Cai v. Shenzhen Smart-In Industry Co., LTD

Summarized by Andrew Hardenbrook , Snell & Wilmer, LLP
11 years 10 months ago

Citation:

9th Cir. BAP, No. 12-56656

Tag(s):

Ruling:

The Bankruptcy Appellate Panel (BAP) affirmed the bankruptcy court’s determination that the creditors’ claims are excepted from discharge under 11 U.S.C. § 523(a)(2)(A). The BAP further determined that the bankruptcy court had the authority to enter a “dollar amount” judgment of nondischargeability. The BAP reasoned that Stern v. Marshall, 131 S. Ct. 2594 (2011) did not prevent the bankruptcy court’s adjudication in this case because Stern implicitly recognized that bankruptcy courts “have authority to adjudicate a state law counterclaim if the counterclaim would necessarily be decided through the claims allowance process.” In re Cai, Case No. 12-56656 (9th Cir. BAP Apr. 25, 2014) (citing Stern, 131 S. Ct. at 2618). Because the scope of a debtor’s discharge is a fundamental part of the bankruptcy process and determining whether a debtor is entitled to discharge under § 523(a)(2)(A) does not raise any issues of state law, the bankruptcy court’s judgment did not raise any constitutional concerns.

Procedural context:

Creditors filed a nondischargeability action for a determination that their claims are excepted from discharge under § 523(a)(2)(A). The bankruptcy court determined that the creditors’ claims are excepted from debtor’s discharge and entered a dollar amount determination of the creditors’ claims. The debtor appealed the bankruptcy court’s decision to the BAP.

Facts:

The decision did not include many of the underlying facts regarding the creditors’ claims. In brief, the BAP determined that the bankruptcy court did not clearly err in its factual determinations that the debtor had made a misrepresentation, intended to deceive the creditors, and the creditors actually and justifiably relied upon the debtor’s misrepresentations.

Judge(s):

The Honorable Randall L. Dunn, the Honorable Ralph B. Kirscher, and the Honorable Jim D. Pappas

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