Generation Capital I, LLC v. Fliss (In re Fliss), 586 B.R. 21

Fliss filed Chapter 13; Generation Capital I, LLC filed a proof of claim based on a 2011 state-court confession-of-judgment against Fliss and others for about $204,797.70 following a note sale/assignment from Barrington Bank.
State court held no evidence that Wojciak or the Trust paid the $240,000 settlement amount to Barrington; therefore Generation Capital had enforceable rights transferred by the note sale.
In bankruptcy, Fliss objected to Generation Capital’s claim arguing payment/release and ownership/alter-ego issues; bankruptcy court ordered document production and tight deadlines over the Thanksgiving/Christmas period.
Generation Capital missed some production deadlines, produced affidavits and some documents (including evidence of a Generation II wire), and requested more time; Fliss moved to disallow the claim as a discovery sanction.
The bankruptcy court disallowed Generation Capital’s claim under Rule 37 and then confirmed Fliss’s Chapter 13 Plan because no objections remained.
The district court vacated the disallowance and plan confirmation and remanded, finding the bankruptcy court abused its discretion by imposing the harsh sanction without explicit findings of willfulness/bad faith/fault and without considering lesser sanctions.

Issue	Plaintiff's Argument (Generation Capital)	Defendant's Argument (Fliss)	Held
Whether disallowance of claim as a discovery sanction was proper	Sanction was improper because production delays were excusable, affidavits showed efforts to produce, and there was no willfulness, bad faith, or fault	Sanction appropriate because Generation Capital failed to comply with court orders and withheld key bank records showing who paid the settlement	Vacated — court abused discretion: no explicit finding of willfulness/bad faith/fault; record does not support such findings and dismissal was disproportionate
Whether confirmation of Chapter 13 Plan was proper after disallowance	Plan confirmation was premature because disallowance was wrongful and Claim should have been adjudicated on merits	With claim disallowed, no objection remained and plan could be confirmed	Vacated — confirmation rested on erroneous disallowance; plan must be reconsidered after proper adjudication of the claim

Kovacs v. United States, 739 F.3d 1020 (7th Cir. 2014) (standard of review for bankruptcy factual findings and legal conclusions)
In re KMart Corp., 381 F.3d 709 (7th Cir. 2004) (abuse of discretion framework)
Ramirez v. T & H Lemont, Inc., 845 F.3d 772 (7th Cir. 2017) (dismissal as discovery sanction reserved for willfulness, bad faith, or fault)
In re Thomas Consolidated Industries, Inc., 456 F.3d 719 (7th Cir. 2006) (Rule 37 sanctions reviewed for abuse of discretion)
Long v. Steepro, 213 F.3d 983 (7th Cir. 2000) (willfulness and bad faith require intentional or reckless conduct)
e360 Insight, Inc. v. The Spamhaus Project, 658 F.3d 637 (7th Cir. 2011) (breadth of remedies and proportionality in discovery sanctions)
In re Golant, 239 F.3d 931 (7th Cir. 2001) (dismissal appropriate where party repeatedly and plainly refuses to comply; contrasts with cases of inability to comply)
Wellness Int'l Network, Ltd. v. Sharif, 727 F.3d 751 (7th Cir. 2013) (pattern of dilatory conduct can justify dismissal)