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Unpublished Opinions

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Judge Joseph G. Rosania, Jr. (JGR)

Alsenaidi v. Alforahy, 24-01118-JGR. Opinion and Order Denying Objection to Discharge Under 11 U.S.C. § 727(a)(4)(A) and 11 U.S.C. § 727(a)(5). 05/20/2025

The Debtor-Defendant moved from Saudi Arabia to the United States.  The Plaintiff, a resident of the Kingdom of Saudi Arabia, obtained a default judgment in Saudi Arabia against the Defendant for $349,142.78.  After the Plaintiff domesticated the judgment in Colorado, the Defendant sought bankruptcy relief under Chapter 7.

The Plaintiff filed a complaint objecting to the dischargeability of the default judgment under 11 U.S.C. § 523(a)(2) and objecting to the Debtor’s discharge under 11 U.S.C. § 727(a).

At the final pretrial conference, the Court dismissed Plaintiff’s claim under 11 U.S.C. § 523(a)(2) for failure to state a claim, finding the complaint failed to make any specific factual allegations of the circumstances of the fraud, the intent to deceive, or that the Plaintiff relied on the alleged misrepresentation or omission.

The dispute involved loans allegedly made by the Plaintiff to the Defendant in 2017 and 2018.  The debts in question consisted of approximately $19,000 used by the Defendant to make credit card payments.  It was not disputed that additional loans totaling approximately $53,000 were made by the Plaintiff.  The Plaintiff testified the loans were made in connection with the Defendants’ business.  The Defendant testified the loans were used for expenses relating to his nephew’s cancer treatment in Germany.  The Plaintiff claimed the loans were made upon the representation that the Defendant was entitled to an inheritance that would allow him to repay the loans.

The Plaintiff testified another $275,000 loan was made to invest in real property in Turkey.  The Defendant denied he received the $275,000 loan or any moneys from a sale of the land in Turkey.  The Defendant claimed he was coerced into signing a document acknowledging the $275,000 loan when he was approached by the Plaintiff and another witness as he was preparing to leave for Germany.

The Defendant testified that his family owned real estate in Saudi Arabia, but that he did not own title to any of the land.  The Defendant testified he resided in an apartment in Denver, but paid no funds in connection with its acquisition, and received no proceeds when the apartment was sold in February 2022.

The Plaintiff’s claim under 11 U.S.C. § 727(a)(4)(A) was dismissed with prejudice.  The Court rejected Plaintiff’s contention that not listing the claim as disputed was a material misrepresentation.  The default judgment was entered, and the Defendant admitted to receiving the funds used for credit card payments and the loans used in connection with caring for his nephew.

The Court dismissed the Plaintiff’s claims under 11 U.S.C. § 727(a)(5) with prejudice.  The loans were made in 2017 and 2018.  The Plaintiff failed to identify any loss of assets that would cause the Defendant to be unable to meet his liabilities.

Henry W. Sutton and Tabatha L. Sutton v. Michael D. Nordike, Adversary Proceeding No. 23-01014-JGR, Docket No. 57 05/16/2025

Pre-petition, the Defendant obtained a judgment against the Plaintiffs in state court. The Defendant filed a contempt motion after the Plaintiffs failed to provide answers to the Defendant’s post-judgment interrogatories, and a hearing was set. Prior to the state court hearing, the Plaintiffs filed for Chapter 13 bankruptcy protection but did not notify the state court. At the hearing, the state court was informed that the Plaintiffs had filed for bankruptcy, but the presiding Magistrate set a final hearing. Soon thereafter, the Plaintiffs’ counsel and Defendant exchanged a series of contentious emails. The Defendant stated that the Plaintiffs would stand trial for their contempt and that he would take legal action against any improper filings against him. The Plaintiffs’ counsel demanded that the Defendant immediately stay the pending contempt hearing. After an unavoidable delay, the Defendant stayed the contempt motion forty days prior to the hearing.

The Plaintiffs filed an adversary proceeding and sought damages under 11 U.S.C. § 362(k)(1) for violations of the automatic stay of 11 U.S.C. § 362(a)(1), (2), and (6). The amended complaint alleged that the Defendant violated the automatic stay by (i) causing a contempt citation to issue; (ii) refusing to withdraw the contempt motion; (iii) insisting that the Plaintiffs answer interrogatories; (iv) scheduling a contempt hearing; and (v) continuing to pursue collection of a debt through a post-petition email exchange.

