Fustolo v. The Patriot Group LLC

Case Type:
Business
Case Status:
Reversed and Remanded
Citation:
17-1984 (1st Circuit, Jul 16,2018) Published
Tag(s):
Ruling:
Bankruptcy court's order denying debtor a discharge reversed because allowing motion to conform complaint to the evidence was a due process violation in the circumstances.
Procedural context:
Patriot and two other creditors filed an involuntary petition in bankruptcy against Fustolo. The bankruptcy court granted an order for relief, which was affirmed on appeal. Patriot and one of the other creditors filed an A.P. against Fustolo for a declaration that the debt ($20.5 million) was non-dischargeable and/or deny him a discharge, essentially for fraudulent actions.
Facts:
The opinion does not delve much into the underlying facts, but only indicates that the petitioning creditors had obtained a $20.5 million judgment against Fustolo in Massachusetts Superior Court. Instead, the opinion focuses on the very contentious pre-trial proceedings, which included motions to compel, discovery orders, and assertions of Fifth Amendment privilege. At trial, the plaintiff denied that it was seeking denial of discharge under §727(a)(6). in its post-trial brief, however, the plaintiff moved to amend the complaint to conform to the evidence, which was allowed and the discharge was denied per 727(a)(6). The Circuit Court held that this was error because Fustolo did not have fair notice, in the due process sense, of that claim against him.
Judge(s):
Toruella (author), Thompson and Kayatta

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