- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- 25-20170 (5th Circuit, Feb 03,2026) Not Published
- Tag(s):
-
- Ruling:
- The Debtor's former business partner had standing to seek a nondischargeable judgment against the Debtor arising from her embezzlement of funds from the LLC that they co-owned. The Court explicitly rejected the Debtor's argument that only the LLC had standing to assert a claim arising from her embezzlement from the LLC or to seek a judgment making that claim nondischargeable.
- Procedural context:
- On appeal from district court, which affirmed the bankruptcy court's judgment against the Debtor in an adversary proceeding.
- Facts:
- The Debtor and Reeves co-owned a concrete company organized as an LLC. Disputes developed between the partners that resulted in Reeves suing the Debtor in state court. After the Debtor filed a petition for relief, the lawsuit proceeded forward as an adversary proceeding in bankruptcy court. Reeves sought an award against the Debtor and a declaration that the debt was nondischargeable under 11 USC 523(a)(4). The parties also disputed which version of the LLC agreement controlled and who were the LLC's members. Following a bench trial, the bankruptcy court found that Reeves and the Debtor each owned 50% of the LLC, that the Debtor's transfers of funds from the LLC to another entity that she wholly owned constituted embezzlement, and that Reeves had a personal interest in a portion of the funds transferred. The bankruptcy court entered a nondischargeable judgment for Reeves in the amount of $299,980.98.
- Judge(s):
- Richman, Engelhardt, Wilson
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