In re Artem Koshkalda

Case Type:
Case Status:
Affirmed in part and Reversed in part
BAP Nos. NC-19-1235-BTaF & NC-19-1255-BTaF (9th Circuit, May 26,2020) Not Published
BAP for 9th Cir. affirmed ruling of bankruptcy court (ND Cal.) granting creditors' motion for summary judgment but reversed and remanded bankruptcy court's order denying creditors' motion for costs. BAP concluded bankruptcy court should have allowed creditors to submit bill of costs before denying. The undisputed evidence overwhelmingly demonstrated that debtor failed to keep adequate business records, and that this failure made it impossible to ascertain his financial condition and material business transactions. Bankruptcy court erred by summarily denying motion for costs without reason.
Procedural context:
Bankruptcy court (ND Cal.) granted partial summary judgment to creditors on its objection to discharge claims against chapter 7 debtor, denying debtor's cross-motions for summary judgment. Chapter 7 debtor and creditors cross-appealed to BAP for 9th Cir.
Prior to his bankruptcy filing, Koshkalda imported and sold ink cartridges and printers overseas. He also invested heavily in residential real estate, individually and through some of his many wholly-owned entities. On September 8, 2016, two related entities Seiko Epson Corporation and Epson America, Inc. (together "Seiko Epson") filed suit against Koshkalda, ART, LLC (his wholly-owned LLC), and others in the District of Nevada for trademark infringement and counterfeiting, unfair competition, and false advertising. In September and October 2016, Seiko Epson seized two laptops and business records from ART's offices in Reno, Nevada. On July 31, 2017, the district court issued a temporary restraining order ("TRO"), freezing Koshkalda's and ART's assets and enjoining them from transferring, selling or otherwise disposing of any existing or acquired real or personal property, and from spending more than $3,000 per month without prior court approval. Koshkalda and ART were also prohibited from opening any new bank accounts. Koshkalda appeared at an August 3, 2017 hearing before the district court, where the TRO was addressed. On August 7, 2017, the district court held a hearing on an Order to Show Cause on issuance of a preliminary injunction. None of the defendants appeared. The court orally granted the injunction, after finding that Seiko Epson had demonstrated a substantial likelihood of success on the merits and that Koshkalda was dissipating and would continue to dissipate assets. On August 22, 2017, the district court issued an Order for Asset Seizure and Impoundment, which froze the assets of Koshkalda and ART ("Freeze Order"). Koshkalda's emergency motions seeking relief from the Freeze Order to permit him and his companies to pay various obligations were denied. When Koshkalda continued to violate the Freeze Order, the district court entered an order on October 27, 2017, finding him in contempt and ordering turnover of his and ART's assets to Seiko Epson. The court then entered an Amended Freeze Order (together with the TRO and Freeze Order, the "Freeze Orders"), in which it eliminated the $3,000 monthly spending allowance but otherwise retained substantially the same provisions as the Freeze Order. Eventually, the district court struck Koshkalda's and ART's answers due to repeated discovery abuses and violations of court orders and entered their defaults. On January 16, 2018, it entered a $12 million default judgment against Koshkalda and ART. Koshkalda and ART filed chapter 11 bankruptcy cases in California on January 5, 2018. Following conversion to chapter 7, Seiko Epson filed a complaint objecting to Koshkalda's discharge under § 727(a)(2)(A), (a)(3), (a)(5), and (a)(7), and seeking to except the judgment from Koshkalda's discharge under separate fraudulent transfer and actual fraud theories under § 523(a)(2)(A) and under (a)(6).
Brand, Taylor, Faris

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