Hannon v. ABCD Holdings, LLC (In re Hannon)

United States Court of Appeals for the First Circuit, No. 15-2269, October 7, 2016
Affirming the district court's affirmance of the bankruptcy court's entry of summary judgment denying the Debtor's discharge under 11 U.S.C. sec. 727(a)(4)(A), the First Circuit examined the standards applicable to section 727(a)(4)(A). It stated that thereunder a debtor can be refused his discharge "only if he (i) knowingly and fraudulently made a false oath, (ii) relating to a material fact." First, while the Debtor had waived the point by not arguing it below, the Court stated in dictum that because the verification language used on monthly operating reports is nearly identical to the verification language on bankruptcy schedules, and because that latter language has consistently been found to be an "oath," then the Court would likely have found that the MOR certification was also an "oath" for purposes of the denial of discharge. Second, the Court stated that a knowing and fraudulent false oath occurs when a debtor "knows the truth and nonetheless willfully and intentionally swears to what is false," including doing so with reckless indifference to the truth. Honest confusion or a lack of understanding might weigh against the inference of such intent, but this does not include reliance on the advice of counsel when the "deficiency 'should have been evident to the debtor.'" Third, materiality, which was not in dispute, is "satisfied if the statement bears a relationship to the debtor's business transactions or estate, or concerns the discovery of assets, business dealings, or the existence and disposition of property."
Procedural context:
This case involved an appeal from a district court order affirming a bankruptcy court's grant of summary judgment denying the debtor a discharge under 11 U.S.C. sec. 727(a)(4)(A) (material false oaths).
While an individual debtor in a Chapter 11 case, the Debtor filed certified monthly operating reports that failed to include, as they had to, (i) the disbursement of funds for his benefit by third-party companies with which he was associated, and (ii) an explanation for such payments. The case later was converted to a Chapter 7. Creditors filed an adversary complaint objecting to the Debtor's discharge under 11 U.S.C. sec. 727(a)(4)(A) (material false oaths). After a hearing, the bankruptcy court allowed the creditors's motion for summary judgment, denying the discharge. The Debtor appealed.
Judges Kayatta, Barron and McAuliffe

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