647 B.R. 256
Bankr. D.C.2022Background
- Debtor Thomas Stephenson owned rental properties; D.C. Superior Court appointed Karen Bower receiver and an Auditor found >$165,000 rental income with >$146,000 unaccounted for and sparse records.
- Debtor filed chapter 11 after a dismissed chapter 13; a chapter 11 trustee proposed a liquidating plan and the court confirmed that plan in February 2020.
- The Plan was a liquidating plan and, under 11 U.S.C. § 1141(d)(5) (post-BAPCPA), any individual debtor discharge was contingent on completion of plan payments and a later court order.
- The case converted to chapter 7 in October 2020; after conversion the District and Bower filed adversary complaints under 11 U.S.C. § 727 seeking denial of Stephenson’s chapter 7 discharge, relying on both pre-confirmation and post-confirmation acts.
- Debtor moved for summary judgment arguing the Confirmation Order had res judicata effect (citing pre-BAPCPA precedent) and thus Plaintiffs were barred from using pre-confirmation acts; Plaintiffs argued § 1141(d)(5) and the Plan’s reservation clauses preserved their rights.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does res judicata bar reliance on pre-confirmation acts in a §727 objection after conversion to chapter 7? | Res judicata does not apply because §1141(d)(5) makes an individual chapter 11 discharge contingent; creditors can challenge eligibility later. | Confirmation is final and preclusive; creditors could have objected before confirmation (relying on Pavlovich). | Res judicata does not bar Plaintiffs from relying on pre-confirmation acts. |
| Was the Confirmation Order a final judgment on discharge eligibility for res judicata purposes? | No — discharge was contingent on future events under §1141(d)(5), so confirmation was not final on discharge eligibility. | Yes — confirmation fixes issues and should have preclusive effect. | Confirmation was not a final order as to discharge eligibility; res judicata’s final-judgment element fails. |
| Do post-confirmation acts alone suffice to support §727(a)(4) (false oath) or other §727 claims? | Plaintiffs contend post-confirmation acts plus pre-confirmation facts create triable issues. | Defendant contends post-confirmation acts alone are legally insufficient; thus summary judgment should be granted if pre-confirmation facts are excluded. | Because pre-confirmation facts are admissible, genuine disputes of material fact remain as to §727(a)(4); summary judgment denied. |
| Do Plan reservation clauses or FRBP 4004 deadline bar post-confirmation objections to discharge? | Plan language and §1141(d)(5) preserve creditors’ rights; FRBP 4004 does not govern objections under §1141(d)(5) which occur after completion of plan payments. | Plan clauses do not negate preclusive effect of confirmation; deadline under FRBP 4004 expired pre-confirmation. | Plan language and §1141(d)(5) foreclose finding that FRBP 4004 or the Plan preclude Plaintiffs’ later §727 challenges. |
Key Cases Cited
- Smalls v. United States, 471 F.3d 186 (D.C. Cir. 2006) (elements of res judicata/claim preclusion)
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (summary judgment standard)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. 1986) (materiality and genuine dispute standards)
- Bank of La. v. Pavlovich (In re Pavlovich), 952 F.2d 114 (5th Cir. 1992) (pre-BAPCPA holding that confirmation/discharge was preclusive)
- In re Witkowski, 16 F.3d 739 (7th Cir. 1994) (statutory text can negate claim-preclusion)
- Travelers Indem. Co. v. Bailey, 557 U.S. 137 (U.S. 2009) (finality and preclusion principles)
- In re Varat Enters., Inc., 81 F.3d 1310 (4th Cir. 1996) (res judicata and plan confirmation)
- In re Greater S.E. Cmty. Hosp. Corp., 333 B.R. 506 (Bankr. D.D.C. 2005) (bankruptcy res judicata discussion)