After a trial where the Plaintiffs and Defendants testified, the Court found that the automatic stay had not been violated. The Court found that the Defendant did not have actual notice of the Plaintiffs’ bankruptcy until Plaintiffs’ counsel appeared at the state court hearing and therefore could not have violated the stay by appearing at the hearing. Citing City of Chicago v. Fulton, Margavitch v. Southlake Holdings, LLC, and In re Iskric, the Court further found that because the Defendant had not taken an affirmative action to advance the contempt motion and stayed the state court action as soon as feasible, the status quo was not upset and therefore a stay violation had not occurred. The Defendant credibly testified that because he was out of the country for work on behalf of the United States Department of Defense, he could not consult with bankruptcy counsel, however, upon his return he promptly secured appropriate legal representation and stayed the state court action. The Plaintiffs failed to produce any evidence that this delay in filing for the stay caused harm.

The Court also found that the Defendant’s emails did not constitute a stay violation as they consisted of statements of facts as they were at the time, and the referenced legal action did not come to fruition. The Defendant also mitigated some of the perceived threats by stating his intention to stay the state court action and clarifying that he was not attempting to collect the judgment.

Ranta, 23-13269-JGR. Opinion and Order Reducing Claimed Homestead Under 11 U.S.C. § 522(o). 09/05/2024

The Debtor filed his bankruptcy case disclosing a 1% ownership interest in a residence, referred to as the Rose Mallow Property, located in Parker, Colorado.  The Property was acquired in February 2022.  The Debtor valued the Property in the amount of $1,636,021.50 and his 1% interest in the amount of $16,360.22 and 99% of the Property was vested in the Debtor’s non-filing spouse, and justified the split as his wife made the down-payment for the Property.

Initially, the Debtor claimed his interest in the residence as exempt using the enhanced disability Colorado Homestead Exemption in the amount of $175,000.  Because the Debtor had not lived in Colorado for two years prior to the bankruptcy filing, an Amended Schedule C was filed utilizing California exemptions, his prior domicile.

The Debtor filed a Motion to Compel Abandonment of his 1% interest in the Property, and the judgment creditors objected and filed a separate objection to the claimed California exemptions.  An evidentiary hearing was held on the combined motions.  The Court held Debtor’s claimed exemptions under California law were proper under the requirements of 11 U.S.C. § 522(b)(3)(A) and that California’s Homestead Exemption could be applied extraterritorially.

Evidence established that the down-payment could be traced to nonexempt property of the Debtor. The Court determined that value in the Property was attributable to non-exempt property disposed of by the Debtor with the intent to hinder, delay, or defraud the judgment creditors and pursuant to 11 U.S.C. § 522(o), the Homestead Exemption was reduced to $0.00.

The Court denied the Motion to Compel Abandonment of the Interests as premature pending the Chapter 7 Trustee’s evaluation of potential avoidance claims regarding the Rose Mallow Property.

303 Investments, Inc., 22-14267-JGR. Order Confirming Nonconsensual Subchapter V Plan of Reorganization (Doc. 253) 06/24/2024

The Debtor is a real estate development company in Parker, Colorado.  An affiliated company to the Debtor obtained construction financing to develop the initial infrastructure for a housing subdivision.  The construction loans are secured by lots owned by the affiliated company located in the second phase of the development.  The Debtor owns lots located in the first phase of the development.  The construction lender filed state court litigation seeking an equitable lien in the phase one properties and recorded a lis pendens against the lots.

As a result of the litigation, the Debtor sought relief under Subchapter V of Chapter 11.  The Debtor negotiated with creditors and reached a settlement with the construction lender. After filing different iterations of its Subchapter V Plan, the Debtor resolved all of the objections, except of one secured creditor.  That bank voted to reject the Plan, objected to confirmation, and moved for the case to be converted to chapter 7.

The Court examined confirmation of the non-consensual plan under 11 U.S.C. § 1191(b), which eliminates the requirements of 11 U.S.C. § 1129(a)(8)(each impaired class has accepted the plan) and (10)(at least one impaired class has accepted the plan), provided that the plan does not discriminate unfairly, and is fair and equitable, with respect to each class of claims or interest that is impaired under, and has not accepted, the plan.

The Court found a number of the requirements of 11 U.S.C. § 1129 were not contested and were satisfied through an offer of proof.  An evidentiary hearing was conducted regarding the remaining contested issues.

The Court found that Debtor acted in good faith pursuant to 11 U.S.C. § 1129(a)(3).  The Debtor utilized the bankruptcy process to negotiate a Plan that has been accepted by all of its creditors with the exception of the bank.  The Plan’s modification of the bank’s claims is permissible under the Bankruptcy Code and has a reasonable chance of success.  The Plan met the requirements of 11 U.S.C. § 1129(a)(7)’s Best Interests of Creditors Test.  Creditors will receive more through the Plan than they would in a chapter 7 and because the Plan incorporates the settlement with the construction lender, it avoids potential risks and delays of further litigation relating to the equitable lien.

