493 B.R. 398
S.D.N.Y.2013Background
- Berger & Associates Attorneys, P.C. and Berger sue to bar discharge of a settled debt in the debtor’s Chapter 7 case.
- Davidson & Kran relationship: Davidson referred cases to the firm for a 40% fee split; later they formed Davidson & Kran.
- In 2004 state court litigation, missing OCA filings and discovery misconduct were alleged against Davidson & Kran; settlement followed (May 2007) at $1.4 million.
- Davidson & Kran dissolved after Davidson’s death; the debt at issue is the $1.4 million settlement.
- Bankruptcy trustee filed Chapter 7; no assets distributed; adversary proceeding filed December 1, 2008, challenging discharge under 11 U.S.C. § 727(a)(3).
- Bankruptcy court denied appellants’ motion for summary judgment and granted appellee’s; the district court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 727(a)(3) bars discharge. | Berger argues Appellee’s prior recordkeeping failures prevent ascertainment of financial condition. | Kran contends discharge can be granted because focus is present financial condition, not past recordkeeping. | No; § 727(a)(3) does not bar the discharge here. |
| Whether § 727(a)(2) applies to bar discharge. | Berger asserts post-petition concealment or transfers show intent to hinder creditors. | Kran argues evidence falls outside the one-year/pendency window. | Waived on appeal; and even if reached, § 727(a)(2) does not apply given timing. |
| Whether the bankruptcy court properly granted summary judgment for the appellee. | Berger contends unresolved record issues preclude ascertainment of financial condition. | Kran shows sufficient disclosure and that ascertainment is possible; prior malfeasance does not affect present condition. | Yes; summary judgment for appellee affirmed. |
Key Cases Cited
- In re Jacobowitz, 309 B.R. 429 (S.D.N.Y. 2004) (limits § 727(a)(3) to reasonable records for ascertainment of present financial condition)
- In re Cacioli, 463 F.3d 229 (2d Cir. 2006) (purpose of § 727(a)(3) is truthful presentation; liberal in debtor’s favor)
- Meridian Bank v. Alten, 958 F.2d 1226 (3d Cir. 1992) (disclosure completeness for discharge; complete information to creditors)
- In re Erdheim, 197 B.R. 23 (Bankr.E.D.N.Y. 1996) (deterrence and scope of § 727(a)(3) analyzed)