filed his Chapter 7 bankruptcy case.

Plaintiffs actively participated in the bankruptcy case, scheduling a Rule 2004 examination and requesting the production of various documents. Throughout this process, the Debtor resisted production and engaged in a pattern of delay.

In May 2019, within a year after the granting of the Debtor’s discharge but well after the expiration of the dischargeability deadline, Plaintiffs filed their Complaint, alleging claims under 11 U.S.C. § 727 for revocation of discharge and to except their claims from discharge under 11 U.S.C. §523(a)(4), (a)(2), and (2)(6). The Debtor filed a Motion to Dismiss the dischargeability claims on the basis that no timely extension was sought and the claims were filed after the expiration of the deadline established by Fed.R.Bankr.P. 4007(c).

The Court, relying on Kontrick v. Ryan, 540 U.S. 443, 447 (2004), wherein the United States Supreme Court held that the time period within which to object to discharge under 11 U.S.C. § 727 prescribed in Fed. R. Bankr. P. 4004(a) is not “jurisdictional,” concluded the deadlines to object the dischargeability established by Fed.R.Bankr.P. 4007(c) are similarly “procedural” and therefore subject to equitable defenses including equitable tolling.

Recognizing the Plaintiffs bear the burden of proof to establish the doctrine of equitable tolling applies, the Court looked to the factual allegations set forth in the Complaint and held they were sufficient to withstand a Motion to Dismiss.

Individual and corporate debtors in two consolidated chapter 7 cases formerly provided accounting and payroll services to clients. Prior to filing, the debtors engaged in a fraudulent scheme pursuant to which they stole in excess of $11 million dollars from their clients by filing false payroll tax returns with the IRS and stealing client funds meant to pay payroll taxes. Some of the debtors’ clients, including the defendant, discovered the fraudulent scheme prepetition and forced the Debtors to pay funds to the IRS during the preference period. The chapter 7 trustee sought to recover the payments from defendant as a preference. The defendant moved for summary judgment, arguing the payments were not recoverable as preferences because they were not the debtors’ property but were instead either trust funds of the IRS under 26 U.S.C. § 7501 or stolen property. The Court granted summary judgment in part, holding that the defendant had only established a portion of the funds transferred were covered by the § 7501 statutory trust. The Court further held the defendant had failed to adequately trace those funds it alleged were its stolen property.

Debtor inadvertently omitted an unsecured creditor from his schedules and his creditor matrix and the creditor did not receive timely notice of the case. The creditor later filed a late proof of claim and motion to deem the proof of claim timely. The chapter 13 trustee objected, arguing that Fed. R. Bankr. P. 3002(c) lists the only circumstances in which a creditor may file a late proof of claim and that none of them applied to this case. The Court overruled the objection, concluding that Rule 3002(c)(6) applied. That subsection, by its express terms, permits a late filed proof of claim if notice was insufficient because the debtor failed to file the creditor matrix required by Rule 1007(a). Under a plain language interpretation, this Rule would not apply because the Debtor had timely filed a creditor matrix, albeit an incomplete one. However, the Court concluded that this interpretation would render the Rule superfluous because other requirements would dictate the dismissal of the bankruptcy case due to the untimely filing of a creditor matrix long before any creditor would face a bar against an untimely proof of claim. Thus, the Court held that Rule 3002(c)(6) should be read to apply where a debtor fails to list a particular creditor on the creditor matrix, thereby preventing adequate notice to that creditor.