The Court found the terms of the settlement agreement with the construction lender incorporated into the Plan were fair and reasonable and in the best interests of the estate.

The Plan proposes to pay all of the claims in full through the sale of the lots.  The Court found the Plan did not discriminate unfairly and is fair and equitable with respect to the objecting bank.  The unrebutted evidence established the objecting bank’s modified claim was adequately protected and that the twelve-month injunction for the sale of the lots and enjoining the bank from collection, after which point it may seek state law remedies if applicable, is reasonable and permissible.  The Court confirmed the Plan over the bank’s objection.

Waunsch et al. v. Weston Educational, Inc., 16-01516-JGR. Order and Judgment Denying Plaintiffs’ Motion for Class Certification entered on March 28, 2024 (Docs. 125 and 126). 03/28/2024

This Adversary Proceeding presented unusual procedural facts.  Weston Educational, Inc.(“Weston”), operated eleven campuses across the United States.  Its headquarters were in Colorado.

The Debtor’s Chapter 7 bankruptcy was filed on November 21, 2016.  Approximately one week later, the Plaintiffs filed this Adversary Proceeding alleging violations of the WARN Act for failure to notify employees of the closing of the business on November 1, 2016. 

The parties recognized legitimate concerns over whether the chapter 7 bankruptcy estate would be solvent on an administrative level.  As a result, numerous stipulations were filed holding the Adversary Proceeding in abeyance.

At the beginning of the bankruptcy case, the Trustee issued a Notice of Possible Dividends.  71 employees filed Proofs of Claim for unpaid wages, including three of the four named Plaintiffs in the Adversary Proceeding.  The Trustee reports that the bankruptcy estate currently has sufficient funds to pay the timely filed wage claims totaling approximately $315,000, in full, with some funds being available to pay general unsecured creditors.

Eventually, the Trustee commenced litigation seeking to recover funds for the estate under a D&O insurance policy.  With the prospect of significant funds being recovered through the litigation, the Plaintiff sought class certification of the Adversary Proceeding.

After the motion was briefed and argued, the D&O litigation was dismissed, creating a situation where allowance of the WARN claims would potentially prejudice the holders of timely filed wage claims.

Fed.R.Bankr.P. 7023 incorporates Fed.R.Civ.P. 23.  Examining the four prerequisites for class actions of Fed.R.Civ.P. 23(a), the Court found three prerequisites were not met: (1) the class is so numerous that joinder of all members is impracticable; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.

The Court found that even though Weston had approximately 600 employees, the numerosity requirement was not met as the punitive class was not so numerous that the joinder of all members was impractical.  The Court found the typicality requirement was not met as the majority of former employees did not include WARN damages in their claims.  The Court found the fourth requirement of adequacy of representation was not met as three of the four putative class members timely filed wage claims that stand to be paid in full and would receive more money if the WARN claims were not allowed.

The Court found that the superiority requirement of Fed.R.Civ.P. 23(b) was not met as the Plaintiffs proposed to provide notice of the class action using the dated information used to prepare Weston’s bankruptcy schedules over 7 years ago. 

The Court recognizes that class actions can be appropriate in bankruptcy cases but denied the motion for class certification under the facts presented in this bankruptcy case.  The Court found that any class wide recovery of WARN Act claims would unfairly punish former employees who timely filed priority wage claims.

Michael Joseph Roberts, Sr., Bankruptcy Case No. 22-10521-JGR, Docket No. 777 03/28/2024

The Debtor filed a chapter 11 bankruptcy petition on the eve of a pending damages hearing. After this Court granted relief from stay, a Denver District Court entered a $22.8 million award against the Debtor for his breach of fiduciary duty as a result of certain pre-petition actions. During the state court litigation, the Debtor was jailed for contempt and was subject to harsh discovery sanctions as a result of his misconduct. This Court later converted the case from chapter 11 to chapter 7, finding that the case was filed in bad faith and a chapter 7 trustee was appointed.

The Trustee negotiated a settlement with the judgment creditors, inter alia, which reduces the claim to an allowed $19 million unsecured claim in exchange for dismissing the appeal of the damages award in state court. The Trustee submitted a joint motion for approval with the judgment creditors on the grounds that the settlement agreement was the best result for the estate, citing the need to end the ongoing litigation to achieve the most efficient administration of the estate.

