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Schnitzel, Inc. v. Sorensen

Summarizing by Bradley Pearce

Couch v. Panther Petroleum, LLC (Couch)

Case Type:
Business
Case Status:
Affirmed
Citation:
No. 17-5194 (File Name: 17a0609n.06) (6th Circuit, Nov 06,2017) Not Published
Tag(s):
Ruling:
Sixth Circuit affirmed the Bankruptcy Appellate Panel's decision upholding the Bankruptcy Court's granting of a motion for summary judgment in a non-dischargeability case finding that a state trial court decision in Tennessee against the debtor for fraud was entitled to preclusive effect in the adversary case. The Sixth Circuit found that the debtor had "actually litigated" the case under Tennessee law by filing an answer and counterclaim even though counsel later withdrew and debtor did not oppose a motion for default judgment entered against him.
Procedural context:
Tennessee employer sued debtor in state court for fraud, breach of fiduciary duty, conversion, breach of contract and other claims. Debtor filed an answer and counterclaim. Debtor's state court counsel withdrew due to debtor's failure to keep in touch with counsel. Debtor failed to comply with discovery order and state court granted default judgment after an evidentiary hearing. Debtor filed chapter 7 case but failed to list former employer. Employer filed non-dischargeability case under Section 523 (a)(2)(A), (a)(4) and (a)(6). Bankruptcy court granted employer summary judgement on all claims except (a)(4).
Facts:
Debtor went to work for employer but employer later found that debtor was engaging in a scheme to compete with employer and hide profits from sales to employer's customers. Employer filed suit in state court. Debtor's chapter 7 petition failed to list employer as creditor. State court granted default judgment to employer and evidentiary hearing. Debtor's counsel withdrew. In bankruptcy court debtor claimed several errors of his counsel and that he moved out of state. Sixth Circuit said that if state court would find collateral estoppel under state law then it would apply the same standard. Case was actually litigated under state law. Debtor is responsible for actions of his counsel and has a duty to keep the court informed of his whereabouts, event after counsel withdraws.
Judge(s):
Cole, Chief Judge, Rogers and Griffin, Circuit Judges. ,

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