File a motion to dismiss an adversary complaint for denial of discharge in United States Bankruptcy Court

File a motion to dismiss an adversary complaint for denial of discharge in United States Bankruptcy Court under Title 11 United States Code section 727 is the topic of this blog post.   

The motion is made pursuant to Federal Rules of Bankruptcy Procedure 7012(b)(6), ("FRBP") which is the section used in Bankruptcy Court instead of the Federal Rules of Civil Procedure  12(b)(6).

The motion is made on the grounds that the adversary complaint fails to state a claim for relief.

Consider a hypothetical example of a case in which a creditor filed an adversary complaint alleging that the Debtor deliberately failed to list the creditor on their bankruptcy schedules. The adversary complaint requested a denial of discharge under 11 U.S.C. § 727(a)(4) due to an alleged false oath by the Debtor in that they failed to list the creditor.

The Debtor in the case filed a voluntary Petition for bankruptcy pursuant to Chapter 7 of the U.S. Bankruptcy Code. And the Chapter 7 Trustee filed their Final Report under FRBP 5009 which stated that there was no property available for distribution, in other words a no-asset case. Unfortunately an unsecured judgment creditor was omitted from the bankruptcy petition.

The Debtor denied that the failure to list the creditor was deliberate or done with fraudulent intent The Debtor filed a motion to dismiss and contended that the Complaint fails to state a claim for relief as it fails to state facts sufficient to show that: (1) the debtor made a false oath in connection with the case; (2) the oath related to a material fact; (3) the oath was made knowingly; and (4) the oath was made fraudulently. The Debtor also contended that the Complaint failed to state a claim for relief as it also failed to state facts sufficient to show that (1) the debtor made the representations, e.g., a false statement or omission in bankruptcy schedules; (2) at the time he knew they were false; and (3) he made them with the intention and purpose of deceiving the creditors.

Finally, the Debtor also contended that had the creditor waited until after the bankruptcy case was closed they would not be entitled to have the case re-opened because relief would be unnecessary as case law in the Ninth Circuit is clear that reopening to add an omitted creditor is not necessary in a Chapter 7 "no asset/no bar date" case where the court sends a notice directing creditors not to file a proof of claim. Relief is unnecessary because if the omitted debt is dischargeable, it was already discharged. Because the creditor was objecting to the discharge of the Debtor they bear the burden of proving by a preponderance of the evidence that the discharge should be denied as the Court construe § 727 liberally in favor of debtors and strictly against the party objecting to discharge.

The adversary complaint merely made conclusory allegations without any showing of the four elements discussed.  And the false oath must relate to a material fact. The adversary complaint failed to detail how the alleged false oath relates to any material fact, other than the fact that the creditor was not listed. The adversary complaint failed to state how that "omission" relates to any material fact.

The creditor had not alleged how the failure to list them as a creditor has detrimentally affected the administration of the estate.

Because the adversary complaint failed to state any facts which showed that the Debtor made any false oath or omission with the knowledge at the time he made it that it was false, and that he made it with the intention and purpose of deceiving the creditors, the creditor failed to meet their burden of showing that the discharge of the Debtor should be denied.

This case was deemed a no asset case, as evidenced by the Final Report filed by the Chapter 7 Trustee which was in fact admitted in the adversary complaint. Conclusory allegations or legal conclusions are not sufficient to prevent a motion to dismiss.

Attorneys or parties in who wish to view a portion of an 11 page sample motion to dismiss an adversary complaint under 11 U.S.C. § 727 in United States Bankruptcy Court containing a memorandum of points and authorities with citations to case law and statutory authority and proof service by mail. can use the link shown below. 

Sample motion to dismiss adversary complaint for denial of discharge

 
The author of this blog post, Stan Burman, is an entrepreneur and freelance paralegal who has worked in California and Federal litigation since 1995 and has created over 300 sample legal documents for California and Federal litigation.

*Do you want to use this article on your website, blog or e-zine? You can, as long as you include this blurb with it: “Stan Burman is the author of over 300 sample legal documents for California and Federal litigation and is the author of a free weekly legal newsletter. You can receive 10 free gifts just for subscribing. Just visit http://freeweeklylegalnewsletter.gr8.com/ for more information.

Follow the author on Twitter at: https://twitter.com/LegalDocsPro

You can view other sample legal document packages for sale by visiting: http://www.legaldocspro.com/downloads.aspx

DISCLAIMER:

Please note that the author of this blog post, Stan Burman is NOT an attorney and as such is unable to provide any specific legal advice. The author is NOT engaged in providing any legal, financial, or other professional services, and any information contained in this blog post is NOT intended to constitute legal advice.

