Hernandez v. Shove, 83 F.4th 102

Debtor Richard M. Shove owned/managed multiple income-producing rental properties and formerly ran a landscaping business; he and his wife Kathleen filed Chapter 7 in December 2017.
In December 2015 a house fire destroyed paper business/rental records; afterward the Shoves primarily used a partial cash system and did not keep contemporaneous rental records.
In 2015 employee Jose R. Hernandez was severely injured while working for Shove; Hernandez obtained a judgment eventually recorded for $965,201.53.
The Chapter 7 Trustee requested rental records and bank statements; the Shoves produced post-hoc monthly “rent rolls” (January 2017–March 2018) based on their “best recollection.”
Hernandez initiated an adversary proceeding to deny Shove’s discharge under 11 U.S.C. § 727(a)(3) (and other subsections); the bankruptcy court denied discharge under § 727(a)(3) and § 727(a)(4).
The BAP affirmed denial under § 727(a)(3) (declining to reach § 727(a)(4)); the First Circuit likewise affirms denial under § 727(a)(3) and declines to decide § 727(a)(4).

Issue	Plaintiff's Argument	Defendant's Argument	Held
1) Motion to dismiss §727(a)(3) claim — plausibility	Hernandez alleged Shove failed to keep rental/financial records for multiple properties, preventing ascertainment of financial condition.	Shove moved to dismiss for failure to state a claim.	Complaint plausibly alleged §727(a)(3) violation; motion to dismiss properly denied.
2) Did Shove fail to maintain adequate records?	The post-fire absence of contemporaneous books and the cash-based operations left no reliable records to determine finances.	Shove argued he produced enough records (post-hoc rent rolls, some bills) and admitted limited contemporaneous records.	Bankruptcy court’s factual finding that Shove failed to keep adequate records is not clearly erroneous; affirmed.
3) Was the failure justified?	Hernandez: no—given Shove’s experience and prior record-keeping, failure was not reasonable.	Shove: post-fire displacement and customary practices for small landlords made his recordkeeping reasonable; post-hoc rent rolls suffice.	Objective reasonableness test fails for Shove; court reasonably found failure unjustified and rejected post-hoc rent rolls as adequate.
4) Did the post-hoc rent rolls cure the defect?	Hernandez: post-hoc recollections insufficient to enable intelligent inquiry into finances.	Shove: rent rolls created for Trustee show rents and should suffice.	Post-hoc rent rolls labeled "best recollection" were unreliable; did not cure lack of contemporaneous records.

Grogan v. Garner, 498 U.S. 279 (U.S. 1991) (bankruptcy discharge and "fresh start" principle)
Privitera v. Curran (In re Curran), 855 F.3d 19 (1st Cir. 2017) (standards for appellate review of bankruptcy decisions)
Razzaboni v. Schifano (In re Schifano), 378 F.3d 60 (1st Cir. 2004) (elements of § 727(a)(3) claim)
Harrington v. Simmons (In re Simmons), 810 F.3d 852 (1st Cir. 2016) (debtor's duty to maintain records; justification defense explained)
Gannett v. Carp (In re Carp), 340 F.3d 15 (1st Cir. 2003) (mixed question standard and review for clear error)
Meridian Bank v. Alten, 958 F.2d 1226 (3d Cir. 1992) (objective-reasonableness test for justification of poor recordkeeping)
Zizza v. Harrington (In re Zizza), 875 F.3d 728 (1st Cir. 2017) (denial under one § 727(a) subsection suffices; appellate scope)