This Court held a 3-day hearing, where each side presented expert witness testimony and heard testimony on the Kopexa factors, which govern the approval of a settlement agreement. The only creditor to object to the settlement agreement was the Debtor’s state court attorney. The Court granted the motion to approve the settlement as it was reasonable and fulfilled the Kopexa factors. The Court found that on the balance of probabilities the underlying appeal would not succeed, the ongoing litigation costs were burdensome to the estate, and reducing the damages to $19 million while ending the litigation was in the best interest of the creditors.

Autotech Technologies, LP v. Palmer Drives Controls and Systems, Inc. (In re Palmer Drives Controls and Systems), Bankruptcy Case No. 23-1223-JGR, Docket No. 17 (Bankr. D. Colo. Jan. 30, 2024). 01/25/2024

The Plaintiff brought a complaint under 11 U.S.C. § 523(a)(4) to except its allowed general, unsecured claim from discharge for fraud while acting in a fiduciary capacity against the Defendant, a Chapter 11 Subchapter V debtor. The Plaintiff relied on In re Cleary Packaging, LLC, 36 F.4th 509, 513 (4th Cir. 2022), a recent case that allowed a debt owed by a corporate debtor in Subchapter V to be excepted from discharge under § 523(a), a section of the code previously only available to individual debtors. The Defendant filed a motion to dismiss for failure to state a claim in response, arguing that the Cleary decision was flawed and non-binding. During the pendency of this proceeding, the Debtor-Defendant had their second amended plan confirmed by the Court, despite a late ballot rejecting the plan and a late objection to confirmation from the Plaintiff.

The Court reviewed In re Cleary against other decisions denying the use of § 523(a) in proceedings involving corporate debtors. The Court found that all cases cited by the parties were not relevant because they pertained to non-consensual discharges which are governed by 11 U.S.C. § 1192, and the plan confirmed by the Court here was consensual. The discharge of debts in a consensual plan is governed under an entirely different section of the Code, 11 U.S.C. § 1141(d)(2), which expressly limits the use of § 523 to individuals. The Court found that because all Creditors had either accepted the plan or were deemed to have accepted the plan, the plan was consensual and governed under § 1141(d)(2). The Court further found that even if it permitted the late ballot to be counted, which it had not, the plan was still accepted under 11 U.S.C. § 1126(c) and was consensual. The Court granted the Defendant’s motion, and the complaint was dismissed.

Together Real Estate Holdings, LLC v. Karen S. Bordner, 22-01047-JGR. Findings of Fact and Conclusions of Law and Judgment entered on August 15, 2023 (Docs. 47 and 48). 08/15/2023

Karen S. Bordner and her husband Donald H. Ellis, sought bankruptcy relief in a Chapter 11 case.  Prior to the bankruptcy filing, Together Real Estate Holdings, LLC was involved in various real estate renovation projects with companies owned by Bordner.  TRE filed a Proof of Claim in Bordner’s personal bankruptcy case and filed an adversary proceeding raising claims for relief under 11 U.S.C. § 523(a)(2)(A) for false representations, false pretenses, and actual fraud to except two loans from discharge.  The Court combined the trial on the Complaint with Bordner’s Objection to TRE’s Proof of Claim.  The Court entered an order finding in favor of Bordner and against TRE on the dischargeability claims and granted Bordner’s Objection to the Proof of Claim.

The dispute centered around two loans made by TRE to Bordner, her business partner, Victoria Roberts, and their company, Artemis Realty Investments.  The first loan was made in the amount of $20,000.  A promissory note for the loan was executed after the fact, which was personally guaranteed by Bordner and Roberts.  The second $260,000 loan was also made without the execution of a promissory note and without signed personal guarantees by Bordner and Roberts.

The loans were made for the proposed purchase of a property located on Race Street in Denver.  When the purchase fell through, Artemis located a substitute property on Emerson Street and the parties agreed that the TRE loan proceeds could be used for its purchase.

The renovation project experienced complications and delays as a result of the worldwide pandemic and was eventually foreclosed upon by the first mortgage lender.  Interest payments on the TRE loans were made for a period of time, but the balance of the loans remain unpaid.

In its Complaint, TRE claimed that Bordner represented that she would repay the loans, that she and Roberts were going to contribute personal funds to the project, that the loans would be secured by Deeds of Trust, and that both promissory notes would be personally guaranteed.

