Camp Inn Lodge, LLC v. Gene Kirvan, 21-1250

Background:

Debtor Gene Kirvan managed Camp Inn’s daily cash receipts; he collected envelopes and prepared deposit slips that were handed to Monsignor Brucksch for bank deposit.
After Kirvan’s romantic and employment relationship with owner Deborah Wiltse ended, Wiltse discovered accounting irregularities and hired CPA/fraud examiner Cynthia Scott to investigate.
Scott used Camp Inn’s Room Master software, bank records, employee interviews, and physical records; she concluded tens of thousands in cash were missing and many daily "drop sheets" were discarded.
Bankruptcy court found Kirvan embezzled $55,847.45, trebled damages, and held the debt nondischargeable under 11 U.S.C. § 523(a)(4) (embezzlement) and § 523(a)(6) (willful and malicious injury); the district court and Sixth Circuit affirmed.
Kirvan contested entrustment, sufficiency of circumstantial evidence (Room Master, his finances, missing drop sheets), and the reliability of Scott’s expert testimony; the courts rejected these challenges.

Issues:

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Kirvan embezzled Camp Inn’s cash (§523(a)(4))	Kirvan was entrusted with receipts, misappropriated cash, and fraud is shown by Room Master discrepancies, his finances, and discarded drop sheets	His role was a temporary pass-through; Room Master is unreliable and evidence is circumstantial	Affirmed: entrustment established; circumstantial evidence supports fraudulent appropriation; debt nondischargeable under §523(a)(4)
Whether temporary possession disproves "entrustment"	Camp Inn: lawful temporary possession suffices for entrustment	Kirvan: pass-through role insufficient to prove entrustment	Rejected: temporary lawful possession qualifies as entrustment (analogous to postal worker precedent)
Whether debt resulted from willful and malicious injury (§523(a)(6))	Kirvan intentionally and consciously deprived Camp Inn of funds (willful) and acted in conscious disregard of duties (malicious)	Kirvan: lacked intent to injure; aimed to help business; no just cause	Affirmed: taking cash made injury substantially certain (willful) and showed conscious disregard/no excuse (malicious); nondischargeable under §523(a)(6)
Admissibility and reliability of Cynthia Scott’s expert testimony	Scott relied on Room Master plus bank records, interviews, and fraud-examiner methods; qualified CPA/CFE	Kirvan: Room Master was sole, unreliable basis lacking scientific foundation	Affirmed: district court did not abuse discretion; Scott’s methods/facts sufficiently reliable under Rule 702 review

Key Cases Cited

Brady v. McAllister (In re Brady), 101 F.3d 1165 (6th Cir. 1996) (federal common-law definition of embezzlement applied in bankruptcy)
Moore v. United States, 160 U.S. 268 (U.S. 1895) (classic definition of embezzlement as fraudulent appropriation by entrusted person)
Rizzo v. Michigan (In re Rizzo), 741 F.3d 703 (6th Cir. 2014) (standards of review for bankruptcy findings)
Rembert v. AT&T Universal Card Servs., Inc. (In re Rembert), 141 F.3d 277 (6th Cir. 1998) (use of circumstantial evidence to infer fraudulent intent)
MarketGraphics Rsch. Grp. v. Berge (In re Berge), 953 F.3d 907 (6th Cir. 2020) (two-pronged subjective intent test for §523(a)(6))
Markowitz v. Campbell (In re Markowitz), 190 F.3d 455 (6th Cir. 1999) (willfulness: desired consequence or substantial certainty standard)
XL/Datacomp, Inc. v. Wilson (In re Omegas Grp.), 16 F.3d 1443 (6th Cir. 1994) (monetary loss qualifies as "injury" under §523(a)(6))
Anderson v. City of Bessemer City, 470 U.S. 564 (U.S. 1985) (clear-error standard for choosing between permissible views of evidence)
In re Scrap Metal Antitrust Litig., 527 F.3d 517 (6th Cir. 2008) (abuse-of-discretion standard for expert admissibility and Rule 702 criteria)
McPherson v. Kelsey, 125 F.3d 989 (6th Cir. 1997) (issues perfunctorily argued are waived)
EMW Women’s Surgical Ctr., P.S.C. v. Friedlander, 978 F.3d 418 (6th Cir. 2020) (appellate standard for reviewing factual findings)