The materials and information contained in this blog post have been prepared by Stan Burman for informational purposes only and are not legal advice. Transmission of the information contained in this blog post is not intended to create, and receipt does not constitute, any business relationship between the author and any readers. Readers should not act upon this information without seeking professional counsel.

File motion to dismiss an adversary complaint for fraud in United States Bankruptcy Court

File a motion to dismiss an adversary complaint for fraud in United States Bankruptcy Court is the topic of this blog post. A motion to dismiss is generally filed on the grounds that the adversary complaint fails to state a claim.

This type of motion is often called a 12(b)(6) motion as it is based on Federal Rule of Civil Procedure 12(b)(6) (FRCP), or Federal Rule of Bankruptcy Procedure 7012(b)(6) (FRBP). A party may also request in the alternative, that the party be required to provide a more definite statement under FRCP 12(e) or FRBP 7012(e).

FRCP and FRBP 12 (e) both state in pertinent part that, "A party may move for a more definite statement of a pleading to which a responsive pleading is allowed but which is so vague or ambiguous that the party cannot reasonably prepare a response. The motion must be made before filing a responsive pleading and must point out the defects complained of and the details desired".

The motion for a more definite statement may be joined with the motion to dismiss pursuant to FRCP and FRBP 12(g).

Many adversary complaints filed in bankruptcy courts are made under 11 U.S.C. § 523(a)(2) on the grounds of fraudulent representations. Note that FRCP 9(b) states in pertinent part that, "In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake".  The Ninth Circuit Court of Appeals has stated that this is a federally imposed requirement although the Court will examine state law to determine if the elements of fraud have been sufficiently alleged.

The reason for the particularity requirement is due to the fact that fraud is a serious charge against another party.

As the author generally works on cases from California, the great majority of the cases he works on are from one of the Districts in California, so any fraud claims would most likely be a California cause of action.

California law requires that four (4) elements be specifically pleaded in any cause of action for fraud

"A complaint for fraud must allege the following elements: (1) a knowingly false representation by the defendant; (2) an intent to deceive or induce reliance; (3) justifiable reliance by the plaintiff; and (4) resulting damages. Every element must be specifically pleaded." Service by Medallion, Inc. v. Clorox Co. 44 Cal.App.4th 1807, 1816 (1996).

And in California, pursuant to Code of Civil Procedure § 338(d) there is a three-year statute of limitations for an action for relief on the ground of fraud or mistake. The cause of action is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.

An action based on fraud may be brought more than three years after the fraud occurred if the plaintiff shows not only that he did not discover the facts but he could not with reasonable diligence have discovered them within that time.

While leave to amend is usually granted if a motion to dismiss is successful, the Ninth Circuit has ruled that leave to amend does not need to be granted where amending the complaint would be futile, and that any discretion to deny leave to amend is particularly broad where plaintiff has previously amended their complaint. 

A motion to dismiss and/or a motion for a more definite statement are very useful when used in the right situation as many adversary complaints for fraud are filed which fail to allege the fraud with particularity, or they are so vague and ambiguous that the defendant cannot reasonably prepare a proper response.

In the author’s experience filing a motion to dismiss can be particularly useful when it is obvious that plaintiff has a weak case. This will force plaintiff to seek leave to amend. Once plaintiff has previously amended their adversary complaint some judges will deny leave to amend where the moving party can show that amendment would be futile as plaintiff cannot state a cause of action for fraud.

Attorneys or parties who would like to view a portion of a sample 10 page motion to dismiss adversary complaint for fraud in United States Bankruptcy Court containing a memorandum of points and authorities with citations to case law and statutory authority and proof of service by mail sold by the author can use the link shown below.

Sample motion to dismiss adversary complaint for fraud

 

The author of this blog post, Stan Burman, is an entrepreneur and freelance paralegal who has worked in California and Federal litigation since 1995 and has created over 300 sample legal documents for California and Federal litigation.

*Do you want to use this article on your website, blog or e-zine? You can, as long as you include this blurb with it: “Stan Burman is the author of over 300 sample legal documents for California and Federal litigation and is the author of a free weekly legal newsletter. You can receive 10 free gifts just for subscribing. Just visit http://freeweeklylegalnewsletter.gr8.com/ for more information.

Follow the author on Twitter at: https://twitter.com/LegalDocsPro

You can view other sample legal document packages for sale by visiting: http://www.legaldocspro.com/downloads.aspx

DISCLAIMER:

Please note that the author of this blog post, Stan Burman is NOT an attorney and as such is unable to provide any specific legal advice. The author is NOT engaged in providing any legal, financial, or other professional services, and any information contained in this blog post is NOT intended to constitute legal advice.

