In re Cooper, (Bkrtcy.E.D.Ark.)

January 23, 2009: Discharge - Sins of debtor-husband could not be visited on debtor-wife for denial of discharge purposes.

A Chapter 7 debtor-husband's fraudulent intent, in failing to disclose on the statement of financial affairs (SOFA) certain stock transactions that generated more than $275,000 for the debtors, a substantial portion of their liquid assets on the eve of their bankruptcy filing, could not be imputed to the debtor-wife, for purpose of denying her a discharge based on her material false oaths. The debtor-wife was a stay-at-home "soccer mom," who was not involved in her husband's business dealings, and who, while generally aware that her husband at one point sold his stock, did not know the details of these transactions, including what he received and precisely when the transactions took place. The debtor-husband alone signed the transfer documents, and the proceeds from these stock sales were deposited in his individual account.

Dains v. Dains (In re Dains), Case No. 07-2038

Description: Plaintiff brought claims for nondischargeability for false representation and willful and malicious injury to property under 532(a)(2) & (a)(6). Court denied these claims based on Plaintiff ′ s failure to meet her burden of proof on the elements of fraud by a preponderance of evidence and her failure to establish that Debtor willfully and maliciously injured the property. Plaintiff also sought denial of discharge for Debtor ′ s alleged concealment of property with the intent to hinder, delay or defraud creditors and for his making a false oath or account under 727(a)(2)(A) and (a)(4)(A). Court also denied these claims based on Plaintiff ′ s failure to prove each of the elements of the applicable claim by a preponderance of evidence. Court also denied Debtor ′ s counterclaim for attorney ′ s fees under 523(d) due to fact debt at issue was not a consumer debt.

Date of the opinion: 3/24/08

For full opinion click here.

Mukamal v. Bakes, (S.D.Fla.)

Claims - Allegations in trustee's complaint were insufficient to state claim on deepening insolvency theory.

Allegations in a complaint filed by the trustee of a liquidation trust, regarding misconduct of directors of corporate Chapter 11 debtors during their slide into bankruptcy in purportedly "propping" the debtors up, by misrepresenting their fiscal health, in an attempt to allow their business to be sold at a high enough price to generate a return for original investors, were insufficient to state a breach of fiduciary duty claim under Delaware law, absent any allegation that the original investors were being preferred at the expense of minority shareholders or that the directors' conduct was not aimed at benefiting all shareholders. Under Delaware law, the mere act by a corporate fiduciary of causing the corporation to incur additional debt in the face of insolvency does not alone establish bad faith or disloyalty, if the purpose was to maximize the value of the corporation as to all shareholders.

In re Trico Marine Services, (S.D.N.Y.)

Plans - Debtor was not liable to former equity holders for alleged fraud at plan confirmation hearing.

A bankruptcy court did not clearly err in finding that a Chapter 11 debtor's chief financial officer (CFO) had not testified falsely at a plan confirmation hearing, and that the debtor was not liable in fraud to former equity owners when the bankruptcy court, in alleged reliance on this testimony, confirmed a plan that wiped out existing equity. The CFO, when questioned about the debtor's fourth quarter earnings before interest, taxes, depreciation, and amortization (EBITDA), failed to mention that the debtor was outperforming its fourth quarter EBITDA projections by more than 30% and indicated instead that this fourth quarter EBITDA was not "materially different." The bankruptcy court, in finding that the CFO's testimony was not false and was not given with the requisite intent to deceive, had relied on its determination of the credibility of the explanation offered by the CFO after the fact, that in stating that debtor's fourth quarter EBITDA was not "materially different," he was referring to the debtor's EBITDA in relation to its overall valuation, which continued to be poor despite this fourth quarter improvement, and not in relation to his projections.