595 B.R. 148
Bankr. S.D.N.Y.2019Background
- Aspire Federal Credit Union loaned money to three taxi companies owned and controlled by Placida N. Robinson; Robinson personally guaranteed the loans and the loans were secured by company assets (vehicles, medallions, accounts, receivables).
- After defaults in May 2016, Aspire sought replevin in state court; Robinson filed a Chapter 7 petition shortly thereafter.
- Aspire sued in an adversary proceeding, alleging Robinson concealed or converted collateral, made materially false statements in her petition/schedules and at examinations, failed to keep books and records, withheld documents from the trustee, and could not explain asset deficiencies.
- Robinson moved to dismiss all claims under Fed. R. Civ. P. 12(b)(6), arguing the complaint was conclusory, failed to plead veil-piercing, and lacked allegations of the requisite intent for certain Code sections.
- The bankruptcy court evaluated whether Aspire’s factual allegations were sufficiently specific and plausible to survive a motion to dismiss on claims under 11 U.S.C. §§ 727(a)(2)(A), 727(a)(3), 727(a)(4)(A), 727(a)(4)(D), 727(a)(5), and 523(a)(6).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §727(a)(2)(A) concealment alleged | Robinson concealed property (including transfers to herself) to hinder creditors | Complaint must pierce corporate veil to treat company assets as Robinson's | Denied — complaint pleads transfers/concealment of debtor property and veil-piercing can be inferred given sole control |
| Whether §727(a)(3) failure to keep records alleged | Debtor failed to maintain books so estate condition cannot be ascertained | §727(a) claims require intent; pleading insufficient | Denied — adequacy and business sophistication alleged; intent not required for (a)(3) |
| Whether §727(a)(4)(A) false oaths alleged | Debtor made material false statements/omissions under oath (schedules, meeting, exams) with fraudulent intent | Some errors caused by counsel; dismissal premature | Denied — factual allegations support material falsehoods and reckless/disregard inference of intent |
| Whether §523(a)(6) willful & malicious injury alleged (conversion) | Conversion/encumbrance of secured collateral after default supports willfulness and malice | Willfulness requires deliberate intent to injure; conversion does not automatically imply it | Denied — complaint plausibly alleges conversion plus knowledge of Aspire’s security interest and changed conduct allowing inference of willfulness and malice |
Key Cases Cited
- Vaughn v. Air Line Pilots Ass'n, Int'l, 604 F.3d 703 (2d Cir.) (pleading standard: plausibility under Iqbal/Twombly)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (establishes two-pronged plausibility/pleading framework)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility not mere possibility; labels and conclusions inadequate)
- Kawaauhau v. Geiger, 523 U.S. 57 (1998) (§523(a)(6) requires willful and malicious injury)
- Barclays/Am. Bus. Credit v. Adams (In re Adams), 31 F.3d 389 (6th Cir.) (corporate assets may be treated as debtor's where debtor controls corporation)
- Chavin v. White, 150 F.3d 726 (7th Cir.) (reckless indifference to truth can satisfy fraudulent intent for nondischargeability)
- Salomon v. Kaiser (In re Kaiser), 722 F.2d 1574 (2d Cir.) (aggregation of falsehoods can evidence fraudulent intent under §727)