Oklahoma Department of Securities v. Wilcox
- Summarized by Daniel Glasser , Chipman Glasser LLC
- 12 years 4 months ago
- Citation:
- Okla. Dep't of Secs. ex rel. Faught, Nos. 10-6056 & 10-6057, 2012 U.S. App. LEXIS 17507 (10th Cir. Aug. 20, 2012).
- Tag(s):
-
- Ruling:
- REVERSING the District Court, the 10th Circuit held that Debtors were entitled to a discharge of a claim related to Debtors' unjust enrichment from proceeds of a Ponzi scheme because such proceeds fell outside the exception in 11 U.S.C. § 523(a)(19)--judgments for the violation of securities laws. The Tenth Circuit held that the plain language of section 523(a)(19) is limited to the perpetrators of securities violations, not to debtors unjustly enriched by a third party's violation of the law. Chief Circuit Judge Briscoe, however, dissented. She disagreed with the majority’s reading of the statute and argued that at least one of the debtors was complicit in the Ponzi scheme.
- Procedural context:
- Appeal from the US District Court for the Western District of Oklahoma affirming the bankruptcy court’s denial of discharge under 11 U.S.C. § 523(a)(19).
- Facts:
- The Oklahoma Department of Securities (the “Department”) charged Marsha Schubert with operating a Ponzi scheme and obtained a conviction. Thereafter, the Department sought to recoup funds that Schubert had distributed. The Department filed unjust enrichment, fraudulent transfer and equitable lien claims against more than 150 of her investors. The state court granted summary judgment against Robert Mathews and Marvin and Pamela Wilcox (collectively, "Debtors") on the Department’s unjust enrichment claims. Debtors then filed for bankruptcy protection, and the Department initiated adversary proceedings to avoid discharge of the underlying judgments. The Bankruptcy Court consolidated the cases and granted summary judgment to the Department, concluding that the debts were not dischargeable as judgments in violation of securities laws. The District Court affirmed.
- Judge(s):
- Briscoe, Holloway and O’Brien (Briscoe dissenting).
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