515 B.R. 416
S.D.N.Y.2014Background
- Relators Donald Minge and David Kiehl filed a qui tam False Claims Act (FCA) suit against Hawker Beechcraft Corporation (HBC) in 2007 alleging government-contract fraud and seeking treble damages, penalties, and fees.
- HBC filed Chapter 11 in May 2012; a confirmed plan of reorganization issued in February 2013 and the Kansas FCA suit was stayed as to HBC.
- A claims agent mailed Official Form 9F notice of the bankruptcy (including the §1141(d)(6)(A) discharge notice) but indicated the specific deadline for filing a dischargeability complaint would be provided later.
- Relators filed an adversary complaint in September 2012 seeking a nondischargeability determination under 11 U.S.C. §1141(d)(6)(A).
- The bankruptcy court dismissed relators’ claims for damages and penalties, holding §1141(d)(6)(A) incorporated §523(c)(1)/Rule 4007(c) deadlines and that relators were time-barred; it allowed claims for attorneys’ fees to proceed.
- The district court reversed in part and remanded, holding (1) §1141(d)(6)(A) is self-executing and does not incorporate §523(c)(1) procedural requirements for corporate debtors, and (2) relators have standing to bring nondischargeability claims under §1141(d)(6)(A).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §1141(d)(6)(A)’s phrase “of a kind specified in §523(a)(2)(A) or (B)” imports the procedural adversary-deadline of §523(c)(1)/Rule 4007(c) | Minge: §1141(d)(6)(A) excepts FCA-related debts from discharge without requiring the §523(c)(1) procedural deadline for corporate debtors | HBC: the cross-reference to §523(a) implicitly imports §523(c)(1) and Rule 4007(c) so creditors must file within 60 days | Court: §1141(d)(6)(A) incorporates only the definitional scope from §523(a)(2)(A)/(B); it does not import §523(c)(1) procedural requirements — vacated dismissal on timing ground |
| Whether §523(c)(1) applies to corporate debtors (i.e., whether “the debtor” in §523(c)(1) means corporate debtors) | Minge: §523(c)(1) should be read as limited to individual debtors (consistent with §523(a) language) | HBC: §523(c)(1) uses “the debtor” and Chapter 5 applies in Chapter 11, so §523(c)(1) governs all debtors | Court: “the debtor” in §523(c)(1) refers back to §523(a)’s “individual debtor”; §523’s procedural rule does not apply to corporate Chapter 11 debtors |
| Whether relators have standing to file a nondischargeability complaint under §1141(d)(6)(A) | Minge: relators have statutory rights and a partial assignment of the government’s claim under Stevens, so they are creditors with standing | HBC: relators are not a governmental unit and thus lack authority to invoke the government-only clause | Court: Relators have Article III standing and are creditors with a claim under the Code; Stevens supports relator standing |
| Whether FCA damages/penalties are “debts owed to a person” under Clause 2 of §1141(d)(6)(A) (alternate ground) | Minge: claims could be excepted under Clause 2 as debts owed to a person resulting from an FCA action | HBC: FCA damages/penalties are owed to the U.S., not to relators, so Clause 2 doesn’t protect relators’ damage claims | Court: Did not decide this issue; remanded for fact-specific consideration because Clause 1 analysis may suffice. |
Key Cases Cited
- Vermont Agency of Natural Res. v. U.S. ex rel. Stevens, 529 U.S. 765 (U.S. 2000) (qui tam relators have standing and the FCA effects a partial assignment of government’s claim)
- Cohen v. de la Cruz, 523 U.S. 213 (U.S. 1998) (interpretation of §523(a)(2)(A) in discharge context)
- In re Kalikow, 602 F.3d 82 (2d Cir. 2010) (standard of review for bankruptcy appeals)
- United States v. Kozeny, 541 F.3d 166 (2d Cir. 2008) (statutory-construction principles; give effect to ordinary meaning)
- European Am. Bank v. Benedict (In re Benedict), 90 F.3d 50 (2d Cir. 1996) (Rule 4007(c) deadline governs adversary complaints to determine dischargeability)
- In re Spring Valley Farms, Inc., 863 F.2d 832 (11th Cir. 1989) (§523 applies to individuals, not corporate debtors)