The Court held that the $20,000 note (and the $260,000 loan) were dischargeable as TRE failed to establish that they were obtained through false representations, false pretenses, or actual fraud.  The Court further held that the $260,000 loan was not personally guaranteed in a writing as required by the Colorado Statute of Frauds and was not enforceable against Bordner.  The Court granted the Debtors’ Objection to the Proof of Claim filed by TRE and allowed the claim in the reduced principal amount of $20,000 to be treated as a general unsecured claim in the Debtors’ Chapter 11 Plan.

In Re XBridge, LLC, Case No. 23-10045-JGR. Order entered July 12, 2023 (Doc. 124) (denying cross-motions for attorney’s fees sanctions). 07/12/2023

Overall, the Court denied cross-motions for attorney’s fees sanctions that arose out of an involuntary bankruptcy case from which the Court abstained under Section 305.

In the beginning, the Court granted an uncontested involuntary petition against the debtor who was in a pre-petition state court receivership. Then one of the debtor’s co-owners moved the Court to abstain from the case under Section 305. The state court receiver joined in seeking abstention, largely because the petition had been filed one hour after the receiver had closed the bidding on a sale of the debtor’s assets, but before the sale was finalized. The debtor’s co-owner submitted the only bid in the receiver’s sale and was the presumptive new owner. A group of three creditors, including the debtor’s other co-owner, opposed abstention and moved for the appointment of a Chapter 11 trustee. The Court held a multi-day evidentiary hearing and decided to abstain from the bankruptcy case.

Following the Court’s abstention ruling, the co-owner who sought abstention filed a motion for attorney’s fees sanctions against the three creditors (including the other co-owner) and their attorneys. The motion explicitly eschewed Section 303(i) as a source of sanctions, instead proceeding under Rule 9011 and Section 105(a). However, the motion did not comply with Rule 9011’s 21-day safe harbor provision. The motion sought fees because (1) the involuntary petition was allegedly filed in bad faith and (2) the creditors and their attorneys allegedly presented false allegations to the Court. 

For the filing of involuntary petition itself, the Court found that Rule 9011 sanctions were available because the rule’s 21-day safe harbor requirement does not apply to petitions. However, the Court denied sanctions. The Court based its decision on a lack of evidence of sanctionable conduct (which the Court distinguished from simply advancing losing arguments), an involuntary petition that met the statutory requirements, and the petitioning creditor’s legitimate purposes for seeking bankruptcy. 

For the alleged false representations made to the Court, the Court found that Rule 9011 sanctions were not available due to the movant’s noncompliance with Rule 9011’s 21-day safe harbor. The Court found that sanctions under Section 105(a) were available but denied sanctions on this basis as well. Vital to the Court’s decision was an expert opinion provided to the creditors mere days before state court bidding for the business closed and the involuntary petition was filed. Such an opinion, although the Court found it largely unjustified, provided a reasonable basis for the factual allegations advanced by the three creditors and their attorneys—especially under the expedited schedule imposed by the Court.

Finally, two of the creditors cross-moved for sanctions under Rule 9011(c)(1)(A) for their fees incurred in defending against the sanctions motion. The Court denied these sanctions, concluding that the original sanctions motion was a close call and not deserving of the rare and drastic remedy of sanctions.

Judge Thomas B. McNamara (TBM)

In re Signia, Ltd., Bankruptcy Case No.23-14384 TBM, Docket No. 168 (Bankr. D. Colo. Jan. 29, 2024). 01/29/2024

The Debtor, a debtor under Subchapter V of Chapter 11, sought an extension of the 90- day period set by 11 U.S.C. § 1189(b) to file its plan. Section 1189(b) permits the Court to grant an extension only “if the need for the extension is attributable to circumstances for which the debtor should not justly be held accountable.” The only reason asserted by the Debtor to justify extension of the Section 1189(b) period was that a hearing was set in the near future on an objection to the Debtor’s post-petition financing agreement, resolution of which the Debtor asserted was a threshold plan issue. However, after the Debtor requested the extension of time, the Debtor withdrew its financing motion and requested that the hearing be vacated. Nevertheless, the Debtor continued to seek an extension of time to file its plan.

The Court reviewed the decisions of courts which have examined the Section 1189(b) phrase and case law interpreting Section 1221 which uses the same phrase. The Court adopted a “Beyond-the-Debtor’s-Control” standard and concluded that extensions of time to file Subchapter V plans “should not be routinely granted. Instead, debtors bear the stringent or high burden of proving that the requested extension is based on circumstances ‘for which the debtor should not justly be held accountable.’ That means circumstances beyond the debtor’s control.” Having so concluded, the Court found that the Debtor had failed to meet its burden insofar as the circumstances asserted were entirely within the Debtor’s control. The Court denied the requested extension of time.

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