Adamar of New Jersey, Inc. v. August (In Re August)
448 B.R. 331
| Bankr. E.D. Pa. | 2011Background
- Adamar of New Jersey, Inc. loaned Linda August $65,000 via casino markers for gambling; the debt is the subject of a nondischargeability action.
- August is an independent event planner with long-standing casino credit history in New Jersey and Las Vegas; she allocated assets and income on prior credit applications.
- Adamar’s credit process includes annual/biannual bank verifications, Central Credit gaming reports, and explicit marker language signed by August.
- February 2009 markers totaling $66,000 were drawn against August’s bank accounts, but all were later dishonored due to insufficient funds; credit line was suspended shortly after.
- August’s bank balances on the marker dates were minimal or negative, while she continued gambling at multiple casinos, including Adamar, after suspensions.
- August filed for Chapter 7 bankruptcy on December 3, 2009; schedules show modest monthly income and minimal cash on hand.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Adamar has an enforceable claim against August under state law. | Adamar argues New Jersey law governs and validates the gambling loan as an enforceable claim. | If Pennsylvania law applies, the gambling debt may be unenforceable. | New Jersey law applies; Adamar holds an enforceable claim for $65,000. |
| Whether August's debt to Adamar is non-dischargeable under 523(a)(2). | Debtor obtained funds by false representations and/or false pretenses to the detriment of Adamar. | No proven misrepresentation, reliance, or damages; no nondischargeability under §523(a)(2). | Adamar failed to prove actual reliance and other elements; debt is dischargeable under §523(a)(2). |
| Whether August's debt is non-dischargeable under 523(a)(6) for willful and malicious injury. | August acted with intent to defraud casino creditors in February 2009. | No evidence of a scheme to injure Adamar; not willful and malicious. | No nondischargeability under §523(a)(6). |
| Whether Adamar is entitled to costs and attorney’s fees under 523(d). | Because Adamar’s §523(a)(2) claim failed, it should recover costs/fees. | Plaintiff’s position was substantially justified; fees denied. | Costs and attorney’s fees denied; claim substantially justified. |
Key Cases Cited
- Field v. Mans, 516 U.S. 59 (Supreme Court 1995) (elements of nondischargeability for fraud; justifiable reliance standard)
- Kawaauhau v. Geiger, 523 U.S. 57 (Supreme Court 1998) (willful and malicious injury requires deliberate or substantially certain injury)
- In re Cohn, 54 F.3d 1108 (3d Cir. 1995) (material falsity analysis and reliance for §523(a)(2)(B))
- In re Guevara, 409 B.R. 442 (Bankr.S.D. Tex. 2009) (choice of law in nondischargeability; enforcement of gambling debts varies by state)
- Travelers Cas. & S. Co. v. Pac. Gas & Elec. Co., 549 U.S. 443 (Supreme Court 2007) (federal common law for choice of law in bankruptcy disputes; most significant relationship approach)
- In re Roland, 294 B.R. 244 (Bankr.S.D.N.Y. 2003) (dischargeability analysis requires enforceable debt under nonbankruptcy law)
- In re Antonious, 358 B.R. 172 (Bankr. E.D. Pa. 2006) (elements of §523(a)(2)(A) – false representation; justifiable reliance)