- Docket No. 13-1931 (2nd Cir. July 25, 2014)
- Court of Appeals affirmed the lower courts' decisions that the debtor was entitled to a discharge because denial of discharge is an extreme penalty, with exceptions to be narrowly construed, and plaintiffs had not met their burden of establishing the basis for the exception that any missing records were necessary to ascertain debtor's financial condition during the applicable period, which it held should begin from a reasonable period of time before the bankruptcy filing through the end of the proceedings (not the earlier period when records were not properly maintained). The amount at issue in their claim had already been agreed to, and the trustee had received sufficient documentation to conclude that the debtor did not have any material assets available for distribution.
- Procedural context:
- The case presented in the context of cross motions for summary judgment on a complaint to prevent the debtor's discharge of debts. The matter was before the Court of Appeals after the bankruptcy court had granted summary judgment in favor of debtor and his discharge, and the district court had affirmed.
- An attorney and his firm had previously sued an individual debtor and his law partner in state court to recover more than $2 million in fees owed under a referral agreement related to representing personal injury claimants and sharing fees. In the state proceedings, the court concluded that the debtor and his partner willfully obstructed discovery by, among other things, losing or destroying many relevant records relating to various referred cases, and the court sanctioned such parties by striking their answer to the plaintiffs' complaint. The parties settled the claim for $1.4 million. The claim at issue here was brought to prevent the discharge of the debtor's obligations on the basis that it had "concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information . . . from which the debtor's financial condition or business transactions might be ascertained," which constitutes an exception to discharge under Bankruptcy Code section 727(a)(3).
- Straub, Sack, and Lohier, Circuit Judges
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