Case Type:
Case Status:
22-1005 (10th Circuit, Jul 12,2022) Published
Like the Bankruptcy Appellate Panel of the Tenth Circuit (BAP) that it fully affirmed, the U.S. Court of Appeals for the Tenth Circuit (Circuit) affirmed a bankruptcy court's decision valuing the claim of a couple (CRs) at $458,470 and finding it nondischargeable under § 523(a)(2)(A) and (a)(6) due to its root in the attested-and sued upon, prepetition-schemes of Steven Bloom (DR): contracted to find and buy an airplane, the DR's shell company secretly acquired the same plane bided upon by and sold it to the CRs for $250,000 more. It also denied DR's request for state certification.
Procedural context:
[The foregoing paragraphs are mostly identical to those use in the author's summary of the BAP's earlier opinion.] Prepetition, but after the sale of their relevant piece of property--a Raytheon Hawker 800XP (Airplane)--had closed, the CRs had furiously discovered the extent of the machinations indulged by the DR, the very man whose company they had hired first to find a suitable such vehicle and then to consummate the acquisition of the Airplane, the one he had eventually found and they had liked enough to bid upon via Glencove Holdings LLC (Glencove), the artificial entity they created only one day after signing an agent agreement with the DR and Bloom Business Jets, LLC (BBJ), a company that the DR formed to buy and sell aircraft and for which he was the sole owner and manager, to find them a plane. Specifically, they learned how the DR had hidden relevant information about the seller's identity and counteroffer from them, made promises he knew to be either impossible or untrue, and used both secrecy--and the corporate form--to trick them, all in pursuit of the $250,000 profit that the DRs' decisions ultimately secured, on top of the commission the parties' contract promised him (the lesser of $121,000 or 3.75% of the purchase price, consistent with industry standards) and the post-sale management services agreement between Glencove and BBJ. Upon this management agreement's termination, the parties sued each other in state court, prompting the DR to file a chapter 13 petition for relief (Petition) in the United States Bankruptcy Court for the District of Colorado (BC). The DR's bankruptcy led the CRs to file, on behalf of Glencove, a proof of claim and a nondischargeability complaint. At the parties' requests, the BC lifted the stay to allow the continuation of their prepetition state court lawsuits. However, after litigation stalled for two years, the BC vacated its order and heard the adversary proceeding and claim-objection contested matter together during a three-day bench trial that commenced on June 22, 2020. The evidence closed on June 24, 2020, and both parties submitted post-trial briefing. In a memorandum opinion dated September 10, 2020, the BC determined that the DR had committed fraud and fraudulent concealment against Glencove, that damages totaled $458,470, and that the claim embodying these damages fit the elements for deeming a debt immune from a discharge's effect under § 523(a)(2)(A) and (a)(6). The BC declined to address Glencove's remaining claims, its foregoing disposition making such additional analysis unnecessary. The BC then allowed the Glencove's claim as a nonpriority unsecured claim, with post-judgment interest and attorneys' fees to be assessed; classified the resulting total to be nondischargeable under § 523(a)(2)(A) and (a)(6); and set a deadline for Glencove to file any request for attorneys' fees and costs. The DR timely appealed. While this appeal was pending, Glencove asked the BC to alter or amend its judgment so as to award it "all interest" to which it claimed to be entitled. Though the BC denied this motion, Glencove opted not to cross-appeal. After the BAP affirmed the BC in full, the DR appealed again, this time to the Circuit.
[The foregoing paragraphs are mostly identical to those use in the author's summary of the BAP's earlier opinion.] Prepetition, the CRs had hired the DR and his BBJ to find them a certain kind of airplane. When the DR did so, and after the CRs had submitted their initial bid, the DR had taken the seller’s counteroffer, which came back lower than his clients had expected, as an invitation to manipulate this wealthy duo. Keeping the seller's identity and the real counteroffer's value hidden, the DR instead claimed to be negotiating hard to get the Airplane's purchase price down; in truth, he purchased the Airplane via a wholly-owned shell company for a "good price" and then resold it for $250,000 more than he had paid to the CRs. In the sale's aftermath, Glencove hired BBJ to crew and manage the Airplane's operation. In May 2016, Glencove terminated BBJ's services after growing concern with BBJ's "false billing practices." Now, the lawsuits started. BBJ responded to this termination by filing a lien against the Airplane for unpaid fees pursuant to the management agreement in June 2017 and a suited against Glencove in a Colorado trial court asserting rights under its lien and claiming breach of this same same accord in August 2016. On March 3, 2017, having discovered the DR's aforementioned actions, Glencove filed a counterclaim against BBJ and a third-0party complaint against, among others, the DR for actions related to the purchase and management of the Aircraft. On the same day that this pleading was filed, the DR turned to the Bankruptcy Code.
Harris L. Hartz; Bobby Ray Baldock; and Carolyn B. McHugh

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