Daren C. Daly, 666 B.R. 810

Daren C. Daly, after extensive litigation with his parents (the Dalys) and their company (Sealcoating), filed for Chapter 11 bankruptcy in July 2022, staying state court litigation over ownership of All Paving, Inc.
The Dalys and Sealcoating filed a bankruptcy claim based on their state court claims, also seeking to except their debt from discharge under 11 U.S.C. § 523(a)(2), (4), and (6).
After a nine-day trial, the bankruptcy court ruled Daly owed no debts to the Dalys and Sealcoating, and that their claims were not excepted from discharge; the Dalys appealed this ruling.
Daly’s reorganization plan was confirmed without provision for the Dalys’ claim, and neither the Dalys nor Sealcoating appealed or sought a stay of this confirmation order, which became effective March 15, 2024.
Daly sought enforcement of the discharge injunction to compel dismissal of the state court claims against him; the Dalys resisted, citing their pending appeal and concerns of losing remedies if forced to dismiss now.
The court addressed whether the state court claims must be dismissed in light of the discharge injunction, and whether sanctions were warranted for noncompliance.

Issue	Daly's Argument	Dalys' Argument	Held
Must the Dalys and Sealcoating dismiss state court claims against Daly despite a pending appeal?	Discharge injunction requires dismissal of all pre-petition claims against him.	Dismissal now risks losing remedies if they win on appeal; have not acted against Daly while case stayed.	Must dismiss claims for personal liability (Counts I-XI) without prejudice; declaratory relief claims can proceed.
Does the discharge injunction apply while appeal of dischargeability ruling is pending?	Yes, debts are presumptively discharged unless and until reversed on appeal.	Claims should not be dismissed yet as they are subject to the pending appeal.	Discharge is presumptive; litigation against Daly must cease during appeal, but claims dismissed without prejudice.
Does agreed language in the confirmation order or state court stay affect scope of discharge protection?	No, discharge and plan confirmation are final and binding, unaffected by those provisions.	State court stay and confirmation order's language allow their claims to remain pending during the appeal.	Discharge is absolute; neither provision limits Daly’s protections.
Are sanctions or fees against Dalys/Sealcoating or their attorneys warranted for not dismissing claims?	Yes, for costs incurred enforcing discharge.	No, since no violation and acting in good faith during appeal.	Sanctions and fees denied; only dismissal of claims is required.

Ritzen Grp., Inc. v. Jackson Masonry, LLC, 589 U.S. 35 (bankruptcy orders that finally dispose of discrete disputes are immediately appealable)
Taggart v. Lorenzen, 587 U.S. 554 (the bankruptcy discharge operates as an injunction barring collection of discharged debts)
Harrington v. Purdue Pharma L.P., 603 U.S. 204 (explaining the effect of bankruptcy discharge as both release and injunction)
Butner v. United States, 440 U.S. 48 (state law determines property rights in bankruptcy proceedings)
Jaffree v. Wallace, 837 F.2d 1461 (final judgments retain preclusive effect pending appeal)