495 B.R. 555
Bankr. S.D. Florida2013Background
- Debtor Peter G. Herman, a senior attorney and non‑shareholder "Director" at Tripp Scott, filed Chapter 7 on Feb. 18, 2012 while facing a ~ $4.57 million prepetition deficiency judgment held by CIB Marine. CIB Marine was actively garnishing wages prepetition.
- Herman co‑originated and was co‑lead counsel on two contingency‑fee cases that produced roughly $10 million in fees to Tripp Scott shortly after the petition (Home Depot and Security Mutual matters); Tripp Scott later awarded Herman a $2.7 million bonus from that pool.
- Prepetition emails among Herman, Tripp Scott’s president and CFO show Herman believed he had a substantial, imminent entitlement to a multi‑million bonus from the $10M fee and that firm allocation discussions were underway before the petition date.
- Herman filed Schedules and a Statement of Financial Affairs on March 20, 2012 and did not disclose any interest in the $10M fee or certain prepetition transfers (~$46k) to accounts controlled by his ex‑wife; he admitted intentionally omitting the bonus claim.
- The court found (1) Herman’s interest in the bonus was property of the bankruptcy estate under § 541, (2) Herman concealed that interest and made false oaths in his Schedules/SOFA, and (3) Herman made prepetition transfers with intent to hinder/delay/defraud creditors.
- As a result, the court denied Herman’s Chapter 7 discharge under 11 U.S.C. §§ 727(a)(2)(A), 727(a)(2)(B), and 727(a)(4)(A). The court ordered the bonus (as determined) belongs to the estate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Herman’s inchoate right to a postpetition bonus from prepetition contingency fees constituted property of the estate under § 541 | Herman had a prepetition interest in the $10M fee (via firm compensation system and prepetition communications); that interest is estate property | Herman argued the bonus was discretionary/not vested and thus not estate property because not paid prepetition | Court: Held estate includes Herman’s contingent/prepetition interest; §541 is broad and facts showed an enforceable expectancy leading to a $2.7M award |
| Whether omission of the bonus and transfers in Schedules/SOFA warrants denial of discharge under § 727(a)(2)(B) (postpetition concealment) | Plaintiffs: omission was intentional concealment of estate property to hinder/delay/defraud creditors (CIB Marine, trustee) | Herman: claimed legal research and relied on case law to treat bonus as non‑estate property; presented no credible innocent explanation for omissions | Court: Held plaintiff proved concealment of estate property after filing with fraudulent intent; discharge denied under §727(a)(2)(B) |
| Whether false oaths in Schedules/SOFA justify denial of discharge under § 727(a)(4)(A) | Plaintiffs: deliberate, material omissions about bonus, anticipated income and prepetition transfers were false oaths that prevented trustee/creditors from discovering assets | Herman: asserted belief (via legal research) that disclosure unnecessary; claimed Schedules were accurate | Court: Held omissions were material and knowingly fraudulent; false oaths support denial under §727(a)(4)(A) |
| Whether prepetition transfers to ex‑wife were fraudulent transfers warranting denial under § 727(a)(2)(A) | Plaintiffs: transfers of investment proceeds into accounts solely controlled by ex‑wife within one year of petition were intended to place funds beyond creditors’ reach | Herman: offered unconvincing explanations (e.g., condo repairs) and failed to disclose transfers | Court: Held transfers were made with intent to hinder/delay/defraud creditors; discharge denied under §727(a)(2)(A) |
Key Cases Cited
- Segal v. Rochelle, 382 U.S. 375 (U.S. 1966) (contingent or future interests can be property of the estate)
- Longaker v. Boston Scientific Corp., 715 F.3d 658 (8th Cir. 2013) (postpetition payments grounded in prepetition contractual interests belong to estate)
- Majestic Star Casino, LLC v. Barden Dev., Inc., 716 F.3d 736 (3d Cir. 2013) (§ 541 construed broadly to sweep contingent and novel interests into the estate)
- Bracewell v. Kelley (In re Bracewell), 454 F.3d 1234 (11th Cir. 2006) (postpetition governmental payments not property of estate where statutory right did not exist before enactment)
- In re Hanley, 305 B.R. 84 (Bankr. M.D. Fla. 2003) (§ 541 sweeps future, contingent, speculative interests into the estate)
- In re Soboslai, 263 B.R. 700 (Bankr. D. Conn. 2001) (attorney’s postpetition bonus related to prepetition services constituted estate property)