633 B.R. 830
Bankr. C.D. Ill.2021Background
- Debtor Christopher M. VanHuss filed Chapter 7; he was a shareholder/officer/director who ran Custom Curbs, which ceased business in January 2020.
- Union dues and vacation-pay deductions were withheld from four employees’ paychecks but allegedly not remitted to the union and vacation fund for the July–December 2018 period.
- Central Laborers’ Pension Fund (a collection agent) initially sued to except $9,449.67 from discharge; the court dismissed the first amended complaint for lack of standing and for failure to plead veil-piercing or a plausible §523(a)(6) claim, and granted limited leave to amend.
- A second amended complaint was later filed naming four individual employees as plaintiffs (while Central Laborers’ remained on the docket); they conceded they were not parties to the collective-bargaining agreement and alleged conversion/willful-and-malicious nonpayment and sought to pierce the corporate veil.
- The court found the individuals lacked both constitutional and prudential standing, that plaintiffs failed to plausibly plead veil-piercing, and that they failed to plead conversion or willful and malicious injury under §523(a)(6).
- The Second Amended Complaint was dismissed with prejudice and leave to amend was denied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to pursue nondischargeability under §523(a) | Individual employees claim conversion (tort) basis so they can sue even though they are not parties to the CBA | Plaintiffs lack constitutional injury and prudential standing; debt was owed to union/benefit fund, not to employees | Plaintiffs lack both constitutional and prudential standing; dismissal for lack of standing |
| Piercing Custom Curbs’ corporate veil | VanHuss ran day-to-day operations and withdrew business funds (alleged deposits into retirement) so veil should be pierced | Allegations are conclusory; no facts showing unity of interest/sham or that injustice/fraud would result from respecting corporate form | Veil-piercing not plausibly alleged; dismissal |
| Conversion / §523(a)(6) nondischargeability (willful & malicious injury) | Nonpayment of deducted dues/vacation pay was a willful, malicious conversion of plaintiffs’ property | No allegations of concrete injury to plaintiffs; nonpayment is at most a breach of contract or unpaid debt, not an intentional tort causing willful and malicious injury | §523(a)(6) claim fails: plaintiffs pleaded only labels and not the deliberate/intentional injury required; conversion not plausibly pleaded |
| Leave to amend / substitution of parties | Plaintiffs sought leave to correct caption/signature and effectively substitute themselves for Central Laborers’ | Debtor opposed; court previously warned additional amendment unlikely to cure defects | Motion to amend denied; dismissal with prejudice because further amendment would be futile |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (pleading must contain factual allegations raising claim above speculative level)
- Ashcroft v. Iqbal, 556 U.S. 662 (plausibility standard requires factual content permitting reasonable inference of liability)
- Kawaauhau v. Geiger, 523 U.S. 57 (§523(a)(6) requires deliberate or intentional injury, not merely intentional act)
- Warth v. Seldin, 422 U.S. 490 (standing inquiry: who is entitled to invoke judicial review)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (constitutional standing requires concrete injury and redressability)
- Judson Atkinson Candies, Inc. v. Latini-Hohberger Dhimantec, 529 F.3d 371 (veil-piercing requires actual unity of interest, not mere opportunity)
- In re Thebus, 108 Ill. 2d 255 (money as subject of conversion must be specific chattel; mere obligation to pay money is insufficient)
- Sea-Land Servs., Inc. v. Pepper Source, 941 F.2d 519 (to pierce veil to avoid injustice, some wrong beyond inability to collect must exist)
- First Weber Group, Inc. v. Horsfall, 738 F.3d 767 (elements of §523(a)(6): injury, willfulness, malice)
- Wachovia Sec., LLC v. Banco Panamericano, Inc., 674 F.3d 743 (factors considered for veil-piercing under Illinois law)