2006 Chief Judge Burns - Opinions

Chief Judge Gloria Burns -- Opinions signed in 2006

In re Mewborn, 367 B.R. 529 (Bankr. D.N.J. 2006)

The debtor filed a motion asserting that a state agency had violated the automatic stay by withholding his post-petition unemployment compensation benefits for recoupment. The court found that the state agency did not qualify for the police power exception to the automatic stay and that the debtor's unemployment compensation benefits were property of the bankruptcy estate. However, the court found that the overpayment and withheld benefits arose from the same transaction and therefore the recoupment did not violate the debtor's automatic stay. However, because recoupment is an equitable remedy, while the state agency was entitled to recoupment, it was limited to the amount already recouped and the remainder of the claim was to be discharged.


Sales and People, Inc. v. Schroeder (In re Schroeder), Case No. 01-14748, Adv. No. 01-1270, 2006 WL 4470716, at *1 (Bankr. D.N.J. March 29, 2006)

A pro se creditor filed an adversary complaint against debtors for nondischargeability of a claim pursuant to 11 U.S.C. § 523(a)(2)(A) and 523(a)(4). After reviewing the totality of the circumstances, which included a several year friendship between the creditor and the debtors, the court found that the creditor justifiably relied upon the debtors and that the creditor met his burden of proof regarding nondischargeability of his claim pursuant to § 523(a)(2)(A). The court determined the total nondischargeable claim owed by subtracting the funds and interest received by the creditor from previous investments with the debtors.


Steiert v. Schroeder (In re Schroeder), Case No. 01-14748, Adv. No. 01-1273, 2006 WL 4452975, at *1 (Bankr. D.N.J. March 31, 2006)

A pro se creditor filed an adversary complaint against debtors requesting the nondischargeability of a claim pursuant to 11 U.S.C §§523 (a)(2)(A) and 523 (a) (4). The court held that based on the totality of the circumstances, at a minimum the debtors indirectly benefitted from the creditor's investments and therefore could not defeat a §523(a)(2)(A) claim. As to whether the false representations were knowingly and fraudulently made, the court found that the debtor's statements and actions were reckless and in conscious indifference to the consequences and that the debtors were grossly reckless in failing to register, become licensed, and properly investigate the enterprise behind securities sold to investors. The creditor met the burden of proving non-dischargeability was warranted under §523 (a)(2)(A).


In re Zagara's Fresh Markets, LLC, No. 03-43017, 2006 WL 4452980, at *1 (Apr. 13, 2006)

A debtor's attorney applied for compensation for services rendered to the debtor prior to the appointment of a chapter 11 trustee. The court held that the debtor's attorney breached a duty to his client by failing to properly guide the debtor through the bankruptcy process because the debtor's attorney allowed violations of the Rules and Code, failed to adequately explain the impact of business decisions on the case, lacked knowledge of the debtor's financial condition in order to provide proper advice, and neglected his responsibilities in appointing professionals. The only fees for actual, necessary, beneficial, and therefore compensable services consisted of those related to petition preparation, cash collateral, attendance at the Committee formation and 341(a) meetings, resolution of PACA claims, and other related services.


Ashley v. Andrews (In re Andrews), Case No. 03-16226, Adv. No. 03-1931, 2006 WL 4452986, at *1 (Bankr. D.N.J. May 10, 2006)

A creditor filed a complaint objecting to discharge of its claim pursuant to 11 U.S.C. § 523(a)(6) resulting from a jury award in a defamation case. The court held that the maliciousness element in 11 U.S.C. § 523(a)(6) was met by the state-court jury determination since it established that the debtor acted maliciously. Additionally, the court determined that collateral estoppel prevented the re-litigation of this issue, and the Rooker-Feldman doctrine prevented the court from reviewing the jury determination. Finally, the court held that non-compensatory damages including reasonable counsel fees and costs are part of the nondischargeable debt under 11 U.S.C. § 523(a)(6) and thus the defamation judgment and counsel fees and costs were nondischargeable.


In re Nickels Midway Pier, LLC, No. 03-49462, 2006 WL 4457349, at *1 (Bankr. D.N.J. Sept. 15, 2006)

The landowner and chapter 11 debtor, Nickels Midway Pier, LLC, moved to establish that the business lease and sales agreement between it and Wild Waves, LLC were individually executory, had not been terminated pre-petition, and could therefore be rejected if the debtor determined rejection was in its sound business judgement. On remand from the United States District Court for the District of New Jersey, the court revised its previous ruling by treating the lease and sales agreement as two separate contracts and reached the same conclusion that the contracts were both executory. By highlighting the differences between a mere breach and termination by a material breach, the court determined that the breaches in each of the contracts did not amount to material breaches and therefore did not terminate the contracts. Without pre-petition termination, the debtor could determine whether it was in its sound business judgment to reject the two contracts.


Marchand v. King (In re Lopresti), Case No. 03-4889, Adv. No. 04-2351, 2006 WL 2708605, at *1 (Bankr. D.N.J. Sept 20, 2006)

A defendant filed a motion for summary judgment on a chapter 7 trustee's adversary complaint to void a fraudulent transfer from the debtor to the defendant, a close friend of the debtor. The court found that the debtor's loan repayment to the defendant was not conducted at arms length and that the defendant was considered an insider under 11 U.S.C. § 547 because the loans were not secured by any collateral, the defendant knew the debtor was insolvent when she accepted the repayment, and the loans between the debtor and the defendant had no commercial motivation. Although the debtor and the defendant did not share a romantic relationship, the relationship motivated the transfer and alleged preferential treatment and thus enough undisputed badges of fraud under N.J.S.A. 25: 2-26 were present to deny summary judgement.