Sethna v. Brown, 22-00034

Richard S. Brown (Debtor) filed for Chapter 13 bankruptcy; Jonathan and Christine Sethna (Plaintiffs) sought to have a debt owed by Brown ruled nondischargeable, based on a prior settlement agreement and subsequent judgment (Revived Judgment).
Plaintiffs argued that Debtor admitted facts under §523(a)(2)(A) making the debt nondischargeable, and obtained partial summary judgment on this ground.
Several issues were reserved for trial, including whether parts of the debt comprising post-judgment, pre-petition interest, and legal fees were dischargeable, and whether the Debtor could reduce the judgment due to alleged breach of contract by the Plaintiffs.
The parties later agreed that only issues related to Brown’s breach of contract counterclaim and whether Plaintiffs’ action constituted enforcement of the Settlement Agreement remained to be decided.
The court determined that Brown’s offset claim was a counterclaim (not an affirmative defense) and was barred by Pennsylvania’s four-year statute of limitations for contract claims, as the alleged breach occurred in 2008 and was not timely refiled after previous withdrawal.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Is debt (including post-judgment, pre-petition interest) nondischargeable under §523(a)(2)(A)?	Entire amount is nondischargeable due to debtor’s admission of fraud.	Did not dispute nondischargeability of Revived Judgment.	Full amount, including interest, is nondischargeable under §523(a)(2)(A).
Can Brown reduce debt due to Plaintiffs’ alleged breach (failing access)?	Offset claim is counterclaim, time-barred by statute of limitations.	It is an affirmative defense, not time-barred.	Claim is a counterclaim, time-barred under Pennsylvania law; no offset or reduction allowed.
Does Plaintiffs’ nondischargeability claim enforce the Settlement Agreement?	They are not enforcing the contract, just seeking nondischargeability.	Their claim is essentially enforcing the Settlement Agreement.	Court did not need to decide, finding for Plaintiffs on limitations grounds.
Is §523(a)(6) claim necessary after §523(a)(2)(A) ruling?	Will dismiss as duplicative.	No argument stated.	Court did not address; Plaintiffs to voluntarily dismiss as duplicative.

Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. City Sav., F.S.B., 28 F.3d 376 (3d Cir. 1994) (defining the distinction between counterclaims and affirmative defenses)
Colonial Assur. Co. v. Mercantile & Gen. Reinsurance Co. Ltd., 297 F. Supp. 2d 764 (E.D. Pa. 2003) (interpreting Pennsylvania’s statute of limitations for breach of contract claims)