580 B.R. 218
Bankr. E.D. Tenn.2017Background
- Plaintiff Azaam Almasudi, a Saudi student, gave Defendant Khalid Ibrahim $28,000 (cashier’s check) in Nov. 2014 to fund a kitchen renovation at Dubai Hookah Lounge; Defendant opened a “Kitchen & Alcohol” (K&A) bank account as sole signatory.
- Plaintiff was promised profit share and account access; he later discovered he had no access, received no kitchen work, and Defendant repaid nothing despite demands and a state-court suit.
- Bank records show the $28,000 was withdrawn/transferred and largely spent on Defendant’s personal and lounge-related expenses; Defendant endorsed the cashier’s check in his individual name.
- Defendant filed Chapter 7 bankruptcy; Plaintiff filed this adversary proceeding seeking nondischargeability under 11 U.S.C. § 523(a)(2)(A) (fraud) and § 523(a)(6) (willful and malicious conversion), plus punitive damages and TCPA relief.
- The court found Plaintiff credible and Defendant not credible, concluded Defendant individually owned/operated the lounge, converted the funds, acted with fraudulent intent, and was liable individually.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether debt nondischargeable under § 523(a)(6) (willful & malicious conversion) | Ibrahim willfully converted the $28,000 and intended harm by taking funds for personal use | Funds were business money or compensation; no intent to injure | Held nondischargeable under § 523(a)(6); conversion was willful and malicious and invaded Plaintiff’s legal rights |
| Whether debt nondischargeable under § 523(a)(2)(A) (fraud/false representations) | Ibrahim made material misrepresentations (kitchen, profit share, account access) with intent to deceive; Almasudi justifiably relied | No fraudulent intent; the transaction was a business arrangement or loan; no false representation | Held nondischargeable under § 523(a)(2)(A); court finds fraudulent intent and justifiable reliance |
| Whether Tennessee Consumer Protection Act (TCPA) applies | Seeks treble damages and attorney’s fees under TCPA for deceptive acts | Transaction was isolated between individuals, not a consumer-business transaction, so TCPA inapplicable | TCPA does not apply; transaction was casual/non-commercial, so no TCPA damages or fees |
| Damages and fees: actual, punitive, attorneys’ fees | Requests $28,000 actual, treble/TCPA remedies, attorneys’ fees, and punitive damages | Opposes awards beyond dischargeability determination; challenges amount/ entitlement | Awarded $28,000 actual and $56,000 punitive (total $84,000). Attorneys’ fees denied; TCPA treble and fee claims denied |
Key Cases Cited
- Grogan v. Garner, 498 U.S. 279 (issue: plaintiff bears burden of proof by preponderance in nondischargeability proceedings)
- Kawaauhau v. Geiger, 523 U.S. 57 (issue: § 523(a)(6) requires deliberate or intentional injury, not merely an intentional act)
- Markowitz v. Campbell, 190 F.3d 455 (6th Cir.) (issue: willful and malicious standard — actor must desire consequences or be substantially certain they will occur)
- Husky Int'l Elecs., Inc. v. Ritz, 136 S. Ct. 1581 (issue: actual fraud under § 523(a)(2)(A) can include schemes without express misrepresentations)