Catt, Jr v. Rtech Fabrications, LLC, 635 B.R. 559

Rtech Fabrications, LLC (an Idaho LLC doing custom vehicle work) contracted with Jerry Catt from 2016–Feb 2020; the parties’ relationship soured and Catt sued Rtech and its member/managers (Randall and Dru-Ann Robertson) in Idaho state court for breach, fraud, and alter-ego/veil-piercing.
The state court issued an order to attach Rtech property; the next day Rtech filed a chapter 11 subchapter V petition.
Catt brought this adversary seeking (1) to except his claim from discharge under 11 U.S.C. § 523(a) and (2) to pierce Rtech’s veil to hold the Robertsons personally liable.
Rtech moved to dismiss: it argued § 523(a) discharge exceptions apply only to individuals (so Catt stated no cognizable claim against an LLC) and that the Court lacked subject-matter jurisdiction over claims against the non-debtor Robertsons.
The court granted dismissal as to Rtech, holding § 523(a) exceptions do not apply to subchapter V entity debtors, and dismissed claims against the Robertsons for lack of subject-matter jurisdiction (claims not core or “related to” the bankruptcy estate).

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether § 523(a) exceptions apply to a subchapter V entity debtor	Catt: §1192(2)’s reference to "debts of the kind specified in §523(a)" incorporates the types of nondischargeable debts, not a limitation to individual debtors	Rtech: §523(a) by its plain text applies only to "individual" debtors; §1192 does not expand §523(a) to entities	Held: §523(a) exceptions apply only to individuals; §1192(2) does not make entity debtors subject to §523(a); claim against Rtech dismissed
Whether the bankruptcy court has subject-matter jurisdiction over non-debtor Robertsons	Catt: seeks veil-piercing to reach Robertsons in the adversary (overlap with state claims) — implied argument that adjudication affects the estate	Rtech: Claims against the Robertsons are neither "arising under" nor "arising in" the bankruptcy, nor "related to" it; no conceivable effect on the estate	Held: Claims against the Robertsons are non-core and not "related to" the case (no conceivable effect on estate); court lacks jurisdiction and dismisses those claims

Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility pleading standard)
In re Spring Valley Farms, Inc., 863 F.2d 832 (11th Cir. 1989) (corporate debtors are not "individual" debtors for §523)
Yamaha Motor Corp. v. Shadco, Inc., 762 F.2d 668 (8th Cir. 1985) (rejecting application of §523 to corporations)
In re Satellite Restaurants, Inc. Crabcake Factory USA, 626 B.R. 871 (Bankr. D. Md. 2021) (construing §1192(2) and §523(a) to limit §523 to individuals in subchapter V)
Pacor, Inc. v. Higgins, 743 F.2d 984 (3d Cir. 1984) (test for "related to" jurisdiction in bankruptcy)
Celotex Corp. v. Edwards, 514 U.S. 300 (interpretation of the scope of "related to" jurisdiction and Congress's intent)
Battle Ground Plaza, LLC v. Ray (In re Ray), 624 F.3d 1124 (9th Cir. 2010) (distinguishing "arising in" and "arising under" proceedings in bankruptcy jurisdiction)
Arbaugh v. Y & H Corp., 546 U.S. 500 (jurisdictional defects may be raised at any stage)