The materials and information contained in this blog post have been prepared by Stan Burman for informational purposes only and are not legal advice. Transmission of the information contained in this blog post is not intended to create, and receipt does not constitute, any business relationship between the author and any readers. Readers should not act upon this information without seeking professional counsel.

Motion to dismiss adversary complaint for fraud in United States Bankrutpcy Court

A motion to dismiss an adversary complaint for fraud in United States Bankruptcy Court is the topic of this blog post. The motion to dismiss is generally made on the grounds that the adversary complaint fails to state a claim. This type of motion is often called a 12(b)(6) motion as it is based on Federal Rule of Civil Procedure 12(b)(6) (FRCP), or Federal Rule of Bankruptcy Procedure 7012(b)(6) (FRBP).

A party may also request in the alternative, that the party be required to provide a more definite statement under FRCP 12(e) or FRBP 7012(e).

FRCP and FRBP 12 (e) both state in pertinent part that, "A party may move for a more definite statement of a pleading to which a responsive pleading is allowed but which is so vague or ambiguous that the party cannot reasonably prepare a response. The motion must be made before filing a responsive pleading and must point out the defects complained of and the details desired".

The motion for a more definite statement may be joined with the motion to dismiss pursuant to FRCP and FRBP 12(g).

Most adversary complaints filed in bankruptcy courts are made under 11 U.S.C. § 523(a)(2) on the grounds of fraudulent representations. Note that FRCP 9(b) states in pertinent part that, "In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake".

"It is established law, in this circuit and elsewhere, that Rule 9(b)'s particularity requirement applies to state-law causes of action. "While a federal court will examine state law to determine whether the elements of fraud have been pled sufficiently to state a cause of action, the Rule 9(b) requirement that the circumstances of the fraud must be stated with particularity is a federally imposed rule." Vess v. Ciba-Geigy Corp. 317 F. 3d 1097, 1103 (9th Cir. 2003) (internal citations omitted).

The reason for the particularity requirement is due to the fact that fraud is a serious charge against another party.

As the author mainly works on cases from California any fraud claims would most likely be a California cause of action.

California law requires that four (4) elements be specifically pleaded in any cause of action for fraud.

"A complaint for fraud must allege the following elements: (1) a knowingly false representation by the defendant; (2) an intent to deceive or induce reliance; (3) justifiable reliance by the plaintiff; and (4) resulting damages. Every element must be specifically pleaded." Service by Medallion, Inc. v. Clorox Co. 44 Cal.App.4th 1807, 1816 (1996).

Whatever form it takes, injury or damage from fraud must not only be distinctly alleged but its causal connection with reliance on representations must be shown.... In order to recover for fraud, as in any other tort, the plaintiff must plead and prove the detriment proximately caused by the defendant's tortious conduct. Deception without resulting loss is not actionable fraud.

Whatever form it takes, the injury or damage must not only be distinctly alleged but its causal connection with the reliance on the representations must be shown. Service by Medallion, Inc. at 1818.

And in California, pursuant to Code of Civil Procedure § 338(d) there is a three-year statute of limitations for an action for relief on the ground of fraud or mistake. The cause of action is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.

An action based on fraud may be brought more than three years after the fraud occurred if the plaintiff shows not only that he did not discover the facts but he could not with reasonable diligence have discovered them within that time. The complaint must set forth specifically (1) the facts of the time and manner of discovery; and (2) the circumstances which excuse the failure to have made an earlier discovery. Olson v. County of Sacramento 274 Cal.App 2d 316, 327 (1969) (internal citations omitted).

While leave to amend is usually granted if a motion to dismiss is successful, the Ninth Circuit has ruled that leave to amend does not need to be granted where amending the complaint would be futile, and that any discretion to deny leave to amend is particularly broad where plaintiff has previously amended their complaint.

Leave need not be granted where the amendment of the complaint . . . constitutes an exercise in futility," and "the district court's discretion to deny leave to amend is particularly broad where plaintiff has previously amended the complaint." Ascon Properties v. Mobil Oil Co. 866 F.2d 1149, 1160 (9^thCir. 1989).

A motion to dismiss and/or a motion for a more definite statement are very useful when used in the right situation as many adversary complaints for fraud are filed but fail to allege the fraud with particularity, or they are so vague and ambiguous that the defendant cannot reasonably prepare a proper response.

Attorneys or parties in California who would like to view a portion of a sample motion to dismiss an adversary complaint can use the link shown below.

http://www.scribd.com/doc/55067234/Sample-Motion-to-Dismiss-Adversary-Complaint-for-Fraud

The author of this article, Stan Burman, is an entrepreneur and freelance paralegal who has worked in California and Federal litigation since 1995.  

Subscribe to his weekly newsletter with legal tips and tricks for California and Federal litigation.  http://www.legaldocspro.net/newsletter.htm