The above-median income Debtors proposed a Chapter 13 Plan providing for monthly payments of $681 over a sixty-month period.  The Debtors sought to reduce their calculated monthly disposable income of $1,701.27 by claiming special circumstances deductions of $210 per month for cigarettes and $900 per month for medical marijuana.
The Chapter 13 Trustee and the United States Trustee objected to confirmation of the Plan.  Specifically, the UST argued the Plan failed to meet the requirements of 11 U.S.C. § 1325(a) and (b) in that the Plan was not proposed in good faith and failed to provide for the payment of all disposable income.
The Court declined to address the good faith argument but sustained the UST’s objection and denied confirmation because the Plan did not provide for the payment of all disposable income as required under 11 U.S.C. § 1325(b)(1)(B). Marijuana use, whether for medical or recreational purposes, remains illegal under federal law.  The Court held the deduction of a medical marijuana expense cannot be allowed as either an ongoing out-of-pocket medical expense or as a deduction for special circumstances.
Several years pre-petition, the plaintiff obtained a default judgment against the defendant and her then-husband in state court.  After the defendant filed for bankruptcy relief, the plaintiff commenced an adversary proceeding against her under 11 U.S.C. § 523(a)(2)(A), seeking a determination that the state court judgment was excepted from discharge.
The plaintiff was a small business owner who previously worked in the financial services industry and was either employed as, or receiving training to be, a licensed investment advisor when he entered into two transactions to provide funds for real estate development projects undertaken by the debtor, her then-husband, and companies they controlled.
The loans were documented by two promissory notes; one executed by the defendant, and the other executed by the defendant’s former husband.  Both promissory notes provided that the loans would be secured by trust indentures on certain lots of real property, but no trust indentures were ever executed for the subject lots.  The plaintiff received no payment under either promissory note.  
The evidence presented to the Court was complicated and at times contradictory.  Nevertheless, the testimony established that the terms of the transactions were exclusively negotiated by and between the plaintiff and the defendant’s former husband; the defendant’s former husband falsely represented to the plaintiff which lots would be pledged as security for the promissory notes; and the defendant was not present when the false representations were made.
The issues before the Court were whether the defendant, who was not directly involved in the negotiations, possessed deceptive or fraudulent intent, and whether the plaintiff’s reliance on the false representations was justifiable.
The Court analyzed law pertaining to imputed fraudulent intent in the marital context.  With respect to the promissory note executed by the former husband, the Court found that under the facts the former husband’s fraudulent intent could not be imputed to the defendant.  However, given her direct involvement with the other promissory note, the Court found that the former husband’s fraudulent intent could be imputed to the defendant with respect to that transaction.
The Court then addressed whether the plaintiff justifiably relied on the false representations in the promissory note and related negotiations.  The Court concluded that because the plaintiff, a small business owner and licensed investment advisor, was not an unsophisticated lender, and because he ignored red flags regarding the nature of the transaction and the promissory note itself, his reliance as to the defendant was not justified.  Accordingly, the Court found that the plaintiff failed to carry his burden under 11 U.S.C. § 523(a)(2)(A) and awarded judgment in favor of the defendant.

Judgment creditor with a prepetition judgment lien against the debtor’s home allowed the lien to expire following entry of discharge in the debtor’s chapter 7 bankruptcy case. The creditor then sought to obtain a new judgment lien by renewing its judgment and filing it with the county clerk and recorder. The debtor filed an adversary proceeding against the creditor, alleging violation of the discharge injunction. The creditor moved for summary judgment, arguing its actions did not violate the discharge injunction because liens ride through bankruptcy, thereby allowing the creditor to initiate in rem actions against the debtor’s property. The Court held that, although liens do ride through bankruptcy, that principle only protects liens in existence on the petition date. When the creditor allowed its prepetition judgment lien to expire under Colorado law, it became merely an unsecured creditor of a discharged debt and lost its ability to execute against the debtor’s property. Because creation of a new lien necessarily involved establishing the in personam liability of the debtor for a discharged debt, the creditor’s actions violated the discharge injunction.

A 55-year-old Chapter 13 debtor with above-median income filed a plan in which he proposed to pay $142 per month for 60 months to the Chapter 13 Trustee.  The plan payments, totaling about $8,521, were just enough to pay for his attorneys’ fees, the Chapter 13 Trustee’s fees, and his priority tax debt.  The debtor also proposed to continue making voluntary retirement contributions in the approximate amount of  $59,700 over the life of the plan, while paying nothing to his unsecured creditors, to whom he owed over $66,000 for credit card debt.  The debtor wished to continue his retirement contributions for the term of his plan, he explained, because he wanted to be “done working” by age 60 and “just relax” for the rest of his years. 

The Chapter 13 Trustee objected on the ground that the debtor’s plan was not proposed in good faith, as required by 11 U.S.C. § 1325(a)(3).  Evaluating the plan under the totality of the circumstances standard, the Court found that the debtor had failed meet his burden under Section 1325(a)(3), concluding that the debtor’s plan to enlarge his already-substantial retirement account while paying his unsecured creditors nothing was an abuse of the purpose and spirit of Chapter 13 as well as a manipulation of the Bankruptcy Code.  The Court, therefore, denied confirmation of the plan.